Tonight, the Rockies will tender a contract to Nolan Arenado. All that means is he'll be under contract with the team for a currently unspecified amount of money in 2016. One thing we know for sure though, he won't be making league minimum anymore.
Arenado has reached that all important monetary checkpoint in his career where he's eligible for salary arbitration. Usually this doesn't happen until a player's reached three years of MLB service time, but because Arenado is really close to that number at 2.155 years (two years and 155 days) of service time (a year of MLB service time is considered 172 days), he gets an extra year of the arbitration process and a chance to make more money. He still won't be eligible to become a free agent until he racks up six total years of service time (so after the 2019 season), but he will get four years of arbitration pay instead of the three we see from most players.
According to the MLB Trade Rumors Salary Arbitration Projection page, Nolan is due to make around $6.6 million in his first year of arbitration in 2016. This is a problem for the Rockies long term because that's the type of starting salary arbitration figure that can get out of control extremely fast. Nolan Arenado is worth every penny at $6.6 million now, but from a salary perspective, this is like keeping a baby lion in house. Sure it's cute now, but just wait two or three years and see what happens.
Do the math. If Arenado went from making the league minimum of $512,000 in 2015 to an arbitration projection of $6.6 million with the season he just had, how long is it going to take before you're paying him close to or even over $20 million for a season. Here's a very realistic guesstimate of how this could play out if the Rockies choose to take this year by year and Nolan Arenado keeps putting up seasons worthy of MVP votes:
- 2016: $6.5 million
- 2017: $12.5 million
- 2018: $18.5 million
- 2019: $24.5 million
That's a six million dollar raise each season, and as good as Nolan is in multiple phases of the game now, a scenario similar to this is likely to play out as long as he stays healthy.
One player who the Rockies should look at as an example of what can happen here is Josh Donaldson. Like Arenado, he plays third base and got himself into a position where he's arbitration eligible for four seasons. 2016 will be the second of those four seasons and after an AL MVP campaign in 2015, Donaldson's projected to see a $7.7 million raise from $4.3 million to $12 million. That's an even larger raise than I projected for any of Arenado's seasons in the scenario above. (The reason they both end up around $12 million in their second year of arbitration is because Arenado is projected to make $2.3 million more than Donaldson did in his first year of the process, so has a higher starting point.)
In any case, you don't have to dig too deep to see how fast these salaries can get out of control when star players get to arbitration. It's also important to note that this isn't something the Rockies have had to deal with when they signed Troy Tulowitzki and Carlos Gonzalez. Tulo signed a really team friendly deal after his rookie season in January of 2008 that bought out all of his arbitration years before he got there (and even a couple of his free agent years if you include the team option for 2014 in that deal) and Cargo signed right after Tulo's second extension in the winter of 2010 / 2011 before he ever got to arbitration. This saved the Rockies a tremendous amount of money, and allowed Cargo and Tulo's combined salary to take up less 27.5 percent of the payroll for every season through 2014.
The Rockies have already missed that boat with Arenado. Now that he's reached his arbitration years without a contract, he's going to cost significantly more than Tulo and Cargo did during those years, and would probably cost $25 million or more per season if you wanted to buy some of his free agent years, which I don't think is a good idea at this point.
Knowing this, it's easy to see why this is going to become a problem for the Rockies. If all goes according to plan and the team is coming out of their rebuild in 2018 and 2019 with competitive clubs, it's going to stink if they have to tie up that much money in just Arenado only to potentially lose him to free agency in the middle of the run.
So here is what I would do if I were the Rockies. I would attempt to use the payroll space in a lost 2016 season to save the team some money when they're (hopefully) capable of contending. (This goes in line with what I've already suggested in other threads where I advocate the Rockies try to use the 2016 payroll to sweeten prospect returns in a Carlos Gonzalez and / or Jorge De La Rosa trade by paying for their 2016 salaries while they're on another team and / or taking back short term bad contract players.)
So here's the proposal: Offer Nolan Arenado a four-year, $50 million contract at a flat rate of $12.5 million per season.
In sort, this will pay Arenado about double what he would otherwise get in 2016, but save the Rockies some money (potentially significant money) in 2018 and 2019 when they really are going to want to have the books free. Here's the benefits I see for both sides.
For the Rockies:
- They lock up Arenado for four seasons with an actual contract and never have to go to arbitration with him.
- They never have to pay him more than $12.5 million a season before he hits free agency
- They use the 2016 payroll to make them a better team (more future payroll flexibility) in 2018 and 2019
- They save money over the four year window if Arenado stays healthy and continues to be a star
- Arenado becomes a more attractive trade piece with a lower salary in 2018 and 2019 if the Rockies choose to go that route
- He gets a guaranteed $50 million, by far the biggest payday of his life to this point.
- It protects him if he gets injured because the money is now guaranteed
- He gets double the money he would have gotten in 2016
- He doesn't give up any of his free agent years and still gets to go to the open market if he wants at the end of his age 28 season (winter of 2019 / 2020) with a chance to net a new contract over $100 million.
This would be an unusual deal, but it makes sense for both sides considering where Arenado is in his career, and where the Rockies are in the success cycle.