St. Louis Cardinals: How Will the Cardinals Fill Their Third Base Hole?

Financials: How much money have the St. Louis Cardinals committed to the payroll?

There are a lot of moving parts that figure into how much the St. Louis Cardinals can afford to spend over the next few years. These parts include growing revenues, a new TV deal, arbitration projections, contract extension projections, and other payroll-related items. I’ll start by looking at the team’s payroll. Keep in mind that many of these numbers are estimates.

With payroll, the easiest part is current contracts, which are available at Spotrac and Baseball Reference. The next step involves players under team control, including renewable contracts and arbitration-eligible players. For renewable contracts, I assume the team will fill contracts at the league minimums under the new CBA, available here.

For arbitration-eligible players, the process is a little more muddy. First, I use $/fWAR to value how much a player is worth in a given season. I start with the generally accepted $8.5M/WAR for this offseason, and grow that rate at 5.5%, based on an analysis of opening day payroll inflation. While this $/WAR method is not perfect, it is a sound proxy to employ for this type of analysis.

For arbitration-eligible players who have signed a deal for 2017, I use the 25/40/62 rule to estimate their value in the free agent market once eligible, and discount that value to a projected dollar amount for each arbitration eligible season. If these players will reach free agency in 2019 or before, I use that implied free agent value if I expect the St. Louis Cardinals to keep that player once they are no longer under team control.

For players who are not arbitration-eligible this offseason, but will be in 2018 or 2019, I use Steamer Projections and an average aging curve to determine that player’s value in his first season of free agent eligibility.

For Aledmys Diaz, whose arbitration eligibility starts after his current contract expires, I assume the St. Louis Cardinals renew his deal at the same amount as his current deal, $2.5M. For Michael Wacha, I assume he gets the $3.2M he filed for, and determine his future salaries based on that amount.

I project two contract extensions over this period, both beginning in 2019. Using the aforementioned $/WAR and average aging curve, I predict the St. Louis Cardinals extend Adam Wainwright and Yadier Molina at three years each, earning $11.8M and $10.1M, respectively.

I also project that some players will be non-tendered. This occurs after their projected WAR falls below zero, or they become too expensive relative to their value and opportunity cost to keep. The non-tendered player slots are highlighted in black. Notably, I do not expect Lance Lynn to be re-signed. This is mostly due to the depth of young starting pitching behind him.

I did not include every player in this payroll matrix. To fill the active roster, I assume the Cardinals will use players currently in the farm system, and thus pay the league minimum. The result is the following:

Projecting how much the St. Louis Cardinals can afford to spend.

Now that I have the payroll projections that arise from players currently in the organization, I attempt to quantify exactly how much the St. Louis Cardinals can spend on external options. The amount the front office is willing to spend can be approximated using Payroll as a % of revenue (Payroll%)

In John Mozeliak’s tenure, beginning with the 2008 season, the team has averaged a Payroll% of 53.0%. From 2008 to 2013, that number was 56.1%, but has dropped into the mid-40%’s since. This drop has led some to the conclusion that the Cardinals are “cheap” or have “gotten cheaper.”

Yet, despite this sentiment, the Cardinals front office has shown they are not averse to aggressive spending. Between Albert Pujols, David Price, and Jason Heyward, Mozeliak & co. offered nearly $700 million dollars. They’re not cheap, the players just decided to go elsewhere.

That said, 53.0% is a reasonable Payroll% to expect going forward, and 56.1% might be the aggressive limit. To see how many dollars that is, I projected team revenues over the next few years.

Over the past five seasons, the St. Louis Cardinals revenue has grown at an average of 7.9%. I will use that figure to project non-TV-deal revenues over the next five years. 2017 is the last season under the existing deal with Fox, with an expected payment of $30M.

The new deal starts in 2018 with an expected $50M payment, and ends in 2032 with an expected $86M payment. The implied annual growth rate of the deal comes in at 3.95%, so I will grow TV-deal revenue by that annual rate. The result:

The average payroll cap is essentially in line with the luxury tax threshold, which will be at $197M in 2018 and $206M in 2019. The tax rate on the amount above the threshold is 20% for first time offenders, 30% for second timers, and 50% for a third offense.

Factoring in the potential luxury tax for spending near the aggressive cap, we can figure out the dollars available, in millions, for free agency in the 2017, 2018, and 2019 seasons.

As you can see, the St. Louis Cardinals will have plenty to spend, should the two premium third base targets become available.

Elite free agents do not sign at their fair value.

The St. Louis Cardinals are not the only team who thinks twice before committing nine figures and a decade to a player. Teams do not want to tie up that much capital and risk in one player. To figure out how much a player like Machado will be paid relative to his fair free agent value, I’ve analyze how teams have executed similar deals in the past.

To determine how much teams hedge against the risk inherent in huge contracts, I compiled a comp set of players who have signed monster deals since 2009. This set includes Jason Heyward, Giancarlo Stanton, Freddie Freeman, Joey Votto, Robinson Cano, Prince Fielder, Joe Mauer, Mark Teixeira, Buster Posey, Troy Tulowitzki, and Chris Davis.

To determine these players’ fair value through free agency (and, in some cases, arbitration), I started with the player’s WAR in their last season prior to signing the new contract. I then applied an average aging curve to get their annual expected value in WAR. I used $8.5M/WAR for 2017, then accounted for inflation in future seasons and deflation for prior years using a 5.5% rate.

Next, I calculated the average discount these players had to take in their long term contracts relative to their expected value over the contract life. To better demonstrate this process, I’ve included the calculation table for Jason Heyward’s contract with the Chicago Cubs below.

The average discount percentage among the eleven players was 17.7%. In other words, on average, these players were paid 82.3% of their expected free agent value over the life of their contract. Prince Fielder and Robinson Cano were dramatically overpaid in their deals. In fact, both were paid a large premium over their projected free agent value, which skews the average discount percentage.

Taking out their contracts, in addition to the two contracts with the highest discounts, the average discount for the remaining seven players jumps to 28.5%. I will reference both of these numbers when projecting the free agent deals for Manny Machado and Josh Donaldson.

What will it take to get Manny Machado?

Manny Machado is the dream target for the St. Louis Cardinals. He will be only 26 years old at free agency. He’s a bona fide star player. He is a monster upgrade at the team’s biggest position of need, and an annual MVP candidate.

Since debuting in 2012, Machado has played in parts of five seasons, including three full campaigns. Over that time, the former shortstop prospect has solidified his place as the top defensive third baseman in the MLB.

His 70.4 Defensive Runs Above Average since 2013 ranks first among all third baseman. That rating is 16.3 runs better than the next player behind him in that span (Josh Donaldson), despite Machado playing about 900 less innings than Donaldson.

Offensively, Machado has developed into a lineup anchor. Over the last two seasons, Machado owns a .290/.351/.518 line with 72 homers, good for a 132 wRC+. Additionally, he has only a 16.4% strikeout rate, which is excellent for a player with his power.

Machado is likely to get a massive, long-term deal if he hits free agency in the 2018-19 offseason. To project his value, I use his Steamer projection for the upcoming season, and an average aging curve for each year after that. To determine a value in dollars, I use the $/WAR and inflation method described previously.

Using the average contract discount rate of 17.7%, I expect his deal to be worth $41.5M per year over ten years. This deal would likely include at least one opt out around Machado’s age-30 season. Over ten years, this contract would be worth more than $400 million. I know that sounds like a crazy amount, but you just don’t see star players hitting free agency at such a young age.

Using the contract discount rate of 28.5%, we get a slightly lower number. Yet, this contract is still worth $36 million annually and $360 million in total.

Can the St. Louis Cardinals afford either of these deals?

Based on my previous payroll projections, the Cardinals will have plenty of room. I expect them to have between $73M and $80M available, which is enough to make a run at Machado while still filling other team needs.

What about Josh Donaldson?

If the St. Louis Cardinals are unable to bring in Manny Machado, Josh Donaldson would be a great “consolation” prize. He would be another major upgrade both defensively and to the heart of the lineup. He won the AL MVP award in 2015, and received votes in every year since 2013.

As mentioned previously, Donaldson has accumulated the second most Defensive Runs Above Average since moving to third full-time in 2013. Offensively since 2013, he has hit for a .284/.375/.518 line, worth a 146 wRC+. Additionally, he has averaged more than 30 homers per season in that span. He has a comparable strikeout rate to Machado at only 17.7%, but a much better walk rate of 12.0%.

Given his high walk rate, Donaldson’s offensive profile should age relatively well. However, he will have completed his age 32 season by the time he hits free agency, so his defensive value may take a hit.  To determine Donaldson’s expected value, I again apply next year’s Steamer projection, an average aging curve, and inflation adjusted $/WAR.

Using the average discount of 17.7%, I project Donaldson to sign a six-year deal worth $29M annually and $174.1M total. Bumping the discount up to 28.5% yields a contract value of $25.2M annually and $151.3M total.

I expect the St. Louis Cardinals to have between $73M and $80M available during this offseason, so pursuing Donaldson should not be a financial issue. This deal, however, would likely take Donaldson to retirement. Given how the aging decline accelerates as players get older, there is a risk that this contract with Donaldson could be a bust.

However, since his offensive profile is one that ages well, he could very well out-produce these projections. In that case, the contract might look like a steal. The ultimate determinant of whether the St. Louis Cardinals pursue Donaldson or not is how much risk they believe the organization can tolerate.

Next: Meet Brett Cecil and his Wicked Curveball

There is reason to buy into the St. Louis Cardinals vision. The team nearly made the playoffs this past season. Further, free agent signings and better starting pitching depth will improve the team next year. Many fans believe the front office has been too hesitant to make a splash in free agency. Expect that to change in the next couple of years.