Arbitration decisions looming

As explained by Tim Dierkes (MLBTR), “[f]or a team to receive draft pick compensation for a departing free agent, arbitration first must be offered to that player. The risk is that the player will accept, and the team will be stuck with that player on a non-guaranteed contract for 2010.” Last winter, in order to sidestep fiscal “risk” and reallocate funds to effectively improve their ball club (e.g., CC Sabathia, Mark Teixeira, A.J. Burnett), the Yankees chose not to offer arbitration to any of their ranked free agents. In a depressed market, the move, which was originally criticized by many fans and writers, was ultimately a wise one, as most players, even those with plenty to offer — see, Bobby Abreu — struggled to find lucrative contracts on the open market. Had the Yankees made arbitration offers in the hopes that they would later receive compensatory picks upon their free agents signing elsewhere, perhaps those same free agents would have accepted and limited Brian Cashman’s ability to better equip the team for 2009 (again, he needed payroll space).

However, this winter, with fewer holes to fill, a thinner free agent class, and a championship caliber core still present in the Bronx, the situation has evolved and the Yankees could very well offer arbitration to their ranked free agents rather than decline to do so. In fact, the club’s arbitration decisions will be announced later today, therefore, we won’t have to wait long to hear about who was offered arbitration and who was not. While Xavier Nady, a Type-B free agent, probably won’t receive such an offer due to his injury-marred campaign, his cost, and the presence of Nick Swisher, Johnny Damon and Andy Pettitte are two players that could be considered for offers, as the Yankees reportedly want both of them to return for next season.

In Damon’s case, after earning $13M in 2009, if the Yankees were to extend an arbitration offer to him, following an arbitration hearing (or perhaps the two parties will agree to a deal), he would likely receive a figure close to $16M in 2010. While this is above market value — overpaying an aging left fielder with poor defensive credentials certainly is not ideal — it does provide a significant benefit in terms of short-term roster flexibility (in essence, the Yankees would be overpaying for that flexibility). Based on published reports, however, it seems as though Damon, along with his agent Scott Boras, would be displeased with a one-year deal. The two appear to be seeking a 3-4 year contract in order to capitalize on Damon’s productive year, therefore, it is definitely not a foregone conclusion that Damon would accept an arbitration offer, as he is much more likely to reject such a proposal. As a Type-A free agent, if Damon does, indeed, decline the organization’s arbitration offer, they would subsequently receive two draft picks (first and second round) from his future team. That’s obviously not a bad thing, although the Yankees would still be in need of a new left fielder.

With Andy Pettitte, the arbitration decision could be a lot clearer. While Pettitte was not content with having to accept an incentive-laded deal (roster and performance bonuses) with a “meager” base salary of $5.5M for 2009, he did end up winning most of those incentives and earned $11M, in total. Due to his impressive 3.3 WAR performance this season, one that was worth $15M according to FanGraphs (about $4.5M per win), the Yankees may inevitably choose to offer Pettitte arbitration. Though I am uncertain of the manner in which roster and performance bonuses are taken into account when negotiating arbitration offers, I would assume that Pettitte could amass more than the $11M he earned with the Bombers, meaning that his 2010 salary, after the arbitration process (agreeing to a deal or attending a hearing), would inch closer to $13.5M. With a state of ambiguity surrounding the team’s starting rotation, the Yankees would be particularly pleased if Pettitte were to accept that offer. If Pettitte, a Type-B free agent, rejects the team’s arbitration overtures and signs elsewhere — an outcome that is thought to be unlikely — the Yankees would garner a supplemental draft pick from the lefty’s new team.

So, while we wait for today’s arbitration announcement, which won’t arrive until later tonight, what do you think? Could Damon receive an offer due to the flexibility such a deal would provide the Yankees (collecting two prospects would be great, too)? Given the team’s pitching needs, maybe Andy Pettitte should be offered arbitration (perhaps you believe both players should receive arbitration offers)? Will either player be presented with offers or will we see a repeat of last winter’s strategy? For the record, both Tom Singer (MLB) and George King (NY Post) have reported that the Yankees are unlikely to offer any of their free agents arbitration.

7 thoughts on “Arbitration decisions looming

  1. MJ

    I’m not sure what the alternatives are in LF and a lot of what happens in LF will also have to do with what (if anything) the Yanks decide to do with CF. For instance, they could sign Cameron or trade for Granderson and move Melky to LF.

    Assuming that the Cabrera/Gardner/Swisher CF/RF group remains, I think the Yanks would be foolish to pass up offering arbitration to Johnny Damon. Part of offering arbitration is knowing if the player will accept it or not. If Cashman thinks Damon will insist on a three or four year deal, he should offer it to get compensation picks. Frankly, the worst thing that could happen is that Damon accepts and plays one year at above market. It buys the Yanks one year to figure out a more permanent solution to the LF question and insulates us from making the Holliday/Bay multi-year contract mistake.

    • Moshe Mandel

      I like offering Damon arbitration for all the reasons you noted.

  2. BG90027

    I also would offer Damon arbitration. I think I might even prefer Damon on a 1 year, overpriced deal than on a 2 year, cheaper deal for the flexibility you noted. I’d also add that if Damon turns down arbitration, the cost of the draft picks may make him less attractive to other teams and slightly increase the Yankees’ negotiating position. I don’t think arbitration makes sense for any of the other free agents. I probably would offer it to Wang but that’s a decision for another day.

  3. Offer arbitration to Johnny, Andy and CMW.
    Johnny will not except a one year deal (non-guaranteed), we get draft picks.
    Andy, for reasons list by others above.
    CMW, as a back-up for mid season if he is healthy and pitching well. When right, he is a very good #3 (in our rotation), maybe even a #2. He will be cost effective, coming back from injury again.
    If we stay pat with our OF of Melky-LF, Brett-CF and Swisher-RF, we start the season with a very good defensive team. With Pena coming off the bench and A-Jax ready by mid-season(+/-), we may not have the power but, we have more speed, better defense and more ways to score runs…let the big guys hit the HR’s, with those guys on base.

    • Except Johnny will take a 1 year deal for 16 million when he finds out it is almost double what anyone else will give him on a multi year deal and the draft pick makes him even harder for other teams to want to sign!

      Wang will get a pay raise in arbitration you would be better off to wait and sign him to a 1 year deal in a few weeks over giving him a raise to maybe never pitch well again.

      Wang is a 1 pitch pitcher who was only effective because he threw 95 MPH sinkers, last year even before the final injury when he had gotten his arm and legs back into throwing his velocity still never got better than 91… at 90-92 MPH he is an average player who is a 1 pitch pitcher with no dominance at all!

      I really doubt going into the season with Melky-Gardner-Swisher is smart because your last 2 players in the lineup would Melky and Gardner and there is really no proof Gardner can start a full season and have his bat be effective, I would rather have one of them coming off the bench.

      You would be better off signing Cameron for 1 year and putting him in CF and Melky in LF or Garnder in CF and Cameron in LF… Either way it’s an upgraded defense and Cameron has 25 HR power still so he replaces Damon’s power from last years lineup.

  4. leftylarry

    I WOULD Not OFFER DAMON ARBITRATION.YOU GUYS DON’T SEEM TO UndERSTAND WE’RE HEADED INTO WORSE TIMES ECONOMICALLY, NOT BETTER.

  5. Yup, couldn’t agree more. And I’d like to add that you’ve got a great colour scheme on your site, I suffer with colour blindness and many webmasters don’t give us a second thought!

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