Funny Money

Tuesday, August 01 2006 @ 01:00 PM EDT

Contributed by: Pistol

So what became of the $210 million payroll allocated to 2005-2007?

From a couple days ago in the Globe and Mail a breakout of the math was given:

It had been thought that the Blue Jays would have around $90 million to spend in 2007 because payroll figures of $48 million in 2005 and $72 million this year.  But for accounting purposes the figures work out differently.

"Even I got confused and I know something about finances," team president Paul Godfrey said.

For lack of a spread sheet, several pie charts and an accountant, Godfrey says the easiest way to break down the club's spending over the three years is $52.5 million last year, $75 million this year and next plus a written off $7.5-million payment to the Milwaukee Brewers to help cover Corey Koskie's contract.

Well, guess what?  I do have a spreadsheet.

Like the article mentions the Jays were around $48 million in 2005, but I'm willing to call that $52.5 million for the sake of argument.  Heading into this year it was repeated said that the payroll would be $75 million at most.  The Jays started the year at approximately $72.5 million (including $3.25 million to Milwaukee in the Koskie trade).  Trading Shea Hillenbrand shaved off $2 million from that amount.  With injuries the Jays may have paid a bit more in salaries than that (because if a player is on the DL he's making major league money and so is the player called up to replace him such as Mottola, Figueroa, Taubenheim, etc.).  So take off Hillenbrand's $2 million and add in another $0.5 million to cover that.  That takes you to $71.0 million.

So when you do the math you come up with:

2005 - $52.5 million
2006 - $71.0 million
2007 - $86.5 million
Tot  - $210.0 million

So where did that $11.5 million go if the payroll for 2007 is $75 million?  I believe it's a bookkeeping issue.  (Fun tangent - I believe bookkeeping is the only word that has three consecutive pairs of the same letters).  It appears the Jays are keeping two sets of books - the cash books and the accounting books.

When Burnett and Ryan were signed they were both given bonuses.  From an accounting standpoint, and how the team has been reporting it in their payroll, the bonuses are spread over the life of the contract.  But the actual cash is paid when the players signed (hence, signing bonus).  Burnett's contract this year is for $1.0 million and Ryan's is for $2.0 million.  Each got a $6 million signing bonus this year, so $1.2 million (one-fifth of $6 million) of that amount goes on the accounting books and what the Jays have been stating as their payroll.  So the books show Burnett for $2.2 million this season and Ryan $3.2 million - a total of $5.4 million.  However, the actual cash that was paid to these two players this season was their combined $3 million salary and $12 million bonus - a total of $15 million.

And that's where the difference I believe comes into play:

             Accounting              Cash
2005 - $52.5 million           $52.5 million
2006 - $71.0 million           $80.5 million
2007 - $86.5 million           $77.0 million
Tot  -  $210.0 million         $210.0 million

So if you take the stated $75 million payroll for next year, plus the $2 million saved with the Hillenbrand trade you get to $77 million.

Right now the Jays have $62.6 million of cash committed to Halladay, Burnett, Ryan, Towers, Glaus, Wells, Hinske, and Molina's buyout.  On the accounting side the total is $63.0 million (Ryan's $4 million 2007 bonus offsets the amortized bonus of Ryan and Burnett so the two numbers are pretty similar in 2007).

Overbay, Rios, and Johnson are all due raises for next year so that will take it up to at least $70 million giving the Jays about $5-7 million to fill out the rest of the roster, assuming that the $75-$77 million is a concrete payroll.  And the Jays will need to find at least a starting pitcher, catcher, and shortstop.  This is why it's assumed that Lilly and Speier, among others won't be re-signed.

I assumed that the three year payroll commitment would be a rolling payroll commitment.  That is, each year prior to the offseason the Jays would budget what they project their payroll to be for the next three years. It would make sense that a well run national company would operate this way.  How can you sign players to long term contracts if you don't know what your payroll will be down the road?  And the way the Jays acted this offseason they appeared to be operating under the assumption that the payroll next year, and beyond, would be, at least, in the $85 million range.  It doesn't make a lot of sense otherwise to pay 6 players around $55 million if you're only going to have another $20-23 million for the rest of the team.

So I think either:  A.  What's being said publicly is lower than what the actual plans are.  B.  The Jays were misled by Rogers on what the payroll would be going forward past this season and/or there's poor long term planning.  C. The Jays were very shortsighted with their moves this offseason adding three $10 million players to long term contracts when they knew payroll in 2007 would be tight.  D.  A combination of A, B, or C.

Jeff Blair's latest article raised some concerns about the future:

The back story is a growing concern in the administrative ranks about whether Blue Jays owner Ted Rogers is ready to roll out an extension of his three-year, $210-million (all figures U.S.) commitment beyond next season. More important, the concern focuses on the timing of any announcement, since the last time out, Rogers didn't make the announcement until after the free-agent crop was well picked over and Carlos Delgado had been lost for nothing.

I'm not quite sure what to make of all of this.  But certainly it can't hurt for Rogers Communications to have a big quarter that was much higher than analysts predicted.