Cubs Budget Reportedly ‘Significantly Below’ $246M Max Tax Threshold
Asked Saturday whether the competitive balance tax played a role in the Cubs’ offseason plans, Theo Epstein summarily brushed the notion aside. There is, however, a budget in place that limits the flexibility the front office has to add to a payroll that is currently estimated to come in around $227 million after bonuses and arbitration raises.
“The CBT threshold is not dictating any of our actions or inaction this winter at all,” Epstein said. “We’re not governed by that. There are times when strategically you wanna make sure you’re under it or where you don’t mind going above it. This isn’t one of those offseasons where strategically it makes a heck of a lot of difference to us.
“It’s just traditional budgeting: You spend what you have, you don’t spend what you don’t have and you try to put the absolute best team on the field with what you do have. And that’s what we’ve done every year. We have more than enough resources to win and that’s the way we’re gonna continue to approach it.”
It’s obvious the Cubs aren’t limited by the first tier of the CBT penalties, which starts at $206 million, but many have assumed the top tier of $246 million could present a cap. That doesn’t appear to be the case, according to Patrick Mooney and Sahadev Sharma of The Athletic ($).
When asked if the max luxury threshold of $246 million was more appropriate — a number that if exceeded has implications on how much the Cubs could spend on international free agency and could affect their draft position — one source suggested ownership’s budget was significantly below that. According to Rosterresource.com, the Cubs’ estimated payroll is a tad above $214 million, while their estimated payroll for luxury-tax purposes is slightly above $228 million. But again, the luxury tax doesn’t appear to be the issue.
That should not be interpreted as an immediate opening for Harper, whose megadeal would still require the Cubs to shed major salary commitments and fundamentally restructure their roster. It does not mean Epstein is hoping for a magical exception from ownership. The Ricketts family runs the team as a business and the Cubs have already committed more than $200 million to the roster, plus around $25 million more for player benefits and a trade-deadline cushion for midseason additions.
This tidbit comes as part of a larger look at what the Cubs have done, or not done, this winter and rather than cull further information from it I’ll suggest you check it out for yourself. As for what it means for the Cubs moving forward, Epstein talked about leaving no stone unturned and the front office expending all of its collective energy to leverage creative competitive advantages to fix what broke last year.
So what does that mean, really? Well, part of it is shuffling coaches around after previous changes yielded poor results. Some of that is necessity as well, but after replacing their hitting and pitching coaches each of the last two offseasons the Cubs have opted for a little less experience this time around. Anthony Iapoce and Tommy Hottovy are familiar with the front office and the team, though, and they should bring new insights.
Another under-the-radar hire is former pitcher Brad Mills, who recently joined the staff to assume many of Hottovy’s previous responsibilities as run prevention coordinator. So, uh, that’s not nothing.
But even the greatest coaches in the world can’t affect as much change as the players on the field, which is why it’s so frustrating to see the front office apparently handcuffed by a limited budget. And while the Cubs are indeed operating with a higher payroll than ever, it’s hard to justify keeping it static when MLB experienced record profits of $10.3 billion in 2018. That represents an increase of around $800 million since 2015.
Oh, and that figure doesn’t even include the nearly $2.6 billion windfall from the sale of BAMTech to Disney last August. Or the $5.1 billion extension with FOX that begins in 2022.
Assuming every team receives an equal share of those revenues, we’re looking at over $343 million apiece. And I think we all know the Cubs are generating far more money at the gate, in concessions, and in merch than most others. They’ve got the highest average ticket prices ($58.57) in baseball by more than $1.50 and their fan cost index ($368.28) easily outpaces the other 29 teams. So the Cubs have the money, about that there can be no doubt.
So what it comes down to is that ownership and the business operations side have chosen to allocate those funds to things other than the baseball payroll. It’s entirely possible, likely even, that much of the revenue is going into numerous projects in and around the ballpark. It could also be that said projects have yet to generate their own profits, especially after an early postseason exit and when many are yet nascent.
Then you’ve got the whole business of the new regional sports network, which Epstein said isn’t expected to increase revenues over the current deal for the first few years. As dubious as I find that notion, there may be factors at play that limit either the profitability of the deal (startup costs, etc) or the Cubs’ insight into exactly how lucrative it will be right away (carriage fees, carrier negotiations, ad revenue). Which, yeah.
Make no mistake about it, the Cubs have money. It’s just that, at least for the time being, very little of it is being allocated to baseball operations to make moves this winter.