Left-hander Cole Hamels had a 2.46 ERA for the Phillies in 2014 -- the same mark as Jon Lester had for the Red Sox and A's. (Brian Garfinkel/Getty Images)

Making (dollars and) sense of Cole Hamels' contract as an alternative to Jon Lester

November 11, 2014 - 12:08 pm
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Don't want to pay the going rates for an elite free-agent pitcher? The Phillies' phone lines are apparently open. Philadelphia is willing to discuss left-hander Cole Hamels, a pitcher who is coming off a dominant season at age 30. Though he went just 9-9 for the Phillies, he posted a career-best 2.46 ERA in 30 starts with 8.7 strikeouts and 2.6 walks per nine innings in 204 1/3 innings this year. Those numbers align closely with what Jon Lester (16-11, 2.46, 9.0 Ks/9, 2.0 BBs/9) did in 2014. The similarities go beyond that. The two pitchers were born just 11 days apart, Hamels at the end of December 1983, Lester in early January 1984. Hamels has a career 108-83 record with a 3.27 ERA and 125 ERA+. Lester is 116-67 with a 3.58 ERA and 121 ERA+. Both have dominant World Series performances and a history of thriving in some of the most highly scrutinized environments in baseball. It goes without saying that Lester will use Hamels' six-year, $144 million contract (signed just months before he reached free agency in 2012) as a very relevant data point for his own contractual discussions. And so, the notion has been articulated many times: The Red Sox can re-sign Lester for full market value, but if they don't want to commit, say, five or six years to a pitcher who turns 31 in January, they could trade for Hamels, who is owed $90 million (four $22.5 million salaries) in the next four years. But the contractual contrast between the two pitchers might have been overstated, in part based on some misunderstanding about Hamels' contract -- particularly given the possibility that, if the Sox were to trade for Hamels, because he reportedly has the right to veto a deal to Boston and can thus extract negotiated concessions from a team that deals for him, they might have to pick up his $20 million for his age 35 season in 2019. Here's the shakedown: -- Hamels has $96M guaranteed remaining (4 years' salary at $22.5 million each along with an oft-overlooked $6M buyout for 2019) remaining on his contract. For luxury tax purposes, his contract counts for $24 million in payroll for each of those next four years. Could Lester command a six-year, $144 million deal in free agency? Maybe. If so, then trading for Hamels would mean avoiding two years at roughly the same luxury tax hit -- at a cost of multiple top prospects in a system. -- If the option year has to be guaranteed, nothing changes about how the next four years of his deal are calculated for luxury tax purposes. His contract still functions as a $24 million a year hit from 2015-18. -- If the option year has to be guaranteed, the real impact would thus first be felt in 2019 (the option year). Because of the $6 million buyout (which is treated as guaranteed money in calculating the average annual value of the original six-year deal), the $20 million option will only count for $14 million for luxury tax purposes in 2019. Unless his career goes off the rails, that's far from an onerous commitment, and indeed has at least the potential to represent a bargain. That $14 million AAV for Hamels' option year would represent a payroll discount of approximately $10 million relative to Year 5 of a hypothetical six-year, $144 million deal for Lester. -- So, if Hamels would insist on his option being guaranteed as a condition of a trade to the Red Sox, there would be no decrease in financial cost (or risk) relative to a Lester contract through the next four years; there would be one year that would represent an opportunity for savings in 2019, and there would be no risk associated with a sixth year of a deal at age 36. -- The value of that discount is not clear. The current Collective Bargaining Agreement will have expired by the time 2019 rolls around. If the luxury tax threshold has increased by, say, $30 million or $50 million by that time, then the consequences of a bad (or even mediocre) final year or two of a contract signed at market standards in the 2014-15 offseason would be far less than they would be right now. Ultimately, if one views Hamels and Lester (based on career track records) as similar assets (and risks) going forward, and if the choice was between trading for Hamels or signing Lester for six years and $144 million, a team would have to decide whether the "discount" on 2019 and the avoidance of risk in 2020 would be worth three of its top prospects (a contrast made all the easier by the fact that Lester is not attached to any kind of draft pick compensation). Frankly, it might be difficult for a team to justify dealing Hamels for even one top prospect if the choice was between a trade for the next five years of Hamels' contract as opposed to a six-year deal for comparable free agent.

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