Economics of Baseball: Can the Phillies Afford to Keep Cole Hamels?

The recent acquisition of the Dodgers has had a major ripple effect on the rest of MLB; owners are re-assessing the values of their clubs, new media contracts are being negotiated, and, from a personnel perspective, there is now a significantly increased demand for upcoming free agents given the Dodgers’ intention of spending, and spending big, to win.

Barring options and extensions and their limited commitments in the upcoming years, the Dodgers will theoretically have the opportunity to make a run at Josh Hamilton, Matt Garza, and/or Zack Greinke.  Rumors indicate that the Giants have extended Matt Cain for 5-years and $110 million, and Joey Votto is also rumored to be wrapping up an extension with the Reds, meaning that the Dodgers will be able to more acutely focus their efforts on the remaining free agents.

There are three key Phillies available over the course of the next few years, and it’s no secret that one of them, Cole Hamels, is the prize of next winter’s free-agent class. Already, rumors are swirling that Hamels could command a Cliff Lee-type deal or better.  It’s no stretch to imagine the Dodgers making a big splash by offering whatever it takes to lure Hamels away from Philadelphia and back to his home state.  Given Cain’s contract, $25 million per season seems like an inevitability for Cole.  Dodger Stadium has historically been an excellent park for pitchers, giving Hamels the opportunity to team with reigning Cy Young winner Clayton Kershaw and cement his legacy as one of the best LHP of the decade.

While the Phillies are expected to try to work something out with Hamels, Shane Victorino, and Hunter Pence, delaying an extension (while throwing money at the likes of Joe Blanton, Jonathan Papelbon, an injured and decreasingly effective Ryan Howard, and the aging Jimmy Rollins) seems to have cost the Phillies both the opportunity to lock up Hamels, and the opportunity to do so with a team-friendly contract.

Despite their many strengths on the diamond and their ability to sell out Citizens Bank Park night after night, the Phillies are approaching luxury tax territory and have a significant amount of money committed to the aging core of the club over the next few years.  Not only is payroll flexibility seriously hindered, it’s not clear how much value they’ll be able to extract out of these contracts:

The Phillies have $118 million committed to ten players in 2013, which is something more like $130-$133 million to eleven players if you assume Hunter Pence will get $12-$15 million as a super two.  With $94 million committed to 5 players in 2014 and $74 million committed to 4 players in 2015, the Phillies have already limited their ability to make free agent acquisitions and/or sign long-term deals with their current players.

Complicating matters is that the Phillies will also have to do their best to retain Shane Victorino and Pence.  Victorino, arguably the heart of the team, is a free agent after this season, and there’s no question that the city has embraced Pence’s style of play even after only a few months in a Phils uniform.  For a team that is rich with pitching and on the decline offensively, locking up both players should be at the top of Ruben Amaro’s list of priorities, even though both will finish long-term contracts well past their respective primes.

The problem is that both are likely to be very expensive.  Last year in his age 30 season, Victorino posted 5.9 WAR and seems primed for a nice payday.  He has made no secret of the fact that he is seeking a 5-year deal, and one would have to imagine there will be a suitor in the 5-year, $75 million range.  Pence has averaged about 4 WAR per year in his career and is entering his prime.  He will hit the market in his age 30 season, and it’s easy to envision a scenario where he commands 5-years and $90 million on the open market.

So perhaps, at this point, the question shouldn’t be “Can the Phillies Afford to Keep Cole Hamels?” and instead should be “Can the Philles Not Afford to Keep Shane Victorino and Hunter Pence?”  Assuming the Phillies can sign Pence and Victorino for about the same price as Hamels would cost them, it seems like a no-brainer.  Let’s face it: this team does not have a lot of offensive reinforcements on the way.  While Trevor May projects as a top of the rotation starter and Jesse Biddle as a solid #2 or #3 guy, nobody in the Phils system, save Domonic Brown or John Mayberry, projects as a significant offensive threat.

The Phillies will not win a bidding war with the Dodgers if it gets to that point, but at the same time, committing $25 million/season to Hamels gives them little flexibility in filling out the rest of the roster.  This whole discussion may be rendered useless if Amaro’s payroll continues to grow without limitation, but it’s hard to imagine a scenario where the Phillies have $100 million committed to just 5 players in 2015 and are still able to compete with the Braves and Nationals.

Why the Phillies haven’t been more proactive about locking up their young, homegrown players is puzzling.  The Rays have bought themselves a bigger window in which to compete by signing both Evan Longoria and Matt Moore to long and extremely team-friendly contracts, and the Royals have begun to do the same, inking Sal Perez and Alex Gordon, while presumably working on a deal for Eric Hosmer.  If structured correctly, a long-term deal buys the player out of his best years and also makes the player a valuable trade chip, assuming he produces.  It also guarantees the player financial security despite a limited track record.  At worst, the player doesn’t produce and his contract is not an albatross because it was signed earlier in his career when he had less negotiating leverage.

The window to do that has come and gone for the Phillies.  For his part, Hamels has played it close to the vest regarding his impending free agency and is saying all the right things.  If I were in the Phillies front office, however, I’d be concentrating my efforts on Pence and Victorino and assuming Hamels walks at the end of the year.

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