For nearly two years now we’ve heard about the Yankees’ plans keep payroll below the luxury tax threshold in 2014. The story first cropped up in December, 2011, and a little over a year later Hal Steinbrenner acknowledged it as the organizational goal. Yet he always notes that getting under the threshold is a goal, one he believes is attainable, rather than a mandate. Fielding a championship-caliber team, he reminds us, remains the top priority.
Until the chips start to fall, fans can believe what they want. Some believe that the Steinbrenners are more concerned with lining their own pockets than winning, and won’t be convinced otherwise until the Yankees start doling out contracts. This is not an outrageous stance; given how much money the Yankees stand not only gain, but to take out of other teams’ pockets, getting under $189 million makes sense. At the same time, we saw the crowds at Yankee Stadium last year when the Yankees fielded a mediocre product. Surely the Steinbrenners understand that they could stand to lose plenty if the 2014 Yankees resemble the 1991 Yankees.
For those worried about how the payroll breaks down, we’ve seen some positive stories in the past few days about the Yankees showing interest in a number of quality free agents. On Friday Jon Heyman published one containing an encouraging quote from one of his sources: “Hal is very involved, and he wants to win.” Another interesting tidbit comes a few paragraphs later (emphasis mine).
Word is the Yankees still believe they can keep get their payroll below the luxury-tax threshold of $189 million, thanks to $100 million or so in contracts coming off the books, depending to a fair degree on the status of Alex Rodriguez‘s PED arbitration case vs. MLB.
If A-Rod somehow walks away without any suspension, he will count $33.5 million against the luxury tax next season ($27.5 million AAV, plus $6 million after he hits six more homers). If suspended for 50 games that number comes down to around $25 million, and if he gets suspended for 100 games it’s around $16.5 million ($10.5 million if he can’t hit six homers in 62 games, but he did hit seven in 44 games last year). And, of course, if he gets 162 or more games, the Yankees will have a nice heap of cash at their disposal.
The pace of the proceedings between MLB and Rodriguez throw a wrench into the Yankees’ off-season plans. Free agency is already in full swing with the GM meetings this week followed by the Winter Meetings in about a month. A good number of players will sign between now and when the Winter Meetings end on December 12. How can the Yankees make a move if they don’t know exactly what their 2014 books will look like?
The answer is that it shouldn’t matter. If Steinbrenner is truly serious about prioritizing a winning team over the luxury tax savings, he should forget that Alex Rodriguez exists. When arbitrator Fredric Horowitz renders his decision, it should have no effect on the Yankees’ plans. They should work with the assumption that Rodriguez will be suspended for all of 2014.
If the bet works out, the Yankees are in superb position. They can, with relative ease, field a competitive team and stay under the luxury tax threshold with another $33.5 million, in addition to the $40 million or so they have currently (as Mike calculated). That $70-plus million can pay for Robinson Cano, Masahiro Tanaka, plus two or three other starting-caliber players, depending on whether they’re acquired via free agency or the trade market. Chances are Rodriguez will push them over the threshold again in 2015, but at least they’ll have gotten below for one season, resetting the tax and keeping some of their revenue sharing monies.
If Rodriguez does play in 2014, Plan 189 does go out the window, though the luxury tax bill won’t be close last year’s record $29.1 million luxury tax bill. If Rodriguez avoids suspension and the Yankees are butting up against the tax threshold, they will pay $16.75 million in tax. At 50 games the bill would be $12.5 million, and at 100 games it would be $8.25 million.
Therein lies the entire bet. If the Yankees win, they get a championship team and pay zero dollars in luxury tax while keeping money previously sent to other teams. If they lose they still have to pay out those revenue sharing monies, plus luxury tax — though even in the worst case scenario the tax itself will amount to less than they’ve paid in the past four seasons.
As always, the it’s-not-my-money caveat applies. The Steinbrenners have the dollars, so they control who gets paid. But if they are serious about their statements, that winning takes precedence over the budget, they should spend as though Rodriguez doesn’t exist. To win that bet is a coup. To lose means writing another check, though not nearly to the level of last year and a bit below what they’ve paid in the recent past. We can only hope this makes sense to the people writing the checks.