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Can the Oakland A's afford to sign Cuban outfielder Luis Robert?

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More discussion on the fiscal realities facing the Oakland A's.

Negotiation techniques will vary depending on the situation.
Negotiation techniques will vary depending on the situation.
Kim Klement-USA TODAY Sports

Thanks to the peculiarities of international signings, the time between now and June 15 offers a unique opportunity for the Oakland A's to pursue the last big-ticket player available on the international market: OF Luis Robert.

Luis Robert is a 19-year-old Cuban defector who was recently granted free agent status by Major League Baseball, allowing him to sign with any team starting May 20 -- that's Saturday. At 6’3" 205, Robert has 60 Grade Power and 70 Grade Speed. Average arm strength only helps his CF profile. His RH bat rates a 55 Grade but scouts note he had some swing-and-miss when he played for Cuba against North American teams last summer. Of course, at 19 he has plenty of time to hone his skills, and some of the scouting community thinks he could start at Low-A as soon as he signs.

There is no question that Robert is a great amateur prospect. The question that needs answering is: What will it take to sign him?

Let’s try to set the range of the salary bonus it’s going to take for someone to sign Robert. The new CBA put a hard cap on international spending. Teams start with either $4.75/$5.25/$5.75 million dollars in their international pool. A team can increase their pool by 75% of their starting figure or they can trade away every last dollar. When the new international signing period starts on July 2, no one will be able to spend more than $10,062,500 on foreign talent; Major League Baseball simply won’t approve the contracts if a team tries to spend more. Robert’s handlers pushed MLB to get him approved prior to the new rules going into effect, so therefore it makes sense that $10 million is the low end of our range.

Just over two years ago the Boston Red Sox set a new record when they signed then-19-year-old Yoan Moncada to a $31.5 million signing bonus; the switch-hitting Moncada is considered the better prospect due to a better Hit tool, because at this price point teams need the guys to be difference makers with their bats. In late April, FanRag’s Jon Heyman wrote about a rumored $25 million offer but that has yet to be confirmed by any other source; it seems a fair mark for the upper end of our range.

Oakland is one of six teams pursuing Robert, and of the six only the Chicago White Sox have not blown past their 2016/2017 international singing pool. Even the White Sox are near their pool cap, and whoever ends up signing Robert will owe Major League Baseball a penalty tax equal to the value of the signing bonus. Therefore a $10 million bonus to Robert becomes a $20 million investment and a $25 million bonus begets a $50 million price tag. How is Oakland going to be able to cover this cost?

Let’s start explaining how the A’s can pursue Robert by clearing up a possible misconception: the A’s can’t just "give" Robert the money they offered to Edwin Encarnacion. Consider this timeline of events:

  • 12/22 – Edwin Encarnacion rejects Oakland’s 2 year/$50 million offer, an AAV of $25 million, to sign with Cleveland.
  • 12/23 – Oakland signs P Norge Ruiz with a $2 million signing bonus/$4 million investment (MLB tax).
  • 1/3 – Oakland signs Rajai Davis to a 1 year/$6 million contract.
  • 1/18 – Oakland signs Trevor Plouffe to a 1 year/$5.25 million contract.
  • 1/20 – Oakland signs Santiago Casilla to a 2 year/$11 million contract, an AAV of $5.5 million.
  • 1/25 – Oakland signs Adam Rosales to a 1 year/$1.25 million contract.

Those five signings represent a $22 million investment for Oakland. Additionally, signing Encarnacion would have meant surrendering the #33 overall pick and the $2 million and change draft slot allotment that comes with it. Signing Edwin Encarnacion wouldn’t have represented a change in how Oakland does business; it would have been classic Moneyball … taking advantage of a market inefficiency that placed maybe the best bat on the Free Agent market in a position where he had to sign a short-term deal. The cash Oakland offered EE has been gone and spent.

What Oakland’s Front Office can do is piecemeal the cash together. There’s a $2.6 million difference between Oakland’s 2016 expenditure and what I have projected for them to reach in 2017; let’s call that a budget surplus. Oakland saved approximately $4.25 million last year when they traded Reddick and Hill at the deadline, and trading similar expiring contracts this summer would allow the transfer of additional funds toward signing Robert. The following is a list of players scheduled to become free agents at the end of the season and the projected savings to Oakland if they dealt these players at the deadline.

Jed Lowrie $2.145 million
Trevor Plouffe $1.7325 million
John Axford $1.815 million
Yonder Alonso $1.32 million

The A’s aren’t going to be able to move Axford until he gets healthy and can actually pitch but the other three could be dealt at the Trade Deadline, saving Oakland approximately $5.2 million. But Oakland wouldn’t just be dealing these players for the sake of freeing up cash … Oakland’s Best Case scenario for a successful 2017 involves graduating top prospects Franklin Barreto and Matt Chapman to replace Lowrie and Plouffe, respectively, and moving Ryon Healy to 1B full time. We WANT the A’s to be in a situation where they’re looking to move on from these veterans and begin the future of the next great A’s team.

Pull a million from the Cash Reserve and a couple hundred thousand from the International Fund, combine that with the trade savings and the budget surplus and we have $9 million that can be put towards a Luis Robert signing bonus. Oakland has the payroll flexibility to handle the (low end) signing bonus but ownership would have to kick in more cash to cover the penalty tax. 2016 saw the A’s increase their total expenditures by 5% over the previous franchise high; signing Robert to a $10 million signing bonus would require ownership to boost spending 10% over what they spent last year.

Getting accurate information about the team’s income is difficult, but my sense is a 10% boost in spending to $115 million would still keep the A’s turning a profit at the end of the season. Much has been said about Dave Kaval and the A’s owners not being worried about take-home profits and wanting to re-invest in the team … but any good businessman is going to want to stay in the black if at all possible. A situation where the A’s can invest $20 million in signing Luis Robert makes sense across the board. But what if $20 million doesn’t get a deal done? I don’t have enough information to speculate about the profitability of a $10 million dollar signing bonus vs. $11 million, so I’m going to review the situation at intervals of $5 million.

A $15 million signing bonus to Luis Robert would mean a $30 million investment on the part of Oakland. The good news is that the rules for international signings allow teams to split any signing bonus of $1 million over a 3-year period. Looking back at the Moncada signing, Boston ended up giving him a bonus that averaged $10.5 million annual for three years and I believe that average annual value (AAV) will serve as a cap for Robert. But I also believe that the team that offers the most upfront money is going to close the deal so Oakland would have to structure a $15 million signing bonus to pay out $10 million during the 2017 season and the remainder in 2018. So the current payroll flexibility is still sufficient to cover the 2017 portion of the signing bonus.

The bad news is any bump in Robert’s signing bonus means a corresponding increase in the penalty tax paid to Major League Baseball, and MLB’s corporate offices expect their money during the current fiscal year. So Oakland’s ownership group would have to come up with an additional $5 million (for a total of $15 million) to cover the MLB tax. I believe that the additional $5 million puts the team into the red, meaning they’d be operating at a loss for the 2017 season.

As a rule I’m opposed to any business plan that includes finishing the year with an operating loss. But I can see an argument that the Front Office can make to ownership: that this would be a one-time expense, and with the team forbidden from spending on big-ticket international talent next season, the projected expenditures in 2018 would be far lower than the $120 million Oakland would find itself paying this season to land Luis Robert. I also don’t think the team would be "too far" into the red and it’s even possible that moving another salary (Gray, maybe?) would be enough to make the budget balance again. When I combine the opportunity to land a premier talent with an unclear bottom line … there’s enough flexibility to make a deal happen.

But that flexibility doesn’t extend to cover a signing bonus of $20 million or more.

There are limits to how far a team like Oakland can extend itself and I don’t see the loss of several million dollars as being acceptable to a team that is both losing revenue and not in contention. I realize majority owner John Fisher has a lot of money, and one of the reasons he does is because he doesn’t go around spending $40 to $50 million every chance he gets.

The recent influx of funds into the infrastructure of the team and the farm system show a clear desire for sustainability and a balance between risk and reward. Money to increase the scouting and analytical departments is measured in thousands, not millions. Money to improve the game experience via food trucks and stadium renovations are designed to pay for themselves by getting more people to buy tickets and spend on concessions. Spending $40 million or more on a 19-year-old outfielder is a high-stakes gamble that does nothing to bring fans to the Coliseum this season or next. The return on investment for Robert isn’t until 2020 at the earliest (if at all) and the inherent risk associated with ANY prospect is now compounded by the loss of several million dollars in fiscal year 2017.

This is the type of investment the A’s can only make once between now and the opening of a new stadium. No matter how appealing Luis Robert is, spending too much money on a maybe-one-day star isn’t part of a prudent business model. I believe Oakland should pursue him up to the $15 million price point but they simply aren’t in a place where they can go much beyond that. They aren't in a place where they can compete dollar for dollar with the White Sox and Cardinals, the two current front runners to sign Robert.

If the A’s Front Office is ever going to pound the table and urge their owner to make an extreme financial outlay, it shouldn’t be to spend $40 million on a prospect who can't be expected to help Oakland win games (or fans) until 2020. Instead they should wait about 18 months and pay top dollar to a legitimate star in Bryce Harper.