This post was written by Moshe Mandel and Stephen Rhoads
Yesterday Joe walked through the different stages of grief Yankee fans have been going through since learning that a $189M payroll was a realistic option in the near future. Part of my frustration when reading this (still in stage 2, I suppose) was that I didn’t have a firm handle on how much money the Yankees would actually be saving. If the amount they could potentially save ranges into the nine figures territory, then it’s hard to quibble with the team tightening the belt. If it was significantly less, then a whole host of options come into play, including the possibility that the team is not serious about getting below $189M in 2014 and was using Sherman to broadcast their bluff in advance of the Yu Darvish bid.
Accordingly, Moshe and I have run the numbers for six different payroll scenarios. We used the basic parameters set forth by Sherman in this quote to try and estimate the proper figures for each scenario:
For if they are at $189 million or less for the three seasons from 2014-16, they not only avoid paying one cent in luxury tax, which would rise to 50 percent for them as repeat offenders, but they also would get roughly $40 million in savings via the to-be-implemented market disqualification revenue sharing program. However, only teams under the luxury-tax threshold get reimbursed in this program, which is designed to prevent big markets such as Toronto and Washington from receiving revenue sharing dollars, which in turn will lower how much teams such as the Yanks pay (as long as they are under the threshold).
And even if they just went under $189 million for 2014 before going over again in 2015, the Yankees would receive serious benefits. They would get about $10 million in the revenue sharing disqualification program. Also, by simply going under the threshold once, the Yankees would go back to having a 17.5 percent tax rather than the 50 percent that begins in 2014 for them if they never go under. Keep in mind that since the luxury tax went to 40 percent for them in 2005, the Yankees have averaged paying $25.75 million in tax annually.
In the first three scenarios, we use a $210M payroll in 2013, and then assume that they go back to $210M in later years. In the second three scenarios, we use a $220M payroll. In each scenario, we provide savings figures per year. At the bottom of each scenario we provide a total amount saved, and also provide what we’re calling “CBA Savings”. This figure emanates directly from the new CBA, and would include revenue sharing refunds, and luxury tax savings resulting from a new, lowered rate. It would not include the $21M they’d save from going from a $210M payroll to a $189M payroll, for instance. We get down to business after the jump.
Scenario 1: Payroll dips from $210M to $189M in 2014, then goes back to $210M in 2015.
2014: Payroll at $189M
Payroll savings: $21M
Revenue sharing refund: $10M
Luxury tax savings ($21M*50%): $10.5M
Total saved: $41.5M
2015: Payroll back at $210M
No payroll savings
No refund
Luxury tax savings ($21M*50%) – ($21M* 17.5%): $6.825M
Total saved: 6.825M
2016: Payroll stays at $210M
No payroll savings
No refund
Luxury tax savings: ($21M*50%) – ($21M*30%): $4.2M
Total saved: $4.2M
2017: Payroll stays at $210M
No payroll savings
No refund
Luxury tax savings: (21*50%) – (21*40%): 2.1M
Total saved: $2.1M
TOTAL SAVINGS: $54.625M
CBA Savings: $23.125M
Scenario 2: Payroll dips from $210M to $189M in 2014, stays under $189M for 3 consecutive seasons:
2014: Payroll at $189M
Payroll savings: $21M.
Revenue sharing refund: $10M
Luxury tax savings ($21M*50%): 10.5M
Total saved:$41.5M
2015: Payroll at $189M
Payroll savings: $21M.
Revenue sharing refund: $15M
Luxury tax savings: ($21M*50%): $10.5M
Total saved: $46.5M
2016: Payroll at $189M
Payroll savings: $21M.
Revenue sharing refund: $15M
Luxury tax savings: ($21M*50%): $10.5M
Total saved: $46.5M
2017: Payroll back at $210M
No payroll savings
No refund
Luxury tax savings ($21M*50%) – ($21M* 17.5%): $6.825M
Total saved: $6.825M
2018: Payroll stays at $210M
No payroll savings
No refund
Luxury tax savings: ($21*50%) – ($21*30%): $4.2M
Total saved: $4.2M
2019: Payroll stays at $210M
No payroll savings
No refund
Luxury tax savings: ($21M*50%) – ($21M*40%): $2.1M
Total saved: $2.1M
TOTAL SAVINGS: $147.625M
CBA Savings: $53.125M
Scenario 3: Payroll dips from $210M to $189M in 2014, stays under $189M for 2 of the 3 seasons between 2014-2016 (Note: the CBA summary seems to suggest that as long as the team does not exceed the luxury tax threshold in consecutive seasons, they continue to be eligible for the revenue sharing refund. The summary is unclear on this point, but I’ve provided the relevant data should the Yankees be able to take advantage of that provision):
2014: Payroll at $189M
Payroll savings: $21M.
Revenue sharing refund: $10M
Luxury tax savings ($21M*50%): 10.5M
Total saved: $41.5M
2015: Payroll back at $210M
No payroll savings
Revenue sharing refund: $15M
Luxury tax savings ($21M*50%) – ($21M* 17.5%): $6.825M
Total saved: $21.825M
2016: Payroll back at $189M
Payroll savings of $21M.
Revenue Sharing Refund: $15M
Luxury tax savings ($21M*50%): $10.5M
Total saved: $46.5M
2017: Payroll back at $210M
No payroll savings
No refund
Luxury tax savings: ($21M*50%) – ($21M*30%): $4.2M
Total saved: $4.2M
2018: Payroll stays at $210M
No payroll savings
No refund
Luxury tax savings: ($21M*50%) – ($21M*40%): $2.1M
Total saved: $2.1M
TOTAL SAVINGS: $116.125M
“CBA” Savings: $54.125M
Scenario 4: Payroll dips from $220M to $189M in 2014, then reverts back to $220M in 2015.
2014: Payroll at $189M
Payroll savings: $31M
Revenue sharing refund: $10M
Luxury tax savings ($31M*50%): $15.5M
Total saved: $55.5M
2015: Payroll reverts back to $220M
No payroll savings
No revenue sharing refund
Luxury tax savings ($31M*50%) – ($31M*17.5%): $10.075M
Total saved: $10.075M
2016: Payroll stays at $220M
No payroll savings
No revenue sharing refund
Luxury tax savings: ($31M*50%) – ($31M*30%): $6.2M
Total saved: $6.2M
2017: Payroll stays at $220M
No payroll savings
No revenue sharing refund
Luxury tax savings: ($31M*50%) – ($31M*40%): $3.1M
Total saved: $3.1M
TOTAL SAVINGS: $75.9M
“CBA” Savings: $29.4M
Scenario 5: Payroll dips from $220M to $189M in 2014, stays under $189M for 3 consecutive seasons:
2014: Payroll at $189M
Payroll savings: $31M
Revenue sharing refund: $10M
Luxury tax savings ($31M*50%): $15.5M
Total saved: $56.5M
2015: Payroll at $189M
Payroll savings: $31M
Revenue sharing refund: $15M
Luxury tax savings ($31M*50%): $15.5M
Total saved: $61.5M
2016: Payroll at $189M
Payroll savings: $31M
Revenue sharing refund: $15M
Luxury tax savings (31M*50%): $15.5M
Total saved: $61.5M
2017: Payroll back at $220M
No payroll savings
No refund
Luxury tax savings ($31M*50%) – ($31M*17.5%): $10.075M
Total saved: $10.075M
2018: Payroll stays at $220M
No payroll savings
No refund
Luxury tax savings: ($31M*50%) – ($31M*30%): $6.2M
Total saved: $6.2M
2019: Payroll back at $220M
No payroll savings
No refund
Luxury tax savings: ($31M*50%) – ($31M*40%): $3.1M
Total saved: $3.1M
TOTAL SAVINGS: $198.875M
“CBA” Savings: $59.375M
Scenario 6: Payroll dips from $220M to $189M in 2014, stays under $189M for 2 of the 3 seasons between 2014-2016:
2014: Payroll at $189M
Payroll savings: $31M
Revenue sharing refund: $10M
Luxury tax savings ($31M*50%): $15.5M
Total saved: $56.5M
2015: Payroll back at $220M
No payroll savings
Revenue sharing refund: $15M
Luxury tax savings ($31M*50%) – ($31M*17.5%): $10.075M
Total saved: $25.075M
2016: Payroll back at $189M
Payroll savings: $31M
Revenue sharing refund: $15M
Luxury tax savings ($31M*50%): $15.5M
Total saved: $61.5M
2017: Payroll back at $220M
No payroll savings
No refund
Luxury tax savings: ($31M*50%) – ($31M*30%): $6.2M
Total saved: $6.2M
2018: Payroll stays at $220M
No payroll savings
No refund
Luxury tax savings: ($31M*50%) – ($31M*40%): $3.1M
Total saved: $3.1M
TOTAL SAVINGS: $152.375M
“CBA” Savings: $59.375M
It’s a lot of different scenarios, and a lot of math. In two hours we will be back to break down what it all might mean.
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