Thoughts on How Cubs Will Handle Roster as Payroll Approaches CBT Penalty Levels

The Cubs finally made another big move, facilitating a long-overdue reunion with Cody Bellinger that rounds out the roster by giving them more lefty pop and a solid veteran presence. It also makes the payroll higher in more ways than one, though we won’t be getting into the specific impact on local dispensaries’ bottom lines in this piece. The more pressing matter is what this addition does to the team’s competitive balance tax figures.

According to Roster Resource, the Cubs are now at roughly $234.2 million in CBT payroll — not to be confused with Sunnyside’s CBD payroll — for the 2024 season. That’s a little less than $3 million below the first penalty threshold of $237 million, but that buffer will shrink if Bellinger opts out after either of the first two years of the deal. CBT payroll is calculated using the average annual value of players’ contracts, and Bellinger’s AAV will change if he doesn’t play out the full three-year term.

His $80 million pact carries a $26.67 million AAV on paper for the time being, but his salary is $30 million in each of the first two seasons and $20 million in the third. Shaving the last year off boosts the AAV to $30 million, thus adding to the Cubs’ payroll and pushing them closer to penalty territory. It would likewise boost their 2025 and ’26 numbers, though the penalty thresholds increase each year and we obviously don’t know what other moves they’ll make in the future.

A lot of the conversation in the wake of the Bellinger news is that the Cubs have less wiggle room than the front office typically likes to maintain, meaning they may have to pull off some trades. I get where those ideas come from, but I don’t believe the situation is nearly as binary as all that. Despite what Tom Ricketts recently said about spending right at the first tax threshold being “kind of our natural place,” it’s entirely possible the budget includes the ability for Hoyer to spend more than $237 million.

The biggest clue there, other than the whole business of selling ad patches on their jerseys, is actually the same thing that has many believing a money-saving trade is coming. Is it more likely that Hoyer put himself right up against his hypothetical budget max knowing he’d have to make a trade or that he did this because he still has more room to add? Both things could be true, of course, but I tend to think the latter makes sense in terms of how this front office likes to operate. When in doubt, refer to Occam’s razor.

During their CubsCon panel, Hoyer and Carter Hawkins talked about how difficult it is to pull off a trade and how a vast majority of those conversations end up going nowhere. As such, banking on a trade to clear space after the fact is a pretty risky proposition. Signing a free agent, on the other hand, is far simpler. I suppose it’s possible that they could already have a deal or two worked out contingent on Bellinger signing, though showing their hand like that doesn’t track with the way the Cubs work.

The other wrinkle here, and this is something I wasn’t clear on when the Bellinger news first broke, is exactly how his AAV number shifts if and when he opts out. That’s why I turned to my online buddy Jon Becker, a self-proclaimed FanGraphs contract crank who is a genius when it comes to these numbers. As Becker explained, an opt-out would shift the AAV retroactively on a pro-rated basis over the years Bellinger doesn’t play.

Just in case that wasn’t clear, and I can’t imagine it was for most of you, opting out after the first year would bump the AAV to $30 million and add $1.67 million to the Cubs’ payroll in 2025 and ’26. If Bellinger leaves after the second year, the full $3.33 million would be charged to the ’26 tally. They won’t make an actual payment, mind you, it’s just the way the accounting works out.

When viewed that way, the deal looks even better for the Cubs because it alone can’t push them into penalty territory. Not based on the way things currently stand, that is. So the AAV hit would be lower than initially believed, the CBT threshold increases by $4 million each season, and Bellinger opting out would also mean a big drop in total payroll. Works well from a number of different angles.

Another matter of context here is that all this talk about where they sit relative to the CBT assumes the Cubs will make no other moves between now and the trade deadline. If there was truly an edict to avoid penalties, signing Bellinger would put Hoyer in a position where he is either forced to trade players just to save money or he’s prohibited from signing anyone else. There’s just no way in hell that was an option he’d willingly choose.

If we go back to early December, which seems like six months ago at this point, it felt like the budget was being set somewhere below the second penalty level of $257 million. Their fruitless pursuit of Shohei Ohtani almost certainly allowed for an even higher payroll, but those additional funds were not then earmarked for “normal” free agents because the resultant revenue-generation calculations don’t work the same. Just for the sake of this conversation, let’s say Hoyer has a budget of $250 million this season.

This is where we need to note the difference between the Cubs’ CBT number and their actual payroll, which is what Ricketts is responsible for in real time. That latter figure is roughly $225 right now, giving Hoyer about $25 million. But adding that much would probably push the Cubs beyond the second penalty level, thus triggering at least a 20% tax as first-time offenders and likely a 12% surcharge for being more than $20 million over. While another $6-7 million isn’t much relative to the total, Ricketts has spoken out more than once about his disdain for dead-weight losses.

Operating under those guidelines and assuming they’d like to maintain $5-10 million in wiggle room for in-season additions caps them at around $250 million in CBT and $240 million in actual payroll. That means Hoyer has maybe $15-16 million left to spend, which seemingly rules out other Scott Boras clients like Matt Chapman, Blake Snell, or Jordan Montgomery. J.D. Martinez might still be an option and should fall well within that proposed price range.

The 36-year-old slugger recently turned down an undisclosed offer from the Giants because he reportedly “didn’t want to go there,” but we don’t really know what that means. It could just be part of the Giants’ long-running difficulty when it comes to luring free agents, or maybe it’s because the offer was laughably low. Or it’s because Martinez didn’t like the roster fit.

To put a bow on what may have become a rambling mess by this point, I’ll reiterate once more that I don’t believe the Cubs are operating with the first tier of the luxury tax as a hard cap. I’d even be willing to believe the second tier isn’t prohibitive under the right circumstances, though Hoyer would probably have to mortgage his ass to get there because his seat would get quite warm if things didn’t work out. They could still end up making trades that clear a little cash, but salary relief won’t be the driving force behind those moves. Rather, it’ll be the same opportunistic mindset that has dictated everything thus far.

One such possibility is sending Drew Smyly, whose role on the staff is hardly defined, to a team that really needs a starter. That would trim as much as $8.5 million depending on the structure of the deal. Patrick Wisdom could find himself without a position now that Bellinger is back, and a team desperate for power from the right side might see his $2.725 salary as a tremendous bargain. Again, those would be about taking advantage of the moment should opportunities present themselves.

The Cubs’ value-based model is based on maximizing the money they end up spending rather than simply finding new ways to be cheap, though the two things can certainly appear to be one in the same much of the time. Patience doesn’t always feel like a virtue from the outside and I doubt Hoyer was always calm on the inside, but it worked out. They ended up getting what appears at the outset to be tremendous value in Bellinger, who gets another chance to prove his rough years in LA were injury-based exceptions to the rule of his status as a top-tier player.

Best of all, the yoke of his pending status has been removed from our collective neck and we can now stand up a little straighter to fully enjoy the spring. Congratulations, everyone, we made it!

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