A very preliminary estimate of the Cubs’ 2019 payroll and luxury tax

The Cubs spent 2018 not spending, or at least not spending as much as the Ricketts family could likely afford. Without specifically saying so, they seemed bound and determined to stay under the $197 million luxury tax limit for 2018, and even with the midseason acquisitions of Cole Hamels and Daniel Murphy, they appear to have done so.

It was widely assumed by many of us that the Cubs would, indeed should, spend over the limit in 2019.

They’re going to do that, and really, do it without even trying. Arbitration increases for several key players, as well as the likely pickup of Hamels’ $20 million option, will not only break the $206 million 2019 luxury tax limit, they will blow through it with the speed of a Brandon Morrow fastball (or, at least, we hope his fastball is back to that level in 2019).

BCBer The Deputy Mayor of Rush Street helped me put together this very preliminary look at what the Cubs’ 2019 payroll (and tax hit) will look like.

Now, a lot of this has to come with an explanation, and so you will get one. The table above lists 27 players, and not all of them are going to be with the Cubs when they open the 2019 season in Arlington, Texas. In fact, you could argue that several of these players might wind up elsewhere.

Addison Russell, with a suspension of 30 games at the start of the 2019 season, could be traded — or even non-tendered. It’s an open question of what the Cubs will do, or attempt to do, with Tyler Chatwood’s contract. It seems almost too much to eat two years of that deal and have it count against the tax while he plays for someone else. Perhaps he could be traded for someone else’s bad contract. And while I think the Cubs should and will keep Hamels, perhaps they’ll tear up the $20 million one-year option after they exercise it and swap it out for a two-year deal at, say, around $35 million, with a lower AAV. Maybe they even trade Jose Quintana; his contract is affordable to many teams and perhaps some younger, controllable arms could be had in return.

The following players are arbitration-eligible in 2019: Russell, Kris Bryant, Kyle Hendricks, Tommy La Stella, Javier Baez, Mike Montgomery and Kyle Schwarber (and probably Carl Edwards Jr. as a Super Two, see below.) The Deputy made the above estimates for those players, and here follows his reasoning for each:

Bryant: With a record first-year baseline to start, KB had a down season. While it was not what you (or an arbitrator) would call a bad season, he also missed a fair bit of time, which lowered his topline numbers. As far as I can tell, Ryan Howard was the previous first year record holder at $10 million, and he got a raise to $15 million based on a season he hit 48 HR with 146 RBI. So while I’d guess this would fall more in the middle, Team Theo has been generous with Bryant, possibly as a tacit recognition of the service time games. I’ll go with something just a bit more generous.

Hendricks: Also a bit of a down season, but an average result generally means doubling from the first to second year for a non-Super two guy. 199 innings is likely to impress an arbitrator, and 3.5 WAR is nothing at all to sneeze at. So Kyle basically doubles.

Russell: A no-question down season (and only on-field counts here). Still, the system is set up to very rarely cut a player, so I went with a more modest percentage increase. Russell is in his second arbitration year as a Super Two player.

La Stella: A bit of a down year with the power drain, but mostly he gets a smaller increase due to limited playing time. Even without the power the pinch hits had value to the ballclub, so I bumped this one up from 15% even if La Stella might ultimately settle for less. In a hearing a 30% raise wouldn’t seem out of line even on an off year.

Baez: He had basically the bWAR season Bryant did before getting $10.85 million, but KB had two extremely solid seasons before that to deserve the first-time arbitration record. Baez benefits from having his good season just before starting arbitration, but not to Bryant levels. After looking up Mookie Betts (Betts has a better three-year track record) and Freddie Freeman’s first arb (Freeman’s numbers are a better comp with Baez), I’m figuring that many of Javy’s unique contributions on the diamond are going to be the sort of things that don’t catch the arbitrator’s eye.

Montgomery: Another decent, but not great looking set of top-line numbers, I sort of compared to Hendricks’ $4.125 million settlement last year and came up with this number for the versatile lefty. I really couldn’t find a good comp player for what Monty does, so this is a guesstimate.

Schwarber: Decent but in no way outstanding numbers, but arbitrators dig the long ball, so I think a 25-30 HR guy will do a bit better than a player with a different profile. Justin Bour and Jake Lamb seem reasonable comps here, and Schwarber hasn’t quite produced to the degree either of those two had when they went to first-time arb last year. Still, I placed Kyle close to these two players.

Lastly, it turns out there’s a decent chance Carl Edwards Jr. will qualify as a Super Two this season. The cut-off service time date probably won’t be announced for a couple of weeks, but Edwards’ two years, 134 days (2.134) compares favorably with the time needed for the last few seasons. Saves are the big thing with relievers in arbitration, which CJ does not have. Hunter Strickland’s first arbitration last year looks like a pretty close comp to Edwards’ case this year. So the estimate here is the same, with a small bump for reliever inflation based on what set-up guys were getting this past winter.

MLB Trade Rumors released their arbitration salary estimates for 2019 on Tuesday, and as you can see, ours here are pretty close to theirs, so I think we’re at least, uh, “in the ballpark.”

It’s entirely possible that La Stella could be non-tendered; he turns 30 in January and though he was the league’s best pinch-hitter (and set the franchise record for pinch hits), that’s a skill that doesn’t necessarily stay the same year-to-year. Further, it’s possible the Cubs make Baez a multi-year offer that would buy out his arb years and maybe a year or two of free agency (see below). Montgomery has value to other teams and could be traded; his hybrid relief/starter role could be taken over by Drew Smyly.

The following players are “pre-arb” in 2019, listed above in the table: Willson Contreras, Albert Almora Jr., Ian Happ, Victor Caratini and David Bote. The other 40-man pre-arb players, Randy Rosario, Alec Mills, Dillon Maples and James Norwood, will be pro-rated based on their MLB service time. They are accounted for in the “40-Man minor leaguers” group. The MLB minimum salary for 2019 is $555,000.

The following 2018 Cubs are free agents this offseason: Daniel Murphy, Jaime Garcia, Justin Wilson, Jorge De La Rosa, Jesse Chavez, Terrance Gore, Anthony Bass and Bobby Wilson. Of this group, I would expect the Cubs to retain Chavez, offer Gore a minor-league deal and let the rest of them walk. There won’t be any qualifying offers made to any of these players, not even Murphy, who’s not eligible for a QO since he was traded mid-season (and has also previously received one, which he rejected in 2016).

This isn’t accounted for in the spreadsheet, but I asked The Deputy to estimate what it would take to sign Javier Baez to a multi-year extension, buying out his arb years and the first two years of free agency. This is a long explanation, but worth your time, as it very well could happen:

Looking back at some extensions, back in 2015 Brandon Crawford got a $1.2M signing bonus, $5.8M and $8M for his last two years of arb, then four years at $60M guaranteed with a NTC. That was done off his best season (3.7 bWAR), and after a very good 2016, the last two years have been a bit of a disappointment, though no worse than Jason Heyward. He’s still very playable at the price.)

Wil Myers was extended in 2016, with three arb seasons and three free agent years bought out with a team option year after that. $15M signing bonus, $2M, $2M, $3M, then three years at $60M guaranteed with a team option ($20M, $1M buyout) at the end. Came off an All-Star season, but not a near-MVP season. (3.5 bWAR)

Eugenio Suarez did an extension in spring training this year, which encompasses all three arb seasons and four free agent years with a team option after that. $2M signing bonus, $2.25M, $7M, $9.25M, then four years at $43.5M guaranteed with a team option ($15M, $2M buyout) at the end. (Coming off an 3.7 bWAR season)

Kyle Seager was extended in the 2014-15 off season. The Mariners bought out all four of his arbitration seasons and three free agent years for 7/$100M, with a team option on the end of it. (Seager has had one great season out of four since, and last season he kind of fell off the table with still three guaranteed years to go.)

The specifics were a $3.5M signing bonus, $4M, $7.5M, $10.5M, $18.5M, $19M, $19M, $18M guaranteed with a team option ($15-35M, with a a $0-3M buyout) at the end.

These are probably the closest recent examples, though only Seager had as big of a season as Javy just did just before signing an extension, 5.8 bWAR, though he was only 20th in the AL MVP voting.

A contract like this would take Baez though his age 30 season, which is probably as far as he would want to go with a chance at free agency in mind.

So what’s a reasonable expectation without the extension? I’ve got $6.2M for this coming season.

Javy remains a perennial MVP candidate? $6.2M, $12M, $18M, $30M, $30M, total $96.2M
Javy settles back more toward last year? $6.2M, $10.5M, $15.8M, $18M, $18M. total $78.5M
Javy regresses to something less than that? $6.2M, $8M, $11.3M, $12M, $12M, total $49.5M

So for this to make sense for the Cubs to take a risk at a price Javy and his agent might take, I’d say look at a $75-80M value.

2019: $2M plus $5M signing bonus (to get some money into his hands faster)
2020: $11M
2021: $14M
2022: $20M
2023: $20M
2024: $30M team option, with $6M buyout

Which is a 5 year/$78M guaranteed deal, that could be called a 6/$102M deal. I’d take the 5/$78M and throw the extra $6M into the last two seasons if Team Baez didn’t want that extra year in the deal, but I’m thinking they might be happier with a “$100M deal.”

Because I set the sixth year up as a team option, either way would be treated the same for the luxury tax threshold — five years guaranteed, $78M guaranteed. That would come out to a $15.6M “cap hit” in 2019-2023.

The ramifications of doing this extension over the winter, while keeping everything else the same, the Cubs spending for luxury tax threshold purposes would increase by $9.4M, for a revised total of $238,867,000.

Whether they do this kind of extension or not for Javy, the Cubs are going to spend more money in 2019 than they ever have — before they make a single trade or sign a single free agent. Granted, this is what many of us have said the Cubs should be doing, and this preliminary look at the payroll shows them way over the luxury-tax limit. Remember again that this preliminary look shows a 27-man active roster, which obviously can’t happen, and some of the players on the list won’t be on the team when they begin play for the 2019 season next March. You’ll also note that there are three different luxury tax thresholds, and the penalties for breaching each one are all different. That’s a topic for another article, though.

Note that besides paying the luxury tax money, there are certain draft pick and IFA spending pool penalties for a luxury tax-paying team signing or getting compensation for departing free agents. Also, for teams that exceed the luxury tax threshold by more than $40 million there is a penalty which moves the team’s first-round draft pick down 10 places.

It’s my feeling that if you are waiting for the Cubs to add the $30 million a year or so it would take to sign Bryce Harper or Manny Machado, you are going to be waiting a very, very long time. While they certainly can afford that sort of money, it just doesn’t seem to be the way this team operates. Even so, BCB’s Josh Timmers thinks the Cubs should sign Harper. He’ll have an article explaining his reasoning coming up at 11 a.m. CT.

After the World Series, when free agents officially become free and contract options are exercised (or not), I’ll have another look at the Cubs payroll for next season.