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Yankees should offer Cano a 12-year contract

Offering anyone a 12-year deal sounds like a terrible idea, but for the Yankees and Robinson Cano it actually makes financial and baseball sense.

Where do I sign?
Where do I sign?
Jim McIsaac

(When someone says) Now hear me out, whatever follows that is not gonna be good.

-Kevin Nealon

Now hear me out. The Yankees should give Robinson Cano a massive twelve-year contract following this season that will pay him until he’s nearly 43 years old. If the Yankees are serious about getting under the luxury tax of 189 million dollars and staying competitive in 2014, they need to get creative. Spreading Cano’s money over 12 years instead of 7-10 creates a lower average annual value of the contract. When calculating payroll for luxury tax purposes, Major League Baseball does not use the amount the player actually made in a given year. The Yankees could not offer Cano $5 million in 2014 with a much larger salary in the years that follow in order to get under the luxury tax level. Baseball uses the average annual value (AAV) of the guaranteed money in a contract including player options.

Whether the Yankees actually go through with their goal to get under the luxury tax in 2014 is questionable. At the end of this season, the Yankees will lose Curtis Granderson, Hiroki Kuroda, Robinson Cano (potentially), Andy Pettitte, Kevin Youkilis, Mariano Rivera, Phil Hughes, Travis Hafner, Joba Chamberlain, Lyle Overbay, and $8.5 million of Vernon Wells’ salary for a total just a tad under $100 million. The Yankees current commitments to Alex Rodriguez, Vernon Wells, Ichiro Suzuki, CC Sabathia, Derek Jeter, as well as third-year arbitration players Brett Gardner and David Robertson total roughly $107 million for luxury tax purposes. Adding in a few other arbitration cases and a bunch of league minimum salaries adds another $14 million. While the luxury tax level is set at $189 million, around $175 million will go to big league salaries with the rest going towards benefits, medical expenses, and minor leaguers on the 40-man roster. As a result, the Yankees would need to fill out the rest of the roster with roughly $54 million.

Signing Cano to an eight-year, $200 million contract may make sense logically. A shorter term contract at an even higher AAV may make even more sense logically, but financially, a longer contract could net huge savings for the Yankees while allowing the team to compete in 2014. Whatever amount the Yankees deem a fair price for Cano, they should offer that amount over 12 years. At 8/200, the amount counting against the 2014 payroll is $25 million. If the contract were 12/200, the amount counting against the payroll in is $16.7 million. The Yankees would then have eight million more dollars to spend on the 2014 team when they will likely be shopping for an outfield bat, starting pitching, and infield insurance for A-rod and Jeter.

Cano would need to be enticed in some way to take the same amount of money over more years. The Yankees could offer $30 million per year over the first three years to make up the difference. Owners are generally reluctant to front-load contracts because they want to keep their money as long as possible. However, the move would prove valuable for the Yankees as getting under the tax threshold could be worth close to $60 million in 2014 alone, with the benefits likely totaling over $100 million from 2014-2016 even if they go back over the luxury tax in 2015 and 2016. After 2016, the Yankees would owe Cano $100-$120 million dollars over the next nine years. That is not exactly chump change, but should be palatable for the Yankees as Cano enters his decline phase. It would not hinder the Yankees the same way A-Rod’s contract hangs over future planning as Cano would make less money as the contract rolls on.

If the Yankees do go this route, expect hand-wringing from sportswriters and fans about the Yankees exploiting the system. Expect some form of an inquiry from Bud Selig regarding the fairness of the contract. Expect the Yankees to be able to do it anyway. The decision is actually defensible on baseball grounds. If the argument is that the Yankees should not be able to extend a player into his age-42 season, then the reply is to point to a certain Yankee who signed a long-term deal that reaches into his age-42 season. Derek Jeter, Andy Pettitte, and Mariano Rivera are all players the Yankees agreed to sign past age 39. Although NHL contracts have been voided to get around the salary cap, those efforts were more blatant and one was set to pay Ilya Kovalchuk the NHL minimum for five years at the end of the 17-year deal. Cano would still be making in the $5-$10 million range when his contract ended, and it is reasonable to think he may still be able to play at that time.

If the Yankees further try to exploit the rules and make every one year deal they sign this winter a one year deal with a $1 million player option, they may be more likely to run afoul of Selig. Signing Cano to a longer term and front-loading the deal would be a win for Cano, Yankee management, and fans who want to see a winner. Shorter term deals are generally preferable, but in this unique circumstance, the Yankees are better off extending the years on the contract. Skepticism abounds at whether the Yankees will actually go through with their plan to get under the tax level, but if they get creative they may be able to pull it off.