As the Yankees continue to allow free agents to sign elsewhere, the detriments of a $189 million budget in 2014 is growing obvious. They have no real catcher or designated hitter, and the team’s collective age might challenge injury records that they set last season. But World Series victories are not won in January. Despite the fan outcry, there’s plenty of time left to acquire a catcher and designated hitter, though Hal Steinbrenner is making the situation worse. In regards to fans being uneasy with the current roster, he said,
“I’m surprised to hear that there’s anger, if you see what we’ve done this offseason. …We’ve signed three or four of the top free agents that were on the market, because we’re going to continue to field a championship caliber team.”
What the team has really done, is lost Russell Martin, Nick Swisher, Rafael Soriano, and Alex Rodriguez. Adding Kevin Youkilis neutralizes the effect of losing Rodriguez, but how’s the team supposed to make up the nearly 8 wins the other three provided? This is now an 87 win team, and 87 wins hasn’t won the AL East since 2000.
It’s all in the name of the budget, and though I’m not against keeping the payroll down, this current team is far from “championship caliber”. Essentially, the Steinbrenners handed Brian Cashman a mammoth sized Alex Rodriguez contract, and then told him to keep the salary down. Fans should be upset, especially in ownership, but Cashman is still a smart enough GM to deal with it. He wouldn’t have allocated resources to Hiroki Kuroda, Andy Pettitte, Mariano Rivera, Ichiro Suzuki, and Youkilis if he was throwing in the towel.
In all the recent talk about limited payroll, I think there’s a lot more money left than the team is letting on. For instance, there were talks that Justin Upton‘s $8.54 million average annual value couldn’t fit into the current payroll and 2014. Perhaps they’re just purposefully blowing the budget situation out of proportion, in order to make the Diamondbacks lower their asking price.
Before I start rambling, the 2014 budget is what we’re looking at. As it stands, there are four guaranteed contracts. CC Sabathia at $24.4 million, Mark Teixeira at $22.5 million, Ichiro Suzuki at $6.5 million, and Alex Rodriguez at $27.5 million. There was some speculation that Alex Rodriguez’ home run milestone bonuses might effect the payroll, but they actually aren’t counted towards the luxury tax, and as of last year, these types of bonuses are banned. Between these four players, the Yankees are at $80.9 million.
Then there’s Derek Jeter and his option year. The new CBA is very confusing when it comes to option years, but from what a number of inquisitive minds, myself included, have interpreted, this particular option acts like a one-year contract on the luxury tax. I can’t say this is for certain, but from the general consensus, as well as my interpretation, this seems to be the answer. Anyway, Jeter’s option should count for $8 million plus $1.5 million for a silver slugger raise, or $9.5 million total.
There are also a few arbitration players that’ll receive raises, and we have to guess at those. Brett Gardner, who’s making $2.85 million in 2013, might see up to $5 million in his third arbitration year. David Robertson, who made $1.6 million in 2012, could see about $6 million in 2014. Then the first year arbitration players Francisco Cervelli and Clay Rapada will probably get around $1 million, with Ivan Nova getting around $2 million. Again, these are educated guesses, but the total is $15 million.
As for pre-arbitration players, all of these guys will receive around the league minimum, which should be $500,000 in 2014. Although Michael Pineda lines up as an arbitration player, there are some very big hints that team wants to option him to the minors for some of his rehab, limit his service time, and get an extra pre-arbitration year out of him.
There’s also additional costs for other 40 man players, which should work out to around $78,000 for each of the additional 15 players not on the 25 man. Also there’s player benefits to work in, which is currently slightly lower than $11 million in 2013.
As it stands, this is what we can predict for the team.
| C | Austin Romine | $0.50 |
| 1B | Mark Teixeira | $22.50 |
| 2B | David Adams | $0.50 |
| 3B | Alex Rodriguez | $27.50 |
| SS | Derek Jeter | $9.50 |
| LF | Zoilo Almonte | $0.50 |
| CF | Brett Gardner | $5.00 |
| RF | Ichiro Suzuki | $6.50 |
| DH | Eduardo Nunez | $0.60 |
| SP | CC Sabathia | $24.40 |
| SP | Michael Pineda | $0.50 |
| SP | David Phelps | $0.50 |
| SP | Ivan Nova | $2.00 |
| SP | Brett Marshall | $0.50 |
| RP | Dellin Betances | $0.50 |
| RP | Francisco Rondon | $0.50 |
| RP | Mark Montgomery | $0.50 |
| RP | Cody Eppley | $0.50 |
| RP | Cesar Cabral | $0.50 |
| RP | Clay Rapada | $1.50 |
| CL | David Robertson | $6.00 |
| C | Chris Stewart | $0.60 |
| UTL | Corban Joseph | $1.00 |
| C | Francisco Cervelli | $1.00 |
| OF | Ronnier Mustelier | $0.50 |
| 40 Man | (15 x 78K) | $1.17 |
| Player Benefits | $11.00 | |
| Total | $126.17M | |
| Remaining | $62.83M |
A lot of the bullpen pieces and utility players are guesses, but we can assume that they’ll otherwise be filled by other league minimum salaries.
Just for fun, let’s work a few of the other potential acquisitions into this budget. Let’s say the Yankees re-sign or extend Cano to a generous deal that guarantees him $25 million a year. They trade for Justin Upton and his $8.54 AAV. And assuming Phil Hughes has a great season, the Yankees could re-sign him to a $10 million AAV contract.
| C | Austin Romine | $0.50 |
| 1B | Mark Teixeira | $22.50 |
| 2B | Robinson Cano | $25.00 |
| 3B | Alex Rodriguez | $27.50 |
| SS | Derek Jeter | $9.50 |
| LF | Justin Upton | $8.54 |
| CF | Brett Gardner | $5.00 |
| RF | Ichiro Suzuki | $6.50 |
| DH | Eduardo Nunez | $0.60 |
| SP | CC Sabathia | $24.40 |
| SP | Phil Hughes | $10.00 |
| SP | Michael Pineda | $0.50 |
| SP | David Phelps | $0.50 |
| SP | Ivan Nova | $2.00 |
| RP | Dellin Betances | $0.50 |
| RP | Francisco Rondon | $0.50 |
| RP | Mark Montgomery | $0.50 |
| RP | Cody Eppley | $0.50 |
| RP | Cesar Cabral | $0.50 |
| RP | Clay Rapada | $1.50 |
| CL | David Robertson | $6.00 |
| C | Chris Stewart | $1.00 |
| UTL | Corban Joseph | $0.50 |
| C | Francisco Cervelli | $1.00 |
| OF | Ronnier Mustelier | $0.50 |
| 40 Man | (15 x 78K) | $1.17 |
| Player Benefits | $11.00 | |
| Total | $168.21M | |
| Remaining | $20.79M |
So the Yankees end up with $20 million left, even after handing out these three contracts. Though the team is obviously looking a little weak on pitching, they have a number of prospects that will hopefully be ready by then. Dellin Betances, Manny Banuelos, Brett Marshall, and Mark Montgomery could provide some quality innings in the bullpen or rotation. Guys like Nick Goody, Branden Pinder, and Vidal Nuno could also be some relatively high-upside players that see some time in 2014.
The offense is pretty solid, though there’s room at catcher and designated hitter. I don’t think the team will be lucky enough to have any positional prospects become quality everyday players by 2014, so the remaining budget should be spent on depth. A few million dollars for some platoon DH’s and utility players should set the offense straight.
Outside of the remaining budget, the team could also have something to spend in prospects. In any Justin Upton deal, they’ll likely see two of the four top 100 overall prospects leave the system, but the organization has a number of high-upside players in the low levels. By 2014, a couple of these guys should be showing off their talent. They’ll also have three first round picks in the upcoming Rule-4 draft, which will replenish the system.
In the end, having just $20 million to fill out this team isn’t desirable, but neither is a $189 million budget. There’s a lot more room than I first thought though, and it makes the idea of re-signing Cano, trading for Justin Upton, or extending Phil Hughes more realistic. All the team’s complaints about not having enough money seem to be nothing more than a play at gaining an upper hand in the market.
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19 Responses to 2014 Payroll Outlook And The Current Effect
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TIQ IQ
Per the CBA, player option years (as well as player opt out years) are treated the same as guaranteed years for luxury tax purposes unless the buyout is over half the value of the option (Jeter’s isn’t), making Jeter’s contract 4/$56M. If he picks up his option he will count for that $14M AAV(actually about $13.9M to account for present value of deferred payments) + the $1.5M bonus, and any additional bonuses, for a total luxury tax hit of at least $15.4M.
“Player Option Year shall not be considered a Guaranteed
Year if the payment the Player is to receive if he declines to exercise
his option or nullifies the championship season is more than 50%
of the Base Salary payable for that championship season”
Also, it appears milestone bonuses do count toward the luxury tax. They just don’t count until they are actually earned. Stark’s article just indicated the payments don’t count as guaranteed money. They don’t, just like any other bonus, but are still included if earned for luxury tax purposes.
Here’s my understanding of the rule.
Jeter’s 2014 salary is not set until the 2013 season has completed, and the final points are calculated for his finish in the Gold Glove, Silver Slugger, etc. This type of player option, where the salary is yet to be determined, is not included in the CBA’s definition of a guaranteed year. The additional money he can earn is not considered performance bonuses, but instead part of his 2014 salary, and thus there is no way to determine how much to charge from 2011-2013.
If these incentives were in the form of bonuses, I would agree with you, but instead, it’s an unknown salary amount until the end of the 2013 season, which does not fall into the CBA’s definition of a guaranteed player option. Likewise, it doesn’t follow the definition provided in A(8) of a guaranteed year.
As for Arod. The CBA’s definition of bonuses does not include what’s considered milestone bonuses, specifically because they’re against the rules, and have been for a long time. At the time of signing, the Yankees called Arod’s incentives market bonuses, saying they were earned based on increasing their marketable image. Now that the MLB considers market bonuses milestone bonuses, they can’t tax it under the CBA’s definitions.
The CBA is pretty clear on Jeter’s deal. Its an 8 million dollar player option, which makes it guaranteed. He then has bonuses which are salary escalators. Those are only counted in the year they affect, and do not alter the AAV. So for the luxury tax in 2014 you have Jeters AAV (14) + any of his escalators.
Team options count as individual 1 year contracts.
Again, I’d agree with you if these incentives were in fact bonuses, but Jeter’s salary in 2014 does not contain a bonus. The salary is instead set at the end of the 2013 season, based on how he finishes. It’s not a typical player option.
The questionable part is how this sort of contract is classified.
They are clearly bonuses!
if 2014 option is exercised at less than $17M, Jeter may earn same bonuses in 2014, up to $17M
And even if they were not ‘bonuses’, it is clearly a special covenant:
(b) A Special Covenant in a Uniform Player’s Contract that pro-vides that Player performance or achievement in one year of the
Contract will increase the Base Salary in other year(s) of the Con-tract shall not be considered in the determination of Salary until the
triggering event occurs (other than, if applicable, as a “potential
bonus”), unless it is determined by the Arbitration Panel that the
Special Covenant was designed to defeat or circumvent the inten-tion of the Parties as reflected in this Article XXIII. As long as such
a finding is not made, the additional Base Salary triggered by the
Special Covenant shall count as part of the Player’s Salary in the
Contract Year(s) to which it is attributed by the Contract once the
triggering event has occurred. Multi-Year Contracts shall not be
recalculated on an Average Annual Value basis once the triggering
event has occurred; the additional Base Salary shall be added to the
Salary as originally calculated for the Contract Year in question.
On top of all that, I am pretty sure the calculation on what Upton’s Luxury tax hit is, if he were traded to the Yankees is off as well. I believe the Luxury tax hit would be on the portion of his salary the yankees actually pay, not what his whole contract is when he signed it with Arizona. So therefore the Yankees would assume 3/38 making his luxury tax hit just shy of 13M.
This is unconfirmed, and it can be interpreted that way with the CBA, but there is slightly stronger evidence that his salary would remain at the original AAV.
The clause in the CBA regarding a traded player’s salary is purely how the salary the team pays is divided up. It simply states that mid season its pro-rated and otherwise the team takes on the hit from point of trade. If Upton’s contract is valued at 8.5 or whatever for each year, the Yankees would take on that 8.5 per year.
I have tried calling the commish’s office, emailing around about it, and so far no one has got back to me.
You are also forgetting the value of player benefits. They do not have $189M to spend on player salaries. I think it is more like $178. So this is all overly optimistic.
He included $11M for player benefits. That might be slightly low, but it’s in the ballpark. (Benefits counted for about $10.8M for the 2012 and 2013 seasons)
Hello,
Just FYI, A-rod’s marketing bonuses count in the year they earned. That is in the CBA. The issue with them as you linked in that article is that they did not count in the AAV of the deal, allowing teams to reallocate money to certain years which is a potential way to get around the luxury tax.
So if A-rod does not hit 13 HRs next year, they will need to allocate 6 million towards his bonus for 2014.
And by the by, a vice president in charge of this stuff at MLB confirmed this when Chad Jennings fact checked the CBA article I wrote, so take that as you will.
Not to pile on but some of whatever’s left will have to go towards a closer.
And Yankees continue to miss easy opportunities to control costs in 2014. Most recent example– failure to extend Joba. Probably could have been done at AAV of less than $4 mill– a very reasonable risk/reward investment IMO. Now, though, they only have D-Rob lined for 2014 pen. I would say a first-rate closer will cost at least $10 mill, pretty much soaking up the rest of the budget. Also, nice to add Upton but no way do I trade two Top 50 talents for three years of this up and down “slugger” who didn’t even match Russell Martin’s output last year. As you say, 189 is doable — but unless youngsters come up big not a championship club.
I don’t have trust with Joba as closer, he hasn’t fully recovered from last year, yet.
He doesn’t have to be the closer — just part of the late inning mix.
CBA also has minor league min. Salary as 81,500 for 2014. So those 15 players on the 40 man roster will be slightly more.
It will be strange cheering for a-rod to get at least 13 home runs but not too many more so that he reaches the first bonus in 2013 but will be unable to reach the second until 2015.
you are insane to think the Yankees would have so many minor leaguers on the MLB everyday roster. Knowing the Yankee history those roster spots that are filled with now minor leaguers will go to vets who’ve been there and done that. So your cap figures with 500k salaries will more than likely be 1-2 million vets.
Counting on minor league players is always a risky proposition, specially such a high number for making the team. Just look at the hype & setbacks for the Killer B’s. Forget Upton, another Jekyll & Hyde player from a consistent production perspective. 2013 is tough to figure due to the number of players coming back from injuries and no sure fire closer either. The Yanks could finish 3rd in the East in 2013, not likely but it could happen. Just look at the roster realistically.
2014 – who knows what Hank & Hal have in mind.
Counting on vets cut by other teams is a lot riskier than counting on prospects. Prospects may not all succeed, but some some will, and to an unexpected degree. Yanks have enough talent in their system to have seven first- and second year players on the 25 man roster in 2014. And then more once the top talent arrives in 2015. These guys don’t have to be stars– just role players and contributors for the most part. But one or two could emerge as stars.
Pick seven from these: Adams, Romine, Banuelos, Marshall, Montgomery, Kahnle, Mustelier, Flores, Heathcott, Williams, Z. Almonte, A. Almonte, J. Ramirez, Turley. Some of these guys are going to turn into very good players too.
I don’t worry about the ability of these kids to perform well. I worry about the commitment and patience of Yankee management and part of the fan base.
People are forgetting the luxary tax rule of a 189 mill payroll starts as of the END of the 2014 season. In two seasons our double a prospects of romine mesa slader and ect r going to be ready