Pondering Josh Donaldson’s Contract Terms

photo: Josh Donaldson (Thomas Shea/USA TODAY Sports)

Important update from Brian Walton

As credited below, the base reporting of news that Atlanta had agreed to make Donaldson a qualifying offer following the 2019 came from an article at The Atlantic. You can read the original relevant text here.

What I did not learn until several days after the fact is that the author, Bernie Miklasz, made a significant post-publishing correction to his article. Here is his explanation of an honest misunderstanding.

“I wanted to pause here to sincerely apologize for putting out some incorrect information in an early version of this column. I’d misinterpreted what an agent told me, and assumed that the Braves assured Donaldson that they’d automatically make that QO at the end of the season. That’s not the case, and I didn’t vet the info properly. Bad form on my part.”

Obviously, this correction has an impact on my article that follows, which I will leave in its original form.

To summarize: Donaldson has a one-year contract. Assuming he is not traded, the Braves will have the right to make him a qualifying offer next fall, but are not obligated to do so.

When free agent third baseman Josh Donaldson committed to a one-year, $23 million contract with the Atlanta Braves this week, I was among the many surprised – for several reasons. Further, some members of the St. Louis Cardinals fan base were upset when it was reported that the club made a “competitive” offer for Donaldson, but obviously fell short.

I definitely scratched my head over the events, but perhaps for a different reason than others.

It seemed counter-intuitive to me that the former American League Most Valuable Player would commit to such a short-term deal – especially so early in the off-season. Further, it appeared to set him up to re-enter what may be a crowded free agent market again next fall.

On the first point, perhaps Donaldson valued getting his deal done quickly, and not have to worry about getting frozen out later like some free agents did last winter. It could be that his other “competitive offers” at this point were for just one year. Some reports stated he preferred a Southern destination and has familiarity with former Toronto staffers now employed by the Braves.

Regarding next fall, along with Donaldson being a year older (he turns 33 in 10 days), he could be competing with fellow third basemen Nolan Arenado and Anthony Rendon in the 2019-2020 free agent class. I did not expect he would do that, but as we learned later, he may not, as there is a twist in his new agreement with Atlanta.

The plot thickened with the disclosure by The Athletic that the deal between Donaldson and the Braves includes a commitment that the team will make him a qualifying offer next fall. This is a very creative approach by the player and his agent, but what does it really mean?

As many may already know, a qualifying offer is a one-year commitment made by the club to the eligible free agent-to-be. The salary is preset for all eligible players as the mean salary of MLB’s 125 highest-paid players in the prior season. The qualifying offer amount for 2019 is $17.9 million.

There are two ways this could go next fall.

  • If Donaldson accepts the qualifying offer, he would make roughly $41 million for two years as a Brave ($23 MM plus an estimated $18 MM). This represents his easy path for 2020, especially if he has a bad 2019 and/or is injured and misses significant time. For what it is worth, it is rare, though not unheard of, for a player to accept a qualifying offer.
  • If he declines the qualifying offer – which the vast majority of eligible players do – Donaldson would become a free agent again next fall. However, he would also carry draft pick and international spending penalties for the signing team that come with being a qualifying offer free agent, diminishing his appeal.

This latter case represents the upside of the gamble. The option to decline covers him if he has a big 2019 and feels he can make more than the qualifying offer amount for 2020 and/or secure a longer-term deal next winter – even with the qualifying offer tag.

While this idea is innovative, it seemed to me initially that the same thing could have been accomplished with a one-year contract and a second-year player option.

Well, it is not quite the same thing, after all.

In this option case, Donaldson would not be assured of burning up his one-time career qualifying offer.

The sequence would be that Donaldson would first decline the option. Given there is nothing to restrict the team from making the qualifying offer (mid-season trade, prior QO, etc.), the team would be allowed to make the qualifying offer, and the player could then accept or decline it. However, Atlanta would not be required to issue the qualifying offer and could decide not to.

That is reason enough for the unique approach taken, which would for sure remove the qualifying offer obstacle for the future.

A painful case study

Greg Holland (St. Louis Cardinals)

One recent example of a player who followed a similar option path to the one I suggested is a name that is a very sore subject to many Cardinals fans, Greg Holland. In fact, the matter is likely unpleasant for the pitcher and his agent, as well.

With Colorado, the reliever had a conditional $15 million player option for 2018 that would take effect if he either pitched in 50 games or finished 30 games in 2017. He earned that option, declined it, then the Rockies made him a qualifying offer.

Holland turned that down, too, which turned out to be a mistake for everyone involved. After a long winter and spring of uncertainty, the Scott Boras client came to terms with St. Louis during the regular season’s first series on a one-year contract for $14 million. The option with Colorado turned down would have paid Holland $15 million and he then left $17.4 million on the table when he declined the qualifying offer.

Then, there is the apparent negative impact of not having a spring training to his performance in his St. Louis downfall, which resulted in his July release and return with Washington to close the season. Again a free agent currently, Holland has no benefit in no longer being qualifying offer-eligible. There was no way the Nationals would ever have considered it, anyway. That train has left his station, likely to never return.

The Cardinals absorbed his poor results – 7.92 ERA, 0-2 record and zero saves in three opportunities – and of course paid his salary. St. Louis forfeited its second-rounder, the 59th overall selection in the 2018 draft and lost a half-million dollars of international signing cap money to boot.

Even the Rockies did not come out all that well. To replace Holland, they signed former Cubs closer Wade Davis to a three-year, $52 million contract plus a fourth-year option – a record AAV for a closer. The 33-year old delivered his worst season since converting from starting five years earlier. In his first year with Colorado, Davis went 3-6 with a 4.13 ERA. He saved 43, but also blew six chances, with his 87.8 percent success rate only seventh-best among NL relievers with at least 15 saves. The Rockies also received the 76th overall selection in the 2018 draft as compensation for losing Holland.

In closing

Having said all that, this maneuvering will only matter if Donaldson chooses to re-enter the market two years from now – following the 2020 season. Even if so, I have to wonder how much it would matter at that time. After all, he currently had no qualifying offer attached, either, and his market was not multi-year strong – or was it?

To come full circle, it is unclear if the Cardinals made more than a standard one-year bid and what its amount may have been. While Donaldson was positioned in some media reports as not being a primary option for the Cardinals as they look to add a middle-of-the-lineup bat for 2019, reports of a trade offer of Jack Flaherty to Toronto 12 months ago suggest that St. Louis wanted him at that time.

An indisputable point is that one big-bat possibility for the Cardinals this winter came off the table very quickly – perhaps due to this innovative view of how to approach Donaldson’s year two.

P.S. It has been suggested that one reason the Cardinals lost out on Donaldson was an unwillingness to pay any player a higher salary than $20 million-per-year catcher Yadier Molina – unless his name is Giancarlo Stanton or Bryce Harper, apparently.

One just has to hope that is not reality or the Cardinals are purposely heading into battle holding one arm behind their back – both this winter and next. And if they continue to encounter “headwinds” in their free agent pursuits, they need to be ready and able to weather the storm.

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Brian Walton can be reached via email at brian@thecardinalnation.com. Follow Brian on Twitter.

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