It’s been well documented that the Yankees have a huge incentive to get their payroll under $189 million for the 2014 season. They would save approximately $10 million on revenue sharing payments, and their luxury tax would temporarily reset from 50% to 17%. It makes a lot of sense to dip below for at least one year.
With Teixeira, Sabathia, and Alex Rodriguez under big-dollar contracts. That isn’t going to be easy. Here’s what the situation looks like:
(I estimated payroll for Gardner and Montero. A couple of other arbitration eligible could be in there, but I excluded them for simplicity)
I think two immediate thoughts come to mind. First, the Yankees have a ton of payroll opening up after the 2013 season. Derek Jeter, Robinson Cano, Curtis Granderson, Rafael Soriano and A.J. Burnett are all free agents, assuming Jeter’s player option does not vest. Mariano Rivera, Russell Martin and Nick Swisher also come off the payroll after this season. But on the flip side, the second thought is that the team has a lot of holes to fill all over the diamond in order to build a competitive roster.
I see an opportunity. The Yankees have incentive to be under $189 million during the 2014 season, but some of those incentives go after that season, and they can exceed. This gives the Yankees some opportunity to backload contracts in order to get under the cap. They can trade a lot of 2014 salary for 2015 salary.
But for the argument’s sake, let’s keep annual salary averaged out. Let’s say the Yankees resign Cano to a $18 million contract. Let’s also suppose that Curtis Granderson, or some other outfielder the team signs, gets a contract a touch smaller, at or around $16 million. The numbers don’t have to be exact. Already, we’re looking at $122.625 spent on just six players. Add Jesus Montero and Brett Gardner in, and the number goes to $130.625, with 17 spots on the roster left to pay for, including a starting catcher, outfielder, four starting pitchers, a complete bullpen, and quite possibly a starting shortstop (if Jeter can’t handle it anymore) to be added.
Assuming Mariano Rivera is retired by then, I think the Yankees have a little bit of room to play here. They hopefully will be able to rely on the pre-arbitration years of a few of Manuel Banuelos, Hector Noesi, Adam Warren, Dellin Betances and Austin Romine, among others, to fill starting or important bench spots. They may even get lucky and bring a few of the Slade Heathcott, Mason Williams, Angelo Gumbs, Cito Culver, etc crowd into the picture as well. I don’t think it’s unreasonable to expect the 2014 Yankees to fill 2 starting slots and one of C or RF with super-cheap farm players, plus the bench and the majority of the bullpen. So, spending a little money on free agents is an option.
As always, Yu Darvish presents a nice place to spend money for the Yankees. I don’t know what his contract with run, but (albeit with risk) it’ll be less than comparable starting pitchers. John Danks, Matt Cain and others present attractive post-2012 free agent options, and more will present themselves after 2013. The Yankees can’t afford to give out a mega, $20+ million contract, but they can sign someone for A.J. Burnett’s salary.
But seriously, accounting tricks can handle all of this. MLB wasn’t smart enough to build in AAV as the luxury tax measure. The Yankees should take full advantage.
If you enjoyed this article, please consider sharing it!
20 Responses to Getting to $189 million
Leave a Reply
TIQ IQ
Backloading doesn’t help. Luxury tax uses AAV so even if the Yankees get under 189 based on actual salary, if contracts are backloaded, they could still exceed 189.
Backloading may not help but signing bonuses do. The Yankees can give a player(s)a relatively big signing bonus. Signing bonuses are pro-rated over the length of the contract. And every little bit helps.
Granted it won’t be easy but where there is a will there’s a way.
How do signing bonuses help? Giving a guy a signing bonus still applies to the luxury tax
It helps a little because the signing bonus is spread over the entire length of the contract as opposed to be charged to just 1 year.
As Montero will be in his last pre arb year on 2014, so he shouldn’t be making much more than the league minimum
Noesi also will still be a pre-arb player. I think we also have to assume Banuelos or one of the other pitching prospects will be in the starting rotation at minimal cost. Even 1st year arbitration players aren’t going to set the Yankees back a lot generally speaking.
In 2014 Nova will just be a 1st year arbitration case.
The key to the Yankees getting to the $189MM luxury tax threshold in 2014 in my opinion is Robertson replacing Rivera as closer. Soriano going bye/bye. An adequate replacement for Swisher for under $9 or $10MM. And probably having to find a replacement for Granderson for around $10MM. Just my opinion.
Having Darvish come in and pitching like a solid number 2 for 10M a year would also be huge
And you also have to consider that 189M is for the entire 40 man roster (I think benefits are included as well) so really the 25 man has to be something around 175 to make it work.
I also think that you’re WAY underestimating the Cano contract. I’m pretty sure that the Yankees would be thrilled if he signed a 6 year 120 million dollar contract but I wouldn’t be surprised to see something like 7/160 or so as long as he remains crazy durable (and a Scott Boras client).
So if you figure Cano will be around 20 million, let’s say that they have another outfielder in the 16 million range. The convenient thing is that they can fill any of the three spots since Gardner can play left or center.
Jeter will exercise his player option no matter what. The convenient thing about this is that it’s a 3 year/ 51 million dollar contract (3M buyout in 2014) for the purposes of the luxury tax but then turns into a 4 year/ 56 million dollar contract that last season. Thus, they only have to count what was not already counted into the luxury tax so his payroll hit is only 5 million for that season.
So that leaves us with:
C – Montero/Romine/Murphey – all of these players should be making the minimum unless my math is wrong
1B – Tex – 22.5
2B – Cano – 20M
SS – Jeter – 5M
3B – A-Rod – 27.5M
OF – Gardner – 5.5M (could be a lot higher if he has a couple decent seasons as this would be his third time through arbitration but I’ll go with 5.5 for now)
OF – ??
OF – ??
DH – Montero/A-Rod/Jeter/ect
SP – CC – 24.4M
SP – Nova – Arb 1 so we’ll say 1.5M because of the wins
SP – ??
SP – ??
SP – ??
RP – Robertson – Arb3 for a guy who could be a closer but let’s say that Soriano is the closer through 2013 and keeps Robertsons value down to 5M
RP – Wade – Arb 2 so I’ll give him Boone Logan’s 1.2M
RP – ??
RP – ??
RP – ??
RP – ??
BN – Cervelli – Let’s use him for the backup catcher although it could be another prospect but we’ll say 1M here to be safe
BN – Nunez – could be the starting shortstop in his first arb year if he’s still here so we’ll say the .5M that Lowrie got this year
BN – Outfielder making the minimum
BN – Extra bat (minimum)
So we’re now at 109.15M for those known guys but we still need 3/5ths of a rotation and two outfielders. Add in the outfielder at 16M and we’re at 125.15M. Let’s assume they give out another 3year/12 million dollar contract to somebody in the bullpen and the rest are at the minimum (is that .5M?). Now we’re at 131.65M with all the minimum guys. That leaves us with something like 45 million to fill 3/5 of the rotation and an outfield spot.
Now things get interesting. IF they sign somebody like Solar or Cespedes, you could fill that third outfield spot for under 5 million. I think that if they don’t go that route, they’ll still keep that spot under 5 million because you have a lot of other money tied up in that lineup already.
For the rotation, things could go really well if we get a few hits from the farm. You can either be optimistic and give two spots to the group of Noesi/Betences/Banuelos/Warren/Phelps/Mitchell/Marshall/whomever else breaks out but I think you have to assume that a minimum of one of those guys will step up and be in the rotation and making the minimum. That gives us something around 40 million for either one or two spots in the rotation. Realistically, you could actually fit two of the big free agents in there especially if you get Darvish. Say they get Darvish at 10 million, it’s still realistic to go out and get even Hamels.
Either way, it looks pretty good for the Yankees. They still have some room to maybe get a real shortstop in there or maybe put some more money towards the outfield. If they end up hitting big on any of their pitching prospects, they could have a great rotation. Of course, this all assumes health and expected performance continue from all of these guys which we know won’t happen but it’s good to see it’s possible to get under the cap and still have a pretty solid lineup out there.
I’d like to point out how quickly my numbers take a turn for the worse if A-Rod hits his 714th homer by 2014 or if Cano makes more than 20 million (which I think he will)
I don’t think Cano will make much more then $20MM per even if he does make more. I think what will hold down part of it is he will be 31 years old after the 2013 season. I think that will have some effect on both the years and the dollars.
Chip your numbers on Alex are wrong. The best the Yankees can hope for is an AVV of 28.7. That includes just 2 of his 6 million dollar marketing perks.
You are right to set aside somewhere between 10 and 14 million for perks, incentives and non 25 man roster players on the 40 man roster.
I think you are wrong on Jeter as well. Iirc that if the Yankees buyout his 4th year his full contract would just be a 3 year deal at 17 million per year AVV. If they picked up his option then it would turn into a 4 year 14 million dollar deal which would really hurt the chance to go under 189 in 2014. Luxury tax when it comes to options is fluid meaning the past tax bill could go up or down an if it goes down the team gets a refund.
But they’ve already paid the 3 year / 51 million dollar payroll hit the previous three seasons so I’m pretty sure that you would only pay the difference on it but I don’t know for sure. Otherwise, it seems that you would get charged twice.
And yes, you’re absolutely right on A-Rod, he will almost certainly cost an additional 1.5 – 2.5M a season because of the same averaging. Say he hits 714 in 2014 at the very end of 2012. That causes his AAV to go up 2.5 M by 2014 (6M averaged over 6 years plus another 6 averaged over 4 years)
You need to add in those 6 million dollars home run perks to the entire contract and then divide by 10. Luxury tax is fluid. So at best Alex is 28.7 an at worse he could 29.9.
Jeter is different because that 3 million dollar buyout is already earned money making his contract right now at 3 years 51 million. If the Yankees don’t buy him out then it becomes a 4 year 14 million dollar deal where as the Yankees get a luxury tax refund for 11-13.
The Yankees best hope for getting under 189 going forward is to have multiple players say like Nova if they would agree to a 4-5 year extension with options so the overall AVV is low even if the later years are higher in yearly salary.
Signing Nova long term would actually hurt as his AAV of the entire contract would be applied to 2014 instead of just the ~2-3M he’d actually be paid
Yes in respect for just 2014 but the goal is not to get under the luxury tax threshold for just that year it’s to be under from 2014 going forward as that is when the real money comes back to NY.
The only way to do that is have multiple player contracts where the AAV is low. So could they buyout a couple of Robertson’s free agent years? Can they sign Montero to a team friendly deal?
Trevor Cahill and Matt Moore are good examples of the type of contracts the Yankees need to be able to do this if that is their goal.
O yeah, then I completely agree. I’d offer Evan Longoria’s deal to Montero right now and then offer Banuelos the Matt Moore deal if he has a big season and forces his way into the majors
I don’t think the Yankees have any intentions of being under 189 million from 2014 to forever. It’s simply not realistic to think the days of the 200 million dollar payroll are coming to an end. If the Yankees simply get under for 2014 they get enough incentives to go right back over in 2015. Which ultimately is what I think the goal is.
The Yankees aren’t going to pass on top level players they like simply because it would help to be under 189 million in pay roll. Players are going to come along they don’t want to pass up, when that happens we’re right back to 200 million.
what if cashman went to alex and tex and asked them to retool their contracts to back load , lets say take off six mil for alex’s in 14 and go from 20 mil in his last year to 26mil.same set up for tex..that w 12 mil can help big time to keep it under 189mil..
Backloading doesn’t help unfortunately. Luxury tax is actually based on average annual value of the contracts rather than the single-year value, so accounting gimmicks won’t allow the Yankees to manipulate their payroll.
Accounting tricks are great, but for the same reason that we can’t expect the yanks to exploit the loopholes in the IFA draft we shouldn’t expect them to do this. There are politics involved among the owners and doing this would spit in the face of the commish and owners and I just can’t see the yanks doing that. I have always believed that the the teams “budget” has been a direct reult of not wanting to piss other teams off. Haven’t seen their books but I would imagine that the team easily could have supported a 250 mill payroll the past 5 to 10 years and still would have been more profittable than any other teame. Teams are individuals but still operate in a cooperative syatem. Because of that the yanks will have to restarin themselves somewhat.and certainly won’t take advantage of the system the way we all hope they would