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How Would The Cubs Have Paid For James Shields?

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We've been told for years that the Cubs were spending every dollar they had on the baseball operation... but can we believe that any longer?

Jerry Lai-USA TODAY Sports

When we last looked at the Cubs' financial outlook for 2015 on January 23, I thought that we had a good feel for the club's spending power. The team had just acquired Dexter Fowler, and utilizing arbitration estimates for Fowler and reliever Pedro Strop as this we before the club settled with the pair, the team figured to spend just a hair under $144 million between the 40-man roster, amateur signing bonuses for both draftees and international free agents, and dead money allocated to veterans no longer with the team. That estimate included the Cubs spending just $3.9 million on international amateurs, a figure that could easily eclipse $15 million between bonuses and penalties, pushing total spending to about $155 million. $155 million would represent a massive jump from 2012-14 spending levels but on par with 2009-2011 spending.

Then, something funny happened. Veteran righthander James Shields sat on the free agent marketplace. And he sat. And then he sat some more. Rumors of a five-year, $125 million demand floated around as clubs laughed at the idea, and Shields watched every other marquee free agent sign a contract without even much in the way of rumors circulating about his own market.

We now know how the Shields saga resolved itself as the World Series veteran inked a four-year, $75 million deal with the San Diego Padres that included a fifth-year club option that could push the deal to a total value of $89 million over five years.

But we're not interested in the Padres here. We're interested in the Cubs.

Here's what we "know" about the Cubs' offer. First, the Cubs were the runner-up for Shields. We know this because Shields said so. Second, we have a good feel for the parameters of the Cubs' offer. The same San Diego Union-Tribune article linked above noted that the Cubs' offer was for roughly $60 million over three years. Jon Heyman tells us that the Cubs' offer covered three years with a vesting option for a fourth year. And Joel Sherman of the New York Post tells us that the total guarantee was about $60 million.

Given those collective nuggets of information, the Cubs' offer likely would have paid Shields about $20 million per year for three years, perhaps slightly less is a buyout was involved.

All of this begs an obvious question: where in the world were the Cubs going to find this money?

In my eyes, there are three options, all of which are plausible. I honestly don't know which one I expect to hold the most truth. I need your help with this, BCB readers. I really do. I'm still trying to process it. Here are the options:

Option One: The 2015 payroll wasn't actually going to increase all that much

This scenario makes plenty of sense to me. If Shields' day was backloaded instead of paying out ratably, it's entirely possible that the cash outlays for 2015 wouldn't have been impacted by his acquisition, at least not in a meaningful way. If, for example, Shields would receive $10 million in 2015, $22 million in 2016, $25 million in 2017, and a $3 million buyout of the vesting option, the Cubs could have easily created $10 million of 2015 space. If the Cubs traded Travis Wood ($5.685 million) and Welington Castillo ($2.1 million), they would create approximately $7.270 million of salary space after accounting for a new addition to the 40-man roster at the minimum salary.

Additionally, the Cubs would lose the 47th overall pick in the 2015 Rule 4 draft (their second-round pick; the first-round pick is protected since it's in the top 10 overall). In 2014, that pick had a slot value of $1,187,900. If we adjust upward 2 percent for inflation and assume that the Cubs would spend up to 5 percent over their pool limits, the loss of the draft pick would further reduce expenditures by approximately $1,272,241. Jacking up the payroll by $1.458 million in order to acquire James Shields would almost certainly get an easy stamp of approval from the Ricketts family. Even releasing Wood and Castillo before the season would create approximately $5.713 million of space as only 20% of their salaries would be due. Subtracting the draft pick savings, adding Shields would have required only $3.015 million of new payroll space even where Wood and Castillo were released.

Backloading Shields' deal and kicking a couple of high-priced, largely superfluous veterans to the curb would create almost all of the space needed to absorb Shields into the fold.

Option Two: The Cubs were going to rob Peter to pay Paul, taking their July 2 allocation and spending it on Shields, delaying their next big foray into the international amateur market until 2016

This option also makes sense, although it seems like the least likely of the three to me. If the Cubs actually have $15-$20 million earmarked for international amateurs this summer as opposed to the $3.9 million that their bonus pool calls for, they could easily justify spending most of that cash on Shields in order to improve the 2015 team, figuring that they'd rework the medium-term budgets to find extra cash for spending in Latin America in 2016.

This strikes me as unlikely for two reasons. First, the Cubs are aware -- just like every other team -- that an international draft may be on the horizon. With the current collective bargaining agreement nearing renewal (it runs through 2016), waiting until 2016 to heavily exceed their spending limits comes with the risk that overspending will no longer be an option when it comes time to gobble up some prospects. Second, the Cubs are already connected to the top 2015 international amateur prospect: Dominican centerfielder Starling Heredia. The team is unlikely to repeat its 2013 1-2 coup -- when both top-two prospects outfielder Eloy Jimenez and shortstop Gleyber Torres signed with the Cubs -- given that premier outfield prospect Vladimir Guerrero, Jr. is rumored to have already agreed to a $3.2 million deal with Toronto. Even without a shot at Vlad Jr., the Cubs likely have other verbal agreements in place and are working on more in the late winter, the prime period during which such agreements are made. It would be a big surprise to see the team turn their back on these oral deals.

Most expect the Cubs to be major players for multiple top amateurs this summer, indicating that any cash with which to pay Shields likely would not have come from the international amateur budget.

Option Three: The Cubs have way, way more money to spend than we've been led to believe

Back in April 2013, Theo Epstein gave an interview on The Score in which he discussed the financial aspects of the Cubs' operation. Bleacher Nation's Brett Taylor collected a number of quotes from the interview, and his article includes a link to the CBS Chicago page where you can hear the interview itself. Among the relevant comments from Epstein (emphasis added in italics):

- "We're not withholding dollars from this year's team (2013). We are spending every dollar that we have on this baseball team."

- "We maxed out our payroll last year and we maxed out our payroll this year."

- "It's not like we're making a conscious decision to say, 'Hey, let's withhold $15-20 million from the 2012 or 2013 payroll because we don't think we're quite good enough or it's not worth it to spend it there. Let's save it for a rainy day. Or let's save it so we can get that free agent in 2016."

- "The baseball department is spending every dollar that is allocated to baseball operations."

- "Yeah, we're spending it in the draft and we're spending it in the minor leagues. There's only so much you can spend there. We're also spending every dollar we have available on the Major League payroll."

Whew. All right. Let that settle for a moment.

By my admittedly amateur calculations, the Cubs spent the following totals on the baseball operations from 2012-14:

2012: $138.3 million
2013: $127.0 million
2014: $108.1 million

We know that the club had quite a bit of cash earmarked for Masahiro Tanaka in 2014, up to $40 million between his posting fee and the first year of his expected contract. If we assign a full $40 million to Tanaka, subtracting the $6 million that the Cubs spent on Jason Hammel instead of Tanaka for a net addition of $34 million, the 2014 number jumps to $142.1 million. It is difficult to explain how the baseball operation uncovered $15 million between 2013 and 2014, but I'll give the Cubs the benefit of the doubt in that situation.

But now this with Shields? It just doesn't add up. If the Cubs are going to spend $15-20 million on international amateurs this summer -- and even that estimate could be low -- the spending estimate reaches $155-160 million for 2015. Adding Shields on top of that pushes the total spending to anywhere from $165 million to $180 million depending on the structure of his deal and corresponding roster moves.

Such an outlay would require the Cubs to have found something in the range of $38 million to $53 million of new cash to spend in just two years. It doesn't add up. No matter how you fudge the numbers, they don't work.

It's possible that the Cubs had money to spend in 2012-13 that Theo simply decided not to spend. That's his prerogative as President of Baseball Operations. But if that's true, he lied about it, and he did so boldly. It's also possible that the Ricketts family withheld tens of millions of dollars from the baseball operation so they could spend that money elsewhere, be it on additional debt payments (a risky choice in a leverage partnership) or what have you.

Most of us have had 2020 on our minds as the year in which the Cubs will be freed from the shackles of the debt burden created under the terms of the Tribune Company/Sam Zell sale agreement. However, in light of projected baseball spending in 2015 and in the wake of the James Shields non-transaction, it appears as though the Cubs have way more money to spend than even the most optimistic among us previously believed.

Looking forward, this is a cause for celebration. Looking back? Well, that's for you to decide.