Crane Kenney's ‘roll over' payroll claim makes no sense

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There’s a rumor rumbling around the Cubs’ business operations like a wheelbarrow full of imagined cash that suggests Jed Hoyer hasn’t used all of his 2022 payroll budget and will therefore have so much more to spend in 2023.

That’s because he can “roll over” that unused portion to add to next year’s budget, according to business president/wheelbarrow operator Crane Kenney.

But if that’s true, the Cubs and their cost-cutting rebuild might be in worse shape than the results on the field have led us to believe.

“We have a lot of money left at the end of this year that we need to spend. All of that will roll over for next year,” Kenney said on 670 The Score’s “Inside the Clubhouse” over the weekend.

Why? What difference should that make?

While the Cubs as a private business don’t make their books public, they are one of baseball’s highest-revenue teams. And even the most conservative estimates of Cubs baseball revenues and costs suggest the ability to exceed MLB’s Competitive Balance Tax (luxury-tax) payroll thresholds by leaps and bounds and still put money in their pockets.

Since cutting costs after the 2020 season of “biblical” pandemic losses, the Cubs have not come close to approaching the luxury-tax threshold.

Any payroll budget assigned by ownership that’s less than the CBT threshold is likely not based on revenues but more likely choices of how much of the vast revenues to spend on other things or to bank as a franchise.

If they truly have shortfalls that prevent an ability to spend at the CBT levels and still be profitable, then that might indicate financial restrictions or issues well beyond those short-term pandemic losses (or perhaps such things as bigger capital expenditures than thought, or recouping 2020-21 losses).

This year, they’re projected to be at $177 million for CBT purposes — leaving more than a $50 million margin below the CBT.

But even if the budget this year is, say, $230 million (the CBT threshold), then that doesn’t mean the Cubs’ budget next year would suddenly become $280 million — and assure CBT violations. That makes no sense.

In other words, there is not reason to “roll over” money from one payroll budget to the next if you’re the Cubs and your revenues aren’t compromised by debt restrictions or other spending choices.

Meanwhile, while the Cubs' average ticket prices have remained relatively flat the last two seasons, they also have among the highest-priced tickets in the game, and by at least one analysis the most expensive 2022 game day "experience" (including concessions, parking, merchandise, etc.).

If the “roll over” policy sounds familiar, that’s because the Cubs became the rare — if not only — major-revenue team in the sport to employ such a policy in the early years of the first tanking rebuild under Theo Epstein and Hoyer.

After the Cubs’ failed bid for free agent pitcher Masahiro Tanaka in 2014, Epstein worked with the team’s chief financial officer to create the baseball ops “piggybank” to carry over unused budget. It allowed the Cubs enough flexibility the following winter to front-load a contract offer that landed free agent Jon Lester.

That mechanism, more commonly used by some teams with more limited economic resources over the years, was necessary because of a complicated debt structure resulting from the Ricketts family’s 2009 purchase of the club from Tribune Company.

That debt structure, among other things, created a 10-year management plan that involved bank covenants that restricted spending based on rigid revenue definitions.

The Cubs have long been out from under those restrictions and have since dramatically increased revenue streams and franchise equity — theoretically rendering any payroll budget more than a dollar under the CBT threshold a matter of spending choices.

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