The Captain's Blog

Plan $189 million is dead. Long live the Yankee dollar.

The Yankees aren’t saying that, of course. On the contrary, just about every article dealing with the team’s free agent ambitions or acquisitions have been careful to cite anonymous sources who maintain the Yankees’ commitment to dipping below the luxury tax threshold. However, actions speak louder than words. Unlike last winter, when every move the Yankees made seem designed to trim payroll in 2014, the team’s aggressive approach this off season leaves little doubt about the fate of plan $189 million.

Even though the Yankees have not signed Robinson Cano, their $160 million offer over seven years indicates the team is willing to allocate at least $22.9 million per year to their second baseman. Should Cano accept that offer, it would place the team’s 2014 payroll around $188 million (figure includes modest arbitration estimates for four other players). Mission accomplished? Not quite. That amount covers only 16 players on the 40-man roster. Even if every remaining member of the team was paid the league minimum, the Yankees would soar past the $189 million level.

Yankees 2014 Financial Obligations (with Cano and Arod)

Note: See here for explanation of contract assumptions. Alfonso Soriano’s and Vernon Wells’ AAV are offset by payments made from the Cubs and Angels, respectively.
Source: Cots Contracts for salaries, MLBTR for base arbitration estimates.

The Yankees only hope of adhering to plan $189 million hinges on the fate of Alex Rodriguez. If the former MVP’s suspension is upheld, in part or whole, the team would enjoy a sizable payroll reduction. However, even if the Yankees are given a $27.5 million gift from Bud Selig (the AAV attributed to Arod’s contract), that doesn’t mean plan $189 million is a fait accompli. After all, in addition to courting Cano, the Yankees have also reportedly made Hiroki Kuroda a one-year offer worth $15 million. If true, and both he and Cano sign for the team’s current terms, the Yankees would now be looking at having approximately $14 million to spend on the rest of their roster, or less than $1 million per remaining player. And, one more thing. Derek Jeter’s new contract has $7 million in potential bonuses, all of which, if achieved, would be applied to the team’s final payroll calculation. In other words, the Yankees’ best laid plans could still be scuttled by the Captain’s resurgence.

Yankees 2014 Financial Obligations (with Cano and Kuroda, but no Arod)

Note: See here for explanation of contract assumptions. Alfonso Soriano’s and Vernon Wells’ AAV are offset by payments made from the Cubs and Angels, respectively.
Source: Cots Contracts for salaries, MLBTR for base arbitration estimates.

The only reasonable scenario under which the Yankees could achieve a $189 million payroll would have to involve Arod being suspended and Cano leaving for “greener” pastures. In that case, the Yankees would be left with $50 million, but only have 14 players under contract. Could they use that amount to fill out a team that is a legitimate championship contender? Or, is that the mission toward which Hal Steinbrenner is paying lip service?

Yankees 2014 Financial Obligations (without Cano, Kuroda and Arod)

Note: See here for explanation of contract assumptions. Alfonso Soriano’s and Vernon Wells’ AAV are offset by payments made from the Cubs and Angels, respectively.
Source: Cots Contracts for salaries, MLBTR for base arbitration estimates.

Although the Yankees may still back into a payroll under $189 million, it is no longer the driving force.  What explains this about-face by the organization? The same thing that motivated its desire to cut payroll: profit maximization. For some reason, the Yankees thought cutting costs was the better way to build profits, even in spite of the team’s history of spending money to make even more.  As predicted here ad nauseam (see here and all of the links here), and confirmed by a recent Wall Street article, the financial fallout from 2013 has proven otherwise. The Yankees experienced a significant revenue haircut in 2013 because they disrupted the model that had been so successful for 15 years. It was a mistake to prioritize profit over winning because the latter begets the former, but it now seems clear that the team has learned its lesson. That’s why plan $189 million is dead. If the Yankees didn’t kill it, the plan might have done the same to them.