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A payroll primer: Exploring the questions, complexities of Cardinals' spending for 2023

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2019 Cardinals spring training

Cardinals ta president of baseball operations John Mozeliak and Chairman Bill DeWitt, Jr. talk during practice on Monday, Feb. 18, 2019, at Cardinals spring training at Roger Dean Stadium in Jupiter, Fla. Monday was the first day of workouts for the full squad. Photo by Christian Gooden, cgooden@post-dispatch.com

Sports columnists Ben Frederickson and Jeff Gordon run through some popular names in the free-agent class and assess their potential fit with the Cardinals.

LAS VEGAS — While the seeding and standings suggested that the National League Championship Series between San Diego and Philadelphia was a win for the underdogs, an upset conjured from the unpredictability of baseball’s new expanded format, it didn’t seem all that surprising when you sorted teams in another way.

The Padres and Phillies had two of the top payrolls in the game, and the National League side of the playoff bracket featured four of the six teams who would pay a luxury tax. Five of the six NL playoff teams had payrolls of at least $210 million, by seasons end.

“The National League had bigger-spending playoff teams,” Cubs president Jed Hoyer put succinctly during a conversation he had with several Chicago writers and me.

The cost of contending is going up, it seems.

That was the thrust of the question I asked John Mozeliak weeks ago.

His answer has launched millions of speculations.

“Our payroll is going up,” he said. “That’s a fact. Payroll is going up.”

Asked again this week if he could offer an adjective to describe how “up,” Mozeliak declined. But through additional reporting, interviews, and Post-Dispatch research it was possible to illustrate in Thursday morning’s paper the direction the payroll is headed. (You can find that story here.)

Summary: Cardinals are aiming to get back on the upward curve they had planned before the pandemic, one that would take their 2023 opening day, 26-man roster close to $183 million. That is right in the $180 million to $185 million range that’s possible to open 2023, per sources.

Discussing payrolls is tricky because there are many sources out there, and not all of them use the same structure to arrive at their estimates. Some use 40-man roster payments. Some focus on a 26-man roster. Some go with the known salaries, estimate the arbitration salaries, and do not include the players who make around the minimum, or estimate those salaries, too. That leaves you, the reader, with a lot of numbers dancing in the conversation.

It can prompt questions and confusion.

And we haven’t even gotten to the complexity of the Nolan Arenado trade.

So, let’s do that.

It’s taken some time to report this week and confirm the following information, but here is a rundown, in clear and concise (I hope) bullet points, about some questions regarding the payroll.

• The Cardinals signed Adam Wainwright to a one-year, $17.5-million contract for 2023. That contract does include $10 million in deferred money, but the entirety of that deferred money does not come off the payroll. It has to be paid now, so that MLB, the union, and the Cardinals know the money will be there when it’s owed. If there is any rebate it’s related to the present-day value of that money. So, say a player has money deferred, it’s possible slightly less will count against the payroll – whatever present-day value will grow into, say, the $10 million when owed to the player. So the entire $10 million is not removed from the current payroll, but a portion less than 70% of it is. Quick and simplified math using an online inflation calculator that presumes an annual growth of 2.5%: If the team deferred $10 million to a player and owed it in 2030, the current-day cost would be $8.2 million. The difference for current payroll is $1.8 million. 

The benefit to the team is that difference, not the entire amount of money deferred but some that allows for additional spending on the current team. 

• Simply put, when it comes to MLB accounting, deferral money counts against the payroll in the year it is earned, not the year down the road when it is paid. 

• There are two tiers to the deferred money in Arenado’s ultra-complex deal following the trade. There is the money Colorado negotiated to defer (that is to be paid with interest, according to a source), and there is deferred money the Cardinals negotiated directly with Arenado to make the trade possible (no interest). Arenado’s salary for 2023 is $35 million. Of that, he agreed to defer to $6 million that the Cardinals will pay later (installments from 2032-2041). Please see above explanation of deferred money.

• That brings us to the money Colorado is sending to the Cardinals. And this is important when understanding the Cardinals’ view of their payroll headed into this offseason and 2023.

The Rockies agreed to send two guaranteed payments -- $14.4 million in 2021 and $16 million in 2023. Both payments are related to his 2021 salary.

The first one paid part of his salary for that season.

The second pays the deferred part of his salary from that season.

That $16 million does not count as a rebate on Arenado’s 2023 salary with the Cardinals, per source.

That’s not how the trade was structured.

Remember the reports at the time of the trade about how the Cardinals were not going to pay any of Arenado’s 2021 salary, or that the Rockies were ultimately covering the entirety of it. That is where this $16 million comes in and why it was not contingent on Arenado accepting his opt-out. I know: The layered deferred makes this confusing, and it’s one reason I’ve tried to write it as clearly as I could with what I could confirm. Now, with more understanding, I can explain even more.

The Rockies, in an agreement with Arenado, deferred a substantial portion of his 2021 salary to make the trade happen. The $16 million coming in 2023 goes toward the money owed Arenado in the 2021 season and covered by the Rockies to make the deal possible for the Cardinals. This is one example of how deferred money helps a team. Again, it is not a subtraction from the coming year’s payroll for the Cardinals, per sources.

• Due to Arenado opting in for the remainder of his contract, the Rockies will end up paying $51 million, and that does include payments from 2024 to 2026. In 2027, Arenado has a guaranteed deal for $15 million added by the Cardinals and funded by them.

• When calculating payrolls, MLB and many teams, like the Cardinals, include the deferred money in part to avoid creating a loophole when it comes to luxury tax penalties. For example: The team could negotiate a deal with a player that pays a lot upfront, really puts a team over the tax threshold, and defers a bunch to later – thus taking a luxury tax penalty in the first year of the deal, but finding a way to avoid that later in the deal.

• For luxury tax purposes, the Cardinals finished the 2022 season with a payroll around $170 million, and that ranked 12th in the majors. Given their flush of revenue from this past season due to ticket sales – they can thank the fans and Albert Pujols – they should climb back into the top 10, where they spent time nestled the previous decade.

• A look at recent opening day rosters shows how the Cardinals were headed for around $168 million for the 2020 opener that was delayed. Coming out of the two years with zero or limited ticket sales, the Cardinals had scaled back to around $154 million for the opening day payroll in 2022. That was about $24 million less than they would have been at the growth rate they had before the pandemic – a growth rate that, yes, dovetails with the yearly uptick in broadcast rights fees.

A jump back to that curve and $180 million would mean an increase from 2022 opening day to 2023 opening day of 16% or more in spending.

• Infielder Tommy Edman, who finished second in the Gold Glove voting at second base and second in the Gold Glove voting for utility player, will receive an after-the-fact raise for 2022. Edman qualified for a bonus created in the new Collective Bargaining Agreement. As one of the top players this season who was not yet arbitration eligible, Edman will receive a cut of a bonus pool, and that will be added to his 2022 salary.

That bonus will help set the starting point for Edman, who is entering the arbitration process this winter for the first time and will get a substantial raise.

• When cracking open the spreadsheet or – as I do – getting out the yellow legal pad to itemize the Cardinals’ payroll obligations and potential flexibility for any season, please keep two things in mind. First, signing bonuses are spread out over the life of the contract for purposes of payroll calculations, even if they're paid in some cases right away. Any grid you use should explain how it includes signing bonuses.

Second, players with less than three years of service time who are not eligible for arbitration, will make a minimum of $720,000 in 2023. The Cardinals increase that salary slightly based on a players service time and a publicly available WAR statistic, according to a memo sent to agents years ago that the Post-Dispatch also read. Andre Pallante and Lars Nootbaar, for example, will make more than the minimum given their performance and service time, and so too with Brendan Donovan. Other players, with less time in the majors, will make closer to $720,000 or exactly $720,000 when the Cardinals offer them contracts in spring training.

• MLB Trade Rumors and Baseball Prospectus’ Cot’s are good places to go for arbitration salary estimates. Cot’s currently pegs Jordan Montgomery for a $9.5 million salary in the arbitration process. MLB Trade Rumors estimates a $10.1 million salary for the lefty.

Using estimates from sources, reporting, and comparable players I put together a 24-man roster for the Cardinals, leaving room for a catcher and a bat, as their shopping list suggests. I used all of the above information to reach an estimate of about $164.5 million committed money at the moment, give or take based on pre-arb and arb salaries.

There is room to grow.

And hopefully, with this info, you have a sense how much.

If you have additional questions, I’ll check the comments and do my best to address them or find the answers to address them.

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