Hurdles that Kept the Cubs from Extension Agreements

Over the past three offseasons, there has been a ton of talks surrounding extensions to the Chicago Cubs core. The conversations have been happening, behind the scenes, but nothing concrete has developed. In recent years there are confirmed conversations with Javier Baez, Anthony Rizzo, and Willson Contreras. Kris Bryant you ask? Perhaps in a conceptual manner, but there has not been official conversations or offers.

In the 2019 offseason, reports suggested that the Cubs were falling short in these conversations. The idea at the time was that the Cubs weren’t offering market-level deals to the players. Now, no one wins when you discuss $20 million annual salaries. As a whole, fans cannot wrap their minds around that much money – especially for a game they stopped playing when they were kids.

When I’ve talked to some pretty in touch people, there were a couple of interesting ideas that came from the discussions. It seems as if there is a fair market dollar being offered, and potentially agreeable years, but there were terms that were less than exceptional being offered.

Terms? What exactly does that mean? Terms?

The biggest issue that has been whispered to me has been… deferred money. It seems that the Cubs’ front office is leaning into deferred money in several extension offers they’ve had. This makes some sense for the club, especially considering the financial constraints that they’ve told us about these past two offseasons.

With the costs of renovations far-exceeding their expectations (come on Ricketts, if you’ve ever seen Fix or Flip you know the real expenses will exceed your budget!) as well as the costs of starting up Marquee Sports Network (and a delay in being able to reap the benefits of the network) deferred money makes sense. But players are smarter today, especially financially, and deferred money doesn’t entice them to sign agreements.

So what’s the big deal with deferred money?

A dollar bill in your pocket today is worth more than a dollar bill is worth tomorrow. Just how can I say that?

Most deferral deals will spread payments out 20 or more years. Look at Bryce Harper’s rejected contract in Washington in the 2018 season. That deal was a 10-year contract, but it was reportedly deferring $100 million until he was 65 years old. Now, earning millions of dollars sipping Mai Tais on a Caribbean beach when I’m 60 is intriguing, but you lose money that way.

Say Bryce was to accept that deal, without deferred money. If he put $10 million in say, the S&P 500, that additional $10 million a year being invested could net him something between $675 million and $725 million if he waited till he was 65 to pull it out. Sure, the deferred payment would have interest added, but that interest wouldn’t compile to nearly three-quarters of a billion dollars in 26 years. This is why players would prefer to have money in hand as opposed to deferring, your money is more valuable working for you today, than being paid out tomorrow.

I don’t have specifics, but with the Cubs needing to sign several players to extensions, and all of them likely to command a ton of money, AND there being expenses that have run out of control – deferring is a very likely outcome for the Ricketts family.

Bryce decided to leave because that contract was deferred. He actually signed a contract with less per year money (AAV) in Philadelphia than Washington since they were deferring a third of his compensation.

Deferred isn’t a new idea, teams have used it to afford contracts in the past. Bobby Bonilla is the most famous deferred contract, but his situation worked out a little differently than what is traditionally a deferred contract. According to Spotrac.com, there is around $124 million paid out annually by MLB teams for deferred money. The most egregious is the New York Yankees deferment to Jacoby Ellsbury, coming in just over $26 million. That Harper deal would have been nearly four times the deferred money than Ellsbury.

The other term that left players scratching their heads was offering a full no-trade clause and demand to include options.

I will get to the no-trade clause (NTC) here soon, but the options piece is something I am curious about. It seemed that not too long ago, players wanted to protect themselves with an option in the event that their play warranted a bigger/larger contract. Look at Alex Rodriguez.

Rodriguez won the AL MVP in 2007 and promptly opted out of his contract. If you recall, Rodriguez had signed a record 10-yr $252 million deal with the Texas Rangers in 2001, he was then traded to the Yankees before the 2004 season. He would then break his own contract record in 2007 by signing another 10-yr contract valued at $275 million.

The option allowed Rodriguez another shot at cashing in on himself before he retired. But, players today have a different view and are looking for deals without the options.

Look at the Harper deal again. This is a 13-year contract that includes no options – for the team or player. This is somewhat unprecedented for these mega-deals. Then, Anthony Rendon signed his deal in Los Angeles. That is a seven-year, $245 million deal that also includes no opt-outs. Mike Trout’s record $426.5 million deal includes no opt-outs as well.

What is impressive is, the players are asking for these to not be included. I don’t know this for certain, but it seems as though the players are showing this as a token sign to the fanbase that they understand this is a giant commitment and they want to show their commitment to the city by not having an opt-out.

The other commitment is in having a full NTC.

Players tend to be younger and when they hit free agency for the first time are signing contracts that should take them through the end of their careers. Harper signed a 13-yr deal in 2018, at the end of this deal he will be 38 years old. Rendon has a NTC on his deal, which will take him to his age-36 season. Gerrit Cole signed a massive contract as well – with full NTC protection – and it will take him to his age-37 season. Trout’s deal will also keep him wrapped up until he is 37, and has a full NTC as well.

These players aren’t only looking for large investments in themselves, they are looking to invest into the community in which they play.

A lot of these guys are young and just beginning to have a family. They aren’t just looking for a team to play for, they’re looking for a community for their kids to grow up in. I thought it was odd when there were rumors coming out that Harper’s wife, Kayla, was attending some meetings with GMs. It was equally strange that she was prepared with questions that she would pepper them with as well. The Harper’s created a united front, and from whispers, Scott Boras wasn’t always in control of the conversation.

The Harper’s knew that the money and the years would be there. They were going to be wealthy and they would have a deal in place for a long time. So that was never an issue for them, they were actively interviewing the team to find the best fit for their family. That was important as this was going to be where they raise their children and they didn’t want to uproot them in three years or so.

This is a trend that has started in baseball. Perhaps it is a part of a more sensitive era of people, but when a player says they’re looking for the best situation for their family – they actually mean it.

From some accounts, this isn’t the way the Cubs would prefer to do baseball contracts. They’re also in a weird position as whatever deal they do today, will be left for the next president of baseball operations when Theo Epstein leaves after the 2021 season.

We have heard Rizzo, Baez, and even Bryant proclaim they want to finish their careers in Chicago. If there is a deal that would take any of those players to their age-37 season or later, perhaps the Cubs are filling those offers (or suggesting) that they also have several opt-outs (both player and team) and limited no-trade. If the trend is for the latter, perhaps including any of this language is a complete non-starter for the Cubs?

This makes sense. Rizzo has been a phenomenal player for the Cubs. His value has far exceeded his salary. He has had back issues, whether you believe these will continue to be a chronic issue or not, the Cubs have to protect themselves. Why wouldn’t they fight to fit a team option somewhere in it? Why wouldn’t they look to have some unprotected NTC years?

Baez has had two spectacular offensive seasons and has always been a gem defensively. But it seems as if there is a feeling that 2018 is his ceiling and his real floor is something like .240/.270/.435 or an 80ish wRC+ offensively. At his best, he’s in the conversation with the top third contracts (AAV) in the game. At his worst, he’s in the $8 million a season range.

So, as a team, what do you offer them? You have to protect yourself in these situations as you are also looking to have these conversations with Willson Contreras, who is a top-three catcher in baseball. You will likely have this conversation, to a lesser degree, with Kyle Schwarber. The dollars will eventually cause CBT issues, so things like deferring money (doesn’t help with CBT), opt-outs, and having the ability to move a player protects the club.

These details weren’t shared in any specifics, so I cannot guarantee that this is the case for all of them. But, you hear Baez suggest talks were ongoing but they never found mutual terms. Then Rizzo suggested their talks stalled. Then Anthony’s agent, Marc Pollack going public with the news that the Cubs would not discuss an extension.

Jed Hoyer was pressed the last offseason, where he was frank in saying that there was no reason to talk extension since the two sides were too far off. Money and even years are easy things to negotiate. There are comps that the player’s agent brings to the table and comps that the team brings. From there they work things out, but the biggest framework is already there.

But if there were NTC and deferrals and opt-out disagreements, it could cause either side to stop the talks, especially if the other side wouldn’t budge.

Now, I’m not 100% sold on the deferred money bit, it has never really been the Cubs thing to include deferred money. But perhaps in a pre-Marquee Sports Net world, this was something the owners wanted. I would put more money on the idea that the Cubs would provide full-NTC or including team options.

Let’s hope that they figure these terms out sooner than later, there are several players looking at their last year under contract, and if the Cubs cannot reach an agreement with any of them, this will be a pretty rough couple years.