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A New York Yankees blog by Chad Jennings and the staff of The Journal News


One contract to the next: Counting up to $189 million

Posted by: Chad Jennings - Posted in Misc on Nov 06, 2013 Print This Post Print This Post | Email This Post Email This Post

Alex Rodriguez

It’s a bit early to put the Yankees luxury tax situation into particularly meaningful context, but it’s such a massive topic of discussion that I suppose it’s worth a shot. So far, both The Associated Press and the New York Post have come up with the same number: A current luxury tax payroll of $97.71 million based on seven guaranteed contracts (including Alex Rodriguez). In addition, the Yankees will be charged roughly $11 million for various player benefits, and the Post points out that teams generally budget about $5 million for in-season minor league call ups. That brings the total closer to $113.71 million, and that’s before expected arbitration raises for key players like Brett Gardner, Dave Robertson and Ivan Nova. 

In other words, the Yankees are already well over halfway to $189 million.

Here’s the AP story on the situation, with the interesting note that, even if he’s suspended, Rodriguez will still count at least little bit toward the luxury tax threshold.

Andre Ethier, Derek Jeter, Robinson CanoNEW YORK (AP) — Derek Jeter’s new contract has increased the Yankees’ luxury tax payroll to $97.71 million for seven signed players next year. That leaves New York with about $80 million to spend on the rest of its roster if the team wants to get under the 2014 tax threshold.

Jeter and New York agreed Friday to a $12 million, one-year contract. Major League Baseball determined its value for purposes of the luxury tax is $12.81 million.

The Yankees’ captain, injured for most of this year, was playing under a three-year contract with a player option for 2014 that wound up being worth $9.5 million and was replaced by the new salary.

Baseball’s luxury tax uses the average annual values of contracts as defined by the sport’s collective bargaining agreement. Determining Jeter’s payroll figure for the tax is complicated by the option and the new salary, and New York may contest his 2014 evaluation.

The Yankees want to re-sign free agents Robinson Cano, Curtis Granderson and Hiroki Kuroda, and need to fill roster holes after missing the playoffs for just the second time in 19 years. The team figures to be interested in free-agent pitchers and catcher Brian McCann.

Managing general partner Hal Steinbrenner has said getting under the $189 million tax threshold for 2014 is a hope but is not essential.

“It’s a goal that we have if it’s possible,” general manager Brian Cashman said last month. “There’s a lot of benefits to staying under that, but it’s not a mandate if it’s at the expense of a championship run. It just depends on what the opportunities are before us, and the costs associated with it.”

New York’s other signed players are Alex Rodriguez ($27.5 million), CC Sabathia ($24.4 million), Mark Teixeira ($22.5 million), Ichiro Suzuki ($6.5 million), Alfonso Soriano ($4 million) and Vernon Wells ($0).

The impacts of Soriano and Wells on New York’s luxury tax payroll were reduced because of cash being paid by their former clubs attributable to 2014. The Yankees will receive $18.6 million from the Los Angeles Angels as part of the acquisition of Wells last March and $13 million from the Chicago Cubs as a result of July’s deal for Soriano.

Rodriguez’s payroll impact for 2014 would drop to $2.5 million if arbitrator Fredric Horowitz upholds a 211-game suspension imposed on the third baseman by MLB for alleged violations of the sport’s drug agreement and labor contract. Rodriguez, who is contesting the discipline, has a $25 million salary for next year, and the Yankees would not have to pay him for any period he is suspended.

Payrolls for the luxury tax include the entire 40-man roster and a 1-30th portion of the cost of benefits and extended benefits for all major leaguers. That category totals items such as health insurance premiums, pension payments, club medical costs and payroll, unemployment and Social Security taxes.

The 2013 figure will not be completed until next month. For 2012, each team’s payroll was assessed $10,779,500.

New York has paid luxury tax for every season since the provision was put in place for 2003, a total of $224.56 million. The Yankees will pay again for 2013, when the threshold was $178 million.

But there are large benefits if the Yankees get under the threshold in 2014. The team’s tax rate would drop from its current 50 percent to 17.5 percent in 2015, and New York would be eligible to get back a portion of its revenue-sharing payments.

Associated Press photos

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