Yankees payroll update: how much will they have to spend this winter?

Jim McIsaac

With a $189 million budget in effect, the Yankees will need to get creative in order to field a quality roster in 2014.

For the past two years, the most important number in Yankeeland hasn’t been any of the retired digits that sit beyond the center field fence at the Stadium. It hasn’t been anyone’s batting average or ERA or OPS or WAR or even the 27 championships the franchise has won. The number that’s been etched in every Yankee fan’s brain has been 189 million, the payroll threshold for MLB’s luxury tax, which the club is determined to squeeze below for 2014.

We all know the reasons for the Yankees' newfound austerity. Baseball’s current collective bargaining agreement includes a harsher tax that heavily penalizes repeat offenders who spend beyond the sport's soft cap. Teams who exceed the limit four or more years in a row pay fifty cents on each over-cap dollar into MLB’s coffers. The Yankees will pay out $29.1 million in luxury tax this season, which was more than the Houston Astros’ entire payroll. By bringing their salaries below $189 million in 2014, as opposed to keeping it at its current $236 million, the team will save over $70 million in tax and pay. Beyond that, the frequent violator rates would reset and the Yankees could spend what they want in 2015 while submitting to a tariff of 17.5 percent rather than 50.

Yankee execs have been somewhat coy about their budget while speaking publicly. Brian Cashman insisted this week that project 189 is a goal and not a mandate, and Hal Steinbrenner’s assured fans that he won’t forego fielding a championship caliber roster just to avoid the luxury tax. Those are vague terms, though. A great man once said "you can’t predict baseball, Suzyn," and by that wayward logic, a front office can essentially insist that any assortment of crap it puts on its field is championship caliber. With more teams than ever involved in the playoffs thanks to Bud Selig’s quick buck philosophy of commissioning, that argument only holds more water. From 2002 through 2013, the Yankees have had baseball’s highest payroll every year, and they’ve won just one World Series. If the front office thinks it can contend for an increasingly crap-shoot postseason for $189 mil instead of $236 mil, it’s hard to blame them for trying.

It’s been suggested that the Yankees might abandon their budget after posting their worst record since 1992 and their lowest total attendance since 2001. If anything, though, 2013’s results might spur Hal and company on toward their target. Despite eschewing multi-year deals for players like Nick Swisher and Russell Martin for failed one-year fixes like Kevin Youkilis and Travis Hafner, despite losing a huge chunk of the roster to injury, the Yankees came within six games of the playoffs. While George Steinbrenner’s response to the CBA's rules would probably have been to defiantly spend even more, his son is much more a pragmatist. For now it’s safe to assume that $189 million is something that’s going to happen.

Even faced with the task of reducing their payroll by $47 million this off-season the Yankees’ hands aren’t completely tied. They'll see over $95 million worth of contracts expire after the World Series. So much freed up cash would have meant ‘free agent shopping spree’ in the past, but that’s not the case in this alternate Yankee universe we’re presently living in. Still there’s some flexibility to be enjoyed. Here’s a look at what the Yankees are committed to for next year and what they’ll have left to play around with:

Guaranteed Contracts (2014 AAV)

The downside of chipping away so much salary is that only six Yankees are under guaranteed contract for 2014, leaving them with many holes to fill. Alfonso Soriano obviously makes more than $4 million next year, and Vernon Wells isn’t going to play for free – though he probably should – but subtracting the portions of their contracts that their former teams are picking up from their average annual values results in those minuscule figures. In actual dollars, the Yankees owe Soriano $5 mil and Wells over $6 mil, but those amounts are based on contract back-loading and thus aren’t applicable to the luxury tax.

It’s pretty clear that A-Rod won’t cost the Yankees his full $27 million AAV in 2014. The best result he can hope for in his appeal of his 211-game suspension is probably a reduction to the customary first-offense ban of 50 games. That outcome would give the Yankees an extra $8.5 million to spend. A 100-game penalty would save them nearly $17 mil and if their third baseman is gone for the entire 2014 season or more, the entire $27 mil would be liberated. To be conservative, I’ve gone with the 8.5 in this estimate, but A-Rod’s portion of the payroll could end up being considerably less.

Options

Jeter’s player option is the only one for the Yankees this year. While the option is worth only $9.5 million in cash, it’ll cost $15.5 million tax-wise if he opts in due to the increase in the overall value of his deal. If he opts out Jeter will still count for $9 mil plus whatever the club pays to keep him around. Jeter and the Yankees can save some of the 2014 payroll burden by arranging a new agreement with a low player option for 2015, but for now we’ll assume the cap hit that comes with the basic opt-in.

Arbitration Eligibles

The Yankees have seven players eligible for arbitration. What they’ll actually get is anyone’s guess. For David Robertson, Brett Gardner and Shawn Kelley, I’ve assumed 100 percent increases over their 2013 salaries. They may do better than that. Nova’s a first year arbitration eligible coming off a very strong season, so a bump of nearly $2 million from the league minimum contract he played for last year seems in order. Cervelli, Nix and Stewart are all players the Yankees may – unfortunately – want back, but they’ll likely be non-tendered and signed to minor league or low major league contracts. It makes sense to maintain control over what they’ll be paid and to possibly free up 40-man roster spots. Losing any of the three to another organization wouldn’t be a major blow. Not counting the non-tenders we’re up to eleven players now at a cost of approximately $107 million.

The Yankees can probably count on a few players from their farm system holding down roster spots for the league minimum. David Phelps and Michael Pineda should fill out two fifths of the rotation on the cheap. Eduardo Nunez will be around and Preston Claiborne, Adam Warren, Dellin Betances and Cesar Cabral are possible bullpen fodder. One of Austin Romine or J.R. Murphy, and arguably both, could see time behind the plate. The major league minimum salary starts at $500,000 next year and increases by $81,500 for each year of service time. If eight of these guys are on the roster it would cost somewhere in the neighborhood of $6 million. We’ve got 19 players now for the low, low price of $113 mil.

Salaries paid to 40-man roster players in the minors, as well as certain benefits paid out by teams, are counted against baseball’s luxury tax. These costs are usually estimated at around $11 million which ups the payroll so far to $124 million – still for 19 players. That’s not so bad, except that so far, this team isn’t very good. Keeping Robinson Cano should be the first order of business this winter and doing that will eat up a good chunk of the Yankees’ remaining cap space. $25 million per year may be a little light or a little heavy compared with what Cano ultimately receives, but it’s a fair estimate. That puts us at $149 million for 20 guys.

Even with Cano in the fold, the Yankees still need a power-hitting corner outfielder, since they can’t run Ichiro or Wells out there all year again, and someone to competently caddy for Jeter at short – ditto for Rodriguez at third. They need a number two starter and possibly a back-end innings eater type as insurance for Pineda. A starting-level catcher would be nice and they can’t expect to go into next season with just Robertson, Kelley and a cast of first and second year arms in the pen. $40 million is a lot of money, but not that much when you consider what quality free agents make. Even solid role players were hitting eight digits last winter. If Curtis Granderson and Hiroki Kuroda accept qualifying offers, or sign similar one-year deals, that’s another $28-$30 million, which would leave the team without much left in the wallet.

The Yankees payroll situation for next year is bleak but not insurmountable. Realistically, they can re-sign Cano and pursue two other significant free agents – whether that means Granderson and Kuroda or other options – while filling out the roster with Brian Cashman dumpster diving specials. That might not be the kind of off-season we were used to in George’s day, but it’s not one that will produce a 70-win squad either. There are plenty of choices out there – the Yankees need to make the right ones.

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