Rebuilding Tigers’ lofty payroll eases a bit in 2018
They had a 64-98 record in 2017, tied for worst in big-league baseball.
And yet the Tigers were on the flip-side in player salaries. They were third, behind the Dodgers and Yankees, among 30 teams and were penalized for it, with a luxury-tax fine of $3.7 million tacked to the $200 million-plus the team acknowledges it paid in 2018 when all costs were factored.
It was a cruel slice of irony for the Tigers, competitively and financially. A team was paying exorbitantly, and being treated punitively, for a product that was demonstrably bad.
With many of last year’s wealthy players now destined to be playing elsewhere — Justin Verlander, Justin Upton, J.D. Martinez, Ian Kinsler, etc. — the Tigers are expected to begin the 2018 schedule in the mid-range of big-league payrolls. Although numbers are far from precise because of signings and contracts that aren’t complete, the Tigers are projected to have a payroll of $130 million-$140 million, likely placing them anywhere from 14th to 16th in Opening Day salaries.
One prominent national analyst, Spotrac.com, has a slightly lower forecast of $111.845 million, although a Tigers executive, who did not wish to be identified, acknowledged the figure likely will be closer to $135 million.
Still, the Tigers’ lighter overhead could drop costs by $60 million-$70 million in 2018, according to a Tigers source with knowledge of the numbers, who asked not to be identified.
The savings should lighten red-ink marks that annually have been part of the Tigers’ financial ledger and figure to turn somber in 2018 as rebuilding’s realities bite hard, with lower attendance and less ancillary revenue probable, if not certain.
Even during their 2006-14 heyday, when they five times made the playoffs and twice earned a ticket to the World Series, the Tigers are known to have been annual money-losers because of their heavy spending and mid-market revenue stream. The upside for the Ilitch family: A team that was purchased in 1992 for $82 million is now appraised by Forbes.com at $1.2 billion.
What also is known inside the Tigers front office is that money isn’t the driving force behind trimming player pay in 2018 and in the immediate years beyond.
Adding a wide swath of younger talent, all in a bid to build a more serious long-term contender down the road, is the strategy, much as baseball’s last two champions, the Cubs and Astros, did earlier this decade when they went young and saw title teams later coalesce.
Slimmer salaries are a natural early dividend for the Ilitch family, and for primary overseer, Chris Ilitch, who decided after his father’s death in February of last year, the Tigers would accept a second consecutive luxury-tax hit in 2017. They would trade players, if the market cooperated, hoping to re-seed their farm, but not fire-sale their way out of sky-high contracts Mike Ilitch sanctioned as he made a long and failed bid to bring Detroit a World Series parade during his reign.
Last year’s plummet, however, was the product of pushing an aging team past its competitive limit. Following the elder Ilitch’s passing, it led to the go-ahead for a full-throttle roster reconstruction. With the remodeling will come salary relief for a mid-market big-league team that had instead spent in recent years on the level of baseball’s elite coastal money-makers, the Yankees, Red Sox, Dodgers, Giants, Angels, etc.
Differing payroll figures, while not greatly out of line with each other, reflect a reality that can challenge assessors and confuse fans:
Big-league payroll is composed of elements beyond player salaries.
It is why anyone who burrows into the data provided by ever-popular Cot’s Baseball Contracts, a subset of Baseball Prospectus, will find salary math to be at odds with overall figures.
Big-league payrolls encompass not merely a team’s 25-man active roster, but all salaries on a team’s 40-man roster.
Assorted costs are involved: Medical expenses (about $14 million annually for most clubs) are part of the overall figure. So, too, is insurance on player contracts, as well as workmen’s compensation premiums, unemployment and Social Security taxes, meal money and gratuities, spring training overhead, player bonuses, All-Star Game expenses, travel and moving fees. College scholarships, which many players secure when they’re drafted out of high school as a fallback should baseball not prove fruitful, also apply.
It is a significant chunk of change, these additional outlays. And they do not include various wrinkles in a team’s annual payroll status.
The Tigers, for example, four years after Prince Fielder was traded to the Rangers, and two years after he retired because of injury, are still responsible for $6 million each season through 2020 as part of the original $214-million deal he signed with the Tigers in 2012.
There is another trapdoor in simply computing yearly salaries as a measure of a team’s paydays. Player compensation isn’t always aligned neatly with that year’s figure. Division is required. A player with a multi-year contract, for differing amounts of money throughout the course of that contract, will have the “average annual value” of his deal applied to a year’s payroll numbers.
A classic example there is Tigers pitcher Jordan Zimmermann. Two autumns ago he signed a five-year contract for $110 million that will have paid him, beginning in 2016, salaries of $18 million, $18 million, $24 million, $25 million, and $25 million. In terms of big-league payroll accounting, however, the Tigers will be shown to have paid him the average annual value of his contract, which is $22 million ($110 million divided by five).
Big-league salary intricacies surface in sundry ways.
Begin with how a team’s figure, for luxury-tax purposes, is computed. It is established on the regular season’s final day. That was fortunate for the Tigers and for their luxury-tax fine in 2017, all because Verlander, Martinez, and Upton, among others, were traded in July or August.
But while luxury tax penalties were trimmed when the players and contracts were dealt, overall savings were relatively minor, at least for 2017.
The Tigers paid more than 80 percent of the combined $50-million-plus owed Verlander and Upton, and two-thirds of the $11.75 million pulled by Martinez.
The Tigers will continue to pay $8 million this year and next as part of Verlander’s long, nearly $200-million contract that has a minimum of $56 million remaining, of which the Astros must absorb $40 million.
The Tigers also are sending $5 million to Anibal Sanchez as an option buyout when they chose not to reunite with him in 2018, which otherwise would have cost them $16.8 million.
The Tigers get one break ahead of 2019 as another of their testaments to Mike Ilitch’s largesse, Victor Martinez, is almost sure to depart, and with him, the $18 million the Tigers are obliged to pay in the final year of his deal.
But saying goodbye to Martinez does not translate into an overall payroll knockdown heading into next season. At least not as the roster is currently constructed.
Arbitration on horizon
Nicholas Castellanos, who last week signed for slightly more than $6 million, will be arbitration-eligible again next year. Assuming his numbers rise in line with projections for a player who in March turns 26, Castellanos could approach $10 million in 2019.
Michael Fulmer, now the Tigers’ ace pitcher, will be looking at arbitration in 2019, as well. So, too, will catcher James McCann, as well as the team’s anointed bullpen closer, Shane Greene.
Presuming they have even reasonable health in 2018, any savings on Victor Martinez’s paychecks likely will be sopped up.
Forecasts for 2018 do not include the possibility, if not probability, that one or more of the above quartet will be traded, just as Verlander, J.D. Martinez, Upton and Kinsler were dealt for prospects designed to deliver future inventory that can develop at roughly the same time and for what the Tigers hope will be an extended playoff run.
Spending limits unclear
That requires a quantity of blue-chippers from which a quality core roster is shaped. And those players arrive by way of the draft, international signings and trades, not to mention future free-agent muscle of the kind Mike Ilitch tended to spend lavishly on for much of his final 13 years as Tigers owner.
Chris Ilitch hasn’t yet signaled if that brand of spending is part of a future strategy.
But his decision to accept last year’s luxury-tax welts and wait until trades for younger blood could justify those swaps suggest he could be closer to his father’s ways than might have been thought initially.
For now, a makeover that his father probably should have authorized two years ago is under way.
Victories will be far fewer in the early going. It may come as consolation, at least to an owner, that bad contracts are diminishing, as well.
2017 LUXURY TAX
Five teams exceeded the team payroll limit of $195 million when additional 40-man roster and medical costs, etc., were factored. Repeat offenders, which includes the Tigers for overruns in 2016 and 2017, are charged at higher rates.
Dodgers: $244 million payroll ($36.2 million luxury tax)
Yankees: $209.3M ($15.7M)
Giants: $186.4M ($4.1M)
Tigers: $190.4M ($3.7M)
Nationals: $188M ($1.45M)