Padres “Prefer” To Stay Under Luxury Tax In 2024, Could Reduce Payroll Below $200MM

The Padres have long been expected to pare down payroll significantly this offseason, with early signals indicating a target payroll of no more than $200MM for the 2024 season as they look to get back into compliance with the league’s debt service rules. The Athletic’s Dennis Lin reports that the club may plan to cut payroll even more drastically, suggesting that the club’s final payroll next season could come in “more than a little lower” than that aforementioned $200MM figure as club officials reportedly “prefer” to stay under the luxury tax threshold in 2024. Importantly, Lin notes that the club would be willing to go “slightly” over the luxury tax if the right opportunity were to present itself later this winter, though it’s unclear what sort of opportunity would be necessary to convince San Diego to push their payroll over the threshold.

While RosterResource projects the Padres for a payroll of just over $152MM as things stand, it projects a significantly larger $205MM payroll for luxury tax purposes. That would leave the club with just under $32MM of budget space remaining for luxury tax purposes if they intend to remain below the first luxury tax threshold, which will sit at $237MM in 2024. That roughly $30MM of wiggle room for luxury tax purposes tracks with Lin’s suggestion that a payroll of around $180MM could allow the Padres to duck below the threshold next year.

Lin goes on to report that the club’s pursuit of outfielder Jung Hoo Lee, who signed with the Giants earlier this week on a six-year, $113MM deal, was impacted by the club’s budget constraints. While Lin notes that San Diego’s offer to Lee was reportedly considered “competitive” but nonetheless was not especially close to the figure offered by San Francisco. Lee’s contract with the Giants sports an average annual value of roughly $18.8MM, meaning landing the outfielder would have required more the remaining space the Padres have available to them below the luxury tax threshold.

As Lin notes, the Padres themselves demonstrated as recently as last offseason that there are ways to creatively structure a deal to deflate its AAV. Right-handers Michael Wacha and Nick Martinez, for example, commanded salaries of $7.5MM and $10MM respectively in 2023 despite carrying AAVs of just $6.5MM and $8.7MM for luxury tax purposes thanks to the complex structures of their contracts. It’s possible that similar deals could allow the Padres additional room to maneuver this offseason as they look to rebuild their starting outfield after shipping Juan Soto and Trent Grisham to New York as well as a pitching staff that lost Wacha, Martinez, Seth Lugo, Blake Snell, and Josh Hader to free agency last month.

It’s possible some of the club’s holes can be filled internally, with Lin noting that the Padres see the likes of Jackson Merrill, Jakob Marsee and Robby Snelling, among others, as prospects who could impact the big league club in 2024. Even in San Diego manages to successfully embrace a youth movement, however, it’s hard to imagine the club being able to fill two outfield spots, one rotation spot, and restock the bullpen without making several external additions.

With so many holes on the roster and relatively little wiggle room in the club’s budget for 2024, Lin notes that infielders Jake Cronenworth and Ha-Seong Kim are both potential trade candidates for the Padres. Kim would surely be an attractive trade candidate if available on the heels of a strong season that saw him slash .260/.351/.398 while playing superb defense all around the infield, and a deal would allow the Padres to shed his $8MM salary in 2024 while potentially bringing back major league ready talent in return.

Cronenworth, on the other hand, would be far more difficult to deal, as MLBTR’s Anthony Franco explored earlier this week. The 29-year-old is coming off the worst season of his career in 2023 and is owed a whopping $80MM over the next seven seasons, making him a less-than-palatable trade target for the majority of clubs. While Cronenworth’s salary is just over $7MM for the 2024 campaign, his contract’s AAV of around $11.5MM counts as a more significant hit against the luxury tax. While Cronenworth is far from the only player locked up long-term the Padres could consider trying to move, others would like present even more significant obstacles.

Right-handers Yu Darvish and Joe Musgrove figure to anchor the club’s rotation next season, and dealing either veteran arm would be counterproductive for a club hoping to bolster its rotation depth. It’s a similar story for Robert Suarez in the bullpen. Meanwhile, the likes of Xander Bogaerts, Manny Machado, and Fernando Tatis Jr. are due hundreds of millions through at least the 2033 season, making them all far more complicated to move for fair value than Soto, who will be a free agent next season, was. Making a trade for any of the aforementioned names even more complicated is that each player is coming off a season that either saw them produce below their recent career levels, struggle with injury, or both. With plenty of holes to fill and few realistic options for shedding salary available, the Padres face a major uphill battle as they look to improve upon their 82-80 season in 2023 that saw them just miss out on playoff contention.