The Orioles Have a Lot of Hard Payroll Decisions to Make

At first glance, it would seem like the O’s have a lot of long term flexibility in terms of payroll.  According to Cot’s Contracts, they are at $87M for 2017, $51.5M for 2018 and then all the way down to $30M in 2019.  That, however, is simply the amount of money we know is already committed, as these numbers necessarily do not factor in arbitration raises. In some ways, this is good: Not having a lot of money committed long term should allow for greater flexibility to sign extensions with current players or to go out and get free agents.

The flip side is that much of the team is only under control for two more seasons.  Here’s a list of current players who will not be under team control in 2019 as of today:

Adam Jones

Matt Wieters

Brad Brach

Zach Britton

Mark Trumbo

Yovani Gallardo

Chris Tillman

Hyun-Soo Kim

Dylan Bundy

Ryan Flaherty

JJ Hardy

Oh, and a guy you have maybe heard of.  He’s having a pretty good year.  Young shortstop, used to play third, punched a guy in the face a little while back…

The point here is not to say that the team will look different in 2019, because that’s obviously true for many teams.  The issue is that the entire core of the current team will not be guaranteed to be in Baltimore in just three seasons.  Even in 2018, the only players who are under team control from the above list are Manny Machado, Jones, and Britton.

So, what’s a road map for the team in terms of payroll going forward?  Everything should start and stop with Machado.  He’s the biggest and most important domino and the future of the franchise is largely based on whether the Orioles can retain him.  Let’s say, for the sake of this post, that the O’s can sign Machado to an extension after the 2016 season.  Let’s also say he gets something similar to what Jon Shepard proposed: 10 years, $400M, with an opt out after year 5.  Assuming there is some money deferred, I'd estimate Machado will be around a $35M per year payroll number.

Under this scenario, a Machado extension would raise the total committed payroll in 2017 to $122M, which does not include salaries for Tillman, Britton, Gausman, Brach, Caleb Joseph, or Jonathan Schoop.  Combined, those players made just over $16M in 2016.  That number could easily double in 2017.  If it does, the payroll would then be at a record high of $150M, and that does not include other, smaller arb raises, not to mention possibly re-signing someone like Trumbo, Wieters, Alvarez, etc.  If the O’s need to make moves in free agency, just inking a big Machado extension will easily push the club into the top 6 or 7 payrolls in baseball (potentially even top 5) with little to no improvement in terms of actual players. Perhaps Machado takes a reduced salary for the first year or two which will be made up in subsequent seasons, but even so, it is very difficult to imagine the O’s not running a $150M+ payroll in 2017 that may not even include their current starting catcher, RF, and DH.  

Things calm down a bit in 2018.  Ubaldo Jimenez’s deal will be off the books, as will Hardy’s and Gallardo’s (though it will require $4M total to buy them out, which is the most likely outcome).  That represents a savings of over $35M.  The problem there is that Tillman will be a free agent and will probably command a $15-20M commitment per season.  If he leaves in free agency, the rotation could be something like Gausman and... well, the rest is unclear.  It also means that the team would likely need a third baseman, a left fielder, a right fielder, and possibly a catcher.  That’s a lot of holes when you consider that, even with some big contracts coming off the books, the payroll will be around $100M (with the theoretical Machado extension) without any of those positions being filled.  This is also not taking into account potential extensions for guys like Gausman, Schoop, Bundy, etc.  

There are, of course, players that could plug these holes that are currently in the system. By 2018, Chance Sisco should be in line to make his debut. Perhaps Trey Mancini moves to the outfield or becomes a DH. DJ Stewart has had a slow start to his professional career, but as a former first round pick there's a chance he is ready to contribute in two seasons. Jomar Reyes will still only be 21 years old, but he is consistently ranked among the team's top prospects and could be in a position to move up to the big club. Pitchers like Cody Sedlock, Chris Lee, Tanner Scott, Hunter Harvey, and David Hess could be knocking on the door for the rotation as well. All of these players, however, come with the inherent risk and unpredictability of being prospects and they will almost certainly not all pan out. The O's will need to rely on their farm system to fill some of the holes on the big league roster for sure, but they will also need to go out of the organization as well.

So, what’s the solution?  It’s honestly hard to see one with the current roster and payroll.  A Machado extension after 2016 (which seems like the most likely time for it to occur, if ever) will require a huge payroll jump in both the short and medium term if the Orioles want to keep the team together.  For a team that, prior to 2016, has traditionally been closer to the middle than the top of payroll rankings this would require a pretty significant shift in philosophy.  Depending on what happens the rest of this season, perhaps they simply throw caution to the wind and go all out for 2017 but the potential repercussions of that kind of approach could be drastic.

The alternative would be to sign Machado and simultaneously rebuild by trading guys like Britton, Tillman, Gallardo, O’Day, and maybe even Adam Jones to get younger and cheaper, and in so doing build around Machado, Davis and a new crop of prospects to go along with what they currently have in the minors.

Of course, the third and most treacherous path (one that many O’s fans don’t want to contemplate) is to trade Machado for a huge haul in prospects.  To me, though, that would only be viable if they also dealt the rest of their core players as well and went into a total rebuild.  Additionally, the longer they wait the less trade value Machado will have.  Teams will certainly line up to try and trade for Machado, but the price tag would necessarily go down the closer he is to free agency and one of the biggest contracts in history.  Essentially, the O’s need to make the decision on Machado by the end of this season in order to put a plan in place to either go for broke or to rebuild and re-tool.

To me, the most viable path forward for the team to remain competitive long term is to sign Machado and rebuild at the same time.  It seems unrealistic to assume that the O’s will spend $150M+ every year, and trying to keep the current team together will absolutely cost that much and is likely to cost more.  The front office has been surprisingly liberal (at times) regarding payroll issues, so perhaps this analysis is not giving enough credit to the idea that the Orioles will do whatever it takes to win a World Series.  It would not be entirely dissimilar to what the Tigers have done for the past five or so seasons, and with some clever contract structuring it might not have to be a long term disaster.  

In the end, the Orioles are going to have to make some very difficult decisions regarding the roster and payroll in the very near future.  I see this as a feather in the team’s cap.  Without spending on ridiculous free agent contracts they have built a team that has become so good that it is almost too expensive, but their success may be the impetus for pretty drastic roster changes.  Just another reason to win the World Series this year.