Padres Plan To Reduce Payroll To Around $200MM; Front Office Changes Possible

An Opening Day payroll of just under $249MM and some aggressive acquisitions of star players meant that the Padres were fully expecting a championship in 2023, but San Diego has instead posted only a 77-79 record, and the season’s final week begins with the Padres still in mathematical contention for a wild card slot by only the faintest of margins.  It has been an unusual season in many ways at Petco Park, as such analytical numbers as the Padres’ +91 run differential (the 10th best in baseball), their 7-22 record in one-run games, and unfathomable 0-12 mark in extra-innings games all suggest that the Padres might simply be one of the unluckiest clubs in recent memory.

However, the organization doesn’t seem to be writing off 2023 to just misfortune, as Kevin Acee of the San Diego Union-Tribune reports that the Padres are planning a different strategy for next season.  This includes “player commitments of around $200MM,” as Acee writes that the payroll cut is “in part because they are out of compliance with MLB regulations regarding their debt service ratio.”

Less spending isn’t necessarily a huge surprise, as the Friars have a lot of money coming off the books anyway in terms of pending free agents and several contractual options and may or may not be exercised.  However, what might count as eye-opening is the fact that president of baseball operations A.J. Preller might not necessarily be back, as “no decisions have been made regarding who will be running or helping to run the Padres’ baseball operations department beyond this season.”

Preller has been running the Padres’ front office since August 2014, a tenure that has consisted of an initial spending splurge for immediate success that didn’t pan out, followed by a rebuilding period, and then San Diego’s current state of sky-high spending.  The results have been mixed at best, as the Friars have posted winning records in only two of the last eight seasons and also might not reach the .500 mark this year.  The Padres’ two winning seasons under Preller (2020 and 2022) resulted in trips to the playoffs, with San Diego winning a series in the expanded 2020 bracket before falling to the Cardinals in the NLDS.  Last year’s playoff run saw the Padres eliminate both the Mets and the arch-rival Dodgers before eventually falling to the Phillies in the NLCS — San Diego’s first trip to baseball’s final four since 1998.

The inconsistency on the field could well be related to what’s happening behind the scenes.  Last week, The Athletic’s Ken Rosenthal and Dennis Lin published a fascinating look at the dysfunctional elements of the Padres organization, with plenty of criticism directed towards Preller.  As Rosenthal and Lin wrote, Preller’s “default setting of simply trying to outwork the competition, however, has not always sat well with managers, players, coaches and other team officials….Many also criticize him for poor communication and a lack of feel.”

This style of management (or micromanagement, in his critics’ view) might have resulted in the revolving door of managers and coaches during Preller’s tenure, and there is currently “a major disconnect” between Prelller and current Padres manager Bob Melvin.  This isn’t the only time that internal discord has been a public problem in San Diego, as the club’s collapse in the second half of the 2021 was largely attributed to a rift between the players and then-manager Jayce Tingler.

With such issues surfacing for a second time in three seasons, it could be that ownership has decided that a larger culture change if required, even if that means firing Preller with three years still remaining on his current contract.  Despite the Padres’ struggles this year, there had been more rumblings over Melvin being fired than Preller, especially after team chairman Peter Seidler gave Preller a full endorsement back in July.

However, Acee notes that “the path the team travels in many matters is currently be being charted by more people than usual, including members of Seidler Equity Partners,” as Seidler himself “remains involved but not nearly as intimately, as he recovers from a medical issue.”  It could be that the other members of the partnership group are less enamored with Preller than Seidler is, or it could be that Seidler (who is the largest single equity holder in the team) has decided himself that a change is necessary since the Padres simply never got things turned around this year.

The Padres’ payroll has exploded since Seidler took control of the club in 2020, and the chairman has been pretty forthright about his stance that increased spending will translate into consistent winning.  As such, a winning team and the subsequent higher national profile will lead to higher revenues — attendance, merchandise, TV ratings, etc. — that will help offset said spending.

How sustainable this tactic is over the long term has been a looming question in San Diego for the last two years, and the debt service issue Acee referenced could indicate that the Padres perhaps saw 2022-23 as their true all-in years before having to inevitably scale things back to some extent in 2024.  Falling so drastically in an “all in” year could be why Preller is now facing more scrutiny from upper management, and Acee also writes that missing out on the postseason cost the franchise at least an extra $10MM in playoff revenue.

Whomever is running the front office will have plenty of decisions to make, especially in regards to how to address this upcoming payroll cut.  Roster Resource projects that the Padres have just under $128.5MM on the books for 2024, though that doesn’t include the arbitration-eligible players — most notably Juan Soto, who made $23MM this year and will earn another hefty raise in his final arb year before free agency in the 2024-25 offseason.  Whether or not to trade Soto this winter, keep him for 2024 and let him walk in free agency, or try and retain Soto by adding another major long-term extension to the Padres’ ledger are the primary choices facing the team in regards to the star outfielder.

Trent Grisham and Tim Hill are two other arb-eligible players with far lower price tags than Soto, though Acee wonders if either could be non-tendered as the Friars look to cut costs.  Acee also notes that “it is virtually certain that” pending free agents Josh Hader and Blake Snell won’t be retained, and the Padres face other questions in regards to retaining either Nick Martinez and/or Michael Wacha on two-year, $32MM extensions.  Seth Lugo is likely also headed for the open market rather than exercise his $7.5MM player option for 2024.

Despite all of these portents of change, there doesn’t appear to be any shift in San Diego’s overall direction, or their desire to quickly return to contention in 2024.  None of the core group of Manny Machado, Fernando Tatis Jr., Xander Bogaerts, Yu Darvish, Ha-Seong Kim, Joe Musgrove, and others appear to be in danger of being traded, as their larger contracts should all be able to comfortably fit within the framework of a $200MM payroll.

However, while San Diego has plenty of roster needs to address, the payroll reduction could mean that the Padres won’t be nearly as aggressive in pursuing top-level free agents as they have in recent years.  Trading Soto would be one obvious way of unloading salary while still bringing back some (less expensive) win-now help for 2024, and the Padres might still be busy on the trade front rather than looking to splurge on the open market.  With all that awaits the Padres in what might be another newsworthy offseason, Preller’s fate might need to be decided relatively soon, so that a possible new PBO/GM can get moving quickly on winter plans.