NEWSLETTER
At 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:
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.
