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How the Yankees can retain DJ LeMahieu and stay under the luxury tax threshold

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The Yankees are faced with the agonizing decision of either keeping their most productive player or resetting their tax penalties. But why not do both?

American League Division Series Game 3: New York Yankees v. Tampa Bay Rays Photo by Alex Trautwig/MLB Photos via Getty Images

Before the Yankees lies the icy landscape of what could be a particularly frigid winter. They approach this frozen wasteland without the insulating warmth of some of their most trusted security blankets. Key contributors in DJ LeMahieu and Masahiro Tanaka enter the free agency market, while James Paxton’s and J.A. Happ’s departures further deplete New York’s pitching depth.

The Yankees enter this offseason with two apparent prerogatives. On the one hand, they have made it clear that their primary objective is re-signing DJ LeMahieu. At the same time, many indications suggest they will attempt to pare back spending so as to avoid the luxury tax threshold. These two objectives appear to stand at odds with one another. But what if I told you they could accomplish both? That they could have their cake AND eat it too?

As fans, I think it is time we come to terms with the strong possibility that Yankees ownership has real designs on sneaking below the $210 million competitive balance tax threshold. From a business standpoint, it does not make much sense to carry a payroll that only slightly exceeds the CBT cap - say somewhere in the $210-$220 million range - when for a few million less they can avoid the tax and reset their repeat offender penalties.

Retaining LeMahieu - who is due a raise - and filling the holes in the pitching staff is no mean feat. It requires sacrifices, machinations, and no small amount of luck. If the Yankees play their cards right, there is still a chance.

Before we begin our investigation, I must make note of the following caveat: the amount of available salary space depends on the payroll projection system we employ. The problem here lies in the variation in available payroll predicted by three different projections. Baseball Prospectus currently lists the spending money at just under $35 million and FanGraphs at $28.7 million, while Spotrac already has them exceeding the cap by $1.5 million.

Spotrac incorrectly counts Jacoby Ellsbury’s voided 2020 salary to the 2021 payroll, so they can be discounted from consideration. That leaves us with a $6.3 million disparity in spending money depending on which projection system we believe. Baseball Prospectus predicts slightly higher arbitration costs while FanGraphs is counting Ellsbury’s and Brett Gardner’s buyouts toward the cap in addition to higher projected salaries for pre-arbitration players.

By my understanding of the CBA, buyouts generated by the declination of a club option are not counted toward the CBT payroll in the year that the buyout is paid. Therefore I am more inclined to use Baseball Prospectus projection as the amount of money the Yankees have to spend. So with that in mind, let’s see how they can make this work.

Some sources claim that LeMahieu would be willing to take a discount to remain in pinstripes. This is fantastic news if you are a Yankee fan. Just as important is the report that he is seeking a five-year commitment. This is the first step for the Yankees in maximizing their limited cap wiggle room.

Attaching an extra year onto a prospective deal lowers the average annual value of said deal, and the AAV is all that matters when calculating CBT payroll. In this manner, the Yankees can offer an extra year to LeMahieu while matching the overall value of rival offers, where hopefully his preference to stay with the Yankees would kick in.

All of a sudden, under this scenario, the Yankees will have re-signed LeMahieu at a “below-market” price in terms of AAV, freeing up unanticipated salary to fill out their rotation. They can reallocate additional money by ridding themselves of Adam Ottavino and his $9 million hit.

It is hard to see any team taking on his entire salary in a straight-for-straight swap, but perhaps the Yankees could sweeten the deal by eating some of the remaining money and attaching a low-end prospect. There are a handful of unprotected top-30 organizational prospects whom the Yankees could lose to the Rule Five draft. Why not get something back for them by including them in a deal to unburden the payroll of Ottavino’s contract?

A final move that may tempt the Yankees would be to non-tender Gary Sánchez. I must argue against this route with the utmost vehemence. The $5-6 million in savings is not worth throwing their trust behind the unproven Kyle Higashioka, or unnecessarily spending additional money on the free agent market for a catcher. Especially when Gary still has 30+ home run potential in his bat.

At first glance, it would seem impossible for the Yankees to retain their top-contributing free agents without wading into the tax penalty. I firmly believe that with some crafty maneuvering, that remains an attainable goal. This is contingent upon a willingness to offer an extra guaranteed year in combination with the ability to offload an onerous contract. In a perfect world, and assuming Baseball Prospectus’ projections are accurate, the Yankees could have close to $44 million to spend this winter before hitting the tax threshold. You would have to think that is enough to re-sign DJ LeMahieu, target a reliable mid-level starter (Masahiro Tanaka anyone?), and bring in a competent replacement for Ottavino in the bullpen. All of this for less than $210 million. Let’s make it happen.