There is one last spot in the Chicago Cubs rotation that needs to be filled, and it sounds like the organization is still hoping that their prodigal son returns. Even with reports that Jake Arrieta is expecting six years and $160 million (per Bruce Levine’s sources), the Cubs sound like they are interested in the return. Bruce also claims the Cubs are very much in on Jake, as well as Yu Darvish and keeping tabs on a number of other pitchers.
I do not think that Jake is close to signing, anywhere, just yet. With Tyler Chatwood being the only starting pitcher of note to sign a multi-year deal, Jake and his team want to wait things out until teams begin to offer more than four years. In fact, on Inside the Clubhouse, AM-670 The Score’s Bruce Levine said that both Arrieta and Yu Darvish is waiting for teams to offer a sixth year. Scott Boras, Arrieta’s agent, mailed a 75-page binder to MLB owners explaining why they need to bring Jake in.
We don’t know exactly what was in that 75-page dossier, but I can only imagine it was filled with similar content that Scott spewed around the Winter Meetings about his client. Here he claimed teams were purposely deciding to not move into “Playoffville” by not attempting to sign Jake. Most of Scott’s rambling almost sounded hostile and I couldn’t imagine owners and executives weren’t crazy about him taking deep dives into individual team’s finances. But within a lot of his hard selling (mostly through guilt), Scott made some good points.
“This isn’t the Windy City. This is the economic hurricane in Chicago of what the Cubs have done,” Boras said, lauding ownership and Epstein for the Cubs’ revenue spike. “It is something where it is the value of the franchise, the amount of money that was rolling in, the revenues annually and in the future that the Cubs can do whatever they choose to do in this free-agent market and the next one.”
Could re-signing Jake work?
I have talked a lot about the penalties of the luxury tax, but to say that the Cubs couldn’t withstand those penalties would be an ignorant statement. First, let’s take a look at the Cubs current payroll.
Per Spotrac, the Cubs have $118,652,381 tied up in current contracts. According to MLB Trade Rumors, the Cubs will likely add another $23.8 million in arbitration salary. The team will also have about $7.5 million in pre-arb salaries (excluding any raises the team gives out) and probably $6.5 million for Steve Cishek’s deal (not counted in total salary yet). Then let’s add another $5 million in contracts the team buys from their minor leagues throughout the season as well (potentially high estimate). This leaves the Cubs with roughly $162 million in committed salaries for the 2018 season.
The luxury tax will be $197 million in 2018, leaving the Cubs with about $35 million to spend. The team has tried to keep about a $15 million buffer between their payroll and the tax. This leaves the Cubs with around $20 million to spend in 2018.
The tax is going to jump to $206 million in 2019 and $208 in 2020. That additional room could allow the Cubs to go over the tax in 2018 while staying under the threshold in 2019. Why this is important is, the tax is compounded in years two, three, and four. Under the 2016 CBA, first-time offenders would pay a fee of 20% on the dollar, second-time offenders would pay a 30% on the dollar, and third or subsequent time offenders would have to pay 50% on the dollar.
So let’s play out a Jake Arrieta re-signing. The AAV is going to be $25 million. He is not a $30 million a year type, those guys are Clayton Kershaw and Max Scherzer. Jake is not one of those guys. But he is an elected official of Playoffville and will get $25 million a season.
So we add Jake’s $25 million to the Cubs payroll. This brings them up to $187 million in 2018 salaries. Again, not too shabby. They remain under the cap, with $10 million to spare. They might be handcuffed come the trade deadline, but this is the path we’ve chosen. Now let’s move to the 2019 season.
2019 Free Agency and Tax implications
With current salaries, arbitration adjustments, pre-arb deals, and Arrieta, the Cubs payroll will be roughly $200 million. This doesn’t account for any other free agent signing or trades or minor leaguers the team calls up. That would leave the team with $6 million to remain under the threshold.
It is expected that the Cubs will go over the threshold in 2019. The team, like many other organizations, will be gunning hard for one of the bigtime free agents coming out that season. The biggest name on their shopping list will be Bryce Harper, and it is looking like someone will likely pay him $40 million a season. So let’s add $40 million to the Cubs payroll, bringing the total up to $240 million in 2019.
Being a first time offender (probably) the Cubs would pay $6.8 million to the tax. With arbitration increases in 2020 and the threshold increases to $208 million, let’s assume the Cubs have a $250 million payroll. This would result in the team paying $12.6 into the tax. These are not astronomical by any means. So financially speaking, they could re-sign Jake, they could spend $40 million on a player next offseason, and the tax hit wouldn’t be that bad.
Other penalties
When you see 20 and 30 and 50 percent on the dollar taxes, it scares a lot of people, I know it scared me. But when you do the math it isn’t that horrible. When you look, the Cubs have revenues over $400 million, so paying out a $15 million tax is doable (easy for me to say).
What is tough is the other penalties the tax brings with it. So when the Cubs sign Bryce Harper to that 10-year $400 million deal, they will lose their second and fifth highest draft picks in the subsequent draft. Additionally, if a player were to leave the Cubs after being offered a Qualifying Offer, the Cubs would only be able to receive a compensation pick AFTER the fourth round.
So in the very real scenario where Kris Bryant tests free agency, the Cubs would only get a pick that is essentially a fifth rounder in return. That really hurts.
This is a huge reason why I would consult the Cubs to let Arrieta walk. If he is on the roster five years from now, he could be the reason the Cubs are left with a number of fifth-round picks in 2023, 2024, and 2025 drafts. I will take the remaining careers of Bryant, Anthony Rizzo, Javier Baez, Albert Almora, Kyle Schwarber, and Willson Contreras over the remaining career of Jake Arrieta.
Sure the Cubs would do their damnedest to re-sign every one of those guys, but Boras will take Kris to free agency. If he reaches the open market, he will likely get one of those $400 million deals that will be kicked around a lot next offseason.
So while Jake might be the only legitimate resident of “Playoffville” on the market, I would stay away unless he will accept a four-year deal with a vesting option. Even then the Cubs are playing with poison.
