The Financial Particulars of Jon Lester’s Contract, Including Annual Salary Breakdown

MoneyAt long last, the annual salary breakdown, in addition to the various other terms, in Jon Lester’s $155 million deal with the Chicago Cubs is now available, courtesy of Jon Heyman. That means we can put the whole financial package together.

As reported, Lester gets a $30 million signing bonus, $15 million of which is payable before the 2015 season begins (which I suspect is a financial benefit not only for Lester, but also for the Cubs, as discussed previously). From there, $2.5 million is paid in 2018, $2.5 million is paid in 2019, and $10 million is paid in 2020.

For salary, Lester gets:

  • $15 million in 2015
  • $20 million in 2016
  • $20 million in 2017
  • $22.5 million in 2018
  • $22.5 million in 2019
  • $15 million in 2020
  • Then there’s the $25 million option for 2021, which will vest as a player option if Lester pitches 200 innings in 2020 or 400 innings in 2019 and 2020, combined. That option comes with a $10 million buyout, which adds up to the $155 million guarantee.

    Including the bonus payments, each of the 2018, 2019, and 2020 seasons will effectively be the most expensive, with $25 million paid out each year* (which you’d expect in a back-loaded contract, as these kinds of deals always tend to be).

    The average annual value of the deal (AAV) is $25.833 million, and is simply $155 million divided by six years. This matters only to the extent the luxury tax cap ($189 million) comes into play for the Cubs during the course of Lester’s deal – for luxury tax purposes, a team’s payroll is the AAV of all of its contracts, not the actual amount it is paying in a given year.

    Because the 2021 option is for $25 million with a $10 million buyout, it’ll actually be a mere $15 million decision for the Cubs. If Lester ages as well as Andy Pettitte did – which we discussed yesterday as a reasonable comp – the Cubs will be all too happy to pay that $15 million to get Lester back in 2021. Here’s hoping that’s what happens.

    *(The answer to your question is, no, I don’t quite understand why the “signing bonus” is partly paid out much later than when Lester signs. I assume there are accounting and/or tax implications.)

    One final point of discussion I forgot to add initially: the 2021 option is technically a mutual option, which is not likely to make a big difference down the road, but could. The way mutual options generally work for teams is something like this: the club decides if they want to pick up the option (here, it would be $25 million or a $10 million buyout). If they decide they do, then it’s up to the player if they want to agree, as well. If the player says yes, he gets the option rate – here, $25 million – but if he says no, then he doesn’t get the buyout.

    So, in this situation, it’s hard to see the Cubs wanting Lester back for $25 million in 2021 in a situation where Lester is going to want to leave no matter what (even if he didn’t want to play one year for $25 million, the two sides could always work out a short extension). But, because it’s not inconceivable – maybe he’s been such a stud that he can get another huge contract, even at age 37 – it’s worth noting that the Cubs could wind up paying $10 million less on this deal if they pick up the option but Lester declines.

    written by

    Brett Taylor is the Lead Cubs Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and on LinkedIn here. Brett is also the founder of Bleacher Nation, which opened up shop in 2008 as an independent blog about the Chicago Cubs. Later growing to incorporate coverage of other Chicago sports, Bleacher Nation is now one of the largest regional sports blogs on the web.

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