The $189M Payroll: Part 2 of 2

This post was written by Moshe Mandel and Stephen Rhoads

In part 1 of this series we went through six different payroll scenarios for the Yankees over the next decade. We were careful to distinguish between total savings and CBA savings, noting that how you treat the difference in payroll can make a big difference. Where you come down on the question of how much the Yankees can save is very much determined by which figures you’re examining. Let’s use Scenario 1 as an example. In this Scenario, payroll goes from $210M in 2013 to $189M in 2014, and then goes back to $210M in 2015. We summarized the savings accordingly:

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

CBA Savings: $23.125M

Now, how you account for 2014 really determines whether the savings are significant or not. We peg the initial savings figure for 2014 at $41.5M saved. This number is comprised of a $21M reduction in payroll, a $10M refund from revenue sharing, and a $10.5M savings in luxury tax. However, the $21M reduction in payroll and the $10.5M reduction in luxury tax don’t really have anything to do with the new CBA per se. This $30.5M savings is a savings they could have gotten at any point in the last decade simply by reducing payroll. Thus, the $30.5M is comprised of savings prompted by the CBA, but it’s not comprised of savings emanating from the new CBA. It’s a $30.5M they could have gotten at any point in the last few years and chose not to. It’s still a cash item – it’s not depreciation in a cash flow statement – and it still means more money in the coffers, but it’s not a CBA savings per se, at least in our estimation. This is an important distinction.

In 2015, the payroll goes back to $210M, which means there are no payroll savings and no revenue sharing refund. There is a luxury tax savings though, as the new CBA allows teams to “reset” the luxury tax by going under the threshhold in just one season, an option that was unavailable under the old agreement. This means that any savings reaped due to the reduced tax rate can be attributed to the new CBA and can therefore be included as “CBA” savings. In this particular scenario, these savings are comprised of a $6.825M difference in what their bill would have been had they not gone under $189M in 2014 compared to what it is since they did go below the threshold. In other words, had they not gone under $189M in 2014, their luxury tax rate in 2015 would have been 50%. Since they did, it’s $17.5%. The difference is $6.825M. This is a real CBA savings and it plays out over the 2016 and 2017 as well (rate goes up to 30% and 40%, respective, per the CBA). Thus, the total amount saved in Scenario 1 is about $55M, but only $23M of it is prompted by the new CBA. Here’s the summary, then, of all six scenarios and how much the team could save by going with each option.

Scenario 1 ($210M to $189M in 2014, returns to $210M in 2015 and beyond): total savings of $55M, CBA savings of $23M.

Scenario 2 ($210M to $189M in 2014, stays at $189 for 3 seasons): total savings of $147M, CBA savings of $53M.

Scenario 3 ($210 to $189M in 2014, stays at $189 for 2 of 3 seasons): total savings of $116M, CBA savings of $54M

Scenario 4 ($220M to $189M in 2014, returns to $220M in 2015 and beyond): total savings of $76M, CBA savings of 29M.

Scenario 5 ($220M to $189M in 2014, stays at $189M for 3 seasons): total savings of $199M, CBA savings of $59M.

Scenario 6 ($220M to $189M in 2014, stays at $189M for 2 of 3 seasons): total savings of $152M, CBA savings of $59M.

Clearly the Yankees would save the most total money in Scenarios 2, 3, 5 and 6. In these scenarios, they’re dropping their payroll down to $189M and keeping it there for a substantial amount of time. The most they could save would be in Scenario 5, in which they shave nearly $40M off their payroll and maintain the reduction. In this case they’d net nearly $200M more, $59M of which would be a derivative of the new CBA.

These gains would be real, but they’re not entirely relevant for our purposes. Saying the team could save nearly $200M in Scenario 5 is true, but it’s also true they could save $75M right this moment if they dropped their payroll down by $75M. Of course, they haven’t done that at any point in recent memory. Our concern is the CBA savings.

The team would obviously save the most by dropping the payroll and keeping it low. Their tax bill would be lower, and they’d receive money back from the revenue sharing refund. However, these CBA-related savings don’t seem to amount to more than $60M. If they don’t maintain the new low payroll, the savings are even less. In Scenarios 1 and 4, in which they drop the payroll for one year and return it to prior levels immediately after, they’d only save $23M-$29M over four years. At most, this amounts to a little over $7M per year. In the latter scenarios, this annual savings figure rises to a little less than $12 million per year.

It’s our opinion that if the Yankees were interested in saving fifteen to thirty-five million dollars a year in payroll and tax, they should have done it already. They could have done it at any point in the last decade. We’re told that the new CBA incentivizes them to get below $189M to incur specific savings, but we see that the only time those savings are truly noteworthy is in the unlikely scenario in which the Yankees stay under $189M for a significant amount of time. Furthermore, we see that the CBA-related savings, at their most extreme, are about $12M a year. Are the Yankees really concerned about $12M a year in “new savings”? Are they suddenly concerned about the fifteen to thirty-five million dollars a year that they could have been saving all along? Perhaps most importantly, are they willing to forgo top free agents and risk missing the postseason to garner those savings?

Without further guidance as to what the true long-term goal is, we can’t get more specific than this. But it seems to be the case that the team will only realize serious, significant gains if they make a permanent move towards a payroll level more reminiscent of the early part of the last decade. Perhaps we’re stuck in the denial stage of the 5 stages of grief. It’s hard for us to understand the prospect of a “new normal” in which the payroll drops 10-20% while the team simultaneously reaps greater and greater revenues from a lucrative television network and new stadium. It’s even harder for us to understand risking contention in an increasingly competitive American League with an already-expensive roster to simply eke out a pittance in savings relative to the team’s balance sheet. But this may be the new Yankees reality, in which the Steinbrenners reach for a modicum of fiscal responsibility at the expense of some performance certainty. If it is, we all need to adjust our expectations accordingly.

The $189M Payroll: Part 1 of 2

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.
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Prospect Profile: Dante Bichette Jr.

(Photo via The Orlando Sentinel)

Dante Bichette Jr. | 3B

The son of former big leaguer Dante Bichette Sr., Dante Jr. first popped up on the radar in 2005, when he helped his Maitland, Florida team to the Little League World Series. He went on to star at Orangewood Christian High School just outside of Orlando, twice being named the All-Central Florida Baseball Player of the Year. He also led the Rams to the state tournament his junior and senior years.

Baseball America (subs. req’d) ranked Bichette as 15th best prospect in Florida and 108th best prospect overall heading into the 2011 draft, so it was somewhat surprising when the Yankees drafted him with their first selection, the 51st overall pick. They’d received that pick as compensation for the loss of Javy Vazquez to the Marlins. Bichette signed quickly for a $750k, passing on his commitment to Georgia for roughly $55k over slot.

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Behind Derek Jeter’s unexpected second-half resurgence

(Bill Kostroun/AP)

I’ve given Derek Jeter a considerably hard time since his offensive game started to fall off a cliff back in May 2010, and so it seemed appropriate to reverse course and give Derek proper due for the remarkable turnaround that saw him hit .327/.383/.428 in the second half of 2011 after a .270/.330/.353 first half and a .270/.340/.370 2010 season. Additionally, while many have acknowledged Derek’s resurgence, few (if any) have taken a look into the why, and so here’s a deeper dive into how Derek Got His Groove Back (and no, it has nothing to do with gift baskets).

The below chart (as always, click to enlarge) shows Derek’s plate discipline numbers graphed against his wOBA on a month-by-month basis, beginning in April 2010.

There’s obviously quite a bit going on here, and I was actually surprised to find that a lot of this data didn’t correlate the way I was expecting it to. I figured Jeter’s best months would feature low O-Swing% and O-Contact% rates; and yet his best month (August 2011’s .398 wOBA) featured his third-highest O-Contact% (77.6%) out of the 12 months shown here. For a player with a career 62.0% O-Contact%, I really have no idea what to make of that.

Fortunately his four best months of the last 12 — August 2011, April 2010’s .380 wOBA, July 2011’s .352 wOBA and September 2011’s .344 — were each among his top four Z-Swing% rates (though not in that exact order), lending some sense of order to the proceedings. Although only two of those four months — again, April 2010 and August 2011 — were among the top four Z-Contact% rates.

The other data type that correlated with Derek’s top monthly wOBAs was Swing%, as his three highest Swing% months were also his three best wOBA months. So based on this data it seems like Derek is at his best the more frequently he swings, which is also driven home by the below table:

O-Swing% Z-Swing% Swing% O-Contact% Z-Contact% Contact% Zone% Sw-Strk%
2010 28.2% 67.2% 47.1% 69.2% 92.9% 85.5% 48.3% 6.7%
1H 2011 26.9% 66.8% 45.8% 73.1% 91.6% 85.9% 47.3% 6.4%
2H 2011 29.9% 71.7% 48.9% 71.5% 90.6% 84.3% 45.5% 7.5%

Although that probably isn’t terribly surprising news to anyone who’s watched Derek with any frequency of late. While Derek’s never been a notorious hacker (his career 8.9% BB% is certainly respectable) he has seemed less inclined to take ball four as he’s gotten older, and indeed, he’s only exceeded the league average BB% once in the last five seasons (though he did match it last year). This past season his walk rate was 7.6% against a league average of 8.1% — a five-year league-average low.

Of course, plate discipline only tells part of the story; we also need to see what Derek did with the balls he put into play.

Now this chart makes a little more sense. Derek’s worst month — April 2011 — also featured his highest GB% of the 12 months surveyed here, a ridiculous 72.3%. On the flip side, Derek’s best month, August 2011, saw the fewest ground balls (55.8%). His best LD% months were, unsurprisingly, August ’11 (31.6%) and September 2011 (26.2%). He’s only exceeded 20% line drives in a full season once in the last five seasons, so Derek really turned back the clock this past summer.

I also thought it’d be interesting to see how pitchers attacked Derek over the last two seasons. Instead of drilling down on each individual pitch type, I decided to borrow Mike’s binning of Fastballs (FB%=FF, FT, SI, FC, FA and FS), Breaking Balls (BrB%=SL, CU, KN) and Changeups (CH%).

First-half Derek saw a slight decrease in fastballs from 2010, an uptick in breaking balls and a very small decrease in changeups. However, pitchers on the whole seemed to start challenging Derek with more heat in the second-half, which is probably at least partially responsible for his offensive resurgence, as Derek’s been an above-average fastball hitter for all of the years in which we have data for.

Pitchers did continue to exploit his difficulty with the offspeed pitch, and in fact, 2011 was the worst season of Derek’s career in terms of pitch type linear weights for the changeup. Opposing teams undoubtedly know that you can beat Derek with the change, and I wouldn’t be surprised to see that CH% rise even higher next season.

Lastly, I wanted to take a look at where Derek was hitting the ball. Here’s Derek’s first-half 2011 spray chart:

We all know Derek’s made his living going the other way, but Derek rarely pulled anything with power in the first half, hitting 11 balls to left field (though seven went for hits).

Here’s the second-half spray chart:

That’s a nice-looking spray chart. By my count Derek hit 22 balls to left field in the second half, and 21(!) of them went for hits. I’m not saying Derek needs to become a pull hitter or anything crazy like that, but it’s rather remarkable how much different the results were after he started using the entire field.

The one angle I was curious about but didn’t have the tools to dig too deeply into was whether the Yankees faced a disproportionate amount of lefthanded pitching in the second half, though unfortunately none of the usual suspects have the capability of showing platoon splits by half. However, the Yankees only faced (by my count) 21 lefthanded starters out of their 74 second-half games, so even if Derek did presumably continue to feast on southpaws, his numbers were likely also very good against righthanders in the second half as well, a subset whom he has really struggled against (81 wRC+ on the whole in 2011, and 71 wRC+ in 2010).

To summarize, it would appear that the keys to Derek’s second-half resurgence were, in part, as follows: swinging a lot more frequently than he had been doing (and more frequently than league average, but slightly less than league average on pitches out of the zone), hitting the ball in the air, getting a lot of fastballs and pulling the ball to left field. Of course, this begs the question whether any of this is sustainable for the 2012 season (and beyond, if we’re extremely lucky), or if Derek will regress back to being the groundout-to-the-shortstop-on-the-first-pitch machine that frustrated the heck out of Yankee fans for roughly a year-and-a-half’s worth of plate appearances.

Biz Round-Up: Sweet Lou returns, MLB rule changes

Report: Lou Piniella set to join YES Network team

An old familiar face is getting ready to return to the Yankee family. One-time Yankee player and manager Lou Piniella will be rejoining the Yankees as a spring training instructor and YES Network analyst, Bob Raissman of The Daily News reported yesterday. Piniella, who served as a San Francisco Giants’ consultant last year, wanted to stay in baseball but also wanted to be close to his home in Tampa. The Yanks were the perfect fit.

According to Raissman’s report, Piniella will do “a limited number of appearances” on YES. The News scribe expects the former skipper to be in the booth come Opening Day in the Trop, and he’ll do a handful of other series throughout the season. The Piniella deal isn’t final yet, but a YES Network spokesperson confirmed to Bryan Hoch that the two sides were working toward a contract. It’ll be good to hear Sweet Lou, who served in the MSG broadcast booth in 1989, back on TV.

Rule tweaks dominate new MLB Basic Agreement

Later this week, the MLB Owners will ratify the new Major League Baseball Basic Agreement, and as the Players Association approved it today, it will become the law of the baseball land. We’ve heard a lot about the changes to the luxury tax, the amateur draft and international spending. Now, courtesy of the Associated Press, we learn about the myriad minor rule changes as well.

Many of these rule changes are common-sense. The Yankees, who should have played the Wild Card Rays this year in the playoffs but did not, would under a rule that allows teams from the same division to meet in the Division Series. MLB, as was reported earlier this fall, will expand instant replay to include “trapped” catches and some more fair/foul calls. The All Star Break will now be four days, and the game may move to Wednesday beginning in 2013 as well.

For players, MLB has banned tattoos with corporate logos and obscene nicknames written on equipment that may be visible to fans at the stadium or at home. Furthermore, David Ortiz will no longer be allowed to whine about his RBI total as players are banned from requesting scoring changes from the official scorer. Only MLB may hear an appeal now.

My favorite new rule change concerns uniforms though. Here’s how the AP describes it:

Quick uniform number switches will be a thing of the past. Players must tell the commissioner’s office by July 31 of the preceding year if they want a new jersey. That is, unless “the player (or someone on his behalf) purchases the existing finished goods inventory of apparel containing the player’s jersey number.” As in, every replica jersey, jacket, T-shirt, mug and anything else with a number that’s anywhere in stock.

How utterly vindictive.

Finally, one popular team practice has been eliminated as well: Clubs may no longer summon Minor Leaguers to the Majors without activating them. In other words, no more will top prospects be allowed to watch the rest of the regular season unfold in late September from the bench. The Yanks have done this in the past with their youngsters ranging from Derek Jeter to Jesus Montero and beyond. All told, though, these rule changes seem fairly reasonable to me.

Open Thread: Kevin Brown

(Photo via The New York Times)

In many ways, Javier Vazquez and Kevin Brown are the poster boys for the Yankees’ pitching failures in the mid-aughts. Javy bears most of the blame for the Game Seven loss in the 2004 ALCS, but of course he couldn’t have done it without the help of Brown, who was nice enough to load the bases on a single and two walks with one out in the second inning before Johnny Damon hit that grand slam. The Yankees acquired Brown from the Dodgers eight years ago today, sending Jeff Weaver, Brandon Weeden, and Yhency Brazoban to Los Angeles.

Brown, 38 at the time, was coming off a monster season with the Dodgers in 2003. He’d used his trademark sinker to generate a ground ball on 62.5% of the balls he allowed in play while striking out 7.89 batters per nine and walking just 2.39 per nine. Stretch that out over 32 starts and 211 IP, and you’ve got a 6.0 fWAR and 5.4 bWAR season. Of course Brown never replicated that success in pinstripes, though his 2004 regular season wasn’t as bad I remember: a 4.09 ERA (4.03 FIP) in 132 IP across 22 starts. The playoffs were a disaster, and he did miss time with a back strain and a broken left hand after infamously punching a clubhouse wall.

The 2005 season was a complete catastrophe. Back problems forced Brown onto the disabled list three different times, and when he was on the mound he couldn’t prevent runs from scoring. He allowed 57 runs in his 73.1 IP (13 starts), resulting in a 6.50 ERA. The peripherals were okay (3.61 FIP) but at that point, who cared? Brown wore out his welcome in New York and was essentially forced out of baseball after the season, an unceremonious end to a great career that should earn him Hall of Fame consideration.

* * *

Here is tonight’s open thread. All three hockey locals are in action tonight, but talk about anything you want. Go nuts.

Yanks talking to Nakajima, but not close to deal

Via David Waldstein, Brian Cashman has said that he is currently negotiating with the agent for Japanese shortstop Hiroyuki Nakajima, but the two sides aren’t close to a deal yet. The Yankees won Nakajima’s negotiating rights with a $2.5M bid last week, and the 29-year-old is likely to sign. I suspect that talks won’t get serious until after the holidays, at which point they’ll have about two weeks to hammer out a deal.

In other Nakajima news, Dan Szymborski’s ZiPS system projects a .276/.322/.389 batting line for him next season (89 OPS+), adjusting for Yankee Stadium. That’s after he hit .306/.379/.478 with an average of 19.3 homers and 18.7 stolen bases over the last three seasons with the Seibu Lions. For comparison’s sake, Eduardo Nunez hit .265/.313/.385 with 22 stolen bases this past season. Like the Yankees have been saying, Nakajima’s a utility guy.