This idea comes to us via Joel Sherman of the NY Post and it really isn’t as crazy as it sounds.
The Yankees have a goal of getting below $189 million in payroll by 2014 to avoid newer and more harsh penalties under the new collective bargaining agreement. Sherman’s idea to help them reach that goal is to offer Alex Rodriguez a one-year $14 million contract extension in the place of a possible $24 million in historic incentives that he will get for reaching certain home run plateaus.
The reason this could work is that the average annual value of a player’s contract is counted toward the luxury tax. However, if a player signs an extension the league takes the remaining portion of the contract plus the extension and takes the average of that.
In A-Rod’s case, the average annual hit is $27.5 million. However he is owed just $86 million over the final four years of his deal. If the Yankees extended him after the 2013 season for just one year at $14 million as Sherman suggests, the average annual value would shrink to $20 million.
That would not only shave $7.5 million a year off the Yankees payroll for luxury tax purposes, but it would getting hit with A-Rod’s historic bonuses. He is due $6 million when he reaches 660, 714, 755, 762, and 763 home runs. That creates a couple of problems in that it is hard to predict exactly when or if he’ll reach those marks and it also counts against the cap each time.
So let’s say A-Rod has 700-something homers by the start of the 2014 season (unlikely but possible) and then has a monster year where he not only reaches 714 and 755 in the same season (this is more unlikely, but still possible), he potentially would be worth $39.5 million against the cap all by himself in 2014. That is a nightmare scenario that will kill any chance the Yankees have of cutting payroll and remaining at the same competitive level.
If A-Rod would agree to such a move and the league approved it (Sherman said he ran this by the league and they reluctantly agreed it could work) than this is a no-brainer for the Yankees. It’s hard to say how many homers he will finish with, but it isn’t hard to imagine him getting to at least 714 at some point. So that means they are likely going to have to pay out at least $12 million in bonuses anyway, an extra $2 million guaranteed would give them a huge amount of payroll flexibility.
The downside of course is that A-Rod still has a whopping six more seasons on his contract and this extension, even at just one year, would mean he would be playing as a 43-year-old. For a guy who is going to need to be moved to DH well before that it’s really a hard prospect to imagine.
The problem with this idea is the Yankees have never been overly creative when it comes to contracts. Then again, the Yankees only ever heard of the word budget about two years ago so things can change.