A Different Perspective on the Pittsburgh Pirates 2024 Financial Report

This is not changed in any way from when I posted it in Apri—I just wanted to give it a permanent home.

I’m self-aware enough to realize my reputation precedes me—I’m the person who is constantly correcting other people.

I can think of several examples immediately off the top of my head in which this has rubbed people the wrong way. To outside observers, I’m sure some could see it as being a “know it all”. For those being corrected, I realize that no one likes to be wrong and doubly don’t like for it to be pointed out.

However, if you’ve followed my work for long enough, you realize I value accurate information being available for those who want it. That is my main goal. So, when I see incorrect information being perpetuated, I like to correct it, because I view it as no different than pointing out to someone that 2 + 2 does not indeed equal 5.

Mike Burrows either was or wasn’t Rule 5 eligible in 2021. The sky is either blue or green. Liover Peguero either did or didn’t have a fourth option heading into 2025.

Fact or fiction, black and white—that’s how I like to view it.

Having said all that, it’s why I’m proceeding with caution from here on out, because questioning or disagreeing with a process isn’t the same as correcting a fact.

Hopefully I can make that clear; unfortunately, it took a lot of numbers, which I know can be hard to follow. I tried to bold the most important ones to make it a bit easier to follow.

On March 20^th, DK Pittsburgh Sports released the results of a months-long investigation, with the intent of getting to the root of the Pittsburgh Pirates’ business operations. The findings, which surprised many fans—and apparently the reporting team themselves—was that the Pirates actually lost money in 2024—$2.2 million to be exact.

To be completely transparent, I was asked if I wanted to take part in this endeavor back in October. I chose to decline. However, I was still interested when it came out, as this type of story is right up my alley.

I typically read pieces like this with a discerning eye, because as I said, they are of interest to me. I understand them better than a more “common fan” may. To be honest, I read it initially, had some discussions with others—as I’m sure many did—but largely moved on. It wasn’t until I read a follow up piece by JJ Cooper at Baseball America that something hit me.

The report breaks down revenue and expense in different sections, and to its credit goes into quite a bit of detail on different revenue streams. Unfortunately, the same can’t be said for the expenses, as it only lists two specifically—payroll and amateur signing bonuses—lumping the rest into “all other costs”.

The payroll figure listed—$122,942,572—was the Competitive Balance Tax figure reported by the Associated Press, so that is verifiable. Assuming many of you follow my work, you know I track payroll. For 2024, I was a mere $23,116 over this amount in my projections, so I see no issues there.

Being able to come that close in my own calculations, I think it goes without saying that I have a solid understanding of just how this figure is calculated, but I’ll try and provide a quick explainer for those who don’t.

Competitive Balance Tax payroll—or more appropriately “Actual Club Payroll”, as the Collective Bargaining Agreement (CBA) refers to it—is the agreed-upon measure between the Major League Baseball Players Association (MLBPA) and Major League Baseball. With the calculations ratified in the agreement, it’s the figure that the sides are going to fight over when one accuses the other of not following the rules.

However, to be totally honest, it’s really just a “paper” number, with lots of accounting tricks written into the agreement that can increase or decrease the final total. By and large, it’s based on the Average Annual Value (AAV) of contracts, which for one-year deals is the same as what a player actually makes in a year; however, long-term contracts are where it’s much more important.

AAV evenly spreads out the total guarantee of a contract—base salary, signing bonus, buyout, and deferred compensation—valuing that total in any given year of a contract. The hangup about this calculation is that it can often differ greatly between what a player actually was paid in total compensation versus the AAV of their contract.

To illustrate this, Mitch Keller, who signed a long-term contract going into 2024, made a base salary of $5,442,500 last season; however, the total value of his contract—$77 million over five years—is what was used as the input for the CBT calculation. As you can see, the difference between $5.4 million and $15.4 million (Keller’s AAV) is quite large. Similar situations were also in effect for Ke’Bryan Hayes (a $1.75 million difference) and Bryan Reynolds (a $4,285,714) difference.

There were a few smaller differences between the CBT payroll and what the league calls its Labor Relations Department (LRD) calculation. I get this question a ton, so to summarize, the LRD is a much more “true” valuation of outgoing payroll expenses in a given season. For example, it values Keller at $5,854,000 (it does include the prorated portion of the signing bonus), whereas the CBT value is $15.4 million.

This report always gets a much more muted response around the industry, but LRD payroll for the Pirates was reported to be $87,300,901 by The Associated Press.

Herein is where my first—and biggest—issue comes in. The difference between the values is obviously a large—approximately $35.6 million dollars—and obviously notable one. In fairness, there is one additional piece of the calculation that needs to be mentioned.

Part of the CBT calculation—and a major reason why it’s so much larger—is each team’s share for benefits. The Associated Press cites the shared figure to be $17,028,816, along with describing what goes into the figure. Each team also shares an even split of the $50 million Pre-Arbitration Bonus Pool—$1.67 million per team—however, that is centrally funded, so it’s not really an actual expense for the teams.

Benefits certainly are though, so again, in fairness, if we add in $17 million plus to the $87.3 million LRD figure, we now have a payroll of $104.3 million—but I do want to perform one additional calculation.

Remember when I said signing bonuses were prorated? Well, both Keller and Reynolds’ bonuses hit the LRD figure for a total of $661,500. If we back that out, but add in Keller’s entire $2,057,500 signing bonus (that usually is paid at signing), the new, final payroll figure is $105,725,717.

As you can see, this is quite different from $122,942,572—about $17.2 million to be exact.

That, in and of itself, is a major red flag, and one that I felt obligated to spend 1,100 words on up until this point examining. However, remember when I said the other expense listed by name in the report was amateur signing bonuses? I wanted to take the time to walk through that as well.

By my account, the Pirates spent $22,498,044 in signing bonuses in 2024; however, I find it more prudent to try and walk through that total, which is approximately $4 million less than what is cited in the report.

Fortunately, these figures are largely readily available, at least if you know where to look. On the amateur draft side, MLB reported the Pirates had $14,000,500 of pool space to spend in 2024. Based on reporting and tracking on signing bonuses done by Carlos Collazo at Baseball America, the Pirates spent the entirety of their pool, including the allowable five-percent overage before draft picks start to be lost as a penalty. However, the way pool space is calculated versus what is actually spent is slightly different, and the Pirates paid a total of $15,370,525 in draft bonuses. Again, in fairness, we need to make some additions.

Teams pay a 75% fee on the five-percent allowable overage ($700,025), so the Pirates would have spent an additional $525,019 as part of their draft expenses. Also, the league allows for what are known as Contingent Payments, which are $2,500 sums that are paid contingent on a player being retained by the club for 90 days. Many teams will pay an “actual” bonus of $2,500 less, pay the Contingent Payment separately, and save $2,500 in pool space. The Pirates are no strangers to this strategy.

Tracking slot values versus bonuses, it’s more obvious some places than others. For example, the slot for the 37^th pick in the 2024 Draft was $2,511,400, and Levi Sterling signed for $2,508,900—$2,500 less than slot. So, presumably, $2,500 payments need to be added for some players, but it’s not entirely clear for which ones exactly. To be sure the possibility is being accounted for, if $2,500 is added for every player selected in the first ten rounds—the rounds in which the pool is based—that’s an extra $27,500.

So, if we add $15,370,525, $525,019, and $27,500, we come to a total of $15,923,044 towards the 2024 Draft.

The report also cited the 2024 International Signing Period, which luckily is also fairly easy to track.

According to MLB, the Pirates had $7,114,800 to spend on international free agents in 2024. According to The Associated Press, the Pirates had $89,800 remaining after the period closed, or $7,025,000 spent. However, the Pirates traded $500,000 in space to the New York Yankees as part of the JT Brubaker deal, which isn’t actual money; rather, it’s the opportunity to use that amount of money. So, in reality, the Pirates spent $6,525,000 towards their pool. Again, however, bonuses of $10,000 or less don’t count against the pool, and the Pirates signed five such players, or an extra $50,000 in bonuses. Add that up and it’s a total of $6,575,000 in international bonuses.

If you add up draft and international signings, that comes to a total of $22,498,044, which is approximately $4 million less than total cited in the report.

Add $17.2 million fewer in payroll expense to this $4 million difference, and a $2.2 million loss turns into a $19 million gain.

After having explained all that, am I sure the Pirates made $19 million in 2024? No, absolutely not. However, given the few questions I raised, am I sure they lost $2.2 million? Also, no, I am not.

As I said above, I don’t know how the report went about coming to its conclusion. If the $2.2 million loss was on a financial overview that the investigative team saw and the rest of the report was an attempt to back into that figure, all the inflated payroll and bonus figures would mean is that other operating expenses would be higher than expected. However, if the $2.2 million loss was derived by internal calculations centered on a largely inflated Competitive Balance Tax figure—along with a slightly higher than expected signing bonus figure—that’s where potential issues with the math arise.

I understand that once genies like this are out of the bottle, there’s no getting them back in. Anyone who read the report is still, by and large, going to have their own personal views, and the $2.2 million loss will likely be the figure that persists.

However, I hope that I at least showed why I found the questions at least worth asking.