Though the rule 4 amateur draft may not receive as much national publicity as, say, the NFL variety, its importance is certainly understood in baseball circles. In an age where massive payroll disparities exist between franchises, the easiest way for financially-challenged teams – like the San Diego Padres — to compete is to out-draft, and out-develop, the big spenders.

Developing home grown talent is vital because a players first six years are spent under team control, at a tremendously discounted rate. Let us take, for example, an average player and estimate how much surplus value he’ll accrue in his first six years under team-control:

To clarify, we have an average (2 WAR) player. His Free Agent salary is estimated by multiplying his WAR by the marginal value of a win (~$4.5M in 2012 and escalating $.5M each year). His actual salary is estimated by near-minimum totals for his first three years, and then using the 40%-60%-80% scale, which models how much arbitration-eligible players are paid, when compared to their FA value.

So, if a team can draft and develop an average player, not at all a superstar, it is looking at $40+ million in surplus value over the players first six years – in other words, a tremendous asset to the organization. This is a player that will provide three years of average play for peanuts, and then another three years of average play at 60% of his market value. Overall, this club gets $69 million worth of production for $25.3 million. Add in a signing bonus, minor league salaries, and some developmental fees, and you’re still looking at a great value.

If a team can draft a star player like Evan Longoria, well, it is that much better off. Longoria has already netted the Rays some $50+ million in surplus value in his first two seasons. The Rays went on to sign Longoria to an extension that could be worth $44 million over nine years. They have their cornerstone player locked up at a very reasonable price, thanks to the draft and MLB’s salary dynamics.

Dollars and sense

The draft might sound perfect for its efforts in leveling the playing field between big market and small market franchises. That is its intent, but there is at least one small problem. There is no slot-requirement, and some players that may be top talents are bypassed by small market teams because of signability issues – teams are concerned that, after drafting the player, they won’t be able to sign him to a deal.

A good example is the 2007 draft. Back in the infancy of this blog, as Rick Porcello continued to go unselected (due to aforementioned $ concerns, not talent) , I was hoping the Padres would pick him at #23. The Padres passed, taking Nick Schmidt, who signed at estimated slot money — $1.26 million. Porcello fell into the hands of the Tigers five picks later, who signed for $3.58 million — $2.4 million above slot-recommendation.

Of course, I understood that the Padres were unlikely to take Porcello. After all, they weren’t the only team that passed on him, and they didn’t exactly have that kind of money to throw at a prep pitcher – even, a very good one. However, my theory went that, yes, they would be spending a few million dollars more than desired, but the potential value Porcello could provide later on would be well worth it.

Porcello debuted with the Tigers last year and, conveniently for this article, delivered a league-average season (1.9 WAR). He was worth approximately $8 million in surplus value. He has struggled a bit this season, but his peripheral numbers actually look fine (sans the K-rate), and the Tigers have a solid pitcher locked up under team-control.

It doesn’t work like that every time, kid

The draft is an inherently risky process. Trying to evaluate young players and project what they will become in four or five years is both art and science – and a lot of headaches. Sure, there’s a correlation between draft slot and WAR, but it isn’t a great one. There are no-brainers (A-Rod, Longoria, Strasburg), but there are also countless busts (ie, no-brainers that didn’t work out). The obligatory Matt Bush mentioned comes now.

The Padres may very well have thrown $3.6 million Rich Porcello’s way, if they knew exactly how he was going to develop. But, perhaps their analysis concluded that there was, maybe, a 40% or 50% chance that he wouldn’t give them any MLB value. In the end, maybe he was too risky. Nobody wants $3.6 million to go to waste, especially when there are plenty of other attractive options to choose from.

The draft is critical for all teams. But if the Padres – and other small-mid-level market teams – want to compete, it is almost essential that they draft and develop well. Producing home grown players would give the Padres a (cheap) core to build around, allowing them to add to it with some good trade acquisitions and solid free agent signings. The past era of Padres baseball has been filled with a mixed bag of drafts – some good, a lot not so good. But overall, they missed out too many times when they had a plethora of high picks.

It is critical that this regime not only evaluate talent well, but also not be afraid to spend the extra dollar. If the Padres are confident in their ability to evaluate a draft class – and they should be, with all the brainpower in the front office – then they shouldn’t be worried about spending that extra money. In the long run, it will be money well spent.

“At some point, ownership has to lead the revenue,” Gerut said. “It doesn’t always occur where your players first start to win and then you start to build around it. Sometimes the ownership has to lead that first. There’s ancillary stuff that I probably know nothing about. I know sometimes that if you build it, fans will come. It doesn’t always have to work out the other way. You don’t always have to get guys at absolute steals in order to keep them.” – Jody Gerut, in a FanHouse article by Tom Krasovic

As the San Diego Padres have continued to surprise the baseball world with a National League best 28-18 record, the near constant questions of Adrian Gonzalez’s future have calmed. He’s a Padre, for now, and not many people are thinking about a deadline deal at this point. Gonzalez is still working on a fantastic – from San Diego’s perspective — four year, $9.5 Million deal, and is signed for $4.5M this year. The San Diego Padres have a $5.7M option for next year, which is the biggest no-brainer in all of baseball.

So, there is no rush. However, in terms of trade value, as each day passes, Gonzalez loses some. It all about surplus value – the value that a player brings in above and beyond what he is being paid. The two aspects that determine surplus value, then, are performance and salary. Take a look at the chart, an estimation of Gonzalez’s surplus value through the remainder of his contract:

I’m estimating Gonzalez as a 4.8 WAR player, currently, based on his performance since 2007. One could argue either way, but I think it is good enough for blog-work. Using $3.5M per marginal win in 2010 and $4M in 2011, we can estimate Gonzalez’s value on the free agent market ($10.9M for the rest of this season and $19.2 for all of next year). His surplus value is the difference between his estimated free agent worth and his actual contract, which comes out to $21.3M.

Read the rest of this entry »

by Myron Logan

On Friday, Jed Hoyer and the Padres signed veteran catcher Yorvit Torrealba to a one year, $1.25 million deal, with a mutual option in 2011.

Assuming $3.5 million per win, the Padres are paying Torrealba like a .3-.4 WAR player. That is probably a slight bargain for Torrealba, who, as a part time catcher, has averaged about .8 WAR a year over the last three years.

While the contract is fine and Torreabla actually adds something at catcher for the Pads, he’s obviously by no means a difference maker.  He’ll be 32 years old and his wOBA has hovered around .300 in hitter-friendly Colorado. He hits the ball on the ground a lot — about 55% of the time — which might help to ease the transition to Petco, though generally is not a good sign for a slow-moving catcher.

What has to be applauded about the deal, though, is that rather than overpaying for a veteran catcher, Hoyer and company, if anything, underpaid on the free agent market. You could argue, like I have before, that they would have been better off going with someone making the minimum, and putting the $1.25M to use elsewhere. But, if it’s going to be spent on this year’s roster, at least it is being spent effectively.

by Myron Logan

Daniel analyzed the Jon Garland signing earlier, concluding:

Expected to perform at a $7MM level for only $5.3MM, Garland provides surplus value, at a position of need.  Not a bad signing.

Daniel is of course spot-on, and his approach to evaluating the deal is precisely how I would have looked at it. However, consider the question Aaron asked in today’s chat:

Why do you guys always use WAR as a universal stat. Aren’t wins worth more or less to different teams?

He makes a great point. A marginal win has a different value for each franchise. It is something that I’ve talked about along time ago, but neglected all too often. Let’s just consider one aspect; the team’s placement on the win curve. And just for the purposes of this post, let’s say the Padres were projected to win 79 games before acquiring Jon Garland. If you look at the chart in that linked post — Nate Silver’s wonderful research –a projected 79 win team has about a 12% chance of making the playoffs.

If we say that Garland’s addition adds two wins to the Padres projection, now they are an 81 win team. That increases their playoff chances by 6% — to a whopping 18%. If a playoff berth is worth $30 million — again, according to Silver, though obviously that figure is dated — Garland gets a $1.8 million playoff bonus. Now, are those two extra wins that he’s adding worth that remaining $3.5 million — the difference between Garland’s salary and the playoff bonus — without consider their impact on San Diego’s playoff chances.

Though Garland’s deal may have been a relative bargain, even in this year’s free agent market, the Padres are still paying a premium for his services. Due to his free agent status, and the fact that all teams can bid on him, his salary gets a major bump. Would the $5.3M the Padres gave Garland be better utilized on, say, locking up young players currently on the roster, future draft pick signing bonuses, international signings, and improving the scouting, player development, and analysis departments?

I don’t know the answer, but I think that consideration is definitely warranted. It is tough to criticize the Padres when they actually do spend money, putting them into a classic “damned if ya do, damned if ya don’t” situation. That said, their payroll sat at a mere $33 million before Garland’s acquisition, clearly showing that they are not necessarily trying to compete this season. Does it make sense to spend 13% of the payroll on one player, one player who likely is not going to change the season’s ultimate fate? Should they even be competing on the free agent market at this point?

Seriously, I ask questions because I don’t know the answers. $5.3 million is not going to cripple the franchise, but I’m just wondering if it could have been better spent elsewhere.

by Daniel Gettinger

Pitcher Jon Garland and the Padres have agreed to what is essentially a one-year deal worth $5.3MM guaranteed.   (Note: There is actually a mutual option for a second year at $6.75MM with a $600K buyout).

Garland has been consistently durable and has posted consistently average performances throughout his career.  He is a low strikeout guy, who gets away with a lack of stuff by minimizing his walks and homeruns allowed. Since 2002 Garland has thrown no fewer than 191 innings in any season, while posting WARs between 2 and 4.

The projections that are out are pretty much in agreement on Garland.  He is expected to produce a FIP around 4.5 in about 190 innings.  That is solid, valuable performance, and worth approximately 2 wins ($7MM) above replacement.

Garland takes the place of the Padres previously unnamed fifth starter.  Instead of running Stauffer, LeBlanc, or some other replacement type player currently in the Padres system, the Padres can throw Garland. If someone else in the system steps up, the team will probably be able to deal Garland to a different team.

Expected to perform at a $7MM level for only $5.3MM, Garland provides surplus value, at a position of need.  Not a bad signing.

by Myron Logan

It was reported today that Kevin Kouzmanoff reached a $3.1 million deal with Oakland, avoiding arbitration.

Kouz is in his first year of arbitration, so, using Tango’s 40-60-80 rule, he should be expected to make about 40% of his free agent value. As we’ve discussed recently, Kouzmanoff has been very consistent, sitting right around 2.7 WAR for the last three years (via FanGraphs). Conservatively, let’s project him a 2.5 WAR this year with Oakland.

Now what we need is a dollars per win value, the amount teams are paying for wins on the free agent market. Previously, that number sat in the mid-to-high fours, and was rising 10% each year due to inflation. With the economic downfall, however, the market has corrected itself with teams now paying less money per win. Tangotiger informed me that he is using a $3.5 million value this year (increasing by .5M each year, going forward).

That means, on the free agent market, Kouz should make about $8.75M. Multiply that by 40% and we get $3.5M. It looks like the A’s got a pretty good deal, especially considering Kouzmanoff brings a gold glove reputation to the table that probably is not deserved.

Projecting out Kouz’s long term value, in terms of how much the A’s are saving over having to replace his performance on the free agent market, now looks like this:

Due to the lower dollar/win value, Kouzmanoff’s projected value falls about $3 million from my previous look.

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Corey Brock reported that the Padres could not reach an agreement with arbitration-eligible Scott Hairston today. Hairston is seeking $2.9 million, while the Padres come in at $2.1M. What is a fair price for Hairston? First we have to peg his value on the field, and that is a bit of a challenge since he’s been a role player for a while now, and has not logged a ton of PAs. His WAR values have hovered between 1.4 and 1.8 over the last three years; let’s go with 1.5 for this year.

On the free agent market, Hairston should make somewhere around $5.25M (1.5*$3.5) in 2010. Since he’s in his second year of arbitration, we estimate that he should make 60% of his free agent value, or $3.15. If the Padres get a deal done somewhere close to Hairston’s proposed 2.9M, they won’t be hurting themselves. Here is Hairston’s chart over the next two years in which he is under Padres control:

As I mentioned in the post on the trade, one of the reasons Kouzmanoff has a lot more surplus value than Hairston is because he is under team control for an extra year. The other, of course, is that he’s a better overall player.

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The Padres also reached a one year deal with Mike Adams that will pay the rightly reliever $1 million in 2010. Adams has done just about all you can ask in the majors, though he has only logged 171 MLB innings since 2004. His career ERA of 2.54 is tremendous, and he got it down under one last year. His peripherals – 9.1 K/9, 2.8 BB/9, .8 HR/9 – are also sparkling.

Of course, relievers are hard to project, especially ones that throw as few major league innings as Adams has. If we, I think somewhat optimistically, call him a 1 WAR player this year, he would be expected to earn $3.5 on the free agent market. Since he’s in his first year of arbitration, we multiply that figure by 40% and get $1.4M.

$1 million is not a steal by any means, but it looks like the Padres got a decent enough deal here. And, really, you can’t go wrong when you have a reliever with Adams’ ability and you’re only paying him $1 million on a one year deal. Worst case scenario, Adams gets injured and/or is completely ineffective and you lose $1 million. Best case, he repeats his past recent performance, and logs a lot of high leverage innings in front of Heath Bell.

by Daniel Gettinger

Following their trade for Scott Hairston, the Padres decided to double down on Hairston’s and sign his brother Jerry.

Jerry Hairston is one of the more versatile players in baseball, capable of playing every position on the field, and seemingly doing so pretty well.  Over his career, Hairston has an above average UZR at every position except for SS and 3B.  Of course, he does not have enough innings logged at some of those positions (including 3B and SS) to really be sure about his defensive ability at particular positions.  Overall though, he appears to be a very good fielder who can at least hold his own at any position.

Fielding and versatility is what keeps Hairston in the majors.  With the exception of a flukey 2008 campaign with the Reds, Hairston has been a below average hitter.  He projects to be a below average hitter in 2010 as well, with the projection systems on fangraphs pegging him to be between 4 and 5 runs below average in about 340 plate appearances.

Hairston signed a 1-year $2.12 million deal.  His solid fielding and versatility should help the Padres, but he is unlikely to greatly outperform his salary.  While the signing makes sense, it is tough to get too excited about the addition of a weak hitting utility player.

by Myron Logan

According to Corey Brock, the Padres and Heath Bell have come to a one year deal worth $4 million, avoiding arbitration. The Padres closer, who made just over $1.25 million last season, gets a large (and well-deserved) pay increase. Bell, 32 years old, is under San Diego’s control through 2011.

Since joining the Padres in 2006, Bell has posted a 2.72 ERA in 241 innings, striking out 252 batters and allowing just 11 home runs. According to FanGraphs, Bell has been worth about $23 million over the last three years (on the free market), while making just over $2 million. While he should easily be worth more than $4 million in 2010, the gap between his free market value and actual salary should begin its decline phase.

by Myron Logan

There were some rumblings that the Padres were going to non-tender Kevin Correia, arguably their most valuable pitcher from a year ago, allowing him to become a free agent. However, the Pads reached a one year deal with Correia yesterday worth “about $3.6 million,” according to Corey Brock. Let’s take a look at some of Correia’s numbers, courtesy of FanGraphs:

In 2006 and ‘07, Correia was primarily a reliever with the Giants. 2008 was his first year as a full time starter, and obviously it did not go well. His fastball velocity, according to BIS, dropped about 1-2 MPH, perhaps contributing to the poor results. His strikeout rate declined and his homer rate increased, however, his BABiP was an abnormally high .340 – well above his career norm, which usually hovers around .300.

Last year with the Padres, Correia regained a couple of miles per hour on his fastball (and the rest of his pitches), saw an increase in his strikeout rate, a decrease in walks and homers, and put forth an all-around solid, if not spectacular, year. He was worth 2.4 Wins Above Replacement, by FanGraphs’ calculations, which easily led Padres starters.

Daniel was right on the money when he said that, “non-tendering Kevin Correia makes no sense.” It is not that Correia is a great pitcher; he is just too good of a player to let leave for nothing, and as Daniel says, he is not yet expected to be paid more than he is worth. Let’s take a closer look, though.

The projection systems are pegging Correia as about a 3.90-4.10 ERA pitcher next year, with a decrease in innings pitched. If we, somewhat conservatively, call him a 1.5 WAR pitcher, how much should he earn? Well, on the free agent market, if we put the $/WAR value at $4.4 million, we’d expect Correia to make somewhere around $6.6 million this year. If we use Tango’s 40-60-80 rule, which says a player in his last year of arbitration-eligibility should make 80% of his expected free agent value, then Correia should be paid ~$5.3 million ($6.6m * .80). That is assuming our 1.5 WAR projection; obviously that number goes up if we raise that projection, or down if we lower it.

Anyway, this appears to be a good deal for San Diego. They bring back one of their better pitchers at a reasonable price, and it is only a one year commitment. Like Daniel said, there is little risk involved here. Rather than losing a productive player and receiving nothing in return, the Padres retain Correia’s services for another year, and hold onto a potential chip who should bring some interest on the trade market.

by Daniel Gettinger

Yesterday I received a text from a friend who wrote: “Inexcusable if the Pads non-tender Correia.”

That was the first time I had heard any discussion about non-tendering Correia, and frankly, I was a bit surprised.  However, my immediate reaction was not one of anger, but instead, as I usually do, I tried to defend the possible action.

I wrote back: “Well…some guys are getting more in arbitration now than on the market, so it might make sense…[plus] its Correia we’re talking about-at best he’s an average pitcher.”

That was yesterday.  Today, after further reflection, I see no reason for the Padres to not tender Kevin Correia a contract.

The team has four options: go to arbitration with Correia, agree to a contract with Correia, trade Correia, or let him leave for nothing.  Because Correia is a good bet to provide at least some value in excess of his contract in 2010, Correia is indeed tradeable, and the “let him leave for nothing” option is strictly dominated.

Last season, Correia threw nearly 200 innings, and had a 3.91 ERA and a 3.81 FIP.  Fangraphs valued him at 2.4 wins above replacement, and nearly $11M.  With incentives, Correia made about $1M.  No matter how you break it down, Correia was a valuable pitcher.

The problem of course is that Correia had never before been such a valuable pitcher, and expecting the same type of production is probably a bit optimistic…or is it?

Bill James projects a 4.23 ERA in 217 innings for Correia.   Zips has Correia pegged for a 3.93 ERA in 171 innings.  Basically, both Zips and James project Correia to be a bit above league average, just like last season.  I personally see Correia as no better than an average pitcher, but that is still very valuable, especially to a team like the Padres that does not currently have many (if any) pitchers projected to be much better than average.  Lets say, just for the sake of argument, that Correia will be a 2 WAR pitcher in 2010, valuing him around $9M.

Reports are Correia wants to be paid between $3M and $4M.  Meanwhile, the Padres want to pay him something closer to $2M.  In either case, Correia’s expected production exceeds his salary.  Not tendering Correia a contract makes no sense.  If the team cannot afford the $3M or $4M it might take to employ Correia, they should trade him to a team that can.

Doing so will allow the team to get something, rather than nothing for Correia.  In fact, they could probably get something decent.  The argument that the Padres would have no leverage in trade negotiations is irrelevant.  Assuming there are a decent amount of teams (and there are) who could benefit from adding a league average starting pitcher to their rotation, competition between teams should allow the Padres to get a fair deal for Correia.

To sum things up: the Padres should not non-tender Kevin Correia.  He is not expected to earn more money in 2010 than he is expected to produce on the field.  The Padres would benefit from either keeping Correia, or trading him to another team.  Of course, the Padres may just be using the threat of a non-tender as a negotiating ploy, making all this excitement somewhat moot.