Why are the St. Louis Cardinals planning on significantly increasing payroll in three to five years?

After the St. Louis Cardinals' 2014 season came to an end with a five-game NLCS defeat at the hands of the San Francisco Giants, chairman Bill DeWitt, Jr. spoke with Derrick Goold of the St. Louis Post-Dispatch about the team's plans in the coming years for payroll. Goold's whole article is worth a read as it has some tidbits about revenue streams and more, but the part that caught my eye was DeWitt sharing the Cardinals' long-term plans regarding the major-league club's payroll. It's going to increase quite a bit. The DeWallet is going to open yawningly.

"We have forecasted increases over the next three to five years that will accommodate what we need to do with the young players we have," Cardinals chairman Bill DeWitt told The Post-Dispatch this past week. "We knew as younger players matured at the major-league level they would get to arbitration and into free agency. We wouldn’t be able to retain them at the current payroll level, so we’re forecasting fairly significant increases in the next three to five years."

The Cardinals finished the 2014 season with a payroll around $115 million, and even though it swelled with additions of pitchers John Lackey and Justin Masterson the total outlay was less than the limit set for the season. DeWitt confirmed that the team had "the capacity for a higher payroll than we currently have." With the size of raises owed a player like Lance Lynn and guaranteed to a player like Matt Carpenter, the Cardinals front office expects the payroll to grow for 2015 after several years of hovering around $110 million to $115 million and one year of stepping back in total spending.

DeWitt declined to put a figure on "significant." The number will be based on revenue and market, he said. Given those indicators, within a few years the payroll could approach $130 million. The club expects to be ready to have a franchise record payroll in the coming years.

The Cardinals' payroll has sat between around $88 and $116 million over the last several years. DeWitt's announcement from his throne atop a pile of dry powder in the form of hundred-dollar bills is not particularly surprising. DeWitt's vision for the organization was to develop a pipeline of young, cost-controlled talent. It was that vision that led to Walt Jocketty's ouster and John Mozeliak being hired as general manager. Well, the pipeline spigot is open and the talent has gushed to the major-league club from the farm.

Remember that, until the season after a player accrues three years of MLB service time, he makes the league minimum. Teams have some discretion on how much they pay players during their first three years in the majors. The Cardinals typically pay players a bit more than the minimum based on how long they've been a member of the big-league club. For example, the MLB minimum in 2014 was $500,000. For example: Kolten Wong made exactly the minimum of $500,000, but Matt Adams—who had over one year of service time on opening day—made $516,000.

After a player accrues three years of service time, he becomes arbitration eligible and can make more money. A player is eligbile for salary arbitration for three seasons. Typically, in year one, a player earns 40% of what he would have made in the arbitrator's estimation on the open market. He'll make approximately 60% of that in his second year of salary arbitration and about 80% in year three. After a player has accrued six years of MLB service time, he is eligible for free agency. That is, unless he signs a contract extension before reaching that threshold like, say, Matt Carpenter. Whether a player reaches arbitration or signs an extension, the cost of his salary goes up. And the Cards are planning ahead for this with their current crop of young, cost-controlled players.

The following chart shows the guaranteed salaries owed players who have signed contracts either as free agents (Matt Holliday and Jhonny Peralta, for example) or contract extensions while still under St. Louis control whether by individual contract (Adam Wainwright and Yadier Molina) or by function of the collective bargaining agreement (Matt Carpenter). Also shown on the chart are those Cardinals who will be making the league minimum or enter salary arbitration. Some of the players (e.g., Kolten Wong) have their eligibility by my best estimate. Others are based on Baseball-Reference's estimation of their arbitration and free agency eligibility.

*Carlos Martinez is not featured on the graphic, but he ought to become arbitration eligible after the 2016 season or so, depending on what the club does with him in 2015 (big-league bullpen vs. starting in Memphis). The difficulty in estimating Martinez's arbitration and free-agency eligibility is why I left him off the chart. This is also why other pitchers who split time between the majors and minors in 2014 (such as Marco Gonzales, Sam Freeman, or Kevin Siegrist) are not included in the graphic. If they spend all of 2015 with St. Louis, projecting their arbitration and free-agency eligibility becomes easier, but we don't know that they will, which could conceivably push such eligibilities back a year.

As you can see, starting with Lynn this offseason, the Cardinals have players who are going to start costing the club more money. Some of this expense will overlap with the final years of Wainwright, Molina, Peralta, and Holliday's big contracts. So a ballooning of payroll during the 2017-2020 window is natural, if you're willing to spend. Lucky for Cardinals fans, DeWitt and company appear ready, willing, and able to do just that in the forthcoming years. Now it's just a matter of hoping that John Mozeliak and the front office elect the right players with whom to sign contract extensions that buy out arbitration and free-agency years.