In advance of next week's Winter Meetings in Orlando and partly as a result of the flurry of activity on Tuesday, my brother and I have enjoyed an aggressive back-and-forth regarding the state of the Cubs. We have approached the current status of the franchise from different points of view. While we both believe that genuine contention lies in 2016 with a strongly competitive team capable of progressing early and competing in 2015, we disagree on what current steps should be taken to help the team reach that goal. Or at least we used to.
I have repeatedly contended that this offseason represents the best opportunity for big-time upgrading given the presence of marquee talent on the market and the club's guaranteed protected #4 overall selection in next June's draft. The opposing view? The 2014 Cubs aren't going to compete yet, so what's the point of spending now instead of later?
There are plenty of business reasons for spending now with a trio standing out. First, as happened with the Yankees last year, attendance is way down at Wrigley Field. After Cubs fans tasted winning somewhat regularly in the 2000s, the 2010s have been a massive letdown. It would certainly help to pack the ballpark again.
The other two business reasons are more important to the team's bottom line. The second reason: a competitive team that generates interest from Chicagoans could significantly increase the odds of obtaining city approval for major renovations of the stadium and Wrigleyville area. And third, the club's television rights contract is up for grabs in 12 months. Higher ratings equal big dollars there.
But even with all of that in the open, the baseball reasons for spending now instead of next year are extremely compelling. In order to convey that in full, three realities must be clearly understood:
1. The Cubs are historically bad and devoid of talent at the MLB level, having just lost the most games ever at the MLB level over a two year stretch;
2. There is serious, impact talent in the pipeline set to reach Wrigley Field in the 2014 and 2015 seasons; and
3. Unlike in years past, the Cubs do not have significant financial resources committed well into the future.
The third point merits a deeper look. In latter portion of the last decade, the club made a series of massive, long-term salary commitments to players including Carlos Zambrano (5 years, $90M), Ryan Dempster (4 years, $52M), Ted Lilly (4 years, $40M), Jason Marquis (3 years, $21M), Carlos Marmol (3 years, $20M), Alfonso Soriano (8 years, $136M), Aramis Ramirez (5 years, $75M), Derrek Lee (5 years, $65M), Kosuke Fukudome (4 years, $48M), and Milton Bradley (3 years, $30M).
The current Cubs? They carry only one such deal at this point: the remaining 3 years and $33M on Edwin Jackson's deal (I am presuming that the signing bonus was paid up front). There is some dead money on the 2014 payroll, namely $14M for Alfonso Soriano, $1.2M for Gerardo Concepcion (also in 2015), and roughly $500K for Scott Hairston.
This is a franchise in a much different position than it was in three years ago when the payroll ballooned to $144.3M for a 75-87 disappointment.
With this foundational understanding of the state of the franchise, my brother made a comment that spurred a detailed comeback from me. I have criticized him repeatedly for not being willing to take bold steps to improve the team this offseason. Translation: he doesn't want the Cubs to spend any money in free agency, instead preferring bargain bin shopping and trades. I have countered with the reasons given below, as well as the idea that the team lacks sufficient talent to trade for impact talent: when you're short on talent everywhere, you can't use what little you have to plug a hole because it just creates another one.
Anyway, in response to my questioning why he doesn't want the team to win in 2014 if possible, he rose the idea of the team signing Robinson Cano, Masahiro Tanaka, Matt Garza, Curtis Granderson, and Grant Balfour this offseason so that we could enjoy watching a competitive team in 2014, lamenting that it would be against the team's long-term interest. He said, "I know it's dumb to make some major expenditures with where we are at this point."
And that was it; I had my opening.
See, it's not nearly as crazy as it sounds for the Cubs to go on a massive spending spree. Here are projected contracts required to sign the five free agents listed above:
Cano: 8 years, $200M
Tanaka: 7 years, $110M plus $20M posting fee (given the new cap, the player will get more)
Garza: 5 years, $80M
Granderson: 4 years, $62M
Balfour: 3 years, $24M
The Granderson number feels a bit high while Garza may be a bit low; regardless, these deals are in the ballpark.
There's no way the Cubs could actually absorb such enormous expenditures, right? Here's a look at the 2014 roster without any major additions:
LF Lake ($.5M)
SS Castro ($6M)
1B Rizzo ($3M)
RF Schierholtz ($3.8M)
CF Sweeney ($1.5M)
C Castillo ($.5M)
3B Valbuena ($1.5M)
2B Barney ($2M)
SP1 Samardzija ($4.9M)
SP2 Jackson ($13M)
SP3 Wood ($3.6M)
SP4 Arrieta ($.5M)
SP5 Rusin ($.5M)
Bench: C Kottaras ($1M), INF Murphy ($1M), 3B Olt ($.5M), OF Bogusevic ($.5M), McDonald ($.5M)
Bullpen: Strop ($1M), Russell ($1.7M), Wright ($1.5M), Parker ($.5M), Vizcaino ($.5M), Arrieta ($.5M), Grimm ($.5M), Villanueva ($5M)
Dead Money/Prospects: Soriano ($14M), Fujikawa ($4.5M), Hairston ($.5M), Soler ($2M), Concepcion ($1.2M)
The lineup costs just $18.8M, the bench $3.5M, the rotation $22.5M, the bullpen $11.2M, and dead money and prospects $22.2M for a total of $78.2M. That's a really terrible roster with a payroll that would have ranked 22nd in 2013, just behind Kansas City and ahead of Minnesota. One of these is not like the others...
Well, after that sobering look at our likely future, here's a look at the 2014 roster with those big salaries added in (I will amortize the posting fee over the life of Tanaka's contract given that I expect the team to finagle his salaries to accomplish the same):
LF Lake ($.5M) / Schierholtz ($3.8M)
SS Castro ($6M)
2B Cano ($25M)
1B Rizzo ($3M)
RF Granderson ($15.5M)
CF Sweeney ($1.5M)
C Castillo ($.5M)
3B Valbuena ($1.5M)
SP1 Samardzija ($4.9M)
SP2 Tanaka ($18.6M)
SP3 Garza ($16M)
SP4 Jackson ($13M)
SP5 Wood ($3.6M)
Bench: C Kottaras ($1M), INF Murphy ($1M), INF Barney ($2M), OF Bogusevic ($.5M), OF Schierholtz (above)
Bullpen: Balfour ($8M), Strop ($1M), Russell ($1.7M), Wright ($1.5M), Parker ($.5M), Vizcaino ($.5M), Arrieta ($.5M)
Dead Money/Prospects: Soriano ($14M), Villanueva ($5M), Fujikawa ($4.5M), Hairston ($.5M), Soler ($2M), Concepcion ($1.2M)
For that 25-man roster, the Cubs would spend $53.5M on the lineup, $8.3M on the bench, $56.1M on the rotation, $13.7M on the bullpen, and $27.2M in dead money and prospect contracts for a total of $158.8M.
The 2010 payroll was $144.3M, so this isn't exactly uncharted territory for the Cubs. This projected number also misses high compared to what the team would realistically do if the five free agents were brought aboard: Villanueva is expendable with Chris Rusin and Justin Grimm available for spot starts and long relief, and Barney is unnecessary with marquee starters at 2B and SS, leaving the club free to unload both salaries for low-level prospects or even just the salary relief alone. Removing that $7M and replacing it with a pair of minimum-salary bodies leaves a payroll of $152.8M. That 2014 club is obviously exponentially better than the product the team is likely to put on the field.
Just as importantly, those players augment the talent the club has coming up through the minors as opposed to blocking it. Here's a look at the 2015 roster with approximate arbitration raises and re-signing Wesley Wright for $1M beyond his 2014 figure:
CF Lake ($.5M)
3B Baez ($.5M)
2B Cano ($25M)
LF Bryant ($.5M)
1B Rizzo ($5M)
RF Granderson ($15.5M)
SS Castro ($7M)
C Castillo ($1.5M)
SP1 Samardzija ($10M)
SP2 Tanaka ($18.6M)
SP3 Garza ($16M)
SP4 Jackson ($13M)
SP5 Wood ($5.5M)
Bench: C Kottaras ($1.3M), IF Alcantara ($.5M), 3B/OF Olt ($.5M), OF Sweeney ($1.5M), OF Szczur ($.5M)
Bullpen: Balfour ($8M), Strop ($1.5M), Russell ($2.2M), Wright ($2.5M), Parker ($.5M), Vizcaino ($1.5M), Arrieta ($1.5M)
Dead Money/Prospects: Fujikawa ($.5M), Soler ($3M), Concepcion ($1.2M)
That roster? The lineup is $55.5M, the bench $4.3M, the rotation $63.1M, the bullpen $17.7M, and dead money and prospect contracts are down to $4.7M. The total? $145.3M.
Under that scenario, as of the end of 2015, the Cubs would have the following guaranteed salary commitments remaining:
Cano: 6 years, $150M
Rizzo: 4 years, $32M (includes $2M paid for 2020 buyout of team option)
Castro: 4 years, $38M (includes $1M paid for 2020 buyout of team option)
Tanaka: 5 years, $92.9M
Garza: 3 years, $48M
Granderson: 2 years, $31M
Jackson: 1 year, $13M
Balfour: 1 year, $8M
Soler: 5 years, $18M
Sweeney: Buyout of team option, $.5M
That 2015 team has the potential for an explosive lineup, top to bottom, and some serious pitching every day. Samardzija would hit free agency and a group of (hopefully) contributors would be well into the arbitration system including Strop, Castillo, Vizcaino, Wood, and Arrieta, but there would be increased flexibility to acquire talent via trade given the amount of in-house options. More importantly, there would be a lot of 2014 and 2015 wins in the rearview mirror.
The 2014 payroll of $158.8M would have ranked fifth in baseball in 2013, roughly $1M behind Philadelphia and just a hair beyond Boston. However, given the rosy long-term outlook for the club, the team payroll likely wouldn't reach the $159M figure again for a few more years given that the team's biggest talent acquisitions will come in the form of cheap, internal options: Javier Baez, Kris Bryant, Jorge Soler, Albert Almora, Arismendy Alcantara, Christian Villanueva, Kyle Hendricks, Pierce Johnson, CJ Edwards, Corey Black, Ivan Pineyro, and even former top prospects turned question marks in Mike Olt and Brett Jackson. There is a ton of talent on the way that will actually help to decrease the payroll over time.
To be clear: I am not proposing that the Cubs sign Cano, Tanaka, Garza, Granderson, and Balfour in the next month. That would cost an enormous amount of someone else's cash plus the club's 2nd and 3rd round draft picks next June. But Cano, Tanaka, and Garza for cash and a 2nd rounder? Yeah, I'm all for it! Removing Granderson and Balfour from the above calculation and replacing them with minimum salary bodies, the 2014 payroll drops to $136.3M and the 2015 number is down to $122.8M. A $122.8M payroll for the Chicago stinkin' Cubs? That's eminently doable: the Cubs were at $134M or more from 2009-2011 and $118.3M in 2008.
The $122.8M figure would have figured tenth in 2013 behind the Yankees, Dodgers, Phillies, Red Sox, Tigers, Giants, Angels, Rangers, and White Sox. The Blue Jays, Cardinals, Nationals, and Reds would have all been within $12M of that number too. By 2015, given inflation and the mounds of cash pouring into the game, a $122.8M payroll should be close to the median figure in the league.
The Cubs' actual payroll peers in 2013? With their revenue rankings in parentheses, the three teams spending just more than the Cubs were St. Louis (7), Washington (13), and Cincinnati (17). The three spending just less were Baltimore (19), Milwaukee (20), and Arizona (24). The Cubs? The Cubs were fourth in revenue.
The moral of this story: don't think that it's crazy for the Cubs to go after a 25-year-old potential #2 starter, a top-2 position player over the last four years (Cano trails only Miguel Cabrera from 2010-2013) who plays a premium position, and another #2/#3 starting pitcher at the same time. It's just absolutely not crazy, not for a team that plays in Chicago owned by billionaires in a sport with millions of additional dollars coming in every year. The Cubs could add Cano or Tanaka using just the amount of increased revenue they'll enjoy in 2014 as a result of MLB's new national television contract. Cano, Tanaka, and Garza would all supplement, not block, the core of prospects making its way to Chicago in the coming years.
The club should actually have even more spending flexibility in 2014 than it may have had without its international shopping spree in 2013. Thanks to the additions of teens Eloy Jimenez, Gleyber Torres, Jen-Ho Tseng, Jefferson Mejia, Erling Moreno, and Johan Matos, the Cubs spent at least $7.8M on international amateur signing bonuses in 2013. While the team will still spend internationally in 2014, their expected bonus outlay is severely restricted by the $250K maximum bonus that the team may offer as a result of the new CBA. Thus, expect the Cubs to spend something like $2M-$3M on amateur targets. If the team also signs two compensation free agents like Cano and Granderson, the Cubs would forfeit their 2nd and 3rd round draft picks and the corresponding bonus pool allocation. Accounting for slight inflation, those picks would be worth about $1.3M and $720K. Taken together, the team would have about $7M less to spend on amateur talent in 2014 than it did in 2013, cash that may be reallocated to other avenues.
There's one additional factor that must be considered having looked at all of the above: the financial state of the team. Much has been made of the heavily debt-financed purchase of the team by the Ricketts family. Thus, any available figures should be taken with a very large grain of salt. Nonetheless, Forbes currently values the Cubs as MLB's fourth most valuable franchise at a value of $1B. The team's 2013 revenue of $274M also ranked fourth. The $32.1M operating income ranked first (although you may wisely question the utility of operating income). Unfortunately, the club also ranks first in a much less appealing category: debt-to-value ratio. The 58% figure is one of just three at 50% or higher and many clubs are in the single digits or at 0%.
Still, the team's revenue increases have been largely immune to the on-field product, increasing steadily from $156M to $274M over the past decade that included a pair of division flags and a quartet of top-10 draft picks.
The team doesn't have to spend its money this offseason and it most likely won't. But don't confuse yourself: it's not crazy to think that they have the resources to do so while fitting acquisitions squarely into gaping holes in the short- and long-term plans. The rule of thumb of baseball payrolls is to spend roughly 50% of revenue. Applying that figure would leave the Cubs with a $137M payroll in 2014, plus half of any gains.
Still think a $152.8M payroll is crazy?
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