The Padres, The Luxury Tax And The Trade Deadline

The 45-31 Padres possess baseball’s fifth-best winning percentage (.592) and fifth-best run differential (+63). They’ve achieved this success despite receiving middle-of-the-pack production from first base and designated hitter in addition to well below-average offensive production from center field and right field. The Friars have also played the entire season thus far without star shortstop Fernando Tatis Jr. (although Kevin Acee of the San Diego Union-Tribune writes that Tatis could begin hitting off a tee within the next two weeks and embark on a rehab assignment a couple weeks after that).

Given their success to date, the clear win-now direction of their recent slate of transactions and the generally aggressive mindset of baseball operations president A.J. Preller, one would expect the Padres to be in the market for upgrades as the Aug. 2 trade deadline approaches. They were reportedly seeking corner outfield upgrades even before the season started, and this year’s rough showing from center fielder Trent Grisham (.188/.287/.321 through 281 plate appearances) creates even further uncertainty in the outfield.

The problem for the Padres, as has been well documented in the past, is that their backs are up against a luxury-tax barrier that ownership seems unwilling to surpass for what would be a second consecutive season. Roster Resource’s Jason Martinez estimates San Diego’s current slate of luxury tax obligations to be $229.4MM — just $600K shy of this year’s newly increased $230MM threshold. Agents I’ve spoken to who talked with the Padres late in the offseason said the team indeed suggested there was no real room to add to the Major League payroll, given their proximity to the tax line.

All of that meshes with reports that we’ve seen for more than a year now: that the Padres would love to shed the contracts of Wil Myers and/or Eric Hosmer and have explored attaching prospects of note in an effort to do just that. Those efforts, however, have come up empty — and it seems unlikely that the Padres would have any more success now. Myers has been on the injured list since May 31 due to a knee injury and was hitting just .234/.276/.306 in 134 plate appearances before being shelved. He’s owed the remainder of a $20MM salary this year plus a $1MM buyout on a 2023 option. Hosmer came out of the gates on fire but has faceplanted with a .238/.294/.330 slash in 201 plate appearances since May 1. He’s being paid $20MM this season and is owed $39MM total from 2023-25.

Every deadline season is different, and perhaps the Padres will finally beat the odds and manage to unload one of those cumbersome contracts, but with neither player doing much to improve his stock, that feels unlikely. If the Padres can’t manage to find a taker for either Myers or Hosmer but still wish to improve at the deadline, it stands to reason that they’ll have to explore other creative scenarios.

The simplest scenario for the Friars, despite the manner in which their pitching depth evaporated late in the 2021 season, would be to deal from their Major League rotation — either in order to acquire an outfielder of note or in order to clear the requisite payroll to do so in a separate trade. The Padres have an enviable starting staff of Joe Musgrove, Yu Darvish, Sean Manaea, Mike Clevinger, Blake Snell and breakout rookie MacKenzie Gore. The staff is deep enough that righty Nick Martinez, who signed an opt-out-laden four-year deal in free agency this winter, has been working out of the bullpen at times in recent weeks.

It’s true that the Padres’ upper-level depth in the minors isn’t exactly at a high point. Adrian Martinez was traded to the A’s in the Manaea deal. Ryan Weathers and Reiss Knehr have pitched poorly in Triple-A. There’s risk in dealing from the big league staff, as a few injuries (and/or workload fatigue from Gore) could radically alter the picture. That said, a trade involving someone from the current staff could also net some lower-end pitching depth to help serve as insurance upon which to lean in the event of further injuries. It also shouldn’t be ruled out that the Padres could deal from the current rotation and reallocate some of that space to yet another newly acquired veteran arm; they’ve already been linked to Reds ace Luis Castillo, for instance.

Dennis Lin of The Athletic wrote in his latest mailbag that of the team’s current starters, Snell is the likely preference if they’re to make a trade. That makes good sense, as he carries a $10MM luxury hit for the Padres and has underperformed this season after missing significant time with an adductor strain to begin the year. Snell has at times looked quite strong this season, and fielding-independent pitching metrics feel he’s been better than his 5.60 ERA. Still, Snell has walked 12.2% of his opponents and regularly run up lofty pitch counts early in games, leading to an average of just five innings per outing.

Despite the struggles, Snell isn’t far removed from a far more promising stretch of games. Last year’s 4.20 ERA in 27 starts looks underwhelming, but he posted a 3.24 ERA with a 33.3% strikeout rate and 10.8% walk rate following last year’s All-Star break –a stretch that was capped off with 44 1/3 frames of 1.83 ERA ball. Snell completed seven innings and logged double-digit strikeout totals four times in that span, looking every bit like the former Cy Young winner he is. Snell is earning $12.5MM this season and has a $16MM salary for the 2023 season, and another club might feel it’s worth taking the financial risk to buy low on such a talented arm. Lin writes that the Padres have been “frustrated” by Snell’s lack of performance.

Other members of the rotation would also be more difficult to move. There’s no chance the Padres would move Musgrove amid a potential Cy Young campaign. Darvish has been their second-best starter, making him tough to replace, and he’s also the most expensive of the bunch, making him tougher for other teams to take on. Clevinger’s $5.75MM luxury number doesn’t give the Padres as much financial leeway as Snell would, and he’s pitched even less this season than Snell (albeit also more effectively). Manaea has been solid and would surely draw interest, but the team probably doesn’t want to remove an as-advertised mid-rotation arm that was only acquired a couple months ago — even if he’s a free agent this winter. Martinez’s opt outs make him an unappealing trade candidate. Snell strikes the balance of track record, upside and also current expendability that could make a team bite, even if it’d be selling low for the Padres.

Where else could the Friars look to get creative, though? Righty Dinelson Lamet is currently pitching out of the bullpen in Triple-A while earning a $4.775MM salary. He was clobbered for 10 runs in 8 1/3 big league innings earlier this year and hasn’t been the same since returning from Tommy John surgery, but he’s a big arm who could potentially appeal to another club willing to take on some money. No one should expect him to replicate his otherworldly 2.09 ERA, 34.8% strikeout rate and 7.5% walk rate from the shortened 2020 season, but those numbers are illustrative of the talent Lamet possesses. Could they find a taker for an injured Drew Pomeranz, who’s in the third season of a four-year, $34MM contract? Again, it’d be selling low on an immensely talented arm.

Looking up and down the roster, the Padres may not love the idea of parting with Ha-Seong Kim, who has become a useful bench piece thanks to standout defense at three positions and a passable, if unexciting, .226/.311/.345 batting line (91 wRC+). But the former KBO superstar hasn’t yet lived up to expectations since signing a four-year, $28MM contract in free agency, and the associated $7MM luxury hit that comes with that deal is more significant for the Padres now than it was at the time of his signing. Once Tatis returns, Kim will likely see his playing time reduced considerably.

However it plays out, the Padres have a difficult road ahead as the trade deadline approaches. They’ll either need to convince trade partners to pay the salary of any upgrades they acquire (thus increasing the prospect cost to make those deals), finally succeed in dumping an onerous contract, or sell low on some pricey but valuable depth in a manner that could come back to haunt them.  The alternatives are to simply stand pat, hoping that the return of Tatis and some improvements from the likes of Snell, Myers and Hosmer will be sufficient upgrades — or to bite the bullet and cross over into luxury territory.