First Pitch: The Pirates Payroll and a Realistic View on Salary Dumps
When the Pirates make a move that cuts salary — such as what happened in the Joel Hanrahan trade — you hear the usual “salary dump” cries. Technically the move was a salary dump. The Pirates saved about $6.5 M in the move. Dumping salary might have even been a key reason to make the move. The Pirates recently signed Francisco Liriano to a two-year, $12.75 M deal. So the salary unloaded in the Hanrahan deal is mostly already spoken for.
Pirates fans tend to obsess about the team payroll. For years the team has been losing, and payroll was down around the $50 M range. Fans wondered when the payroll would jump to the $70 M range, like what we’ve seen from other small market teams. I’ve always pointed out that teams usually follow a specific pattern.
1. The team gets close to .500.
2. Attendance increases.
3. Payroll increases.
Prior to the 2011 season, we asked Pirates president Frank Coonelly when the team would be able to spend $70 M or more on payroll. His response, which drew a ton of criticism at the time, is below.
Kevin: Would the Pirates be able to afford a $70M to $80M payroll, in present-day worth, if this current group of players were competitive enough to merit additional outside free agents?
Frank: Today, no but we will be able to support that payroll very soon if our fans believe that we now have a group of players in Pittsburgh and on its way here in the near future that is competitive. We need to take a meaningful step forward in terms of attendance to reach that payroll number while continuing to invest heavily in our future but I am convinced that the attendance will move quickly once we convince our fans that we are on the right track.
A lot of the criticism was centered around the idea that Coonelly was saying the fans had to invest first before the team would. That wasn’t exactly what he was saying. It was a variation of what I said above. Coonelly mentioned in the last line that he felt attendance would move quickly once they convinced the fans they were on the right track.
Enter the last two seasons. The Pirates have had two disappointing second half finishes, but have inched their way closer to .500 each year. The result has been an increase in attendance each year. When those comments were made, the Pirates were coming off a year where they had just over 1.6 M in attendance. They saw a slight increase the following year to 1.9 M fans. Last year there was another increase to just under 2.1 M fans.
The team record improved. The fans showed up. From there, the focus is on the Pirates to hold up their end of the bargain and spend money. So far they have. Last year they spent $61 M in payroll. After the Hanrahan trade, and with the eventual signing of Liriano, they’re projected for $66.5 M to start the 2013 season. They’ve added at least $8 M in payroll during each of the last two seasons, so the end of the year payroll right now could end up around $75 M. On a side note, the new national TV deals don’t go into effect until 2014. At that point $70 M will essentially be the new $50 M. For now, $70 M is still the same $70 M it has been for the last few years.
The thing lost in all of this is that spending money isn’t the answer. The answer is spending money wisely. That’s an even bigger issue with small market teams. The advantage that big market teams have is that they can afford to spend to cover up their mistakes. They don’t have to build with prospects, as they can also spend on proven players. Just take a look at the Yankees. They lost Alex Rodriguez for the year. Rodriguez was making $28 M. Their solution was to spend $12 M on Kevin Youkilis. The Pirates would be spending about 15-20% of their payroll if they added a guy for $12 M. The Yankees can add someone like that as a replacement, while eating a $28 M contract for one year. That kind of stuff is unthinkable for a small market team.
In the case with Hanrahan, we got to see both sides of the equation. The Pirates shed salary and added guys who aren’t proven in the majors. Some of them won’t make it. Some of them might go on to be just as effective as Hanrahan, and I’m talking about Mark Melancon here. That’s the type of move the Pirates need to make. They can’t be spending 10% of their payroll on a closer. They’re better off dealing Hanrahan, getting back someone who might be just as good, getting back a few other players with potential, and spending that money on a player who could provide a bigger impact. They did exactly that by adding Liriano.
On the other side, the Red Sox show the luxury that big market teams have. Last year they traded a package of prospects, highlighted by Josh Reddick, for Andrew Bailey. Bailey was brought in to be their closer. They traded Jed Lowrie and Kyle Weiland to Houston for Mark Melancon, who was brought in to be the set-up man. One year later the stock on both relievers is down. The Red Sox don’t have to hope for a bounce back year from Melancon, and they’re not stuck with Bailey as the closer, even though he’s set to make at least $4 M in 2013. They can trade prospects and bounce back candidates to the Pirates and they can spend $7 M on a new closer, one year after trading Josh Reddick and Jed Lowrie to help their bullpen.
It doesn’t even matter to Boston if Melancon bounces back in Pittsburgh. They can just sign a replacement. It also doesn’t matter if Jerry Sands carries his power over to the majors, just like it didn’t matter that Josh Reddick broke out in Oakland. They can just sign Mike Napoli, and if that falls through, they can sign Adam LaRoche.
Boston does have a budget. It was only this past summer that they made one of the biggest salary dumps in baseball history, sending $260 M in contracts to the Dodgers.
The Yankees have a budget. Last year their budget restrictions forced them to send A.J. Burnett to the Pirates at a huge discount. This year their restrictions prevented them from beating the Pirates financially in the bidding for Russell Martin.
The Pirates also have a budget. Their budget is much lower than the Yankees or Red Sox, but it still exists. They haven’t released an exact figure, but Frank Coonelly did say at PirateFest this year that they could be in the $70 M range. That seems to be where most similar teams end up. If that’s their budget, then they had to make a choice between Hanrahan and Liriano. I would agree with the choice of Liriano. If you’ve read me for any amount of time you know I don’t like paying closers. Relievers are too volatile from year to year. I also think that someone like Liriano has more upside than someone like Hanrahan. If given the choice, I’d take Liriano, Grilli, and Melancon, rather than Hanrahan and Grilli at around the same price. There’s risk involved with Liriano and Melancon, but there’s also a lot of upside with each situation. When you’re on a limited budget, those are the types of players you need to target.
Technically the Hanrahan trade was a salary dump. So much value is placed on the act of spending money that the automatic reactions to salary dumps are negative. Again, it’s not about spending money. It’s about spending money wisely. I feel that with the above considerations, the Pirates are spending wisely. I wrote the other day about how I could see Melancon being just as valuable as Hanrahan. Liriano and Melancon have some risk, but there’s more upside with that combo than there is with Hanrahan for the same price. The return for Hanrahan probably would have been better if the Pirates would have traded him last off-season. However, I don’t think that the return this year is limited to salary relief. I think Melancon and Ivan De Jesus could be just as effective as Hanrahan and Brock Holt. Jerry Sands and Stolmy Pimentel are wild cards and will be the tipping point for this deal.
The main focus of this trade seems to be on the salary. You can’t read an article — whether that’s this site, another Pirates site, or another team’s site — that doesn’t talk about the money aspect. There’s a good reason for that. The Pirates are like every other team in that they have a budget. The salary aspect is an important topic to discuss, but the trade shouldn’t be evaluated based on how much money the Pirates cut from the payroll. The trade should be evaluated on the players that came back in return, and what the Pirates did with the money saved. Based on the timing of the deals, it looks like most of that money went to Francisco Liriano, which should set up a “Liriano/Melancon or Hanrahan” watch during the 2013 season.
Links and Notes
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