With 2015 in the rearview mirror for the Cubs, let's move our focus to 2016, a year in which the Cubs will look to make a repeat trip to the playoffs for the second time since making three straight trips from 1906-08 (the other, as you likely remember, was 2007-08). The Cubs have shifted from a purely developmental phase into a period in which it truly matters that the Major League club maximize its current wins while the system continues to produce impact talent for restocking the roster through graduation and/or trade.
Of course, in baseball as elsewhere, talent acquisition requires money. So, let's delve in to what exactly the Cubs might be expected to spend in 2016, starting with a quick refresher of the club's approximate spending over the previous nine years.
|Draft Bonuses||Dead Money||TOTAL|
That table certainly tells part of the story, but I would venture to say that the vast majority of you recall Theo Epstein and Jed Hoyer explaining that the money earmarked for Masahiro Tanaka from 2014 would be rolled over to the 2015 budget. The Cubs' offer to Tanaka was for $20 million per year plus his $20 million posting fee, but the team turned around and spent some chunk of that money on Jason Hammel's deal. Accordingly, it's probably a safe assumption to peg approximately $20 million from the 2015 budget as having actually been allocated to the 2014 budget. If we make such a move, the following table results:
|Draft Bonuses||Dead Money||TOTAL|
Hmmm, that sure changes the picture, doesn't it?
Personally, I find this chart very confusing. Sure, I understand the raw numbers and I can construct a basic narrative based on what ownership and the front office has said in the past that goes something like this:
- The Ricketts family inherited a bloated salary table in late 2009 and needed to cut spending
- The Ricketts brought in Theo Epstein and his front office in late 2011 with a payroll ready to tumble
- The payroll tumbled
- The Cubs are slowly investing additional cash into player personnel as revenues creep up
- This incremental incline should be expected to continue
That's reasonable enough on its face. So why am I confused?
Because of this little nugget from Theo in April 2013: "We maxed out our payroll last year and we maxed out our payroll this year." Either I'm completely off of my rocker or the Cubs President of Baseball Operations claimed that the dollars available for baseball operations dropped by approximately $20 million from 2012 to 2013. That's nearly impossible to believe.
On the other hand, if revenues actually fluctuated that wildly, it should actually be an encouraging sign for the club going forward. Attendance is up, media advertising revenue should be way up (something that at the very least indirectly profits the Cubs), and the Cubs have remade Wrigley Field's outfield into a moneymaking machine. If revenues are being reinvested, there should be a lot of reinvestment in the coming years.
Which brings us to 2016. As I did in the piece looking back on 2015 spending, I'll break the Cubs' expected 2016 spending down into four categories. There's obviously some projection here, but we'll end up with a discussion of 40-man roster spending, the ideal end point, regardless of how we get there.
As a category, Dead Money experiences some pretty significant fluctuations from year to year. Fortunately, this category is simple for the 2016 Cubs: the club owes Edwin Jackson the final $11 million of his contract. That's it. That number will likely change over the course of the year, but for now, this is all we have. Please note that we'll see Gerardo Concepcion down below. Although he was outrighted off of the 40-man roster, he is still a member of the system, so he falls into my International Bonuses + Salaries bucket.
This category requires a bit of discussion before we delve into it. The Cubs haven't been directly affected by the new qualifying offer system yet, but that figures to change this winter. Dexter Fowler will almost certainly receive a qualifying offer, meaning that the Cubs will net an additional draft pick between the first round and Competitive Balance Round A in the 2016 draft. The average compensation pick in 2015 came with a slot bonus amount of $1,866,730.
Here, we have to make our first assumption: I am assuming that Fowler bolts in free agency and that the Cubs do not sign a qualifying offer-rejecting free agent themselves. Obviously a change in either circumstance impacts the draft budget.
In order to estimate 2016 draft spending, I took the Angels draft pool from 2015 ($5,050,100), added the average compensation pick value from above, inflated both numbers by seven percent, roughly the average increase over the years), and came up with a projected draft bonus pool of $7,401,000 ($5,403,600 + $1,997,400). Given that the Cubs have consistently exceeded their pool by five percent, I've accounted for the overage and its resulting 75% tax, resulting in the following total spending:
|Draft Rounds 1-10||$7,771,050|
|Draft Rounds 11-40||$1,000,000|
Now, I noted that there is an assumption about the Fowler compensation pick above. You'll also notice that spending assumption for rounds 11-40. I just have no idea how much teams actually spend in that area. They could spend up to $3 million without triggering any additional amount into the bonus pool by giving every prospect the maximum non-triggering $100,000 bonus. Or they could give everyone a few thousand dollars and cap the spending at, say, $100,000. I just don't know. So take that portion of the estimate with a grain of salt.
International Bonuses + Salaries
This category is substantially easier, at least once we have final numbers from the 2015 international free agency period. While some might assume that the Cubs will only spend a pittance internationally because they are restricted to individual bonuses of no larger than $250,000, the Cubs' 2014 international amateur free agent class suggests that the club will continue to spend nearly their full pool allotment. In fact, in 2014, the Cubs spent $3.32 million on 47 bonuses according to Baseball America, the ninth most expensive class in baseball, despite the maximum individual bonus restriction. Expect the Cubs to use their full pool again in 2016.
Speaking of that pool, I took the 28th-largest pool from 2015 and accounted for seven percent inflation again.
Oof. That 2015 tax bill is a bummer, but that's the price of doing business with international amateurs. Jeferson Mejia was the primary return for Miguel Montero last winter (no offense, Zack Godley), so these players have value. Monster penalty bills just aren't fun.
Because the penalties will be paid in 2016, I have accounted for them accordingly. 2017 should show a big drop in international bonuses and salaries, unless a 23-year-old Cuban prospect comes calling.
Regardless of our imperfect access to information, this estimate should be very close to reality.
A Brief Pause Before Reaching the 40-Man Roster
The three categories above should be very similar to what they were in the previous couple of years. Take a look:
|Draft Bonuses||Dead Money||TOTAL|
Hmmm. I'm no mathematics scholar, but it sure looks like the Cubs spend just about the exact same amount of money each year on player personnel expenses outside of the 40-man roster. I'm not sure if that's good or bad. I'm just pretty sure that it is true.
All of my usual caveats apply: I use a couple of extra spots to account for non-salary expenses like benefits and minor league payments and for the fact that there are always guys on the 60-day disabled list, meaning that the 40-man roster is more like a 42- or 43-man roster.
To be clear: members of the 40-man roster who are not on the 25-man roster or the Major League Disabled List do NOT collect the Major League minimum salary. They earn about $81,000 if they are on their second (or later) Major League contract and about $41,000 if they are on their first Major League contract.
I did have to make an assumption in the chart below. Major League Baseball hasn't yet announced what the minimum salary will be for the 2016 season, but it's a pretty safe bet to either stay at $507,500 as it was in 2015 or to inch up to only $508,000; the Collective Bargaining Agreement only requires that the minimum salary not decrease. The minimum salary increases based on the October-to-October change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. While we don't have the October 2015 total in as of the time of this writing, the September 2015 index was approximately two-tenths of a percent below the October 2014 index and the changes tend to be very gradual anyway. So while a repeat of $507,500 is likely, let's round up to $508,000 for simplicity's sake and be content.
Here's what the Cubs currently have in terms of guaranteed salaries (bold), arbitration estimates (italicized), and expected auto-renewals for pre-arbitration players (regular type):
|Tommy La Stella||$508,000|
|MINIMUM (Corey Black)||$508,000|
|MINIMUM (Jeimer Candelario)||$508,000|
|MINIMUM (Willson Contreras)||$508,000|
|MINIMUM (Pierce Johnson)||$508,000|
|MINIMUM (Juan Paniagua)||$508,000|
|MINIMUM (Jonathan Martinez)||$508,000|
|MINIMUM (Armando Rivero)||$508,000|
|MINIMUM (Daury Torrez)||$508,000|
|MINIMUM (Dan Vogelbach)||$508,000|
That total payroll is for 42 spots on the 40-man. It also includes the Cubs adding a player to the 40-man roster doesn't need to be added (Rivero), three who are long shots (Martinez, Paniagua, Torrez), and every player likely to be added (the rest).
Now, will that be the 40-man roster in April? Of course not. That won't even be the 40-man roster in mid-November. But it's a starting point.
Adding in the projected allotments from the previous categories ($33,561,288), this 40-man roster would result in a total expenditure of $140,127,288, about $256,389 less than the 2015 spending if we allocate $20 million of Lester's 2015 outlay to 2014. The trend line in that scenario would put the expected total budget for 2016 at about $150 million, leaving just $10 million of wiggle room.
However, the team will be able to free up some space by deciding not to tender a contract to some of the players above. Herrera is very unlikely to receive an offer.
Wood is a much tougher choice. His contributions out of the bullpen were undeniably fantastic, striking out more than 11 batters per nine innings and allowing just two home runs in 58 innings of work. Unfortunately, he struggled mightily as a starter for the second straight year: the average hitter against Travis Wood as a starter for the past two years has been 2015 Todd Frazier. Needless to say, that's not good at all. I'm sure that the Cubs would love to have him back at a lower price point, but his $6.4 million price represents a tough choice, even on a short-term commitment.
Obviously there are numerous trade candidates on the roster, all of them of the good variety because they have genuine appeal. Chris Coghlan looks to be out of a starting gig in Chicago, but he's certainly worthy of an everyday role and is wildly undercompensated. Miguel Montero is an above-average starting catcher, though the front office could move him if they think that his salary allotment could be put to better use. Starlin Castro and Javier Baez appear locked in a battle for the second base job. Depth is great, but either of those players could yield a substantial return in a trade. Pedro Strop has locked down his role as a high-leverage reliever, but the Cubs could look to capitalize on his value before his arm falls off from such a heavy workload.
Regardless of what the front office decides to do with the roster, it appears as though this offseason, like each one before, will be heavily influenced by just how much ownership decides to spend on the team.
Do the Ricketts look at the trend line as going $120 million --> $130 million --> $140 million with $150 million as the natural next step? Or do they look at the $160 million expenditure in 2015 and see that as a new baseline? Or has the inflow of revenue from new revenue streams kicked the budget up another gear, perhaps to $170 million or more? At those thresholds, the expected 40-man outlay would be $120 million, $130 million, and $140 million respectively.
As a final nugget: the purchase transaction that is expected to play a role in determining the payroll through 2019 functions on a sliding scale because it restricts spending only as it relates to revenue. As revenue climbs, spending can climb without running afoul of the terms of the purchase or Major League Baseball operating restrictions.
So, with all of that said, what do you expect to see for the payroll in 2016? If there's any confusion going from the 25-man number that is widely cited to the 40-man number I use above, just take your 25-man estimate and add $7.6 million to it.
Personally, I think that the 40-man total will settle around $130-135 million. That would result in total spending of approximately $163-168 million, a two-to-five percent increase over actual spending in 2015 or a sixteen-to-twenty percent increase over the recalculated 2015 payroll if Tanaka's $20 million is reallocated to 2014. I'm expecting an increase of somewhere north of ten percent, so in effect I'm splitting the baby... and providing enough space for a serious run at David Price.
I could see a large jump happening this offseason with an acknowledgment that 40-man plus dead money spending shouldn't change much from 2016 to 2017 as Jake Arrieta's raise is absorbed by the 2016 dead money allocation to Edwin Jackson and Gerardo Concepcion with significant arbitration raises for only Hector Rondon and Pedro Strop.
But that's just my take. Have at it!