The Cubs’ Financial Flexibility

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While the Chicago Cubs continue tuning up for the regular season, when games actually count, I noted that the MLBTR folks had started talking about the free agents come next offseason.  MLBTR ranked the top ten impending free agents of that class, which is headlined by the Cubs’ own Jake Arrieta and three other starters.  This inspired me to look at the Cubs’ payroll and their commitments over the next few seasons.

I looked at the payroll before spring training started last year, and had essentially the same thoughts as I will outline below.

With contracts coming off the books next year, there won’t be as much relief as one might think due to arbitration raises, but the Cubs continue to keep their options wide open for when the cool toys come on the market in a few years’ time.

According to the Cot’s estimates, the Cubs have $177.2 MM in commitments for 2017, about $18MM less than the luxury tax threshold for the season.  This is important for the Cubs to reset their luxury tax penalties, since they had to pay luxury taxes for the first time ever last season.  It’s obviously important to remember that the Cubs are now a cash cow, what with being able to finance and benefit from the Wrigley Field renovations, a now-justifiable ticket price hike, and increased merchandise sales since they did win the World Series (people sometimes forget that).  So the Cubs should be able to afford to toe the luxury tax line, but preferably should stay below it to not trigger the tax.

After 2017, assuming that Jake Arrieta goes elsewhere and John Lackey retires, the Cubs will have to replace at least two key players in the starting rotation.  It does help that Mike Montgomery doesn’t hit arbitration until 2019, and there are other guys in the minors who are on the verge of breaking out.  But if you take a look at the Cubs’ commitments, it drops below $80MM in 2018 before taking into account arbitration raises or potential extensions.

The 2018 outlook could get relatively expensive because several core players will hit arbitration for the first time, including Addison Russell, Kyle Hendricks, and Kris Bryant.  Russell and Hendricks got well-deserved pre-arb raises, and so did Bryant, who set a record for pre-arb salary with his service time and also figures to be involved in extension talks soon.  Getting cost certainty for these guys seems to be a priority for the Cubs front office to free up money to throw at the non-Arrieta starters (or even Arrieta himself) like Johnny Cueto and Masahiro Tanaka (if they opt out, which seems likely given performance), or Yu Darvish.  The Cubs are reticent to throw too much money at pitchers on the wrong side of 30, especially pitchers with injury histories, but every now and then a club has to at least put themselves in position to take a risk.  The financial flexibility certainly helps them keep their options open, and there seem to be plenty of options available in 2018.

The current outlook for 2019 has the Cubs at below $69MM (nice) in commitments, but of course, Bryant, Russell, and Hendricks will get more expensive in their second year of arbitration, and now Javier Baez and Kyle Schwarber also enter arbitration themselves.  The 2019 free agent list is full of goodies, with some intriguing pitchers as well as some guy named Bryce Harper.  At around that time, Jason Heyward could potentially opt out of his contract (which would suggest that he got good again with the bat), but even if not, the Cubs are in good shape money-wise.  Note that the luxury tax increases by a couple million dollars each year over the course of the new collective bargaining agreement as the Cubs’ commitments drop during the same term.

It’s actually really awesome to see how the Cubs staggered contracts and arbitration-eligible players to keep the payroll steady despite their players continuing to earn big raises through their production.  It’s certainly nice to have a front office that knows what it’s doing, and an ownership that is not afraid to spend when it makes sense.  The Cubs’ system is capable of producing talent in house, and pay that talent as it grows and produces (either through arbitration raises or, we hope, a team-friendly extension or two).  But the financial flexibility that I just outlined gives Theo Epstein and Jed Hoyer the option to splurge if the right player comes along.

 

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About Rice Cube

Rice Cube is the executive vice president of snark at World Series Dreaming. He loves all things Cubs, with notable exceptions (specifically, the part of Cubs fandom that pisses him off). Follow on Twitter at cubicsnarkonia

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