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wallet cashAlthough you can always leave yourself open to being pleasantly surprised, I’d like to encourage you to adjust to the financial reality of the Chicago Cubs’ situation right now: payroll will continue to be relatively low for the near-term future.

We’ve discussed it at length over the past seven months or so, and I think most attentive Cubs fans have understood this to be true for a while now. Going back to February, team owner and chairman Tom Ricketts explained that the $135 to $145 million payrolls of the late Tribune era were “unsustainable,” suggesting that the Cubs are affording what they can right now (which, at the time, looked like a payroll in the $95 to $110 million range). From there, a great deal of ink was spilled on the subject of Cubs finances, and whether the Ricketts Family was living up to its pledge to put every dollar that comes in the door right back into the organization.

By the end of April, we had a pretty good sense of what was what: every dollar of revenue the Cubs generate (revenue that is falling along with attendance) is going back into the organization after taxes and ownership’s debt service payments. With revenues on the way down, however, and debt service payments added to the picture (not to mention a stadium renovation to pay for), payroll was bound to decline, even if baseball operations was using every dollar allocated to their department.* The big payroll dollars weren’t going to come, it seemed, until after the Wrigley Field renovation was well underway and a new TV deal had been negotiated (hopefully the portion that expires after 2014, not just the portion that expires after 2019).

*In many instances, wisely: don’t forget that baseball operations has overspent on the last two drafts, hugely overspent in the international free agent market this year, expanded the salaried staff in the front office dramatically, acquired advanced data systems, upgraded minor league facilities, and helped build a state-of-the-art facility in the Dominican Republic.

Though we shouldn’t have needed any further confirmation that payroll could be relatively lean for a little while, President of Baseball Operations Theo Epstein offered it in an interview on The Score this weekend. The entire interview is worth a listen – it ranges in topics from specific players, to overall progress, to minor league developments, etc. – but the comments I’d like to highlight are as follows:

We are clearly taking the long view here. It is the right thing to do. Some of it is out of necessity, frankly, because we simply don’t have the payroll flexibility that we would need for a quicker talent infusion given some of the limitations and timing of our business plan and the realities of a lot of circumstances surrounding the ball club right now. We need to take the long view. It is not easy. I do enjoy the scouting. I enjoy the draft. I enjoy the player development part of it. I enjoy the young players, I believe in young players. But in an ideal world we would be doing both. We would be infusing a lot more, sort of ready talent in this situation, to speed up the clock a little bit with Major League players. We don’t have that luxury right now.

From there, Epstein goes on to note that, although the plan is to spend more money in free agency in the coming years, that is dependent on the renovation and TV deal(s) coming through as revenue-drivers.

I’ll grant a moment for you to put your hands in your pockets and kick some rocks.

Epstein saying that the baseball operations team does not have the money available to help speed along the rebuild at the big league level is the real bummer. The mere fact of saying it implies that there are or have been big league moves out there that he believes would align with The Plan, but that they cannot make or have not made because of a lack of money. The ability for this front office to sign anyone they believe is worth signing is probably not there right now. That stings.

That said – hands out of pockets, feet at attention – I’m not going to become too despondent for a handful of reasons.

First, given the money coming off of the Cubs’ books in the last year or two, a $100 million payroll isn’t going to cripple the front office. A quick and dirty review of the Cubs’ payroll obligations for 2014 – including generous arbitration raise estimates, and completely ignoring the $13.65 million the Cubs saved this year in trades – puts the organization somewhere in the $62 to $65 million range. Even if payroll is cut further to $90 million, that’s still $25 million to work with in improving the 2014 big league roster.

Second, even in the face of falling payroll and budgetary restrictions, it’s not like the Cubs weren’t able to go out and spend last year. Edwin Jackson was actually one of the bigger free agent signings of the Winter. The Cubs also committed more than $20 million to Scott Feldman, Scott Baker, and Kyuji Fujikawa. The Cubs signed Starlin Castro and Anthony Rizzo to extensions. These are guaranteed dollar commitments that could have waited if the only motivation at play was saving money in the short-term. This is all to say: there is money available to be spent. It isn’t Yankee or Dodger money – hell, it probably isn’t even Oriole or Giant money right now – but contracts can be signed.

Third, the 2014 free agent class is extremely weak, and likely wasn’t the way for the Cubs to improve their near-term roster anyway. You don’t just start spending like crazy because you want to bring payroll back up. You spend when it makes sense to spend, regardless of where payroll stands. This offseason, other than a player or two (Choo? Tanaka?), I’m not sure I see where it makes sense to spend big bucks.

Fourth, I really can see the synergy of the business and baseball plans that Epstein describes. Even if I’d prefer that the Cubs were competitive sooner rather than later – I have written about a terrible team every single day for almost five seasons now – I’ve always been on board with the rebuild. I can see the fruits of that effort down the road, and I can see when it’s going to make sense to spend big. It doesn’t look like 2014 is going to be that year (a season in which I’ve always said I hope to see a team that looks like a .500-ish team on paper going into the season), but we could see some real traction by 2015 from the farm system. That doesn’t just mean players breaking through in the bigs, but it also means trading duplicative pieces for Major League players. And, going into 2015, the Cubs will have secured a new TV deal for the portion of games currently airing at a bargain rate on WGN, and the renovation will have (hopefully!) reached the point where a couple large, revenue-generating signs will be going up in the outfield.

From there, a window opens where revenue begins to increase alongside a more competitive team. That, in turn, drives more attendance, and more revenue. That, in turn, drives more payroll flexibility … just at the time when it becomes the most important, on the opening of a long-term competitive window.

None of this is to say it is time to check out until 2015. Because I remain optimistic that the front office, with the resources afforded them, can put together a .500-ish team on paper going in 2014 (it’s easy to forget how close this year’s team was to being a .500-ish team in the first half, given the underlying metrics), you never know what could happen in the next 8 to 12 months. Maybe Starlin Castro turns it around at the same time Anthony Rizzo really breaks out. Maybe the one or two offseason additions are huge boons to the team. Maybe Jeff Samardzija fulfills the promise of ace-dom, and the rest of the rotation pitches as well as it has, generally, this year. Maybe Javier Baez really is ready by midseason. Maybe Kris Bryant is, too. The ability of the Cubs to spend big money in 2014 on payroll is not going to be the primary deciding factor in that team’s competitiveness.

If the Cubs sit out the spending this Winter, I’m probably not going to be too upset, given the reality of the financial situation, the reality of a weak free agent class, and the reality of various timelines.

Instead, I will continue to follow the renovation and TV deal story lines with as much vigor as ever. Because, even as I say that the ability of the Cubs to spend big money in 2014 on payroll is not going to be the primary deciding factor in that team’s competitiveness, I do recognize that, long-term, teams that can spend money tend to make the playoffs more consistently than teams that cannot.

  • another JP

    I’ve been as huge a supporter of this ownership/mgmt. as anyone and still believe in the long-term approach, but Theo can’t be in favor of tanking several seasons and not expect some sort of financial backlash when us fans quit showing up at Wrigley to see our Cubbies get pounded by the hapless Marlins and put up only 27 wins at home in 71 games. Furthermore, cutting the payroll is necessary given the extra money to be spent on Wrigley renovations, the Mesa & Dominican facilities, etc. And building the farm system costs $$ too… getting high draft positions are nice but the bonuses have to be paid to acquire them and the big penalties incurred in the IFA draft add to the cash outlays. $14M will be paid to Sori so he can play for the Yanks next year. So Ricketts & Theo have been given a mulligan the past couple years so they can build with younger players, but if marked improvement is not seen next season they are all going to feel a lot more wrath from fans than they’re getting now… including myself.

  • cecilJ

    love the site, but I’m so un-obsessed with stadium renovation updates being the glimmer of hope for this team. covering Rickets’ debt was a highly disappointing development/repurpose of believed funds for payroll. I’ll keep following along from home, but so not inclined to watch games starring lackluster MLB roster. much less travel to watch this squad in person until there’s something approaching a legit MLB playoff contender taking shape here. not to say we should overspend for mediocre FA’s, but I’m gonna kick rocks for a while longer still. the ETA for a competitive squad seems locked at ‘year or two out’. boo to that wherever you want to place blame.

  • Coal

    I think there is a real risk that 6-7 years of ‘sucking’ will permanently damage fan loyalty. Not to the point that nobody will come when they are playing well – of course the will. But the days of selling out 75% of the games may be gone. My sense is that the season ticket base is aging, and the 20 somethings and yuppie locals, who probably make up 5,000 fans per game when the team is good (the difference between 35,000 and 40,000 on a weekend, or the difference between 30,000 and 35,000 on a weeknight), are going to find “something else” to do unless the team is in contention. It’s a bad convergence between slower than expected re-build – which followed faster than expected fall-from-playoffs grace – combined with stubhub, a bad economy, and a protracted city/ward battle. The perfect storm. Not much to do about it now, except hope for some decent breaks and continue to stay the course.

  • FastBall

    I think the Ricketts went nuts spending money on everything but the Cubs in Chicago. Maybe if they picked a reconstruction project and completed it, then realized the benefit before starting 3 others they might not be so cash strapped right now. Do they need to upgrade Wirgley right now. It’s an owner who wants a new paint job on his expenisve sports car. Instead of appreciating the futiny it needs to be repainted. Hey people have been filling Wrigley for years just the way it sits today. I think Ricketts has chosed the egg over the chicken. He has decided to fix his ball parks up before fixing his team up. Kind of like the cart before the horse. The Cubs will not be competitive in 2014 or for then next 3 or 4 more years following. Why? because there is always going to be an excuse coming out of Theo and Tom’s mouths at every turn. Here’s the real problem Ricketts has. Theo is not going to stick around for much longer when he doesn’t have any money to spend on players. His contract isn’t forever!! It’s up next year isn’t it. Don’t think the rest of baseball hasn’t seen how much Theo has done with rebuilding the Cubs farm system. Some owner or owners will pay Theo damn near double what he makes now for a similiar result. The Ricketts are sending Theo out to sell a bull shit story. Put up a smoke screen and test the water temperature at the same time. I bet he sits in Ricketts office tomorrow and says something like “Tom, you gotta come up with something new for me to say when I go on the radio next time”. None of the season ticket holders are sending in their money for next year. Are we going to all be unemployed if they don’t keep buying tickets? Shit Tom I gotta get my resume out on MLB.com and start looking for something more reliable. Problem is Tom told his dad that this was a simple thing to run. Old man Ricketts isn’t giving Tom a nickle more than he orginally gave him. Tom is running a business with a lot of providers he probably can’t pay on time. Wonder what the Cubs pay terms are by now. I bet 90 to 120 days is the norm by now maybe even longer. That will tell you how the business is doing. Night games go back to being Day games because they can pay the light bill. How long before the Cubs are up for sale? I bet 2015 the Ricketts sell the Cubs because Tom and the clan are broke and Daddy won’t give them a dime.

  • Northside Neuman

    I would respond to your delusional post. But their are only so many hours in a day.

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  • Napercal

    I have followed this website for the past year and love the daily updates on the minors. I go way back with the Cubs – actually 1969 was my first year of Cub consciousness and I was at the Bartman game. I have felt the pain – man, have if I felt the pain. Other than Theo and Jed, Dallas Green was the only true baseball man the Cubs have had run their organization. Let’s face it, the Tribune Company was all about generating money and creating excitement. They essentially milked Harry Caray and the Wirley Field experience for every nickel they could. It never seemed that there was ever a real plan for building a solid organization. They hit the jackpot with Kerry Wood and Mark Prior and watched them flame out. Ten years ago, who would have bet that the best pitcher out of that young staff would be Carlos Zambrano? Under Hendry, it never seemed that the Cubs had a plan to win. They never discussed the type of qualities they looked for in players. It felt like Hendry bought into whatever the “hype” was at a particular moment. Sign Soriano! Sign Lilly! Sign whatever broken down piece of garbage reliever was on the free agent market! Hendry would sign them and then the marketing department would sell them to the fans. Then they would oversell their minor leaguers – Corey Patterson, Felix Pie, Bobby Hill, Dave Kelton (don’t touch his swing, it’s the best ever), Brian Dopirek, to name a few. They blew nearly every high draft pick in the 2000’s – Ryan Harvey, Mark Pawelek – I could go on and on. They are all bad dreams. Because Hendry oversaw a lousy farm system, he had to plug overpaid, underperforming free agents into the lineup. Now I love that Theo and Jed have a plan. You absolutely cannot win consistently without a strong farm system. If you look at the teams that win consistently – Cardinals, Braves, Yankees, Red Sox – the core of those teams are always home grown. Sure, there are high priced free agents sprinkled in to fill certain holes, but the base of the teams all came through the system. So I think the long-term plan is excellent. I don’t think the minor leaguers are overhyped ala Patterson and Pie. Reputable scouting services all support the belief that these guys are ther eal dealHowever, the short-term plan is an insult to Cubs fans. The current roster is filled with 26th players from other teams. These are guys who qualify as major leaguers simply because the Cubs signed them. Ryan Sweeney, Donnie Murphy, Julio Borbon, Cole Gillespie, Brian Bogusevic, Darnell McDonald, Cody Ransom and Thomas Neal are not major league baseball players. David DeJesus – nice guy, fourth outfielder on a real team. Nate Schierholtz – maybe a third outfielder. There are certainly better players available than that. I’m sure that the Ricketts family has made the decision that fielding this type of team is acceptable. It is not. There is no reason that the Cubs cannot field a competitive team while the farm system develops. The team is the product and the product is unwatchable. The Ricketts’ have had their grace period. No one cares about their debt repayments. If the consultants they hired were stupid enough to allow them to take on all that debt without coresponding tax credits and deductions, they should be fired. There are ways to structure the purchase of a business without crippling the business going forward. Most of the debt that the Cubs incurred also ought to be at historically low interest rates too. I just don’t buy the debt service argument as a reason not to field a competitive team. I do not suggest that the Cubs spend big bucks and sign long-term deals for over priced players. But they surely have enough money to field a team that can score some runs consistently. They’ve been shut out 8 times in the last 5 week. That is unacceptable. I don’t exect fans to put up with that for another year. It looks like the Ricketts kids have no business sense and are really just membes f the lucky sperm club.

  • Scotti

    Brett, when you combine this year’s salary with the “savings” from this year’s salary, that comes to about $90 million for 2013. If the budget for the payroll is going to go down further, the team won’t be at $90 million next year. More like $80 million it goes down just $10 million from this year.

    The “savings” from this year’s budget don’t get spent elsewhere because they never materialized in the first place. Meaning, there was a budget for the Cubs to spend roughly $105 million in player salaries, but the income never matched that budget and it’s the projected income that sets the budget. If the projection is off then you lower the actual budget ( spending) just like in any other business (where, instead of trades, you fire people or cut back hours).

    Again, IMO, the Cubs cut budget this year to get to where income and budget met. Next year’s income can’t be looking so good so I see it going south from here.

    • http://www.bleachernation.com Brett

      “Meaning, there was a budget for the Cubs to spend roughly $105 million in player salaries, but the income never matched that budget and it’s the projected income that sets the budget.”

      … you’re basing this factual assertion on what?

      • Scotti

        That “factual assertion” would fall under basic business principles. It is common practice in MLB to dump salary (like the Cubs did this year) to keep payroll within the framework of income generated based on that season. Businesses of many stripes follow similar practices.

        Something like a Hollywood movie, or a video game, has a set budget but, while those budgets are still based on projection, the “production” is completed before the goods are sold. In the typical business (such as MLB), you set a budget based on projected income/desired outcome and the season unfolds. If the season goes well (people buy many widgets, hamburgers, tickets) then you add to the budget and create more (widgets, burgers, wins). If the season goes poorly, you subtract from the budget and, generally speaking, that’s payroll (far easier to cut payroll then sell off uncooked burger meat or widget parts).

        The Cubs didn’t “save money” this year because they have some cunning plan. They traded players to cut payroll just like other teams do. A part of that is getting back talent but other teams do that as well. Income/outgo. Being buyers or sellers has been around MLB for a long time. Generally, the guys sold are the costly guys. The Cubs have been trying to move their costly guys for years. The reason is because the team needs to make adjustments to the income generated just like other teams.

        That said, whether or not the team needs to take a further haircut for next year is pure speculation, as I intimated. Based on Theo getting so far ahead of fan expectations, I would expect more cutting from the current $90 million that payroll is THIS year.

        • mjhurdle

          that is all nothing but speculation and assumptions.

          • Scotti

            Heh. Cot’s numbers. Brett’s numbers. Standard MLB practice.

            • mjhurdle

              heh, none of which you provided.
              assumptions. speculation. slight air of unwarranted superiority
              standard message board practice.

              • cub2014

                I am glad we get to see Lim. 97mph sidearm,
                who did they dfa to add Lim?

              • Scotti

                Dude, Brett provided his numbers in a link above that a great many of us have read at some point or another (kind of why we’re on the site). Cot’s numbers are readily available to anyone with an Internet connection and, low and behold, you have one.

                Re. slight air of unwarranted superiority: I’m not the one who belched out “that is all nothing but speculation and assumptions.” WARRANTED. If you want constructive conversation then perhaps you should post something constructive.

                • mjhurdle

                  So, because there are numbers on the internet, and some people have read them, then your assumptions are then correct?

                  I see this is fruitless and my daughter is waking up, but a parting word of advice:
                  if you want to act smarter than the crowd, then at least possess the ability and/or desire to actually draw out the support for your theories. Otherwise, don’t get a stick so far up your backside when people state that your post is merely assumptions and speculation.
                  Maybe to YOU they make sense, but, this may come as a shock so sit down before reading further, no everyone knows what you know nor thins the same way.
                  Why is it my job to go out and validate that your theory may or may not hold water? (spoiler alert: it isn’t)
                  i understand that maybe you didn’t want to spend the time/energy that typing out everything, and that is fine. but again, dont get butthurt when you throw a wordy post with no meaningful facts out on a message board and people question its validity.

                  • Scotti

                    Sorry, dude. None of what I bothered to read there washes. Yes, I referenced numbers on the Internet–by name. If you are too busy to look them up then perhaps you’re too busy to have a decent conversation–or at least to rate someone else’s comment. Don’t get all bent out of shape by someone else’s perceived smugness when there is a “log” in your own eye. Blythely rating other commenter’s comments just isn’t cool.

        • http://www.bleachernation.com Brett

          My point was you predications your position on the fact that the front office had to have known how many guys to trade in order to “make budget.” And they would have had to predict the moves going into the beginning of the budget year. That is not how these things happen. There is considerable play.

          • Scotti

            Brett, I’m not really sure where the issue with “how many guys to trade” is. I must be missing something here. The FO knows what their players make, and TR opened the books to Hendry, so I’m VERY confident he opened the books to Theo, as well. Going in to a season the Cubs know what the ticket sales look like since the majority are purchased prior to the season. However, there are still no shows, concessions, ad buys, etc. that fluctuate.

            Re: having to predict the moves going into the year: Again, I’m confused at what you mean here. They already KNEW that they wanted to get rid of Soriano, seemingly Garza, and guys were added to the budget knowing they would likely be moved (Baker, etc). The budget was always artificially high.

            “There is considerable play.”

            On this we agree. But Baker was a $5 million dollar hole in the budget. I also imagine they wanted expected more cash relief for Soriano coming in. The guy has been very productive. Again, the very nature that the Cubs started @ $106+ (Cot’s) but also knew going in that they were going to be dumping huge chunks of salary (UNLESS they actually were competitive) is where that considerable play comes in.

            The team, if competitive, would have brought in enough cash to keep the payroll high. It isn’t what happened so payroll had to go bye-bye, as expected. Again, the actual paid salary this year will be between 90 and 95. Moving DeJesus, just to save money, seems to show that they needed to get it down closer to what the accepted payroll is. That payroll is projected early and solidified as the season goes on.

            Injury bumped back when they could move Garza, DeJesus, Baker and others. But I don’t see Theo lowering fan expectations they way he is if the team has $25 million to spend this offseason. After all, lower expectations have a direct effect on ticket sales and that’s the last thing he would want to do (unless it was true) because ticket sales directly effect the next year’s projected budget.

        • Northside Neuman

          Sorry, but cutting the payroll is simply cutting expenditure for the sake of saving money that doesn’t need to be spent.

          Their is no way the Cubs 2013 franchise expenditures are anywhere near $275 million. This team is operating well into the black.

    • bbmoney

      I find exercises like this completely counter productive. Too many assumptions that you need to assume to be facts in order to jump to any meaningful conclusion or assertion about things moving forward.

      • Scotti

        The only assumption made was that Theo is getting out ahead of fan expectations re. free agent signings for a reason. I suppose he could be tempering expectations for no good reason. I think he’s smarter and more experienced than that, however. Outside of that I’m just using Cot’s numbers combined with Brett’s numbers.

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  • http://MSN,Outlook Byron Mullins

    Brett, first time I’ve read anything you have written. Enjoyed it. I’m just wondering if you could enlighten me on how much the Arizona, and the Dominican projects cost and how many 8 dollar beers were sold at Wrigley last year… I’m just kidding on the last comment I think… Anyways Happy Holidays to you and yours.
    Byron

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