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Projecting Payrolls: New York Yankees

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As we kick off the fifth installment of this series, here are links to the previous team payroll projections:

Philadelphia Phillies
Los Angeles Dodgers
Los Angeles Angels
Atlanta Braves

If you have questions about financial information made available to the public and the assumptions used in this series, please refer to the Phillies piece linked above.

Today, we’re moving north to visit with the once and future biggest spenders in the game: the New York Yankees.

Team Leadership

The ownership portion of this section likely needs very little explanation, but a bit of history is actually instructive. Going back to the end of World War II, The Yankees were owned by Lee MacPhail, Dan Topping, and Del Webb from 1945-64. The team failed to reach the World Series in 1945 and 1946, then, improbably, played in the Fall Classic in all but three of the remaining years of their ownership run. CBS then purchased a controlling stake in the team in 1964 and the Yankees failed to make the playoffs during all 10 campaigns of corporate ownership.

Then, the Boss arrived. George Steinbrenner led a group of investors in purchasing the Yankees in 1973 for an unfathomable $10 million. While the team has had minority owners since then, the Steinbrenner family has held the reins with George relinquishing control to his son Hal and his three siblings in 2008, two years prior to George’s passing.

The baseball operations department is headed by senior vice president and chairman Brian Cashman. Cashman took control of the baseball operations department in early 1998 and promptly saw the team make the World Series five times in his first six years at the helm, winning three championships in the process. Perhaps somewhat surprisingly, Cashman’s job security has rarely been at issue despite the fact that the Bronx Bombers have won just one World Series title since 2000 (2009).

Historical Payrolls

Before hitting the numbers, please recall that we use data from Cot’s Baseball Contracts, we’ll use average annual value (“AAV”) on historical deals but actual cash for 2019 and beyond, and deferrals will be reflected where appropriate. And, of course, the value of examining historical payrolls is twofold: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both. We’ll focus on a 15-year span for the Yankees, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership.

Fasten your seatbelts, the payroll figures are about to get gaudy.

The Yankees surprisingly began the 2000s with a payroll of just $107.6 million and that figure held true in 2001 at $112.3 million. Then the spending boon started in 2002 as the team increased payroll by $13.6 million, $26.8 million, $31.4 million, and $24.1 million in four consecutive offseasons causing payroll to soar to the 2005 starting point above of $208.3 million. Incredibly, payroll has been largely stagnant since 2005 with only modest dips and climbs over the next 12 years before a notable drop in 2018 that reset the Yankees luxury taxpayer status (more on that below).

The Yankees have been a model franchise when it comes to finding ways to use their financial might to improve their club on talent beyond the Major League roster. The best recent example of this spending acumen came in the international amateur market in 2014 when the Yankees zoomed past their bonus threshold to sign one third of the top-30 prospects that year. It is overwhelmingly likely that this bonanza spurred Major League Baseball to revisit and revise the international spending limitations in the next iteration of the Collective Bargaining Agreement. To read more about this spending spree, check out this piece on Baseball Prospectus from Dustin Palmateer. Needless to say, if there is a way to use the club’s financial might to create a competitive advantage, the Yankees have done and will do it, even if significant taxes are at issue.

Speaking of taxes: since Major League Baseball instituted its first version of a luxury tax in 1997 through 2017, teams paid approximately $548,155,916 in taxes. The Yankees paid $329,519,651 of that amount, accounting for 60.1 percent of total luxury tax payments. Truly astonishing. Keep in mind that these tax payments do not include the taxes paid for overspending in the international marketplace. Simply put, the Yankees will spend and spend big, not that this is news to anyone.

Future Liabilities

The Yankees entered the offseason with a truly bizarre contract table: they had no guaranteed contracts with one year remaining, instead holding multi-year guarantees only. The recent re-signings of CC Sabathia and Brett Gardner added a pair of contract year players to the payroll table. Here are the guaranteed future dollars with club options highlighted in peach and player options — in this case, opt-out clauses — are highlighted in light blue.

We’ll start with Stanton. It was an imperfect debut season for the former National League Most Valuable Player, but on the whole, Stanton delivered what was expected: a whole bunch of home runs. His contract comes with two deeply intriguing facets. First, the Yankees enjoy a significant luxury tax benefit as a result of the inexpensive early year guarantees on his deal when with the Marlins and financial help Miami will send to New York in the mid-2020s. The Yankees should seek out players for whom they can pay exorbitant amounts while enjoying relatively depressed luxury tax figures. Stanton’s $22.7 million annual luxury tax hit is on par with the likes of Justin Upton, not befitting an in-prime superstar. Second, the 2026-28 commitments are comparatively very small given the influx of money from the Marlins. Assuming that the Yankees exercise their option on him in 2028, they’ll be responsible for just $49 million over those three years. In the meantime, obviously, they’ll pay an MVP level rate.

The other commitments are for the team’s three most recent marquee free agent acquisitions: Tanaka, Ellsbury, and Chapman. The returns for those three have been all over the place. Despite some control issues this past season, Chapman has largely excelled since returning starting with the 2017 season. At the other end of the spectrum, Ellsbury enjoyed a good first year with the Yankees in 2014, but he provided below-average production in 2015-17 before missing all of 2018 with a hip injury. Tanaka has occupied the space between stars and scrubs. He looked like an ace in 2014 and again in 2016. In the middle, he struggled with an elbow injury and since 2016, he has been a slightly above-average starter but not the ace that the Yankees hoped he would become. His value isn’t poor by any stretch, but he’s being paid at almost exactly his market rate.

As for the arbitration projections, the Yankees figure to spend a good amount on controllable talent with less than six years of service time. The Yankees don’t appear to have any obvious non-tender candidates. Here are their arbitration projections (salary projections by MLBTR and Matt Swartz):

It’s likely Gray finds himself wearing a new uniform when 2019 kicks off, but the front office will nevertheless take pleasure in seeing both Paxton and Severino occupying only arbitration salary slots instead of monster eight-figure annual salaries.

There is one name that comes with oodles of intrigue: injured shortstop Didi Gregorius. Gregorius underwent Tommy John surgery on October 17, an operation that will keep him on the shelf for months. With a $12.4 million arbitration payday on the way, could the Yankees consider non-tendering him, especially if he won’t be available until late in the 2019 season?

I don’t see it. His middle infield partner, Gleyber Torres, underwent Tommy John surgery on June 19, 2017, but he was ready for Spring Training in 2018, participating fully and playing the entire 2018 regular season starting on Opening Day. Torres needed only about eight months to return to full participation, though it’s possible that he would have been ready even earlier. If Gregorius is ready to return in mid-June, he’s certainly worth his arbitration estimate. It’s also possible that the Yankees come to a multi-year agreement with him in lieu of playing out his final year in advance of free agency.

What Does Team Leadership Have to Say?

When asked about how the team will fill out its rotation holes early in November, Cashman unsurprisingly explained that the Yankees will take whatever path necessary to build a winning rotation. “I think we’ll just gravitate to anything that will make sense,” Cashman said. “It could be a combination; something could make sense via trade in the same category as free agency. I’m interested in adding more than one pitcher. I need to, I think, add multiple. If I can do so, we’ll see.” While commenting on his preference to remain south of the luxury tax line, Cashman admitted what we all already know: “…because of the market we’re in and the ownership we have I know that we’re capable of and it’s a decision they ultimately will make when they’re forced to make it…” Quite simply, Cashman has openly admitted that big spending is a viable option, even if he publicly states a desire to avoid doing so.

Are the Yankees a Player for Bryce Harper or Manny Machado?

Yes.

We could spend a long time explaining why this is viable for the Yankees, but for a team with revenue estimated at $619 million as of 2017, it probably doesn’t require much in-depth examination to see how this works financially.

The more interesting question with the Yankees involves the fit of these two young stars. Incredibly, the Yankees’ top seven players by WAR in 2018 were four outfielders (Aaron Judge, Aaron Hicks, Stanton, and Gardner), two shortstops (Gregorius and Torres), and a third baseman (Miguel Andujar). Judge, Hicks, Gregorius, and Stanton all produced at star-level rates.

That said, it’s not terribly difficult to see the fit for Machado. Andujar’s rookie year defensive metrics were putrid. He could justifiably be moved to first base and/or designated hitter, or traded, opening up third base for Machado. Shortstop will be open to begin the season with Gregorius recovering from surgery and Torres also comes with Tommy John in his background, so Machado would be a safer bet to hold the spot defensively into the future, especially with Gregorius an impending free agent. Machado could easily cover shortstop or third base with minimal roster revisions.

But Harper? The Yankees would need to kick Harper to center field, enforcing a massive defensive downgrade for their outfield, move one of Judge, Stanton, or Harper to designated hitter, or trade one of their current corner outfield stars to clear a spot for Harper. Or they could do something even more surprising like moving one of Judge, Stanton, or Harper to first base, a risky defensive move.

I’m sure that Cashman would find a way for this to work. But the Harper fit is clearly tougher.

What Will the 2019 Payroll Be?

The standard disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

The Yankees’ payroll is going to go up. The only question is whether they sneak over the $200 million threshold or if they blow past it.

Assuming that Gray is gone but that Gregorius stays at his arbitration salary, the Yankees are staring at a cash payroll of $152.2 million with a luxury tax payroll of $164.9 million. There’s absolutely no chance that they’ll end the offseason with payroll figures that low.

They’re going to be major players for the elite free agents with cash, prestige, and a young core of premium talent to offer any players looking for a new fortune and a ring or two to go along with it…and that’s before we factor in that the Red Sox have won four World Series titles over the last 15 years while the Yankees have just one flag. Given their need for pitching, expect to hear plenty of Patrick Corbin, Dallas Keuchel, and J.A. Happ rumors, even after the acquisition of Paxton. And expect to hear Harper and Machado linked to the Bombers until the day they sign, be it in New York or elsewhere.

I could see them marrying Cashman’s desire to stay below the luxury tax line with a couple of impact additions, setting payroll above the $206 million tax line but below the maximum penalty threshold of $246 million. As a refresher, the Yankees will incur a 20 percent tax on amounts spent over $206 million and a 12 percent surtax on amounts over $226 million. Once spending reaches $246 million, the tax rate is 42.5 percent and the club would see its top draft selection lowered ten spots. Those penalties are tough to swallow.

I expect that the club will begin the 2019 season either in the first tax tier or narrowly into the second tax tier in order to maintain some flexibility for in-season acquisitions and to stay safely below that $246 million threshold. This will bring spending back in line with where it has been for much of the past decade and a half.

Projected 2019 Payroll: $220 million cash (approximately $232.7 million for luxury tax purposes)

Projected 2019 Payroll Space: $67.8 million

Projecting Payrolls: Atlanta Braves

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As we kick off the fourth installment of this series, here are links to the previous team payroll projections:

Philadelphia Phillies
Los Angeles Dodgers
Los Angeles Angels

If you have questions about financial information made available to the public and the assumptions used in this series, please refer to the Phillies piece linked above.

Today, we’re heading back to the National League East to examine the payroll situation of a burgeoning juggernaut: the Atlanta Braves.

Team Leadership

While most baseball franchises are now owned by families or groups of them, the Braves have been owned by corporate entities since 1996. Time Warner purchased the club, along with TBS, from Ted Turner and Turner Broadcasting in 1996, then sold the club in 2007 to Liberty Media Corp., the current owner, as part of a convoluted transaction involving billions of dollars worth of assets. The human face of ownership is that of chairman Terry McGuirk, a lifer at Time Warner.

The baseball operations department is headed by executive vice president and chairman Alex Anthopoulos. After serving as general manager of the Blue Jays from 2010-15, Anthopoulos turned down a five-year extension from the club to remain in his current role, instead spending two years as a vice president with the Dodgers. The arrival of new president Mark Shapiro reportedly played a significant role in his decision to leave Toronto. In the end, Anthopoulos found his way to a superior situation, taking over the Braves front office just over one year ago and inheriting a loaded farm system outside of the rigors of the wildly competitive American League East.

Historical Payrolls

Before hitting the numbers, please recall that we use data from Cot’s Baseball Contracts, we’ll use average annual value (“AAV”) on historical deals but actual cash for 2019 and beyond, and deferrals will be reflected where appropriate. And, of course, the value of examining historical payrolls is twofold: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both. We’ll focus on a 15-year span for the Braves, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership.

Using this time frame for the Braves captures the end of Turner’s ownership period, a spending downfall from the peak of $106.2 million in 2003. Braves spending was remarkably consistent from 2005-16 before a notable jump in 2017. Here is what the Braves have spent in the prior 14 seasons:

After spending like a top-10 club for much of Turner’s ownership, the Braves have spent like a mid-market team throughout Liberty’s ownership, never ranking higher than 13th or lower than 22nd in end-of-season payroll.

Atlanta’s spending hasn’t been limited to Major League talent by any stretch. In fact, their penchant for swimming in the international amateur market got them into deep trouble and helped propel Anthopoulos to the general manager’s job. The Braves infamously split the signing bonuses paid to top amateurs between the the elite prospects and lesser “foreign professionals” for whom bonuses were exempt from international signing restrictions. This enabled the team to funnel additional money to top amateurs without being forced to incur stringent tax liabilities. Unfortunately for the club, when their deceit was uncovered by Major League Baseball, it resulted in the exodus of many top amateurs, including elite target Kevin Maitan, and much of the club’s leadership, including president John Hart and general manager John Coppolella. The Braves will be significantly restricted from signing expensive international amateurs in the next two summers, so they’ll paradoxically have more cash available for spending on Major League talent should they choose to allocate the unspent funds in that way.

Future Liabilities

The Braves have truly remarkably little on the books in terms of long-term commitments. Organizational stalwart Freddie Freeman has three years remaining on his deal and defensive wizard Ender Inciarte has three years plus an inexpensive club option for a fourth. That’s it for guaranteed money beyond 2019…at least, that’s it for current players. Here is a look at their future guarantees with the peach highlight indicative of 2020 club options for Julio Teheran and Tyler Flowers.  Note that the numbers shown on here are cash payments by year, not the salary plus the prorated amount of any bonus. The AAV column captures the player’s luxury tax number.

The top portion of this chart is relatively straightforward: the Braves have long-term commitments for Freeman and Inciarte and one-year commitments for Teheran, O’Day, and Flowers, unless they want more for Teheran or Flowers via the options.

The bottom portion? The bottom portion carries the intrigue. We’ll start with O’Day, the simpler case study. When the Braves acquired starter Kevin Gausman at the trade deadline, they also agreed to absorb the remaining contract for injured reliever Darren O’Day as a means of limiting the talent package they sent to Baltimore (this should make Braves fans happy and Orioles fans sad). O’Day’s contract called for $1 million each year from 2016-19 to be deferred, payable in equal installments from 2020-23. Perhaps as a sign of how desperate the Orioles were to move payroll, the Braves agreed to absorb the deferred obligations owed to O’Day, even those incurred from money deferred in earlier seasons. As a result, the Braves owe O’Day $1 million for each year of O’Day’s contract, including the time he spent in Baltimore in 2016, 2017, and 2018.

Sutter is an entirely different matter. The Braves signed Sutter to a six-year, $9.1 million deal prior to the 1985 season when Sutter was coming off of a top-10 finish in Most Valuable Player voting having just completed a return to star status after a couple of rocky seasons. With Atlanta, Sutter produced a whopping 0 WAR while sputtering out after three seasons. However, that’s not the source of intrigue. That comes from the extremely unique structure of Sutter’s contract which called for minimal annual payments and massive deferrals, paying Sutter $1.12 million per year for 30 years after he retired. Mercifully for the Braves, Sutter will collect his final annual payment in 2021. Unmercifully for the Braves, Sutter collects the entire $9.1 million principal that year as well. His $10.22 million payment in 2021 may very well rival Mike Foltynewicz for the second largest payout on the team. If the Braves already have Sutter’s balloon payment tucked away and ready for payment in 2021, this is merely a goofy historical anecdote. If, however, the Braves need to come up with the balloon payment, it may have a meaningful impact on the 2021 roster and the team’s willingness to commit future dollars this offseason.

With Sutter out of the way, let’s move to the arbitration projections. Outfielder Adam Duvall and reliever Sam Freeman both appear to be non-tender candidates, but for now, both are included below (salary projections by MLBTR and Matt Swartz):

Gausman, Foltynewicz, and Vizcaino all figure to occupy significant chunks of payroll, but all three pitchers are important to the 2019 Braves, so they provide nice value to the contending team.

What Does Team Leadership Have to Say?

Anthopoulos was surprisingly forthcoming when discussing Atlanta’s spending plans, telling reporters, “We will have a good amount of money to work with.” This likely doesn’t surprise anyone. The Braves have been a picture of consistency with their spending over the past decade, so it would be stunning to see payroll plummet or explode this offseason.

However, the color that Anthopoulos added to his basic comment provides significantly greater insight: “We’re not going to just walk in the store and buy because we have money in our pockets. If we don’t find the right deal with something we like, there’s still other opportunities to shop. There could be opportunities next season. If you start signing guys to big, long deals, if you feel good about the deal, you do it now. I wouldn’t force a deal right now that would limit you in years from now. I don’t think with our club, with what we have, that the value is going to be there in the free-agent market. It doesn’t mean it won’t. We’ll certainly explore it. But if I could sit here in the middle of October, I’d say it’s more likely we go the trade route. It’s not ideal to give up young assets, but it’s also not ideal to do a deal you don’t believe in — that may look good for a year or two, and then in years three, four and five, it does not.”

Are the Braves a Player for Bryce Harper or Manny Machado?

It’s entirely possible that some of the above was merely posturing on the part of Anthopoulos as the Braves prepare a foray into the depths of free agency. But given the club’s hesitance to spend at top-of-the-market rates in the past, I would expect that Atlanta’s free agent targets won’t reach the Harper/Machado tier.

However, that said, Atlanta’s salary flexibility and ludicrous hoard of prospect arms ready to fill the Major League rotation for the next half decade or longer mean that the Braves can afford to take a massive swing and miss without crippling the franchise for years. So few teams have such a luxury. As a result, they should be considered a sneaky contender to spend big dollars, especially for Harper as the Braves would likely love to put him in the outfield with Ronald Acuna Jr. and Inciarte. Machado makes a bit less sense given the presence of Ozzie Albies, Dansby Swanson, and well-rounded top prospect Austin Riley, but the money is there. There’s just a chasm of disconnect between the figures on paper and the words of the general manager.

What Will the 2019 Payroll Be?

The standard disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

The Braves’ payroll has been quite consistent over the years, and given their historical trajectory and current revenue streams, I’d expect for them to at least comfortably plod along with methodical increases. That might mean something like $130 million in 2019.

However, last year’s club blew open the competitive window. As a result, I foresee a slightly larger increase this year than expected. As a result, they’re likely going to make a significant expensive addition or two. A reunion with Craig Kimbrel makes an awful lot of sense.

Projected 2019 Payroll: $135 million

Projected 2019 Payroll Space: $50.6 million

Projecting Payrolls: Los Angeles Angels

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In the opening piece in this series, we looked at the Philadelphia Phillies, a team almost certain to be a major player in this winter’s free agent market. Next we traveled to southern California to see if the deep pockets of the Los Angeles Dodgers would make them a major player this winter. Once again, in addition to being a fun look at a key market participant, the Phillies piece also sets forth some key assumptions to be used in this series regarding financial information available to the public.

Today, we head 30 miles southeast to Anaheim to check in on an Angels team still seeking to win its first playoff game during Mike Trout’s historic career.

Team Leadership

Unlike the rival Dodgers, Angels ownership has been a pillar of stability since advertising magnate Arte Moreno purchased the club in April 2003. Moreno is perhaps best known for embarking on an aggressive marketing strategy after taking control, rebranding a club that had been known as the California or Anaheim Angels since 1965 as the Los Angeles Angels of Anaheim. After carrying that name for a decade and surviving lawsuits from the City of Anaheim regarding the rebranding, the club finally reverted to its original name in 2016: the Los Angeles Angels.

It’s difficult to argue with the results. While Moreno purchased the team for $180 million in 2003, Forbes projected that team value had increased tenfold in the 15 years that followed, reaching $1.8 billion as of April 2018.

The baseball side of the operation is headed by a model of persistence, general manager Billy Eppler. While working as assistant general manager under Brian Cashman with the Yankees, Eppler interviewed for the Angels general manager job in 2011, losing out to Jerry Dipoto. However, when Dipoto resigned during the 2015 season due to a rift with manager Mike Scioscia, Eppler leaped at the opportunity to return home to Southern California and secured the Angels job.

Historical Payrolls

Before hitting the numbers, please recall that we use data from Cot’s Baseball Contracts, we’ll use average annual value (“AAV”) on historical deals but actual cash for 2019 and beyond, and deferrals will be reflected where appropriate. And, of course, the value of examining historical payrolls is twofold: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both. We’ll focus on a 15-year span for the Angels, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership.

Using this time frame works well for the Angels as it captures nearly all of Moreno’s run of ownership. After years of spending like a mid-market club, Moreno boosted the Angels to top-10 spending during his first full season in 2004 and they have remained there ever since. Here is what the Angels have spent in the prior 14 seasons:

Angels spending spiked dramatically under Moreno’s first decade of ownership, more than doubling the spending levels employed by the Walt Disney Company during their brief period of ownership prior to Moreno. However, after reaching $151.4 million in 2012, the spending rate has largely plateaued with remarkable consistency over the last three seasons.

The Angels have largely eschewed massive commitments in the amateur sphere. This is likely due in large part to the club being burned on their $8 million deal with Cuban infielder Roberto Baldoquin. Signed in January 2015, the 24-year-old Baldoquin has a putrid wRC+ of 72 for his minor league career. He is yet to reach Triple-A, let alone the Major Leagues. Yet because of the size of the signing bonus that the team gave Baldoquin, the Angels found themselves in the international amateur penalty box for the next two signing cycles, severely limiting their ability to swim with the big fish internationally. Accordingly, their Major League spending is an excellent indicator of total spending.

Future Liabilities

Unlike some other big-market clubs that have handed out significant dollars while retaining salary sheet flexibility, the Angels are largely wedded to their big contracts with five eight-figure AAV contracts extending through at least 2020.

Here is a look at their future guarantees with the peach highlight indicative of a club option for Kole Calhoun.  As mentioned above, note that the numbers shown on here are cash payments by year, not the salary plus the prorated amount of any bonus. The AAV column captures the player’s luxury tax number.

There are some seriously significant numbers here. While it should start with the all-world Trout, we instead begin with the final three years on what quickly became an albatross deal for Albert Pujols. The Angels now owe Pujols “just” $87 million for his final three seasons, pushing them closer to a time in which his contract won’t all-but-guarantee him significant playing time. Perhaps the need to use Shohei Ohtani as a designated hitter in his return from elbow surgery will push Pujols toward more time on the bench, where he should be at this stage in his career. Unfortunately, the payments to Pujols won’t stop just because he stops playing: Pujols will receive a 10-year, $10 million personal services contract following the completion of his career. I presume that he will retire following his 2021 guarantee.

The other two numbers that jump off the page are the commitments to outfielders Trout and Justin Upton. Both players provided the Angels with good production in 2018 — OK, Trout was a hair better than “good” — so it comes as no surprise that they top the payroll spreadsheet. Both talents figure to occupy core lineup locations throughout their deals.

A pair of infielders follow as Andrelton Simmons and his elite glove come with two more years of below-market control while Zack Cozart will look to rebound after a rough debut season in Anaheim. Neither guarantee is terribly significant, and if the Angels need to move money at some point, I expect that Cozart would be a good starting point.

Finally, we reach Calhoun. The right fielder followed three consecutive above-average seasons from 2014-16 with a solid year in 2017 before slipping all the way to replacement level in 2018. If the Angels find themselves wanting to move salary to make another acquisition, Calhoun would seem to be a logical candidate to find a new home. Ken Rosenthal hears the same.

Moving to arbitration, the Angels feature only modest and even genuinely low projected salaries. Factor in that Matt Shoemaker may be non-tendered, and the Angels figure to allot a comparatively small amount of their total payroll to arbitration-eligible talent. Here are the arbitration statuses (salary projections by MLBTR and Matt Swartz):

In addition to Shoemaker, JC Ramirez is a possible non-tender candidate. It’s also possible the pitchers agree to contracts south of what arbitration would be expected to provide.

What Does Team Leadership Have to Say?

Simply put, neither Moreno nor Eppler has had much to say recently about spending, so we find ourselves looking to prior offseasons for guidance. Last winter, Moreno commented that the Angels lost money in 2016 and 2017, yet it didn’t stop him from authorizing a similar payroll in 2018. He hasn’t imposed any austerity measures during his ownership tenure, so that jives well with what he said last year.

Are the Angels a Player for Bryce Harper or Manny Machado?

As fun as it would be to see Harper and Trout share the outfield or to see Machado and Simmons vacuum up every ball hit to the left side of the infield, it’s tough to see a fit for either young star here. A look through the Angels roster shows some strong position player talent and a handful of good, youngish starting pitchers. Unfortunately, the best starting pitching in question — Andrew Heaney, Tyler Skaggs, and Shohei Ohtani — all come with significant current and/or recent injuries. Los Angeles does have young righty Jaime Barria around, but he looks more like a good back-end option than an impact starter for a contender. Expect to see the Angels focus their spending efforts on an arm or two.

What Will the 2019 Payroll Be?

The standard disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

The Angels’ payroll has been remarkably consistent over the years. Despite Moreno’s spending increases during his ownership tenure, they have all been of the gradual variety with the sole considerable jump that was unaccompanied by a corresponding dip in the prior year occurring in 2011 when spending spiked $20.7 million in one year as a result of the Vernon Wells acquisition.

With all of that said…

Moreno is the one current owner in Major League Baseball who appears likely to go the way of Mike Ilitch, incurring significant losses to keep his team in contention each year as he ages. Moreno purchased the club shortly after their sole World Series title in 2002, so he is yet to hoist a trophy as owner. To be clear: this is baseless speculation. As far as I can tell, no writers or front office folks have leaked information indicating that Moreno plans to break the bank this winter. But would I be stunned if Moreno authorized a $200 million payroll so he could pair Harper and Trout together for the next two years before allowing both to leave via free agency for Trout and an opt-out clause for Harper? Absolutely not. And in that scenario, the Angels would jettison Calhoun, minimizing the payroll impact of Harper’s addition.

It’s still more likely that the Angels focus on pitching acquisitions this winter — Dallas Keuchel and Patrick Corbin make sense as targets — but if payroll hits $200 million, they would have room for both Harper/Machado and the needed pitching. For now, let’s assume they non-tender Shoemaker and Ramirez but hold onto Calhoun as a bounceback candidate.

Projected 2019 Payroll: $175 million

Projected 2019 Payroll Space: $36.6 million

Projecting Payrolls: Los Angeles Dodgers

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In the opening piece in this series, we looked at the Philadelphia Phillies, a team almost certain to be a major player in this winter’s free agent market. In addition to being a fun look at a key market participant, that piece also sets forth some key assumptions to be used in this series regarding financial information available to the public.

With Philadelphia in our rear view mirror, we turn our attention to the biggest spender in recent years: the Los Angeles Dodgers.

Team Leadership

Despite being a marquee franchise, the Dodgers found themselves embroiled in a quagmire during much of the last decade, with Frank McCourt’s tumultuous ownership ending with a bankruptcy sale to Guggenheim Partners in 2012. Guggenheim — consisting of Mark Walter, Magic Johnson, Stan Kasten, Peter Guber, Bobby Patton, and Todd Boehly — added Billie Jean King and Ilana Kloss as minority owners in 2018, comprising the current group. As is well known, they have spent aggressively throughout their ownership, fueled in large part by an $8.3 billion, 25-year television rights deal with Time Warner.

After directing a run of success in Tampa Bay, Andrew Friedman joined the Dodgers as President of Baseball Operations on a lucrative five-year, $35 million deal after the 2014 season. Despite that massive contract, this is actually a time of some uncertainty with the front office. Friedman named Farhan Zaidi his general manager shortly after taking over in 2014, but Zaidi left to run the rival Giants earlier this month. It is also worth noting that the Dodgers have yet to guarantee an outside free agent even $50 million during Friedman’s tenure.

Historical Payrolls

Before hitting the numbers, please recall that we use data from Cot’s Baseball Contracts, we’ll use average annual value (“AAV”) on historical deals but actual cash for 2019 and beyond, and deferrals will be reflected where appropriate. And, of course, the value of examining historical payrolls is twofold: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both.

As with the Phillies, we’ll focus on a 15-year span for the Dodgers, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership. With the Dodgers, this captures nearly the entirety of the McCourt years and all of Guggenheim’s free spending ways. Here is what the Dodgers have spent in the prior 14 seasons:

The Dodgers payroll story tracks the story of their ownership changes remarkably well. In the mid-2000s, McCourt increased spending to build a winner before corralling expenditures as his divorce from ex-wife Jamie and the effects of purchasing the team with so much debt caught up with him. Then the Guggenheim folks showed up and blew the top off of what most of us thought was the ceiling for spending outside of the Bronx. Importantly, the figures above do not include luxury tax payments, meaning that Dodgers spending was actually notably higher over that span thanks to the taxes that accompanied their lavish spending.

Unlike Philadelphia, the Dodgers were substantial players in the Latin American amateur market before Major League Baseball imposed significant spending restrictions, handing out substantial deals to the likes of Yadier Alvarez, Yusniel Diaz, Omar Estevez, and Erisbel Arruebarrena. In the end, as gaudy as the Major League spending figures were, amateur spending added a significant amount to overall expenditures reflected above, at least during the Guggenheim period of ownership.

Future Liabilities

For a team known for its massive spending habits, the Dodgers have surprisingly little in the way of long-term guarantees, especially when compared to other big spenders in major markets competing for the World Series each year.

Here is a look at their future guarantees with the powder blue highlight indicative of a player option — in the case of Kenley Jansen, this is an opt-out prior to the 2020 season.  As mentioned above, note that the numbers shown on here are cash payments by year, not the salary plus the prorated amount of any bonus. The AAV column captures the player’s luxury tax number.

The Dodgers’ new deal with Clayton Kershaw gives them an ace on a reasonably short-term deal. While the annual financial commitment is high, the Dodgers must have been pleased to keep the term so modest.

Beyond Hill, their salary sheet is loaded with short-term commitments until we hit Maeda. Maeda’s contract is heavily incentive driven. Maeda receives $3 million annually, then receives the following incentives:

  1. $0.15 million for making Opening Day roster
  2. $1 million for each of 15 and 20 starts, then $1.5 million for each of 25, 30, and 32 starts
  3. $0.25 million for each of 90, 100, 110, 120, 130, 140, 150, 160, 170, 180, and 190 innings pitched, then $0.75 million for 200 innings pitched

It is an extraordinarily team-friendly pact, one that has played out handsomely for Los Angeles. From a budgetary standpoint, however, it does present plenty of uncertainty.

At the bottom of the chart, we see two lines with hefty numbers but no tax component. First, we see the remaining half of the $48 million owed to Scott Kazmir from his three-year deal covering the 2016-18 seasons. Instead of receiving $16 million per year or something close to it, Kazmir received $8 million annually for six years. As such, he will receive his $8 million annual payouts in 2019-21, but those cash receipts won’t count against the Dodgers’ luxury tax figure. Cuban pitcher Yaisel Sierra obtained a substantial guarantee from the Dodgers, but he is yet to pass Double-A and didn’t record an inning in affiliated ball in 2018. Because L.A. removed him from their 40-man roster (under a rule that has now been amended), his significant cash guarantees do not count against the luxury tax figure for the Dodgers either.

Moving to arbitration, the Dodgers feature a pair of massive paydays for pending free agents in Yasiel Puig and Alex Wood. On the other hand, they appear to have “lucked” into artificially deflated arbitration pay rates for shortstop Corey Seager due to a poorly timed injury in his platform year. Here are the arbitration statuses (salary projections by MLBTR and Matt Swartz):

The Dodgers have a number of key contributions controlled via arbitration, but as is the case with most teams, there are some players here who stand a good chance of being non-tendered. From this viewpoint, it looks like Koehler, Garcia, and Rosscup will likely get the boot. Regardless of what happens with that trio, only a couple of million dollars in savings are there to be found.

What Does Team Leadership Have to Say?

This is where things get interesting. Really interesting. Last week, the Bill Shaikin of the Los Angeles Times got hold of a document prepared by the Dodgers before the 2017 postseason for potential investors indicating that the club intended to stay below the luxury tax threshold each year from 2019-22. This would be a striking shift from the free-spending club. The document pegged future payrolls roughly $5 million south of the luxury tax threshold in each season once player benefits are factored in, as they are for luxury tax purposes, projecting payroll at $185 million in 2019 and 2020, $191 million in 2021, and $196 million in 2022.

Will such a spending restriction come to fruition? Your guess is as good as mine. It’s worth stressing that the document was prepared before the 2017 postseason and that Shaikin cited a team official as saying that he would be “shocked” if the payroll stayed below $200 million in 2019. The team’s plans might have changed in the last 13 months, especially after back-to-back World Series losses. But one significant data point out there regarding Dodgers spending in 2019 suggests that the 2018 payroll will be far more predictive of spending in 2019 and beyond than were the payrolls from 2013-17.

Are the Dodgers a Player for Bryce Harper or Manny Machado?

Simply put, this depends on how you feel about the two preceding paragraphs. If the Dodgers haven’t altered their plans since that document was prepared, it’s difficult to see them making a serious push for either player. If the Dodgers were merely posturing with the leaked document or setting forth an aspirational threshold that they don’t actually expect to hit, Harper or Machado is surely in play as the franchise continues to be flush with cash as they chase a World Series title that has proved elusive. (Those same leaked projections also predicted significant revenue increases.)

What Will the 2019 Payroll Be?

The standard disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

Whereas the Phillies will clearly spend and spend big, the Dodgers enter this offseason as a wild card. They have enough talent on the Major League roster and in the upper levels on the farm to expect another excellent season in 2019 without marquee additions this winter. They lack an obvious hole — provided, at least, that the Dodgers believe in Matt Kemp’s 2018 resurgence. Of course, even if they don’t buy into Kemp repeating his surprising success, Alex Verdugo is likely ready to jump to the big club to take his job.

If the Dodgers are serious about capping their spending south of the tax line, they won’t make a big move. Even removing Koehler, Garcia, and Rosscup, the Dodgers are projected to spend $196.5 million including the hits for Kazmir, Sierra, and Toscano. Removing that trio, they are still at $184.3 million. There just isn’t enough payroll space to make a splash. If, on the other hand, the Dodgers get serious about Harper, they could create enough financial wiggle room to sign him by upping payroll by a few million dollars, shipping out Puig, and trading one of their lefty starters: Wood, Rich Hill, or Hyun-Jin Ryu. Friedman would likely be able to find a market for his moderate-sized contracts should he elect to go that route, though Ryu would have to approve any deal before June 15th of 2019 since he accepted a qualifying offer and is therefore treated like a signing free agent.

While it seems crazy to think that they’ll actually hold tight to their purse strings, the presence of impact talent on the farm and a strong Major League roster lends credence to the idea that L.A. could roll into 2019 with their core largely intact from 2018, allowing Machado to leave in free agency after a mercenary visit while passing on the chance to bring Harper back to the Southwest. Crazier things have happened.

We’ll find out if I’m a chump for believing this in the coming weeks.

Projected 2019 Payroll: $195 million

Projected 2019 Payroll Space: -$1.5 million

Projecting Payrolls: Philadelphia Phillies

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I’m ecstatic to join the MLBTR team to offer insight on an essential topic in the baseball world, especially this time of year: team payrolls. We’ll be combing through the league this winter, focusing first on the teams that figure to be the biggest players in the free agent marketplace.

There’s no better place to start than Philadelphia.

Team Leadership

The Phillies have one of the more complicated ownership structures in the league. Current managing partner John Middleton first purchased an ownership stake in the team in 1994, acquiring additional interests in the club over time until finally reaching a plurality 48% interest, becoming manager partner in 2015. The Buck family owns the other plurality 48% interest via their Tri-Play group. Despite the fact that Middleton has been managing partner for only four years, his longtime involvement with the club as well as that of the Buck family provides solid continuity.

The front office is headed by longtime baseball man and team president, Andy MacPhail, the prior president of the Orioles and former general manager for the Cubs and Twins. Current general manager Matt Klentak enters his fourth season at the helm, still searching for his first winning season and Philadelphia’s first winning season since the 2011 club blitzed its way to 102 regular season victories. While Klentak appears to have strong support from ownership, the fourth year of a rebuild is traditionally moving time: if it’s going to work, the wins need to show up and in a big way.

Historical Payrolls

Before digging into Phillies specifics, here are a few general notes when looking at historical data:

  1. Generally speaking, we’ll be using the data from Cot’s Baseball Contracts, maintained by Baseball Prospectus, for our historical data.
  2. Because the data comes from Cot’s and not from a meticulously detailed historical record of internal, proprietary information maintained by individual teams, the figures cited here will tend to be annual salaries plus prorated bonus amounts for each year. This is not how most Major League free agency contracts pay out: the various bonuses paid to players are often paid at specified times and not ratably over the course of deals. Nevertheless, using the data from Cot’s will help provide a strong estimate.
  3. Deferrals are difficult to capture. For example, the Nationals owe Max Scherzer a $35 million salary in 2019…but they won’t pay him a penny of his base salary for 2019 until 2022 (he does receive a $15 million portion of his signing bonus next year). Because of the difficulty in capturing deferrals, I’ll use something of an arbitrary cutoff, only factoring them into the numbers when they figure to have a significant impact on team spending, as is the case with the Nationals and Orioles, for example, given a bevy of deferred obligations, but as is likely not the case with the Rockies who owe only a relatively small amount to Todd Helton into the future.
  4. There are two primary considerations in examining historical payrolls: they show us either what type of payroll a team’s market can support or how significantly a given ownership group is willing to spend. In the most useful cases, they show us both.

With those housekeeping items out of the way, let’s dig in on what the Phillies have actually done in recent years.

Defining “recent” can be tricky. Changes in ownership, competitive windows, and market forces can yield wildly different payrolls over time. As a result, we’ll focus on a 15-year span in this series, covering 2005-18 for historical data as a means to understanding year 15: 2019. We’ll also use Opening Day payrolls as those better approximate expected spending by ownership. Here is what the Phillies have spent in the prior 14 seasons:

The Phillies payroll history tells a compelling and clean history of the club over the past decade and a half. They emerged in the mid-2000s as a young team supplemented by some expensive veterans, got extraordinarily expensive at the end of the 2000s and beginning of the 2010s as the core reached its peak earning years, endured some bloated payrolls despite meager win totals as the 2010s went on, and kept payroll to a minimum as a rebuild began. The Phillies carried a top-six leaguewide payroll each year from 2009-14 before tumbling to be among the 10 lowest payrolls in each of the past three seasons, a truly remarkable swing.

Philadelphia has not been a franchise to push the boundaries in the amateur market either, eschewing the big-bonus deals given to the likes of Latino amateurs Yoan Moncada (Red Sox) and Yadier Alvarez (Dodgers), among many others, by other big-market ball clubs. As such, the Major League payroll is a strong indication of true spending capacity for the team.

Future Liabilities

Some teams are loaded up with future guaranteed money, significantly hampering their ability to commit significant dollars to free agent targets. We’ll address teams like the Cubs and Rockies later in this series.

Other teams find themselves with barren future guarantees. We’ll spend time discussing the Twins and White Sox later as well.

The Phillies find themselves largely in the middle space of teams with regard to future commitments. Here is a look at their future guarantees with the powder blue highlight indicative of a player option whereas the peach indicates a club option. Note that the numbers shown on here are cash payments by year, not the salary plus the prorated amount of any bonus.

The future commitments are not exactly staggering. We’ll start at the bottom of the list. Kendrick’s $5 million in 2019 is the only deferral on Philadelphia’s chart, and it obviously shouldn’t impact future spending. Kingery’s extension basically guarantees him salaries commensurate with that of an above-average regular throughout what would have been his arbitration years with the 2024-26 options reflecting discounts over free agent salaries for a similarly effective player. If he turns out to be dead weight going forward (unlikely), the commitment remains relatively meager: $21.75 million through 2023, including the $1 million buyout of his 2024 option. That’s not breaking the bank and could provide strong value. Herrera is quite similar, just a few years further along the way; Herrera also figures to bounce back from poor BABIP luck in 2018, a year in which his defense also failed the metrics for the first time. Hunter and Neshek provide short-term guarantees with Neshek’s option in 2020 serving solely as a value play with minimal downside.

Instead, the big numbers to focus on here are Santana and Arrieta. Because Santana’s contract featured a significant signing bonus ($10 million), his future guarantee is both closer to approximating his actual value than it otherwise would be and easier to fit into a ballooning payroll, should that be the case. Nevertheless, Ken Rosenthal of The Athletic recently reported that the Phillies are aggressively shopping Santana, hoping to move his salary while opening up a defensive home for young (and cheap) slugger Rhys Hoskins.

Arrieta, on the other hand, has a contract structure that functions as a real wild card thanks to its unique language and Arrieta’s recent production. Arrieta earned $30 million in 2018, he gets $25 million in 2019, and then the chaos begins. Arrieta may opt out of his contract following the 2019 season, forfeiting a $20 million guarantee in the process. However, the Phillies may preempt the opt-out clause by exercising their club option on a two-year, $40 million extension covering 2021-22, Arrieta’s age-35 and age-36 seasons. The club option years may increase to a total of $50 million based on Arrieta hitting an unknown innings pitched threshold over 2018-19*, but that number is likely to be quite high meaning that Arrieta’s 172 2/3 innings from 2018 likely foreclosed the possibility of hitting that escalator.

*=Editor’s Note: MLBTR has since learned that the escalators are based on games started as opposed to innings pitched. By starting 31 games in 2018, Arrieta has boosted the base salary in both club option seasons by $2.5MM apiece, making the combined value of those seasons $45MM. He’d boost each by $1MM with 28 starts in 2019, plus another $500K each for starts 29, 30 and 31.

The Arrieta decision appears fascinating for both player and club. Arrieta is projected for another season of being a roughly league-average starting pitcher who throws about 180 innings. If he performs at such a rate, he has a strong incentive to opt out of his contract as the market will likely yield something in the neighborhood of $40-50 million on a multi-year guarantee for that production. On the other hand, the Phillies have an incentive to keep him around for that production but it isn’t so strong as to risk buying Arrieta’s mid-30s at the rate of $60 million over three years. Unless Arrieta erupts for another Cy Young-caliber season or melts down due to injury or ineffectiveness in 2019, the parties appear headed for a November 2019 staredown regarding their respective decisions.

Nevertheless, among the names listed above, the Phillies won’t be hamstrung due to their future guarantees.

Moving to arbitration, the Phillies feature some significant likely expenditures, particularly as ace Aaron Nola and slugging third baseman Maikel Franco age through raises. Franco may represent a tough non-tender decision in future years if he continues to struggle getting on base, but for now, he has age, power, and pedigree on his side, justifying his $5.1 million figure.

It is overwhelmingly likely that Bour is non-tendered or traded given the presence of Santana and Hoskins. Altherr and Garcia could also be non-tendered, though taking them out of the salary table results in relatively little change to spending from a team-wide perspective.

What Does Team Leadership Have to Say?

This will likely come as little surprise: despite clamoring for continued financial flexibility into the future, Klentak admitted that the Phillies have the wherewithal to make a significant addition to payroll in 2019. Addressing the media at the general manager meetings in early November, Klentak stated, “It’s a pretty bad feeling to go into an offseason knowing that you have things you need to address and not having the financial resources to do it because your money is tied up in players. I don’t think we ever want to put ourselves in that position. But some players are going to demand more than three-year contracts, and we have to be open to that. If it makes sense, we can do it. This is a franchise that carried big payrolls for a long, long time. We will likely get back to that again.”

Middleton provided a similar directive from ownership last offseason, offering that, , “[y]eah, I think we’re close. They [the front office] came to us with a budget, and we said, ’Guys, if you want to put that number in for the budget, that’s fine, but don’t live with that. If something comes up, and it breaks the bank relative to the budget, and you don’t pursue it, we’re going to be upset.’ And they know that.” In an era where ownership frequently addresses the need to cut costs and operate efficiently, such an admission from Middleton is startling, even if it occurred nearly a year ago.

There is one final consideration that requires mention here: attendance. The Phillies regularly sported attendance figures just shy of two millions visitors each year until they opened Citizens Bank Park in 2004. Attendance figures ballooned to 3.25 million that year, dipping to about 2.7 million in each of 2005 and 2006 before climbing over the three million threshold again in 2007 and staying there through 2013, peaking at 3.777 million in 2010. From 2014 onward, however, attendance has tumbled back to the 1.8 million to 2.4 million territory.

Are the Phillies a Player for Bryce Harper or Manny Machado?

For some teams, this will be a really interesting examination. For the Phillies, it isn’t: they’re definitely players for Harper and Machado, and from a purely financial perspective, it’s within the realm of possibility that they could be contenders to sign both young stars. That said, there has been no indication to date that ownership or management is mulling such an unprecedented dual pursuit of both talents.

What Will the 2019 Payroll Be?

It’s worth providing what is likely an obvious disclaimer: ownership and management knows the actual budget whereas we’re focusing on historical data and other relevant factors to project future spending in the immediate and more distant years to come.

Nevertheless, there are numerous reasons to expect the Phillies to spend and to spend big this winter. Between Nola, Nick Pivetta, Vince Velasquez, Zach Eflin, and Arrieta, the Phillies already have a cheap, controllable playoff rotation in-house before considering possible contributions from bounce-back candidate Jerad Eickhoff and the late-season prospect arrivals of the much-hyped Sixto Sanchez and Adonis Medina.

The position player talent, however, is another story. Philadelphia’s team-wide wRC+ of 91 last year ranked 21st in baseball, narrowly ahead of the lowly Rangers and Royals. For a team looking to make the jump to postseason contention, the Phillies are in desperate need of an offensive jolt and it isn’t coming from the farm unless 2017 top pick outfielder Adam Haseley finds a way to bring his plus on-base skills up from Double-A despite a low-power profile.

Taken in the aggregate, the above shows that the Phillies:

  1. have a significant need for an impact bat or two,
  2. can afford to stick that bat (or bats) at just about any defensive position outside of first base,
  3. have traditionally carried significantly weightier payrolls than they have in recent years,
  4. possess an ownership group and front office ready to take the plunge into big-spending territory,
  5. feature a roster loaded with young talent that is traditionally supplemented by veteran talent for winners, and
  6. have a front office that needs to win now to stick around.

Add it all up and the Phillies are going to spend and spend big. Whether through free agency or the absorption of significant liabilities on the trade market, payroll is going to climb in a meaningful way. It’s unlikely that payroll reaches the heights of the earlier part of this decade ($170 million plus) in one year as that type of one-year spending jump is a rarity, but I expect that Philadelphia will get close. The projections below assume that Bour is non-tendered/traded and that Franco is shipped out should the Phillies add Machado to take his job. Things could get significantly more interesting if the Phillies succeed in their quest to ship out Santana and perhaps Hernandez, utilizing Kingery and J.P. Crawford up the middle. The available space could grow in a big way if Klentak chooses to go that route. The below assumes that both Santana and Hernandez stay.

Projected 2019 Payroll: $155-165 million

Projected 2019 Payroll Space: $52.25 million to $62.25 million

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