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Wednesday, September 27, 2023

Disappointing Padres expected to cut payroll by about 20% to around $200 million for 2024, per report

This offseason also promises to be interesting in San Diego. GM A.J. Preller’s seat figures to be at least a little warm with the team likely to miss the postseason, and changes to the roster are coming. So too, apparently, it a payroll reduction. According to the San Diego Union-Tribune, the Padres are expected to reduce player payroll by about 20%, to around $200 million in 2024.

Here are more details from the San Diego Union-Tribune:

How much the team is bringing in is not a known number, though one highly placed source says the team has doubled revenue since 2018 and others around baseball marvel at the impressive gains. However, the size of the payroll is known, and it has jumped from $104 million in 2018 to the season-ending figure of around $253 million in ‘23.

In part because they are out of compliance with MLB regulations regarding their debt service ratio, according to multiple sources, the plan is to go into 2024 with player commitments of around $200 million.

The Padres entered this season with a franchise record $248.9 million payroll. Trimming nearly $50 million off payroll in an offseason is extreme, though pricey veterans Josh Hader and Blake Snell will come off the books, as will Drew Pomeranz’s dead money. That said, the Padres will have to replace Hader and Snell this winter. That won’t be easy (or cheap).

RoyalsRetro (AG#1F) Posted: September 27, 2023 at 03:16 PM | 18 comment(s) Login to Bookmark
  Tags: padres

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   1. The Duke Posted: September 27, 2023 at 03:45 PM (#6142445)
Someone tell me more about this debt service ratio thingy.

There was an awful lot of ownership complaining about the Padres trying to play in the big boy sandbox and then they have a historic season of "bad luck" and miss the playoffs with one of the best teams in MLB. And now they are being forced to cut payroll. Hmmmm.

   2. . . . . . . Posted: September 27, 2023 at 04:05 PM (#6142456)
I have no idea how MLB defines it, but in syndicated debt facilities you generally see it as EBIDTA/(Interest Expense)
   3. The Duke Posted: September 27, 2023 at 04:24 PM (#6142461)
What an interesting selection of guys they could deal:

Martinez and Wacha contracts are like 2/32 if they take club option. Anyone would trade for those

Future HOF Soto !

Tatis is back and doing great

Boegarts had a good year - that's the deal I'd try to sell.

Machado? IDK, he might go into HOF as a Padre. That's worth something

Kim is cheap but super valuable - you could throw him onto a boegarts/machado/Tatis deal to avoid eating money.

They don't need to do much to comply. I'd bet Soto is the one they deal.
   4. Tony S Posted: September 27, 2023 at 04:34 PM (#6142469)
The Padres have spent the last few years cultivating a strong and growing fan base. And they have been successful in this regard.

Trading Soto would pull the rug out from under that fan base overnight. It would be a Marlins thing to do.

If that's what they want...

   5. Tom Goes to the Ballpark Posted: September 27, 2023 at 04:40 PM (#6142473)
The Acee article intimated that Seidler’s mother and uncle were taking a larger role in running things now. They probably aren’t thrilled with how little Peter has been blowing their money.
   6. Ziggy: social distancing since 1980 Posted: September 27, 2023 at 05:12 PM (#6142481)
Machado? IDK, he might go into HOF as a Padre. That's worth something

Something - yes, but not what Machado is being paid. His is the kind of deal that cripples a franchise. The Padres' payroll actually understates their commitments, because Machado's deal is so backloaded. To be clear, backloading a contract is a good thing, but it makes it seem like their problem is more tractable than it is. Machado made $17m this year, in 2026 it goes to $25, and then to $39 from then through 2033. Just to keep payroll constant in the future, that's going to mean cutting another $8m in 2026, and another $14m on top of that the following year. (By which point Machado will be old and not good.)
   7. bookbook Posted: September 27, 2023 at 05:38 PM (#6142483)
This debt-ratio thing smells very fishy. If I'm the MLBPA, I'd look into a challenge.
   8. Starring Bradley Scotchman as RMc Posted: September 27, 2023 at 06:20 PM (#6142489)
the Padres are expected to reduce player payroll by about 20%

I guess if you're gonna have a losing team, might as well do it as cheaply as possible.
   9. Walt Davis Posted: September 27, 2023 at 06:31 PM (#6142493)
Machado is essentially untradable at the moment -- so much money would be eaten that it's hard to see ownership agreeing to it. Tatis might also be untradable -- he had a heck of a year so in baseball terms it works, maybe even with that contract. There's a big statcast (+8) vs DRS (+25) difference but, maybe more importantly, it will be a while before he shakes the fragile troublemaker image. But I suppose any GM who trades for him gets to enjoy the good, cheap years and will probably be fired by the time the expensive years come along.

X is interesting. He did what was expected so that's good. But if 4 WAR is the starting point of his 30s then the contract doesn't look good. If you know he's gonna repeat this for another 4-5 years then start a steady decline (certainly possible) then that's fine. Still, a full market contract, how much value can the Pades get in return?

The issue here isn't the quality of the players -- lots of valuable "assets" -- it's the contracts. X has 10 years left; Machado has 10 years left; Tatis has 11 years left. Signing both X and Machado never made sense -- very similar players of the same age, quite possibly both best-suited to 3B in a couple of years, plus displacing Kim to 2B and Cronenworth to 1B (and killing any hope of Tatis returning to SS but let's assume they had already decided that wasn't gonna happen).

Trading Soto would pull the rug out from under that fan base overnight

Really? Why? Is he super popular there? Is there some reason trading him would be worse than trading X, Tatis or Machado? I thought he was always seen as a long-term rental and if they're cutting payroll, there's no way they can re-sign him anyway (at least not without trading one of the other guys) ... even assuing he's not committed to going FA regardless which has always been the assumption.

I've never understood how Preller keeps his job. The plan seems to change every year or two. For example, why in the world would you extend Cronenwroth and Machado, money that could be used on Soto, Are he and the owners so bad at communicating that he actually thought he'd be able to roll out another 10/$300+ M contract for Soto? Surely not.

Martinez and Wacha contracts are like 2/32 if they take club option. Anyone would trade for those

No they won't. Wacha hasn't started more than 24 games in a season since 2017. The last couple of years, he's been the Mookie Wilson of pitchers:

2022 23 GS, 127.1 IP, 49 RA, 3.32 ERA, 125 ERA+ (but 3.3 WAR), he missed 6 weeks in July/Aug
2023 23 GS, 127.1 IP, 49 RA, 3.39 ERA, 121 ERA+ (but 2.1 WAR), he missed 6 weeks in July/Aug

The WAR difference vs the ERA+ similarity is still somehow due mainly to PFs but also higher-scoring this year. Still, it's weird take your pick.

The point being that after that 2022 in Bos, he could only get this 1/$7.5 deal with the Padres which has a 2/$32 team option and a 3/$18+ player option. The Padres are in the "sweet spot" of declining their option while being confident he won't exercise his option. But the idea that a 75% starter can get 2/$32 is not a good one. We went through this in the Maeda thread -- Wacha will do fine but teamms are not going to pay 30-start money for him. Eovaldi got 2/$34 last year and he's better than Wacha.

Martinez is an interesting guy as a swingman and puts up good numbers for his role. But they aren't great numbers and nobody is paying 2/$32 for 100 innings of 110 ERA+.

So at best Wacha and Martinez are guys they could exercise their options on to sign them to market-value contracts or scmething close to it. Other teams may trade some small value for them, avoiding the hassle of the FA market and (if I'm under-valuing them) saving themselves a couple of million but why should the Padres take that chance when, especially with Wacha, they can just decline and not risk spending any of the money? To pick up the #15 prospects from a couple of teams? If you're cutting payroll these are two easy declines. Taking the option then trading them doesn't cut 2024 payroll by a single penny.
   10. The Duke Posted: September 27, 2023 at 10:29 PM (#6142527)
you are right, I misread the player option logic when I looked it up. So that does likely make Wacha and Martinez likely free agents which does free up a lot of salary. Of course it leaves them short two important pitchers for them.
   11. Walt Davis Posted: September 27, 2023 at 11:53 PM (#6142537)
No worries. And I do agree with everybody that the only way they can really pull this off is to move at least one of the big contracts. Soto is certainly the easiest to move but cuts only $23 M. Wacha and Martinez would bring it up to $40. Still $10 to go and that's signing nobody (plus I don't know who's in line for arb/buyout raises). Add Hader. B-R shows them shaving a ton of money off the books so maybe this isn't as tricky as I expected, it may be more a matter of who else they sign more than dumping contracts.

Per b-r: Pomeranz $10; Snell $17; Hader $14; Martinez $10; Wacha $7; Garcia $4. So that's $62. Lugo has a $7.5 M player option that I imagine he'll pass on; Carpenter has a $5.5 M option that I imagine he'll exercise. Their arb costs don't look too bad. Trading Soto would seem to give them some money to play with. They will be under pressure to re-sign Snell if he wins the CYA but I don't think they'll be able to if they want to hit their target.

So yeah, Padres pitching next year could be a disaster -- nothing but Darvish and Musgrove.
   12. baxter Posted: September 28, 2023 at 12:47 AM (#6142542)
3. machado in the HOF? he's got "tennis elbow" will need (according to the doctors) off season surgery. He's missed games and hasn't played in the field lately b/c of it. I'll take the under on the HOF; he sure isn't there yet. Maybe he'll go in w/Pedroia.
   13. Never Give an Inge (Dave) Posted: September 28, 2023 at 08:15 AM (#6142548)
From the Athletic:

Debt service

Teams have a little more leniency in the debt service rule, which requires most teams to keep their debt to less than eight times their earnings (or in the case of teams that have a new stadium, 12 times). In the prior deal, the first $75 million in debt wasn’t counted toward compliance. For 2022 and 2023 fiscal years, it’s $125 million, before dropping to $100 million for the rest of the CBA.

So the ratio is probably Debt/EBITDA, and has to be under 8x. And it was collectively bargained so I don’t think the union could challenge it unless they thought the Padres were miscalculating the numbers.

   14. The Duke Posted: September 28, 2023 at 11:22 AM (#6142564)
I'd love to know the math on that for, say the Marlins or the As. Find it hard to believe the Padres are the only team that have run afoul of this.
   15. villageidiom Posted: September 28, 2023 at 11:27 AM (#6142565)
So based on #13 starting in 2024 $25 million more in Padres debt will be counted in the ratio, and per TFA they are looking to reduce payroll expenses by $50 million.

Let's say San Diego was right at the debt service limit: their debt was $D, and their earnings were 8x($D-$125m). Ignoring for a moment that they likely will have paid down some of that debt, their earnings for next year (if they achieve the same debt service ratio) would be forecasted at 8x($D-$100m), or ($50m + oe) more than this year's earnings because that's what they'd save in payroll ($50m) plus whatever changes they'd experience to other earnings (oe) compared to this year.

8x(D-100m) = 8x(D-125m) + 50m + oe

8D - 800m = 8D - 1000m + 50m + oe

1000m -800m - 50m = oe

$150m = oe they expect to gain $150 million in other earnings next year, through some combination of increased revenue and decreased non-payroll expense?
   16. Ron J Posted: September 28, 2023 at 11:40 AM (#6142571)
#15 This ignores the issue that payroll cuts always reduces revenue.

It always leads casual fans to expect the team to be worse and casual fans are where the marginal revenue comes from.
   17. Tom Goes to the Ballpark Posted: September 28, 2023 at 02:12 PM (#6142593)
Spotrac has the Padres at $315M for payroll and luxury tax in 2023. The $250M that the article uses is ~$35M off from the luxury tax payroll number. The Machado and Tatis contracts are heavily backloaded so the actual payroll and luxury tax payroll vary significantly.

The Padres are likely going to see a decrease in TV revenue for 2024. MLB guaranteed them 80% of their Ballys contract for 2023, but in 2024 they will get whatever they generate in
   18. Cris E Posted: September 28, 2023 at 04:02 PM (#6142614)
The Padres are likely going to see a decrease in TV revenue for 2024. MLB guaranteed them 80% of their Ballys contract for 2023, but in 2024 they will get whatever they generate in

I think this is driving a lot of the discussion in San Diego, and it could be in a lot of other front offices as well. There's a lot of uncertainty out there right now and I think the number of $200m+ contracts is going to drop precipitously, more than the lower quality of this year's free agent crew might indicate.

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