Over the past few years, the Yankees have repeatedly talked about operating under a budget, but the team has always been willing to break through those constraints when push came to shove. Just ask Mark Teixeira. However, according to a recent report by Joel Sherman, the new CBA could make sticking to a budget an offer not even the Yankees can afford to refuse.
There are several components of the new CBA that could increase the burden for teams whose payrolls exceed $179 million ($189 million starting in 2014). The most stringent is the 10 percentage point increase in the tax rate for habitual offenders. Not only would a team like the Yankees be forced to a pay a 50% penalty for every dollar spent over the limit, but by exceeding the barrier repeatedly, it would become ineligible to receive a new revenue sharing refund designed to return money that in the past would have been earmarked to large market teams that qualified for a payout.
So, does this mean Yankees’ fan should expect the Bronx Bombers to embark on a long-term plan of fiscal restraint? Probably not. Instead of representing a complete reversal of economic philosophy, the Yankees’ aim could simply be to play the 2014 season under the luxury tax threshold. By dropping down below that barrier, the team’s assessable penalty would reset at a 17% rate (and not reach 50% again until 2019, assuming the Yankees exceed the limit in every subsequent season and no changes are made in the next CBA). What’s more, the team would also become eligible for the aforementioned revenue sharing rebate because disqualification is only triggered when a team exceeds the limit in two straight seasons. In a sense, the Yankees’ new fiscal policy could be more about pressing the reset button than completely changing the rules.
Even if the Yankees are being more conservative with an eye toward a trimmed down 2014 payroll, that doesn’t mean there isn’t room for improvement this offseason. Although the Yankees may not be one of the teams throwing money around during the winter meetings, they could emerge as a likely land spot for Yu Darvish and Yoenis Cespedes, two highly touted international players from Japan and Cuba, respectively.
There are several advantages to the Yankees looking overseas to improve their team. In the case of the Darvish, the bulk of the cost is likely to come in the form of a posting fee, which would not count toward payroll and therefore not incur the wrath of the luxury tax. Remember, when the Red Sox shelled out $103 million for Daisuke Matsuzaka, the average annual salary of his player contract was only $8.5 million. Even if Darvish is paid just as well, it would represent a significant discount versus free agents with much less upside potential.
Similarly, if the Yankees sign Cespedes, the average annual salary would likely be lower than a comparable player with a major league track record. According to some reports, Cespedes’ agent may be holding out for as much as $10 million per season, but if he lives up to his potential, even that figure, which is probably inflated, could prove to be a bargain. What makes that price tag even more palatable for the Yankees is Cespedes’ salary would be offset by the departure of Nick Swisher, whose $10.25 million cost comes off the books in 2013 (assuming he does not re-sign with the Yankees). Also, by signing him one year early, the Yankees could afford to let Cespedes get acclimated to the big leagues before thrusting into the spotlight.
Another benefit of signing Darvish and Cespedes is they do not qualify as amateurs, and therefore would not be subject to the CBA’s new stringent international free agent bonus limits. However, there are some very significant risks involved. The Yankees most recent forays into Japan and Cuba yielded Kei Igawa and Jose Contreras, so, needless to say, signing players who have never stepped foot in the majors comes with a high degree of uncertainty. Having said that, at a combined projected salary of $18 million per season, Darvish and Cespedes would come at the same cost as one “domestic” free agent, which should make it easier for the Yankees to recoup their investment (put another way, even if Darvish and Cespedes both struggle, the cost wouldn’t be much greater than what the Yankees are paying A.J. Burnett, and less than what the Red Sox will be paying Carl Crawford for the same period of time).
Regardless of what tact the Yankees take this offseason, and even if they are committed to a payroll below $189 million in 2014, the team is not looking at having to implement an austerity plan. After the 2013 season, approximately $50 million is scheduled to come off the books (including Burnett, Rafael Soriano, and possibly Derek Jeter). Some of that savings could be eaten away by contract extensions for Robinson Cano and Curtis Granderson, but nonetheless, Brian Cashman should have some wiggle room to temporarily cut costs without compromising the team’s ability to contend for a championship.
With the Marlins throwing around money and lucrative long-term contracts becoming common place, it seems a little odd to talk about the Yankees practicing fiscal restraint, but maybe this time the team will actually follow through with its “threat”? Or, maybe Albert Pujols will be wearing pinstripes at a press conference in January?