Cap dancing: Cubs chairman doesn’t deny team uses MLB’s luxury-tax threshold as salary cap
With or without new TV income fully realized, what’s increasingly clear is that Cubs stars Kris Bryant and Anthony Rizzo are right when they say teams are using the competitive balance tax threshold as a salary cap — including the Cubs.
MESA, Ariz. — Before the 2015 season, when the Cubs’ World Series and subsequent spikes in revenue were mere aspirations, business president Crane Kenney told a business publication:
“Basically, my job is to fill a wheelbarrow with money, take it to Theo’s office and dump it.”
Consider Kenney’s wheelbarrow capped. Or at least very sticky.
Because five years later, with record team revenues rising and a new TV network about to launch, there’s a lot more money going into the wheelbarrow than landing on baseball president Theo Epstein’s office floor.
Maybe it’s not fair to include Marquee Sports Network as a revenue source until at least the other half of cable subscribers in Chicago have access to it on their services. (There’s no indication a carriage deal with Comcast/Xfinity is close to happening, although the streaming service Hulu ).
But with or without that new income fully realized, what’s becoming increasingly clear is that Cubs stars Kris Bryant and Anthony Rizzo are right when they say teams are using Major League Baseball’s luxury-tax threshold as a salary cap.
And Cubs chairman Tom Ricketts didn’t deny the Cubs are one of those teams when he was asked repeatedly about the subject during his annual spring-training new conference with reporters.
“I think the competitive-balance tax is a factor every large-market [general manager] at least has to put into their calculus when they create their teams,” Ricketts said when asked directly whether players are right when they say the threshold is being used as a salary cap.
“It’s not just a financial penalty. It’s a financial penalty that grows over time for the number of years you’re above the threshold. And then it gets into a player penalty, which you have to be careful to avoid. It’s a factor. I don’t think it’s a defining factor, but it’s definitely a factor that every team has to deal with, at least that every large-market team has to deal with.”
The Cubs are one of three teams that exceeded the threshold last year, and without shedding salary, their payroll this season is projected to exceed it again.
Ricketts already raised the subject of the CBT on his own as a factor when asked an earlier question about whether, as Bryant said, the Cubs have the wherewithal to keep their entire core together on contract extensions “if they want to.”
And when asked if he would support raising the threshold significantly, or even tying it directly to industry revenue increases, in the next collective-bargaining agreement as a way to maintain a big-market competitive advantage, he would not offer such support:
“I’ll leave that for the league,” Ricketts said. “I don’t want to speculate on what we’re going to negotiate in the next CBA.”
The bottom line remains the bottom line: The revenues for a franchise worth well north of $3 billion continue to rise through media rights, ticket prices, merchandising and sundry other streams — with another spike on the horizon projected through Marquee.
And yet an 84-win team that missed the playoffs and chapped the brass remains largely unchanged because of a payroll budget that remains largely unchanged as it hovers around the arbitrarily low luxury-tax threshold.
Ricketts said the annual meeting Monday with the front office, manager David Ross and full spring-training squad was “truly inspiring.”
“Barring some kind of crazy injuries, I think we should win our division and get back in the playoffs,” he said.
If it happens, it won’t be because he and the rest of the ownership family suffered the inconvenience of adding enough to Kenney’s wheelbarrow to provide for, say, a reliable starter this winter or anyone so much as coming off a good season.
In fact, if they don’t win the division because of injuries and depth issues — like last year — those depth issues can fairly be dumped on Ricketts’ office floor because of the budget stasis.
The luxury-tax level rose less than 1 percent from last year to this year ($206 million to $208 million) and will rise by the same figure next year, the final year of the CBA.
Meanwhile, MLB rosters grew from 25 players to 26 this year. The threshold increase is less than half the average big-league salary.
So when the mega-revenue Red Sox trade superstar Mookie Betts and big-ticket pitcher David Price in a salary-dump trade to reset the CBT penalties and the moneybags Cubs operate like they must choose between keeping Bryant or Javy Baez because they can’t afford both, can anyone have faith in the wheelbarrow theory anymore?
And what might history have to say, in turn, about how much the franchise did to maximize this competitive window?
“That’s in Theo’s camp. That’s his decision,” Ricketts said of the Baez-and/or-Bryant question. “We’d have to take a look at what it would all mean for us financially.”
Ricketts wouldn’t say what the club’s payroll budget is this year, whether it’s fluid or fixed, whether any salary must be shed this season to make budget or whether any of that depends on how well the team starts.
He also said the cost overruns on stadium renovations he recently mentioned to a business journal were taken out of context and have no bearing on the team’s ability to fully fund the baseball operations department.
Which seems to be true if full funding is roughly the luxury-tax mark.
And if Marquee becomes fully distributed and the financial boon the team anticipates? And if the luxury-tax thresholds don’t rise as fast? Would this ownership group be willing to blast past the threshold, taxes be damned?
“We’ll have to cross that bridge when we get there,” Ricketts said. I can’t speculate on exactly how much the Marquee Network will change the financial picture of the team and can’t speculate on where the competitive balance tax is going.”
Doesn’t look like Kenney will need a bigger wheelbarrow anytime soon.
Source : Gordon Wittenmyer Link