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Locking Up(ton) Justin

I was inspired to write this piece by a recent article on dbacks.com, which detailed that the front office is working on extensions for not just Mark Reynolds, but also toying with the idea of trying to assemble the type of massive contract that would be needed to extend Justin Upton and buy out one or two of his free agent years in return for some stability.  So I thought to myself: what type of contract would be necessary to actually lock up Justin Upton for the long-term in Arizona, and how on earth could we assemble the financial structuring to allow us to do so?  And then I had an idea that, while admittedly strange, appears to work (if MLB contract rules would allow for it, of course, although I can't claim to be informed on their intricacies).

First, though, I'll outline the entire situation as I see it.  Year-to-year, Upton's arbitration would be as groundbreaking as Tim Lincecum's was supposed to be, provided Upton stays healthy.  Given that Lincecum only filed for $13M, I see that as a good figure to designate as Upton's ceiling at his first arbitration filing.  It at least makes sense to me that a one-time All-Star would make a little less than a two-time Cy Young winner, regardless of potential.

So here’s where things get interesting as we begin trying to structure a long-term contract.  Perhaps the key component of this possibility is the fact that we’re locked in to giving Upton the minimum for this year, which allows us to dangle a lot of shiny dollars and long-term security in front of him as soon as possible to try to entice him to take a significantly undervalued contract based on what people expect for him to become.  The next thing I looked at was the recent two-year contract extension granted Tim Lincecum.  It was a pretty weak play when rumors were throwing out $20M for his filing, but while we may have wanted to see the Giants stuck with that burden, the fact that he took so much less is probably going to help us in a big way with the Upton negotiations and arbitration filings.  Considering the fact that his resume is less impressive that Lincecum’s, if you are looking at a long-term contract for Upton, its value held in the first two arbitration years shouldn’t exceed the $23M given to Lincecum in his recent two-year extension.  It’ll certainly be close though, and for the sake of this exercise I’ll make it very close, at $20-22M, since you can expect Upton to get comparable money than Ryan Howard’s $10M arbitration win, even with the long-term contract discount.

Next, you’ll have one more arbitration year.  This one is also a bit dicey.  You can certainly expect a raise, but the raise within a long-term deal would be reduced because of the guarantee of money.  Year-to-year, I could see Upton getting past $15M in his final arbitration year, but with a long-term deal, I don’t think he will.  I’d imagine that that discount will make that last arbitration year somewhere between $13-15M.  And then the free agent years begin, as do the hellish parts of this contract.  You have to imagine that these years will start at $18-20M and rise for each year bought out in the contract.  It’s certainly discounted from what he possibly could make, but the fact of the matter is that these years are five and six years down the road, and Upton is 22 years old.  We can’t know for sure what we’re paying for, so it’s not going to be top-level free-agent money along the likes of Alex Rodriguez or CC Sabathia, even though Upton could certainly rival them in value by the end of the arbitration years within the contract).

Of course, if you do this, you crown him as a HOF guy and face of the franchise.  Thus, if it fails, you effectively end your team's hopes for half a decade.  And yet, it could be a bargain if he ends up being worth A-Rod money ($30M per) within the life of the contract and you retain him an extra year or two.  But with Lincecum setting the standard, and with the figures above used as base points, a five-year deal is going to cost about $51-57M, and a six-year deal I'd put from $71-79M.  Obviously these estimates are from someone completely outside the negotiation process and a wild estimate, but I think it’s a nice reference point to have.

Now we move on to the big question – how is this going to get done, and further, is it worth it with this team's budget constraints and with the history we have of extensions failing?  There are other concerns to consider, such as: 1) What money would be left for Reynolds?  2) How much of a signing bonus can we afford to give Upton?  & 3) When would the salaries and/or roster bonuses be paid to him?

So the first question I see to ask is this – when will we have money available in the near or distant future in conjunction with our plans to contend?  Obviously, a lot of money has gone into 2010 as a contention year.  But as we all know, a lot of money is coming off of the books after the 2010 season in free agents, and this is where I see some room for creativity.  To list the potential free agents and terminating salary obligations:

2010-2011 Free Agents

2010 Buyouts

  • Adam LaRoche ($3M net decrease in payment after buyout payment if mutual option is declined)
  • Bob Howry ($1.75M net decrease in payment after buyout payment if club option is declined).

2009 Buyout Payments

That's $35.585M to throw around in 2011, which is a lot of money, even after arbitration raises for other players and a Reynolds contract with the FO saying it is going to grow the budget.  This can even be further expanded by trading a player like Stephen Drew, who is going to hit his second year of arbitration after making $3.4M in 2010.  Also, trading Chris Snyder, who is making $4.6M in 2010, would free us from a $5.75M obligation for 2011.

Of course, dumping all of these free agents requires a certain mindset – that 2011 is a wasted year, and would require the use of minimum-salary prospects filling multiple holes.  You would need:

  • A starting pitcher from the Augenstein/Mulvey/Enright/Valdez quartet (assuming Buckner is in the rotation in 2010) to be the fifth starter in 2010, with Edwin Jackson filling Webb’s 2 spot, Ian Kennedy filling Jackson’s 3 spot, and Billy Buckner filling Kennedy’s 4 spot.
  • Three relief arms to replace Qualls, Heilman, and Howry – Where things could get interesting.  One of them is likely Esmerling Vasquez.  If we can find a way to retain him through 2010 despite not having him in the majors, another could be Leo Rosales.  But you’ll still need to find another arm, hopefully a lefty.  The two primary candidates that come to mind are Leyson Septimo and Jordan Norberto, although both have issues to work out, with Tom Layne as a possibility if we don’t want to keep him as a starter.  Or you could downsize the bullpen and add a Cole Gillespie type bat to the group.  Or you could just pick up Howry's option if you're not comfortable with any of the tertiary options.  There are possibilities abound here.
  • A first-baseman, where hopefully we’ll have Brandon Allen chomping at the bit to get back to the majors.
  • Finally, possible replacements for Drew and/or Snyder if they are traded, likely Pedro Ciriaco and John Hester – frankly, whether or not Drew and/or Snyder get traded could depend more on the prospects’ performance than anything.

So at the very least we have prospects near the upper levels who could play in the majors without being complete embarrassments.  Not the best-sounding idea in history, I know, especially with regards to the rotation.

But if we’re comfortable with this idea, we can structure Upton’s contract to have an absolutely absurd roster bonus after the 2011 season.  Think $30M+ on top of a salary.  If you subtract $30M from a five-year deal’s structure, you have approximately $21-27M to pay out over the course of the five years in the deal (although there likely would not be a huge raise in 2010 with our budget already bloated).  If you subtract it from a six-year deal’s structure, you have approximately $41-49M to pay out over the course of the six years in the deal. 

And that’s not taking into account the fact that giving Upton such an absurd bonus so quickly could also entice him to lower his overall asking price.  If we wanted to make the contract more aesthetically-pleasing (and if he has thick agents), we could play a little financial trick by removing that entire payment from the 2011 payroll, and deferring it to the back part of the contract to bloat the last year's payroll, then find a way to invest all of that money so we can hand Upton a fat bag of interest at the end of the deal to raise the overall lump value of the deal.

If this can happen, we would be able to build for 2012-2015 with extra pieces like Parker, Allen, Borchering, Davidson, Pollock, Wheeler, and Belfiore, while Upton is making a relatively paltry amount of money in salary for his expected ability around an already-existing core of Dan Haren, Mark Reynolds, Miguel Montero, Chris Young, Conor Jackson, Ian Kennedy, Juan Gutierrez, Clay Zavada, Tony Abreu, Brandon Allen, etc.  That's a mighty fine four year window of possible success, which is all you can really ask for when you're a small-money team like the Diamondbacks.  It’s a weird, uncomfortable idea for a weird, uncomfortable situation, but if we can really accept a beat-down in 2011, I believe we could really position ourselves nicely by locking up a superstar.