The San Diego Padres reportedly needed a little help making ends meet this season.
The team took out a $50 million loan in September to address short-term cash-flow issues and meet its obligations, including a franchise-record player payroll, according to The Athletic. It also reportedly asked MLB for permission to borrow nearly $100 million, but the league gave the team permission for only $50 million, which MLB apparently thought would be enough to cover expenses.
To be clear, businesses often borrow money, from the smallest mom-and-pop shop to international conglomerates. This includes MLB teams. What makes the Padres' borrowing newsworthy, however, is the Padres' well-publicized spending and how they went about the move so late in the season.
The Padres entered 2023 with the third-largest opening day payroll in MLB, at $248.9 million, per Cot's Contracts. They were also third-largest, at $296 million, by the competitive balance tax payroll, which prorates player salaries and signing bonuses, includes dead money from past contracts and includes salaries from players on the 40-man roster but not on the active roster.
Basically, the Padres spent more this year than they ever have, by far. They spent like a big-market team, bringing in Xander Bogaerts on an 11-year, $280 million contract and extending Manny Machado ($350 million) and Yu Darvish ($90 million) in the previous offseason.
All of that spending made some people excited and some people (mostly other MLB owners) uneasy. Padres fans seemed to be in the former group, as the club reportedly sold a franchise-record 3.3 million tickets and told The Athletic that they finished in the top six in regular-season ticket revenue (which probably means they finished sixth).
The increased ticket revenue apparently didn't offset the increased spending, as one official admitted to The Athletic:
“If the question is, despite all that revenue growth, why would we need to be borrowing more money? I mean, you can connect those dots,” said a Padres official who was not authorized to speak publicly. “The levels of payroll that we’ve been at have probably reasonably been in excess of what we could have supported, but it was part of the larger plan.”
That excitement for 2023 ultimately went bust. The Padres struggled all season to turn strong peripherals into wins, finishing the season 82-80 and two games out of the playoffs. Issues went beyond the financial, as a reported feud between general manager A.J. Preller and manager Bob Melvin led to Melvin moving to the division-rival San Francisco Giants.
Whether the Padres should be worried about this is another story. An official claimed the team was aware it might need to borrow money. Padres CEO Erik Greupner also released a statement saying the team is still following the "capital plan" previously established.
Reading between the lines, it appears the missing revenues from the postseason are haunting the Padres. MLB teams are allowed to rack up only so much debt before the league gets involved. Also not helping would have been the issues with the Padres' local broadcasting, which saw MLB take over the team's rights after the bankruptcy of Diamond Sports Group.
Usually, not much is done when teams run afoul of the "Debt Service Rule," but MLB teams are sometimes put on a formal plan to address their debt, which the Padres might now be facing.
How much more are the Padres going to have to spend?
The Padres now have some significant debt to pay off. Unfortunately, balancing the books by cutting payroll might be tricky.
The team already has a total of $155.6 million committed to the 2024 payroll ($209 million by the CBT 40-man number), most of it in salary to Bogaerts, Machado, Darvish, Fernando Tatis Jr. and Joe Musgrove. That total doesn't include what the team will pay in arbitration to players it controls, such as Juan Soto, who is set to get a significant raise from his $23 million in 2023.
Meanwhile, The Athletic reports that officials expect the team's 2024 payroll to be closer to $200 million than this season's record high. That leaves very little wiggle room for a team that already has Cy Young favorite Blake Snell and ace reliever Josh Hader hitting free agency.
Of course, there is one thing the club can do that might help.
Are the Padres going to trade Juan Soto?
Hearing about an MLB team's financial issues near the start of an offseason usually portends some difficult decisions for that club. In the case of the Padres, that might mean trading Soto, whom they acquired at great expense at the 2022 trade deadline.
Speculation has been rampant about Soto's future with the team since it became clear the Padres wouldn't be making the 2023 playoffs. The 25-year-old Soto is on track to hit one of the most lucrative free agencies in MLB history next offseason. The fact that he has not signed an extension in his year-plus as a Padre is a pretty good sign that the team hasn't offered the money he's looking for.
Trading Soto would be a massive reversal of the vibes that have surrounded the Padres the past three years, but it seems pretty clear that the bill is coming due — literally, in at least one case.