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Thursday, March 05, 2009
How far would Juan Pierre have to defer his contract?
You guys may remember that at the start of last year, before the emergence (or should we say fulfillment) of Ethier and Kemp, we agreed via our fan poll that Pierre had 1500 PA left in his MLB career. In attempt to disparage him, we may have been pretty optimistic.
Now, with Manny in the mix, there is zero room for Pierre, and he knows it:
Pierre is entering the third year of a five-year, $44 million contract with $28.5 million in salary remaining. Pierre said he would defer payment if that would help facilitate a trade. “I realize the economic situation,” Pierre said of his contract. “I’ll defer if it makes it more attractive.
If Juan Pierre was a free agent, with absolutely no strings attached, what could he be worth? He’s at best an average-fielding CF, with an arm horribler than his baserunning is good. And a bat that is very bad. That works out to a 0.5 WAR player. He’s basically in a similar class to Garrett Anderson, and plenty of other backup outfielders on their last legs. Basically, he’d get 2MM, and at that, a one year contract. Let’s be nice, and say some team would give him 2.85MM. However, the Dodgers are on the hook for 28.5MM (spread over three years).
If we presume a 5% rate of return, Pierre’s new team could invest $2.45MM in a 50yr bond that will mature at a value of $28.1MM. And if they give him a league minimum salary this year, Pierre will get his $28.5MM.
So, if Pierre is serious about wanting to play this year, and away from the impossible competition he faces with the Dodgers, then he must defer his salary for 50 years, and sign at the league minimum. The signing team pays him what he is worth (0.4 + 2.45 = 2.85).
Juan Pierre is as untradeable as Dustin Pedroia, but for the opposite reasons. Pedroia signed a contract so far below his value, that in order for the Redsox to ever get a fair return for him, they’d have to get back $100MM in cash in return. Juan Pierre has the opposite problem, that he is signed at so much above his value, that the Dodgers have to write him off at ten cents on the dollar.
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By the way, the value of the Redsox increased by 100MM when Pedroia signed that contract, just as the sale price of the Penguins went up, when they won the right to draft Sidney Crosby, and pay him at no more than the rookie cap. That value has to go somewhere… and it’s captured inside the value of the enterprise itself.
The team value can’t have gone up $100 million from that contract alone, since most of that surplus came from having Pedroia under team control in the first place. If they had just gone year-to-year with him, he still would have been worth a lot to the franchise value.