The Captain's Blog

Should the Yankees try to sign Robinson Cano to an extension before the season? Following comments from Hal Steinbrenner that alluded to preliminary negotiations with the All Star second baseman, that question has been foremost on the minds of the team’s legion of fans.

Should the Yankees sign Cano to an extension?

The best answer is the Yankees should have re-signed Cano last year, but the team has stubbornly held to a “no extensions” policy despite the changing trends throughout the game. With that opportunity now past, the advantages of giving Cano a new deal before the current one expires are much less, but a case can still be made.

Perhaps the most compelling reason to re-sign Cano now is the luxury tax implications. Because Cano is playing under a club option in 2013, the $15 million he is owed is applied straight up to this year’s payroll calculation. However, if that amount was rolled into a long-term extension, the Yankees could use the extra year and lower salary to reduce the average annual value (AAV) of Cano’s new contract.

Since Alex Rodriguez signed his first mega-deal with the Rangers, no player has surpassed his $25.2 million average salary. So, it seems fair to assume Cano’s new deal will also fall just below that benchmark. For the purpose of this exercise, let’s assume the second baseman would agree to a contract worth exactly that amount per season. But, what about the years? Although nine- and 10-year contracts have become increasingly popular for younger stars, five to seven years have been more the norm for players who become free agents over 30. Once again, we’ll take the high end of this range and assume Cano would be amenable to a contract extension worth $175 million over seven years (if that sounds familiar, it’s because Felix Hernandez just signed at those very terms).

Because Cano is not yet a free agent, and there is always a risk that either injury or poor performance could dampen his salary demands next winter, the Yankees should be able to negotiate more favorable terms. However, using these maximum assumptions allows us to estimate a high-end AAV savings between an extension and a new contract signed after the 2013 season.

AAV Comparison of Hypothetical Cano Contracts

As the chart above illustrates, by rolling this year’s contract into an extension (creating a contract worth $190 million over eight years), the Yankees would save $1.25 million in AAV applied to their payroll. Is that an overwhelming sum? Of course not, but if the Yankees hope to retain Cano and dip below the luxury tax threshold in 2014, every penny counts, right?

It’s important to note that if the Yankees don’t sign Cano to an extension now, that doesn’t mean they can’t re-sign him in the offseason. The only thing forfeited would be the opportunity to save approximately $1 million in AAV. Hal Steinbrenner knows his economic situation and intentions better than anyone, so if this savings isn’t worth the risk that Cano will suffer an injury or drastic decline in 2013, there’s no compelling reason to execute an extension now, unless, of course, the Yankees fear that the market for Cano would break through the Arod barrier. Then again, with Scott Boras as his agent, if that is a real possibility, chances are Cano wouldn’t even consider forgoing free agency.

Ultimately, if Cano is willing to sign a deal at terms comfortable to the Yankees, they should do it now. If the Bronx Bombers have any reservations, however, they should wait until the off season. Although that creates more uncertainty, it also gives the team more time to figure out its priorities. Is it winning, maximizing profit, or some combination of both? The answer to that question could decide whether Cano is wearing pinstripes in 2014.