A very preliminary estimate of the Cubs 2021 payroll and luxury tax

Now that all the various Cubs free-agent and contract option decisions have been made and the 40-man roster stands at 34 players, it’s time to take a look at the team payroll for 2021 and also how those figures will affect any luxury tax the Cubs will pay.

The novel coronavirus pandemic upended baseball in every possible way in 2020 — games played, no fans, payrolls — and it’s very likely that the game in 2021 will be similarly affected. While there have been schedules issued for both Spring Training and the regular season for next year, there’s no guarantee those games will be played as scheduled and even if they are, there could be some, many or all played without fans, which will affect total revenue for ballclubs.

That’s the long way of saying that the Cubs are likely going to cut payroll in 2021. By how much, we do not yet know. But given the fact that the team has let go 100 non-playing employees, we can, I think, assume that player payroll will be smaller in 2021 than it would have been in a full season in 2020 — and likely lower than it was in 2019.

As I have done in previous years, I have put together some numbers for Cubs players for 2021. Some of these are known already for players with multi-year contracts. Others are arbitration estimates; for those, I have used the estimates posted by MLB Trade Rumors. Note that due to next year’s uncertainties, MLBTR used three methods to estimate arb salaries. I have used their “Method 3.” For details, click on the link.

Here are Cubs estimates for 2021:

With that, I turn the rest of this article over to BCBer The Deputy Mayor of Rush Street, who has put together further details and analysis of the numbers.

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The 2021 Cubs Roster: Choose Your Own Adventure

TOP LINE: The Cubs spent into the luxury tax for the second year in a row, and the penalties just continue to multiply for each successive year a team is above the cap. For reasons beyond virus-related revenue shortfalls in 2020 (and very likely 2021 as well) I say with confidence that the 2021 baseball budget will be set firmly under the $210 million first luxury tax threshold. But how far under?

Of course free agency has started already, but again this figures to be as slow of a market as we’ve seen the last two hot-stove seasons. So while it makes sense that Tom Ricketts has already told Theo Epstein what the baseball budget will be, I don’t believe that figure has leaked out. Yet that budget number is absolutely vital in understanding how the Cubs will go about building their roster for the coming season. I’ll offer no predictions, but as the front office begins re-assembling the team I’ll hopefully have made headway in explaining what the options are.

The next dates we need to keep in mind are November 20, which is the date minor league players must be added to the 40-man roster to prevent them being exposed to the Rule 5 Draft. More vital for our purposes might be December 2, the deadline for clubs to offer eligible players salary arbitration (or non-tender them, making any such players free agents).

With that preface out of the way, here’s a preliminary look at the 2021 Chicago Cubs roster:

Andrew Chafin, Tyler Chatwood, Billy Hamilton, Jeremy Jeffress, Jason Kipnis, Cameron Maybin, Josh Phegley, and Jose Quintana all became free agents at the end of the season.

As expected, Daniel Descalso and Jon Lester both had their options bought out, and Anthony Rizzo’s final team option was exercised.

The Cubs claimed infielder Max Schrock off waivers.

Rex Brothers was outrighted to Triple-A Iowa, but elected free agency.

James Norwood, Manuel Rodriguez and Brad Wieck were returned to the 40-man roster from the 60-day Injured List.

That leaves 34 players on the Cubs’ 40-man roster to begin the offseason.

(Note, these figures are for each player’s ‘cap hit,’ the charge against the Cubs’ luxury tax spending level. The base luxury tax threshold increases to $210,000,000 in 2021. And 2021 is the final year of the current CBA.)

Players with Guaranteed Contracts:

Darvish $22,000,000¹
Heyward $23,000,000
Rizzo $16,500,000
Kimbrel $14,333,333
Hendricks $13,875,000
Bote $3,000,000
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TOTAL $92,708,333
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¹ - Yu Darvish has an incentive clause in his contract for a $2 million contract escalator for winning the Cy Young award, or a $1 million escalator for finishing second through fifth. As he’s one of the three finalists this year, I’ve added $1 million to his 2021 salary. If he wins the award, another $1 million will be added.

Arbitration Players (based on MLBTR Estimates):

Bryant $18,600,000
Baez $10,700,000
Schwarber $7,900,000
Contreras $5,600,000
Happ $2,500,000
Martinez $2,100,000
Almora $1,575,000
Ryan $1,200,000
Caratini $1,200,000
Tepera $1,100,000
Rea $1,000,000 (Iowa/6th starter)
Winkler $900,000
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TOTAL $54,375,000
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Note: The MLB minimum salary for 2021 is expected to be (approximately) $570,000. It’s subject to a COLA adjustment from last year’s $563,500, which was an $8,500 raise from the $555,000 minimum in 2019.

Pre-Arb Players more likely to make the 26-man roster:

Adam $580,000 (2 options)
Alzolay $585,000 (0 or 1 option)
Hoerner $575,000 (3 or 4 options)
Mills $590,000 (OUT OF OPTIONS)
Underwood $575,000 (OUT OF OPTIONS)
Vargas $575,000 (OUT OF OPTIONS)
Wick $585,000 (1 option)
Wieck $575,000 (1 option)
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TOTAL $4,640,000
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Pre-Arb Players more likely to start in the minors:

Amaya $570,000 (2 or 3 options)
Maples $570,000 (OUT OF OPTIONS)
Marquez $570,000 (3 or 4 options)
Miller $570,000 (2 options)
Norwood $570,000 (1 option)
Rodriguez $570,000 (2 or 3 options)
Schrock $570,000 (2 options)
Steele $570,000 (1 or 2 options)

Other Expenses:

40-man Roster Players in Minors $2,250,000
Pension Payments & Sundry Expenses $15,500,000

(Reserve Withheld for Trades/Buffer)² $10,000,000
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TOTAL $27,750,000
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GRAND TOTAL FOR CAP PURPOSES $179,473,333

LUXURY TAX THRESHOLD $210,000,000

CUBS START UNDER THE TAX BY $30,526,667

²- In this case, I imagine if the budget is closer to the tax threshold, that will be a buffer against going over. If the budget is lower than customary, it would then be up to Epstein to set a legitimate trade budget that he wants to hold back for July.

Note: Jon Lester’s buyout of $10,000,000 is a 2021 cash expenditure, but it is for money that’s already been accounted for in previous seasons for luxury cap spending purposes. There is no “cap hit” for a contract at the time a team option is bought out. The same holds for the $1,000,000 buyout paid to Daniel Descalso.

ADJUSTED FOR ACTUAL PAYROLL EXPENDITURES IN 2021

GRAND TOTAL IN CASH OUTLAY $179,275,000

(This figure includes $9,801,667 in buyouts and adjustments between contract payouts and cap valuations, less the optional $10,000,000 trade buffer.)

This could come into play if the baseball budget is set under the luxury tax threshold and considering current financial conditions, management goals, etc.

Projected Roster:

OF - Schwarber, Happ, Heyward, Almora
IF - Bryant, Baez, Rizzo, Bote, Hoerner, Martinez, Vargas
C - Contreras, Caratini

SP - Darvish, Hendricks, Mills, Alzolay
RP - Kimbrel, Ryan, Tepera, Winkler, Adam, Underwood, Wick, Wieck

(One starting rotation spot left open)

Iowa - Miguel Amaya, Dillon Maples, Brailyn Marquez, Tyson Miller, James Norwood, Colin Rea, Manuel Rodriguez, Max Schrock, Justin Steele

So we’re left to wonder: How much financial flexibility will Tom Ricketts give Theo Epstein after a season where the Cubs sold no tickets?

We can’t be sure of any team’s approach, because we’ve never been in this situation before. Free agency could be a disaster for players not getting anything close to what they are typically worth. If there’s any team willing to make a splash and be a big spender, they could snap up some bargains and benefit on the field.

The standard moves made so far leave the Cubs at around $179 million in payroll.

And leaves you a rotation of Darvish/Hendricks/Mills/ Alzolay? / ???

Bote/Hoerner at second rounds out a starting lineup unless they want to re-sign Jason Kipnis, but they’d still need to find one or two starting pitchers, plus a bench player (maybe a DH) and perhaps a veteran bullpen arm or two other than Kimbrel. (A number of lower-cost choices are available in-house, but they’d have to sign back Jeffress or Chafin if you want either of those relievers on your team).

It’s a problem if Tom Ricketts has cut the baseball budget by $30-50 million or so.

There is no avoiding the elephant in the room now. A baseball budget of $200-205 million could mean one last run for this current core group, augmented with a decent rotation piece, a couple of mid-level relievers and a bench player or two. A baseball budget of $160-175 million (or less?) is an entirely different offseason, and would force Theo Epstein to make some changes to what remains of his World Series Championship team.

BOTTOM LINE: Last year I suggested there would be no room to re-sign Nick Castellanos and Cub fans would have another cold stove winter. This year I’ll suggest that I think it’s more likely than not that Theo Epstein knows he’s already over his baseball budget. And considering it might again be difficult to shed salary in the trade market — the alternate way to reduce the payroll would be non-tendering arbitration-eligible players.

Trades or non-tenders are the only options to cut payroll.

But I’m not here to make a specific prediction on where the baseball budget sits, or if Epstein will be forced to make some uncomfortable choices in putting his team together. I’ll let everyone choose their own adventure on how this offseason is likely to play out.

We’ll be back at times through the off-season with updates, and to discuss events as they transpire.