No, the Padres are not in financial trouble

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The San Diego Padres are in dire straits and can’t pay their bills. This is the current narrative making its rounds in the baseball community. It’s nothing more than that — a narrative.

The Athletic published an article on Nov. 1 revealing that the franchise took out a loan worth $50 million. The Padres took out this line of credit, according to the piece, to stay on track with short-term financial obligations, including player payroll. It coincides with the front office setting a goal to keep the team’s 2024 payroll around $200 million. The news has led to rumblings that the Padres are in a position where they have to trade generational talent Juan Soto and possibly other valuable assets. 

Padres CEO Erik Greupner issued a statement countering the idea that the franchise is in financial trouble. “The Padres organization continues to have access to all the resources, financial and otherwise, it needs to field a championship caliber team for the fans of San Diego,” the statement read.

“We established a capital plan for 2023 with our ownership group and lender partners and are operating our business in accordance with that plan.”

The Athletic cites another team official who said the high payroll is part of a larger plan. The official was not authorized to speak publicly. They added that the loan was anticipated, and the franchise is not in financial crisis.

Taking out a loan for this amount comes at an inconvenient time for the Padres. The team finished the 2023 season at 82-80, falling well short of their contention expectations. Before the season, the Padres awarded exorbitant contracts to Manny Machado, Xander Bogaerts, Jake Cronenworth, and Yu Darvish. These actions ran the team’s luxury tax balance to above $296 million in 2023. Fangraphs estimates the 2024 payroll to be around $197 million and the luxury tax balance around $250 million. The payroll figure includes estimated arbitration amounts. 

What prompted the need for the loan is unclear. Perhaps the front office had counted on 2023 postseason revenue that never came to fruition. Maybe Bally Sports’ filing for bankruptcy had an impact on revenue projections. Regardless, the team maintains that it is following a long-term plan. 

The real motivation behind this news going viral could be in the lower half of this piece:

“The Padres’ spending has become politicized in the sport, which can complicate industry perspectives. Various parties are incentivized to make San Diego’s payroll look prudent, or not.Any owner who spends heavily will drive up prices for other owners. But Seidler’s spending, in particular, also runs counter to a refrain favored by owners and the commissioner’s office: that teams outside of the largest markets have trouble financially competing with those inside those powerhouse markets. In effect, the Padres’ spending made other owners look bad. Some owners also believe the Padres have simply been behaving recklessly.

On the other side of the spectrum, their spending is regarded positively by the Players Association, player agents, and even some owners who want to see their peers invest more in their respective products.”

The Padres are a small market team but spend like a large market team. San Diego had the third largest payroll in 2023, behind the New York Mets and New York Yankees, respectively. It began with a trickle — a $144 million awarded to Eric Hosmer. The following year, AJ Preller sent a shockwave across Major League Baseball by signing Machado for $300 million. One more gargantuan contract (Bogaerts) and five big extensions later, this small market club has elevated itself to one of baseball’s biggest spenders. 

Rival MLB executives have made comments about the Padres’ spending in the past. Last January, Colorado Rockies owner Dick Monfort said the Padres’ spending put pressure on other teams. He added that he didn’t agree with it, though his fans probably did. That pressure he spoke of would come from his fanbase. It’s not unreasonable to think that fans of other teams would react the same way.

The Athletic reported that a third-party lender found the Padres eligible for a $100 million loan, but $50 million was the maximum amount allowed by MLB. 

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Is the team in over its head? It’s difficult to assume that owner Peter Seidler would put himself in that situation. It’s even more difficult to assume that MLB would allow the Padres to put themselves there. Beyond this thinking, the Padres were second in MLB in ticket sales in 2023, behind the Los Angeles Dodgers. Earlier this year, the Padres invested $20 million into a renovation of Gallagher Square, expected to be completed by Opening Day 2024. 

But do the Padres have to trade Soto? The Athletic speculated that the Padres might have to trade him due to their financial situation. Low-information baseball fans have taken this as confirmation that Soto will be traded this offseason. No such confirmation has been made.

Soto is entering his final year before free agency. Trading him this winter as opposed to at the trade deadline obviously would gain a bigger return. At the same time, the Padres have not signaled that they are trying to trade him. Last month, Preller told reporters that extending Soto remains the team’s “first path.” 

As of now, the Padres have not announced a priority to trade their superstar outfielder.

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