With Opening Day having arrived (either yesterday or today, depending on how you’re counting), opening payrolls for MLB’s 30 teams are now locked in. To be clear, the figures do not carry any rule-based importance, as payrolls for luxury tax purposes are calculated after the season, given all the transacting that goes on in a given year.
But the numbers are certainly interesting to see, not only relative to each other, but also relative to how a team has spent in the past.
The Associated Press today reported those Opening Day payroll figures, as you can see here at Forbes.
Again: these payroll figures are for the Opening Day 25-man roster only, and do not include the many other things that go into luxury tax payroll (the full 40-man, various benefits, etc.), and are not calculated on the same average annual value basis that luxury tax payroll is. This is meant instead to be a snapshot of where things stand for an organization, and, as we’ll see, at least a useful indicator of where things may eventually stand in relation to the luxury tax at the end of the year.
The Cubs’ figure for 2017 comes in at just under $177 million, a $6.5 million increase from the start of 2016, reflecting not only the Cubs’ short-term deals in free agency and the Wade Davis trade, but also mostly reflecting raises for many players who were already on the roster. With arbitration looming for so many youngsters in the next few years, that aspect of payroll will need monitoring.
That Cubs payroll is sixth highest in baseball, right where the Cubs were last year at this time, and is behind the Dodgers ($226 million), the Tigers ($200 million), the Yankees ($195 million), the Giants ($182 million), and the Red Sox ($179 million). The next highest in the NL Central, by the way, is the Cardinals, at $150 million. For the full list and more context, be sure to read the Forbes article.
So, then, the big question: how are things looking for the Cubs this year with respect to the luxury tax? Recall, the front office has explicitly suggested a goal of staying under the threshold, and not just for financial reasons – the new CBA imposes significant baseball-related penalties on organizations over the luxury tax limit, many of which would be particularly painful after this season for the Cubs.
The luxury tax threshold increases to $195 million in 2017, so, at this figure, the Cubs are looking good, right? Well, not quite. Remember, there is an additional $15 to $20 million in payroll for luxury tax purposes that comes from the rest of the 40-man roster and other expenses. Further, any in-season additions will count against the payroll to the extent salary is paid out in 2017. So … the Cubs are screwed, right?
Not so! Again: The AP is calculating the Cubs’ Opening Day payroll in terms of what is actually being paid out – which is not the same thing as payroll for luxury tax purposes. The latter not only includes that extra $15 to $20 million, but it includes only the average annual value (“AAV”) of a player’s contract for the given season. For example, the Cubs’ payment schedules for long-term deals like Jon Lester and Jason Heyward have them making significantly larger salaries this season than the AAV of their contracts.
In other words, the Cubs’ payroll right now, for luxury tax purposes, is lower than $177 million (my quick-and-dirty math has the AAV figure closer to $160 million). That means, yes, the Cubs probably do have at least some wiggle room to play with this season for new acquisitions without going over the luxury tax threshold (as Theo Epstein indicated was part of the team’s considerations when limiting their signings this offseason).