Jacoby Ellsbury’s financial future is a mess for the Yankees

Jacoby Ellsbury’s contract isn’t the worst in baseball at this time. Chris Davis, Albert Pujols, and Miguel Cabrera are duking it out for that title. Ellsbury’s deal is at least the worst deal on the current Yankees’ books, and that’s bad enough for our purposes. He’s taking up a valuable roster spot and earning more than he’s worth on the open market, and conveniently could play scapegoat should the Yankees decide not to spend on the 2019 free agent class.

Brian Cashman alluded Wednesday to bringing Ellsbury back for the 2019 team. At best he’s a fourth outfielder, in a crowded group as it is. The Yankees are rapidly approaching the point where it would make sense to cut their losses when it comes to Ellsbury, and arrange some sort of release agreement a la Prince Fielder and Alex Rodriguez.

To start, let’s review the glory that is the Jacoby Ellsbury Albatross. Seven years, $153 million guaranteed, with a team option for an eighth year and $5 million buyout if the option isn’t picked up. That, plus a full no trade clause, and Ellsbury holds an awful lot of power. The deal when signed was a bad idea; it violates a rule of thumb I picked up from smarter, better people than me. Guaranteed years, plus half the player’s age, shouldn’t equal more than twenty. There are exceptions to this rule, especially for players in their mid-twenties, but generally that’s a good game plan for contract structure.

Ellsbury has two guaranteed years left, plus the buyout – I really don’t think the Yankees will pick up that option. That’s $21,857,142 for 2019 and 2020, with the $5 million bullet at the end, for a $48,714,284 total bill. Pretty good pay to ride the bench, or the disabled list.

To get rid of Ellsbury, the Yankees have three options: designate for assignment, permanent-injury-triggered retirement, or an “enforced” retirement with a hefty payday. We all know how DFAing works, and we just saw the Red Sox cut bait on Hanley Ramirez earlier this season despite still owing him $15 million. Ramirez hasn’t played since. There’s some precedent for designating players with large contracts – the Red Sox did it with Pablo Sandoval too – but both Panda and HanRam were owed far less than Ellsbury.

The permanent-injury-triggering retirement precedent is seen clearest with Prince Fielder, who left baseball with $96mm still owing to him. This wasn’t a DFA, since Fielder was on the 60-day disabled list with neck problems, and teams can’t cut injured players. Instead, the Texas Rangers worked out a deal with an insurance company, where the Rangers and insurers each kicked in 37.5% and the Detroit Tigers contributed the remaining 25%. Fielder had to remain on the 60-day DL for an entire year while this settlement was negotiated.

We have no idea what Ellsbury’s medical situation is. Cashman’s comments on Wednesday indicate that they expect Jacoby to be healthy enough to play in some capacity in 2019, so using the Fielder precedent probably won’t work.

So if the Yankees want to get rid of Ellsbury, the easiest solution appears to be an A-Rod-like conditional release with a negotiated payout. The Yankees initially considered voiding Rodriguez’s contract fully, only to be sued by the player. In 2016, the two sides reached an agreement to pay out A-Rod’s contract in full, conditional on Rodriguez retiring, taking a position as special advisor, and crucially forfeiting the roster spot he had been taking up.

So what would it cost the Yankees to do that? Settlements usually incorporate the net present value (NPV) of a contract, rather than the nominal amount. Dollars today are more valuable than dollars tomorrow, and in lieu of a deferred payment structure, players and teams will want settlements done in as close to 2018 dollars as possible.

Using the most recent inflation rates published by the US Department of Labor, we can break Ellsbury’s contract down into NPV thusly. Please note that this only includes guaranteed money, the possible option year does have a present value but both MLB and the union keep close to the vest their means of calculating it:

So, any discussions with Ellsbury about a retirement settlement will include payments of right around $46 million, far more than the Yankees or another team have absorbed when biting contracts before. Even the Rangers were only on the hook for $35.25 million in the Fielder agreement. It’s yet to be seen if the Steinbrenners are okay with swallowing that kind of money just for a roster spot. Crucially, A-Rod’s contract buyout counted against the competitive balance tax, so Ellsbury’s would too.

There’s no easy way out of the Ellsbury quagmire. He’s pretty well untradeable, and if he keeps bouncing on and off the DL, it makes him very difficult to cut loose. As the Yankees pursue free agents, his impact on the CBT gives an easy out if ownership doesn’t want to commit to a Bryce Harper or Manny Machado. Maybe it’s best if they Yankees just pay Ellsbury out, but whatever the solution, someone is going to end up unhappy.