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TwinsCentric: No reason for payroll to decrease

  • Blog Post by: John Bonnes
  • October 6, 2011 - 8:09 AM

Last offseason was a disappointing one for many Twins fans – but only to those that didn’t want to pay attention to the economic realities the team faced. The Twins had a $140 million team and only had about $110 million in their budget. Indeed, when we suggested that payroll would only increase about $14 million, we were savaged. It increased about $17M and ended up being a frustrating offseason for the organization, the team and their fans.

 So what should it be this year? If you want to take an educated guess at the budget, start by looking at the salary level for the last decade (according to USAToday):

Year     Payroll             % Change

2011    $  112,737,000             +16%

2010    $   97,559,166             +49%

2009    $   65,299,266             +15%

2008    $   56,932,766             -20%

2007    $   71,439,500             +13%

2006    $   63,396,006             +13%

2005    $   56,186,000             +5%

2004    $   53,585,000             -3%

2003    $   55,505,000             +38%

2002    $   40,225,000             +67%

2001    $   24,130,000             +54%

2000    $   15,654,500     

 Pay attention to those percentages on the right. The only time that payroll has really dropped, there was a giant extenuating circumstance. Just prior to spring training in 2008, the Twins decide to trade away Johan Santana, rather than have his walk year cause a possible distraction. Santana would have made over $13M, which would have kept payroll about even. By the time they freed up that money, it couldn’t be spent on free agents, because any good free agent had already signed.

 Furthermore, those 2008 salary numbers do not include an extra $8.75M that were paid in signing bonuses to Justin Morneau and Michael Cuddyer that offseason. So even that year, it isn’t clear that the Twins planned to cut payroll. It just happened, and they took a big chunk of that leftover money and invested it in future contracts.

 That’s why, initially, I was projecting a payroll level of about $120 million this year. That represents just a 6% increase, which they have generally exceeded. However, they Twins may also need to be reserving some extra cash for the MLB June draft, in which they have the 2nd overall pick. Even a $7 million increase seemed like a conservative estimate.

 Until LaVelle E Neal’s interview with Jim Pohlad, in which Pohlad hinted it would be less than $115 million.

 I’m shocked by that revelation but more shocked by how little reaction there is to it. Really? We’re upset last year because payroll only went up 16% and this year resigned to it going down?

 For the record there is no reason the Twins payroll and revenues should be lower this year than last. A major league club’s revenue consist of two sources: local and shared. There is no evidence that shared revenue is going down by evidenced by the increase in payrolls across the board in MLB. Indeed, a higher and higher percentage of clubs revenues are coming from these shared sources such as MLB Advanced Media.

 Will local revenues go down? TV won’t – that’s a long term deal. So is radio. Ticket prices are remaining steady. Some season tickets likely won’t be renewed, but the Twins have a waiting list of 3000 names and don’t expect to get all the way through it, so that number is steady too.

 Did the team “stretch” too much last year and need to come down? Hardly. There was some evidence that they exceeded their budget when they signed Pavano to his $8M contract, but they also saved $3M by trading away Delmon Young and Jim Thome.

 The final reason I’ve heard suggested is that the Twins now need to start paying into revenue sharing instead of getting money out. Supposedly (and I have no reason to doubt these numbers too much) the Twins used to received $20 million from revenue sharing and now must pay $20 million into it.

 But here’s the thing – that’s not a $40 million shift THIS year. If the Twins were getting $20 mllion, it was back when their revenues were ludicrously low. If they’re paying $20 million this year, then they certainly paid that much last year, since it’s a reflection of the team’s local revenues. If revenue sharing wasn’t a problem in 2010 and 2011, why would it be this year?

 The suggestion that the Twins need to scale back is silly. The Twins have several of their own player that they need to re-sign – fixtures like Michael Cuddyer, Joe Nathan and Jason Kubel. And the free agent market, while thin at many hitting positions is thick with good ideas among the pitching names. The Twins can certainly use that money, and should.

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