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The financial impact of the Yankees acquiring Giancarlo Stanton

The CBA and competitive balance tax are huge factors in 2018 again

World Series - Houston Astros v Los Angeles Dodgers - Game Two Photo by Tim Bradbury/Getty Images

Many fans purposefully ignore the impact their team’s payroll has on roster construction. The attitude follows the “it’s not my money” line, and that’s perfectly valid. That’s certainly my belief too, if I’m strictly observing as a fan. Go out and get the best player available and don’t worry about the balance sheet of the Steinbrenners or Ricketts families.

When analyzing the sport, though, it’s nonsense to suggest that management and ownership don’t seriously consider the cost of fielding their 25 and 40-man rosters. When Bruce Sherman took over ownership of the Miami Marlins, the entire world knew there was a lack of liquidity in the deal, and therefore it was important for new ownership to drastically cut costs. As we know, this led to the trade of Giancarlo Stanton to the Yankees.

When it comes to talking about Stanton, the proportional value of his contract can’t be ignored. The original deal of $325 million over 13 years in 2014 is now 10 years, $295 million, but the average annual value remains $25 million a year. A large investment, to be sure, but Brian Cashman worked out a pretty deft way to offset the cost and keep the Yankees’ goal of posting a payroll below the competitive balance tax (CBT) for 2018.

The 2018 CBT threshold is set at $197 million, with $208 million in 2019. Prior to the Stanton deal, the Yankees were looking at the following financial commitments in 2018:

  • Guaranteed contracts - $111.42 million
  • Project arbitration raises (per MLB Trade Rumors) - $29.4 million
  • Pre-arb renewals - 9 players x $545,00 = $5.995 million
  • Outstanding 40 man spots - $2 million
  • Brian McCann outstanding value - $5.5 million
  • Benefits and miscellaneous - $12 million

This gives a total of $166.315 million. Remember, this is the total before Stanton, with Starlin Castro’s $9.5 million still counted. Stanton’s $25 million AAV has yet to be added. AAV is used for the tax as it prevents any funny structuring to artificially lower payroll.

So, to add Stanton we take that $25 million and remove the $9.5 from Castro’s departure. But wait! The Marlins also added $30 million to offset the cost of Stanton’s contract. How is this broken down across the deal?

The CBA stipulates that traded money be allocated evenly across the full term of the contract, and that the team assumes any opt-outs are not exercised. This gives the Yankees about $3 million in relief every year of Stanton’s deal. If he were to opt-out after 2020, the Yankees forfeit the outstanding $21 million (7 years x $3 million) but that forfeiture would pale in comparison to the savings of the outstanding contract’s value.

Now, with that $3 million in salary relief, Stanton’s AAV drops to $22 million, bringing the total guaranteed figure from above up to $133.42M, less Castro’s $9.5M, for a final total of $123.92M. The committed payroll as of now stands at $178.815M. Our total gives the Yankees some wiggle room to sign a fifth starter, if they decide to. Lance Lynn or someone similar would probably cost less than $18M/year, bringing the Yankees right to the brink of the threshold.

Who knows if the Yankees can stay below the CBT level, as adding a contract the size of Stanton’s is tough for any bottom line to absorb. If they can manage it, while fielding what could be the best offensive team of my lifetime, the “Fire Cashman” crowds may just be silenced permanently.