The Red Sox Income Statement: Today and Tomorrow

With Bobby Jenks and his 291 pounds of girth now on the payroll, it looks like the Sox will head into 2010 with right around $156M in MLB player costs. If Dan Wheeler is signed, that figure could tick up, but as of today, with the 25-man roster basically set, $156M looks about right.

That is hardly an insignificant number when one considers that just two years ago, the figure for the 25-man payroll was closer to $130M after incentives were paid out (thank you Brad Penny and John Smoltz). But it does represent a small decrease from last season when payroll jumped to ~165M in large part because $20M in dead money was owed to Mike Lowell and Julio Lugo.  

Coming into this off-season, I had expected Boston’s owners to settle on a budget that split the difference between 2008 and 2009. That is because 2008 seemed anomalously low considering the team’s $143M payroll from 2007 but $165M in 2009 seemed a bit inflated by one-time charges. So split the difference, make a small adjustment for inflation and apply a small upward bias to spark lagging fanbase confidence. All told, in the Showcase Showdown where going over means doom, I would have guessed …….. 152M.

That the Sox went over my “guess” by a mere four million dollars is not so surprising. But what I think is interesting and what represents one of the big stories of the Winter is the following: Boston’s ownership has made commitments over the past two weeks that will surely lock in a $160M payroll floor through 2014 and very possibly, that number will grow considerably. Forget going back. The Sox are now laden with sizable commitments and as such, the farm system is now under considerable pressure to produce low-cost replacements to fill upcoming vacancies.     

Gazing forward, the Sox shouldn’t have any fiscal problems in 2012 as big chunks of salary come off the books. Between Drew, Cameron, Papelbon and Scutaro, there is roughly $37M in expiring contracts. There is another four million to be saved on Wakefield and Varitek. And perhaps another $12M could be saved if Ortiz is replaced by someone from within. Best case, Jenks is now on board to replace Papelbon, Ryan Kalish gets Drew’s spot, Lowrie or Iglesias slides into Scutaro’s vacancy and Cameron can be replaced by a $2M veteran RH bat. Beyond that, Ortiz is due for a pay cut or a lower cost replacement. And Matsusaka could always be jettisoned, freeing up another ten mil.  

All these savings should easily accommodate a HUGE raise for Adrian Gonzalez, steeper arbitration charges for Buchholz and Bard, and escalators for Pedroia and Lester. In fact, there should be money left over to address a problem that crops up during 2011 like an injury to a starter or a big problem at catcher. And if no such problem exists, then perhaps some money can be set-aside to cover future writedowns (LACKEY).

So I lied. $160M may not be a floor for 2012. But gazing forward, there are some big fiscal issues looming in 2013 and 2014. To illustrate, come 2014 the Sox are now on the hook to pay $98M to just six players: Crawford, Gonzalez, Lackey, Beckett, Lester and Pedroia.  Throw in the fact that Buchholz, Bard, Lowrie and perhaps Saltalamacchia (if he works out) will all be in their third year of arbitration that season and you get the potential for some pretty big charges.  And that doesn’t even consider the possibility that Ellsbury re-signs with the team after 2013 and a new third baseman will be needed as Youkilis is also up after 2013.

The message here is not entirely bleak. After all, the Sox have THREE years to develop some players. And in three years, it’s not hard to imagine the Sox developing a couple of starters that could step in for Matsusaka and Lackey. Nor a couple of regulars who could take over in center or third or behind the plate.

But confidence aside, the onus is now on the scouts and the development guys to produce. And importantly, players who are being counted on in 2012 can’t be total busts. That means Kalish can’t tank and either Iglesias or Lowrie has to stick. Because if these guys miss and free agents are needed to plug the holes, the Sox income statement could get real stressed in 2013. So stressed that the ownership group will pine for the days when it was ONLY spending $160M on payroll.  But hey, they wanted to get off the “bridge” and sometimes that requires paying an expensive toll. How expensive is yet to be determined.

[Editors Note … For anyone who wants to quibble with the numbers … I am using CASH numbers (plus incentives) and not the average contract values that go into calculating the Competitive Balance Tax. I am also just addressing the 25-man roster so this year, that meams the 3M that is being collectivley paid to Iglesias and Tazawa is not refelcted.]

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