Wednesday, December 28, 2011

The Fiscally Conservative Yankees

Over these past two months, countless Yankees fans - myself included - have lamented Cashman's apparent lack of activity within the free agent marketplace. C.J. Wilson, Yu Darvish, and Mark Buehrle have signed, with nary a murmur of genuine interest from the Yankees. Hiroki Kuroda and Roy Oswalt remain available, yet appear to be nothing more than a pipe dream. Beyond those five - all of which appear to be a fair upgrade over any number of the starters on the Yankees current payroll - it would seem that there isn't much to be excited about, regardless of the front office's plan of action (or lack thereof).

This begs a simple, yet important question: why? There are two legitimate answers to the question, I think, and I would argue that they are fairly well intertwined.

With respect to the five aforementioned starters, I think a reasonable argument can be crafted in favor of the Yankees disinterest. Wilson, for all of his success in 2010 and 2011, is 31 ... with two years as a starter on his resume. For that, he received a five year deal worth $75 MM - a figure which includes a hometown discount for the Angels. Does that represent a sound investment?

While I do buy into Darvish's potential, we should not forget that that's all we have to work off of - his potential. He has never pitched stateside, and, despite his dominance in the NPB, the historical NPB to MLB transition has been rocky at best. The issues of a different ball, a new culture, and starting every five days are very real, even for a starter of his caliber. Is that package worth a $100 MM or better investment? And, for comparison's sake, did Stephen Strasburg receive a $100 MM bonus? No.

Buehrle has been remarkably consistent for the past decade or so, but is he really worth $58 MM from his age-33 through 36 seasons? Further, consider that he may have cost the Yankees more, as New York state taxes are fairly costly, whereas Florida's are nonexistent.

As for Oswalt and Kuroda, remember that both are older (34 and 36, respectively), and neither have pitched outside of the National League. Oswalt is also coming off of some fairly disconcerting back issues, and Kuroda is only a few months removed from expressing an unwillingness to pitch on the East Coast. There seems to be at least a bit of risk, even on a one-year deal.

Perhaps I am lying to myself, or even sipping the Cashman Kool-Aid. After all, I have argued for all five being a worthwhile pursuit for the Yankees, and I am somewhat reneging on previous statements. However, considering the risks involved, a large investment may well have resulted in a hindsight-fueled lambasting, not unlike those levied against A.J. Burnett and Alex Rodriguez.

The most pressing reasoning for the lack of spending, however, may well be something that has not been discussed here - the ramifications of crossing the luxury tax line under the new Collective Bargaining Agreement. Joel Sherman does a tremendous job of outlining what the Yankees have to gain by dipping under that line prior to 2014 here. For our purposes, the key passage is this:
As an organization, they are saying they are driven to have a payroll of $189 million or less in 2014 when that becomes the luxury tax threshold. Because the incentives that come via the new CBA are just too great for them to ignore.

For if they are at $189 million or less for the three seasons from 2014-16, they not only avoid paying one cent in luxury tax, which would rise to 50 percent for them as repeat offenders, but they also would get roughly $40 million in savings via the to-be-implemented market disqualification revenue sharing program. However, only teams under the luxury-tax threshold get reimbursed in this program, which is designed to prevent big markets such as Toronto and Washington from receiving revenue sharing dollars, which in turn will lower how much teams such as the Yanks pay (as long as they are under the threshold).

And even if they just went under $189 million for 2014 before going over again in 2015, the Yankees would receive serious benefits. They would get about $10 million in the revenue sharing disqualification program. Also, by simply going under the threshold once, the Yankees would go back to having a 17.5 percent tax rather than the 50 percent that begins in 2014 for them if they never go under. Keep in mind that since the luxury tax went to 40 percent for them in 2005, the Yankees have averaged paying $25.75 million in tax annually.
As per Cot's Contracts, the Yankees currently have $72.125 MM tied-up in Rodriguez, Teixeira, and Sabathia for the 2014 season. That leaves a bit over $116 MM to re-sign Granderson and Cano ... and fill an additional twenty roster slots.

With that in mind, the Yankees hesitance to give long-term deals to Wilson, Darvish, or Buehrle is understandable and wholly justified. Standing pat with Ivan Nova, and giving shots to David Phelps, Adam Warren, D.J. Mitchell, Manny Banuelos, and Dellin Betances, all of which would be making the minimum in 2014, in order to see if they could play a role in the team's future may well take precedence over a one-year flier on Kuroda or Oswalt. For the rotation, this may well be a transitional year. As disconcerting as that may be in terms of going all-in for the World Series ... it makes sense for the team's financial future.

The Yankees will be a competitive team this year. I'm loath to point to the team's record last year, or the successes of Garcia and Nova, or anything of the sort - but there is talent throughout the roster, and every team has its fair share of question marks. All things considered, this isn't rebuilding so much as it's ensuring a more stable future, both in terms of salary commitments and roster spots. As someone that enjoys watching a solid team year in and year out, I respect that.

In the end, it boils down to a rather simple terms: frustrating, yet understandable.

Follow me on Twitter - @DomenicLanza

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