February 14, 2005
Four More Years!
I don't have a lot of "inside" Twins sources, but one of the few I do have sent me an early morning e-mail yesterday telling me that the Twins and Johan Santana had agreed to terms on a four-year contract. His thought was that as the driver of the Santana bandwagon over the past few seasons, I should get a nice scoop and post the information here before it was reported on by the mainstream media. It was a very nice gesture and a great idea. Unfortunately, I slept through it.
I didn't have class until 2:30 yesterday afternoon, so I stayed up late playing poker Sunday night and then slept in. I woke up around noon, turned on my laptop, and logged in to check my e-mail. After reading the note from my charitable source, I smiled for a minute and then started to write up a little "breaking news" column for this blog. Before I did, I figured I should check out places like ESPN.com and MLB.com first, just to make sure the story hadn't already been broken. Sadly, the front page of MLB.com read "Santana, Twins agree on four-year deal" in big, bold print, and there was a giant picture of Johan accompanying it. So much for my scoop.
As for the signing (you didn't think I was going to talk about myself for more than two paragraphs, did you?), there are two basic ways to look at it. The most simplistic way is to see that Santana will be in Minnesota for the next four years, through the 2008 season. There isn't much to dislike when you view it that way, obviously. The other, more complicated way to look at the signing is to examine the specifics of the contract and what they mean to the future of the Twins.
Santana's deal is reportedly worth a total of $40 million and according to La Velle E. Neal's article in the Minneapolis Star Tribune, the contract breaks down as follows:
The math majors among us probably realize that those numbers add up to only $39.25 million, so I assume Santana has an extra hundred-thousand or so coming his way in at least a couple of those years. But assuming that is more or less the correct breakdown of the contract, I think it is pretty interesting for a number of reasons.
The $5 million Santana will get in 2005 is the amount the Twins offered him in arbitration, while Santana countered with a proposal for $6.8 million. That means the Twins essentially "won" the arbitration battle as part of the new contract (and didn't have to insult Santana in front of an audience to do so). Paying Santana $5 million instead of $6.8 million (or whatever the compromise would have been) gives the team some immediate payroll breathing room. Whether that means Terry Ryan was feeling pressure to get the team to Opening Day under budget or this now gives him some money to play with is unclear, but obviously saving the money for this season was important to the Twins.
The $9 million Santana will get in 2006, his final arbitration-eligible season, compares favorably to what other quality starters (Kevin Millwood, Javier Vazquez, etc.) have received recently for their final arbitration-eligible years. The important part of the deal comes after 2006, which is when Santana would have become a free agent. Instead, the Twins will retain his rights by paying a combined $25.25 million for his first two free-agent seasons. Considering the contracts given to free agents Carl Pavano, Kris Benson, Derek Lowe, Russ Ortiz, Jaret Wright, and Eric Milton this offseason, there is no doubt that a healthy Santana would fetch more than $12.5 million a year as a free agent.
Of course, his remaining "a healthy Santana" is obviously one of the biggest keys to this entire contract. The Twins won the player lottery with Santana through a combination of luck and skill. They identified a young player with great potential in another team's organization, snatched him up in the Rule 5 draft, developed and refined his skills, and sacrificed a roster spot and innings to keep him. It went about as well as could possibly have been imagined, as something clicked for Santana down in the minors in 2002 (a "click" most likely tied to perfecting his changeup) and he blossomed into an elite pitcher. With that said, none of that will help the Twins any if he comes up lame in the next couple years.
For a small-market team like the Twins, committing a huge chunk of the payroll to a single player is very dangerous, regardless of how great that player is. If Santana, who had his elbow cleaned out following the 2003 playoffs, misses one season over the life of the deal, he will not only leave the Twins with a gaping hole in the starting rotation, he will wipe away as much as 20% of their total payroll. However, while this signing has a great deal of risk involved, I just don't see any way the Twins could have passed it up.
The alternative would have been to take Santana to arbitration for two years and then, if he remained healthy, try to sign him to a long-term contract either right before he became a free agent or after he hit the open market. While that is less risky in the sense that the team wouldn't be committing guaranteed millions years in advance, it is incredibly risky in the sense that Santana could pitch two more years and then bolt via free agency.
Whether or not a contract given to a star player is a "good" deal is almost always dependent on the terms of the contract. In other words, locking someone like Santana up for the future is never a bad thing by itself, but it might be if the Twins agreed to pay him $50 million a year for 15 seasons. The terms of this deal are very agreeable for the Twins. The $15 million they will pay him for his final two arbitration-eligible seasons will likely save the team money, and the cost of his first two years of free agency, while expensive and risky, are reasonable even in today's market.
The comparison most easily made between Santana's new deal and a recent contract signed by another starting pitcher is the contract Toronto gave Roy Halladay last offseason. Like Santana, Halladay was coming off a season in which he won the American League Cy Young and he had two seasons of arbitration eligibility remaining before he became a free agent. While Santana went 20-6 with a 2.61 ERA last season and is about to enter his age-26 season, Halladay went 22-7 with a 3.25 ERA in 2003 and was entering his age-27 season.
Halladay received a four-year deal worth $42 million, while Santana's is a four-year deal worth approximately $40 million. Here is how the year-by-year breakdowns compare (in millions):
Year1 Year2 Year3 Year4
Halladay 6.00 10.50 12.70 12.80
Santana 5.00 9.00 12.00 13.25
The good news is that the two contracts are very similar and it could be argued that the terms of Santana's deal are more beneficial to the Twins than the terms of Halladay's deal. The bad news is that Halladay had problems with his shoulder last year and made just 21 starts, going 8-8 with a 4.20 ERA.