The Curse of Jerry Hairston, Jr./Eric Hinske:

Tuesday, November 13, 2012

IIATM: Explaining the luxury tax, revenue sharing refunds, and the Yankees

Unfortunately for the Yankees, the $189,000,000 goal will be difficult for the team to get under without some very shrewd maneuvering and getting a bingo on a minor league prospect or three.  The 2014 Yankee club, as viewed through a luxury tax lens, looks like the following:

Team must be at or under $189,000,000 for entire season costs

Alex Rodriguez -$27,500,000 (Average Annual Value of contract)

Mark Teixeira -$22,500,000 (Average Annual Value of Contract)

CC Sabathia -$23,875,000 (Average Annual Value of Contract [Original + Extension])

Player Benefits -$10,799,590 (Or more!)

Remaining budget room: $104,325,410

These are known costs, but there is 1 more cost that will definitely factor in to 2014.  It is variable.  If Derek Jeter accepts his player option for 2014 he will cost $15,500,000 (14 AAV+1.5 silver slugger bonus).  If Derek Jeter declines his option, he will count as $9,000,000 for 2014, due to the rules of the CBA.  Derek Jeter’s $8 million player option for 2014 counts as a guaranteed year and is included in the AAV calculation, which lowered the AAV of Jeter’s deal from $16mm to $14mm.  The Yankees will owe $2mm each in back pay for 2011, 2012, and 2013.  They will also owe $3mm for his buyout.

Without doing anything significant via trade, the Yankees 2014 operating budget will be either $88,825,410 or $95,325,410 depending on what Jeter does.  This does not include anyone in arbitration or minor leaguers on the 40 man roster.

Can the Yankees fit ~21 players under that salary amount while still competing for the playoffs?

Well worth a read if you want to understand just how big of a task the Yankees face if they want to get under the payroll limit in 2014 while remaining competitive.

--Posted at 3:31 pm by SG / 46 Comments | - (0)


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[0] And realistically, to account for any possible mid season pickups, they will probably want to come into the season with 4-5MM to spare.

I’m not really sure it is possible for the Yankees to achieve their “goal” and field a truly competitive team.

Looking at some numbers given in the article, the Yankees will get back about 6-7% of the total revenue sharing pot, if they stay under the luxury cap. How large is the total pot? Who knows!

Is it possible to get players like Tex, CC and others to adjust their contracts to backload them for the good of the team?

[3] Not really; the relevant number is the annual average value of the contract, and it looks like contract extensions are actually treated as separate contracts, and Selig and the Player’s Union would have to go along with anything else they could come up with.

That said, front loading contracts could give you a marginal advantage, since ideally a player would take a slightly smaller overall contract, and being under the luxury cap is looking much more useful than the time-value of money.

[3] - That buys you wiggle room on the front end, but then kills you on the back end. Forget Teix and Cano, let’s go to A-Rod since he is the most common example.  Currently he costs $27.5M against the “cap” but his contract over the remaining 5 years is only $22.8M per year.  Let’s say you want to extend him 3 years, at $1M a year so he signs an new contract that pays him the same in the first 5 years, but the last 3 are $1.5M, $1M, and .5$.  Now your total AAV is $14.6M.  So that saves you about $13M a year over the next 5 years.  The problem is years 6-8 instead of being clear of his salary you are now on the hook for $14.6M for a 43-45 year old A-Rod.

True, sd2528, but that actually still sounds like a good idea, since it would save you so much more when you actually really need the wiggle room (2014). If getting under the cap in 2014 has such a gigantic benefit to it, then it probably still makes sense to carry the $14.6 million in years 6-8, especially since the time value of money will make the $14.6 million be not as significant (heck, what will the luxury tax even be six, seven and eight years from now? It must be higher, right?). So I would still definitely do that deal. However, I imagine that MLB wouldn’t allow it.

What the fuck Marlins?

My sentiments exactly, sd!

Holy shit, this sucks.

Also, I am more than a little aggravated at the bullshit with these teams spending money in one year and then dumping it all the next year. Is common sense really THAT hard to come by in MLB?

WTF are the Marlins doing?  They just made the Blue Jays the second-best team in the AL East and got shit back.

Obviously the Marlins instantly regretted all of the money they spent and found a way to dump it all at once. Very aggravating. That they couldn’t get anyone good in return is the worst part of it. The Blue Jays just improved themselves dramatically without giving up anything that hurts their team at all.

A friend of mine who is a Blue Jays fan told me that all the Jays need to do know is hire Ozzie. Ha!

Man, if the Yankees had trouble with Toronto when Toronto was terrible, imagine how bad things will be now!

What a one-sided clusterfuck of a trade!

The trade drops the Marlins payroll from 100m to 16m.  I’m reminded of when Bowie Kuhn wouldn’t let Charlie Finley sell Vida Blue to the Yankees and Rudi and Fingers to the Sox.  Only this time comrade Bud aint gonna intercede.  The Marlins are not getting fair consideration but it’s not unconscionable as a matter of law.  But can you imagine the reaction if the Yankees were to try to do something similar assuming hypothetically they were in a position to do so?

CAIRO offensive and pitching projections:

Jays get:

Buck: 1.5
Reyes: 2.7
Buehrle: 3.7
Johnson: 3.2
Total: 11.1 WAR

Marlins get:

Alvarez: 0.6
Escobar: 1.8
Hechavarria: 0.7
Total: 3.1 WAR

Nicolini better be a hell of a prospect.

I had no idea that the Canadian Dollar was that strong.

Despite the strength of the Canadian Dollar, I still can’t get rid of these damn Canadian quarters.

This pretty much guarantees that the Blue Jays will win more games next year than the Maple Leafs.

9 who’s the strongest?

The Marlins are just clearing space so they can acquire ARod.

Who’s with me?

Tampa Bay is the strongest.

[21]How about the Orioles after they sign Josh Hamilton?

Yeah, imagine if the Yankees were the ones acquiring Buehrle, Johnson and Reyes for a smattering of middling prospects. I think we might have a Civil War in the country if that happened!

And yet this is just no big deal.

22 indeed and we may be weaker and another year older

Think about all that talent going out of the country.  Its a good thing Canada is a friend and ally of the U.S. 

Imagine, for example, if all of our best hockey players were going someplace like Russia.

How is this trade OK?

[17] Take them to Niagara Falls, use them to tip Canadian strippers.  But you knew that.

There is no goddamn way Reyes’ fragile hammies survive 82 games on artificial turf.

[21]How about the Orioles after they sign Josh Hamilton?

Not sure.  My guess is no.  If they add a starter too then maybe.

[17] Take them to Niagara Falls, use them to tip Canadian strippers.

I know not of Canadian strippers.  I do attend the Canadian ballet though.

[30]  Do they take tips?

I know not of Canadian ballet.  I do attend to Canadian strippers though.

There is no goddamn way Reyes’ fragile hammies survive 82 games on artificial turf.

How about 81 games?

Do they take tips?


[33] I’m anticipating a tiebreaker game coming into play.

There’s also the games in Tampa Bay.

On the one hand, good for Toronto, but on the other hand, how the heck does Miami do this deal instead of trading each of Reyes, Johnson and Buehrle individually? Wouldn’t each of those guys get SOMEthing. You might need to just dump Reyes, but Johnson and Buehrle HAD to have some real trade value!

Like if they had just done a salary dump of Reyes, it’d make sense. The Blue Jays would get a decent shortstop just for spending the money. But the other two guys are legit gets.

Don’t be so quick with those projections - Yankees are apparently in talks with Ibanez.

The Blue Jays are going to pay too much money to Reyes and Buehrle. I am not saying this is a bad trade for them, I just don’t love it.

On the Yankees side, this is going to be a long decade.

ESPN (TGS) NY: Travel. What is your favorite place you have traveled to?

GIRARDI: Wow. Maybe, Vail, Colo. I went skiing. I love to ski. If I could do that every day, I would do that every day.

Buehrle is fairly paid, as is Johnson. Reyes is making way too much money but he’s at least still a decent player. Reyes is good enough that he’d be the type of guy a team would get in a normal salary dump (you know, where a team basically gives up a player just to get rid of his salary and the other team takes him because all they’re giving up is money. Like the Yankees and the Pirates with AJ Burnett). Buehrle and Johnson, though, are guys you typically give something up to get them.

Poor Giancarlo Stanton is club-controlled next year and only arb-eligible in 2014. Got to seem like a prison sentence.

Yeah, his tweet about the situation says it all. He is piiiissed.

I wonder what John Farrell thinks about everything.

At this point, the Yankees must have a definite plan in place for getting under 189 million (unless they are blowing smoke about that number), right?  The salaries are too large and the deadlines getting too close for them to be winging it. Has anyone seen an article laying out the likely scenario?

Unless something changes with the players already under contract, how is it even conceivable that the Yankees sign Cano?  That would only leave about $60 million with a single pitcher under contract.

Are the Yankees just planning to lose 90+ games in 2014?  And, is that why we haven’t seen any leaks of their plans for how to get under the cap?

[45] See, $90M I believe would still make the Yankees a middle-of-the-road budget team.  Cano would hurt (he isn’t costing $28M per year though), but also be a great player.  Obviously, the team will need some younger, cheap players to step up and be contributers in 2014.  But $90M isn’t chump change, and you can still build a competitive team for that amount.  Now, if CC becomes average, ARod and Teix crater, and Jeter returns to 2010 Jeter by then.  But they could also be 3-4 wins above average all told.

I’m not sure why everyone is SURE the Yankees either will go over $189M, or be a poor team.  Challenges?  Yes.  But they aren’t guaranteed to fail if they don’t outspend every other team in baseball.

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