Nov 242011
Phillies ace Cole Hamels

Cole Hamels and the Phillies could be headed to arbitration

A lot of the course of the Phillies offseason will come from how the Phillies’ arbitration eligible players are handled. I’ll take a look here at each player, project the player and club offer, and project how exactly they’ll be paid (if they’re paid) during this offseason.

I’ll only use the last two years’ arbitration data to try and get this done, and hopefully it will give everyone a better idea about how arbitration works, and where the numbers come from.

First, as most of you probably know, for the first 6 years of a player’s major league career, unless they are released, the player is essentially bound to their club. After three years (or two in the case of so-called Super Two’s) of MLB roster service, the player no longer is subject to the renewal system (which allows a team to tender a minimum salary contract regardless of performance) and is eligible for arbitration in front of three non-baseball people. In this case, the player and club each submit a salary number, and the arbitrators decide which is most fair. There is no middle ground. It’s either club or player. Most of these cases don’t make it to a hearing and are settled before hand, either with a one-year middle ground deal (like Edinson Volquez last year) or a multi-year extension (like Cole Hamels before ’09).

There is a second kind of arbitration, one where a veteran player (more than 6 years of service) is a free agent, and the team offers arbitration in order to retain draft pick compensation if they lose the player in Free Agency when it is rejected. Ibanez was offered this type of arbitration. The only catch is that if a player accepts the offer, the club’s minimum offer must be tendered at no less than 80% of their prior year salary, so, for example if Ibanez were to accept the Phillies’ offer of arbitration (which he won’t), the minimum he could make is 80% of the $12.167MM he made last season or $9.73MM. Not a good thing.

This offseason, the Phils have 7 players eligible for non-veteran arbitration:

P Cole Hamels (2011 salary: $9.5MM)
OF Hunter Pence (2011 salary: $6.9MM)
P Kyle Kendrick (2011 salary: $2.45MM)
OF Ben Francisco (2011 salary: $1.175MM)
IF Wilson Valdez (2011 salary: $560k)
OF John Bowker (2011 salary: $441k)
P Scott Mathieson (2011 salary: $421k)

The first two obviously have the most interest. Hamels is coming off a 3-year deal signed before the 2009 season to avoid and “buy out” his first three years of arbitration eligibility, and has established himself as one of the best pitchers in MLB. There aren’t many arbitration cases with players of his caliber and service time (which matters a ton here — arbitrators aren’t giving massive paydays to 2nd year arbitration-eligible players, but they will give a fourth-year player more money for the same stats).

The most similar cases were both from 2010 — Tim Lincecum and Felix Hernandez:

Lincecum (2.148 years)–club $8MM, player $13MM, settled with 2-year/$37MM contract.

Hernandez (4.060 years)–club $7.2, player $11.5MM, settled with 5-year/$78MM contract.

Hamels currently has 5.143 years of service time, more than either of the two pitchers above, and is in his last year of arbitration eligibility. His stat line in his previous two seasons compared to Lincecum (who was a 2-time Cy Young award winner at the time) and Hernandez:

Lincecum: 33-12, 2.55 ERA, 1.11 WHIP, 3.0 BB/9, 10.5 K/9, 3.46 K/BB ratio
Hernandez: 28-16, 2.93 ERA, 1.25 WHIP, 3.1 BB/9, 8.0 K/9, 2.60 K/BB ratio
Hamels: 26-20, 2.92 ERA, 1.08 WHIP, 2.2 BB/9, 8.6 K/9, 3,86 K/BB ratio

Other than the won/loss record and the fact that Lincecum and Hernandez pitch half their games in an extreme pitchers’ park, you get the feeling the boy’s gonna get paid, don’t you…

Every stat category beats King Felix except for the W/L record. Felix was also coming off a 2nd place finish in Cy balloting. So let’s look at Felix’ contract and see what he’s being paid:

2010: $6.5MM + $3.5MM bonus = $10MM
2011: $10MM
2012: $18.5MM
2013: $19.5MM
2013: $20MM

You see where this is heading? Skip the first year because of the difference in service time, and you see a contract for 4 years/$68MM, or an average of $17MM per year. This will probably be the Phillies offer for arbitration. Anything less, and the arbiters will see that a (statistically–remember, they are NOT baseball people) lesser pitcher is getting paid more than the Phils want to offer in a one-year deal, and Hamels would just about automatically win the case and whatever his counter offer is ($20MM?).

I think the Phils offer $17MM and the Hamels counter is $20MM. In this economy, no arbitration board wants to set the bar for the highest arbitration award ever, so they will encourage the camps to get together and settle the thing. So when I say that on a one-year deal, Hamels gets $18.5MM, this is why.

If they offer to extend multi-year, which they absolutely should, they can defer salary to a time when it will cause the least effect on team payroll. In 2013, they have $95MM committed to 5 players (Halladay, Howard, Utley, Lee, and Papelbon) and 4 buyouts (Polanco, Wigginton, Ruiz, and Contreras) and a big arbitration payday in Pence (discussed in the upcoming Part Two). So a multi-year extension may look like this, mainly because in the era of MLB guaranteed contracts, players are more willing to defer salary:

2011: $15MM
2012: $17.5MM
2013: $20MM
2014: $20MM
2015: option year ($22.5MM)

So we get a 4/72.5 deal with an option (vesting or mutual) that could push the value to 5/95, and everybody’s happy. Part Two with Pence and the rest comes later.

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