River Avenue Blues

The Yankees, baseball’s biggest spenders for the better part of two decades, may finally be eying something of a budget, according to a report by Joel Sherman. In a piece on Sunday, the New York Post scribe says that Major League Baseball’s Collective Bargaining Agreement and the other 29 teams’ attempts at keeping the Yanks’ spending under control may finally pay off in 2014 as the New York front office wants to bring its payroll below the luxury tax threshold. If the Yanks are truly intent on reducing costs, the club will not overpay for long-term deals in the near future and may focus on ushering in a new round of young players instead.

Sherman, who noted that this drive toward fiscal control has them lukewarm on top free agent pitchers Mark Buehrle and C.J. Wilson, explained the rational behind the Yanks’ thinking:

As an organization, they are saying they are driven to have a payroll of $189 million or less in 2014 when that becomes the luxury tax threshold. Because the incentives that come via the new CBA are just too great for them to ignore.

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.

So what’s going on here? How could the Yankees, who enjoy the edge of money with their new stadium, TV deal and various other revenue sources, suddenly become fiscally conservative? There are, in effect, three answers. First, the Yankee sources who are talking to Joel Sherman are being truthful. The Yankees know what they stand to gain by getting their payroll under $189 million in 2014, and they think they have the young pieces to do so. Plus, as Sherman writes, the Yankees say, “The big-name guys are a waste of time. We are not spending that kind of money.”

Next, they could be bluffing. Maybe they’re playing coy now to make a bigger move later in the year. If any free agent player wants to come to New York but the Yanks don’t want to meet that player’s asking price, it’s in the club’s best interest to put forward a plausible explanation for future that is fiscally conservative. Maybe they want to go big on Yu Darvish or Yoenis Cespedes but do not want to overplay their hand now.

Third, they’re laying the groundwork now in order to play it coy next winter. Right now, they have $72 million tied up in three players in 2014 — A-Rod, Mark Teixeira and CC Sabathia. They know that they’ll have to deal with Robinson Cano‘s, Curtis Granderson‘s and Nick Swisher‘s free agencies within the next two offseasons, and they will likely want to retain two of those three if not all three. Plus, the free agent pitchers could include Matt Cain, Cole Hamels and Anibal Sanchez while Mariano Rivera‘s current deal — and perhaps his career — is set to end after 2012 as well. That’s a whole lotta holes the Yanks are going to have to fill with an eye toward the 2014 luxury tax benefits.

Ultimately, then, baseball’s long-term effort to rein in the Yanks’ spending may be coming to a head, at least temporarily. Baseball has incentivized the Yanks to drop their payroll under the luxury threshold for at least a season. In 2007, the Yanks spent $189 million and won 94 games. They’ve spent over $200 million every year since then and will likely do so again in 2012. Change may be on the horizon though, and if it comes, it could benefit the Yanks’ bottom line tremendously as they gear up for another half decade of exorbitant spending.