The Continued Costs of Miller Park

Spending Expectations

The Brewers enter the 2019 season in relatively uncharted territory. Their three year progression in operating revenue, estimated by Forbes (prior to interest, taxes, depreciation, amortization), totaled approximately $150 million entering the season and exhibited fantastic growth prior to a 200,000 person spike in attendance and a deep playoff run. Given spending on the Carolina Mudcats purchase and the Arizona Spring Training development, it is clear that the club was leveraging their strengths by investing in capital projects, which is a perfectly reasonable thing for a baseball club to do (as infuriating as it is for baseball fans to see their club rake in profits and invest off the field, that’s what one would expect the club to do from a shareholder’s standpoint).

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Better yet, depending on how one views revenue expectations from the 2018 season, the Brewers likely increased their share of labor spending to approximately 40 percent, based on publicly available information and various trend forecasts (from conservative to aggressive). All of this precludes the MLB Advanced Media money, which undoubtedly gives the Brewers ownership group more cash to leverage for both capital and labor projects.

Year (all $M) Revenue Operating Income Estimates / Projections Minimum Revenue Sustained Growth Maximum Revenue Year-End Payroll Maximum Payroll Labor
2015 $234 $27 n.a. n.a. n.a. $98 n.a. 42%
2016 $239 $58 n.a. n.a. n.a. $72 n.a. 30%
2017 $255 $67 n.a. n.a. n.a. $79 n.a. 31%
2018 Not published $54 $260 $272 $291 $110 n.a. 42%
2019 Not published $55 $266 $290 $310 $112 $123 42%
2020 Not published $57 $271 $310 $330 $115 $131 42%
2021 Not published $58 $277 $330 $350 $117 $139 42%
2022 Not published $59 $283 $353 $373 $120 $148 42%
2023 Not published $60 $289 $376 $396 $122 $158 42%

[quick rant]Brewers, increase minor league pay! Pay your minor leaguers a living wage across all systems![/quick rant]

Of course, one of the difficult aspects of navigating the 2018-2019 offseason is that in order to increase the labor share of the club, Milwaukee actually had to go out and sign some players. So some previously rosy payroll estimates may be pushed back a few years (click that link if you’d like payroll analysis with Lewis Brinson arbitration horizon estimates): but this is a good thing, because the Brewers are in better shape with Lorenzo Cain and Christian Yelich patrolling the outfield, and they’re also in better shape with clearer salary arbitration pictures for Corey Knebel, Travis Shaw, and even Jonathan Schoop.

The trouble is, without assuming that the Brewers will allocate full playoff revenue, and an increasing share of overall revenue, to the MLB payroll, the 2018-2019 offseason might look a little boring if the club simply renews each and every one of their arbitration eligible players. Here’s how this group looks, with Cot’s Baseball Contracts estimates:

Player Estimate ($M) Arbitration Year
Schoop Jonathan $11 A3
Knebel Corey $6 A2
Shaw Travis $5 A1
Vogt Stephen $4 A3
Nelson Jimmy $4 A2
Perez Hernan $3 A2
Davies Zach $3 A1
Kratz Erik $2 A3
Cedeno Xavier $2 A3
Santana Domingo $2 A1
Pina Manny $2 A1
Jennings Dan $1 A4
Saladino Tyler $1 A1
Total $44 13 players

Without major revenue growth, and considering a similar distribution of revenue to labor, this is how the Brewers payroll freedom might project:

Salary (all $M) 2019 2020 2021 2022 2023
Guaranteed Contracts $66 $47 $35 $19 $0
Revenue $266 $271 $277 $283 $289
Operating Redistributed $5 $6 $6 $6 $6
MLBAM Redistributed $3 $3 $3 $3 $3
Payroll Space $49 $71 $85 $103 $125
Maximum Space $76 $103 $123 $148 $176

It is evident that on the most conservative estimates, the Brewers cannot keep each arbitration eligible player and sign additional impact free agents. This raises questions about how the Brewers will employ trade and non-tender (basically releasing an arbitration-eligible player for free) strategies to maximize space, while also raising questions about how lucrative the playoffs were, where that MLBAM money will kick in, and how the club will (or did) allocate profits from 2016-2017.

For if the most rosy scenario plays out, the Brewers could keep a substantially larger portion of arbitration eligible players, and continue to add impact talent on the open market. Thus, there is room across the roster for GM David Stearns to wheel and deal. This is a great time for counterbuilding, which basically means making trades that run contrary to the assumed roster building strategy of the team. If a rebuilding team is expected to trade MLB salary for prospects, and a win-now trade reverses that by bundling prospects for MLB salary, those positions can be mixed in contrarian fashion to help maximize roster resources. Given that the Brewers have the opportunity to develop numerous players at the MLB level in 2019, some (seemingly) head-scratching trades would be a great way to free up additional salary in order to bolster the prospects with gambles on more proven producers.

Stearns developed a contending club so quickly by trading for MLB assets in his first offseason; now the GM can ironically continue to maintain the health of his MLB roster forecast by shedding some salaries for prospects or depth moves. Given the strengths of the 2018 club, this could be just the strategy necessary to improve around the margins, develop top prospects, and land one big ticket free agent.

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