Wednesday Rockpile: What the Tulowitzki Extension Means

Well, it's been a full day since the dual shocks of the Troy Tulowitzki extension and the well-crafted Jorge De La Rosa contract hit Rockies fans everywhere, but I'm sure that the joy?/consternation? created by these moves will take far longer than that to subside. The numbers for Tulowitzki's extension ($157.75 million guaranteed) are so huge that they demand attention from the baseball world. As such, there has been quite a bit of discussion about the Tulo contract in particular on the web.

Reactions have ranged from the strangely vitriolic (Yahoo's Jeff Passan) to dispassionate and analytical (Tangotiger, Fangraphs' Dave Cameron, and Sabernomics' JC Bradbury). There were those who were skeptical (ESPN Insider's Keith Law, ESPN's Rob Neyer) and some that were more understanding (Yahoo's 'Duk). Our own Andrew T. Fisher covered these various viewpoints very well in yesterday's Rockpile, including how these deals affect the Rockies' offseason plans. I'll be going a bit more into that topic after the jump, but first I'd like to offer my opinion of the Tulowitzki extension and explain how it represents a major paradigm shift for the entire organization.

Most everyone that I read agreed that Tulowitzki was a star top 10-20 player and probably one of the 2-3 guys in all of MLB that you would build your team around. Furthermore, they seemed to agree that he would probably be worth most if not all of his new contract as the best SS in MLB. With those opinions out of the way, there are two basic reasons I saw for not approving of the extension:

1. The risk of committing such a large % of your payroll to one player--with this deal and the JDLR contract the Rockies' future salary obligations went up from $47.9 million to $190.65 million (assuming all options are declined, option obligations are in italics). Observe:

Player Name Service Time 2011 Salary Additional Min. Obligation Years After 2011
Todd Helton 13.059 $10,600,000 $9,900,000 2
Jorge De La Rosa 6.015 $10,500,000 $11,000,000 1
Aaron Cook 8.02 $9,250,000 $500,000 0
Huston Street 6 $7,300,000 $8,000,000 1
Troy Tulowitzki 4.033 $5,500,000 $152,250,000 9
Rafael Betancourt 7.079 $3,775,000 $0 0
Ubaldo Jimenez 3.087 $2,800,000 $5,200,000 1
Chris Iannetta 4 $2,550,000 $3,800,000 1
Ryan Spilborghs 4.082 $1,925,000 $0 0
Manuel Corpas 4.076 $3,500,000 $250,000 0
Brad Hawpe 6.054 $500,000 $0 0
Octavio Dotel 11.113 $125,000 $0 0
$58,325,000 $190,650,000

That nine year extra commitment is what leads pundits to criticize the Rockies here because they argue the team is

2. Taking on lots of unnecessary risk by extending him with four years of team control left on his current contract as opposed to waiting a couple of years and negotiating the extension at that point.

Well, the counterargument to the first one (espoused in particular by Passan) is pretty obvious. With inflation probable over the next decade, the $20 million annually the Rockies are paying Tulo might be a bargain compared to the FA market in eight years. In addition, with this inflation will come the necessary rise in payrolls across MLB, wherein Colorado may very well have an Opening Day Payroll of over $100 million by 2015. I absolutely believe that Tulo's market value as the best SS in the game at age 29 as a free agent would well exceed what Colorado would be paying him.

Which brings me to the counterargument of number two. As RG and others have pointed out, this is a situation in which the risk the Rockies are taking on is less odious than pundits would have you believe. Basically, the extra risk accrued by Colorado here is that Tulo suffers a major injury and/or declines, but that risk isn't over the life of the ten year contract but rather over the shorter four year window in which Tulowitzki was already under team control. Why this particular window? Well, without the extension Tulo would be eligible for free agency at this point, and assuming no injury to him, he would likely command at the least a deal around 6/$120 after 2014. Any injury or ineffectiveness that would take place after 2014 would be some other team's problem, so that period shouldn't weigh as heavily on the risk calculation.

Every deal is a risk-reward calculation. In this case, you have to weigh the risk of a 26-29 year old athlete at the height of his ability being severely injured and/or declining against the risk that a) his value will rise even higher if he does produce at the level he's expected to (or even better) and b) that Tulo's contract status would be a distraction on par or greater than Matt Holliday was in 2008 for Colorado.

In addition, the extension gives the Rockies the potential reward of having a Hall of Fame caliber player, which is entirely within the realm of possibility with Tulo, spend his entire career with the team. With that potential reward comes the many potential young fans around the world who will aspire to be Rockies thanks to their idol. If nothing else, this extension is a powerful marketing tool showing that the Monforts are committed to the values Tulowitzki brings as a player and as a person. 

Of course $150+ million is a lot of cash to bet on the health of anyone no matter how you slice it, so I can certainly see why analysts would be leery about it.

More on Tulowitzki as well as some about De La Rosa after the jump...

Off-Topic.

 

Helton and Tulowitzki

Finally, RG brought up another great point when she mentioned Todd Helton. While many pundits (primarily Passan) have pointed to this extension and comparing it to the 9 year, $143.5 million contract Helton signed with two years left on his deal in 2001 as a mistake that shouldn't have been repeated, RG makes the point that the Rockies have experience with these deals and they appeared to like the first one because they're doing it again. Indeed, the two situations aren't really that dissimilar. Helton was a year older and had put up better offensive stats to that point but Tulo plays a premium defensive position very well and had shown flashes of brilliance with the bat.

 I ran the numbers on Helton after he signed the extension in 2001 using Fangraphs WAR valuation as a sort of hard and fast tool to show what the Rockies got out of Helton. For those of you who don't place a lot of trust in the metric, I've also included Helton's wOBA for the year to showcase his hitting value.

Year wOBA fWAR $ Win Value Salary Surplus
2001 0.456 7.6 20.1 4.95 15.15
2002 0.422 6.2 17.1 5 12.10
2003 0.450 6.9 19.3 10.6 8.70
2004 0.455 7.1 22.2 16.6 5.60
2005 0.417 5.2 17.6 16.6 1.00
2006 0.375 2.3 8.6 16.6 (8.00)
2007 0.399 5.1 20.9 16.6 4.30
2008 0.347 1.1 5.1 16.6 (11.50)
2009 0.392 3.7 16.7 16.6 0.10
2010 0.328 0.4 1.5 17.775 (16.28)
0.410 45.6 149.10 137.93 11.18

As you can see, even with Helton's severe decline over the past few years, the Rockies have come out ahead in the deal. If you don't include the years prior to the extension kicking in, Colorado has lost a little over the contract's life, but the point of Helton signing the extension when he did is that Colorado was keeping the market price down on Helton for his prime years. I'd say that Helton's five years of .400+ wOBA were worth a considerable amount to the team not only on the field but in marketing the club to new generations of fans.

Verdict

Those people who have read my columns before will know that I'm a very pragmatic person who often prefers the cheaper alternative if the money is spent efficiently. To a large extent this is true, but one of my core principles in life is that you save your money for the special purpose. In other words, I've always been an advocate of paying what it takes to bring in special talent. Tulowitzki certainly qualifies in this case. That's why I see this extension as not only a perfectly acceptable economic decision but also as a move that will change the course of the franchise for the rest of the decade.

Short-Term

As for how the extension affects the Rockies during this half of the decade, I can't emphasize this enough: Tulo's contract extension has absolutely no bearing on the payroll until 2015. That isn't to say that it won't affect Colorado's bottom line in some way. The primary boon to the extension during the near term will be both the intangible effect that Tulo's long-term presence has on the Rockies' brand image and the tangible effect of more fans coming to see him play at Coors due to the commitment shown by ownership in keeping star players around.

On that note, Colorado's interest in signing Ubaldo Jimenez and Carlos Gonzalez to similar extensions is indicative of the organization's commitment to building a very specific, powerful brand around these players valuing character, team, and integrity over the next decade. This brand's desirability to fans that will translate into benefits to the bottom line spread over multiple decades not only in gate receipts but also in merchandising and in negotiating a more lucrative TV deal.

In any case, as Dave Krieger points out, Monday was like Christmas to Rockies fans. Dan O'Dowd put it really well:

"Your actions have to speak louder than your words when you're running and managing a professional sports team or any organization that has some kind of public affiliation to it," O'Dowd said Tuesday.

"We said all along we're going to try to keep our own core star players here. Now, that takes a two-way street, and it takes compromise on both parts, but I think this is an indication that we certainly are willing to step up and do everything within the team concept."

 Tulo seems to have a pretty good grasp of what the move means in the short-term too:

"There's no doubt in my mind that we are committed to winning," he said. "Anyone who says we aren't that's false."

As long as the Rockies are committed to winning, I'll be a happy camper.

What De La Rosa's Signing Means for the Roster

For those of you who missed it, I previewed the Rockies' 2011 Opening Day Roster a month back from a salary standpoint. In that article, I concluded that Colorado had about $20 million to spend on 4-6 roster slots. Since that time, Colorado has added Felipe Paulino via trade and JDLR via free agency, taking two slots away from that roster (replacing Esmil Rogers and Matt Daley, who would be optioned). Now, there's rumblings that Manny Delcarmen will be non-tendered, opening up another slot -- which is really a shame given that Colorado gave up PR favorite Chris Balcom-Miller to get him. Now that the Rockies have solidified their rotation and bullpen to an extent, they can focus on some other holes. Here's how I see the roster shaking out (without Delcarmen):

Bullpen

Street
Betancourt
Belisle
Paulino
Reynolds
Morales
Free Agent RP acquisition (though Rogers, Daley, Samuel Deduno, or Edgmer Escalona could be here too)

Rotation

Jimenez
De La Rosa
Chacin
Hammel
Cook

Position Players

C: Iannetta, FA (McKenry perhaps)
1B: Helton, FA
2B: one of Young/Nelson
SS: Tulowitzki
3B: Stewart
INF: Herrera
LF: Gonzalez
CF: Fowler
RF: Smith/FA platoon
OF: Spilborghs (maybe Garner here, Spilly as Smith's platoon partner)

Basically, what this means is that Colorado has about $8-10 million in the budget to get likely a bullpen arm, a right-handed bat that can play the corners (OF or INF)--maybe more than one, and a backup catcher. So, 3-4 slots remain to be filled at this point, though internal replacements like Cole Garner and Mike McKenry.

Links

It would amuse me greatly if the Rockies picked Aneury Rodriguez in the Rule 5 Draft from Tampa Bay, as then they would have Jason Hammel and the man they traded for him at minimal cost. Probably not going to happen, but the possibility is there.

Finally, Troy Renck writes about the importance of trust in the Tulowitzki deal as well as potential contracts for Jimenez and CarGo.

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