Stuart Sternberg: Rays have $50 million to spend, but won’t

Speaking with the media at the Winter Meetings, Rays principal owner Stuart Sternberg was candid on the two most significant issues facing his baseball team: payroll and the team’s desire to move to Montreal for part of the season.

There’s a lot going on here, so let’s talk about why these comments are important and how they relate to one another.

Payroll

The Rays have payroll limitations, both self imposed (as discussed below) and imposed by the league (according to the Collective Bargaining Agreement, Attachment 22).

It’s hard to imagine the Rays being financially limited given the appreciation of the team’s value since the current ownership group took over in 2005, but that value is not liquid until portions of the team are sold off as investments (in part or in whole).

Without liquid ownership, the Rays are constricted by whatever profit margin the team is churning year over year, and it’s been more than a decade since we had even a hint of what the available funds might be. Playoff runs and various MLB sources (competitive balance tax, sale proceeds of MLB properties) help the Rays’ five-year running budgets for team payroll, but the size of what’s available year over year has never been clear.

If you take Sternberg at his word when he speaks, though, we might have more information on that financial flexibility in the payroll, so let’s start there.

If you haven’t seen it yet, here’s the doozy of a comment Sternberg made on the team’s 2020 payroll situation:

You can approach these comments one of two ways: by examining the words themselves or the sentiment behind them.

The words themselves indicate that Sternberg has the ability to dip into a considerable amount of cash — $50 million, at least.

It’s not clear if Sternberg meant he would sign either player to a one-year contract or to a multi-year deal. Cole, you might have seen, is signing with the Yankees for $324 million over nine years, which divides out to $36 million annually. Shorter offers for Cole would have presumably driven the AAV higher.

Indeed, it would be instructive to know if Sternberg was referring to a one-year deal or multi-year contract. If he meant a one-year deal, that indicates that he would only be willing to shell out team profits at a rate of $5 million per win. In that same answer to reporters, Sternberg also compared his own valuation of Didi Gregorious ($10 million) to what he signed for ($14 million).

So where does that $50 million of available payroll go if not into the team’s 26-man roster? It’s too lazy to say it goes right back to the ownership group, although a portion likely does.

A baseball team is more than just the roster on the field. There are investments being made in staff and Tropicana Field on an annual basis, minor league pay is on the rise, and a new stadium in Tampa Bay is being planned ... but that pales in comparison to a figure like $50 million annually, so there’s a gap to be made up.

As for the sentiment, out of context and within, these comments are infuriating for the fan who so desperately wants to see their team take that next step in the playoffs. Let’s look at that context:

Perfect example — if we needed a shortstop and Gregorius [...] was $10 million, then we’d sign Gregorius.

Whether we had saved the money with one guy or not, if it’s going to make us better and it’s a need for us and it’s somewhat in the sense of what we can afford, we’re going to do it. But saving money we might’ve had on Pham and reallocating it, we’re not going to reallocate it just because it’s there.

But by the same token, we anticipate this year spending more money than we did last year. We anticipate that, we expect that, so now it’ll be spent in a different way.

If you told me I could have Cole for $25 million, I’d sign him. I’ll spend $30 million. If Cole and Rendon would each sign for $25 million, I’d spend $50 million more. But it’s not happening, so it’s all a question of who’s available and at what price.

As much as we do have a budget, it’s a very wide range, and it ranges from $40 million to $80 million.

[The Athletic ($)]

After the trade of Tommy Pham, the Rays’ payroll is sitting just shy of $60 million; therefore, Sternberg is explicitly saying he’s willing to increase that by $20 million next season, and that he could increase it by $30 million (but won’t).

What does Montreal have to do with payroll?

You’d think that news would be enough on its own, but Sternberg had much to say about Montreal’s pursuit of half of the Rays as well.

You might not like the idea of splitting a season across two countries on opposite sides of the continent, but if the Rays are limited by their profitability, one way to add payroll would be to add profits and/or decrease expenses.

Here are the various ways, based on my personal understanding, that the Montreal Proposal could add cash to the Rays coffers:

1. Selling a portion of the team to Stephen Bronfman and Co. — There’s no guarantee that selling a portion of the Rays to yet another investment group would increase payroll on the field, but it’s possible a portion of that cash could be invested on the field as the current ownership’s pocketbooks are satiated.
2. Reducing the cost of building a new stadium — The Rays will have to build a new stadium, and outside contributions on infrastructure around a new stadium location, local governments appear to be neither interested or capable of giving handouts to an MLB stadium proportionally to what has been given to the local minor league stadiums (looking at you, New York). The Rays claim a half-season stadium would reduce the cost significantly, and perhaps those savings would open up payroll for the Rays to continue to compete with, well, New York.
3. Increasing television revenue — The Rays already benefit from having strong television ratings and two-thirds of Florida in their market. They might not currently benefit from a strong television contract, but they also might. We do not know. Either way, adding the eastern provinces of Canada to that mix would certainly increase the team’s television revenue and thereby increase what’s possible on the field.
4. Increasing attendance figures — It’s no secret the Rays have lagged behind the industry in both public attendance and corporate sponsorship. In fact, the Rays seem to be indicating it’s a half measure of their peers. And the same might be true in Montreal. But if both markets are a half measure, they could combine for a full measure of support, thus increasing the revenue available to the team.

In truth, all four of these possibilities to add to the Rays’ payroll are dependent on the benevolence of the ownership group, and that does not significantly change where the Rays are right now — where $50 million in additions is possible, but only up to $20 million allowed.

The front office would prefer the fan to focus on the benefits the Rays will receive on the field by splitting the season across two markets, but the real benefits will be for the ownership group.

Let’s bring it all back to the most recent comments.

In the Winter Meetings presser, Sternberg was claiming that the Montreal proposal is the only path forward for the Tampa Bay market to keep baseball (or possibly for the Montreal market to gain it back!).

Most places to try to sell 81 games and ask people to show up. Unless it’s one of the top 10 cities in the country (it isn’t happening). It hasn’t happened to this point in St. Petersburg. It didn’t happen in Montreal. I envision a time where with a partial season in Tampa Bay, where we’re consistently drawing 25,000-plus, and a partial season in Montreal, where we’re consistently drawing 25,000-plus.

[...] when we looked into Tampa, had the sponsorship numbers and had the support been robust, I could have been more concrete about (our contributions) and they would have been dramatically and could have been dramatically more. But there was nothing really robust that was coming out as far as support over there, which didn’t give us the confidence to say I could just go pay $550 million or $600 million for a stadium.

I’m more concerned about the viability in Tampa Bay than in Montreal. I could be proven wrong. I’ve tried a couple of times in Tampa Bay and the indications already I’m getting from Montreal are dramatically north of what I’ve seen in Tampa Bay. Maybe that’s because they don’t have a team and they want one, but whatever the catalyst, that’s where we are.

[The Athletic ($)]

Sternberg then reiterated his position with Marc Topkin that a full time team in Tampa Bay is not viable:

But staying full time in the Tampa Bay area, in Pinellas or Hillsborough, remains the least likely solution given their failed previous attempts.

“I’m open to any conversation,” Sternberg said. “They’d have to show me why it would work. We did work previously, we spent years on it. Some of the really solid business leaders, earnestly, and in a caring fashion, tried to make it work. But if there’s a genie in a bottle somewhere that wants to show me why it would work — I just can’t envision it. You never say never, but I can’t envision it. It’s less than highly unlikely.”

[Tampa Bay Times]

If the Montreal Proposal is indeed the only way forward, it will be incumbent upon the Rays to show how the players and fans will benefit, and not just the owners of the team, if they want the plan to succeed.