clock menu more-arrow no yes mobile

Filed under:

Marcus Stroman’s signing and its impact on payroll and future additions

Are the Yankees done adding after bringing in the two-time All-Star?

Chicago Cubs v New York Mets Photo by Dustin Satloff/Getty Images

As the weeks passed without the Yankees investing a cent into the free agent market, fans grew increasingly and understandably worried. These tensions only heightened as we watched Yoshinobu Yamamoto turn down the Yankees’ offer to sign with the Dodgers, removing the best option to bolster a starting rotation rife with question marks behind 2023 Cy Young winner Gerrit Cole.

The team managed to alleviate some of those concerns, signing Marcus Stroman to a two-year, $37 million deal with an option for a third year. We’ve analyzed the deal from a variety of angles, including the arsenal he brings to the Bronx and the community reaction, so today I thought we could wrap up our coverage of the signing by looking at its impact on payroll and the team’s ability and willingness to add more players this winter.

Payroll

Stroman’s deal is for two years and $37 million, with a 2026 club option that vests into a player option should Stroman surpass 140 innings pitched in 2025. That checks in at an average annual value (AAV) of $18.5 million, bringing the Yankees’ Competitive Balance Tax (CBT) payroll up to a hair over $305 million for 2024 according to FanGraphs’ RosterResource tool.

That Stroman signed for almost a million less per year than Lucas Giolito — coming off consecutive campaigns with an ERA north of 4.88 — is a tidy piece of business for the Bombers. That being said, his deal brings the Yankees’ CBT payroll above $300 million for the first time in franchise history — something owner Hal Steinbrenner assured he was comfortable with this season — making it the second straight season that payroll will exceed the fourth and final CBT threshold ($293 million in 2023, $297 million in 2024) and will thus pay the “Steve Cohen tax” in consecutive years.

As a third time offender of the base CBT threshold, the Yankees will pay the maximum base tax rate of 50 percent. However, they are also on the hook for a surcharge rate for each threshold they exceed — 12 percent for the first $20 million over the base threshold of $237 million, 45 percent for the next $20 million, and 60 percent for all overages beyond the “Steve Cohen threshold.”

What does this look like from an actual tax bill standpoint? With a payroll of $305 million, the Yankees would pay a 50 percent tax on the first $20 million overage, 62 percent on the next $20 million, 95 percent on the next $20 million after that, and 110 percent thereafter. With some back-of-the-envelope math, that equates to (0.50*$20MM) + (0.62*$20MM) + (0.95*$20MM) + (1.10*$8MM) for a tax bill of roughly $50.2 million in 2024 as things stand. The team will also have its first selection in the 2025 MLB Draft moved back ten places for exceeding the second threshold.

Impact on future moves

It is uncertain whether the Yankees will continue to add this offseason. Jon Heyman of the New York Post believes the Yankees are finished adding to the rotation. However, his co-worker Joel Sherman isn’t so sure, reporting that the team remains engaged in talks over Dylan Cease and Blake Snell.

As much as we would love the team to continue adding from the top of the market, we have to acknowledge the role the luxury tax is playing in the decision-making process. That the Yankees were prepared to pay Yamamoto $300 million over ten years does not automatically signal that the team will reinvest all of the $30 million he would have made in 2024 into lesser targets.

As Jake thoughtfully covered yesterday, the Yankees’ offer to Yamamoto was likely a special case and not necessarily a signal of looming changes to spending behavior. The money they offered the Japanese superstar was likely earmarked for him and him alone rather than a glimpse into the team’s prospective budget. In looking at the asks of the top two remaining free agent starters — Snell and Jordan Montgomery — adding either while operating under the most punitive tax offender status could add as much as $30-40 million to the Yankees’ 2024 tax bill — a cost they are absolutely able to pay yet may prove prohibitive to ownership’s tastes.

On the other hand, bringing in Stroman gives the Yankees leverage over the market where they’re not as desperate for more pitching. He affords them the luxury of waiting to see how the pitching market develops. They are no longer forced into a hasty move to snatch up one of the top options in fear of another team jumping the gun, giving them time to see whether the market collapses for any of their targets.

For what it’s worth, the Yankees reportedly offered Snell $150 million over five years — an offer he rejected — before pivoting to Stroman. Should other offers fail to materialize — for Snell out of fears over his up-and-down track record or for Montgomery as the Rangers continue to deal with uncertainty over the future of TV rights payments — New York might even be able to tempt one of the pair for less as their own desperation grows. At the very least, Stroman gives the Yankees a starting rotation that should be able to hang in the division, allowing them to reevaluate priorities at the trade deadline should any of the trade targets they’ve been linked to this winter remain with their current teams through the start of the season.

And while I’d prefer to remain focused on the season directly in front of us, it should also be noted that the shorter term of Stroman’s deal relative to the asks of others on the market affords the Yankees greater payroll flexibility to attack next winter’s free agent market in earnest. They will surely be keen to keep Juan Soto in pinstripes beyond 2024 and figure to be players for Corbin Burnes, to say nothing of the possibility of Rōki Sasaki being posted early.

None of this is to say the Yankees shouldn’t remain engaged if not in pursuit of the top names remaining, from Snell and Montgomery on the free agent market to Cease, Burnes, Jesús Luzardo, and Shane Bieber on the trade market. With Aaron Judge and Gerrit Cole in their 30s and Juan Soto under contract for just one year, now is the time to go for it, and the starting rotation has far too much uncertainty for a bona fide title contender. Stroman was a solid add, bringing the team into uncharted payroll territory, but such is the willingness ownership must show if it’s serious about bringing the Commissioner’s Trophy back to the Bronx.