Williams: Breaking Down the Money the Pirates Saved From Marte, Kang, and Hughes

Pirates fans love to talk about payroll.

One of the main features on this site since it started was a payroll tracker, which took a look at the 40-man payroll projection after every move. You can find the 2017 version here.

That feature was added because it seems like every single discussion about the Pirates online eventually discusses payroll in some form. That makes sense, as the small market restraints on the Pirates make the topic of payroll a much bigger issue than it would be for the Los Angeles Dodgers or the New York Yankees. Then you’ve got the “Nutting is Cheap” crowd that interjects that view into every conversation, often to comical lengths.

Not everyone who questions whether the Pirates should spend more is in that crowd (although if you constantly make jokes about Seven Springs, you’re in the group). It’s reasonable to ask if the Pirates can spend more money. The problem is that there isn’t really hard information out there to show what exactly they’re making, what they’re spending on every single aspect inside the organization, and so on. All we have to work with are assumptions, whether it’s projecting the finances, or just going with the assumption that MLB and the MLBPA would have stepped up a long time ago if the Pirates were annually taking millions out of the franchise and out of the game.

This year, however, we have some hard information to work with, or at least as close as we will get to that. As a result, we can say without a doubt that the Pirates have more money to spend going forward, based on events that have happened this year.

A History of the Payroll

The Pirates have seen a gradual increase in their payroll since becoming contenders. That has really gone up the last few years, to the point where they are consistently in the $100 M range.

In 2014, they opened with an estimated payroll of about $75 M, and finished around $81 M.

In 2015, they opened with an estimated payroll of $91.6 M, and finished around $102 M.

In 2016, they opened with an estimated payroll of $102.1 M, and finished around $99 M.

This year was a little different.

The Pirates went into Spring Training with three assumptions — Starling Marte would play the entire year, Jung Ho Kang could return, and Jared Hughes would be part of the bullpen. Marte was suspended 80 games, Kang may never return, and Hughes was released, with only a portion of his salary being paid.

So there are two versions of the 2017 payroll: What the Pirates expected to pay — which we can assume is based on their budget — and what they’re actually paying.

I broke down the Pirates’ 2017 payroll at the start of the season, which gives us a good indication of each scenario. Using that information, we can see what they expected to spend, what they ended up saving, and what they should be able to spend next year with those savings added back in.

What the Pirates Expected to Pay in 2017

On Opening Day, I had the Pirates with an estimated payroll of $98.9 M. This came with a few disclaimers:

**Jung Ho Kang’s salary wasn’t included at that point.

**Jared Hughes was only being counted for his 45 days of termination pay.

**Starling Marte’s full salary was there, obviously, since he hadn’t been suspended yet.

**I didn’t know what the Pirates were receiving from the Mets for Antonio Bastardo. Keep in mind that this remains consistent throughout the study of the 2017 payroll, so any adjustments would adjust all of the numbers.

Kang’s salary would have added an extra $2.75 M. Hughes was signed to a one year, $2,825,000 deal. He only received $694,672 of that after being released.

If you add back what the Pirates budgeted to spend for Kang and Hughes, you get a figure around $103.75 M.

We’re going to go two ways with this figure. First, I don’t think the Pirates were going to be spending around $104 M. I don’t know what they were getting for Bastardo, but I’m guessing that amount brings the total down to around the $100 M figure they’ve been around the last few years.

But the $103.75 M figure is what we’ll use for the rest of this study, since any future projections also wouldn’t include Bastardo, and we’re just looking for the difference in those numbers.

What Have the Pirates Added in 2017?

Here’s the tricky part. Every year the Pirates add to their payroll during the season. This is inevitable. Players get injured, leading to them calling up new players, and having to pay more for the extra players. They add players off of waiver claims, or trade for players with higher salaries. They release players, and are still on the hook for their salary, but then have to pay for the replacement.

Part of what we track each year is all of that movement. It’s usually very simple. You take the Opening Day payroll, and you take the final projection, and do simple math.

This year it gets a bit more difficult with the Marte suspension. I had the Opening Day payroll at $98.9 M. The current payroll projection is at $98.2 M. That looks like the Pirates cut salary. What actually happened was that Marte was suspended, removing just under $2.2 M from the payroll. They also traded Tony Watson, which removed about $1.9 M from the expected payroll.

Between those two moves, the Pirates have saved $4.1 M during the season. That $98.9 M figure at the start of the year would go down to $94.8 M.

The difficult thing about in-season moves is that the Pirates are always making minor additions and subtractions. That means they have subtracted in other areas, which would take the $94.8 M figure lower, and would put their in-season spending total higher. I’m going to avoid an actual in-season total, since that would be complex. Instead, I’ll take a different focus in the next section.

Money Left to Spend

So let’s combine all of the figures we have, and I’ll try to make this as simple as possible.

The expected payroll was $98.9 M at the start of the year.

Adding Kang and Hughes back to that figure puts it at $103.75 M, which we can use as their budget total, since they expected to spend that money (again, I expect it’s actually closer to $100 M, due to the Bastardo factor).

Removing Marte and Watson during the season brings the Opening Day figure down to $94.8 M. Again, they expected to spend this money.

The Pirates entered the season expecting to have Marte, Kang, Hughes, and Watson the entire year. That gives them the $103.75 M figure. With all of the reductions from those four players, they are down to $94.8 M. So they saved about $9 M this year from those four players.

However, they’d also added money during the season, with three additions around the trade deadline in Sean Rodriguez, George Kontos, and Joaquin Benoit. Those three additions amount to $4.65 M in payroll.

This comes with another disclaimer: The Pirates are receiving money for Benoit, which means they’re probably not paying him $2.5 M this year, which is what I have them down for. So let’s count Benoit as more of an in-season move, almost like an expensive waiver claim, and ignore his addition here.

Between the additions of Kontos and Rodriguez, the Pirates have added about $2.1 M this year. We can say that those two additions make up for the loss of some of the Marte/Kang/Hughes/Watson money. But it doesn’t make up for much. There would still be about $7 M remaining to spend.

A Look to 2018

Right now, with all of the players the Pirates have under contract for 2018, and with no arbitration raises factored in, the Pirates are projected to spend $92 M in 2018.

This will obviously go up when arbitration raises for Jordy Mercer, Gerrit Cole, George Kontos, and Felipe Rivero get factored in.

The figure could also go down if they decide to trade or non-tender players. Right now that figure includes $2.3 M for Drew Hutchison, $750,000 for Wade LeBlanc, the $1.5 M option year for Chris Stewart, and who knows what they will do with other players currently under contract.

The figure does not include Jung Ho Kang.

If we assume that their normal budget would be around $100 M, then we could assume that their budget for 2018 should be around $107 M, when factoring in the money saved this year.

If I’m estimating arbitration raises for the big four names above, I’d say that adds about $5 M to the projection next year. So the Pirates should have $10 M extra to spend, plus any additional money they’d get by shedding salary from guys like Hutchison/LeBlanc/Stewart and so on.

How the Pirates tackle their 2018 team is a subject for the offseason. But the takeaway here is that they’ve got extra money from what they saved on Kang/Marte/Watson/Hughes, to the tune of about $7 M. If the 2018 payroll projection at the start of the year is around $100 M or lower again, then it will be safe to say that they didn’t spend the money they saved on those players.

Columns

  • One would think with the TV contract being up in the next year or two, that now would be the time to have the Pirates great. Spending more in payroll would actually be an investment. Maybe I’m assuming higher ratings equals more local TV dollars. Could be a bad assumption.

    • EWS34 that’s been my argument. Make some additional wise investments in the team that hopefully push them over the top. Look at how KC and Cleveland reinvested their windfalls into the team. There is no reason the Bucs should not be keeping pace in regard to payroll with those teams.

  • Did the Pirates have to pay a big fee to the Korean club that had Kang’s rights? If so, maybe the Bucs are trying to recoup some of that sunk money by holding onto the cash from Kang’s salary this year.
    Flame away.

  • “If your significant other found a quarter on the ground and was like, “Oh good, now I can get you a nicer birthday present,” you wouldn’t expect to get a very nice present at all. That’s how I feel when $5.3 million dollars become available to the Pittsburgh Pirates.” (Jared Wickerham) I love this quote.

    • So the Pirates should spend that money just to spend it? If I recall correctly, at the point in time when that cash became available, there really wasn’t anybody worth signing out there. I get in arguments all the time with people bitching that the Bucs didn’t make any effort to replace Marte or Kang, ignorant to the fact that those two are major league starting caliber players and to replace them would cost the team some pretty good prospects in a trade.

      • So there wasn’t anyone available in all of MLB until Rodriguez became available after the deadline. There also was no way whatsoever for NH to bolster the bullpen until just now. Correct? Because nothing was done until now.

        • Correct. There was no starting third baseman who just reached ripeness on the Magical Starting Third Baseman Tree, waiting to be picked by whomever needed a starting third baseman. As for the bullpen? Sure it’s possible they could have upgraded; but outside of a waiver wire pickup, we’re talking about a trade. Who knows what the cost in prospects would have been? Did they try? Did they not try? We have no evidence either way. But I do know there were no viable free agents out there, just waiting to be signed.

      • Funny how you upvoted yourself. lol

  • Yes! We love the 40-man payroll page!

    PS, Luplow is still showing up with a major league salary. Sorry. I track this meticulously… 🙂

  • NH has stated in the past they do not use budget savings from one year on next years budget. The budget will be what it is, Savings from this year will not be added to next year’s budget.

    • ….then the question becomes……..where the hell does the money go?

      • I better not say it goes to Seven Springs. Just joking. It’s an opportunity for a return on investment I guess. Most business probably don’t increase a budget the next year if they have
        savings the current year. In reality they figure they got away with lower spending this year let’s try it again next year.

        • Profits are going toward paying down debt. There isn’t any argument over this. The team admits as much. The question is simply how much.

          • Don’t forget there are many other costs each year. First on the $100 million salary add another 30 percent for benefits (i.e. Medical, social security 7.5 percent I believe, operating costs of travel, clubhouse costs pnc park costs etc) plus minor 8 teams salaries and operations cost, front office costs international costs draft cost ($7 million). Add all these in plus pay down of debt it’s amazing they have enough to cover all this. You FO Nutting bashes really take a look and the really big picture.

            • Wait why is it bashing Nutting to say that they’re paying down the ~$120m in debt that Coonely acknowledged when they took over?

              Anyways, everything you mention is obviously included in a yearly budget, as it is for every other business.

              • Of course it is. Just saying as you read a lot of these posts it seems a lot of readers are forgetting about these costs as well.

            • all of that is taken into consideration when they say teams should spend 50% of revenue on salaries. If they are using more on debt they are essentially raising the value for themselves. That again is ok for a private business owner. There is a standard of expectation for major sports ownership.

            • They are not struggling to make ends meet. Reports show they are profiting as much as $50 million a year after all of those expenses. That’s fine, they just need to cry about their revenues.

              • $50 million not a lot. That’s a bad quarter from break even from a small business as the Pirates certainly represent.

        • Speaking as an investment advisor and business owner, I can tell you thats not reality. Businesses become succesful by reinvesting in their product, not by paying out dividends to their owners (which is effectively what they’d be doing if they didn’t put it into the team) – or, as was mentioned earlier, paying down debt. In this case, it would pay down debt I guess which, theoretically at least, DOES create more financial flexibility going forward. I can’t fault it as a business move, but it isn’t smart if you are trying to grow your business (or in this case, win more games)

    • When did he say that?

      • He did say during this year he would use the savings. That didn’t mean it would be added to next years budget. I’ve seen quotes from him before where he stated savings do not carry over to the next year’s budget.

        • I haven’t seen those quotes, and when he’s making those quotes it’s usually with myself or someone else from the site in attendance.

          • It was about 2 years ago. I looked up NH’s recent comments. When he says, ‘“As soon as that option becomes available, we’ll gladly pour the money back into the club,” (5/21/17) It sounds like he was saying back then he could use the savings towards this years budget (on trade acquisitions), not to go above and beyond next years budget. Maybe you can ask NH to clarify how they plan to use the savings.

    • It kind of makes sense. If you are signing players to long term contracts you cant guarantee a payroll savings one year to the next. I say kinda because the bigger variable would be attendance. Maybe the savings went to make up for underestimating the drop in attendance this year?

  • https://www.forbes.com/mlb-valuations/list/#header:operatingIncome_sortreverse:true

    If the Forbes numbers are close to accurate and they have an operating revenue of $250M+, then they can afford to boost payroll. I think attendance is just a drop in the hat in terms of revenue streams for MLB teams, so any drop in attendance this year should have little impact on future budget.

    I don’t think there’s any reason to focus on public statements about the budget, the budget is the budget until it isn’t. It’s not like they want to advertise that there’s money to spend when there are upcoming negotiations with arbitration eligible players, free agents, and potential trade partners. The Pirates brain trust will have to decide if the price of an FA upgrade over internal options is worth it. We don’t know what kind of urgency they will have to get back to the playoffs, and what sort of contracts 2018 FA’s are going to get offered.

    I hope to see the Pirates kick the tires on Frazier and Moustakas, but if someone comes in and offers those guys 5+ year deals, then you walk. I see it as a fluid situation and that the pirates hold tight to their internal player valuations.

    • I agree with you…and I’d hope they’d kick the Frazier tire too…like kick it into whichever river they so choose. He is not loving his 30s very much nowadays

  • Question: has managed ever said they use past profits to supplement future operating budgets?

    • If fact NH has stated in the past that savings from one year are not added to next year’s budget. This article might fall into the category of fake news spreading the idea that savings from this year will be spent next year.

      • Heh, I’ll take the article as a *recommendation* and not prediction, but yeah, everything I’ve ever read from them points to establishing a yearly budget based on expected revenue.

        • I haven’t heard or seen Huntington say that they don’t use past profits on future salaries. I’ve heard the opposite. I’ve also seen the opposite.

          When they traded Liriano last year, a big thing they were saying was that they were going to use that money going forward. Part of that money they saved was in future years, but part of it was in 2016.

          I’d have to see the article PieRat is talking about.

          • “When they traded Liriano last year, a big thing they were saying was that they were going to use that money going forward.”

            This isn’t at all what we’re talking about.

            By trading Liriano and his 2017 salary, they shed a future *obligation*. That wasn’t literally ~$13m put into the bank in the form of profit, and then pulled back out and spent this year.

            What we’re talking about, financially, is taking past profits to supplement future revenue thereby allowing them to increase payroll budget. If they were doing this, it would show up as losing money in that future year. Is anyone contending that the Pirates have lost money lately?

            • They aren’t going to use the money they saved from Marte’s suspension this year on next year’s budget or the money they saved this year from Kang’s absence. They could use Kang’s salary that is allocated for next year if it isn’t used next year. I’ll look for the quote, but I know NH has stated that savings from year are not used on the next year’s budget. I don’t think we can realistically count this year’s savings into next year’s payroll. With revenue likely expected to be down we might see a $95 million budget next year.

              • PittsburghKid
                August 11, 2017 2:19 am

                I could have swore that in the spring I read NH said that the team would put the money from Kang, Marte, and Hughes back into the team. That’s what should have been done.

            • Just past the cutoff to your quote…

              “Part of that money they saved was in future years, but part of it was in 2016.”

          • Based on Forbes projections the Pirates are under spending on their capacity. The rule of thumb is salaries should be about 50% of revenues. Regardless of if they use this year’s savings toward next year they could still spend more. According to reports they could have a salary budget of around $120 million. They bring the cheap label on themselves. The reason for the Seven Springs jokes are the reports that the Pirates have profits as high as $50 million annually. Maybe the reason they don’t meet the 50% threshold is that they have more debt than other teams. It just wears on me when they cry “small market” so often, but are doing pretty well financially.

            • Id be interested to learn more about why forbes uses 50% as a benchmark, but if that is true then it may be more apt to call them inefficient than cheap. You wouldn’t call a first generation college grad cheap because 1/3 of his income goes to paying off student loans rather than purchasing a high end TV. If a higher % of revenue goes to paying down past debt, then that isnt really the fault of the current group, unless they were the ones who ran that debt up in the first place. I mean, all of this is built on a crap load of assumptions but that presents an interesting angle to consider why the percieved gap is there between pittsburgh and other similar markets.

              • You’re right, it would just leave their words of “putting profit back into the team” highly disingenuous unless paying down that debt delivered tangible benefits. Otherwise it’s just increasing the value of their shares.

                Theoretically it could serve “the team” and the owners if the terms of their debt servicing were terribly and paying down a bunch saved them interest. Would open up additional cash for “the team” while increasing the value of the franchise, which has already skyrocketed.

              • PittsburghKid
                August 11, 2017 2:21 am

                Never thought about it like that and honestly one if the best comments/ideas I think I’ve ever read in this site. Honestly a little annoyed that there’s an explanation other than Nutting being cheap to blame for the payroll.

            • They CAN cry “small market” stature, when you compare them to the “mega” teams (as Tim calls them), even if they do NOT spend up to their total ability to spend. There becomes a pragmatic point when spending one more dollar won’t make them any more successful in this business model of wins vs increased economic risk. Especially when you consider that a team like the Dodgers literally have an insane spending capacity. Beyond the “break-even” quotient, I don’t have a problem with them having excess liquidity or having a disciplined spending philosophy.

              Their business model is to develop home grown players (especially cheap pitching) and make shrewd investments in mid-level free agents. To me, that is a sound strategic to have as a on going concern for building a sustainable product on the field. Building a strong organization has to be analytical and foremost…even in an emotional, fan based environment.

              The Liriano contract was indeed a “future obligation” whatever source that the liability was going to be paid from. It was a guaranteed contract. But really, what the Pirates truly fear is a future obligation that strangles a team like Detroit. Just look at those awful albatross contracts that Justin Verlander and Miguel Cabrera (or for that matter that the Red’s Joey Votto or the Marlin’s DeCarlo Stanton) have their teams resources tied up in long term “investments”. I would call them diminishing assets. Those contracts are purely emotional, made strictly to please the fan base. They make no business sense for the smaller market teams. Those obligations NEVER outgrow their inherent inability to make more profit than the higher debt ratio that they create. Only the player is enriched. Is that really a sound way to run a business…even for the sake of winning?

              The Pirates are completely cognizant (at least Mr Nutting is) that they exist in a 2 level league. They are sober about that reality…Maybe most fans aren’t …but this ownership is. To their credit.

  • I have read in some articles about the behind the scenes, which is always a crapshoot, about how Nutting wants to put more money towards the debt that the organization was under and the minority owners will not budge. I’m no Nutting apologist, but I do wonder how much that massive debt that almost caused the city to lose their team plays a role in whoever would be in ownership right now. KM went through hell to keep it in Pittsburgh, but a what price did it happen? I’d love an off-season article on that when the prospect side of things may be a little quiet

    • The Pittsburgh Pirates were never even considered an outside candidate to leave Pittsburgh.

      • I mean… I guess we’ll agree to disagree. A business doesn’t lose the kind of money it did before KM and ownership took over and then put out a timeline to the governor and everyone else about needing a new ballpark without believing it needed done or they’d move. The organization was pulling no fans, last in attendance, and was losing money hand over fist. New ownership wouldn’t have kept them in Pittsburgh without PNC happening when it did.

        • I think you’re butchering like 20 years of Pittsburgh history but we will agree to disagree.

          • PittsburghKid
            August 11, 2017 2:14 am

            I agree, I’m not going to claim to know everything about the past twenty years but I feel like it would be common knowledge if the team almost left

    • I know the partners don’t want any debt paid for out of Nuttings pocket because that has the potential to affect the ownership balance in terms of percentage of shares.

      But this is leftover money. Using this to pay down team debt shouldn’t affect ownership balance

      • This is correct.

      • This is one thing that drives me crazy with the Seven Springs stuff.

        If Nutting was removing money for Seven Springs, he’d be lowering his ownership share of the team. Fans who make those comments would actually want him to spend on Seven Springs if they want him gone.

    • I’ve felt for a few years now that someone needs to step in and buy out all the minority owners (which I would gladly do the day after I win the powerball lottery). Nutting isn’t the real problem in my opinion.

  • The Pirates announced no overall increases in ticket prices for 2017. I don’t know about concessions, etc. Attendance is down about 220,000 in 2017 vs. 2016 so far according to Baseball Reference. I’m assuming attendance = ticket sales. If I’m wrong, then take this all with a grain of salt. Their decline in per game sales is second only to KC Royals this year. Their average ticket price was just under $30 for 2016 so that’s a potential loss of over $6,500,000 in revenue (just from ticket sales alone) vs. last year (and counting). If you use the fan cost index of $196/game for a family of 4, the lost of revenue for that 220,000 lost ticket sales would be closer to $11,000,000. That’s the cost of short-arming the team for the year or doing nothing at the deadline. So Tim, that might account for how the “saved” money will be allocated in 2018 perhaps.

  • I’m curious to know why a $ per win metric isn’t calculated to rate all GMs across baseball. I’d love to see that. That 98 win team from a few years ago was about $1m/ win. Is that the best deal of the last 20yrs?

    • Some of those early 2000s rays teams probably had them beat, but it is dang impressive what that 98 win team did…

  • Thanks for doing this. This is the first time when we KNOW that there is money out there that they didn’t spend, and now we know what kind of standard to hold them to.

    although… does anybody know if ticket prices have gone up this year enough to counteract the decrease in attendance?

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