A look at the Yankees’ self-inflicted financial bind

Every Yankees winter features a similar song and dance. The team enters the offseason sporting a talented roster, but not one without holes. Rumors abound about whether they’ll target the biggest names on the free-agent and trade markets, but just as much speculation swirls regarding the extent to which the team will spend.

Things are a little different this time around. The question in recent offseasons has been whether the Yankees would spend big to add huge external contributors like Manny Machado or Gerrit Cole. We’re no longer asking if they’ll flash cash to add shiny new toys. The question is whether they’ll spend just to keep the core around.

The early returns couldn’t sound less promising. SNY’s Andy Martino reported that the Yankee front office wasn’t likely to spend big. The New York Post’s Joel Sherman had this to say last week:

I am going to speculate that Hal Steinbrenner will order a payroll that drops beneath the $210 million luxury tax threshold for next season. So you can scratch off signing J.T. Realmuto and Trevor Bauer in free agency and trading for Francisco Lindor.

We can’t know the Yankees’ plans for sure until they execute them, and there’s still a chance the team reverses course and maintains their payroll. At this particular moment, though, the reporting around the Yankees paints a clear picture of a team that wants to shed salary.

Sherman mentioned the $210 million threshold, the lowest threshold of the competitive balance tax. Let’s take a detailed look at the Yankees’ payroll, to get a more exact picture of what exactly it would take, and what kind of damage the team would have to self-inflict, in order to get down there.

A team’s player payroll consists of a handful of main parts. First are the veteran players signed to guaranteed contracts. Next are the players, typically with three-to-five years of service time, who are arbitration-eligible. After that are players pre-arb players with less than three years of service. Then we have buyouts on player options, and player benefits, estimated at $15.5 million towards the 2021 luxury tax.

It’s easy enough to find the salaries of the Yankees’ big-name players. To estimate arbitration costs, I referenced MLB Trade Rumors’ arbitration projections. Here’s a look at the complete picture:

This estimate is still a bit rough; it’s hard to pin down exactly how much the Yankees’ pre-arb players will cost, and it also includes buyout on options for Jacoby Ellsbury and Brett Gardner, as well as a deduction for the amount of Giancarlo Stanton’s salary the Marlins will cover.

The Yankees sit something like $40 million below the lowest threshold, but this is without any players that can hit free agency. This doesn’t include Gardner, DJ LeMahieu, Masahiro Tanaka, James Paxton, or Zack Britton, who can become a free agent if the Yankees don’t guarantee his team option on 2022.

Paxton suffered through a lost 2020, but LeMahieu, Tanaka, Britton, and even Gardner were all vital to the Yankees this past season. It’s obvious the team will face a straightforward choice: keep important but expensive players like LeMahieu, Tanaka, and Britton, or let some of them go in order to save money.

It’s difficult to predict contracts before a winter that will likely be cold towards players, but LeMahieu still looks likely to pull down at least $20 million per year. Tanaka could come in around $15 million. If the Yankees pick up Britton’s option, he’s due $13 million. Do the simple math, and even under team-friendly scenarios, keeping that crucial trio would cost $45 million or more and send the team past the first threshold.

We can all guess where this is headed. In order to meet budget constraints, the Yankees will have to let go of at least one of LeMahieu and Tanaka, sacrificing either their best position player from the last two years, or a key piece of their limited rotation depth. Or, if the Yankees did want to keep their free agents, they’d have to cut elsewhere, perhaps non-tendering players like Gary Sánchez or Tommy Kahnle, or trying to dump a veteran such as Adam Ottavino.

These are the hard roster choices the team will face if they follow through with self-imposed austerity measures. Now, it goes without saying that Hal Steinbrenner and the Yankees are completely free to run their business as they see fit. If they want to try to win on a budget, that’s a route they’re at liberty to pursue.

But just as free as they are to cut payroll, we are to voice our displeasure with a team that may purposely choose to win fewer games just to save money, on the heels of an unprecedented stretch of exploding revenues. Of course, those of us on the outside will never see the team’s books, and the Yankees and the rest of baseball surely lost revenue during this abbreviated, fanless season. Yet the Yankees of pre-2020 saw their revenues skyrocket by 50% between 2014 and 2019, per Forbes, and didn’t once increase payroll until this season, when the team owned a $250-million payroll pre-pandemic. The team may be feeling the squeeze ahead of another potential season without fans, but to immediately slash payroll following one down year of revenue after a decade of printing money feels like a weak admission that winning isn’t all that counts.

No one knows what this offseason will hold. Brian Cashman and his team have a track record of finding diamonds in the rough, and it certainly wouldn’t be a surprise to see the Yankees survive a lean winter with a strong roster still intact. But it looks like Cashman and Co. will work with a narrow, and self-imposed, margin for error. If the Yankees aren’t willing to pay what it costs to keep a great roster together, they will have to get creative. The end result may be a team less capable of bringing home that elusive 28th ring.