Pay-Rod, Payroll & a Yankees Bailout

October 18, 2012 | Thyrl Nelson

Pay-Rod, Payroll & a Yankees Bailout

When assessing the 20 questions that the Orioles must answer as they formulate their own plan for 2013 and beyond, one of the questions I posed was whether the top end of the AL East was leveling a bit or coming back to the pack. It seems a question worth asking, as the Red Sox, fresh off the heels of their 2011 season ending meltdown followed it up with an even more disappointing season in 2012. As a result of their misfortunes the Sox were willing and able to dump over $100 million worth of future payroll commitments on the suddenly viable Dodgers. In freeing themselves of those contracts, Boston was also forced to part company with a debatable (or arguable) amount of elite talent. It seemingly stands to reason that the Red Sox would be willing and able to put that now freed up money back to use, if and when the situation calls for it; but considering the numbers of prospects that the Sox dealt to bring some of that highly priced talent into the fold in the first place, it might be quite a while before they’re able to put back together a nucleus that a few big splash signings might successfully compliment.

The case of the Yankees was more curious still, because of the lingering and long-term commitments that they already have assigned to aging stars moving forward. The Yankees, having paid better than 90% of all luxury tax payments in the history of MLB’s luxury tax era, have stated a commitment (or at the very least a concerted desire) to get themselves below the echelon of having to pay luxury taxes in the years to come. It seemed like a difficult position to believe, considering the decisions they’ll have to make on stars whose contracts are expiring in the next year or so, including Robinson Cano and Curtis Granderson. Despite Cano’s struggles this postseason, he remains one of the most prolific hitters in all of MLB and arguably the Yankees best offensive talent. Getting themselves below the luxury cap would seemingly suggest a need to allow Cano and others to walk by 2014.

 

Before we begin however, to celebrate the Yankees’ struggles and what appears to be their unceremonious demise, before we can revel in the meltdown of Alex Rodriguez in these playoffs and the 5 years and $114 million plus commitment that the Yankees still have to him we’re already seemingly getting the signal that Rodriguez career in the Bronx might be coming to an end. Of course Rodriguez’ full no trade protection will be a factor in whether or not he’s traded this off-season, but speculation is already rampant that A-Rod may be set to follow the likes of LeBron James and take his talents to South Beach.

 

On the surface this would seem to be more Yankees folly worthy of celebration from fans elsewhere, but in reality it may be a glimpse into exactly what the Yankees mean when they talk about slashing salary.

 

The Yankees after all are baseball’s undisputed revenue kings. In stating their desire to avoid baseball’s luxury tax many of us may have been guilty of misreading their intentions. The Yankees’ desire to cut payroll seems less an effort to save themselves inordinate expenditures in an attempt to buy another decade or so worth of contention and more of an effort to avoid paying into a system that rewards the teams unable (or more aptly unwilling) to spend freely and an effort to stop padding the pockets of owners who never put their luxury tax earnings to work in actually trying to improve their clubs.

 

When the Red Sox signed Daisuke Matsuzaka after posting a record posting fee of over $51 million then coupling it with a $52 million contract, many looked at it as $103 million plus in expenditures (and they were right). But not all $103 million expenditures are created equally. The $51 million that Boston paid to post for Matsuzaka was money spent but not salary, Therefore only about half of the $103 million spent to land the gyro-baller was considered payroll and therefore subject to the luxury tax computations. Likewise if the Yankees ship A-Rod to the Marlins this off-season and even if they absorb as much as $100 million of his future earnings to do it, they’ll still have unburdened themselves from about $30 million per year of salary and as a result will have moved much closer to their stated goal of establishing a payroll below the luxury tax echelon, even if they take on Heath Bell and 2 years worth of his contract at $9 million or so per.

 

The long and short of it being that the Yankees will have the opportunity to shed “payroll” obligations and avoid luxury tax while still spending like the Yankees always have and perhaps more. One or two more of those types of trades (albeit on much more modest contracts) and the Yankees have the money at their disposal to re-up Cano and Granderson if they choose along with Raphael Soriano and could still make a splash in free agency while also accomplishing their goal of avoiding the luxury tax by 2014.

 

The other questions that both the Yankees and Red Sox will have to answer for themselves is which free agent players will be worth the price of poker in the coming free agent classes, and whether it’s still prudent to offer big money to aging free agents in the post steroid era of MLB. Figuring out the answers to those questions will be the biggest determining factor in whether the Yankees and Red Sox will be able to exert their financial dominance over the pack moving forward. But in the event that they choose to try, the means to do so are there, as are the financial means of both clubs despite rampant speculation to the contrary.

 

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