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Tuesday, December 13, 2022

Easy as AAV: What the numbers say about MLB’s spending spree, new realities of free agency

The two shortstops who signed 11-year pacts, in particular, found matches with front offices keen on folding new stars into their existing constellations. The Phillies and Padres are already sailing past the CBT line for 2023, but paying Turner ($27.3 million AAV) and Bogaerts ($25.5 million AAV) less per year will give deal-happy executives Dave Dombrowski and A.J. Preller wider lanes in which to operate moving forward. Their new star shortstops aren’t dissimilar to Francisco Lindor or Corey Seager, but they will make $5 million-$9 million less per year, by CBT accounting.

The gap becomes even handier as the CBT rises. Add the fact that $25 million in 2032 is just worth less than $25 million in 2023, and the rationale crystallizes: The truth of Turner’s and Bogaerts’ market value is somewhere between the annual value and the total value. Will they be good in 10 years? Probably not, but they will likely outperform their salaries in the early years of their deals.

Remember when teams deferred money to lower the actual value of a deal but still help players set salary records? This is a little like that, but with an eye toward CBT surcharges. You can look at what the Phillies and Padres did as taking out loans on immediate, impactful help, with fixed, advantageous interest payments slated to come due in the early 2030s.

RoyalsRetro (AG#1F) Posted: December 13, 2022 at 12:31 AM | 2 comment(s) Login to Bookmark
  Tags: competitive window, luxury tax

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   1. Walt Davis Posted: December 13, 2022 at 02:21 PM (#6109360)
The truth of Turner’s and Bogaerts’ market value is somewhere between the annual value and the total value.

So somewhere between $27 M and $300 M? Gotcha.

I think I maybe kinda sorta almost understand what that means -- X is better than a "$25 M player" but he's not a "$280 M player." At least two problems with that -- those labels have always been somewhere between unclear and meaningless and I don't think he is a "$25 M player" as I might use that term. Granted, this offseason is suggesting the meaning of "$25 M player" has shifted.

I probably just under-value X. I put him comfortably in the 2nd tier of SS (with Turner). But the more I think about it, if the Freeman deal was OK at 6/$162 through age 37 ... X is probably a 0.5 to 1 WAR better now and 2 years younger at signing so, even without inflation, maybe 8/$240 was reasonable. Once you're at 8/$240 then deferment, CBT, increased threshold, plain ol' inflation pushing it to 11/$280 might be perfectly reasonable. In NPV terms (3%) the difference is about $20 M.

I wish somebody would do the work to come up with some reasonable estimate of the $/WAR in "NPV terms." Fangraphs gives it a go sorta but their longer-term estimates have seemed high for a while (then I think they adjust them down). What I mean is the NPV on X's deal is about $230 M. If NPV$/WAR is 10, that's a projection of 23 WAR and he seems a pretty good bet to do that over the life of this deal. At current production, he might be there in the first 5 years but, even if he declines early, a couple of average-ish seasons at 35-36 should still get him there. If NPV$/WAR is $8 then the break-even point is about 5 WAR higher and the early decline risk increases. (i.e. the risk is the same, the amount of NPV money that would be wasted goes up though.)

The short-term WAR market should give us a reasonable idea where NPV $/WAR is. We've seen plenty for pitchers, Vazquez is the only position player that comes to mind ... and I'm getting a guesstimate around $8-9 still but I've seen other people saying it's around $10. Hard to tell of course, that's potentially the difference between 1.3 WAR and 1.5 WAR projections for a $13 M AAV starter. And if the first 1 or 2 WAR are cheaper than the above-average WAR ...
   2. Buck Coats Posted: December 13, 2022 at 05:23 PM (#6109418)
But the more I think about it, if the Freeman deal was OK at 6/$162 through age 37 ... X is probably a 0.5 to 1 WAR better now and 2 years younger at signing so, even without inflation, maybe 8/$240 was reasonable.

How could this be, we all know Freddie Freeman is The Best Player In Baseball?

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