How The Phillies Can Maximize a Cole Hamels Trade

After stubbornly trying to hold on to the past long after their glory had faded, the Philadelphia Phillies have finally accepted reality, acknowledging that it’s time to commit to a rebuild and look toward the future. That process officially began when Jimmy Rollins, the best shortstop in team history, was traded to the Dodgers in December. Marlon Byrd soon followed him out the door in a trade to Cincinnati. Ryan Howard, Cliff Lee and Jonathan Papelbon are likely to follow, if the team can find any takers. It’s going to be a long season — or two or three or four, for that matter — in Philadelphia.

Sooner or later, star lefty Cole Hamels is going to be on the move as well. Because Hamels has by far the most value of any of the remaining Phillies, a potential Hamels deal is the most important thing GM Ruben Amaro Jr. has to get right in managing this rebuilding process. He can’t get this wrong, because a misfire here could set the franchise back even further — and potentially cost him his job.

No deal currently seems close, with various reports indicating that the Phillies are being “unrealistic with their expectations,” asking not only for multiple top-level prospects but also for a team to pick up most or all of the $110 million Hamels likely will be due. (Though Hamels is guaranteed only $96 million, it’s widely assumed that he will insist on his 2020 team option to be picked up immediately in exchange for him waiving his no-trade clause, pushing the total value to $110 million.)

The Phillies are a team that is rich in dollars and poor in talent. Major League Baseball has done its best to limit the avenues by which teams can acquire young talent. So why don’t the Phillies make the tough but necessary call to offer not only to eat some of Hamels’ contract, but a big part of it?

Here’s a look at the likely return the Phils will receive in exchange for Hamels and the best next steps for Philadelphia.

Phils’ deep pockets, thin farm system

It’s more difficult than ever for a team to put its resources toward adding young talent. The latest collective bargaining agreement put harsh penalties on outspending a draft allocation, which was partially responsible for last summer’s Houston Astros/Brady Aiken debacle. International spending rules have been tightened substantially, in some cases preventing teams from signing players at all if they’d exceeded their predetermined budget. MLB free agency is always the least efficient way to spend a dollar, and with young prospects so highly valued, acquiring them via trade is difficult.

That means that for teams with money, it’s hard to simply “buy” talent in the way they used to — and make no mistake, the Phillies have money. Despite declining attendance, last year’s $2.5 billion television contract with Comcast stands to bring in more than $100 million annually. Traditionally in the top five of payrolls, the 2015 Phillies are currently set to spend $50 million less than the 2014 team as the youth movement begins. They have more money than ever, and they’re spending less of it than they have in years.

Though the Phillies have reportedly been insisting that Hamels’ full contract be offloaded in any deal, there’s no real need for that, other than the optics of not wanting to pay a popular player to succeed for someone else. The Phillies aren’t the Wilpon Mets or McCourt Dodgers, put in financial peril due to the off-field actions of their owners. They aren’t the A’s or the Rays, limited from the start by ballpark issues. They’re a very rich team with considerable resources, their farm system isn’t brimming with talent beyond shortstop J.P. Crawford, and they’re playing in a sport that has taken steps to limit the means that teams can acquire more talent to quickly rebuild.

So while Philadelphia fans may hate the idea of knowing that the team is signing the paychecks when Hamels returns to shut down the Phillies while wearing the colors of the Red Sox or Padres or Rangers, the alternative is that the money simply returns to team ownership. If it’s that or being used (through Hamels) to purchase talent, the choice is clear: Pay the contract down.

Valuing Hamels, the likely return

How much of a difference could this make? Remember that when other teams are considering Hamels, they aren’t thinking about him as “Cole Hamels, Phillies icon and World Series MVP,” as fans would. They’re thinking about him far more analytically, more in line with “31-year-old pitcher still due $110 million over five years and likely nearing the end of his peak seasons.”

There’s obvious value to that, of course, but perhaps less than you might think. Not having to commit to seven years, as the Washington Nationals did for Max Scherzer, is worth something. The simple access to talk to a pitcher who is otherwise not available is worth something. The Phillies aren’t going to — and should not be expected to — simply dump Hamels for peanuts because they aren’t likely to be very good in the remaining few years of his productive career.

However, five years and $110 million represents an acceptable contract, not a spectacular one. The sum of $22 million per year isn’t exactly a steal, and it’s useful to think of Hamels as though he were a free agent, or were placed on waivers. Lots of teams would line up to pay Hamels $22 million per year, especially because the identically aged Jon Lester just signed for $25.8 million annually (though Lester is coming off a far better season). But not everyone would; plenty of teams couldn’t fit that into their budget, and that’s simply talking about the dollars, ignoring prospect return entirely.

Of course, the Phillies aren’t giving away Hamels for free. They’re expecting a considerable return in talent, and if they aren’t going to eat any of the contract, what they’re essentially saying is “pay us for the right to pay Hamels only somewhat less than he would get on the open market.” Which is to say, Hamels at $110 million is far less appealing than five years of Hamels for $55 million, which is what would happen if the Phillies agreed to eat half. That would open up the bidding to more teams — clubs such as the Padres could get into the mix — and it would increase the return in talent to the Phillies.

Now let’s try to put some numbers to this. Recent research has shown that prospects considered to be among the 10 best in the minors are worth between $40 million and $50 million in surplus value. The pitchers ranked Nos. 11 to 25 generated an average of about $25 million; hitters in that same range were more valuable, just because there’s less injury concern than there is with pitchers. As you go further down the rankings, the prospects could be expected to generate less and less value, as expected.

That’s how the math works when teams attempt to evaluate a trade such as this: They look at how much Hamels is being paid, how much they think he’ll really be worth and take the difference as surplus value. That number varies depending on how a team might calculate WAR, but to use one example, FanGraphs has had Hamels as being worth approximately 4 WAR in each of the past three years. (Though Hamels’ raw numbers looked better in 2014, he pitched fewer innings because of injury, and also don’t forget that offense across the entire sport keeps dropping dramatically.)

If you expect that Hamels is worth another four wins in 2015, and accept that wins are going for roughly $7 million on the open market, Hamels is worth $28 million and will be paid $22.5 million. That’s $5.5 million of surplus value, though that number would be expected to decrease over the length of the contract. After all, the price of wins keeps going up, and Hamels at best can maintain his production or decline; he’s very unlikely to improve.

From there, the math does itself. If a team takes on Hamels’ full contract, they get a small amount of surplus value each year. If a team is asked to take on only half of Hamels’ contract, then suddenly his surplus value in 2015 is more than $11 million, and that greatly increases the value of the prospect the Phillies can ask for in return.

Outlook

The Phillies don’t need Hamels. They don’t need the money. They do need the prospects that a Hamels deal could return. If paying part of his contract increases the value of those prospects, in an environment where they are difficult or impossible to obtain otherwise, it’s not just a good idea to do it. It’s the only idea.

If they don’t, Phillies fans are going to be terribly disappointed in the return. Even worse, the Phillies won’t move Hamels at all, exposing themselves to the risk of getting nothing at all should Hamels injure himself first.