Arbitration Eligibles Do Not Always Provide Value
When the Twins acquired Matt Capps last summer, one of the selling points was that they weren’t just getting him for 2010; as a player with less than five years of service time, they had him under team control for 2011 as well. What they didn’t mention was that, as an arbitration eligible closer with fancy save numbers, he was going to cost them $7.1 million in salary for 2011, the number they agreed to give him today.
Matt Capps is a pretty good reliever, to be sure – his career K/BB ratio is 3.99, and he’s made a successful transition away from being an extreme flyball guy, helping get his home runs under control as well. However, even in this inflated market, $7 million for a not-quite-elite bullpen arm is a pretty good sized expense, and illustrates the point that we can’t simply look at “years of team control” and assume that they’re all of significant value to a team.
Look at the prices for the guys who signed deals today to avoid their final trip through arbitration:
Prince Fielder, $15.5 million
Jonathan Papelbon, $12.0 million
Heath Bell, $7.5 million
Matt Capps, $7.1 million
Ryan Ludwick, $6.8 million
Cody Ross, $6.3 million
Josh Willingham, $6.0 million
Clint Barmes, $3.9 million
Of that group, do any of them strike you as a significant bargain? In most cases, the best you could argue is that the team is saving a few million in annual salary for 2011, and in a few cases, it’s not clear that the player would have done this well on the free agent market. There is value to the team in only having to commit to a single year deal versus contending with other teams who might offer long term deals if these players were available to every team, but in most of these cases (Fielder and perhaps Bell excluded), a comparable player was available in free agency and had to settle for a one year deal.
Once you begin to add in the pretty lengthy list of players who were non-tendered earlier this winter, and the value provided to teams by players in their final year of arbitration becomes even smaller. The reality is that the arbitration system is setup to give a players pretty sizable raises as they gain service time, and if a player’s production slips or he doesn’t develop into a star at an early age, this last year of team control can turn out to be not all that useful.
This is especially true of players who reach Super Two status and kick off their arbitration awards a year earlier than most. For example, Matt Garza got $5.95 million from the Cubs today, and now has two more trips through arbitration before he becomes a free agent. If he stays healthy for the next two years, he’s probably looking at a payout in the $15 million neighborhood for 2013. He might be worth it, but it’s unlikely that he’ll be worth significantly more than that, and that third year of team control the Cubs acquired could turn out to be of minimal value.
Dave is the Managing Editor of FanGraphs.
Truth. I don’t see Papelbon being worth 2.5 wins. Love the Willingham deal though, and Ludwick and Ross may not be bargains, but definite savings.
Seems to me that maybe it’s relievers that are categorically over valued.
Relievers may be categorically overvalued, but the subcategory of relievers w/ a significant number of saves is by far overvalued.
Good article Dave I see what you mean. Barmes, Ludwick & Capps all seem like they will struggle to even match that value this year, let alone exceed it to the point they can be considered a bargain.. Still that 3rd arb year is important don’t you think? Isn’t the value there when teams are smart and lock up their stars? I’m thinking of the Votto deal specifically. If it wasn’t for that 3rd arb year him and the Reds probably don’t have a 3 year deal in place and Votto becomes a FA a year sooner…
Votto’s deal only buys out his arb years, not his free agent years. He’s hitting FA at the same time.
i think he is trying to say that if he only had 2 arb years, then votto would only be in cinci for 2 years, not three. basically, they can make him a 3 year deal because he wouldnt be a FA anyways.
Dave – Willingham kind of jumps out. This is a guy who has earned >12.5 WAR over the past 5 seasons and has not been below 2.5 WAR in the last three. On today’s market, you’d say 2.5 WAR is worth > $12MM, so he’s getting half of that. That is a substantial discount over the 80% you’ve said is the rule of thumb for final year arbitration. For that $6MM to be an overpay, you’d have to assume something closer to less than 1.5 WAR for next year.
I understand your math (2.5 wins at $5M per = $12.5M) but any team handing out $12.5M contracts to 2 1/2 win players with any regularity is rolling toward a nice 80-win season.
(The Yanks and their 8-figure deals for 8th innings guys notwithstanding.)
Not really, because most teams have some number of cost-controlled players who are providing more bang for the buck.
I think the challenge in Dave’s post was, “do any of [these signings] strike you as a significant bargain?” Had Willingham signed for $8MM, I think a case could be made that it was a decent value for what you expect out of him, but not a bargain.
Also, compare him to the signings in the post. Ludwick has had one year over a 2.2 WAR and is a year older, Ross has had 1 year over 2.2 WAR and is a year younger. The Willingham signing is for less than these other signings and his projections are better. In comparison to the value of a win on the FA market, this one looks like the value signing.
The Capps trade just keeps looking worse and worse – even if Ramos becomes a backup, he was tradebait who could have been packaged with others to get something better.
I thought Capps would be in the 5 maybe 6mil range in arb… 7.1 ouch! (Twins better hope he’s a Type A at the end of the year)
Do the Red Sox offer Paps arbitration at the end of the year? (I assume they will). What happens if he doesn’t get what he wants on the market and accepts it? (or is there a handshake deal in place?)
he has to decline it before he can hit free agency. if he declines and cannot find a good deal, he can’t go back and accept it. basically, if he wants 13mil on a one year deal, he accepts. if he thinks he can do better (no matter whether he does do better or not), he does not accept and hopes for the best.
I am shocked, shocked to discover that an article about overvalued arbitration players was written without reference to Ryan Howard, or even really the problems created by the stats arbitration panels tend to look at. Players on good teams are going to get valued higher, on the whole, because their R, RBI, W and L numbers are boosted by their teammates, yet they’ll get credit for them in front of a panel.
Actually, it’s even simpler than that– reading through the guidelines for arbitration makes clear that arbitrators can explicitly consider the team a player plays for as one of the factors in arbitration. By the letter of the guidelines, a player who plays for the Yankees should get more money than his identical twin with identical production who plays for the Marlins.
Garza’s not going to get $15M in two years. Raises tend to follow fairly predictable patterns, short of massive breakout-type seasons; $6M now means he probably maxes out at around $12M in two years.
Unlike the closer prices, which are so outrageous that it’s almost possible to articulate a general rule that closers should be nontendered rather than offered a third arbitration year, it’s not extraordinarily high.
Rauch walks away with a 1 yr/$3.75M deal and Capps makes nearly double? Silliness. They would have been better off non-tendering Capps and keeping Rauch considering the dollar values involved here.