Tom Ricketts Hints at Further Limiting Payroll, Says ‘You Can’t Really Buy Teams’
If you were expecting the Cubs to be big players in free agency after seeing their stifled efforts last winter yield disappointing results on the field, Tom Ricketts offered a bitter dose of reality Wednesday morning. We’ve been hearing a lot over the past few months about whether and how much the new Marquee Sports Network would impact payroll, but that’s all in ownership’s hands at the end of the day.
The Cubs chairman joined 670 The Score’s Mully & Haugh to discuss the upcoming season, including how payroll might change for 2020. Following a little small talk about the David Ross press conference, which Ricketts missed due to an IRS hearing regarding the Tribune Company, the show’s hosts teed up a little financial discussion.
“The good news in there is that over the past 10 years, we’ve done a lot to build up the business side,” Ricketts said. “Our guys have done a great job of getting all the resources we can for the club to put to work. But you know it’s not about how much you spend, it’s how much you win. And the correlation between spending and winning is not nearly as strong as we’d like it to be.”
More than just a statement of fact, Ricketts seemed to either be floating a trial balloon or even just flat-out telling everyone that the Cubs were going to actively seek to slash payroll for 2020.
“Obviously the top couple teams didn’t make the playoffs,” Ricketts pointed out. “We spent more than every team that made the playoffs and probably a couple of them combined. But even if you really thought that spending was the answer, the free agent market is always fraught — I don’t think anyone is any better than anyone else in the free agent market, it’s always a high-risk thing.
“And as you point out, Mully, the fact is if you wanna outspend everyone and try to win, you start bumping into the luxury tax, which this year we’ll pay several million dollars to the league, which is kind of a dead-weight loss that goes to the other teams. And on top of that, if you do it for too long, the fees go up. And if you do it for too much, then you lose draft picks.”
Based on the available estimates from Cot’s Contracts and some quick math on my part, tendering all of their arbitration-eligible players while also picking up options on Anthony Rizzo, José Quintana, and Kendall Graveman would put the Cubs at around $212 million in total payroll. The CBT penalties kick in at $208 million this coming season, with another tier at $228 million and the highest at $248 million. And since the Cubs went over in 2019, they’re going to face stiffer penalties if they do so again in 2020.
Teams that exceed the CBT threshold are subject to a 20% penalty on overages, but that jumps to 30% for two-time offenders and 50% for going over three or more years in a row. Then there’s a 12% surtax for teams that exceed the threshold by $20-40 million. Going more than $40 million over results in a 42.5% penalty, which jumps to 45% for going that high again.
The Cubs are at an estimated $240 million for 2019, an overage of $34 million for the season. So if my math is right, and it’s probably not terribly far off, the “dead-weight loss” Ricketts spoke of is something like an $8.5 million tax penalty. Carrying a similar overage this coming season — which business ops president Crane Kenney indicated was a possibility — would mean parting with an extra $12 million or so in taxes, and going over by that much in 2021 would cost something like $19 million.
What I’m getting at here is that maintaining one of the highest payrolls in MLB would cost the Cubs about $3.5 million more in 2020 than it did this season. That seems like a small price to pay to make some fixes in free agency, which is going to be necessary given the losses they’ll be taking in terms of expiring contracts, buyouts, etc.
From the sound of it, however, the mandate for this coming season is going to be one of financial austerity and a renewed reliance on building from within.
“Ultimately, it’s great to have the financial resources that we do,” Ricketts said. “It’s an advantage and there’s no doubt about it, but the real key is you have to develop players. You can’t really buy teams, you have to build them. I think everybody in baseball understands that, our guys know that.
“And we have to really just re-focus on drafting well and then working on a lot of newer analytics and newer strategies for developing players to get their maximum potential. And that’s really what our challenge is now looking forward.”
While everything he’s saying there is right on the money, pun fully intended, the issue with these concepts is the timing of their re-implementation in terms of the Cubs’ current window. It’s one thing to build a team on the cheap when you’re doing it from the ground up, but at a certain point you’ve got to spend in order to maintain the lifestyle to which everyone has grown accustomed.
That isn’t to say there’s no limit to the point at which you’d keep throwing good money after bad, only that you can’t suddenly strip things down and drastically reduce payroll while also maintaining the same level of competitiveness. The Cubs can save a little money by non-tendering Addison Russell, who is projected to earn $5 million in arbitration, or by trading Quintana and rolling with Tyler Chatwood or Alec Mills in the rotation. But to slash enough to get under the CBT threshold and reset the penalties would be disastrous at this point.
To be fair, Ricketts may not be talking about taking things that far. He may simply be repeating the same thing we heard last season — which no one in the public seemed willing to believe at first — about having no desire to unleash the full power of the club’s financial might in free agency at any point in the near future. Either way, this is a very strong indication that fans can stop dreaming about Anthony Rendon or Gerrit Cole suiting up in blue pinstripes next season.
