Financial Flexibility, Future Chicago Cubs Trade Activity, and the Impending IFA Period

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Financial Flexibility, Future Chicago Cubs Trade Activity, and the Impending IFA Period

Chicago Cubs

theo epstein press conference speaksChicago Cubs President of Baseball Operations Theo Epstein yesterday discussed a range of topics with the media, and you can read his thoughts here, here, here, here, and here, among other places. His comments inform the following, and are worth a read.

Can and will the Chicago Cubs make significant in-season additions to help spur along what looks to be a playoff-caliber performance in 2015?

That’ll be among the big questions sorted out over the coming month, as the young team continues to play well in the face of a tough schedule and a tough division.

Although the Cubs are happy about the team’s performance this year, Theo Epstein explained that they’ll never be satisfied enough to stop trying to improve. The first order of business, if Epstein had to rank? As he’s mentioned before, it would probably be in the starting pitching area, where the Cubs have dealt with some injuries in their reserves. Moreover, as performance in the 5-spot (and Tsuyoshi Wada’s injury) has shown, the Cubs will need more starting pitchers than the six they’ve used so far this year. That’s just the way baseball goes.

Epstein even said the preference was to address the issue before it becomes a problem, so you can expect the Cubs to keep exploring the starting pitching market as we round into July.

Sprinkled into some of the articles about Epstein’s comments is a thread questioning whether the Cubs will have the financial flexibility to make a major mid-season addition. Epstein’s general response to those kinds of questions is to avoid, as you can see in the articles linked above, saying that he’d rather other teams not know what the Cubs are or are not able to do financially.

That makes a lot of sense – imagine a situation where the Cubs are in negotiations to acquire a certain player with a big contract. Imagine that the Cubs don’t have plenty of financial flexibility to take that player on, but the other team wants to eat salary in exchange for a better prospect. If the other team knew the Cubs had little flexibility, they could really put on the prospect squeeze. Conversely, if the Cubs did have plenty of money (they did go after James Shields in February, after all), the other team would know that it’s no big deal for the Cubs to take on salary, making that a weak negotiating point for the Cubs.

Then there’s the other thing about financial flexibility and saying too much about it right now: it might not be entirely clear just yet.

While we know that baseball operations is given a budget at the start of the year, and we know that it tends not to ebb and flow along with that year’s revenues (which instead more typically impact the following year’s baseball operations budget – once expenses are paid, all remaining revenues go to baseball ops), we can’t yet know exactly how that budget will be spent in a given year. Yes, the vast majority of baseball ops outlays for a current year are locked up and predictable by March, but some things – like midseason trades, buying or selling – are not knowable until they arrive.

For the Chicago Cubs in 2015, there’s a potentially really big expenditure that isn’t yet precisely knowable because it hasn’t yet arrived: international free agency.

In the Summer of 2013, the Cubs spent lavishly on international free agents – i.e., prospects from outside the United States, not already playing in professional leagues – topping more than $10 million in total expenditures. In so doing, the Cubs blew out their MLB-imposted bonus pool, and were prohibited from signing any international free agents for more than $250,000 during the next period.

That prohibition expires when the new IFA period opens on July 2. That’s in 10 days.

Rumors are swirling that the Cubs will once again blow out their IFA bonus pool, which could mean significant expenditures in the 2015 baseball operations budget aren’t yet locked up.

Just how significant those expenditures are might depend on how well the Cubs do with various Cuban prospects who aren’t yet committed, because that’s pretty hard to project right now. I’m sure the Cubs’ front office has a better sense of it than most, but remember: the explosion of Cuban free agents this year has really changed things. Unlike Dominican and Venezuelan free agents/prospects who are essentially locked into informal agreements long before July 2, much of where the Cuban players will go, how much they’ll cost, and how open they are to being persuaded is unknown. Many of the priciest (by projection) Cuban free agents were not known to be available back when budgets were being formed and traditional free agents were being signed back in January and February.

Estimates on bonuses for many Cuban prospects vary wildly, and it’s not at all difficult to imagine a scenario – especially when you consider the 100% overage tax for blowing out your IFA pool – where the Cubs right now are projecting that they could spend anywhere from $8 to $30 million in international free agency. That’s entirely hypothetical/speculative/merely an example, but it shows you what could be a huge range when it comes to in-season spending. That could easily impact the path the Cubs take in the trade market, and the balance they strike between using financial assets and prospect assets to make acquisitions.

In other words, then, even if the front office knows that it has quite a bit of financial flexibility right now in the baseball operations budget, they might not be sure how much of that they’ll be able to devote to midseason acquisitions as opposed to international free agents.

I’d expect we’ll see a serious flurry of IFA signing/rumor activity there in the first week or two of the new period starting July 2, as teams like the Cubs try to nail down exactly how much they’re going to be spending in IFA, and how much they’ll have available to spend before July 31 on the trade market.

Author: Brett Taylor

Brett Taylor is the Editor and Lead Cubs Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and @Brett_A_Taylor.