With the World Series now behind us and the offseason getting ready to kick off in earnest, I think it's a good time to take a look at the Cubs' financial situation as we seek to buy some of the most expensive talent for the first time in nearly a decade.
Disclaimer: I am cool. Like super cool. How cool you ask? I've kept a spreadsheet dating to 2007 that breaks down the Cubs' approximate spending in four categories: (1) the 40-man roster, (2) international signee bonuses and salaries, (3) Rule 4 draft bonuses, and (4) dead money. I'm also a tax attorney; does this guy know how to party or what?
Let me be very clear about something: my personal record-keeping, while an impressive amalgamation of every source I can find, is not perfect. The older records have less detail as the free accessibility of detailed contract information has increased significantly in recent years. My methodology also includes some estimating. For example, I don't have the breakdown of international amateur free agent signing bonuses when the numbers get smaller. I've made it a priority to gather every signing bonus of at least $100,000, so I've got Gilberto Abreu's $100,000 bonus from 2010 and Tzu-An Wang's $300,000 from 2009 (not every international prospect makes it, folks). But the $20,000 bonuses or even the $45,000 bonuses like Starlin Castro got? I don't get to that level of detail, nor do I think I could. Instead, I use a deliberately increasing estimate for the total amount of such smaller bonuses. It's imperfect, but it helps to provide an approximation.
There is one substantially larger issue: the salary figures for members of the 40-man roster who are not on the 25-man roster. Generally speaking, the majority of young players signed for the MLB minimum playing at Triple-A receive about one-sixth the major-league minimum. Thus, a player like Christian Villanueva likely earned $83,333 last year instead of the $500,000 under his minimum contract despite his presence on the 40-man roster during the entire season. Accounting for this is exceptionally difficult, especially given the presence of (1) players on the disabled list collecting their full salary, and (2) the frequency of roster moves in which a new player finds his way onto the 25-man roster.
My way of dealing with this is simple: I treat every member of the 40-man roster as receiving his MLB salary, regardless of whether he finds himself on the 25-man roster. This certainly builds a few extra million dollars into my calculated payrolls, but this extra money also serves to figure in the minor league salaries of the full-time minor leaguers as well as much of the coaching staff.
It's imperfect, but it gives us all an idea as to the Cubs' spending levels over time. With that said, here are my totals dating back to 2007, the beginning of the short-lived success of the last Cubs playoff team:
Again, we're not talking about a perfect rendition of team spending, but we are talking about a pretty solid representation.
Looking ahead to 2015 spending, let's address the spending categories in reverse order as they decrease in certainty moving right to left.
This is money that the Cubs pay other teams for a former Cub to play for them and cash spent to buy out contractual options. As of now, only two numbers figure into this tally. First, the Cubs paid Kyuji Fujikawa $500,000 in lieu of exercising a $5.5 million club option. Additionally, the Cubs owed Jose Veras $150,000 to buy out his 2015 option; this cash was likely paid in 2014 upon his release, but I'm counting it as a 2015 expense for purposes of my own sanity.
Edwin Jackson may very well figure into this category in the coming months.
Dead Money Total: $650,000
We can actually get reasonably close to nailing this number. We know that the Cubs currently select ninth in each round of the draft. We also know that slot values increased 1.7 percent from 2013 to 2014. Using a two percent increase from 2014 figures, the Cubs would have the following slot values by pick if the draft broke the same way as it did for the team choosing ninth this year, the Toronto Blue Jays:
|Round||Overall Pick Number||Projected 2015 Slot Value|
For all that we do know, we don't know how many compensation picks will skew the beginning of the second, third, and even fourth rounds. We also don't know if the Cubs will sign a free agent who requires the forfeiture of the team's 2015 second-round pick (or possibly multiple free agents that require the loss of multiple picks). However, it does seem safe to forecast that the Cubs will spend up to the 5 percent overage as they have thus far under the new draft format. Provided that they do, they will spend an additional $335,080 and incur a tax of 75% of that overage for a total tax due of $251,310. I then assume, as always, that the Cubs will spend an additional $2.3 million signing their remaining picks; this estimate is surely high, but it's certainly safe.
Draft Bonuses/Tax Total: $9,587,990
International Amateur Bonuses/Salaries
Although this is difficult to believe, the Cubs still owe Gerardo Concepcion an additional $1.2 million with $600,000 of that total due in 2015. Bummer. On the bright side, Jorge Soler lived in this bucket for the last couple of years, but he has graduated into the 40-man roster group. Way to go, Jorge!
Beyond Concepcion, this category is extraordinarily difficult to peg. The Cubs are free to wheel-and-deal as they did in the summer of 2013, blowing past their pool allotment en route to signing some of the brightest Latino 16-year-old prospects. Then again, with major MLB level expenditures expected, perhaps the club will stick to their pool budget and spend within the confines of the system. Toronto's 2014 pool was $2,852,900; adjusted up 2%, the Cubs baseline would be $2.91 million. If the Cubs again spend the additional five percent overage, they'll pay an extra $145,500 of salary and $109,125 in tax.
International Amateur Bonuses/Salaries: $3,764,625
Now we get to the juicy stuff. As noted above, I use the salary figure for each player as if he is on the 25-man roster or the disabled list. Here are the projected members of the 40-man roster with no free agent signings, trade acquisitions, or non-tendered players factored in and using Matt Swartz's arbitration estimates provided over at mlbtraderumors.com (thanks Matt!). Italicized salaries are estimates; all of the estimates over $1 million are for arbitration-eligible players while the salaries just over $500,000 are auto-renewals. The minimum salary for 2015 has not yet been set, but it will be $500,000 plus a cost-of-living adjustment. I have set it at $515,000.
A few notes as you digest that chart. First, I included Kris Bryant. I don't expect him to break camp with the big club, but he'll be here before April is out. It makes sense to plan with him. Second, C.J. Edwards must be added to the 40-man roster to avoid selection in the Rule 5 draft; such an addition is a no-brainer. Third, I threw in two players who are not likely to be added to the 40-man roster in Pineyro and Zych just so I could get the roster to 40. Finally, John Baker is at the bottom because I cannot envision a scenario under which the front office would actually pay him $1.1 million after he was among the worst catchers in baseball last year. David Ross brings more for the same price, and Rafael Lopez should be better and is already under contract for the minimum. This is not a difficult decision.
40-Man Roster: $64,390,000
Based on the information above, the Cubs project for the following spending level in 2015 if no further moves are made:
|40-Man Roster||International Bonuses/Salaries||Draft Bonuses||Dead Money||TOTAL|
While spending has decreased under the Ricketts family, this level of spending - or lack thereof - would incur the wrath of the union and Major League Baseball. The Cubs won't be spending at this level.
But even this number inflates how much the club has committed in my mind. As noted above, Baker is almost certainly gone. More substantially, Travis Wood is right on the fence, and if the Cubs think that they're going to procure a free agent starting pitcher or two, Wood will almost certainly be dangled in trade talks or even non-tendered if there are no nibbles; Turner, Doubront, and Straily all provide the same type of value as Wood for a fraction of the cost. Non-tendering Wood and replacing him on the 40-man roster with a minimum salary player while doing the same with Baker would result in 40-man spending of $58,820,000 and total spending of $72,822,615.
At this point, it should be fairly obvious that there is a lot of payroll space. Even if the Cubs merely maintain their 2014 levels of spending, there would be $35.5 million of 40-man roster room this winter. If the 2013 level of spending is a more realistic target - note that 2014 came in $18.8 million below 2013 and the Cubs offered Masahiro Tanaka $20 million per season last winter - the Cubs could have in upwards of $54 million to spend.
I can keep going. Perhaps the new television deal provides a windfall that adds $10 million more than expected into the coffers each year. Perhaps the new signage at Wrigley Field adds $15 million per year. Maybe the Ricketts purchase a few rooftop buildings and the team's return to competitiveness enables them to turn a huge profit on the businesses in year one, freeing up additional cash.
The point is simple: the Cubs have an incredible amount of cash to throw around this winter, presumably and hopefully their last offseason with a protected first-round-pick in the upcoming draft.
If you made it this far, congratulations! That's some dense reading above. Feel free to fire away with any questions in the comments. And let your dreams run wild. Now is the time for that!