The Braves signed center fielder Ender Inciarte to a five-year contract extension on Friday morning, and this could potentially be relevant to the Dodgers in a way more than just being able to marvel at the previous front office regime of the Diamondbacks, who dealt Inciarte to Atlanta last winter as part of one of the most lopsided trades in recent memory.
Inciarte’s deal, worth a reported $30.5 million, is the second contract extension signed by an NL East center fielder in the last week or so, along with Odubel Herrera and the Phillies, who signed a $30.5 million contract on Dec. 15.
These deals lay the groundwork and set a rough template by which the Dodgers might consider signing Joc Pederson to a long extension, if they are so inclined.
Pederson has just over two years of service time, just like Herrera, and not eligible for salary arbitration until after 2017. Inciarte is a little different since with two years, 157 days of major league service he qualifies as a Super Two — the top 22% of service time among those with 2-3 years experience — and gets a fourth year of arbitration, which inflates his earning power a bit.
Pederson turns 25 in April, four months younger than Herrera and 18 months younger than Inciarte.
Here is how the trio compare in performance:
Center fielder trio
Pederson has an edge on offense, but trails the other two in defensive value. But he’s within shouting distance, enough at least to make the comparison.
The contracts for both Inciarte and Herrera each bought out the arbitration years plus one free agent year, each with at least one club option for another potential free agent season.
$3.5 million signing bonus
2017 (arb1): $2 million
2018 (arb2): $4 million
2019 (arb3): $5 million
2020 (arb4): $7 million
2021 (FA): $8 million
2022 (FA): $9 million option ($1 million buyout)
Source: Ken Rosenthal
$1.75 million signing bonus
2017 (team): $1.25 million
2018 (arb1): $3 million
2019 (arb2): $5 million
2020 (arb3): $7 million
2021 (FA): $10 million
2022 (FA): $11.5 million option ($2.5 million buyout)
2023 (FA): $12.5 million option ($1 million buyout)
Source: Cot’s Contracts
The idea behind these sort of long-term extensions is that the team gets some cost certainty and, ideally, a discount on a player they are confident will produce for most if not all of the term, while the player sacrifices some long-term earning potential for some financial security, rather than potentially earning more going year to year.
There is also value to the team in that a player locked up to a below-market deal could be a hot trade commodity. Just ask the White Sox, who were able to extract a king’s ransom for center fielder Adam Eaton and the potential five years and $38.4 million remaining on his contract (which, if both options are picked up would buy out a total of three free agent seasons).
Pederson has one more year before qualifying for arbitration, and just looking at a smattering of center fielders who have gone through the process in the last two offseasons, we get a rough idea of what Pederson might earn.
Recent center fielders in arbitration
|Player||rWAR thru 3 yrs||Arb 1||Arb 2||Arb 3|
|Player||rWAR thru 3 yrs||Arb 1||Arb 2||Arb 3|
These aren’t perfect comps, certainly, but give us an idea at least. A.J. Pollock signed a two-year extension last offseason coming off a 7-win season. Ben Revere was a Super Two in 2014. Lorenzo Cain signed a two-year deal with four years of service time after finishing third in the 2015 voting.
Desmond Jennings shows the risk on the other side, when performance goes south the earnings no longer trend upward. He is currently a free agent.
But it looks like Pederson, with any sort of productive 2017 campaign, can expect somewhere in the neighborhood of $3-3.5 million in his first year of arbitration. Let’s say he earns something like $3.5 million, $5.5 million and $9 million through his three arbitration years, just as a guess. That’s $18 million, plus whatever he earns in 2017, likely just north of $550,000 (the major league minimum is $535,000, and he made $12,500 over the minimum in 2016).
Ian Desmond (18.6 rWAR in his 6 years) just got $70 million over five years from the Rockies, and Pederson isn’t a free agent for four more years, so if we are expecting Pederson to be productive through at least 2020 then it is reasonable to expect his free agent years are worth at least $14 million, if not much more.
Tacking on $14 million for a potential fifth year puts Pederson at roughly $32.5 million over the next five years. I would argue that is conservative though. His free agent value will likely be higher (Dexter Fowler just signed for $16.5 million per year, too), and any sort of breakout year in the next four seasons likely puts Pederson in an even higher earning bracket.
There is also the question of whether the Dodgers need or want to extend Pederson. The club doesn’t have much of a recent history of locking up young players until they are further along in their careers. Matt Kemp, Chad Billingsley, Andre Ethier and Clayton Kershaw all signed their contract extensions within one year of free agency.
The last Dodger to sign a contract extension before arbitration was Cesar Izturis in 2005. He signed a three-year deal plus an option that would have bought out one free agent season.
This is a different Dodgers front office though, and Andrew Friedman with the Rays and Farhan Zaidi with the A’s came from organizations that had to try to lock up young players whenever they could, because that was likely the only way to extend their stay beyond six years. That is not the case in Los Angeles.
The competitive balance tax may pose a bit of a problem, which seems counterintuitive since at least in theory a contract extension of a young player on the rise would save the Dodgers money.
But given the natural paring down of salaries with a more steady pipeline of younger talent coming through the system, the Dodgers could get below the threshold by 2019 or so. But in 2017, with a payroll north of the $235 million upper limit, each additional dollar spent is taxed at a 72.5% rate. In 2018, the Dodgers might get under $237 million but if they don’t the marginal tax rate is 95%, and would be 62% if they can settle in between $217-237 million in total.
This imposes an extra cost on a contract extension for the club, because every contract is measure by average annual value. Under the year-by-year system, Pederson will earn roughly $550,000 in 2017 and that is his number for the luxury tax.
But if the Dodgers apply the cookie-cutter, $30.5 million contract over five years to their center fielder, his average annual value is $6.1 million. That number might look great in 2020 or 2021, but the club might not be paying luxury taxes by then. The extra perceived salary in 2017 would cost the Dodgers roughly $4 million in taxes, and in 2018 (assuming $3.5 million had Pederson gone through arbitration), that’s between another $1.6-2.5 million in tax depending on the Dodgers bracket.
That extra $5.6-6.5 million might not make a Pederson contract cost prohibitive, but it is just another cost that would have to be factored in and potentially made up on the back end of the deal.
But if the Dodgers are inclined to extend one of their productive youngsters in Pederson, the template is in place for them to do so.