Rios and Hill Signings

The Toronto Blue Jays announced on Friday that they had signed Alex Rios and Aaron Hill, two valuable contributors, to long term contract extensions. Both players, while already solid major leaguers, have yet to hit their primes. The new contracts should ensure that when they do, they will be wearing a Blue Jays uniform.

Rios signed a six year extension that covers the 2009 to 2014 seasons and pays him $64 million. This works out to roughly $10.7 per year. Note that Rios still has two arbitration years left. There is then a $13.5 million dollar club option for the 2015 season.

Hill’s contract is a little more complicated. He earns $11.6 million over the next three seasons (2009-2011). This covers his arbitration eligibility years. Then, just as he would normally enter the free agent market for the first time, the Blue Jays can pick up a three year, $26 million option. If they decide against the three year option, they can instead elect to exercise a one year option worth $8 million or a two year option worth $16 million. Thus, the contract pays Hill almost $4 million per year over his arbitration eligibility period and potentially some $8 million once he hits free agency.

I like both of these signings. J.P. Ricciardi has locked up two important players for several years at a very reasonable price. In my last year of undergraduate study, I estimated a wage equation for MLB free agents for my senior econometrics paper. According to my results, and based on their performances to this point in their careers, Hill could expect to earn $8.4 million as a free agent and Rios could demand $13.1 million. Of course, my predicted salaries are not exact and the real market values may be higher or lower. But if we make two reasonable assumptions, (1) Both Rios and Hill will continue to improve, and (2) baseball salaries will continue to climb, it seems very likely that the contracts signed today will pay these players less than market value once they achieve free agency eligibility in a couple of years.