Cubs’ Chairman Tom Ricketts on Team Finances, Free Agents, Smart Spending & More

“It sounds great to talk about, but it’s just not true.”

The Chicago Cubs are not broke, says Cubs’ chairman Tom Ricketts, who was on the Kap and Haugh show this morning on The Game 87.7 FM.  Ricketts discussed a variety of issues in the wide-ranging interview, including the financial condition of the team. Ricketts specifically addressed the perception, spawned in large measure by Chicago Sun Times staff reporter Gordon Wittenmyer, that the team is broke: “I don’t know where that perception comes from. We have interest expenses, but we’re financially very strong.”  As he and Cubs’ President Crane Kenny have repeatedly emphasized, “Dollars created by the team stay with the team.” Ricketts does not dispute that the purchase of the team in 2009 created debt and interest obligations, but he observed that the Cubs were no different than most other Major League teams in this respect. If not on big name free agents, the Cubs have spent significantly during Ricketts’ tenure, including on the team’s large, sophisticated baseball operations department, led by Theo Epstein and Jed Hoyer.  In addition, the team has invested in key infrastructure, including its new Spring Training home in Mesa, Arizona, and its baseball academy in the Dominican Republic. Of the new Mesa facility Ricketts said, “For everyone involved, it’s been a huge home run.” The same can be said for the new Dominican facility.

Regarding the issue of the Cubs’ relatively modest payroll, Ricketts is sure that Theo Epstein and Jed Hoyer could put together an 83 win team without much difficulty if they took a “short term approach.” But he added: “We want titles. So we won’t gamble with the future.” The key, said Ricketts, is to spend wisely. Ricketts cited the team’s pursuit of Japanese free agent Masahiro Tanaka as an example of the team’s financial flexibility, but said the Tanaka deal was ultimately structured in a way “that was not in our best interest to match or top.” Tanaka’s deal with the Yankees is worth $155 million over seven seasons, and it includes a full no-trade clause and an opt-out clause that can be exercised after the fourth season. Structurally, the opt-out clause is surely the most objectionable aspect of the deal to Ricketts: if Tanaka performs exceptionally (Yu Darvish) and baseball salaries explode even further in a few years, Tanaka could opt-out and re-sign with Yankees or elsewhere for even more money; if he gets hurt (Daisuke Matsuzaka) or is just plain bad (Kei Igawa) he gets paid anyway for another three years.  In other words, the team assumes all the risk associated with an opt-out clause. (But they do get the player!) Also possible, the Cubs’ front office did not deem Tanaka to be a $155 million pitcher, even under a more traditionally structured contract.

Free agency ain’t the answer anymore

Ricketts also talked more generally about free agents, observing that the ‘80s and 90’s model of free agency is no longer viable. The premier players, such as Andrew McCutchen and potentially very soon Mike Trout, are getting locked up by their teams and are not coming onto the market until after their prime. This puts a premium on scouting and player development, which by all accounts the Cubs have excelled in during the last few years. Also, in the post-PED era, there will be fewer and fewer productive post-prime free agents to choose from. Ricketts did not specifically discuss his own deals, but since he has been Chairman the Cubs have locked up their two best young (big league) players to long-term deals, giving them team control of core players Starlin Castro and Anthony Rizzo well into potential free agency. Despite the players’ struggles in 2013, these are both good deals for the Cubs in the current environment. They will look even better after 2014 if, as expected by many, Castro and Rizzo have comeback seasons. Rizzo’s deal, signed in May 2013, will total $66 million if the Cubs exercise team options in the final two years of the deal (2020 and 2021). Rizzo is under team control through his age-31 season at what appears to be a very reasonable salary in the current market. Similarly, Castro is under team control through his age-30 season in 2020.  Castro’s deal will total $69 million if the Cubs keep him through his 2020 option year.

Rooftop drama nearing an end?

In sum, according to Ricketts, business is good and the baseball is slowly but surely getting better. While music snobs will lament Ricketts’ comment that he would like to see Coldplay perform at Wrigley Field in the near future, I am more concerned about the fact that Ricketts has yet to green-light the Wrigley Field renovation project. Ricketts indicated his goal concerning the rooftop situation was to have “the least amount of incremental drama” possible; as always, he expressed confidence the Cubs would “soon” have a deal in place. On some level, however, it does not make sense to hold up the $500 million capital investment project – and potentially set back baseball operations – over the comparatively modest threat of a rooftop lawsuit. As I argued several weeks ago in Advantage Cubs, the team appears to have a decided legal advantage should the dispute go before a court or another third party. The legal calculus is of course not the only consideration and a negotiated settlement would be preferable. But if they have not settled by now, more than one year after the Wrigley renovation plan was unveiled in January 2013, what are the prospects of reaching a deal anytime “soon”?

Coming soon: “The biggest story in the world of sports.”

Ultimately, it is hard to argue with Ricketts, who sounded confident and genuinely at ease in discussing a long list of topics with Kap and Haugh. Despite my reservations about the handling of the rooftop drama, it is hard not to be impressed that the team is headed in the right direction from both a business and baseball operations perspective. The Cubs have a large, dedicated, and loyal fan base that is hungry for good baseball. In his actions and words, Ricketts appears to take seriously his responsibilities to the greatest fans in sports as he shepherds the ballclub through its current rough patch. As Ricketts noted in today’s interview, as the Cubs continue to get better and finally do win, “It will be the biggest story in the world of sports.” Amen, Chairman!


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