Now that all the various Cubs free-agent and contract option decisions have been made and the 40-man roster stands at 32 players, it’s time to take a look at the team payroll for 2020 and also how those figures will affect any luxury tax the Cubs will pay.
The bad news for any of you who thought the Cubs might go after Gerrit Cole in free agency or bring back Nicholas Castellanos: There’s probably not room for them on next year’s payroll, primarily for luxury-tax reasons. Based on contracts the Cubs are already committed to, estimates for the seven Cubs who are arbitration-eligible and adding in pre-arb salaries, benefits and other miscellaneous required expenditures, the team is already over the first level of luxury tax, which is $208 million for 2020. Cubs Chairman Tom Ricketts pretty much came right out and said the team wouldn’t go on a spending spree in a radio interview last week:
“The real key is you have to develop players,” Ricketts said Wednesday morning on the team’s flagship station, 670 The Score. “You can’t really buy teams. You have to build them. I think everybody in baseball understands that. Our guys know that. We have to really just refocus on drafting well and then working out a lot of the newer analytics and newer strategies for developing players to get their maximum potential. That’s really what our challenge is now looking forward.”
BCBer The Deputy Mayor of Rush Street has helped me put together the figures in the table below. There are a couple of caveats to these numbers. First, you will see that I’ve listed 27 players. There’s going to be an increase in roster size to 26 next season, and at this time I’m not 100 percent sure who that “last man” will be. That doesn’t have a huge effect on the luxury tax bottom line, because whoever that is will be near the minimum salary. Next year’s minimum is estimated to be $565,000, though it has not yet been officially set. The CBA calls for the 2020 minimum to have a “cost-of-living increase” over the 2019 figure of $555,000.
Note that I’ve included Addison Russell and his estimated $5.1 million arbitration salary in the list. It seems likely to me that Russell will either be traded or non-tendered, which would remove that figure from these calculations. Both Russell’s estimate and those for the other six Cubs arb-eligibles are from MLB Trade Rumors’ projected arbitration salaries.
Here are the numbers, and after that I’ll turn the rest of this post over to The Deputy for his thoughts. As you’ll see, the Cubs are already over the first tax threshold and it wouldn’t take much for the Cubs to be over threshold number two. Remember that “tax hit” numbers are calculated on the average annual value (AAV) of player contracts that are multi-year deals. This list is sorted from highest luxury tax hit to lowest.
Cubs estimated salaries and tax hits for 2020
|Albert Almora Jr.||$1,800,000||$1,800,000|
|Duane Underwood Jr.||$565,000||$565,000|
|40-man minor leaguers (estimate)||$2,500,000|
|Player benefits & misc (estimate)||$15,000,000|
|LUXURY TAX THRESHOLD 1||$208,000,000|
|LUXURY TAX THRESHOLD 2||$228,000,000|
|LUXURY TAX THRESHOLD 3||$248,000,000|
The rest of this article is by BCBer The Deputy Mayor of Rush Street.
The Cubs spent about as much as any MLB team did in 2019, and I expect the same will be true in 2020. (The disconnect for me is that the Cubs have the ability to spend much more, but that’s as much a case of MLB owners colluding to hold player spending down as it’s the Ricketts family taking windfall profits off Cub fans.)
MLB and its 40-year effort to manage the loss of the reserve clause has led to a moment where the Collective Bargaining Agreement itself has been weaponized as a way for owners to limit their spending. I’d attribute that to the union losing Marvin Miller and Donald Fehr as much as this generation of players forgetting how hard it was to make the gains their MLBPA predecessors won for their benefit.
When I really grew into my Cub fandom, it happened right around the time of the Messersmith decision that led to what we now know as free agency. A few years after that 1984 happened, and the Cubs franchise really took off as a perennial cash cow. No more closing of the upper deck for half the games, and a cable superstation covering the team did much of the lifting to create an actual Cub Nation across the continent.
I had all the revenue estimates more finely laid out while figuring out how the Cubs could afford to spend into the luxury tax in 2016, yet they fell below that threshold in ‘17 and ‘18... before arbitration raises for the core players caught up to Theo Epstein this past season.
My general estimate was that (based on various revenue increases) the Cubs could afford a 2019 player payroll in the range of $280 million without cutting team profit margin. And even more if they were willing to spend where the 2016 net profit was kept the same, and all revenue increases were plowed back into improving the team.
With the Marquee Network coming online next year, full penetration of the Chicagoland cable market could mean an additional $80-100 million in revenue over last year’s local TV deals. This suggests the Cubs might be in a position to spend $350 million on player payroll at that time without cutting into their net profits.
But the Cubs won’t spend it.
Until some team decides to break ranks, it seems proven at this point that the luxury tax threshold plus $40 million is going to be treated by all MLB teams as an absolute top spending limit.
For all the additional revenue the Cubs will squeeze out of their loyal fans, the luxury tax threshold goes up just $2 million next season (and another $2 million in 2021). So if the Cubs spent around $230-235 million this past season, it seems likely their limit will be $240 million at most in 2020. And that seems likely to open around $225 million for team-building purposes, leaving a typical reserve for July trades.
(Remember that around $15 million of that spending total goes for pension and other sundry expenses which count as luxury tax spending, but is not used on player payroll... but that’s a stable expense every season.)
Put more simply, the Cubs spent about as much as any MLB team will spend in this era, and we have no reason to think there’s a need to cut back from that. The Cubs have all the “financial flexibility” they will ever need under these spending rules RIGHT NOW, and the new TV Network should put any doubts about that dead and buried to anyone with their head out of the sand.