SPORTS: A CHILLY WINTER FOR THE BLUE JAYS,

Skyrocketing salaries and a dismal exchange rate have the Jays in tough

Over four days this week, baseball’s annual bacchanal crackled with gluttonous free-agent signings and landscape-changing trades. Meanwhile, the Toronto Blue Jays were talking about exchange rates and Darwin Barney.

During the winter meetings in Nashville, which concluded Thursday, the Blue Jays did not secure another starting pitcher nor join their rivals’ sudden extravagance around relief pitchers. ( US $ 18 million for three years? Right this way, Tony Sipp.) The Jays did sign Barney to fill a latter-day John McDonald role and picked up Double-A pitcher Joe Biagini in Thursday’s Rule 5 draft.

With bullpen help their priority need, they reportedly came close to signing reliever Yusmeiro Petit, who chose a one- year deal for $ 3 million with Washington. Other free- agent options remain, but the bullpen bazaar has begun to make the Jays squirm. When it comes to year-over-year performance, relievers are notoriously volatile and now they’re getting crazy money too.

“It’s such a tough market to wade into and allocate so many of your resources to, but we know we’ve got to find some alternatives, and we know we’ve got to play in that market,” Blue Jays chief Mark Shapiro told reporters in Nashville. “To play in the upper ends of that market, it’s a dangerous place to play. You’d better have a lot of flexibility and your threshold for risk had better be very high.”

That l ast sentence underscores Shapiro’s predicament. As the Jays’ new president and CEO, he inherits a team that roared into the playoffs, gathering new fans and new revenue along the way. At the very least, he is expected to make that happen again. At the same time, market forces are raising complications. When Jays fans gather to discuss the state of the franchise, they tend to talk about two related needs: pitching and more money from club owner Rogers Communications. The words “exchange rate” seldom arise in those conversations. During his years in Cleveland, Shapiro didn’t have to think about that topic. He does now.

The Jays collect revenues in Canadian dollars and pay their players in U.S. dollars. On Thursday, the Canadian dollar was worth 73.36 cents against the U. S. dollar, an 11- year low. A year ago, it was worth about 88 cents. Shapiro says the 2016 payroll will rise — it was about US $140-million for the past season — but the exchange rate will chew up a sizeable chunk of the unspecified increase.

Shapiro says his goal is to build on the success of 2015 and make the team better for the long haul. But working for a public company beholden to shareholders, he knows he faces a delicate balance. The Jays are not the Red Sox, whose principal owner is one man, John Henry, who runs a company specializing in sports franchises and who, if he feels like it, can awaken one day and say sure, go ahead and spend US $217-million on David Price.

“There are obviously some other things that go into (the Jays’ payroll decisions), challenges with the exchange rate, and things that baseball fans shouldn’t have to think about, but when you run a business you do have to think about,” Shapiro said in Nashville. “Payroll is increasing, and now I think the obligation falls back on us to continue to run a successful business, to grow revenue, to support further increases in the years ahead.”

The Blue Jays certainly helped Rogers grow revenue in 2015. The team is part of Rogers’ media division, which also includes its various Sportsnet broadcast and digital platforms. For the first nine months of 2015, the media division had an adjusted operating profit of $58 million, an increase of 119 per cent over the same period in 2014, according to Rogers’ latest quarterly report. Much of that boost came from the Jays’ increased attendance ( 21 of their final 22 home games were sellouts) and new revenue from Sportsnet, which drew unprecedented TV ratings for Jays games.

Rogers uses hedge contracts to cut its risk on the exchange rate. During the first nine months of 2015, those contracts used an average rate of US$1.27, which meant Rogers would pay $ 877- million on anticipated expenditures of US$ 690- million companywide. Reflecting what a difference a year makes, in 2014 Rogers’ hedge contracts used an average rate US$1.09.

No rush on Encarnacion and Bautista

The foregoing may not generate stimulating discourse on call- in shows, but it certainly forms the context for many of the Jays’ important decisions over the next year and beyond. Looming large are decisions on whether to extend the contracts of Edwin Encarnacion and Jose Bautista beyond 2016.

That subject arose in Nashville when Encarnacion’s agent told the Jays that he will not negotiate an extension once the season starts. In short, get it done now, or risk not getting it done at all when the free- agent market opens next November.

Shapiro’s response: Don’t rush me. He said he and his top aides are focused on more pressing matters, including the recruitment of pitchers to provide depth at Triple- A Buffalo, where the current rotation consists of “five guys named ‘ blank,’ ” Shapiro said.

The here and now

Those blanks represent fallout from the eye- popping trades over the past year that drove the Jays to a division champion- ship before they lost to Kansas City in the ALCS. Former general manager Alex Anthopoulos gambled on those deals and won big-time in the short term. Had he stayed, he would have faced the same challenges that Shapiro confronts now.

“Most important is making sure those trades weren’t made for just a one-year run,” Shapiro said during an interview on MLB TV.

That means replenishing a farm system largely bereft of elite pitching prospects. That process will require astute drafting and lots of time. Meanwhile, to fill their bullpen needs, the Jays need to get cracking and get lucky. Talent seldom hides any more, and bargains are rare.

As well, management’s immediate priorities include preparing for potential arbitration hearings with eight players; hiring a new director of player development; and navigating an awkward management transition after the retirement of CEO Paul Beeston and the unexpected departure of Anthopoulos.

Shapiro inherited a very good team with its elite offence intact. But fans’ expectations are sky-high. And in the past week both the Red Sox and Yankees got better. The coming season is crucial in the Jays’ bid to build a perennial contender.

“Like any business, we’ve got to increase revenue and grow revenue to increase expenses, and the expenses are player payroll when it comes to a major-league team,” Shapiro said. “If we have a great year this year, that’s certainly going to afford us the ability to grow player payroll and player expenses.”