Rumor: Yankees Want to Cut Payroll to $189 Mil by 2014

The new collective bargaining agreement increases the penalties for going over the luxury tax threshold so much more that the Yankees are determined to get their payroll down to $189 million by 2014 to avoid paying the new huge fees, according to Joel Sherman of the NY Post. Their payroll was $207 million for luxury tax purposes in 2011, meaning they would have to cut at least $18 million in salaries over the next two seasons.

Here is more from Sherman:

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.

If the Yankees did manage to avoid paying the luxury tax from 2014-16, that would mean they would save $25.75 million per season plus they could get in on the new “market disqualification revenue sharing program” that supposedly could net them another $40 million a year. Or essentially, the Yankees would be pocketing an extra $65 million a season by cutting payroll by just $18 million.

Now it won’t exactly be easy cutting payroll. They have three players under contract in 2014 – Alex Rodriguez, Mark Teixeira, and CC Sabathia – that make a combined $70.5 million. Then there is Derek Jeter who has an $8 million player option bringing them to $78.5 million. Then, as Sherman points out, Robinson Cano and Curtis Granderson will be hitting free agency that year and will likely cost at least another $20 million each. That’s potentially $118.5 million for six players, leaving them just $70.5 million remaining for 19 other players.

Oh, and those $5 million “milestone” bonuses that A-Rod can stack on, up to $30 million, will count toward the luxury tax. He should reach the first one in 2012, so the Yankees will get that out of the way, but he very well could get at least one milestone in 2014 that would cut into that $70.5 million they have left to spend. So really, that number should be considered $65.5 million left to spend on 19 players in 2014.

This almost guarantees that the Yankees will not be able to add anymore big $15-$20 million-per-season free agent contracts over the next two years if they are taking this seriously. And it is almost certainly the reason why Brian Cashman is reluctant to spend upwards of $20 million for C.J. Wilson, a pitcher he considers a No. 3. And if he is going to squeeze 19 players on the roster for just $65.5 million, then it is exactly the reason why he has been reluctant to deal any of the top prospects.

This entry was posted in Yankees Rumors. Bookmark the permalink.

11 Responses to Rumor: Yankees Want to Cut Payroll to $189 Mil by 2014

  1. Gonzalo says:

    By 2014 Burnett is gone, they really dhould find a way to get rid of A-Rod and problem solved. I don't know what were they thinking giving that contract to A-Rod, just ridiculous.

  2. Joe P. says:

    Sounds like the Yankees are becoming smarter about the "business" of Baseball. I'd actually like to see this come true so we can see the farm system start producing again like in the late 90's. I'd love to see the next generation "Core Four" (or more), come up and become champs. We could see a rotation of Hughes, Nova, Noesi, Betances and Banuelos some day with Robertson as closer and some of the other youngsters as bridges in the bullpen. Montero could end up at first of when Tex is gone with Sanchez the starting catcher. we'll see Cano and Nunez up the middle at short while the new Williams, Mason that is, takes over in center and Granderson moves to one of the corners. A-Rod goes to DH, if he can still hit in his later years, but that's a huge core of young players. The wild card is what if the Yankees get Cespedes and the other younger Cuban OF they seem to like. I'm also wondering whether the Yanks go after Darvish. The future looks very interestin and I'm sure the Yankees will trade some of these players, but they seem to have plenty to build upon while reducing payroll for a while.

    • Susan says:

      The odds of all the prospects panning out are remote at best. There's nothing wrong with giving them a shot but we've got to be able to sign some free agents here and there.

  3. Bucky Dent says:

    He should of thought of that before signing outrages deals for AJ, AROD, Soriano, and Tex…Cashman needs to take some advice from his sister because I think she could run a better club than he does.

    • Mike Sommer says:

      Cashman didn't want Soriano, remember? And it was HANK Steinbrenner, not Cashman, who gave A-Rod the outrageous deal after A-Rod opted out.

      • JayDee says:

        As I was reading Bucky Dent's comment above, I was thinking exactly what you were thinking Mike. Also, imagine if they Yankees knew that ARod was going to decline (which they couldn't have), the would most certainly have been in position to sign Pujols or Fielder this year, although I almost lump Pujols and to a lesser extent Fielder into this category. I would rather see them spend big money on Votto

  4. Cyril Morley says:

    With Mr. Brain Cashman saveing money and cut payroll down, not paying money to other teams. That the yankees ways , could put some of that money in our player and minor league players. The yankees should only sign players three years and four year with option.
    Why should we sign Andrew Jones and Eric Chavez, while Brandon Laird, Melky Mesa and Kevin De Leon are waiting. Key is to sign young player and team control right for three to four years. Sign these players yoenis cespedes, jorge soler and yu darvish

  5. Tanned Tom says:

    This $189 mil threshold might be reachable this year, and definitely so if they move Burnett, Swisher or Soriano. None of these guys are key performers and none should figure in team plans for 2014. How about trading all 3? Burnett could be moved for a left handed reliever if they pick up part of his salary, and why not. Swisher could be traded for a starter like Danks or Rodriguez. And Soriano could be easy to move if they eat some of the salary and accept limited talent in return, although with the glut of closers available it might make sense to trade him in mid-season. Even if you have to pay half of these salaries that's a savings of $19 mil.
    If Cashman gets the nervous nellies, then just trade Burnett, pick up a reliever, make Noesi the 5th starter and save $6 mil off Burnett's $16.5 mil salary.

  6. jwmann2 says:

    Swisher not a key performer? He hits 20+ home runs every year, is an everyday team player and plays big time defense. Yes, he is a big part of the Yankees puzzle. http://www.fromthisseat.com.

  7. Andrew says:

    Finally the Yankees are getting smater

  8. Sounds like the Yankees are going to need to hire a new bookkeeper if they want to cut it that much.