Monday, August 07, 2006

Ya Gotta Spend Money To Make Money

As the Jose Reyes grand slam disappeared high into right field, an obscure record fell: Reyes had become the first shortstop in the Mets’ 44-year history to hit 11 homeruns in a single season.

The homeruns are evidence of the youngster’s growing power, which is paired with speed and drive that see him lead the major leagues in steals and triples.

Reyes had other reasons to celebrate tonight. As the keeper of his parents, daughter and pregnant girlfriend, who live with him in New York, the 23-year-old is now in a much better position to provide, having signed a four-year $23.25 million extension with the Mets.

Among baseball’s many truths is this: the New York Mets are not afraid to spend money. This is the team, after all, that made Bobby Bonilla the best-paid player in baseball in the early '90s (when a $6 million salary bought an OPS of .779, .874, .878 over three years), and Mo Vaughn the leader in 2003 ($17.2 million), when he played in just 27 games.

Omar Minaya has been granted a similarly free hand to create the latest edition of the franchise. As of 2006, the team he’s brought together is exciting – a mix of young top-tier talent like Reyes and third-baseman David Wright and blue-chip veterans like Carlos Beltran, Carlos Delgado and Pedro Martinez. What’s not to like?

If you answered “Billy Wagner,” or “the rest of the starting rotation,” you’d have a point. But there’s not much to be done about it, as least not for the next three years. The Mets of today are also, thanks to Minaya’s love of the long-term contract, the Mets of tomorrow.

Minaya’s top-six (Beltran, Wright, Martinez, Delgado, Wagner and Reyes) have average contract lengths of 4 2/3 years. In four cases there are option years, a mix of club options (with fairly nominal payouts for failing to exercise) and player options that vest based on performance. All are locked-in from 2006 through 2008 (see table below).

In 2006 the Mets are paying $45.8 million in salary for their top-six – a figure that will rise almost imperceptibly over the next two years to $48.4 and $51 million, not counting the payment terms for signing bonuses, some of which are spread over several years.

This is being accomplished in spite of a $6.5 million raise for Beltran in 2008, and a considerable increase in the cost of the two youngsters, whose combined salaries will rise over the next two years from under $1 million to $9 million.

Minaya’s recipe for financial success has two ingredients. The first is the Florida Marlins, who will pay $6 million over the next two years towards the cost of Delgado’s contract. The second, and more significant, is his aggressive use of deferred salary.

Over a six-year period, the Mets are deferring $44 million in salary commitments. The bulk of the deferral comes from the Beltran deal. Over 2008-11, $8.5 million a year will be held back, to be paid from 2012 to 2018. Martinez also agreed to a deferral of $4 million in 2006 and ’07, and $2 million in ’08.

The combination of deferral and contract-endings will leave the Mets with plenty of budget to replace Martinez and Delgado in 2009. But by then Billy Wagner will be on his last legs (if he’s not already), and Beltran will be entering the start of the danger-zone, where the expected gradual decline from ages 32 to 34 may turn, overnight, into a Vaughn-esque collapse.

Deferral is a tricky beast: used excessively, in can put a serious dent in the organization’s future budget, long after the talent, and probably the manager, are gone; used wisely, it may actually reduce the present-value cost to the organization (the current deals carry rates of 5 and 1.67%).

Beltran’s contract is risky no matter how it’s financed. The length of term for a player leaving his prime years, and the high salary on the back-end, make this look like a Mets contract of old. Ditto the Wagner deal, whose terms evidence the fetishistic fervour induced by the Save. Guaranteeing a 34-year-old reliever’s salary for four years is madness.

The other deals, however, look brilliant. Martinez and Delgado brought proven records to Shea Stadium, and both have lived up to their billing. More importantly, their contracts expire at age-36, Pedro’s actually declines in value in the final year, and Delgado’s salary cost remains constant thanks to the Marlins’ beneficence.

As for Wright and Reyes, they are two of the bright young stars of the National League. Wright has already led the Mets in OPS once (2005), and Reyes is showing growing patience and power at the plate, and dominance on the basepaths. Baseball Prospectus currently ranks them 11th and 13th in VORP (Value Over Replacement Player) in the NL, and puts Beltran third. For Mets fans, the future looks as bright as the present.

Minaya's Magic
The table below show the salary commitments for the six New York Mets with long-term contracts. Also listed are the values for signing bonuses (which in some cases are paid over a number of years), deferred salaries (payment dates not shown), and potential salaries for option years (which are not included in the annual total). Club buyouts for unexercised options range from $1 - 4 million.
TOTAL SIGNING 2005 2006 2007 2008
Beltran $119.0 $11.0 $10.0 $12.0 $12.0 $18.5
Wright $54.4 $1.5 - $0.4 $1.0 $5.0
Martinez $53.0 $3.5 $10.0 $14.0 $14.0 $11.5
Delgado $47.9 - $4.0 $13.5 $14.4 $16.0
Wagner $42.0 - - $10.5 $10.5 $10.5
Reyes $23.2 $1.5 - $0.4 $2.5 $4.0
Deferred -$44.0 - - -$4.0 -$4.0 -$10.5
(Marlins) -$7.0 - - -$1.0 -$2.0 -$4.0
Cashflow $288.4 $17.5 $24.0 $45.8 $48.4 $51.0

2009 2010 2011 2012 2013
Beltran $18.5 $18.5 $18.5 - -
Wright $7.5 $10.0 $14.0 $15.0 Opt: $13
Martinez - - - -
Delgado Opt: $12 - - - -
Wagner $10.5 Opt: $8 - - -
Reyes $5.8 $9.0 Opt: $11 - -
Deferred -$8.5 -$8.5 -$8.5 - -
(Marlins) - - - - -
Cashflow $33.8 $29.0 $24.0 $15.0 $0.0

UPDATE: The extended table, running to 2013, was messing-up the blog formatting, so I've split it in two.


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