Why the Cubs Should Sign Closer Daniel Palencia to a Contract Extension

Signing relievers to multi-year deals is not typically part of the Cubs' team-building plan. Even a modest two-year commitment to Phil Maton this winter was a relatively significant investment, by Jed Hoyer's standards; he prefers to cobble together a relief corps without using up a meaningful share of his total resources. 

It might be worth making Daniel Palencia the exception to that rule. The Cubs' closer, 26, is still five years from reaching free agency based on service time. However, he'll reach arbitration eligibility next winter. He had 22 saves last year, and will probably save more games this season. The arbitration system infamously underpays middle relievers, but rewards those who rack up high saves totals. Palencia is in line, absent any change, to go through the arbitration process four times, and his salary will rise steeply because of his role.

Instead of risking seeing him push toward an eight-figure salary by 2030 and being in a position where his earning power diminishes their interest in retaining him, the Cubs could lock Palencia up right now, to an exceptionally team-friendly deal. He only received a $10,000 signing bonus when he joined the Athletics organization in 2020. As a reliever, he has to reckon with the inherent volatility of his role, and unlike most big-leaguers, he's not set for life. 

A contract extension for Palencia wouldn't need to include massive guarantees. Instead, the Cubs could lock up Palencia for the balance of his five years of team control, and add one or two club options that would extend their control. The cost would be trivial, from the team's perspective. Here's one possible structure:

• 2026: $1 million + $2-million signing bonus
• 2027: $2.5 million
• 2028: $4 million
• 2029: $5.5 million
• 2030: $7 million
• 2031: $11 million - club option with $1-million buyout
• 2032: $12 million - club option with $2-million buyout

This structure would guarantee Palencia $23 million, with the opportunity to earn as much as $45 million if the team options are exercised. It's not dissimilar from the deal to which Cleveland signed now-disgraced closer Emmanuel Clase in early 2022. That deal also included incentives, which Palencia's could, too, but he doesn't have quite as strong a track record as Clase had when he signed, and the Cubs have more leverage over Palencia (based on his age and amateur signing bonus) than the Guardians had with Clase, so the incentives could be muted.

A deal like this would ensure that the Cubs don't end up owing huge money to Palencia in 2029 or 2030. It's not terribly uncommon for high-end relievers to reach eight figures in arbitration, especially if they become Super Two-eligible, as Palencia will next winter. Astros closer Josh Hader made over $25 million in his final two years of arbitration, alone, and got $4.1 million in his first year as a Super Two guy. Palencia, again, is not quite on Hader's level, but that illustrates how much a closer can rack up money via arbitration. The Cubs have every incentive to gain some cost certainty, given their lack of power arms waiting in the wings in the minors. Palencia, for his part, would have a hard time passing up over $20 million in guaranteed money, since he's one elbow surgery from ending up as a free agent next winter with less than $2 million in total career earnings.

Although deals with Pete Crow-Armstrong, Nico Hoerner or others would be more impactful, the Cubs could secure Palencia's services pretty cheaply, and it could resolve some of their perennial uncertainty in the bullpen without eating into their ability to do anything else. The two sides should be talking, and try to hammer out a deal before Opening Day.