The almighty dollar

Welcome to Day One of the Cincinnati Reds offseason.

This is the first column in a series about how the Reds can get the next five months right.

The Reds 2014 season plainly disappointed. And passing judgment on the wisdom of the moves that produced their roster and record is part of a successful process of moving forward. Those who ignore the lessons of Jack Hannahan are doomed to repeat them.

But to avoid the polarizing blame game, these posts will stay forward-looking and resist obvious temptations. We’ll identify the right goals for the Reds, put them squarely in front and move toward them. If you think Walt Jocketty or Bryan Price should be fired, those are legitimate topics, just not for this series of posts. The decisions about the roster are controversial enough without adding recrimination toward specific people into the mix. For these posts, let’s bracket that off. 

So what topics will be addressed? Getting the Offseason Right will tackle big-picture strategies, including the wisdom of blowing up the team; the importance of valuing hitters over pitchers and what type of hitters the Reds need; the free agent and trade market for left fielders; the terrible twos; the pros and cons of trading a starting pitcher, and if so, which one; how to unleash the Cuban Missile; and a plan for building a better (and cheaper) bullpen.

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But of course we start with money. Always with the money.

A competitive major league baseball team costs plenty — several arms and quite a few legs. The happy news is that the Cincinnati Reds can afford many of these parts.

Several income streams contribute to the Reds’ revenue and almost all of them are flowing rapidly in a positive direction. The major ones: National and local broadcast revenues, including renegotiation of the Reds regional television deal in 2015 or 2016; live MLB digital platforms; stadium revenues; league revenue sharing and merchandise sales.

Those are complex issues, any of which could be developed in a 1000-word post of its own. But what Reds fans really want to know is pretty simple.

How much will the organization spend on payroll in 2015? What are their current commitments? And can the Reds afford a winning roster?

For years, the Reds were long and rightfully faulted to being overly frugal. However, under the ownership of Bob Castellini, the team has begun to act aggressively in response to greater income and stronger revenue projections. Castellini has put his degrees from Georgetown and the Wharton School to good use. Under his tenure as CEO, the Reds have dramatically increased their spending on major league payroll, both in absolute terms and relative to other clubs.

When Castellini took control of the Reds in 2006, the team’s payroll languished in the bottom third of major league franchises. The rival Cardinals were outspending the Reds by 50 percent. But by 2014, the Reds had the 11th highest payroll and were the biggest spenders in the NL Central. Just since 2012, the Reds have increased their payroll from $87 million to $114 million.

Those recent jumps are likely part of a longer-term plan. If the rosy financial outlook for MLB continues and the Castellini-led ownership follows through with its promise to invest new revenues into player salaries, expect the Reds payroll to increase to $130 million in 2015 and continue upward. The Reds annual payroll could exceed $160 million by 2017. The money is there. So is the urgency to win. 

That leads to the second question: How does $130 million match up to the team’s current payroll commitments for 2015?

Guaranteed-contract and pre-arbitration player salaries are pretty easy to calculate. The arbitration-based salaries need to be negotiated but can be estimated looking at recent arbitration awards. Here’s an educated guess: 

Guaranteed Contracts  Joey Votto ($14m), Brandon Phillips ($12m), Jay Bruce ($12m), Johnny Cueto ($10m), Homer Bailey ($10m), Sean Marshall ($6.5m), Manny Parra ($3.5m), Ryan Ludwick ($4.5m buyout), Skip Schumaker ($2.5m), Jack Hannahan ($2m buyout), Sam LeCure ($1.85m), Brayan Peña ($1.4m), Aroldis Chapman ($8m est.) all have guaranteed contracts for 2015. [Total: $88.25m]

Arbitration Awards  Players entering their third year of arbitration are Mat Latos ($11m est), Mike Leake ($9m est), Chris Heisey ($2.5m est) and Alfredo Simon ($3m est). Chapman is the lone second-year arbitration candidate. First-time arbitration qualifiers are Zack Cozart ($2m est), Todd Frazier ($4m est), and Devin Mesoraco ($3.5m est). [Total: $35m]

Pre-arbitration  Players who remain in their first three years of service time, and who therefore have no arbitration rights and can expect to work at or near the league minimum (roughly $550,000) are J.J. Hoover, Tony Cingrani, Billy Hamilton, Jumbo Diaz and Kristopher Negron. [Total: $2.75m]

Others could take the place of players in the pre-arb category: David Holmberg, Dylan Axelrod, Carlos Contreras, Daniel Corcino, Rasiel Iglesias are examples. But if any of them were to make the 25-man roster in April, it would exchange one relatively low salary for another.

Those totals put the Reds payroll commitment around $126 million. That’s a conservative baseline regarding roster changes, namely that the team doesn’t shed salary through trades, and does cut Logan Ondrusek, Ludwick and Hannahan. The team would still need to acquire a left fielder and a second utility infielder.

Conclusions

1. The Reds can afford their current roster, but barely.

2. It’s a good thing they dumped Jonathan Broxton’s $9 million salary.

3. A major new expenditure on a left fielder is unlikely without a compensating trade.

Again, whether the decisions getting us to this point were smart, the Reds are where they are with guaranteed contracts and likely arbitration awards. Even assuming generous ongoing increases in payroll, they face real constraints in bringing on new players in 2015. 

Getting the Offseason Right – Next: 2013 + 2014 = 2015