Friday, April 26, 2013

The Yankees May Scrap The Austerity Budget

When I first read Jeff Passan's tweet last night I didn't think anything of it. I figured it was just another opinion piece from somebody that didn't think it made sense for the Yankees to try and save a few bucks by getting their payroll down, seeing as how it could cost them dearly by losing more games. We've written things like that right here. But it was between innings during last night's game, so I decided to click the link and see. I mean, it would be nice if the Yankees would drop the austerity budget, but there's been so much talk about it my hopes weren't high.

It turns out that Mr. Passan wasn't trying to simply gain website hits, as had some evidence...
"They're going to be over 189," one source familiar with the Yankees' plans said. "They know it. Everyone knows it. You can't run a $3 billion team with the intentions of saving a few million dollars."
Apparently the money that could be saved by getting payroll down to $189 million wasn't as much as anticipated. It was originally thought that the team could save upwards of $50 million by doing so, however that's not the case.

The rules on revenue sharing are changing. In the past, as long as a team was considered "low revenue", they would receive a portion of the revenue sharing money. That means that teams like Washington, Toronto, and Atlanta would get some of the revenue sharing money, even though those teams are actually in large markets. As opposed to low revenue teams like the Oakland As, who are not only low revenue but also in a small market. All of which would lead to a larger pool of revenue sharing money.

That's changing this season, as those teams in large markets (Washington, Toronto, Atlanta) will actually have to start giving that money back to the large market/large revenue teams that have been giving them money through revenue sharing for years.

However, for a team to get that revenue sharing money back they'd have to have a payroll at or under the threshold ($189 million in 2014). And that is the money that makes up the majority of the $50 million the Yankees were looking to save through the austerity budget.

"What happened to all the water?" - The Yankees/That Kid

Due to their success, the Washington Nationals are moving from being a payee to a payor, which will lower the amount of money to be given back to the Yankees and other large market/large revenue teams. The same goes for the Atlanta Braves and Toronto Blue Jays. Meaning the amount of money to be given back to large market/large revenue teams isn't as much, so the savings won't be as high.

So, it turns out that the majority of the money to be saved by getting to that magical payroll of $189 million would come from the Luxury Tax, which has been talked about quite a bit. As Jeff Passan pointed out in his article, if the Yankees had a payroll of $205 million from 2014-2016, the team would pay $24 million to the tax. However, if the payroll were $189 million in 2014, then went back up to $205 million in 2015 and 2016, the team would only pay $8.4 million. That means the team would save only $15.6 million over those 3 years. There's just no way saving $15.6 million over 3 years makes up for putting a lower quality product on the field.

Hell, the money the team could make from selling Robinson Cano jerseys over three years could make up that $15.6 million.

My math may be off there.

Perhaps if the Yankees didn't already have over $89 million wrapped up in only six players for 2014 (Alex Rodriguez, Mark Teixeira, CC Sabathia, Derek Jeter, Ichiro Suzuki, and Vernon Wells are all contracted through next season) things would be different. Oh, and that doesn't include up to nine possible arbitration cases, as well as ten regulars set to hit free agency (Robbie Cano key among those).

So not only would the savings for getting down to $189 million not be as much as first though, but getting there will be next to impossible. As a Yankee official said, "It was a good idea to try, but deep down, we all pretty much knew it wasn't going to happen."

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Sorry for the Capatcha... Blame the Russians :)