January 3, 2011

Contractual Matters

A Texas-sized Payroll Leap

by Jeff Euston

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Four days before Christmas, the commissioner’s office quietly distributed final 2010 payroll figures for the 40-man rosters of all 30 clubs in Major League Baseball.

The simple list of teams and dollar amounts (reproduced below) was not particularly noteworthy. The Yankees topped the list, as they did on Opening Day. The Pirates and Padres trailed the rest of the field by a considerable margin.

The surprising number came from the middle of the pack, where the final payroll tally for the Rangers came in at $74,302,980, good for 22^nd overall. By themselves, those two figures are not remarkable, except in comparison to where American League champions had started.

The Rangers’ payroll for the 25-man roster on Opening Day was widely reported as $55 million. Add money committed to Kevin Millwood—shipped to Baltimore last offseason along with $3 million—and the figure was north of $58 million, which ranked 26^th in baseball.

Admittedly, it’s not a straight-line comparison. Opening Day figures are usually limited to players on 25-man roster, while year-end numbers include the entire 40-man roster as well as bonuses and buyouts. But the in-season spending jump for Texas represented baseball’s largest leap in raw dollars (about $16 million). That would not be especially surprising, either, except for the minor detail that the Rangers spent more than two months of the 2010 season in bankruptcy.

On May 24, with Texas holding a two-game lead in the American League West, the team filed for Chapter 11 protection. The Rangers then received a loan of $21.5 million from Major League Baseball to remain solvent during the bankruptcy proceeding, on top of an additional $18.45 million in MLB loans since 2009.

Despite financial concerns and an uncertain ownership situation, the Rangers proceeded to operate as buyers as the July 31 trade deadline approached—albeit buyers with a low credit limit. Texas acquired catcher Bengie Molina from San Francisco on July 1, with the Giants sending about $2 million to the Rangers as part of the deal. The extra cash left the Rangers to pay only about $250,000, just slightly more than the major-league minimum salary, pro-rated for the remainder of the season.

By early July, Texas had expanded its lead to 5 ½ games, the largest margin for any division leader in baseball. On July 9, general manager Jon Daniels landed the most sought-after property on the market. He dealt a package of four prospects headed by first baseman Justin Smoak to Seattle in exchange for lefty ace Cliff Lee and reliever Mark Lowe. The new acquisitions had about $4.7 million remaining on their contracts (roughly $4.2 million for Lee and $500,000 for Lowe). But the Rangers received roughly $2.5 million from the Mariners in the trade, adding about $2.2 million to the Texas payroll.

Infielder Jorge Cantu joined the Rangers in a trade from Florida three days before the July 31 trade deadline. The Marlins paid $600,000 of the roughly $2 million left on Cantu’s 2010 deal, putting the cost to Texas at $1.4 million.

One final addition, infielder Cristian Guzman, came at a cheaper price. The Nationals agreed to kick in $2 million in shipping him to Texas on July 30, leaving the Rangers to pay only about $670,000 of his remaining salary.

All told, the Rangers took on about $4.52 million in salary to add Lee, Lowe, Molina, Cantu, and Guzman—all before the group led by Chuck Greenberg and Nolan Ryan won control of the team in August at auction in bankruptcy court. (The August 31 deal that brought outfielder Jeff Francoeur to Texas was a financial wash, as the Mets agreed to pay the remainder of his 2010 salary with the Rangers paying the freight for Joaquin Arias, who was shipped to New York in the trade.)

But Texas also paid out cash for roster and performance bonuses, as well as buyouts for unexercised options. For example, right-hander Colby Lewis reached performance milestones for innings pitched and starts. Vladimir Guerrero earned an additional $900,000 for managing to stay on the active roster during the 2010 season. The Rangers then paid Guerrero a $1 million buyout when the club declined its half of his 2011 mutual option. The club also paid a $1 million buyout to pitcher Rich Harden. Factor in late-season promotions for minor-league players like Alex Cora, Esteban German, and Clay Rapada, and you get a sense of how the Texas payroll ranking jumped from 26^th on Opening Day to 22^nd by year’s end.

The Rangers’ drive to a division title and the AL pennant was one of 2010’s best stories. But in an industry where the wise use of limited resources can be the difference between a good season and a great season, Texas enjoyed a generous boost from the commissioner’s office. It’s all a far cry from the plight of the 2003 Montreal Expos, wards of the MLB state, who were tied for the National League wild-card spot in late August but could not promote players from the minors in September because of cost concerns.

Jeff Euston is an author of Baseball Prospectus. Follow @JeffEuston
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