ORLANDO, Fla. – The agent with the most at stake in this year’s free-agent market fired the first volley Wednesday at the Cubs and other high-revenue teams measuring their payroll spending against the relatively low luxury-tax thresholds negotiated into the new collective bargaining agreement.
“This is not about the ability to pay; this is about the choice to pay. And what you want to provide your fans,” said Scott Boras, whose star-studded client list of free agents this winter include former Cubs Cy Young winner Jake Arrieta and the top hitter on the market, J.D. Martinez.
The competitive balance – or “luxury” – tax applies to teams that exceed annual thresholds for payrolls and benefits ($197 million in 2018), with increasing penalties for exceeding a second threshold and for violations in successive years. Penalties can affect draft position and levels of draft pick compensation for free agents lost or signed.
That’s one of the reasons the Cubs have no intention of getting into a market-setting bidding war for Arrieta and view acquisitions for 2018 through the lens of a two-to-four-year competitive window.
“You read the CBA, you’ll probably be able to figure out that you’re always better being under it and you certainly don’t want to go over it two years in a row because penalties accelerate,” team president Theo Epstein said. “It’s a factor looking at our future, but I don’t want to talk about our exact approach to it.”
In fact, the players’ union is blamed by many in the industry for striking a poor deal on the luxury tax levels.
But that’s not the point, says Boras, who cites massive revenue increases across the board in the game and even more impressive franchise-value increases in many markets in recent years — including a Cubs value that has more than tripled, to $2.7 billion, since the Ricketts family bought the team in 2009.
“I’m just saying the profit-taking, the profits, the revenues, fully allow a team to pay within the luxury tax area and move where they want to be,” he said, “where they want their fan base to be — in ‘Playoffville’ — and live there and be there for a decade.”
He likens the luxury tax to higher property taxes in “the gated community of Playoffville.”
“The team cutting payroll is treating their family where they’re staying in a neighborhood that has less protection for winning,” he said.
Cubs chairman Tom Ricketts isn’t so sure he agrees with Boras.
“I don’t live in a gated community,” Ricketts said with a smile. “Obviously, everybody has to be careful how they use their financial resources. You can’t spend the same dollar twice so you have to be careful.
“But I think ultimately it just comes back to, you’ve got to build your organization and hope that you’re developing players. Otherwise, no matter how much money you have you can’t win.”
The Cubs certainly took that approach to rebuilding the organization to historically successful levels the last three years. But even within that process, the Cubs exceeded the CBT threshold and paid a luxury tax for the first time in 2016, the year they won the World Series – with eight eight-figure salaries on the books, including two players with nine-figure mega-contracts.
“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.
“To not have championship pitchers on your team – there aren’t many of them,” he added. “There is no one with the championship-caliber numbers of Jake Arrieta in this market. We know that.”
If the Cubs are going to exceed the threshold, they might do it for a dive into what’s widely considered a deeper market next year.
Either way, they don’t seem to be moved by Boras’ argument – even when he cites the higher-spending teams reaching the playoffs. Teams with five of the top nine payrolls made the 10-team playoff field this year.
On the other hand, the team that won the World Series, Houston, ranked 18thamong the 30 payrolls. American League pre-October favorite Cleveland was 17th. And wild-card qualifiers Minnesota and Arizona were among the bottom third.
“I think the message the last couple years is the correlation between what you spend and how many games you win is going down,” Ricketts said. “And really, what teams have to do to win is focused on younger players. I think that’s the message that teams should take away, not so much worrying about who spends the most.”
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