Front-Loaded Contract Could Keep Johan Santana in Minnesota

Baseball contracts are guaranteed, so wouldn't you rather get more money up front rather than at the back end of a contract?

The Minnesota Twins have a budget of roughly $59 million with Santana's current contract (Note—Justin Morneau and Michael Cuddyer just signed extensions, but they do not significantly raise the payroll for 2008)

Twins' GM Bill Smith has a Carl Pohlad (Twins' owner)—induced cap of $80M. That leaves plenty of room for Santana to have a monster first year of a contract.

Santana wants a seven-year, $140 million contract.

A front-loaded contract under those terms would look like this:
08 — 30M ($17 million raise keeping the team salary under $80 million at approximately $77 million)
09 — 25M
10 — 20M
11 — 20M
12 — 18M
13 — 15M
14 — 12M

This contract leaves room for Morneau to sign an extension, and after 2009, (when we're in our new stadium) Santana would be earning less than 20 percent of the total team salary.

Looking economically, and assuming a five percent inflation rate, that would put the actual value of his contract in terms of 2014 dollars...

08 — 30M —> $40,202,869
09 — 25M —> $31,907,039
10 — 20M —> $24,310,125
11 — 20M —> $23,152,500
12 — 18M —> $19,845,000
13 — 15M —> $15,750,000
14 — 12M —> $12,000,000

The actual value of that contract is $167,167,533.

Now the inverse, which is what a normal contract would look like...

08 — 12M —> $16,081,147
09 — 15M —> $19,144,223
10 — 18M —> $21,879,112
11 — 20M —> $23,152,500
12 — 20M —> $22,050,000
13 — 25M —> $26,250,000
14 — 30M —> $30,000,000

This totals $158,556,983. So just by front-loading the contract, Santana gets $9 million more while getting paid the same amount of money from the Twins.

Now, the counter-argument of this is the team understands the time-value of money, and realizes they'll lose that $9 million with a contract like that. But, look at the increase in ticket sales that happen when Santana pitches.

With Santana pitching — 32,808 average

Without Santana pitching — 27,337 average

That's a difference of 5,470 fans and multiplied by the average ticket price of $17.26, that equals $94,424 in ticket sales per start or $1,416,371 total for Santana's 15 home starts this year.

Over the course of the 7-year contract, that increase in ticket sales will easily be over $9,000,000. 

Having an ace like Santana also equals more wins each year, which increases attendance in other games when he is not pitching, making his actual value is even higher.

Not to mention the increased advertising revenues and concession-stand sales from larger attendence and overall team success.

In the long term, the Twins would more than make up that money. If you start to add in the increased playoff chances, well, the Twins would definitely make up that extra cost to keep Santana.

With what is currently being offered for Santana in trades, I believe this would be the best option for all involved.

None of the trade offers are remotely close to what Santana is worth, and the Twins definitely don't want to just let him walk.

They can afford him and they should keep him.