Strasburg Arbitration Scenarios

[imref]

Sheinin wrote a novella:

Why the timing of Strasburg's MLB debut is so important

The only question that really matters with the Nationals right now (and the one I've heard everywhere I've been this spring) is this: When will Stephen Strasburg be in the majors?

I'm not going to be able to answer that question definitively here -- even if team officials know exactly when it will happen (and I suspect it is still at least somewhat fluid) they are keeping it a closely guarded secret -- but I will venture a guess. And even more importantly, I aim to cut through all the speculation and incorrect assumptions about the contractual and economic issues that play into the equation.

The bottom line: The Nationals have a strong incentive to keep Strasburg in the minors until at least late May, in order to delay his reaching free agency and arbitration eligibility.

That's not to say the Nationals will do that. But doing so could gain them an extra year of Strasburg's services and save themselves a significant amount of money. I also do not want to imply that only financial issues play into this decision. There are also obvious developmental reasons to send Strasburg to the minors for a few weeks or a couple of months. Doing it this way would be smart baseball management.

Here's how this works:

First, the breakdown of Strasburg's four-year $15.1 million contract, which began in 2009: He received a $7.5 million signing bonus (paid in three installments, two of which have already been made), plus salaries of approximately $100,000 in 2009 (a pro-rated portion of the major league minimum), $2 million in 2010, $2.5 million in 2011 and $3 million in 2012. For the purposes of determining his future compensation -- or his "tender amount," in industry jargon -- the key number is his total earnings in 2012, which is calculated to be $4.875 million. (That's the $3 million salary plus one-fourth of the signing bonus, or $1.875 million.) This number will be important later.

Strasburg's contract covers him for the next three seasons, which are known as his "zero-to-three" years, referring to a player's service time. But Strasburg will remain under team control beyond the life of the contract -- until he reaches free agency. And that's where it gets a bit complicated.

Delaying Strasburg's free agency is fairly simple. A player needs six full seasons in the majors to become eligible for free agency, and a full season is defined as 172 days. However, a zero-to-three player who is optioned for fewer than 20 days gets those days added back to his service time at the end of the year. To simplify: The Nationals need to keep Strasburg in the minors for about three weeks to prevent him from having six full years of service time at the end of 2015, thus retaining his rights through 2016. It's not being cheap. It's being smart. And every team does it.

Under the above scenario, Strasburg would be tied to the Nationals for four years beyond the life of his current contract -- 2013, 2014, 2015 and 2016. Three of those will be arbitration years. (I'll take it on faith that, by virtue of the fact you are reading this blog, you understand how the salary arbitration system works. If not, Google it.) But the nature of the fourth year would depend on whether or not Strasburg will have qualified for arbitration as a "Super Two" player at the end of 2012.

You probably know how Super Two status works, but in a nutshell: The top 17 percent of players who have fallen short of three full years of service time in a given year become eligible for arbitration as Super Twos. There is no predetermined date when a player gains or loses Super Two status; it depends on the service times of every other player in that service class. But typically, a team can safely block a player from gaining Super Two status by keeping him in the minors until late-May of his rookie season.

(The San Francisco Giants famously miscalculated on this in 2007, calling up Tim Lincecum on May 6, which wound up being about a week too soon to prevent his Super Two status in 2010. The cutoff for Super Two eligibility in that particular year was two years 141 days, and Lincecum had two years 148 days. As a result, Lincecum will make $9 million this year in salary/signing bonus as a Super Two, instead of the $700,000 or so the team could have paid him as a zero-to-three player, had they kept him down an extra week in 2007. We'll return to the Lincecum example in a moment.)

For the Nationals to be safe with Strasburg -- and prevent him from reaching Super Two status in 2013 -- they would probably need to keep him in the minors until late-May. If they do this, Strasburg would be considered a zero-to-three player in 2013, saving the Nationals a lot of money. This, too, happens all the time and is seen as smart management. The Baltimore Orioles did it last year with Matt Wieters, who is to catching what Strasburg is to pitching, and whose call-up came on May 29.

But there is an additional catch in Strasburg's case because his contract is a major league contract. According to the collective bargaining agreement, a player under team control cannot receive a pay cut of more than 20 percent from the previous year. Here is where Strasburg's 2012 compensation -- that $4.875 million figure -- comes into play. Because of this rule, the Nationals would have to pay Strasburg at least $3.9 million in 2013 (that's 80 percent of $4.875 million) if he fails to attain Super Two status.

Now, let's take a major hypothetical leap here and apply Lincecum's case to Strasburg's. Let's further assume Strasburg turns out to be as good (and more to the point, as accomplished) as Lincecum -- a humongous assumption, given Lincecum's unprecedented accomplishments (two Cy Youngs before reaching arbitration eligibility). Finally, let's also take a guess and extrapolate Lincecum's third and fourth arbitration years from his first two.

Prorating the signing bonus in the new contract he signed last month, Lincecum will earn $9 million and $14 million in 2010 and 2011, his first two arbitration years. We'll be conservative and say those figures will rise to $18 million and $22 million in 2012 and 2013, his remaining arbitration years. (The actual figures will depend on several factors, including how well he peforms.)

If, for argument's sake, Strasburg is as good as Lincecum, and thus is compensated equally via arbitration, his first three arbitration years will earn him $9 million, $14 million and $18 million. If Strasburg reaches Super Two status, those first three arbitration years would be 2013-15, with a fourth arbitration year in 2016, in which (in our little hypothetical universe) he would make the same $22 million as Lincecum.

But if Strasburg fails to attain Super Two status (and assuming the Nationals keep him down for at least three weeks to delay his free agency), his three arbitration years would come in 2014-16, with a zero-to-three year on the front end, in 2013.

So, using our made-up numbers for Lincecum and applying them to Strasburg, here is what is at stake for the Nationals:

*If Strasburg reaches Super Two status, he gets: $9 million in 2013, $14 million in 2014, $18 million in 2015 and $22 million in 2016, for a total of $63 million in those four years.

*If Strasburg fails to reach super two status, he gets: $3.9 million in 2013, $9 million in 2014, $14 million in 2015 and $18 million in 2016, for a total of $44.9 million.

In other words, it could be worth about $18 million to the Nationals -- or a little less than what they are paying for two years of Adam Dunn -- to delay Strasburg's debut until Memorial Day.

Two quick thoughts:

One, this franchise has survived for five years without him. What's another two months?

And two, you may want to get your tickets now for the June 4-6 weekend series at Nationals Park against the Cincinnati Reds.

[JCA-CrystalCity]

About the best post I've seen on Nats Journal.  I wonder why it was not an article.

BTW - I am an idiot for forgetting that last year was the first year of his 4 year contract.  Avoiding Super two is much higher stakes than it was last year for Zimmermann.

[PatsNats28]

A lot of assumptions. Not sure if anyone's done it yet, but here's how he could be scheduled (trying to max out home games):

POTOMAC:

4/8 vs. Salem (season opener)
4/14 at Winston-Salem
4/19 vs. Frederick
4/24 vs. Lynchburg

HARRISBURG:

4/30 vs. Altoona
5/5 vs. Bowie
5/10 at. Altoona
5/15 vs. New Britain
5/20 vs. Reading

SYRACUSE:

5/25 vs. Toledo
5/30 vs. Scranton/Wilkes-Barre

WASHINGTON:

6/5 vs. Cincinnati

You could also add another AAA start and have him open versus Pittsburgh, but that would be on a Thursday versus a Saturday.

[Lintyfresh85]

Finally an article I can point to when I tell others its just smart business to keep him in the minors for a few weeks!

Awesome, awesome piece by Sheinin.

[DPMOmaha]

WASHINGTON:

6/5 vs. Cincinnati

That's exactly the scenario I've been saying since the schedule came out last fall...

[imref]

That's exactly the scenario I've been saying since the schedule came out last fall...

who wants to jinx it by buying tickets for 6/5?

[DPMOmaha]

If I lived in the DC area, I would.  Worst case scenario is I'd have to go to a random game.  If he did get the start, I'd have the hottest ticket in town.

[natsfan4evr]

I only care about an extra year until free agency. I couldn't care less if the Lerner's have to pay more in the process. They claim this isn't financial and by keeping him in the minors until June, there is no other way to read into that. I'll give them a break on the opening day decision, but I'll be pissed if this team is getting lit up in May and they refuse to bring him up early.

[HalfSmokes]

I only care about an extra year until free agency. I couldn't care less if the Lerner's have to pay more in the process. They claim this isn't financial and by keeping him in the minors until June, there is no other way to read into that. I'll give them a break on the opening day decision, but I'll be annoyed if this team is getting lit up in May and they refuse to bring him up early.

you do realize paying him extra money is not the same as an extra year until free agency?

[blue911]

At whose expense are the Nationals "saving" $18M? Unless Scott Boras falls into a coma, I can't see Starsburg's camp not recouping that money at a later date.

[Evolution33]

At whose expense are the Nationals "saving" $18M? Unless Scott Boras falls into a coma, I can't see Starsburg's camp not recouping that money at a later date.

If Strasburg is as good as they say he is and if things keep trending the way they are I wouldn't be suprised if he gets $30 million a year when he becomes a free agent.

[tomterp]

I couldn't care less if the Lerner's have to pay more in the process.

You don't think that if they have to pay Stras more, that at some level that means they spend less on other players?

I think that absolutely it means they spend less, which is a bad thing.

[DPMOmaha]

At whose expense are the Nationals "saving" $18M? Unless Scott Boras falls into a coma, I can't see Starsburg's camp not recouping that money at a later date.

All "saving" ever is, is a delay in spending.  So, yes, he'll likely make that money up at a later date.  But if the Lerners can "save" that money and not have to pay him 1. at all or 2. for a year later than they would otherwise, it does allow them to address other needs the team will invariably have.

[HalfSmokes]

Isn't it possible that a couple of months in the minors would be good for him?

[PANatsFan]

If I lived in the DC area, I would.  Worst case scenario is I'd have to go to a random game.  If he did get the start, I'd have the hottest ticket in town.

Yeah I'm  leaning towards this. With my "No seats above 200 level" rule, I might just buy a ticket or six.

[natsfan4evr]

You don't think that if they have to pay Stras more, that at some level that means they spend less on other players?

I think that absolutely it means they spend less, which is a bad thing.

This area is not a small market area. 60 million is a joke, especially for the richest owners in baseball. We should be near 100 million in payroll IMO. I'm tired of reading media reports that make it sound like the Nats are strapped for cash. This area has like 4 or 5 counties in the top 10 for median income. We pay a lot more in tickets than smaller market teams charge. If the team isn't struggling in May, I'll be more understanding, but if the starting pitching is in shambles and they still refuse to call him up, that's not fair to us fans.

[JCA-CrystalCity]

Isn't it possible that a couple of months in the minors would be good for him?

Possible, but for the heck of it, there's an argument it isn't. 
Stuff-wise, I don't think there is much dispute that he is major-league ready.  The issues seem to be with men on - rushing to the plate, holding, etc...  Odds are, he can work on that a bit better against hitters who can actually challenge him and even get on.

You want to limit his innings, which would be easier in the minors, but not impossible at the majors

Where are the training facilities better?  Probably at Nats Park.

Who are the top coaches in the system?  Dang good question, but probably at MLB where there are more of them.

Where would there be less moving around?  A start for Potomac in the opener, a start for Harrisburg at Bowie, then Nats Park for the Brewers would let him stay in one spot.

Where is the weather better before June?  Washington beats Syracuse and Harrisburg until mid may or so.

I'm not convinced, but if you threw out the money angle, it is not open and shut thatthe minors are better for his development.

[HalfSmokes]

Who are the top coaches in the system?  Dang good question, but probably at MLB where there are more of them.

I thought a lot of teams but their better teachers/development guys in the minors. I would also say that if the team doesn't see the relationship between major league and minor league innings as a 1 to 1 ratio, it could allow him more major league innings after he gets brought up.

[shoeshineboy]

Isn't it possible that a couple of months in the minors would be good for him?

Yes.

I think they should bring him up when he is ready regardless, but the business consideration is legit and not unique to this organization. He would have to be so obviously ready to bring him up before then to justify not making the business decision. And so far, he hasn't had an opportunity to show that. The raw stuff is there, but he needs at least some time in the minors to build up - not just physically, but to get acclimated to the routine and the game.

I'd rather have him come up later and be dominant and wonder whether he may have won a couple more games (on what is going to be a losing season anyway) than rush him up and have it be an issue and realize that he needed to go to AAA or to the bullpen while he works on his game. He could be successful right away, but if he is not, it's a complete waste for no good reason.

While he has got a good head and shows he has good stuff and the right attitude, his experience is against college kids. He pitched on a different schedule and dominated. He needs to show he can work his way through A and AA batters and the speed of the game. The scenario I fear if he is rushed up is that the environment is different, the speed is different, the quality of the hitters is different, so some batters who get a good look will hit him, he'll work out of the stretch more, his ability to hold runners and get the ball to the plate yields more stolen bases, he struggles mentally, and he suffers from overuse within innings and an impact on his confidence because he didn't have a chance to prepare for the situation. There's zero need to risk that. Let him get some experience. 5 starts in Potomac, then several in AA at a minimum. See how he does, make sure he stays strong with the routine and improves on his ability to work out of the stretch and deal with baserunners. He'll tell the coaches when he is ready.

As soon as he is showing that he gets nothing from the development in the minors, he should be brought up regardless. But the likelihood that he will simply blow away every minor-leaguer without ever facing challenges that help seems limited.

[JCA-CrystalCity]

While he has got a good head and shows he has good stuff and the right attitude, his experience is against college kids. He pitched on a different schedule and dominated. He needs to show he can work his way through A and AA batters and the speed of the game. The scenario I fear if he is rushed up is that the environment is different, the speed is different, the quality of the hitters is different, so some batters who get a good look will hit him, he'll work out of the stretch more, his ability to hold runners and get the ball to the plate yields more stolen bases, he struggles mentally, and he suffers from overuse within innings and an impact on his confidence because he didn't have a chance to prepare for the situation. There's zero need to risk that. Let him get some experience. 5 starts in Potomac, then several in AA at a minimum. See how he does, make sure he stays strong with the routine and improves on his ability to work out of the stretch and deal with baserunners. He'll tell the coaches when he is ready.

You are right. I am usually for keeping guys in the minors until they absolutely force the issue.  I'm just saying he may force the issue earlier than June, and that that might not be the worst thing.

I am not sure Potomac will do him much good after a token 4/8 start.  I don't want him in Syracuse when the weather is cruddy.  AA would be a nice level to move to quickly, perhaps as a soon as 4/13 (@Bowie) or 4/18 (v. NBR).

[shoeshineboy]

You are right. I am usually for keeping guys in the minors until they absolutely force the issue.  I'm just saying he may force the issue earlier than June, and that that might not be the worst thing.

I am not sure Potomac will do him much good after a token 4/8 start.  I don't want him in Syracuse when the weather is cruddy.  AA would be a nice level to move to quickly, perhaps as a soon as 4/13 (@Bowie) or 4/18 (v. NBR).

Yeah Potomac is the furthest north he should go until the weather changes. I agree. They will not want him in upstate NY. I'd rather they keep him in extended ST to pitch in Florida before I did that. I figured they were thinking of starting him 5 games in Potomac to allow him to be in the warmest weather possible and to give the local minor league affiliate some publicity and money.

[houston-nat]

Burbles Litwick just tweeted that the Nationals front office is going to meet on Saturday to try to decide if Strasburg needs to go to the minors or not. I hope they'll make the sensible decision.

[Kevrock]

I'll go ballistic if they start him in the majors.

[houston-nat]

Burbles Litwick just tweeted that the Nationals front office is going to meet on Saturday to try to decide if Strasburg needs to go to the minors or not. I hope they'll make the sensible decision.

Just some more terrible reporting by Blob Wadson. The meeting is, in fact, about the next round of roster cuts and which players to send to minor league camp.

[tomterp]

Just some more terrible reporting by Blob Wadson. The meeting is, in fact, about the next round of roster cuts and which players to send to minor league camp.

Yeah, but putting "Strasburg" in his tweet ensures it gets picked up by the news aggregators.