Paring down payroll gives Cubs new and creative ways to add long term talent

Updated 4:00 p.m.

We have heard Theo Epstein say on numerous occasions that in today’s game, the two most valuable forms of currency are:

1. Young, cost controlled talent

2. Payroll flexibility.

The CBA has closed off a few avenues as far as the ability of the Cubs to buy impact young, cost controlled talent quickly.  Under the circumstances, the Cubs have done an excellent job.  They’ve built a top 5 farm system by flipping short term players for prospects and aggressively pursuing the last two available top Cuban players, landing one of them in Jorge Soler.  They added to their international players by blowing through the cap on a class that they believe is much better than next year’s crop.  They moved quickly to acquire what many feel to be the top two players available in last year’s class: OF Eloy Jimenez and SS Gleyber Torres to go with 4 other players who were ranked among various top 30 lists: RHPs Jen-Ho Tseng, Erling Moreno and Jefferson Mejia, along with recent signee SS-3B Wladimir Galindo, a player the Cubs feel is a sleeper in this year’s class.  They also have acquired MLB ready long term pieces in Travis Wood, Anthony Rizzo, and perhaps Jake Arrieta.

While they were accumulating this cheap, cost-controlled high ceiling talent, the Cubs were also paring down their payroll.   We’ve assumed that cutting down payroll means the ability to go after free agents.  That is partially true.  But the free agent system is set up such that you often overpay for top talent and lose that financial flexibility — so signing players to big long term contracts is something you want to do sparingly and only when the short term gain has greater value.

Incrementally adding short term wins tend to be the most valuable for teams who are in the 82-92 win range since it can mean the difference between staying home and making the playoffs or being the wild card vs winning the division.  The Cubs aren’t in that position yet so overpaying for an incremental increase in short term wins doesn’t hold much value.  And you certainly don’t want to add sacrificing long term assets such as draft picks and prospects on top of that.  Whether or not you believe the Cubs have financial issues, this  is essentially the biggest reason why you haven’t seen the Cubs highly involved in free agency.

But there are other ways to use short term payroll flexibility to help the team in the long run without sacrificing long term flexibility or long term assets.

To illustrate what I mean, here are 3 suggestions on how to use that short term payroll flexibility to their advantage…

1. Front load Masahiro Tanaka’s contract

The Yankees and Dodgers are well into the luxury cap and we mentioned before how the Yankees must pay a 40% tax on all payroll spent over that limit.  With the Cubs having plenty of short term flexibility in terms of payroll, they can afford to pay a lot of the money upfront, as they did with Edwin Jackson, who received $19M in his first year and will receive a total of $33M in his last three.

By front-loading Tanaka’s contract, they put a lot of pressure on the Yankees and Dodgers to match the financial value of the overall deal.  Let’s use the Yankees situation as an example.  Let’s say the Cubs give Tanaka $15M a year for 5 years, but like Jackson, they give Tanaka a signing bonus up front — let’s say $10M.  That’s $25M to be paid out that first year.   For luxury tax purposes, AAV (including the signing bonus) is used.  For such a contract, the AAV would be $17M.   To match that first year money, the Yankees would be paying the 50% luxury tax on the AAV, which amounts to an extra $8.5M,  That makes the salary $23.5M (15M+8.5M) in the first year + $10M more when you factor in the signing bonus.  That’s $33.5M in total.  I don’t care how much money they make, that’s a tough pill to swallow.  And for the Cubs, more money now means less they need to spend on Tanaka contract in the later years, thus preserving some of that payroll flexibility right about the time when the team might want to add that expensive free agent to help in the short term.

2. Take on a bad salary over the next two years 

There are teams out there with bad contracts they’d like to get rid of.  Brandon Phillips, Matt Kemp and Andre Ethier come to mind as bad contracts that could actually help in the short term.  However, those players would cut into the Cubs long term payroll flexibility so they’re not quite as attractive over the long haul.  The Cubs will be stuck overpaying for past their prime players at a time when they should be adding in prime, win-now players.

It may be better to take on a shorter term bad contract.  Dan Uggla is one player that comes to mind.  He’s owed $13M/year over the next two seasons.  The Cubs aren’t really expected to compete in the next couple of years so they can take on that salary with the condition that the Braves also send them a long term asset — a top pitching prospect, for example, as a thank you for taking on their burden.

Is it worth it for the Braves?  Sure.  Uggla is wasted payroll space on a mid-market team that is a legit World Series contender right now.  Freeing up Uggla’s salary allows them to re-allocate that money toward a useful free agent, perhaps Matt Garza, Ervin Santana, Ubaldo Jimenez, or a player or two to add some offense.

3. Buy opportunistically at the deadline

This is more about taking on a player with a larger salary who can help you long term.  We talked about the Cubs having interest in adding Carlos Gonzalez earlier this offseason.  Gonzalez was never made available primarily because the Rockies want to give it one more go next summer.  If they struggle then they may want to cash in and start rebuilding.  Gonzalez is just 28 years old and fits on the Cubs timeline because of his youth and in the future lineup because he hits LH, one of the few weak spots in the Cubs farm system.  He also has the athleticism and plate discipline that fits the Cubs philosophy.  He is owed a lot of money over the next few years so the Rockies may not take as much back in terms of prospects  if they get much-needed salary relief while they rebuild.

If the Cubs are really interested in David Price, perhaps the deadline is a better time if 1) the price is right and 2) the Rays are out of contention.  Maybe a deal makes sense then.  However, if the Rays past history is any indication, I find both of those scenarios unlikely.  The Rays will want to extract significant surplus value from a team desperate to add short term wins.

There are short term adds that may come cheaper: Colby Rasmus, Brett Anderson, Homer Bailey, Johnny Cueto, and Chase Headley would be nice fits at the right price — especially if the Cubs think they can keep them long term, though the mere possibility of an extension should not factor into the trade value for either team.  Anderson and Cueto have options so it buys the Cubs extra time to negotiate as well as giving them the option of making a qualifying offer to recoup some long term value if they lose them to free agency.

Cheaper adds (in terms of dollars) with more cost control could include Domonic Brown of the Phillies or Mike Moustakas of the Royals.  The Cubs could deal from surplus in their system and possibly get themselves a long term MLB ready piece of the puzzle.

This is just a quick glance of who might be available so feel free to add any names I didn’t mention.

The bottom line here is that the Cubs have put themselves in the position to do a lot of good things.  We can get frustrated at the Cubs apparent lack of progress this offseason but one thing they have done to this point is create large amounts of what Theo Epstein considers the most valuable currency in the game: Young talent and payroll flexibility.  They are in a position to pounce should a good value opportunity present itself.

Of course, the purpose of currency is to use it to acquire assets and for the Cubs, that means long term assets, though that does not exclude those players who may also  have some impact in the short term.  Free agency may not be the best use of that currency right now but there are other ways to cash in and take the organization a step or two closer to where it wants to be.

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  • As you laid out in the first scenario, the current flexibility the Cubs have does create a nice opportunity to front load Tanaka's contract. Outside of the Astros, no one else will be able to do that.

    I think this is one advantage the Cubs have, among many, that could entice Tanaka to come to the Cubs.

    I like the Uggla scenario as well. He actually could be a guy you flip in July of 2015 to someone who needs a bat off the bench, maximinzing his value as well.

    Alot of flexiblity, a lot of choices for the FO. It is important they make the right decisions.

  • In reply to IrwinFletcher:

    True. We get caught into thinking that the Cubs need to spend in free agency but there are other ways to use the money they'll soon have to spend -- and these may well be a more efficient way to do it.

  • John...Let's hope you are 100% correct.

  • In reply to GoCubs:

    I hope so too. I don't know if the Cubs FO has similar thoughts but to me at least it seems like these are avenues they should consider.

  • Another great article John. On a subject you can't find on any other website or written by any other writer.

    this way off our front office to think outside of the box is the reason we are going to have sustained success for years to come. It is a great time to be a Cubs fan even with the major league team being under .500!

  • In reply to IowaCubbie:

    Thanks IowaCubbie, I appreciate that.

    Good things are coming to Chicago and this time they are set up to stay good for a long time.

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    good article
    I agree with 99% of it the
    only thing yet to be determined is if Arrieta
    is a long term piece

    he is Baltimore's equivalent of Brett Jackson or Josh Vitters
    a top prospect that didnt pan out he may work here he may not

    but he doesnt belong in the same conversation as travis wood who has proven he can do it - Arrieta hasnt proven anything other than he is inconsistent

  • In reply to deport soriano com:

    Thanks..and it's funny you say that because I originally meant to write potentially in front of Arrieta's name -- so thanks for noting that. I'll edit it that.

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    In reply to deport soriano com:

    I will say that Arrieta had already done more for the Cubs at the Major League level than either Jackson or Vitters.

  • In reply to Ray:

    Agreed -- and Arrieta is held in much higher regard around the league than those those two.

  • In reply to Ray:

    True enough. He actually was tolerably useful end of last season.

  • In reply to drkazmd65:

    He was lucky at the end of last year. It's important to note that although he put up a 3.66 ERA with the cubs, it was due to things that are pretty unsustainable, i.e. a 0.193 BABIP. Jake Arrieta has shown nothing with the cubs that is good yet. I'm not saying he can't be a decent 5th starter because he can improve, but so far there is nothing that indicates he can be counted on to provide value for the cubs.

  • In reply to deport soriano com:

    Arrieta is actually more Al Nipper-great one start, horrible the next. His inconsistency is whats frustrating.

  • In reply to mutant beast:

    Arrieta is nothing like Al Nipper. Nipper had zero upside. He was pretty much a junk-baller. Hated that deal at the time and it caused the Cubs to later have to trade Palmeiro and Moyer to get Mitch Williams.

  • In reply to John Arguello:

    @mutantbeast as well

    That kind of seems to be the risk reward with guys like Shark, E Jackson, and Arietta is it not?

    The fastball can get them out of a lot of jams, but their off speed pitches still are not really plus, plus, or more importantly, consistent in my view.

    Thus, the inconsistency. Take a guy like Verlander that can command multiple pitches well. How many Verlanders are out there? Yes, I understand. ;)

  • In reply to givejonadollar:

    Samardzija's change of pace -- which is his splitter, is a plus pitch. Arrieta and Jackson have excellent sliders. Of course, none of them are as consistent as Verlander, but Verlander is a special pitcher.

  • Great article and agree with everything you said. Continue on this path
    until the time come to change, only if for the long term benefit of the team

  • In reply to emartinezjr:

    Thanks. I like that they are ready to pounce on an a good value opportunity if it presents itself.

  • I would love to know just how much front loading the contract would be worth. I know dollars now are worth far more than dollars will be in 8 years or whatever. Maybe front loading would break a tie with a team like the Yankees. I also find it interesting to compare state taxes for each team and how that either helps or hinders the ability to snag talent. I know the Rangers and Astros have the luxury of no state taxes.
    Great article and I agree that spending money just to spend it is a terrible idea. It is a shame they changed the ways teams can spend money acquiring amateur talent. Jameis Winston might be playing baseball right now instead of winning Heismans if that rule had not gone in to effect

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    In reply to Tide23:

    its a finance equation - usually taking into consideration rate of inflation
    which we havent had much of here lately but take for example

    if edwin jackson had a good financial consultant - he could have made 20% in stocks this year on his signing bonus.

    or in the case of starlin you getting a kid money who has never had any money - so there is value to getting money upfront - thats the model the NFL has been using last several years

  • In reply to Tide23:

    Professional athletes will actually file multiple state tax returns. Each state that they play in, the pro-rated wages for that game will be taxed by that state.

  • Luxury tax is paid by "total contract / years on contract." Individual years, frontloading, backloading, etc. simply doesn't matter.

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    In reply to mucha819:

    It could certainly matter to the player...and the organization as well when it's writing a lighter check towards the end of the contract! The flexibility I believe John's talking about goes far deeper than just the luxury tax. Also, the example he used referenced how much the Yankees would pay in penalties due to their current tax status.

  • In reply to mucha819:

    Even that being so, few teams have the short term payroll flexibility that the Cubs have.

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    Nice Article John. I was thinking the same a few days ago about front loading the Tanaka contract but I was thinking more along the lines of $30-35 million the first year and then escalating downward. Is this possible in your opinion? Keep up the good work

  • In reply to Jimmy Bakopoulos:

    Thanks. Can definitely escalate downward. In fact, that's desirable if you can do it. Tanaka wants a deal averaging $17M, theoretically you can go $27 in the first year and then $15M over the last 4 years...or any number of combinations, really.

  • John, that was one of the best analyses I've read on the Cubs' situation

  • In reply to toboyle9:

    Thanks toboyle. I appreciate that.

  • Great piece!
    This is why I'm such a fan of this site.

  • In reply to SFToby:

    Thanks Toby!

  • Excellent article - have had running *poop* flinging contests over the last year or so with a couple of posters over on Yahoo! who take the opposite stance on what the Cubs should be doing to what the Cubs appear to be doing,....

    They (of course) think that the Cubs are being cheap and idiotic by NOT going in on the big spending on Free Agents,.... I try to point out the logic of what the front office is trying to do,.... and more *poop* gets flung my direction,....

    I love what EpStoyer are doing,.... and especially (although I hadn't thought of it) think that the Frontloading of a potential contract for the likes of Tanaka is an excellent idea. Hadn't thought much about an Uggla type 'mercy acquisition' either,.... but it makes some sense. Makes even more sense of the likes of Uggla finds his hitting stroke again and 'we' can flip him for long-term value to a contender,.....

    Me likey!

  • In reply to drkazmd65:

    Thanks. I'm amazed that after we have seen first hand the disaster that free agency can bring on the long term health of an organization -- and yet people still want to repeat that strategy.

  • In reply to John Arguello:

    Agreed - although that basic strategy almost worked for the Cubs in the Soriano/Ramirez/Lee era (and I still like the add of Alou for what it was worth),...

    That strategy (along with neglecting the Farm and developmental system) produced the gutted disaster that we had when Epstein was hired. This building strategy we are seening now just might work, and be sustainable for a number of years.

    It would NOT hurt my feelings to see the Cubs system being compared to the consistency of StLouis's system in a few years.

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    In reply to drkazmd65:

    doc, I hate to disagree with you, but I'd say it was not those free agent signings that produced that gutted disaster - it was the combination of the liberally sprinkled no-trade clauses in those contracts, plus the failure to trade those players for young talent when it was obvious that the Cubs were not going to be winning any time soon. The Garza trade was another chapter in that delusion, but imagine if they had been able to trade Soriano (after eating some of the money of course) and Ramirez and Dempster at will when they were at their peak value - the current rebuild wouldn't be starting from bare studs.

  • In reply to SKMD:

    A valid point SKMD. That would have made a difference more than likely.

  • In reply to SKMD:

    Let's not sugar coat that era. The Cubs spending in the late Hendry years was an unmitigated disaster for the long term health of the organization -- and most of everyone around baseball knew it at the time. It was also a disaster for the Angels and Marlins in recent years and it will likely be a disaster for the Mariners and Yankees this year. I cannot understand why anyone would do this after we've seen that strategy fail over and over again. It doesn't work. Not unless all you want is a chance -- not a certainty -- of opening a short term window.

    Your best case salvage scenario was that of the Marlins of the past couple of years, who took a few steps back even though they were able to trade their recently signed free agents -- and the prospects they got were decent, but certainly not good enough to turn the franchise around. When teams have to eat those kinds of years and salary, it severely compromises the trade worth of those players.

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    In reply to John Arguello:

    that process can work, but only if you're all in to the free agent method of building and have the pockets to sustain it - the Yankees being exhibit A, but we may be seeing the Dodgers, Angels and Rangers go that route. I agree that for the great majority of teams it is not sustainable.
    But I would still say it wasn't simply free agent spending that brought us to where we are, but not knowing when to hold up and when to fold up - when to spend, and when to sell. Signing guys like Milton Bradley was absolute insanity, not because he was a free agent bust but because that was not a team that was going anywhere with one more free agent. Ecclesiastes tells us there is a time to sign and a time to trade, Crane Kenney just doesn't know the difference.

  • In reply to SKMD:

    Maybe but even with wealthy teams, I think it's a short term deal with the devil -- and the devil doesn't always hold up his end of the bargain. Even when it does pay off, it's usually bad in the long term. Don't forget that the Yankees big spending in the 70s is what led to the Yankees crash in the 1980s. I believe they are headed down that path again. The 2000s Yankees were built in large part because of a reemphasis on the farm.

  • In reply to John Arguello:

    Another example of a free agent sweepstakes bomb would be the Red Sox a few weeks back. Adding big contracts for Adrian Gonzalez and Carl Crawford looked like it was going to cripple the team, but they were bailed out by the deep pockets of the Dodgers and a really good farm system. The Dodgers looked dead in the water until Puig mania brought some life to the team.

    The best piece of this rebuild is that it seems like we are looking to develop a consistent winning program. Collecting prospects is step one, next we need to see how we are doing on the development. If we can start churning out some young arms then I would be thrilled.

  • In reply to KC Cubs Fan:

    That is a good example and a moved that worked for the Dodgers because they have so much money and were able to land pretty good players though it cost them lots of money and some good young pitching. I hope the Cubs don't have to give up the same kind of prospect load when and if they try it.

    And agree very much that the key to this rebuild is sustainability. that's not something Cubs have seen since the first half of the last century.

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    In reply to SKMD:

    SKMD, funny you used the Garza trade as an example, because the main piece in that trade was Archer, who was acquired when Hendry actually traded one of his FA acquisitions. DeRosa (one of my least favorite players. Okay most hated would be more accurate, but that is another story for another day) was sent to Cleveland for three young pitchers, one of which was Chris Archer. Archer was then one of five pieces theCubs sent to TB for Garza.

  • I really, really like the front loading of the Tanaka contract as a bargaining chip. Uggla, not so much. However, I could see taking on Brandon Phillips for two years even with all his problems. Like you, I think the Cubs might actually be buyers at the deadline this summer to pick up some cheap parts in 2014. Good job!

  • In reply to historyrat:

    Frontloading is preferable to Tanaka, but the Yankees and Dodgers can still do that if they want. Luxury tax is based on the average annual value of contracts, so if he gets an average of 17 million per year, their going to pay based on that 17 million per year. It doesn't matter if anyone gives him 35 million in his first year, the luxury tax would still only be payed on that 17 million for each and every year of the contract.

  • In reply to mucha819:

    Signing bonus, however, must be paid upfront. So 17M average AAV + 50% luxury Tax + 10M signing bonus = $35.8M to be paid in that first year. A bit different than what I had originally but it serves the same purpose. So, yes, it does still matter in terms of total dollars paid in the first year of the contract.

    In fact, if the signing bonus is factored into the AAV, then that makes that AAV 19M, making the luxury tax 9.5 M. Even though they don't get taxed on the signing bonus that is still paid up front so $10M bonus + 9.5M tax + 17M first year salary = a total first year cost of $38.5M while it would only cost the Cubs 27M.

  • In reply to John Arguello:

    Thanks for the follow up. I would also add in the 20 million posting fee for a 58.5 first year figure.

  • In reply to mucha819:

    Ouch. Forgot about that. Good point.

    I think it can make it a difficult deal for the Yankees to match and one that wouldn't cost the Cubs quite as much -- and given that their payroll would still be low and that they'd recoup some of that money in the merchandising and advertising revenue Tanaka would bring, ti seems like it wouldnt' be all that big a hit for them.

    Thanks for the tip on the luxury tax, btw. I just read about it on Fangraphs (which I probably should have done before I calculated the figures:). It works out the same in the end and the concept is the same -- whether that's enough to deter the Yankees, I don't know.

  • In reply to John Arguello:

    No problem.

  • In reply to John Arguello:

    Now I'm completely confused. As I was reading your article, I was thinking "Hold on a second, I thought the luxury tax is based on the average annual value." Mucha made my point for me, but other than paying more in a signing bonus upfront, how exactly does this hurt teams like the Dodgers or Yankees. In the end if they match the Cubs offer, they will still have to pay the same in terms of salary and their luxury tax amount would not change whether they front loaded the contract or not. Would it? It appears to me that it is just a matter of when they pay the money, not how much. Also, I thought the posting fee was not subject to the luxury tax?

  • In reply to Ibleedcubbieblue:

    It's not all about the luxury tax. It's just about making them pay a lot up front. The luxury tax + the signing bonus makes them pay an extra $20M up front in addition to his first year salary and the posting fee. Just a way of trying to price them out. They can afford it but do they like him enough to pay $55M up in 2014? I don't know, but I think it's worth putting that kind of pressure on them, in my opinion.

  • In reply to John Arguello:

    This is kind of minor, but i read that the posting fee doesn't have to be paid all at once, it can be paid in payments. Overall I don't really see that much of an advantage to all this frontloading stuff. Edwin Jackson's big signing bonus was an anomaly in that it was made because tax rates were set to increase. Teams don't frontload contracts because it doesnt make financial sense. Rather than use a big signing bonus or crap like that, the cubs should backload the contract, invest the money that would go towards a signing bonus so that they can offer more money in the later years of the contract without it costing anything extra to the team.

  • In reply to historyrat:

    Thanks. The Uggla maneuver may be tough to pull off but it could be another way of buying prospects without using any long term assets they need.

  • I know the Braves were interested in Jeff. Could a Heyward/Uggla deal for Jeff and a few filler guys be pulled off?

  • Personally, I believe if you're going to hand out a big contract, it should be front-loaded. Back-loaded contracts nearly always come back to bite. You wind up with a declining player owed a lot of money that you can hardly give away.

    And please, oh please, no Dan Uggla.

  • In reply to GAHillbilly:

    This is illogical from a financial standpoint. an ideal contract is one that allows the owner to save the money for as long as possible so that it can be invested. The cubs have financial people that understand that more money will have to be saved for the later backloaded deals and that is why it will be invested.

  • These are guys I've been considering as well. What do you think of de aza from the White Sox? He hits lefthanded, can play center, hit at the top of the line-up, and can swing it a little. Cubs can probably get him for a young reliever. I know he's not the best OBP guy but he could keep a spot warm for a minute. I know people have brought him up here before.

  • Nice Job John, I was a little confused why Rizzo was included as we did not follow our M.O. by flipping short term assets for him. We traded our only MLB ready prospect for him. While the merits of that trade are still unanswered, I doubt they would consider moving Cashner if he was still in our system.

    Anyways, I like the way you outlined the possibilities. There may be other scenarios or variables involved, certainly many different players... but we may not be signing many big ticket FA's, we will use the payroll flexibility to acquire talent at every conceivable opportunity. That doesn't necessarily mean that in 2015 we'll be handing out a $200 Million deal to a FA. We could, but I expect them to be disciplined about those things...

  • In reply to HoosierDaddy:

    Thanks. Rizzo was a separate sentence about how the Cubs have acquired young MLB talent

  • Great, positive writeup John. A heavily frontloaded contract would be worth more to Tanaka. Found this on mlbtr today
    http://www.mlbtraderumors.com/2013/12/baseball-blogs-weigh-in-1.html?utm_source=dlvr.it&utm_medium=twitter
    FWIW, this AZ blog gives the Cubs a 55% chance to land Tanaka.

  • In reply to Nate Dawg:

    Thanks for the kind words and the link, Nate Dawg.

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    I've been wondering what the freight on someone like Uggla or Phillips would be after the Diamondbacks essentially paid a prospect to unload Heath Bell's salary. It's an interesting idea. And it has the the additional upside of appeasing the "win now" branch of the fanbase.

  • Couple of things on frontloading the Tanaka contract:

    1) I think another poster already pointed this out, but front loading or backloading a contract doesn't matter for luxury tax purposes. The amount that applies towards the luxury tax each year is Total value of the contract/years on the contract. Where that money is given to the player during the contract doesn't matter.

    2) The penalty the Yankees pay is a 50% luxury tax rate, not 40%.

  • In reply to TulaneCubs:

    Thanks --as you noted it's been pointed out already, so I've addressed that and updated the article. Regardless, it's a $10M signing bonus which is paid up front and separate from the salary, so we're still talking about $35M using that 50% luxury tax when you add that to the average AAV of 17M. So it's still $35M in that first year. So the particulars may change but the concept is still the same.

  • Kudos, John. Article was written. Look up that podcast from Sheehan & Rany, if you get a spare second. Getting a national & very well-informed perspective from two guys like that got me pretty excited.

    In particular, the idea that we'd been discussing earlier in the yr about leveraging the park's advantages to LH power could play a central role in any opportunistic moves. I'll post more later- at zoo with family.

  • In reply to Carl9730:

    Thanks. I'll try and look up that podcast when I can.

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    so now MLBTR is reporting the Twins "are interested" in Tanaka. Of course they are, because interest is free. Let the fan base know you were interested, you tried to get him, but boy those loaded Yanks and Cubs just muscled you right out of the contest. How you gonna compete with those billionaire owners? Tanaka has become the baseball equivalent of the balanced budget in politics - everyone wants to be seen as trying to get it done, but when it comes down to brass tacks, well jeez, it just isn't possible because the system is stacked against you.

  • In reply to SKMD:

    Ha! Good point. Interest is always a dubious word in baseball. Of course they'd be interested. I think almost every team would be interested in Tanaka.

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    Great to see you agree with some of us that talked about a front loaded contract being the way we may be able to lure Tanaka to Wrigley. A few days ago many of us were throwing out #'s as to what we thought it might take. Mine looked like this:

    Year #1= $30M
    Year #2= $30M
    Year #3= $25M
    Year #4= $25M
    Year #5= $20M
    Year #6= $20M
    Year #7= $15M (option)
    Year #8= $15M (option)

    This is a possible $200M deal if the options are picked up. It about $22.5/avg per year to Tanaka plus the $20M posting fee. The reason I like the front loaded contract is two fold.

    1.) It gives Tanaka a real sense of security for him and his family knowing he's going to get a large chunk of change quickly by basically signing his name.

    2.) As the contract goes forward the player's value stays high. We all know the price of talent is going up. But Tanaka's front loaded contract would be going down. This is extremely team friendly because it makes the player more attractive in a trade and also gives the team more money in the later years of the contract to help fill other needs.

    Now I'm not saying that $200M is something that should be taken as the definitive # needed to land Tanaka. But the concept of a front loaded contract is a big advantage the Cubs have in these negotiations. Not too many teams are going to shell out $60M in the first 2 years as my example shows. But since the Cubs have the flexibility to pull it off, it should scare both the Yankees and Dodgers.

  • In reply to bocabobby:

    The Cubs have already front loaded before, effectively doing it with EJax last year, so yeah, the concept isn't new and I think it can work with Tanaka. No way I'd pay Tanaka 30M for any year and 200M, though. He's not that good. I don't think it would take nearly that much to sign him.

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    In reply to John Arguello:

    As I said, I'm not really sticking firmly to those #'s. But it's going to take somewhere between $18M-$24 per year to land Tanaka, imo. Let's just be creative and give it to him up front.

    It would be fun to watch Yankee fans cry a little more and smacking Scott Boras in the chops for his comments at the winter meetings by signing Tanaka...... lol

  • In reply to John Arguello:

    Frontloading contracts doesn't make sense. Edwin Jackson was given the big signing bonus because it would be taxed at a lower rate, giving Jackson more money than he would have gotten. Look at Castro's and Rizzo's contracts. There is a reason that they are not frontloaded. Backloading deals is better for the team. It lets the owners save the money they would be spending the players and letting that money grow. Then the savings can be used to pay the backloaded portion of the deal and the interest can be used to buy more players. GM's and Owners aren't stupid. Contracts are always backloaded because they understand how their finances work. Contracts with big signing bonuses are exceptions, not a change of the rules.

  • In reply to Andrew:

    That is all well and good but this is not about optimal financing strategies. It's about winning the bid for Tanaka. It's about creatively using their payroll flexibility to make it difficult for the Yankees to match their bid by forcing them to pay a ton up front to match.

  • In reply to John Arguello:

    I think you're underestimating the Yankees flexibility here. I bet that absent a posting bid limit the yankees would have bid at least 70 million and not bat an eye. that means that they would be on the hook for 70 million plus whatever they paid him in salary the first year. the scenario you outlined has them paying about 55 million up front, a number the yankees would probably happily pay just for the posting fee. It's not as hard of a pill for the yankees to swallow as you make it out to be.

  • In reply to Andrew:

    Maybe so, but right now that's all assumption.

  • In reply to John Arguello:

    ya but it is as much of an assumption as you are making. You assume that Tanaka will be swayed significantly by higher dollars at the begining of the contract. You assume the Yankees will have a hard time coming up with 55 million dollars for the first year. The Yankees are a multibillion dollar company, assuming that they will not have a huge problem finding 55 million dollars is not a big leap to make. This is a team that just had a $234 million payroll for luxury tax purposes and has shrunk down to near the 189 million dollar mark this year. The yankees have a LOT of money.

    Also there is a lot of nuance to your luxury tax assessment for the yankees. First of all, even if the yankees are over the luxury tax limit this year, they might not be next year and then they dont pay the 50% overage, and then they can go over the year after that and only pay a %17.5 tax, so assuming all of Tanaka's contract will be 50% higher is not necesarily true. Also they only pay the tax on the amount of salary that is over 189 million so if for example tanakas contract brings them to 200 million, they only pay the 50% tax on the last 11 million. A lot of that will still depend on the A-Rod situation but since the yankees are not over the 189 limit yet, at the very most only some of Tanaka's contract will be taxed at 50%

  • In reply to Andrew:

    I didn't. I said more than once in this thread that I didn't know if it would dissuade them, only that it would make the decision more difficult. I don't know the Yankees level of their interest or how highly they have him evaluated so that's not something I can say with confidence one way or the other. I'm merely suggesting different ways to use their payroll flexibility, but you seem to insist upon finding something to argue.

  • In reply to Andrew:

    Andrew,

    What you're overlooking is that players and agents are also aware of future value of money calculations. They know that $10m next year is worth more than $10m in 5 years, both due to investment opportunities as well as inflation. As such, a front-loaded contract will have more value to the player/agent than will a backloaded contract. The Cubs have fewer financial commitments in the short-term than the Yankees / others, giving them the flexibility to offer a front-loaded (and thus more attractive to the player) contract.

    The other reason this makes sense is that it likely does not make sense for the Cubs to try and turn a short-term profit on the team (and potentially run losses later on) because a) you have corporate tax on profits and b) the financial goal for the Ricketts has to be to increase the value of the franchise rather than extract profits over the next couple years - the returns are just much greater in the former scenario. So in a number of ways, I think it can make sense to front-load for financial reasons as well as to increase the chances of landing Tanaka.

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    In reply to John Arguello:

    I'd argue two things. First, if the forkball is as good as advertised, he might be a top of the rotation guy. Second, with all the cost controlled talent we have coming up, who else are you going to spend the money on in the next four or five seasons who will provide a higher return than Tanaka?

    Like I said a few weeks ago, I wouldn't start at a $30 MM AAV, but I'd go there if that's what it takes. We can't lose this one.

  • In reply to Mike Moody:

    Most people I've talked to don't rate him as a #1 type pitcher, mostly #2 and a couple even say #3. I don't think the Cubs should spend that much on him. If the Yankees or Dodgers want to pay him that, then I'd be fine if the Cubs didn't want to match.

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    In reply to John Arguello:

    I agree, John. If I'm the Cubs I make a very good offer to Tanaka but I don't make him the highest paid SP in the Majors. As for the Cubs spending money just because they might have it, that's what Hendry used to do.

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    In reply to Mike Moody:

    I have to disagree. No way it gets to $30MM AAV for a guy who's never pitched in the majors. I understand how rare a 25 yo, potential ace, FA is, but it's still just potential. Nobody is going to make him the richest pitcher in the world. Also, I want Tanaka really, really, really bad...but there's nobody we "can't lose"! There is no one player that we absolutely need, or that needs to pan out for this plan to come together. It's all about volume!

  • As always great article with a view point you just don't find anywhere else. I've been a Cub's fan my whole 33yrs on this planet, but it took till 2 yrs ago to find this gem of a blog.

    I really like what the Cub's FO has done to set us up to compete. While it does get frustrating, I always look at a team like the Browns (NFL). Now the NFL is a complete different landscape, but my point is that great teams (Pittsburg) have a FO that knows their plan abd sticks to it year after year. The Browns on the other hand have always had a shaky FO and are always chasing. My point being, you may not win every year, but putting yourself in a position to do so is all a fan base asks for.

  • In reply to Zambrano’s Fist:

    Thanks and while that is a different sport, the concept is the same. The Browns have no semblance of a good plan. They kind of wing it every offseason instead of developing an organized plan -- and it shows.

    We've used the Hawks here of a good example of a well-run organization. The NHL is different, of course, but the concept of building a core, long term value, and being flexible with short term players is about the same.

  • Since the Yankees have exceeded the cap the three previous years, it they exceed in 2014 the tax is 50%.

    http://www.nydailynews.com/sports/baseball/yankees/yankees-slapped-28m-luxury-tax-article-1.1550986

  • In reply to ddevonb:

    Yes, thank you. I've made the adjustment already.

  • I would love for the Cubs to acquire Dan Uggla, and feel as if I am one of the few proponents of fostering such acquisition.

    Dan Uggla had a rough year last season, so it could be reasonable to assume that he is a bounce-back candidate and could be had at an even cheaper cost.

    Uggla has been victimized by playing in Turner Field, and he is a perennial 30 HR hitter from a position that is tough to get power from. He owns a lifetime .340 OBP so he knows how to get on base as well. He does strikeout a lot, but also takes a lot of walks.

    This season:
    Home: 8 HR 18 RBI .157/.287/.304/.591
    Road: 14 HR 37 RBI .199/.330/.416/.746

    With the Cubs hitting out of perhaps the #6 slot, I think he could provide a lot of value to this team offensively. He is a much-needed offensive upgrade over Barney, and is $13 million really that expensive for a team that has NO salaries holding them back and in a major market? In today's game, if players like Omar Infante (who had a career year and is 32-years-old) are capable of getting nearly $8 mil annually over four years, then I think that the Cubs can afford to take on $13 mil over the next TWO years, and possibly even FLIP him at the TDL or next year's TDL when Uggla recovers that 30-HR stroke of his playing in the Friendly Confines.

  • In reply to Average Samaritan:

    Uggla's numbers have been falling ever since he left the Marlins.

  • I say that by 2016 most teams that signed players to 7-10 yr contracts
    will be very sorry they did it.

  • In reply to emartinezjr:

    Amen to that.

  • I believe Jason Heyward is set to hit free agency in two offseasons. If h makes it to the open market, he would be a great over-the-top addition, and we would most certainly be in a better position to make a move.

  • In my opinion, he and Freddie Freeman will never hit the open market.

  • In reply to GAHillbilly:

    I dont think they would let him go either. Another trade possibility could be Josh Reddick, I have always had a mini man crush on him.

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    A's fans didn't even want him in the lineup during the playoffs.
    It's not like they're exactly an offensive juggernaut, so it kind of speaks volumes in itself.

    He really needs to rebound in 2014.

  • John, thanks for this terrific, insightful analysis. I know I've been ragging about this offseason, but your insights since the news that Tanaka would be posted, has got me feeling more optimistic than I've been in a long time.

    In fact my only disagreement with you is the assertion that Cubs won't be competitive for a few more years. If we get Tanaka, i believe a few other "ifs" will break our way (Olt, CastRizzo rebounds, Lake coninues to excite,Sweens surprises, etc) so I predict that next June you'll be doing pieces on who we can pick up in July to help secure a 2014 playoff spot and Felzz is gonna be writing lots of fun/happy recaps. :)

    Yaaaaaay, Payroll Flexibility!

    Yes sir! Go cubs!

  • In reply to Nondorf:

    Yes getting Tanaka just might speed up the timeline and results. But Theo never gave an exact time. He was just giving an outside timeframe of 4 to 5 years. And he always said that improvement was not linear.

    It still is a big IF we get Tanaka. Keep your fingers crossed.

  • In reply to Nondorf:

    Thanks Nondorf.

    It's really easy to get frustrated but I think they really know what they're doing and setting themselves up nicely for the next 2-3 years. And once they put this together, I think we can expect the Cubs to be consistently good for several years or more.

    You are right. I certainly don't mean to rule out that they can be competitive in the next year or two. I think they can, though a lot of things have to break their way. If they get Tanaka, the core bounces back, the bullpen performs and the Cubs improve their OBP and hitting with RISP, they can improve a lot sooner than we think. I don't think any of those things are unrealistic.

  • id be very interested in a dan uggla and a pitching prospect for darwin barney swap. obviously it would depend on who the pitching prospect was for it to be worth it to the cubs to make this trade, but i think it makes a lot of sense for all parties involved.

    cubs: buy low on uggla, see if a change of scenery helps his game (unlikely, but it wouldnt be the first time it happened). and they get a pitching prospect.

    braves: shed salary, get a gold glove second basemen.

    barney: goes too a team that fits his strengths and weaknesses better, gets a chance to win.

    uggla: gets a chance to start over in a different city with less pressure, if he is the same player hes been recently the cubs will shift him to a backup infielder role in the last year of his deal.

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    In reply to jshmoran:

    why would we get a pitcher AND Uggla?

    Uggla is clearly better than Barney.

  • In reply to Giffmo:

    Barney is cheaper and puts up pretty much the same value though Barney's value comes from defense. He'll give you about the same WAR for more than $20M less and allow Braves to spend money elsewhere.

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    In reply to Giffmo:

    Agreed.
    Even with Uggla's negative fielding value, and terrible batting average. Even with the salary relief, it's not likely we get much more in return than a bag of balls and a little plastic helmet full of soft serve.

  • In reply to Eric Foster:

    If we don't get much in return then this is a trade we do not make. Plain and simple.

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    In reply to John57:

    I just don't see Atlanta's motivation to move a light-average hitting/high power 2B in exchange for a defensive specialist that will hit for nearly the same average, minus 30 HR's.
    Not to mention add a quality prospect on top of it.

    They'd probably rather just trade him to the Dodgers for AAA org-filler and let Magic's guys assume the contract.
    Not to mention our potential surplus in middle infielders with Castro/Baez/Alcantara.
    It's a creative concept, I like it in theory! But I can't see that scenario working.

  • In reply to jshmoran:

    It's not inconceivable that Barney could bounce back to his .276 avg in 2011.

    I don't this FO wants to do anything with Barney except give him the chance to prove he can't rebound. Ironically, his offensive slide mirrored Castro's and the departure of Rudy Jaramillo....

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    In reply to HoosierDaddy:

    I disagree and believe barney's offensive slide began in late May of 2011.
    He batted just .238 in the 2nd half of 2011, .254 in 2012 and .208 last year. I agree that Rowson/Sveum didn't do him any favors.

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    In reply to HoosierDaddy:

    If Barney is a short side platoon and late inning replacement, I certainly believe he is capable of generating solid numbers vs. LHP.

  • CubHouseBlog, while this is not my sight I think that marketing your own site on someone else's work is very unprofessional.

  • Additionally I just looked at your site and you don't even give John or Cubs Den proper reference. Your words "My inspiration to create this blog was from Bleacher Nation. If you havent checked him out you really need to some of the best Cubs information up to the minute. Go Cubs!"

    This is spam and rude.

  • In reply to Zambrano’s Fist:

    Always happy to help people out if they ask but spamming the comments section is not the way to do it.

  • Because we assume over $20M in salary no one else will touch.

  • In reply to JB55:

    That's not what I'm saying at all. I'm saying the Cubs can structure the deal in such a way to make things difficult for the Yankees to get value out of a Tanaka deal, particularly early in the deal. It doesn't mean they won't do it anyway, but the Cubs can at least force them to make a tough decision.

  • In reply to John Arguello:

    John my comment was meant to be a reply as to why Atlanta would give us a prospect for Uggla, nothing to do with Tanaka.

  • In reply to JB55:

    Ahh...it makes so much more sense now! Didn't initially see what you were responding to. Thanks ;)

  • John,

    I agree and have seen you help people (writers) numerous times before. I apologize if I stepped out of bounds, but I thought it should be said.

    Keep up the great work!

  • In reply to Zambrano’s Fist:

    No worries big Z and appreciate the kind words.

  • I wonder what the impact is on Tanaka being Japanese as far as the fan base goes. In other words, how much does he mean to the team in regard to merchandising, fan appeal, attendance, etc.
    Could be another reason to front load the contract if the fan base is "inspired" to see him pitch for the Cubs. If he is as good as advertised then he will have the "wow" factor that actually works in getting fan support. How many tickets are sold because Tanaka is pitching today?
    That really is another selling point for Tanaka to come to this team. He would be the superstar and the guy that the whole fan base wants to see.
    It seems like the Cubs may want to follow the Cleveland Indian model of the 90's with their homegrown players with the Castro and Rizzo signings that we have already seen. If you see Baez and Bryant come up within the next 2 seasons and hit like its like their capable of, then you don't need to sign other "20 million" impact players when you already have them coming through the talent pipeline.

  • In reply to blackstain0661:

    I think a lot of that money could be made that very first year which is another good reason to front load.

  • In reply to John Arguello:

    What??? How would the team make any less money in the first year if they backloaded the contract? This is more of a reason to backload the contract. If a big influx of money comes, more of that money can be saved, collecting interest, rather than being paid to Tanaka immediately.

  • In reply to Andrew:

    You are missing the forest for the trees by trying to make a point about financing but that's not what this is about. Front loading is about using their current payroll flexibility by trying to make it as difficult as possible for a team like the Yankees. That's what that is about. Obviously the Cubs would rather not front load a deal from a financial standpoint. I suggested that strategy solely for the purpose of trying to win the bidding in a creative way -- the purpose of it is not to save them money or benefit financially. The early revenue just helps cushion the blow of the bigger up front payment.

  • In reply to John Arguello:

    well you said: "I think a lot of that money could be made that very first year which is another good reason to front load"

    That isn't a good reason to frontload but rather a good reason to sign him. The fact that it is frontloaded has no influence on the revenue gained from signing him.

    I'm just irritated by this wave of posters that think frontloading is better for the team because it isn't true. Frontloading is better for the player, not the team.

    If Tanaka is going to be significantly swayed by a frontloaded deal then i am all for it, though I really doubt that it will matter much to the yankees and Dodgers who have huge budgets. Considering that most people would agree that both teams would have been willing to pay a $60+ million posting fee up front, I doubt it will be hard for them to match a signing bonus the cubs give. The decision will come down to total guaranteed money and years.

  • In reply to Andrew:

    Well, then I suppose I could have worded that better, and I can see how it can be read that way in isolation, but considering I've only been writing about finding ways to win the bid, it just didn't occur to me that people would interpret it as me talking about an optimal way to finance.

    And yes, that Tanaka will take the best financial deal for him is a given. Don't know who you are arguing against on that front. And as for LAD or NYY signing every top free agent, I'd say that's less a given than you assume it to be.

  • I actually kind of like the thought of Uggla as something of a utility man. I'm sure he could learn to play a passable enough combination of at least two of 1B, 3B, RF, and LF to make him appealing to a team at the trade deadline. Cubs might just be able to swindle a couple of good prospects out of this, and realistically for the cost of someone extremely expendable in the organization (Jonathan Mota comes to mind as someone of this mold).

  • In reply to Jim Weihofen:

    Definitely would be for salary relief and prospect(s). And who knows, maybe Uggla could be useful. I tend to think he'll probably continue his trend downward but maybe a good start and he becomes expendable and the Cubs could pick up another prospect.

  • Good news on who the favorite could be to land Tanaka

    http://insidethezona.com/2013/12/masahiro-tanaka-posted-bet-arizona/

    Like the article mentions though, he won't come cheap, as we have never really seen an impact free agent hit the open market at such a young age.

  • In reply to ChiRy:

    It is a unique case. I hope that guy is right.

  • In reply to John Arguello:

    Joel Sherman says watch out for the Cubs too.

  • In reply to ChiRy:

    Also David Kaplan said the Cubs won't be outbid on this. I agree with all of them. I've been saying it since late August/early September. It's not going to be easy because the competition will be tough but I think the Cubs will do everything within reason.

  • In reply to ChiRy:

    Interesting analysis. Not only does the writer put the Cubs as favorites, he has them as heavy favorites to land Tanaka.

    It seems like people are slowly coming around to the fact that the Cubs are going to be a major factor in landing Tanaka.

  • I thought that Zona link was going to be irrelevant but it made strong argument for how Tanaka ends up a Cub from a third-party source. I'm unfamiliar with that blog but it's well written.

  • Just back online John, I join with others here that with this is one of the best articles you have written! Very thought provoking, indeed:)

  • In reply to TobaccopouchinIvy:

    Thank you!

  • I am missing StillMissingKennyHubbs......hoping all is well

  • In reply to Hubbs16:

    Yes, me too. Haven't heard from him in awhile.

  • One thing I think people should consider when it comes to Tanaka, is that any pitcher signed, will accrue 50% of his stats at Wrigley field. A fly ball pitcher may not play up to his salary. But a sinker-baller, who gives up few home-runs historically, will certainly play his talents up! So Tanaka may be a #2 in St. Louis, but in Wrigley his comparable statistics might make his value more like a #1.

  • In reply to Quasimodo:

    Environment can certainly play a role -- as can defense. We noted how the Yankees would have a poor infield defense and that short RF porch, not ideal for a pitch to contact RHP.

  • In reply to John Arguello:

    See, there ya go! As soon as I think I have my cap on straight, you mention something I never thought of! I guess that is why you do this full time!

  • In reply to Quasimodo:

    People who know a lot more about baseball than I do are saying it's the best splitter they have ever seen

  • In reply to ChiRy:

    Very good! Lets hope his pitches kill a lot of worms at Wrigley!

  • All good ideas. The other thing front-loading contracts does it makes the contracts more attractive to move later. MBA executives understand the present-value versus future-value costs. And if the Cubs have the dollars presently, it makes sense to use those dollars more now, versus having to pay to eat parts of contracts later, which also reduces your payroll flexibility.

    It's also good to realize the Cubs seeming payroll pressures presently really aren't ultimately because of the leveraged purchase of the Cubs or slower development of stadium revenue streams. It comes first and foremost from the FO's desire to rebuild the organization through its talent pipeline. This takes time, so why pointless add payroll in the short term. Also why sign FO that steal a draft choice no matter how unlikely any one draft pick will ever make it to the majors. It's part of a larger philosophy. The fact that keeping the payroll low now also aligns with other business goals is a plus, but not the source of these choices. All of this, the FO has explained before, but many fans choose to believe the lower payroll is part of so "hands tied" dynamic versus a conscious baseball choice first and business choice second.

  • In reply to SkitSketchJeff:

    Thanks Jeff. I appreciate this thoughtful response. And I agree how that "hands-tied" narrative has taken over in many places. While there may be something to that, it seems to me to be greatly exaggerated. It makes a great story. It pushes emotional buttons.

    Yet, as you say, is this current rebuilding plan any different than what the FO has been telling us from day one, when they called this a 5 year process? Why is it always assumed that the Cubs aren't buying FAs because their hands are tied and not because it's simply something the FO believes is a bad idea for the long term health of the organization?

    I was initially encouraged about how people bought into the much needed rebuilding plan, but less than 3 years in, we are seeing more fans wanting to revert to the kind of band-aid spending plans that got the Cubs in trouble in the first place.

    They told us progress wouldn't be linear. They've been pretty transparent about that. I think they're right about where they want to be right now and have set themselves up nicely to put the finishing touches in the next two years.

  • In reply to John Arguello:

    I really think they are very happy with their results in acquiring/developing assets so far. And if they are fortunate and snag Tanaka, they are ahead of schedule. With guys likely coming up in 2014 ( Baez, Alcantara, Bryant, Olt, Vizcaino), they will be settled in for the 2015 year. Putting Tanaka and those guys together with what we already have, I think we will make a run at the playoffs in 2015. The fourth year of Theo's tenure.

  • In reply to John Arguello:

    I have a feeling, that shortly after the Cubs Convention, the Cubs will not only land Tanaka, but it will coincide with the announcement of a finalized Wrigley deal, & with a new TV contract. Call me crazy, or overly optimistic, but I think it's all happening at once.

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    The Yankees fans out there are delusional.
    It's legitimately entertaining how cocky they are about Tanaka going to the Bronx.
    How many horrible contracts do they already have? How many of their position players are on the wrong side of 30? They have no farm system. And they're burdened by the luxury tax.
    Not a wise situation to hop into.

    I agree with frontloading the contract to compensate for a full year of definitive non-contention with the Cubs. It's also a weight off his back. He gets to acclimate himself, make adjustments and get ready to start trying to compete by 2015.
    And if all the "if's" go our way, that might not be far off from the truth.
    (Although 2016 is looking much more likely unless Almora/Soler/Edwards/Johnson simply propel through our system next season.)

  • In reply to Eric Foster:

    I agree with you the Yankee and Dodger fans are pretty sure one of them will get Tanaka. I like laying in the weeds ready to shock them.

  • Really liked this article. If I were to change one thing it would be that I would go after Matt Kemp as opposed to Uggla for the reason that Kemp has a chance to return to all star caliber performance where Uggla will hit with some power, strike out a lot, hit for a low average, and play below standard defense.

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