American League Team Payroll Situations

Major League Baseball teams are not in the habit of revealing their expected payroll numbers for the following season prior to free agency. Revealing such figures would provide agents negotiating deals with their clients important information regarding how much teams planned to spend. Additionally, telling fans how much a team plans to spend could be harmful from a public relations perspective: if a team misses out on a desired target, it is not always a great idea to spend money for the sake of meeting a budget if that spending would not improve the team and the money could be better spent elsewhere. None of those reasons obscure the fact that we still want to know how much money teams will spend.

Last year’s spending should provide a pretty good proxy for where teams will end up on Opening Day next season. By looking at guaranteed salaries and arbitration estimates, we can come with a decent idea of how much money each team has to spend going into the winter unless they make significant changes to the budget from previous seasons. In the American League, teams like the Tampa Bay Rays, Oakland Athletics, and more recently the Houston Astros have kept spending to a minimum while the New York Yankees, Boston Red Sox, and Detroit Tigers have had no issues with payrolls double or even triple the size of those at the bottom. Much of next year’s spending has little to do with potential free agents, and more to do with players who have already signed.

American League teams have already committed more than $1.2 billion in guaranteed contracts to 2016 payrolls, equal to roughly two-thirds the amount of 2015 AL Opening Day payrolls. As we might expect, there are considerable differences across the league, per Cot’s Contracts.

The Yankees have committed nearly $200 million in salaries before the offseason even starts. At close to $185 million, the guarantees in the Bronx are roughly equal to Oakland, Tampa Bay, Baltimore, Houston, and Cleveland combined. In Oakland, the team has signed Billy Butler, Coco Crisp, and Sean Doolittle to contracts already, giving them around $24 million in 2016 before arbitration and free agent signings.

The numbers above do not include qualifying offers. The Orioles (Matt Wieters, Wei-Yin Chen, Chris Davis), Blue Jays (Marco Estrada), Rangers (Yovani Gallardo), Royals (Alex Gordon), Mariners (Hisashi Iwakuma), Astros (Colby Rasmus), and White Sox (Jeff Samardzija) have all extended qualifying offers which could guarantee each of these players $15.8 million next season. The players will have until Friday to decide. No player has ever accepted a qualifying offer before, although of the players above, Estrada seems like the mostly candidate. Until the evidence suggests that a player will accept a qualifying offer, it is probably best to leave them out of the numbers above.

After the guaranteed contracts come the expenses for players in arbitration. Teams do not have to commit to offering these players a contract for another few weeks and, even then, we will not know the amounts until early next year. MLB Trade Rumors provides estimates for what the players are likely to earn in arbitration. Using these numbers, we can add them to the guaranteed contracts, add in some minimum salaries and estimate the payroll of each team if the team did absolutely nothing during the offseason. The arbitration salaries do not become guaranteed until the players are tendered a contract. The only really obvious non-tender candidate in the AL is Greg Holland. As a closer, MLB Trade Rumors estimated his salary at $11.2 million, but as Holland will be recovering from Tommy John surgery, he is not likely to be offered a contract. There are a few other non-tender possibilities, perhaps Mark Trumbo in Seattle or Sam Fuld in Oakland, but at this time, those players are included in the projections.

The chart below includes the arbitration estimates as well as minimum salaries necessary to fill out a 25-man roster.

Oakland, which was on the low end in terms of guaranteed salaries remains in the bottom spot despite the biggest expected outlay for arbitration salaries. Nine of the 15 teams are already over the $100 million mark with Los Angeles and Boston topping $150 million, but still another $50 million behind the Yankees. A decade ago, a $100 million payroll would have put a team right at the very top of team payrolls, and even five years ago, $100 million would have been middle of the pack. As revenues continue to soar, however, $100 million puts a team in the bottom third of spending. It is still a nice round number, but it means little as revenues continue to increase.

While we don’t yet know exactly how much each team plans to spend this offseason, we can use last year’s numbers as a guide. Using the Opening Day payroll numbers from Cot’s Contracts, we can add 5% for salary inflation and reach a good estimate for 2016 absent a change in spending habits. When we subtract the payroll numbers from the graph above, we can get a pretty good idea about how much each team has to spend if they maintain the status quo. The chart below details those figures.

For those more visually inclined, here is a graph of the final column.

Miguel Cabrera’s $248 million contract extension kicks in next season and the team still owes Justin Verlander $112 million, but if Detroit keeps spending like they have in recent seasons, they will have a decent amount of money to spend this offseason. At the other end of the graph, if the Los Angeles Angels want to spend to improve their team via free agency, they will have to raise payroll next season. With the contracts of Jered Weaver and C.J. Wilson set to expire at the end of next season and the payments for Josh Hamilton ending after 2017, the Angels have a lot of future payroll flexibility which they could choose to exercise this offseason given the number of quality players available.

Houston is likely in line for a significant payroll hike after a tremendously successful 2016 season. The Astros’ payroll, under $30 million just two years ago, has been artificially low for some time while the team has been rebuilding. The club has made significant increases in payroll over the last two seasons and is likely in line for another one as they try to return to the playoffs. It is not clear if Texas already made their big move by trading for Cole Hamels, and Tampa is likely to continue to be hamstrung by their stadium situation, but it looks like every team has some wiggle room to at least dabble in free agency even if they do nothing compared to last year’s payroll.