A First Look Payroll Projection for 2021

The 2020 season is officially in the books, so it’s finally time to get the offseason started. It’s my favorite time on the baseball calendar, but the best part of it—for me at least—is updating my payroll estimate whenever a move happens. In order to do that, I must have a starting point, and that’s what I’ll be breaking down today.

Of course, this involves a lot of guesswork, mostly on the roster construction side. For now, I’m assuming a 26-man roster with a designated hitter. The DH part may be putting the cart before the horse, but aside from having an impact on Colin Moran’s standing with the team, going back to pitchers hitting for one season—aside from just being silly—would have little other impact on the roster.

You can find my assumed roster in full here, but I’ll allude to it throughout the article when necessary. Things may change within the next few days when the team officially makes moves to reinstate players from the Injured List and get the roster down to 40, at which point theoretical moves I’m making will become more concrete. I’ll do an update later, probably midway through the offseason, but I just wanted to get this out there before anything official happens, so I can call it strictly my projection.

Guaranteed Salaries: $18,250,000

At the moment, the Pittsburgh Pirates technically have a whole two players under long-term, guaranteed contracts. Of course, one of them is on the Restricted List and the salary will be removed later, leaving one—Gregory Polanco—as the lone player making guaranteed money for 2021. I did not take the time to verify this, but you’d have to assume that is by far the fewest in the league, and the team would probably like to get out from even this solitary deal if they could.

This amount could increase with any free agent signings or extensions agreed upon to buy out arbitration and free agency years, but for now, one is the loneliest number.

Arbitration Salaries: $40,800,000

Here’s the area with the most variability. As you may well already know, the Pirates have 19 arbitration eligible players for 2021, and not only is the payroll allocation dependent on how many players the team decides to tender, but also on how arbitration salaries are ultimately determined.

To expound on what I wrote before, it’s currently not clear how arbitration will be handled this offseason. As far as any public facing information, there appears to be no agreement on how salaries will be determined via the process. Will one be settled on, or will teams and arbitration panels be left to their own devices? Counting stats from this past season are obviously lower than normal, and with a system largely built on comparisons, that could lead to the suppression of salaries. My assumption is that the Players Association wouldn’t be okay with that, as it could be seen as a continuation of prorated salaries, which was supposed to be a one-time occurrence. On the team side, it’s already well-known that they intentionally use arbitration as a way to hold down salaries, so it’s completely foreseeable that they would use lower stats to offer lower salaries outside of arbitration, even though the players didn’t have the opportunity to accumulate better numbers. While the majority of agreements typically come before a hearing, with file and trial becoming more popular among teams, having cases reach a panel could get stickier still. Arbiters normally have little to no baseball background, so without context, it’s entirely possible they would tend to rule on the side of lower salaries due to lower statistical comparisons.

There’s obviously a lot to consider, and without much to go off of, Trade Rumors came up with three different salary projections for eligible players. I decided to use the highest one—extrapolating stats over a 162-game season and paying based off those—in part because I think it makes the most sense, but also honestly because they are also the highest. In their offseason outlook, Trade Rumors went with the third version of their projections—where a raise based on 162 games is calculated and 37% of that raise is awarded—which may mean nothing, or it could mean they find that outcome more likely. The difference between the two versions for the entire class is $11 million, and $9.4 million for the 15 players I chose, so the disparity is certainly nothing to sneeze at. Once any kind of clarity on the situation is reached, I’ll update my projection if necessary, but for now, let’s focus on the players themselves.

For my roster, I went with four nontenders—John Ryan Murphy, Nick Tropeano, José Osuna, and Nick Burdi. To me, Murphy and Osuna seem like all but locks, but there are plenty of others who are on the fence. You could easily sub Michael Feliz or Kyle Crick in for the other two members of the bullpen, or just add them to the list. I know Burdi may come as a surprise, but while he obviously has the talent, I’m just not sure how confident you can be that he can stay on the field.

There are other possibilities to nontender, like Trevor Williams, Erik González, Luke Maile, or maybe even Chris Stratton. Many industry sources are predicting an increase in nontenders, as teams are looking to cut costs and midlevel arbitration deals cost more than minimum salary replacements. The Pirates are obviously no strangers to cost containment, so it certainly wouldn’t be surprising if they looked to replace as many of these higher priced players as possible. As I wrote before though, their best chips to trade, at least in theory, are the ones projected at higher salaries. So, while some savings could be projected with nontendering a contingent of players, significant savings aren’t being realized in replacing Crick ($900,000) or Feliz ($1,100,000) with a minimum salary of around $600,000. It will take tendering and subsequently trading someone like Joe Musgrove ($4,400,000) or Adam Frazier ($5,200,000) to see real savings.

One last note before finally moving on—who wants to revisit the infamous Frank Coonelly comments one more time? Of course, back at PiratesFest 2019, Coonelly was quoted as saying this to the Pittsburgh Post-Gazette:

“This year’s 25-man roster will likely have more than half of it be players not yet arbitration-eligible. Therefore, the payroll will reflect that. That same roster will be more expensive the following year as the following players become arbitration eligible. There will be room for the payroll to grow.”

I’ve revisited this once already, but the shortsightedness of this comment just keeps presenting itself, especially in hindsight. In 2019, I calculated a $77,522,000 opening payroll. This season, before prorating, I had an opening payroll of $61,725,688. As you can see, the projection below is even lower still, and as we discussed, could be lower depending on how arbitration goes. In 2020, nine arbitration eligible players made $21,865,000. The same nine made $7,630,500 in 2019. Now, we’re to as many as 19 players accounting for as much as $45,000,000. So, while arbitration salaries have increased as much as six-fold, total payroll is projected to go down in the $15-20 million dollar range since the comments were made. Why is this? Of course, it’s because of all the payroll that was dropped after 2019, never replaced in 2020, and more than likely isn’t going to be replaced in 2021. Even with adding back the $8 million for you know who, we’re looking at an increase of around $7 million from 2020 to 2021, and a $9 million decrease from 2019 to 2021.

Yes, it was true that arbitration salaries were going to rise; that much was clear. However, when they represent two thirds of your total salary, you’re likely not going to see an actual increase. As usual, I’m not bemoaning the actual numbers here; rather, the disingenuous nature of the comments is my target. They didn’t make sense then, and they aren’t looking any better with the benefit of hindsight.

Pre-arbitration Salaries: $5,995,500

This includes any player on the active 26-man roster who isn’t on a guaranteed contract or headed for arbitration. With the aforementioned mammoth arbitration class facing the Pirates this offseason, room was left for only ten pre-arbitration players in 2021, despite just the one guaranteed salary.

To determine these amounts, I added a three percent raise on to the player’s minimum salary for 2020. Three percent is an estimate based on minimum salary raises from prior seasons, and it better accounts for the increases that will be handed out on individual bases, typically centered on service time. Any differences are often immaterial and don’t change the bottom line much.

Minor League Salary: $1,162,800

This is the total allocated for players not on the active roster, which I filled for all 14 possible spots.

Like 2020, league minimum salaries are to be determined based on a Cost of Living Adjustment, or COLA for short. In order to come up with this subtotal, I had to determine that myself. Last year I used the COLA for social security, which is based on the consumer price index, and projected the minimums exactly right, so I’m doing the same thing this time around. Recently, the Social Security Administration announced a 1.3% increase for 2021, so that’s what I’m going with as well. Using the minor league minimums from 2020 as a base rate–$46,000 for first contracts and $91,800 for second or subsequent contracts—I came up with $46,600 and $93,000 for 2021, respectively.

Coming into 2020, the only names I was projecting for protection from the Rule 5 Draft were Jared Oliva and Blake Weiman. Assignments to the Alternate Training Site this season changed my mind a bit, and with Weiman’s exclusion, as well as the somewhat surprise inclusions of Rodolfo Castro, Max Kranick, and Braeden Ogle, I decided to leave spots open for just those three players. Of course, Oliva was already added to the 40-man during the season, and he—as well as the remaining players on the bottom of the Reserve List not just now being protected—are slated for the $93,000.

Signing Bonuses and Prorated Buyouts: $1,950,000

The same as for guaranteed salaries, this section includes two players, each with a signing bonus and buyout, making for a total of four figures. Again, $750,000 of it will be backed off, but I still like to at least show what the cost would be otherwise.

Extensions could again increase these commitments, but I’m not sure I would hold my breath on free agent signings impacting this amount.

Option Buyouts: $250,000

This of course is assuming the Pirates actually buy out Chris Archer, which is extremely likely, but not a given.

This expense is slightly different than the one above, as it’s the actual cost of the buyout, not the prorated portion. Many sources will include a cost like this when a player is bought out of an option, typically for their first or only option year on a contract; however, that’s not correct. The first-year option buyout is to be spread among the guaranteed years of a contract, like the signing bonus, which is why they are included in the prior section—but what about buyouts for subsequent option years, like the decision on Archer right now?

Article XXIII(E)(5)(b)(i)(B) of the CBA stipulates that if a “Player ultimately receives an Option Buyout that relates to an Option Year other than the earliest Option Year, that Option Buyout shall be included in Salary in the Contract Year covered by the option that was not exercised.” Therefore, Archer’s buyout is being accounted for in full in 2021.

Credits: $(8,000,000)

Believe it or not, this would have been you know who’s final guaranteed year on his four-year contract. Year 4 came with a $7,250,000 salary—add that to $500,000 in prorated signing bonus and $250,000 in prorated buyout, and you get the $8 million offset for 2021.

2021 Payroll Projection: $60,408,300

Will this projection fall below $60 million? Can it get as low as the $50 million range? Follow along all offseason and find out!

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