Projecting Payrolls: Philadelphia Phillies

I’m ecstatic to join the MLBTR team to offer insight on an essential topic in the baseball world, especially this time of year: team payrolls. We’ll be combing through the league this winter, focusing first on the teams that figure to be the biggest players in the free agent marketplace.

There’s no better place to start than Philadelphia.

Team Leadership

The Phillies have one of the more complicated ownership structures in the league. Current managing partner John Middleton first purchased an ownership stake in the team in 1994, acquiring additional interests in the club over time until finally reaching a plurality 48% interest, becoming manager partner in 2015. The Buck family owns the other plurality 48% interest via their Tri-Play group. Despite the fact that Middleton has been managing partner for only four years, his longtime involvement with the club as well as that of the Buck family provides solid continuity.

The front office is headed by longtime baseball man and team president, Andy MacPhail, the prior president of the Orioles and former general manager for the Cubs and Twins. Current general manager Matt Klentak enters his fourth season at the helm, still searching for his first winning season and Philadelphia’s first winning season since the 2011 club blitzed its way to 102 regular season victories. While Klentak appears to have strong support from ownership, the fourth year of a rebuild is traditionally moving time: if it’s going to work, the wins need to show up and in a big way.

Historical Payrolls

Before digging into Phillies specifics, here are a few general notes when looking at historical data:

1. Generally speaking, we’ll be using the data from Cot’s Baseball Contracts, maintained by Baseball Prospectus, for our historical data.
2. Because the data comes from Cot’s and not from a meticulously detailed historical record of internal, proprietary information maintained by individual teams, the figures cited here will tend to be annual salaries plus prorated bonus amounts for each year. This is not how most Major League free agency contracts pay out: the various bonuses paid to players are often paid at specified times and not ratably over the course of deals. Nevertheless, using the data from Cot’s will help provide a strong estimate.
3. Deferrals are difficult to capture. For example, the Nationals owe Max Scherzer a $35 million salary in 2019…but they won’t pay him a penny of his base salary for 2019 until 2022 (he does receive a $15 million portion of his signing bonus next year). Because of the difficulty in capturing deferrals, I’ll use something of an arbitrary cutoff, only factoring them into the numbers when they figure to have a significant impact on team spending, as is the case with the Nationals and Orioles, for example, given a bevy of deferred obligations, but as is likely not the case with the Rockies who owe only a relatively small amount to Todd Helton into the future.
4. There are two primary considerations in examining historical payrolls: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both.

With those housekeeping items out of the way, let’s dig in on what the Phillies have actually done in recent years.

Defining “recent” can be tricky. Changes in ownership, competitive windows, and market forces can yield wildly different payrolls over time. As a result, we’ll focus on a 15-year span in this series, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership. Here is what the Phillies have spent in the prior 14 seasons:

The Phillies payroll history tells a compelling and clean history of the club over the past decade and a half. They emerged in the mid-2000s as a young team supplemented by some expensive veterans, got extraordinarily expensive at the end of the 2000s and beginning of the 2010s as the core reached its peak earning years, endured some bloated payrolls despite meager win totals as the 2010s went on, and kept payroll to a minimum as a rebuild began. The Phillies carried a top-six leaguewide payroll each year from 2009-14 before tumbling to be among the 10 lowest payrolls in each of the past three seasons, a truly remarkable swing.

Philadelphia has not been a franchise to push the boundaries in the amateur market either, eschewing the big-bonus deals given to the likes of Latino amateurs Yoan Moncada (Red Sox) and Yadier Alvarez (Dodgers), among many others, by other big-market ball clubs. As such, the Major League payroll is a strong indication of true spending capacity for the team.

Future Liabilities

Some teams are loaded up with future guaranteed money, significantly hampering their ability to commit significant dollars to free agent targets. We’ll address teams like the Cubs and Rockies later in this series.

Other teams find themselves with barren future guarantees. We’ll spend time discussing the Twins and White Sox later as well.

The Phillies find themselves largely in the middle space of teams with regard to future commitments. Here is a look at their future guarantees with the powder blue highlight indicative of a player option whereas the peach indicates a club option. Note that the numbers shown on here are cash payments by year, not the salary plus the prorated amount of any bonus.

The future commitments are not exactly staggering. We’ll start at the bottom of the list. Kendrick’s $5 million in 2019 is the only deferral on Philadelphia’s chart, and it obviously shouldn’t impact future spending. Kingery’s extension basically guarantees him salaries commensurate with that of an above-average regular throughout what would have been his arbitration years with the 2024-26 options reflecting discounts over free agent salaries for a similarly effective player. If he turns out to be dead weight going forward (unlikely), the commitment remains relatively meager: $21.75 million through 2023, including the $1 million buyout of his 2024 option. That’s not breaking the bank and could provide strong value. Herrera is quite similar, just a few years further along the way; Herrera also figures to bounce back from poor BABIP luck in 2018, a year in which his defense also failed the metrics for the first time. Hunter and Neshek provide short-term guarantees with Neshek’s option in 2020 serving solely as a value play with minimal downside.

Instead, the big numbers to focus on here are Santana and Arrieta. Because Santana’s contract featured a significant signing bonus ($10 million), his future guarantee is both closer to approximating his actual value than it otherwise would be and easier to fit into a ballooning payroll, should that be the case. Nevertheless, Ken Rosenthal of The Athletic recently reported that the Phillies are aggressively shopping Santana, hoping to move his salary while opening up a defensive home for young (and cheap) slugger Rhys Hoskins.

Arrieta, on the other hand, has a contract structure that functions as a real wild card thanks to its unique language and Arrieta’s recent production. Arrieta earned $30 million in 2018, he gets $25 million in 2019, and then the chaos begins. Arrieta may opt out of his contract following the 2019 season, forfeiting a $20 million guarantee in the process. However, the Phillies may preempt the opt-out clause by exercising their club option on a two-year, $40 million extension covering 2021-22, Arrieta’s age-35 and age-36 seasons. The club option years may increase to a total of $50 million based on Arrieta hitting an unknown innings pitched threshold over 2018-19*, but that number is likely to be quite high meaning that Arrieta’s 172 2/3 innings from 2018 likely foreclosed the possibility of hitting that escalator.

*=Editor’s Note: MLBTR has since learned that the escalators are based on games started as opposed to innings pitched. By starting 31 games in 2018, Arrieta has boosted the base salary in both club option seasons by $2.5MM apiece, making the combined value of those seasons $45MM. He’d boost each by $1MM with 28 starts in 2019, plus another $500K each for starts 29, 30 and 31.

The Arrieta decision appears fascinating for both player and club. Arrieta is projected for another season of being a roughly league-average starting pitcher who throws about 180 innings. If he performs at such a rate, he has a strong incentive to opt out of his contract as the market will likely yield something in the neighborhood of $40-50 million on a multi-year guarantee for that production. On the other hand, the Phillies have an incentive to keep him around for that production but it isn’t so strong as to risk buying Arrieta’s mid-30s at the rate of $60 million over three years. Unless Arrieta erupts for another Cy Young-caliber season or melts down due to injury or ineffectiveness in 2019, the parties appear headed for a November 2019 staredown regarding their respective decisions.

Nevertheless, among the names listed above, the Phillies won’t be hamstrung due to their future guarantees.

Moving to arbitration, the Phillies feature some significant likely expenditures, particularly as ace Aaron Nola and slugging third baseman Maikel Franco age through raises. Franco may represent a tough non-tender decision in future years if he continues to struggle getting on base, but for now, he has age, power, and pedigree on his side, justifying his $5.1 million figure.

It is overwhelmingly likely that Bour is non-tendered or traded given the presence of Santana and Hoskins. Altherr and Garcia could also be non-tendered, though taking them out of the salary table results in relatively little change to spending from a team-wide perspective.

What Does Team Leadership Have to Say?

This will likely come as little surprise: despite clamoring for continued financial flexibility into the future, Klentak admitted that the Phillies have the wherewithal to make a significant addition to payroll in 2019. Addressing the media at the general manager meetings in early November, Klentak stated, “It’s a pretty bad feeling to go into an offseason knowing that you have things you need to address and not having the financial resources to do it because your money is tied up in players. I don’t think we ever want to put ourselves in that position. But some players are going to demand more than three-year contracts, and we have to be open to that. If it makes sense, we can do it. This is a franchise that carried big payrolls for a long, long time. We will likely get back to that again.”

Middleton provided a similar directive from ownership last offseason, offering that, , “[y]eah, I think we’re close. They [the front office] came to us with a budget, and we said, ’Guys, if you want to put that number in for the budget, that’s fine, but don’t live with that. If something comes up, and it breaks the bank relative to the budget, and you don’t pursue it, we’re going to be upset.’ And they know that.” In an era where ownership frequently addresses the need to cut costs and operate efficiently, such an admission from Middleton is startling, even if it occurred nearly a year ago.

There is one final consideration that requires mention here: attendance. The Phillies regularly sported attendance figures just shy of two millions visitors each year until they opened Citizens Bank Park in 2004. Attendance figures ballooned to 3.25 million that year, dipping to about 2.7 million in each of 2005 and 2006 before climbing over the three million threshold again in 2007 and staying there through 2013, peaking at 3.777 million in 2010. From 2014 onward, however, attendance has tumbled back to the 1.8 million to 2.4 million territory.

Are the Phillies a Player for Bryce Harper or Manny Machado?

For some teams, this will be a really interesting examination. For the Phillies, it isn’t: they’re definitely players for Harper and Machado, and from a purely financial perspective, it’s within the realm of possibility that they could be contenders to sign both young stars. That said, there has been no indication to date that ownership or management is mulling such an unprecedented dual pursuit of both talents.

What Will the 2019 Payroll Be?

It’s worth providing what is likely an obvious disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

Nevertheless, there are numerous reasons to expect the Phillies to spend and to spend big this winter. Between Nola, Nick Pivetta, Vince Velasquez, Zach Eflin, and Arrieta, the Phillies already have a cheap, controllable playoff rotation in-house before considering possible contributions from bounce-back candidate Jerad Eickhoff and the late-season prospect arrivals of the much-hyped Sixto Sanchez and Adonis Medina.

The position player talent, however, is another story. Philadelphia’s team-wide wRC+ of 91 last year ranked 21st in baseball, narrowly ahead of the lowly Rangers and Royals. For a team looking to make the jump to postseason contention, the Phillies are in desperate need of an offensive jolt and it isn’t coming from the farm unless 2017 top pick outfielder Adam Haseley finds a way to bring his plus on-base skills up from Double-A despite a low-power profile.

Taken in the aggregate, the above shows that the Phillies:

1. have a significant need for an impact bat or two,
2. can afford to stick that bat (or bats) at just about any defensive position outside of first base,
3. have traditionally carried significantly weightier payrolls than they have in recent years,
4. possess an ownership group and front office ready to take the plunge into big-spending territory,
5. feature a roster loaded with young talent that is traditionally supplemented by veteran talent for winners, and
6. have a front office that needs to win now to stick around.

Add it all up and the Phillies are going to spend and spend big. Whether through free agency or the absorption of significant liabilities on the trade market, payroll is going to climb in a meaningful way. It’s unlikely that payroll reaches the heights of the earlier part of this decade ($170 million plus) in one year as that type of one-year spending jump is a rarity, but I expect that Philadelphia will get close. The projections below assume that Bour is non-tendered/traded and that Franco is shipped out should the Phillies add Machado to take his job. Things could get significantly more interesting if the Phillies succeed in their quest to ship out Santana and perhaps Hernandez, utilizing Kingery and J.P. Crawford up the middle. The available space could grow in a big way if Klentak chooses to go that route. The below assumes that both Santana and Hernandez stay.

Projected 2019 Payroll: $155-165 million

Projected 2019 Payroll Space: $52.25 million to $62.25 million