Nov
04

2014 Payroll Breakdown: Part Three

By
Exclusive photo of the first time Cano heard about the plan to get under the luxury tax threshold. (Rich Schultz/Getty)

Exclusive photo of the first time Cano heard about the plan to get under the luxury tax threshold. (Rich Schultz/Getty)

Starting at midnight tonight, free agents will be free to negotiate and sign with any team. The offseason will finally get underway in earnest — up until now it’s been a lot of waiting and boring procedural stuff. Now the Yankees and the other 29 clubs can get down to business for real.

With that in mind, it’s worth figuring out how much money New York has to work with this winter. They’re trimming payroll and intend to get under the $189M luxury tax threshold next year, a threshold they can’t pass at all next season. The payroll is calculated at the end of the year for luxury tax purposes. They don’t get to spend freely after staying under on Opening Day or anything sneaky like that.

The Yankees have many holes to address and, for the first time in a long time, a finite amount of money to do it. Don’t get me wrong, the team never had a truly unlimited budget, but it sure felt like they did at times. None of us were worried about a hard payroll number, that’s for sure. This offseason will be a new experience. Here are the club’s current contract commitments for next season:

Just to be clear: those are luxury tax numbers, which are based off the average annual value of multi-year contracts. Some players will actually take home a different salary next summer — the money in the Wells trade was structured in such a way that he won’t count towards the tax this year despite a $21M salary — but that is how much they will count against the tax.

I tend to be conservative with this stuff, but I wouldn’t expect even a perfectly healthy, in-his-prime A-Rod to hit the 60 homers he’d need to hit to trigger his second $6M milestone bonus. The team does have to plan for the first milestone though — he’s only six homers away, which is easily doable — ditto Jeter’s awards-based bonuses. That stuff counts towards the luxury tax. Between the guys under contract, the arbitration-eligible, and bonuses, the Yankees already have 14 players locked in at $127.91M for 2014. Add in the $12M or so every team has to contribute towards player benefits and it’s really $139.91M for 14 roster spots.

That $139.91M leaves the team $49.09M to spend on the remaining 26 40-man roster spots. The 15 players on the 40-man but not on the 25-man active roster are usually estimated at $2-5M total (they earn a lower salary in the minors), so assuming the high-end of that range leaves us with $44.09M for the final eleven 25-man active roster spots. Non-tendering Nix and Stewart would free up another $2.4M but also create two more spots to fill. With Cervelli, Romine, and Murphy around, I see no reason to keep Stewart at that price. Nix is a fine utility man but that projected $1.4M salary is a bit steep. Let’s assume those two are non-tendered. We’re now sitting on $46.49M to fill 13 25-man active roster spots.

So what 13 positions, exactly, does the team need to fill with that money? Here’s a look at the roster as it stands right now:

Catcher Infielders Outfielders Rotation Bullpen
Cervelli 1B Teixeira LF Soriano Sabathia Robertson
2B ? CF Gardner Nova Kelley
 Designated Hitter SS Jeter RF Ichiro/Wells Phelps Warren
? 3B A-Rod ? ?
? ?
Bench ?
C Romine or Murphy OF Ichiro/Wells ?
IF Nunez ?

I think it’s safe to assume Nunez, Phelps, and Warren will make the roster and fill three of those 13 open spots. Phelps and Warren have earned spots and the Yankees love Nunez. He’s not going anywhere. Either Romine or Murphy can fill in as the backup catcher. All four are in their pre-arbitration years and will make something close to the league minimum, leaving the Yankees with roughly $44.29M to answer those remaining nine ?s.

One of those nine ?s is at second base, meaning Robinson Cano. I feel it’s inevitable that he’ll sign a fat new contract, probably something in the $20-25M average annual value range. Splitting the middle and calling it $22.5M leaves the Yankees are left with $21.79M to fill their remaining eight roster spots. They are going to need to save some payroll space for midseason call-ups and acquisitions (trades, waivers, etc.), so let’s make life easy and call it an even $20M for those eight spots. Still with me? Good.

Obviously the two open rotation spots are the biggest concern. The Yankees have some cheap internal options for those last four bullpen spots — specifically Claiborne, Cabral, Huff, Betances, Daley, and Nuno — though I would like to see them add a veteran late-inning guy to pair with Robertson and Kelley. The bullpen has more openings but is not as much of a priority as the rotation at this point. It’s easy to see the appeal of Masahiro Tanaka here — his posting fee is expected to be gigantic but it doesn’t count towards the luxury tax. Only his contract counts towards the tax. Assuming he signs for a $10M average annual value like Yu Darvish, that’s a bargain for someone who many people expect to be a number two-ish starter. He’s a very luxury tax friendly option for the pitching-needy Yankees.

If the Bombers wind up spending $10-12M on Tanaka or another starter, they’ll be left with $8-10M for the remaining seven spots. Betances (league minimum) figures to get one bullpen spot because he’s out of options. The Yankees could find a fifth starter and long man out of the Warren, Huff, Nuno, and Marshall foursome with the other two guys going to Triple-A as the sixth and seventh starters. They’ll be needed at some point, no doubt about it. It’s worth noting Huff is out of options and would need to clear waivers to go to Triple-A. Either way, the fifth starter and long man would make something near the league minimum in this scenario. That leaves $6.5-8.5M for the last four ?s, which are a DH (Mark Reynolds?), another bench player (preferably a lefty bat with some pop), and two relievers. Maybe Huff makes the team as a lefty specialist with another guy filling in as the long man. That’s an option.

(Maddie Meyer/Getty)

(Maddie Meyer/Getty)

Now, for the elephant in the room: A-Rod. If he is suspended for all of next season, his $33.5M tax hit ($27.5M salary plus $6M bonus) is wiped off the books and the Yankees suddenly have a ton of extra money to spend. Someone like Brian McCann or Carlos Beltran or Matt Garza becomes a realistic option. Heck, they’d be able to afford two of those guys with Rodriguez off the books. If he is suspended for only part of the season, the salary portion of his tax hit would be pro-rated but the team would still have to prepare for that full $6M milestone bonus. Either way, A-Rod being suspended for any length of time leads to considerable payroll savings, though the Yankees would have to find someone else for third base. That’s a trade the team would be happy to make.

In addition to what feels like the inevitability of Rodriguez being suspended for some number of games, it’s also unlikely Jeter will reach all of the bonuses in his new contract. The Yankees have to go into 2014 prepared just in case he does, but this is something they can monitor as the season progresses. If July rolls around and it’s obvious he’s not an MVP candidate — seems silly to say now, but remember, he was in the MVP conversation as recently as 2012 — that’s suddenly $4M the team can allocate elsewhere, specifically towards a trade deadline pickup. That’s a nice chunk of change to have available at the deadline.

After running through all of this, it seems like the Yankees have enough payroll space to make one big Tanaka-sized splash in addition to re-signing Cano this winter. A-Rod’s appeal hearing will resume in mid-November, meaning the ruling may not come down until mid-December, after the Winter Meetings. They’ll have a lot more money to spend if he is indeed suspended, but some of the top players figure to be off the board by then. More than anything, I think this little exercise — which is just an estimation, remember, these numbers are not exact — shows just how much the Yankees will need a) Teixeira and Sabathia to rebound, b) Nova to put together a full productive season (not a half one like 2011 and 2013), and b) youngsters like Phelps, Warren, and various catchers to step forward and contribute. That seems like a lot to ask.

Previous 2014 Payroll Breakdowns: Part One (January 2nd) and Part Two (August 7th).

Categories : Analysis

52 Comments»

  1. lightSABR says:

    Wow. That was depressing. At least as long as you assume we’re stuck paying A-Rod for the full year.

    • I'm One says:

      I think it’s quite reasonable to assume A-Rod will be suspended at least 50 games, saving ~$8.5 mil. And while he may have been in the discussion for MVP in 2012, I think it won’t take long for the Yankees to guage whether or not they need to put $4 mil aside for Jeter’s bonus. While the Jeter money won’t help in the offseason, it will certainly help aproaching the trade deadline.

  2. Chip says:

    So let’s make the assumption that A-Rod gets 50 games (which is my guess)

    Gardner CF
    Jeter SS
    Cano 2B
    A-Rod 3B
    Tex 1B
    Soriano LF
    Ichiro RF
    Reynolds DH
    Cervelli/Murphy/Romine C

    Sabbathia
    Nova
    Tanaka
    Phelps
    Warren/Nuno/Marshall/Banuelos/Pineda

    Really, that’s not nearly as bad as I thought it would be going into the season. Given that A-Rod being suspended for 50 games would save something like 8.5 million and Jeter not winning the MVP would save 4 million, you just may be able to squeeze Granderson in. At that point, this lineup looks quite respectable. If A-Rod gets suspended all season and you bring in Garza and McCann then the lineup and rotation look very strong.

    • Mike Axisa says:

      That’s almost the exact same team as 2013.

      • Chip says:

        Well yeah, that’s not really a contender unless you have huge bounceback years from Jeter, A-Rod, Tex and Sabbathia and hope that second half Soriano is here to stay. Maybe Banuelos/Pineda absolutely blow up and help anchor the rotation or Almonte shows that he’s an above average player. I’m just saying that it’s possible (not likely) they could contend like that.

        If we ignored the 189 plan, they could go out and sign McCann, Granderson and Garza and have a truly formidable team but I’m not going to hold my breath

        • Stan the Man says:

          The 2013 team was in playoff contention until the last two weeks of the season so bounce back yrs from Tex and CC are absolutely needed. The Yanks can’t make the playoffs with their no. 1 starter pitching like an overmatched rookie all year. If CC bounces back to have a CC like yr then the Yanks will be a contender and if CC and Tex bounce back then they can win the division. The injuries to Tex and bad season by CC are legitimately the top 2 reasons why the team missed the playoffs.

          • Chip says:

            Yeah but you have to realize that the Yankees actually played over their heads last season. They really deserved to be under .500 when you consider their production last season. Also, I don’t really expect guys like Jeter, Tex, CC, Ichiro, Wells, ect to get any better

    • mitch says:

      Not terrible, but they’d need a lot of things to go right to make the playoffs. Considering the career trajectories most of those guys are on, I wouldn’t expect that to happen.

  3. HateMclouth (formerly I'mVernon) says:

    Excellent article, Mike. Just the thought of the research involved with this makes my head hurt.

  4. Dicka24 says:

    No mention of Kuroda or Granderson in that steaming pile of payroll poop. You’d think that after all this, the Yankees may finally realize how important it is to allocate money. I’m not sure I quite understand what it is they’re trying to do too. The one resource they do have, is money. I get that there are supposed benefits to getting under $189 million (although some have opined that the bennies aren’t as good as initially anticipated, who knows for sure), but with teams wisely locking up young talent, FA’s costing far more than their actual worth, and players declining faster post PEDs, the Yanks are going to have to use their financial brains a little more. That means signing smarter contracts (Ichiro’s for 2 years, Arod for 10), making the difficult decisions to let players go (like the Cardinals did with Pujols), and using money (QO offers for example) as an asset (Granderson comes to mind), be it to recoup a draft pick, retain a talent for one year, or trading that player with cash for a piece. Another avenue, posting fees for foreign players like Tanaka. Gone are the days when there were prime aged FA’s that you could simply overpay for, or drafts where you could draft tough signs and blow them away with money.

  5. KenC says:

    that picture and caption is gold

  6. Chip says:

    Even worse, if they keep to the stupid 189 plan, there isn’t much offense that is going to be available to sign in 2015. I don’t consider any of Asdrubal Cabrera, Pablo Sandoval or Colby Rasmus to be the type that can change a team. Maybe Chase Headley comes in to replace a bought out A-Rod?

    At least there is a good bit of pitching in Kershaw (probably going to sign an extention), Baily, Scherzer and Masterson but who knows how many of them are going to get extentions.

    • phil says:

      James shields, John Lackey, Jake Peavy and even John Lester are also free agents after 2014 if extensions are not signed….

      • Chip says:

        Doesn’t Lackey have that option year thing that gives them another year of control since he was injured? But yeah, I totally missed Lester and Shields as possibilities

    • mick taylor says:

      how about signing nick markakis after 2014 and then chris davis after 2015.

      • Mouse says:

        2015 is too far down the road. Anything can happen by that time, i.e. extensions, injuries, decline in performance, PED use, etc.

        For the record, I am still not convinced by Chris Davis. Maybe one day in the future we will see that 2013 was a crazy aberration.

  7. jim p says:

    The Yanks need to gamble, imo. Play the off-season as if ARod is gone in 2014. Get the pieces to make it interesting enough to put fans in the seats.

    Then, if ARod gets off scot-free, and they blow past the $189, they’ll still likely make it up in the revenue generated from being a for-real contender.

    Some numbers I’ve seen, I think here at RAB, would indicate that if the Yanks don’t contend, they’ll lose more than they’d save by making the $189.

    • mitch says:

      That’s a good point and will definitely put a test to the mandate vs. goal chatter. It’s extremely likely that Arod misses considerable time and Jeter doesn’t hit the performance goals.

  8. Nate says:

    Are Jeter’s incentives still in place with his new contract?

  9. bkight13 says:

    The funny thing is if Alex is suspended for the year, they will probably save more than the entire 189 plan. The same with Jeter. The 12-20m allocated to Jeter will probably be made up for with revenue from the retirement tour, but him having an average year is better financially for the 189 plan.

    Worst case is Alex only gets 50 games, Jeter has a bounce back season statistically, they still try to get under the 189 and the rotation collapses. They have to scrap the 189 plan to help the team win, but they still miss the playoffs.

  10. mitch says:

    If they do end up successfully staying under 189 throughout 2014, i’ll be very interested to see how much they actually save. Aside from probable losses in ticket sales, etc due to an inferior product, they’ve spent a pretty good amount on payroll manipulation (Wells, Jeter, Soriano..).

    • bkight13 says:

      Exactly, and they might spend another 60m to get Tanaka because that doesn’t count against the luxury tax.

      • Need Pitching & Hitting says:

        They’d still be looking for high end pitching regardless.
        They’d probably make a big play for Tanaka with or without the $189M plan.

    • Need Pitching & Hitting says:

      I don’t think anything in the Soriano deal was payroll manipulation tied to the $189M plan.
      The Jeter contract definitely wasn’t.

      Wells probably played in, but they might have traded for him anyways, and just split the $13M over the 2 years instead of taking on most of in in 2013.

  11. Chip says:

    The more I think about this, the more I think the Yankees should just say screw it and go all in this offseason

    Gardner CF
    Jeter DH
    Cano 2B
    McCann C
    Granderson RF
    Soriano LF
    Tex 1B
    A-Rod/whatever 3B
    Drew SS

    Sabbathia
    Garza
    Tanaka
    Nova
    young cheap guy

    Grab a lefty bat for the bench and a veteran bullpen arm and we look to be in business.

  12. The Lime says:

    It does seem like a lot to ask, I agree. Assuming that there’s an 80% chance of A. B, and C each happening, then there are still just sightly better 50/50 odds of them all working out at the same time. And I’m definitely not bullish enough to assume that there is an 80% chance that both Teix/CC bounce back, Nova progresses, and a bunch of rookies step up, though not quantifying “step up” or “bounce back” leaves a pretty big gray area.

  13. thenamestsam says:

    “If July rolls around and it’s obvious he’s not an MVP candidate — seems silly to say now, but remember, he was in the MVP conversation as recently as 2012 — that’s suddenly $4M the team can allocate elsewhere, specifically towards a trade deadline pickup.”

    Couldn’t they do this the other way as well? Dump salary at the deadline to get under? It seems to me that effectively treating Jeter winning the MVP as a certainty on the books is an incredibly foolish move – he’s got be something like a 1000-1 longshot to win that award. Seems like it would make more sense to assume he doesn’t do it and then either figure out a way to dodge it with a salary dump if he does or just bite the bullet roll it over and make the 2014 plan into the 2015 plan.

  14. Dick M says:

    That 6 mill for Ichiro is really pissing me off.

    Make no mistake, one of the reasons we are in this mess is because of the lack of a farm system. No infielders on the left side. No outfielders that are close enough. And no young starters ready to step in.

    Is it some kind of revelation to the braintrust that we would be overpaying at this stage for Tex, Arod, Jeter and CC?

    Getting under 189 is like the fat guy who loses too much weight too fast. It’ll wreck us. We need Cano, we need Grandy, we need the young Japanese pitcher AND Garza, and we need Ryan to caddy for Jeter. We need a DH. The kids can catch. And then you gotta assume that A-Rod gets 50 games so you need a utility guy who can get on base and field a little bit (no Nunez). These would be no brainer moves in prior years.

  15. TopChuckie says:

    Money is money. What is the general consensus now days regarding what they will save by staying under the $189? I don’t think the savings was ever estimated to exceed the $75M-$100M estimated posting fee for Tanaka, so arguing they will go big to for Tanaka because he will help them stay under the $189 seems irrelevant. In other words, what good is saving $70M by staying under $189, if you have to send $80M to a Japanese team in order to do it?

    That being said, I do hope they land Tanaka regardless of the financial considerations.

    • Chip says:

      Yeah, I think they believe they can have their pie and eat it too. There seems to be a train of thought in the organization that they can stay under 189 despite the terrible contracts given out and lack of farm system without endangering the future. I’m not really buying it

    • Havok9120 says:

      And if their thinking is that they’re reinvesting the savings in the team and they wouldn’t make as huge a bid on Tanaka if they weren’t saving money elsewhere?

      • TopChuckie says:

        $140M is $140M whether they spend it investing in the team by making a posting fee for Tanaka and giving him a contract, or if they spend it signing several current MLB free agents and paying the luxury tax penalty. Either is a form of investing $140M in the team, but apparently the belief is they only have a willingness to do it the Tanaka way, and not the luxury tax way, and I don’t see that logic. In both cases you spent $140M and your team is theoretically more talented and competitive.

        Why characterize one method as unacceptable while the other way is deemed prudent?

  16. Coolerking101 says:

    The Yankee 189 plan seems to require Soriano play everyday and Grandy walk. Soriano will be 38 next year. He hit .250/.287/.467 for 2/3 of the season last year. If he plays everyday, he’s going to wear down faster than you can say Raul Ibanez.

  17. EndlessJose says:

    Why is Cervelli name even mentioned?We don’t know if he is a god player without PEDS.Lets put Romine or Murphy there.

  18. blehmann says:

    They have to approach the uncertainty regarding Arod differently depending on whether they care more about the $189 million budget or winning in 2014. If they are genuinely committed to winning in 2014, they have to essentially spend as if Arod is going to have a substantial suspension and go over the budget if it does not turn out that way. They cannot wait and assume free agents are going to stay on the board until the arbitration decision comes down. This probably means signing, if possible, Kuroda, Tanaka, McCann, and at least genuinely warm bodies for 3b/dh and ss. If they are not genuinely committed to winning in 2014 or, put differently, are really committed to the $189 million budget, they should still sign Tanaka but the others are less obvious. Building a team for 2015 and assessing the uncertainties in the FA market for 2014 is a very different kettle of fish.

    blehmann

  19. blehmann says:

    TopChuckie, luxury tax funds have a surcharge attached if you go over the $189 million threshold while posting fees do not. So $140 million subject to an additional luxury tax costs more than a posting fee that does not. Whether this incremental cost should be the dominant factor in Hal/Hank’s decision making given the extraordinarily lucrative franchise and the value of its brand is a separate question but apparently it is. Hal is certainly right in principle that a team should be able to contend on this budget with a good farm system but this team cannot do so in practice with these legacy contracts – particularly Arod’s contract – and the actual farm system. The decision to be made is whether to let the brand take a hit over the next year in the name of fiscal responsibility and recommit to a quality team a year down the road or to bite the bullet and risk breaching the $189 million threshold and hoping the Arod suspension is not cut too much.

  20. Grover says:

    Mike, please address the omission of Granderson and Kuroda?

  21. Deanland says:

    What of Brendan Ryan, now a free agent? He’s as sure handed as can be found, is a reliable infielder for any position, and will come at a bargain rate. As a late innings defensive replacement he is far and away the best choice. Not much offense, but not a disaster. Given the age and how brittle the Yankee infield is, he seems a necessity. Nunez in the field is always a risk, and he certainly is not who gets put in as a *defensive* replacement in later innings. If indeed A-Rod gets a short suspension, toughing it out with Ryan/Nunez is a good solution to a short term problem.

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