Results tagged ‘ Luxury Tax ’

The Law of Diminishing Return…

 

Dollars to donuts…

Joel Sherman has a good post today with his Hardball Blog in The New York Post entitled ’What would George do?’ among questions in Yanks’ $189M quest.

I do not dispute the reasons for why the Yankees are financially motivated to get under the $189M threshold given the reduced tax penalties it will create for future years in addition to the savings in 2014.  But can the Yankees maintain a championship caliber club in their quest to reconcile the bottom line?  Something’s got to give, and I am fearful that it will be the quality of the Yankee clubs put on the field in the next few years.

That sounds kind of ridiculous to say when other clubs have proven you can succeed with lesser dollars, but in Tampa, for example, it was years of high draft picks that filled the cupboards with premier players like Evan Longoria and David Price.  I see the same thing happening in Kansas City as they’ve been building solid, young talent.  The Yankees, on the other hand, have been picking at the bottom end of rounds for years and there have been more than a few misses along the way.  There has been a renewed emphasis on the farm system in recent years, however, it is still not within the upper echelon among the other clubs.

This paragraph in Joel Sherman’s post cuts to the heart of the problem:

“The aging/diminishing Alex Rodriguez, CC Sabathia and Mark Teixeira plus the roughly $11 million each team is charged for a benefits plan costs about $84 million toward the luxury tax each season. That would give the Yankees roughly $105 million to complete a contender in 2014. But say Robinson Cano gets $22 million a year. Now it is $83 million for everything else. That is doable, but less so after a year in which the Yankees’ farm system regressed horribly, potentially derailing the expected pipeline of lower-cost talent.”

I checked the cities of Baltimore, Boston, and Tampa against Manhattan on a cost of living calculator and found that the equivalent salaries in New York would need to substantially greater to maintain the same cost of living.  A Boston salary would need to be 63.10% greater, Baltimore 89.70%, and Tampa 145.28%.  Okay, not every player will live in Manhattan and that’s probably an extreme, but it still shows on the affordability scale, it simply takes more dollars to live in New York than anywhere else.  Other places like Florida and Texas have no state income tax.  I am sure that when A.J. Burnett got to Pittsburgh, it wasn’t just the reduced spotlight that helped his successful turnaround, the realization of how much further his millions would go in the Steel City probably factored into the equation.

As it stands at the moment, it is very likely the Yankees enter the 2013 season as a weaker team than the one who was swept by the Detroit Tigers last month.  I know, a lot can happen between now and then, but for the sake of this post, I have only the insight for where we stand today.  I felt that it was essential for the Yankees to re-sign Hiroki Kuroda.  As soon as there were indications that Kuroda would consider a one-year deal, the Yankees should have been aggressive in locking him up.  But by delaying, the two LA teams are stepping up their pursuit and the area has an advantage given Kuroda’s familiarity and close ties to Southern CA.  I believe that his wife and two daughters still reside in California.  Losing Kuroda from the rotation will hurt.  I am not convinced that David Phelps can match the level of performance that Kuroda achieved this past season.

The sooner the Yanks can move Alex Rodriguez to full-time DH will be better.  They need a quality, front-line third baseman who can hit in the clutch.  Sadly, there are not any high level prospects so free agency or a trade might be the only options.  Given the former is probably not where the team intends to put its “limited” dollars, a trade is most likely the only solution.  Of course, that will only deplete the Yankees of other young talent.

I guess Moneyball is alive and well and living in the Bronx.  It is time for Brian Cashman to prove to the critics that he is a good general manager despite the Yankee resources.  I do believe that he is so it will be interesting to see how the next few months unfold.  I have read those who believe the Yankees will ultimately spend without regard to 2014, but given Hal Steinbrenner’s financial background, I see the team sticking to its plan.  Time will tell if his stance is justified.  Perhaps this is a radical, game-saving approach that will bring fiscal responsibility back into the game.  Then again, maybe not…

–Scott

 

$189 Million by 2014 or bust…

 

His accounting degree was the first tip-off…

So, it’s true that the fiscal conservative in Managing General Partner Hal Steinbrenner is coming to the forefront.  It’s clear that the Yankees have shown considerable restraint in their financial decisions in recent years and none more evident than this off-season when the Yankees watched and let others pay exorbitant dollars for free agent talent.  It was widely rumored that the Yankees have their eye on 2014 and the desire to get their payroll under the $189 million threshold for luxury tax purposes.  But now that Hal Steinbrenner is on record for the stated goal, it will be interesting to see how this plays out in the next few years.

While there are other guaranteed contracts, the most notable in 2014 will be Alex Rodriguez.  If he continues his deterioration as a star player, that $25 million in 2014 is going to look like a huge albatross.  I haven’t tallied the guaranteed dollars, but it’s clear that the next few years will see similar off-seasons like the one we just experienced.  No significant free agent signings, bargain basement ‘right before training camp’ deals like the one given to Raul Ibanez, and trades for young (and cheap) talent.  It will also mean the Yankees won’t overpay to retain talent, which probably shows the door to Nick Swisher.

Meanwhile, teams like the Los Angeles Angels and the Texas Rangers are profiting from regional TV deals (not to mention previous dollars they received through revenue sharing at the Yankees’ expense).  So, it will be other teams splurging on big talent, and the Yankees as a passive by-stander.  There is some logic in the team’s decision but I am concerned that it will bring an end to the winning run the Yankees have been on since the early 1990’s.  As a Yankees fan, the 1980’s were very difficult.  Yes, we were spoiled by George Steinbrenner’s win at all costs mentality, but 90 to 100 loss teams wearing the grand tradition of the pinstripes seems sacrilegious to me.  I am sure that the YES Network is not excited at that prospect either.  But if the stars, like A-Rod and Derek Jeter, continue to wither while eating up valuable salary dollars, the team is going to develop a Pittsburgh Pirates feel to it.  Very limited dollars to fill the holes.

In many respects, it is unfair that the salary threshold is equal among teams given the higher cost of living in New York, combined with the increased pressure that goes with playing on the biggest stage.  Once the ownership situation with the Los Angeles Dodgers is settled, there will be a slugfest in LA as the Dodgers spend to rebuild their legacy and prominence in the City of Angels.  Meanwhile, in New York, the Mets and Yankees will be scooping up the leftovers from the Pittsburgh Pirates and Kansas City Royals.

Okay, I might be a bit pessimistic but there will be a number of very difficult decisions to be made between now and 2014 as the Yankees attempt to reach their goal.  If the Yankees win the 2014 World Series, then credit Hal Steinbrenner for being one of the greatest owners in Yankees history.  If not, how long will it take to recover?…

Open mouth, insert foot…

You know, I don’t really care what Bobby Valentine is saying in Red Sox camp.  I know that if he were the Yankees manager, he’d be making disparaging remarks about the Sox.  It just goes with the territory when it comes to Bobby V.  Whatever helps him get motivated.  Speaking of Red Sox managers, it was really weird seeing the ESPN clips of Terry Francona in Yankees camp, hugging Yankees and talking with Joe Girardi and his coaches.  Unlike Valentine, I have a great deal of respect for Terry Francona.  Regardless, the Bobby V ingredient should make the Yankees-Red Sox rivalry very spicy this year.  It kind of sets the stage for Joe Maddon and the Tampa Bay Rays to steal the show…

I’m sure that A-Rod wasn’t saddened by the news…

Since I am on the topic of the Red Sox, I should say congratulations to Red Sox catcher Jason Varitek, who announced his retirement today.  He was a hated players at times, but like Jorge Posada, his intensity was off the charts.  He is the kind of guy you hate on another team but you’d love to have him on your team.  I think his baseball career is only getting started as I see future success as a manager for him.  I could even see him being an eventual replacement for Bobby Valentine.  Regardless of what he decides to do, we haven’t heard the last of Tek.

If you can’t beat ‘em, join ‘em…again…

Back to the Yankees, I am glad to see the return of third baseman Eric Chavez.  It took a long time…right up to the start of training camp…but it got done.  I liked Chavez in his years as an Oakland A, and while he isn’t the player he once was, he is a great role player and teammate.  He is also a very sorely needed third baseman given the fragility of the guy in front of him.  Yes, Chavez is an injury risk but if he can stay healthy, he’ll be an invaluable part of the 2012 Yankees.

The Seattle Mariners pipeline worked last time (Tino Martinez)…

I liked the Yankees signing of former Seattle Mariners closer David Aardsma.  I don’t think he’ll be in the running for Mariano Rivera’s replacement when THAT day comes, but it was a low risk, high reward signing.  Having 7th and 8th inning options in late summer of David Robertson, Rafael Soriano, Joba Chamberlain, and Aardsma is a manager’s dream.

Best wishes for a fast return…

Here’s hoping for a speedy recovery for former Yankees pitcher A.J. Burnett.  In a batting incident the other day, a failed bunt attempt led to a broken right orbital bone in his face.  I was frustrated with Burnett as a Yankees pitcher, but I’ll never dispute that he is a great guy and a terrific teammate.  I am hoping that the move to Pittsburgh allows Burnett to flourish and hope the latest injury is not a precursor of things to come.

Don’t trip on the snow rounding first…

It is hard to think of baseball when it is snowing.  Snow has been a rare commodity in Minnesota this year, but we received slightly more than a dusting this week.  Living by Target Field, it’s strange to see the stadium and the surrounding snow while thinking that Joe Mauer and company are practicing to get ready to make the trip home to Minneapolis.  I have already bought my tickets for when the Red Sox and Yankees come to town, however, the Yankees don’t arrive in Minneapolis until late September.  I hope that AL East will be decided in the Yankees favor by that time…

Names I’ve known all of my adult life, and in some cases, when I was just a Daydream Believer…

Whitney Houston, Gary Carter and now Davy Jones?  This has not been a fun couple of weeks…

 

–Scott

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