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A Quick 2019 Payroll Estimate Update

Ivan Nova

After trading Ivan Nova and signing a few free agents, where does the 2019 payroll stand???Photo from Getty Images

We???re basically halfway through the offseason, with the officially unofficial date being January 14th. I know it sure doesn???t seem that way, as most Pirate fans have proclaimed the offseason over and the team done before the season starts. There are still plenty of upgrades available and opportunities for money to be spent.

At the start of the offseason, I calculated an estimated payroll at $76,881,467. While not much has changed since, Opening Day payroll has been a big talking point among fans, so I thought I???d provide a quick update of where the team stands right now.

Guaranteed Salaries: $61,900,000

These are salaries from contracts the team is locked into for next season, including signing bonuses and buyouts. This figure is made up of salaries for 11 players, which obviously includes Gregory Polanco???s contract. He???ll more than likely be starting the season on the disabled list???of which length is starting to become more unsure???which means his salary still counts towards payroll. This means the team is going to be paying for some kind of replacement???more than likely a minimum salary one???in the meantime, artificially raising the payroll.

While I called these salaries guaranteed, that???s not entirely true. Players on minimum, split, or arbitration contracts are not guaranteed until the season starts, meaning this amount could theoretically come in lower come the start of the season. This includes the salaries of Corey Dickerson, Keone Kela, and Michael Feliz. While I foresee no scenarios in which Dickerson or Kela are waived before the season, don???t count out Feliz getting the Jared Hughes??? treatment come March 28th. Feliz actually agreed to a split contract, so if this does happen he would be paid 30 days??? worth of a prorated $375,000 minor league salary if cut during spring training. If he’s waived during the 16 days leading up to the season, he would be paid 45 days??? worth of his $850,000 major league salary. Article IX of the CBA details all of this if you are at all interested.

Pre-arbitration Salaries: $9,896,432

This includes every other player on the 25-man roster that isn???t on a guaranteed contract???17 in total per my projected roster. The minimum salary is set at $555,000 for 2019, but since minimum contract amounts are often determined based on service time, many of them will actually have a slightly higher salary than this. To account for this, I built in a blanket four percent raise on the last minimum salary that every player had on the books. I came up with that number by averaging prior raises given to minimum players by the Pirates. It won???t be exact and I???ll update the information for the final total once these figures are available, but it???s at least more accurate than simply using the minimum for every player.

This does include Chad Kuhl and Edgar Santana, who should spend the entire year on the 60-day DL while recovering from Tommy John surgery. In the meantime, they will be paid their full salaries and continue to accrue Major League service time. Like Polanco, replacing these players on the roster will raise the payroll for the entire season, in this case in excess of a million dollars.

Minor League Salary: $904,400

This is the total allocated for players not on the active roster, which is currently for 12 players. The first year 40-man salary for 2019 is $45,300, while the subsequent payment is $90,400. The four players protected from the Rule 5 Draft are at the lower amount, while everyone else is slated for the higher pay.

Termination Pay: $29,162

In an effort to clear roster space, the Pirates have had to designate two players???Alex McRae and Dario Agrazal???for assignment this offseason. The players were on minor league deals, and as discussed already, the Pirates owe them Termination Pay. Thirty prorated days at their minor league salaries totals $14,581 for each player.

Current 2019 Payroll Projection: $72,729,994

Counting the players on the 60-day DL, this obviously leaves at least two spots on the 40-man roster???possibly three. Until Kuhl and Santana are officially placed on the disabled list, the Pirates have to operate at 40 players, but they could still theoretically open the season with more than 40 salaries on the books, so this total could still go up. The Pirates haven???t opened the season with a full 40-man roster since 2016, so it???s not out of the question that this is more realistic anyway.

Competitive Balance Tax and Cash Calculations

While the calculation above more closely resembles one you???ll see on Cot???s or another source, it???s not actually an official total that MLB would produce, but my own blend of CBT and cash principles. After I compared my calculation from last season to that of what was reported by the AP, I came in less than $2 million off; however, I didn???t track it the whole season, but merely came up with it after the fact.

I???ve always wanted to provide the most accurate representation of payroll possible to fans, and since my calculation isn???t exactly that, I am going to try and track the official payroll for 2019 based on the Competitive Balance Tax as laid out in the CBA. The biggest difference is the use of Average Annual Value (AAV) of contracts, which adds all the guarantees up and divides by the length of the contract, which is then equally assigned to each year of the deal. This allows for potentially large differences in what is truly being paid and what MLB is accounting for.

With that in mind, the payroll estimate based on AAV for 2019 is $63,404,994. If there are any questions on this difference, please let me know in the comments.

Finally, as neither of these totals reflect the true cash payments made for the 2019 season, I thought it would be informative to track that as well. This simply includes base salaries for the season, as well as any buyouts paid for or signing bonuses agreed upon this season???under the assumption that these payments are made in one lump sum. In total, the 2019 estimate is $70,904,994.

Ethan is a Pirates contributor to The Point of Pittsburgh. An Accountant by trade, Ethan is passionate about the business of sports and won't apologize for enjoying it more than the actual games. He's a believer in analytics, hasn't played a game since little league, and can be contacted via Twitter @EthanHullihen

3 Comments on A Quick 2019 Payroll Estimate Update

  1. Ethan, thank you for this break down. I’m sure I’ve said it before, but your analysis of the business side of baseball is awesome. It’s something that small market club’s fans need to know. And getting into the nuts/bolts of this is truly intriguing.

    About a week ago, I commented on an article you wrote in December b/c I’m weird and sometimes I go off on tangents/rabbit holes about this stuff.. basically, I tried to deduce through some rudimentary mechanisms what I think the Pirates budget. Is this something you’d ever consider doing? I feel like you’re much more qualified to decipher that information.

    Personally, I came up w/ 3 options:

    1) Hard cap set by the FO at $75M which I have heard rumored one place or another

    2) A predetermined profit from operating income (So if they made $17M in operating profit last year, wanted to ensure a 5% profit, they reinvest the remaining $7.15M into the roster.. yikes)

    3) A % of total revenue. From 2009-2018 that % has been roughly 43.15%, so if the team made $197M last season, the budget would be $85M

    So again.. these were admittedly pretty basic, straight line strategies. Just curious if this is an article we could potentially see in the near future? Thanks!

    • Ethan Hullihen // January 23, 2019 at 10:47 PM // Reply

      Joe, sorry for the delay–I’ve been dealing with a sick kid–but I truly appreciate you taking the time to read and comment. While I understand this is a niche market–I guess well-informed, no-opinion financial information is the niche in all actuality–and this is simply a hobby, I do enjoy hearing people appreciate my work and I do like to get the information out there.

      As for your question, while I understand the thirst to discuss this among some fans, it’s not something you’ll be seeing from me. No offense to anyone who has tried to figure it out, but in my opinion, it is simply too speculative for what I would consider to be fair and objective to anyone involved, and throwing a guess out there doesn’t do anyone any good. While we have rough ideas on some aspects–I wouldn’t talk as in depth on payroll as I did if I wasn’t comfortable with the details–there are just way too many variables out there that are unknown. From indeterminable revenue streams, other salaries and benefits, operating costs, taxes, interest, depreciation–there is so much more than just payroll, despite what Scott Boras wants you to think. I’m not sure if you’ve seen it, but Kevin has done something along these lines in the past (https://thepointofpittsburgh.com/a-discussion-on-the-pirates-revenue-and-payroll/), but again, it’s just not for me.

      The only thing about the budget I’ll say is this…when Huntingdon came out after the Nova trade and said they had already spent some of those savings, that said something to me. If you are spending money and have to clear some away to get more to spend–think buying too many groceries and having to sell some goods to make to the end of the month–that means you’ve overspent your budget. So, in theory, that would mean they are currently around their budget, which would be around mid-70’s. However, this is simply taking someone at their word and reading between the lines. Is that in actuality what they can spend, or what they want to spend? I don’t know, and truly it doesn’t really matter to me. I enjoy tracking the financials; what they do with them is their business.

      Thanks again

      • Thank you for taking the time to provide a thorough response, and I’ll be sure to check out Kevin’s article!

        Definitely appreciate all the content coming from TPOP. So whatever niche you feel like going after, I can assure you that you’ll have at least one reader!

        Hope your kid is on the mend! Cheers, Ethan.

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