The Yankees Have a Lot of Payroll to Use

The Yankees’ 2018 campaign came to a disappointing end on Tuesday. After a 100-win regular season that, under normal circumstances, would have won them the division, they were forced to face the A’s in the American League’s Wild Card game. And while they managed to get past Oakland, New York ran into trouble against a Boston club that produced 108 victories, losing the final two games due, in part, to rookie manager Aaron Boone’s reluctance to utilize his bullpen.

Now the focus for the Yankees moves to 2019, when the team will be forced to compete not only with the Red Sox but also the lofty standards set by the club’s 2018 season.

In a sense, 2018 was a transition year for the New York. On the one hand, yes, they began the season by trading for the National League MVP and ended it with 100 wins. On the other, though, rookies — most notably Miguel Andujar and Gleyber Torres — accounted for 1,528 of the club’s plate appearances, the highest total for the franchise since 1969, when Bobby Murcer became a full-time starter. The club’s 5.7 WAR from rookie position players is the third-highest total in the past 30 years behind only last season (due solely to Aaron Judge) and 1989 (when Alvaro Espinoza, Bob Geren, and Roberto Kelly were rookies).

As part of their “transition,” the team finally reduced their payroll by a sufficient amount to avoid the competitive-balance tax and reset the penalties associated with it. From 2014 to -17, the Yankees spend an average of $256 million per year in payroll and penalties combined, per Cot’s Contracts. This season, they are likely to end up around $195 million. The Yankees, in other words, just cut payroll by $60 million. And not only that: because they drew 300,000 more fans than last season and also face a more modest revenue-sharing burden under the new CBA, New York likely ended up with $100 million more in 2018 than previous seasons. In light of that, it’s unsurprising to find that the organization is reportedly planning to buy back the YES Network from Disney when the latter sells it off to acquire part of FOX’s assets. The Yankees are awash in cash, and they shouldn’t have any limitations in free-agent spending this offseason.

With that in mind, let’s take an early look at how much they might spend. Since the Yankees pay the most attention to the competitive balance tax number associated with a player’s salary, that’s the figure we will use below. Let’s start with the fixed costs from 2018 to 2019.

Yankees’ Fixed Costs from 2018 to 2019
Player 2018/2019 Salary
Giancarlo Stanton $22.0 M
Masahiro Tanaka $22.1 M
Jacoby Ellsbury $21.9 M
Aroldis Chapman $17.2 M
Minimum Salaries $7.0 M
Benefits $17.0 M
Total $107.2 M
SOURCE: Cot’s Contracts

Even though Giancarlo Stanton’s salary increases next year from $25 million to $26 million, the total contract is worth $25 million per year because the Marlins are eventually paying $30 million of Stanton’s salary — and the figure for tax purposes is that $25 million minus $3 million per season from the Marlins.

In addition to those steady figures, the Yankees will also benefit from one reduced cost. Brett Gardner’s $12.5 million option seems likely to be picked up, but since $2 million of next year’s salary comes in the form of a buyout, that figure was already accounted for in the previous four seasons, where Gardner was guaranteed $52 million, or $13 million per year. Gardner’s money for next season amounts only to $10.5 million.

Yankees’ Salary Declines from 2018 to 2019
Player 2018 Salary 2019 Salary Change
Brett Gardner $13.0 M $10.5 M $2.5 M
SOURCE: Cot’s Contracts

In terms of payroll scheduled to depart, the Yankees have an assortment of free agents coming off the books. The portion of Brian McCann’s salary paid to Houston ends next year, as well.

Yankees’ Exiting Salary from 2018 to 2019
Player 2018 Payments 2018 WAR
Brian McCann $5.5 M 0.0
Chase Headley $0.5 M 0.0
Neil Walker $4.0 M 0.1
CC Sabathia $10.0 M 2.5
Lance Lynn $2.0 M 2.1
Zach Britton $4.4 M 0.1
David Robertson $13.0 M 1.5
JA Happ $4.6 M 1.1
Andrew McCutchen $1.3 M 0.8
Total $45.3 M 8.2
SOURCE: Cot’s Contracts

The only players expected to depart this offseason who were also year-long contributors for the 2018 Yankees are CC Sabathia and David Robertson. Sabathia could presumably be retained on a reasonable deal if the club wished. As for Robertson, there’s a question of space: the Yankees still have Chapman, Dellin Betances, and Chad Green available to serve as late-inning options.

Even with the aforementioned departures, the Yankees seem likely to have assembled a 90-win team already for 2019 even if they do nothing this offseason. That said, there ought to be plenty of money to spend, as well. To understand why, consider first the offseason’s expect pay raises. Here are the estimated arbitration figures from MLB Trade Rumors:

Yankees Arbitration Raises from 2018 to 2019
2018 Salary 2019 Salary/Estimate Change
Didi Gregorius $8.5 M $12.4 M $3.9 M
Sonny Gray $6.5 M $9.1 M $2.6 M
Dellin Betances $5.1 M $6.4 M $1.3 M
Aaron Hicks $2.8 M $6.2 M $3.4 M
Luis Severino $0.6 M $5.1 M $4.5 M
Austin Romine $1.1 M $2.0 M $0.9 M
Tommy Kahnle $1.3 M $1.5 M $0.2 M
Greg Bird $0.6 M $1.5 M $0.9 M
Ronald Torreyes $0.6 M $0.9 M $0.3 M
TOTAL $27.1 M $45.1 M $18.0 M
SOURCE: MLB Trade Rumors

While the raises for Gregorius, Gray, etc. are likely to total approximately $18 million, that figure pales in comparison to the roughly $45 million cited above of departing contracts. Right now, the Yankees project for a competitive-balance tax payroll of roughly $163 million, even including benefits and minimum salaried players. That’s roughly $100 million lower than what they paid in 2014 through -17, when they were drawing a quarter of a million fewer fans and paying more money into revenue-sharing.

We can determine how much the Yankees will pay in taxes by estimating payroll numbers. The table below shows the different levels of penalties and how much payroll room the Yankees have before hitting those penalties based on $162.8 million in current estimated commitments.

Yankees’ Competitive Balance Tax Situation
Tax Level $ Penalty for Yankees
in 2019
Payroll Room
(Before Penalties)
Initial $206.0 M 20% $43.2 M
First Surtax $226.0 M 32% $63.2 M
Second Surtax $246.0 M 62.5%* $83.2 M
*Plus dropping 10 spots in the draft for their top pick (mid-20s to mid-30s).

At the moment, the Yankees have $40 million to spend before they arrive at even the first tax threshold and $80 million before the worst of the penalties. The table below shows how much in penalties the Yankees will have to pay at a few different salary levels.

Yankees’ Potential Tax Payrolls
2019 Payroll Tax in 2019 Total Payments
$200.0 M $0 $200.0 M
$220.0 M $2.8 M $222.8 M
$240.0 M $8.5 M $248.5 M
$260.0 M* $16.4 M $276.4 M
$280.0 M* $31.8 M $311.8 M
*Includes dropping 10 spots in the draft for their top pick (mid-20s to mid-30s).

Because the Yankees remained under the tax threshold this season, their penalties next season are reduced considerably. If they’d gone over the mark this year and run a $256 million payroll, their tax would be around $30 million instead of $15 million. That’s not as much as the savings the team actually netted from reducing salaries this season, but it’s still a mid-level starting pitcher on the free-agent market.

Mere dollar figures might not do justice to how much room the Yankees have to spend this winter, so let’s put it another way: New York could sign Patrick Corbin, Clayton Kershaw, and Manny Machado and still end up spending the same amount on payroll and taxes as they did in the 2015 and -16 seasons. The Yankees have an enormous amount of payroll room and virtually no limits on players they can acquire. With their exit from the playoffs, it’s now up to them to decide which players they want for next season.

Craig Edwards can be found on twitter @craigjedwards.

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5 years ago

I want to be Sonny Gray!!!

(yes, I know he was underpaid for years, but still…)

5 years ago
Reply to  emh1969

How about settling to be a Kahnle, who’s a very well paid minor leaguer.

5 years ago
Reply to  emh1969

FYI, sounds like Sonny Gray is going to be in another uniform next year.