Are Buxton's incentives being treated as guarantees in the budget?

[chpettit19]

It looks awfully likely that the Twins will be well below their recent payroll numbers this year. Is that a response to lower revenues the last 2 years or the much more concerning situation of treating Buxton's incentives as guarantees when assessing their payrolls? Buxton's contract is great for the Twins, but only if they're willing to risk losing some profits if/when he hits his incentives.

I don't like it, but I can understand them lowering payroll this year after the last 2 years with attendance being restricted and all. It feels like they're targeting 100-110M as a budget this year and I hate it, but can at least understand it if it's a 1 year thing. But if this is the plan moving forward and they're going to be consistently below where they should be on payroll because of Buxton's incentives I'm going to be very upset. Maybe my read on things are wrong and they're going to spend another 40M in the next couple weeks, but I don't see it. They have a nearly full 40-man and I don't foresee them dropping young guys for veterans at this point. Cueto or Pineda. Maybe a reliever or 2 when they put guys on the 60-day, but I don't see much more than that. 

What do people think? Are they going to get close to their recent payrolls this year? If not, is it a 1 year dip? Or do we need to be concerned they are going to be lower than normal for the entirety of Buxton's extension?

[Brock Beauchamp]

If they're counting escalators in the budget before those escalators are triggered, I'll be pretty angry. If they planned to do that, they should have just paid Buxton a higher guaranteed salary. I care whether Buxton gets paid while I don't give a damn if the Pohlads pad their billions a little more.

[jmlease1]

I've been saying this ever since the contract was signed that they would be escrowing at least a big chunk of the potential escalators/incentives in the deal against this year's budget. (That said, it also likely means that anything not realized in this season gets rolled over to the next year) I absolutely believe that at least some portion of the potential cost is being assumed in this year's budget.

But even then, the Twins still have a good $25-30M left in the budget to spend on pitching even escrowing $10M in bonuses for Buxton and accounting for the additional costs on salaries from the new CBA. 

(Is it right for the Twins to do this? YMMV. From a competition standpoint, probably not. From a business standpoint, sure. But if the remainders roll over or Buxton achieves all the incentives then it shouldn't impact the team too much long term, other than ensuring that those whose first reaction to anything the team does is to call the Pohlads cheap will have something new to ground it in...)

[gunnarthor]

It's the Pohlads. Nothing they do would surprise me.

[IndianaTwin]

What do people think? 

The main thing I think is that it’s way too simplistic to ask the question if these are being treated as guarantees. 

A “budget” is a “spending plan.” A “plan” is a moving document. And many factors play into how a spending plan moves. Have any of us actually heard the FO talk about what their budget is? Not that I’m aware, and we shouldn’t. Frankly, it’s a competitive disadvantage (both in trades with other teams and in negotiations with agents) to have named your budget.

And aside from that reality, my sense is that Pohlad and the front office are more driven by “value” than by the final expense line in the budget. They showed they would spend on Donaldson when they perceive that they are getting value for the contract. They showed they would spend on Buxton when they perceive they are getting value. They showed they would spend on Cruz, Clippard, Reed, etc., when they perceive they are getting value. Conversely, they have showed that they won’t spend on …, or …., or …. when they don’t think they are getting value for that.

In that way, it would be irresponsible for them to NOT take Buxton’s incentives into consideration. They have to assume some of them will be paid out.

But taking them into consideration isn’t the same as assuming that all of them will kick in. The reason they get paid more than you and me (and I’m making an assumption about TD readers’ salaries, I realized. :-)) is that they know how to find the balance between the two extremes. This year, Maeda’s aren’t going to kick in, for example, but we all (including the FO, I’d argue) hope that most of Buxton’s do. 

[tony&rodney]

26 minutes ago, chpettit19 said:

It feels like they're targeting 100-110M as a budget this year

Exactly. This is a question I have asked, repeatedly and annoyingly so, in a number of posts. When the World Series was over and Twins Daily began to put forth lineup constructions centered around $130 +/-, this seemed reasonable. When the Twins made zero effort to sign any free agents or trade for any experienced players it piqued my queries into what exactly was The Plan and would the budget be closer to $100 million.

With a new CBA a reality and a new agreement with Apple to televise a few games it looked promising for the Twins to become proactive. In fact, the Twins may still complete a few needed trades to fill out their roster. However, it is currently looking more like $100 million is a ceiling. It would be real raw if the Twins added Happ and his ilk (Cueto) to the roster at this time. Dobnak, Bundy, Thorpe, Ober, and Ryan look like the starting five at this point. When individuals support a team with their money in the face of 100+ losses, their opinions carry weight. I'm wondering what a projected attendance is for another couple of last place finishes. As previously stated, there are still options and perhaps the next few weeks include two dramatic trades that greatly improve the Twins roster.

[Dman]

I agree with you that they look like they will stay in the 100 to 110 range for payroll.  There just isn't anything out there that would force them to spend beyond that, that I can see.  I hadn't thought about them adjusting for Buxton making all his incentive money this year but if he is healthy he stands a good chance of making most of his incentives.  

Still I think some of this just plays into where this team is at.  They have a ton question marks all over the roster from Sano to Kirilloff to Larnach to Kepler to most of the pitching staff.  On top of all that they have 5 or 6 young pitchers on the 40 man that they need to figure out if they have what it takes or not because they have Varland, Canterino. Gipson-Long and maybe Mooney and Grace who might need to be added next year as well.  This just doesn't feel like the year to go all in so if they want to try and get ahead of the Buxton money and show more of a profit after the Covid years this seems like the year to do it.

It better not be a long term trend though because I\we have stuck with this team when they were just horrible to watch.  Once things take shape they better spend to put this team over the top.

[USAFChief]

At most, Buxton's incentives can add $10.5m per year. That's winning AL MVP and hitting 625 PAs. That's the max.

 

That still leaves ~$40m unaccounted for.

[jctwins]

1 hour ago, Brock Beauchamp said:

If they're counting escalators in the budget before those escalators are triggered, I'll be pretty angry. If they planned to do that, they should have just paid Buxton a higher guaranteed salary. I care whether Buxton gets paid while I don't give a damn if the Pohlads pad their billions a little more.

I suspect revenue projections are far less scientific than we think they are. 

If Buxton is performing at a level to get the incentive comp, revenue should be up to offset that.

 

 

[Brock Beauchamp]

2 minutes ago, jctwins said:

I suspect revenue projections are far less scientific than we think they are. 

If Buxton is performing at a level to get the incentive comp, revenue should be up to offset that.

Exactly.

[tony&rodney]

The addition of Sonny Gray puts the Twins around $100 million. There is room to make another great trade and still be beneath $110 million. 

Ober*, Balazovic*, Duran*, Ryan*,  Winder*, Enlow*, Strotman*, Sands*, Henriquez*, Vallimont*, Moran* - these guys are all on the 40 person roster at this time.

Alcala, Bundy, Cotton, Dobnak, Duffey, Garza, Gray, Jax, Maeda, Rogers, Stashak, Thielbar, Thorpe, - these guys are on the 40 person and have experience.

Woods Richardson, Canterino, Varland, Mooney, Cruz, Cano, - these guys are expected to be added or contribute as soon as next year. 

The trade for Gray came at a cost that the Twins can take, both now and in the future. I'm of the mind that a trade that loses a couple more is a solid plan too.

[Game7-91]

They have to account for possible expenses somehow. They probably are treating it as accrued liabilities that return to the income side if not paid. I would bet though they are able to both expense the contract and depreciate the value of the contract. I'm speculating on that, but for owners its more balance sheet than operating budget questions. Rest assured, somewhere in the minutaie of their corporate structure(s) the Twins are reaping tax benefits from these contracts. Would have to assume the budget, to the extent it can be called that, is as much about tax sheltering as it is about roster construction.

[bean5302]

Honestly, my thought is the Pohlads were planning for the lockout to result in potentially many lost games and they were looking to limit payroll this year. Also, the Twins lost a ton in 2020 and probably lost some money in 2021 and the Pohlad's typically take the previous year results into consideration when projecting the team's budget for the upcoming year.

I doubt Buxton's escalators are even a thought in the back of the budget's mind. If he hits them, he's an asset.