Finishing the Oakland A’s Rebuild

A lot is happening with the Oakland A’s and I’d like to talk about how we got here and where things could be going.

The rebuild began July 16, 2017.

Oakland traded Sean Doolittle and Ryan Madson to Washington for a wash-out relief arm and two prospects, neither of whom had played above Low-A ball. The largest piece was moved on July 31, when Sonny Gray was dealt to the hated Yankees for three prospects. Everyone, from the Executive VP of Baseball Operations to the most die-hard fans, knew it was time to tear it down to the studs and start the difficult process of rebuilding. Smaller pieces got moved in August, bringing back a couple warm bodies and saving a bit of cash as other teams maneuvered for the postseason. There was talent coming, with September showcasing a pair of potential cornerstones, but it would take time for it to coalesce. Enthusiasm was further tempered by the knowledge that the recently minted World Champs would reside in the AL West in 2018.

Things only got tougher as the offseason began. Peralta. A two-way phenom joined forces with the Best Player on the Planet (who just happens to reside in the same division as the A’s). The defending Champs managed to add an Ace to their pitching arsenal for 70 cents on the dollar. Finally, a plague of injuries began to strike down Oakland’s starting rotation. The epidemic would continue into the summer of 2018, eventually removing from play every pitcher who had made at least 10 starts for Oakland during the previous season. But Oakland was rebuilding and struggles were to be expected.

The winning was unexpected.

The potential cornerstones locked into place at the infield corners and the team may have found its long-term answer in centerfield. The bullpen morphed into an elite unit (although how much of that carries forward will partially depend on the gods of Variance) and the DH was filled by the Most Consistent Hitter in Baseball History. The team received steady performance from shortstop and right field while the bench featured versatility and power. The A’s cobbled together enough pitching to make a run at the division title. They fell short but Oakland clinched a playoff spot September 24, 2018.

Is it time to call the rebuild over?

Let’s look at some underlying factors to answer that question. Last year, if we don’t count Openers, the A’s had 12 pitchers make at least 5 starts during the season. Only 5 of those 12 pitchers (Mengden, Montas, Bassitt, Blackburn, Fiers) are expected to be both healthy and in contention for spots in the Opening Day rotation. Oakland traded for Tanner Anderson, announcing they’ll stretch him out to start. Bob Melvin has said Jesus Luzardo could land a starting spot during Spring Training. Every other pitcher currently on the 40 man roster that has recent, significant starting experience is either injured (Manaea, Cotton, Gossett), not ready (Holmes, Kaprielian), earmarked for the bullpen (Triggs), or bad (Brooks). Below this group you have James Naile, Parker Dunshee, Brian Howard, and Norge Ruiz; none of whom have yet had success above AA. For sake of comparison, 2017 had 10 pitchers and 2016 had 14 pitchers make at least 5 starts for the big league team. Simply put, the A’s currently face a pitching deficit that an Opener strategy alone won’t be able to overcome. Oakland will need to develop and/or add another half-dozen arms just to match the depth they had last year.

Acquiring those arms will cost the A’s, either in prospects or payroll or both. The A’s have the Top 100 level assets (Luzardo, Murphy, Puk) to pursue a high-value trade target but they will not be able to replace them internally in the next 2-3 years. The team has expressed reluctance towards dealing low-level, high-ceiling talent (Beck, Lazarito) at this time. What the organization lacks is that mid-tier level of prospect, the guys good enough to be considered for a Starter role within the next 1-2 years but not possessing the raw talent to project at an All-Star level. These are the types of asset that help you land a mid-value option like Robbie Ray or Marcus Stroman. This deficit is due to a variety of factors: The 2014 class has been picked over, producing a couple big league arms, enough trade collateral to bring in Lowrie and Buchter, and sending a glove-first 3B named Matt to the Show. The 2015 Draft class has thus far proven to be a dud. 2016 has thus far produced two of Oakland’s top prospects as well as the pieces used to acquire Fiers and Laureano. The 2017 Draft class (aside from Beck, Dunshee, Howard) has had trouble staying healthy and productive. Recently acquired prospects Sheldon Neuse and Jorge Mateo saw their value nosedive after down years. Franklin Barreto and Dustin Fowler could provide sufficient trade value but there are questions about their place on Oakland’s roster and/or their ability to adapt at the big league level.

Signing free agent arms will be a necessity. When Matt Harvey can get $11 MM guaranteed it’s hard to see the A’s signing multiple, mid-tier options. The question, as always, is means. This is where I left off the last time I talked about Oakland’s budget. (We’ll look at some Excel sheets later.) There are two key, non-attendance factors in play that will affect Oakland’s budget over the next three seasons. The first is the loss of revenue sharing following the 2019 season. These monies account for an estimated $9 million of Oakland’s 2019 budget; furthermore, being phased out of revenue sharing means the 2019 Draft will be the last time Oakland is eligible for a Competitive Balance draft pick. (This was confirmed by the A’s through Susan Slusser, via Twitter proxy Alex Hall. Thanks to you both for the help.) It is also the last year the A’s will be assigned more than the base cap for International signees. The loss of the Competitive Balance pick and the extra International pool money will reduce the team’s base allotments in these areas by $1.5 - 2.5 MM annual. Thus Oakland’s ability to invest in talent, both professional and amateur, will change on a fundamental level within the year.

The second factor is how I believe the A’s intend to bridge the financial gap between the loss of revenue sharing and the opening of a new ballpark. When Beane and Melvin and Forst sat down at the end-of-season media session to talk about signing extensions and plans for the future, one of the key points discussed was creating a pool of money that would be used to fund the next few seasons. I see two primary sources to fund this pool, the first being yearly revenue generated by the team. The better the attendance, the better the income stream. The second is the $50 MM windfall each team received for MLB’s sale of BAMTech to Disney. (Some have said the team figure is closer to $70 MM but the most frequently mentioned amount is $50 MM. If we budget at the lower figure than anything extra is bonus.) If the A’s are willing to allocate most or all of this money to payroll then there will be incredible flexibility to take advantage of opportunities as they arise. But we need to consider the BAMTech funds as seed money because once it’s gone the payroll will have to be sustainable on existing revenue streams.

Let’s start with a quick review of how the A’s have spent money over the previous three seasons.

Previous efforts led me to “create” a 7% Cash Reserve based on the Opening Day payroll. The Draft and International columns are the reported expenditures during the 2016 and 2017 seasons; the 2018 Draft is final but the International cost is an estimate until Baseball America releases their review in April. I highlighted the Predicted Expenditures in 2017/2018 and the Actual Expenditures in 2016/2018 because I need to make an assumption about Oakland’s yearly revenue stream in order to project what it will be after revenue sharing goes away: I believe there was a mandate for the team to stay in the Black when it came to yearly expenditures. Therefore, the A’s turned a profit in 2016 with an Actual Expenditure of $104+ MM and they based their 2017 Predicted Expenditures at a level to insure another profitable year. Knowing that the A’s were losing $9 MM annual starting in 2017 allows to make an educated guess at the break-even point.

In 2017, with 75% revenue sharing, we can pencil in $105 MM.

In 2018, with 50% revenue sharing, we can pencil in $96 MM.

In 2019, with 25% revenue sharing, we’ll pencil in $87 MM.

In 2020, with revenue sharing no longer available, we’ll pencil in $78 MM.

I think it’s probable that starting in 2019 the team will go away from the mandate of turning a yearly profit because of the pooled BAMTech money. There’s a $50 MM cushion before worrying about seeing Red in the margin. I also think it does away with having to set aside a 7% Cash Reserve based on the Opening Day payroll; again, there’s a large sum of money already set aside to take care of team needs. (And just to be clear, when I talk about “yearly revenue stream” I’m referring to the portion that gets directed towards player payroll and signing bonuses. I realize that the team makes more than $78 MM annual but they also have other expenses as well!)

Now let’s look at Oakland’s roster construction for the next three years. I’m only using players currently on the 40 man roster and when the team loses free agents I replace their spot on the payroll with a league minimum salary. The 2019 salaries come from MLBTR’s Arbitration estimates and Cots Contracts; Cots uses $575,000 for all pre-Arb salaries prior to actual salaries being released at the start of the season. I’ve chosen to project $600,000 and $625,000 for all pre-Arb salaries in the subsequent years. Blue Type represents my best guess at a future arbitration salary. Green Type represents an accepted Qualifying Offer or a buy-out and notes when a player reaches Free Agency. Gold Type is used to create a minimum salary placeholder at the positions that open up due to Free Agency. Red Type represents a player who is expected to start 2019 on the Disabled List.

But we can’t just look at big league payroll, there are other necessary expenditures that need to be anticipated. Last year draft pool money increased by 4.2% and international pool money increased by 4.8% from their respective 2017 levels. Factoring in similar inflation while removing the bonus monies that came with the team’s revenue sharing exception allows us to predict what Oakland’s draft and international pools will look like during the 2019-2021 period. (The A’s just traded their Comp A pick as part of the Profar package, which is reflected in these numbers.) My draft estimates presume Oakland lands the 29th overall pick three years running.

This allows us to see where we might need to tap into the BAMTech money. My Annual Revenue baseline doesn’t factor increases in ticket prices or attendance or merchandise sales, all of which could be expected if the A’s keep winning 90+ games a year. The short, short and over-simplified answer is that the BAMTech money and the current revenues are enough to cover payroll for the next two seasons and there are a multitude of player personnel decisions available to free up funds for 2021 as well. While I believe the A’s would prefer to get Khris Davis signed to an extension that would lower his AAV, there’s minimal downside to having to offer him a Qualifying Offer next winter; they can afford to have him say “Yes”. The recent roster moves clearly illustrate that Oakland is looking at the next two years as a window of contention. We can expect the Front Office to be aggressive at the July Trade Deadline if the team is playing well and I think the A’s will be willing to pay a premium to land an asset they can control through 2020.

So where does this leave the rebuild?

Well, it’s been heavily modified and is live-in ready. The starting rotation is the present weakness, even with the return of Mike Fiers. With luck the depth there will improve organically as pitchers recover from injury. These returning arms could also end up critical in maintaining the bullpen beyond 2019. The A’s gave up a draft pick to improve in 2019 but they’ve been linked to Robert Pauson, one of the top international talents in the upcoming J2 class and a player with a price tag that will eat most of Oakland’s projected base allotment. I expect the team to trade for additional money to bulk up their 2019-2020 J2 group. This would be consistent with a rebuilding team and much of the legwork would have already been done towards this end. I’m not sure if 2020 and 2021 will get this “extra” emphasis as a contending team would want to maximize its trades toward more immediate returns.

Picking late in the 1st will still give Oakland access to high-ceiling talent but it’ll come with more risk. The ability to go significantly over-slot in the 3rd/4th rounds is going to be diminished unless the A’s resort to a lot of Senior signs in the back-half of the top 10 rounds. The A’s have invested heavily in outfielders and middle infielders during the last two drafts, using 7 of 8 top 100 picks on those player types. It’s much too early to talk about specific draft targets but I wouldn’t be surprised to see a bit more emphasis on college trained arms that could fast-track and see their stuff play up in a bullpen role.

Of more immediate interest is what can Oakland do next to prepare for the 2019 season. With Fiers officially re-signed, the 40 man roster will be at 39 and I see roster limits as being a greater impediment than payroll at this point. I think Oakland can take on a bit more salary, maybe another $10 MM or so, but I’m not sure where it would go. Are the A’s truly willing to start the season with a Catching tandem of Phegley/Herrmann? Oakland is rumored to have offered Jonathan Lucroy a one year deal at under $5 MM; the interesting thing about that price point is that if Lucroy chooses to go elsewhere there are at least two veteran backstops, Toronto’s Russell Martin and Arizona’s Alex Avila, potentially available in trade at a similar salary. (To be clear, there has been a lot of speculation that Toronto would be willing to eat much of Martin’s remaining contract to facilitate a trade.) (Update: Lucroy is off the board for $3.35 MM.) The rotation would make most sense (and the team has stated an interest in addressing it) but there aren’t too many free agent options available that are both signable and worth that amount. I think the A’s will absolutely look to add a veteran Pitcher or two on minor league contracts to help build rotation depth.

Any further trades are likely to include players currently on the 40 man roster, which is probably the team’s preference anyways. I don’t see the A’s as being in position to make a big, splash trade. The rotation is the only place where a big move would make sense but the players available (and discussed ad nauseum) currently come with high price tags and enough red flags to merit caution. Oakland is still trying to figure out what they have in Mengden, Montas, and Bassitt, and they’re talking up Luzardo by Opening Day … letting those things work themselves out (in my mind) precludes a costly addition. I’d like to see a small addition, maybe a waiver claim on Clayton Richard for example, that wouldn’t be hard to walk away from should things go swimmingly with the younger arms already on the roster.

2019 is not the year to throw out the rebuild blueprint; there is still critical foundation work to be done. There may well be an opportunity to upsize during the summer, and the team has the means to take advantage, but Oakland needs to have the patience to let things develop more before making that kind of move.