Yankees payroll primer heading into offseason

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Thanks to terrific resources such as Cot’s, Roster Resource, and MLB Trade Rumors, it’s pretty easy for us to get a sense of where the Yankees stand in terms of future payroll. I certainly wouldn’t say this is fair to players, whose salaries technically aren’t supposed to be public, but it does allow us to gripe when the Yankees spend at levels below the organization’s capabilities. MLB revenues keep going up, but payroll remains pretty stagnant in terms of raw dollars. Factor in inflation and the Yankees payroll decreased steadily since the mid-aughts.

The Yankees first eclipsed the $200 million mark back in 2005, per Cot’s. And aside from 2018 (roughly $183 million), they’ve remained above that amount every year since, fluctuating plus or minus $30 million or so. This year would have been the peak if not for the shortened season, so the highest for now has been $237 million back in 2013.

So, how does 2021 look?

Guarantees

PlayerSalary ($M)AAV ($M)
Gerrit Cole$36.000$36.000
Giancarlo Stanton$29.000$25.000
Aroldis Chapman$16.000$17.467
Aaron Hicks$10.786$10.000
Luis Severino$10.750$10.000
Adam Ottavino$8.850$9.000
Total$111.386$107.467

Options

Zack Britton: This is a multi-layered option. First, three days after the World Series, the Yankees must decide to exercise Britton’s 2022 $14 million option. If they do, then there’s no second step. But if they decline, the ball enters Britton’s court. He can then decide to opt out of his 2021 contract ($13 million) and hit free agency.

Brett Gardner: The Yankees hold a $10 million option on the 2021 season. However, if the team declines, Gardner is due a $2.5 million buyout. It’s effectively a $7.5 million decision.

JA Happ: At some point this winter, the saga revolving around Happ’s $17 million 2021 vesting option will be resolved. He and the Yankees will either have to settle or go to arbitration as Happ was one of the players who was exempt from having contract incentives/triggers prorated for the 60 game season.

In sum: We’re looking at up to $40 million added to the payroll for all three of the guys. It’s going to be less than that though. I’d be stunned if Happ was back in pinstripes next year, for one. I also expect Gardner’s option to be declined (that doesn’t mean he won’t be back). Britton’s situation is the x-factor here, though I expect him back in some shape or form.

Arbitration

Matt Swartz’s indispensable arbitration projections were released on MLB Trade Rumors yesterday. This year, because of the short season, Swartz isn’t providing one figure for each player. Rather, he’s taking a few different approaches.

Method 1: Applies model directly with actual statistics from this 60-game season

Method 2: Extrapolates all counting stats to would-be 162-game totals.  One home run becomes 2.7 home runs.

Method 3: For non-first-time eligibles, finds the raise they’d get in a 162 game season, then gives them 37% of that raise

The Yankees have 12 arbitration eligible players for the 2021 season. Here’s the projected figures from Swartz’s methods:

PlayerMethod 1 ($M)Method 2 ($M)Method 3 ($M)
Luis Cessa$1.100$1.300$1.100
Clint Frazier$1.600$2.600$1.600
Chad Green$1.500$2.200$1.600
Ben Heller$0.700$0.800$0.700
Jonathan Holder$0.900$1.000$0.900
Aaron Judge$9.200$10.700$9.300
Tommy Kahnle$2.700$2.700$2.700
Jordan Montgomery$1.200$2.000$1.300
Gary Sánchez$5.100$6.400$5.500
Gleyber Torres$2.500$3.400$2.500
Gio Urshela$3.500$5.200$3.500
Luke Voit$3.700$7.900$3.700
Total$33.700$46.200$34.400

That’s a pretty wide range of potential outcomes. A $12.5 million swing from maximum to minimum, in fact. This season, before the pandemic led to prorated salaries, the Yankees arbitration eligible players were set to be paid $34.045 million. One of those players included James Paxton, who agreed to a $12.5 million deal with the Yankees. He’s going to be a free agent now, of course.

We’re likely looking at a bit of a raise from that here if we gravitate toward method two. That said, there are a few guys that are at risk of being non-tendered. Tommy Kahnle, Ben Heller, Luis Cessa, and Jonathan Holder strike me as the most likely to not receive an arbitration offer.

Kahnle will miss all of 2021 due to Tommy John surgery, so a non-tender is expected. Heller has barely pitched in the majors and is always hurt (ended season with a biceps nerve injury). Lastly, if we are to believe that there will be a swath of non-tenders like never before this winter, Cessa and Holder seem like guys who could be victims. The Yankees can probably get similar production from Nick Nelson and Brooks Kriske for roughly half the salary.

Non-tendering those four pitchers would reduce the Yankees’ payroll estimate between $5.4 and $5.8 million.

Other

Marlins payment: You may have noticed I didn’t include Stanton in the options section. After all, he could opt out of the $218 million remaining on his contract. However, he’s already said that he’s staying, so I put him in the guarantees. And since he’s not going anywhere, the Marlins owe the Yankees $30 million to be paid in installments. Those installments don’t actually start until 2026. From a luxury tax standpoint, this reduces the Yankees’ Competitive Balance Tax payroll by $3 million annually. So Stanton’s net CBT hit is really $22 million.

Player benefit costs: Cot’s estimates $15.5 million in player benefits for the 2021 season, which covers things like health and pension benefits. This counts toward the CBT payroll.

Pre-arbitration 40-man roster: Entering 2020, the league minimum salary was $563,500. That’ll go up slightly in 2021. Let’s just round up to $600,000 to be conservative and say the Yankees are carrying 10 pre-arb players on the roster for the majority of the season. That’s approximately another $6 million tacked on to the payroll.

40-man players in the minors: These players salaries count too while down in Scranton or Trenton (or elsewhere). Cot’s puts this figure at $2.25 million.

Grand Total

David Wells on a pile of cash? David Wells on a pile of cash.

So, where does this leave the Yankees? Let’s make a couple of assumptions here, first. On the options: Britton stays, the Yankees decline Gardner, and Happ’s gone. The Yankees non-tender Kahnle, Heller, Cessa, and Holder. Here’s where that leaves the Bombers:

CategorySalary ($M)AAV ($M)
Guarantees$111.386$107.467
Options$13.000$13.000
Arbitration$40.400$40.400
Marlins Payment$0($3.000)
Player Benefits$15.500$15.500
Pre-Arbitration$6.000$6.000
40-man in minors$2.250$2.250
Grand Total$188.536$181.617

That leaves the Yankees with under $30 million of wiggle room below the first luxury tax threshold. Figure a big chunk of that has to go to DJ LeMahieu.

The three tranches are $210M, $230M, and $250M. The Yankees got under the tax threshold in 2018, but exceeded it in 2019 and 2020. Going over it again would put them at the highest tax rate. There has been speculation that they will try to get back under the first threshold for the 2021 campaign. Make of that what you wish.

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7 Comments

  1. Mungo

    “At some point this winter, the saga revolving around Happ’s $17 million 2021 vesting option will be resolved.”
    ——————–

    I’m guessing it will be resolved within the next two weeks. Happ has to know the status so he can file for free agency and begin negotiations with other teams. If the case is ruled in his favor, then he is still a Yankee. I don’t see how Happ wins his case. He didn’t hit the vesting numbers. Not sure how an arbitration hearing will change that.

  2. Coolerking101

    $30 million doesn’t net the Yanks Tanaka and LeMahieu, let alone additional help w/ the staff. Even money says they get rid of Ottavino to shed payroll. Then we’ll hear about how getting Severino back is like making a trade for superstar and that the team expects German, Monty, Garcia and Schmidt to compete for last two starter spots.

    • Lars B Weinrich

      + D.J.
      + Tanaka
      – Ottavino (salary dump)
      + some salary neutral trade for a starter

      Seems totally reasonable to me. Sign me up.

      • Yanks317

        I think those relievers are goners. Cessa and holder have been decent enough, but with the way they are used (generally when we are down), likely to go with guys at the minimum. Kahnle is an interesting case. They’ll be betting his recovery goes just about perfectly and he has a month to get into the circle of trust again.

        • I’d keep Cessa & Holder since they don’t cost much above minimum. In addition, I don’t see the Yanks trading Ottavino, unless another team gets desperate. Decline Gardy for sure, he’s only worth 3-4M as a part-time player. Since Tanaka’s lost the ability to pitch well in the postseason, let some other team sign him unless he’s willing to take only 8M or so. Sign DJLM at $80M for 4 years. Sign a #3 pitcher for $15M to go along with Cole, Severino, Garcia and Gumby, with Schmidt in AAA.

        • MikeD

          There’s nothing really to bet on with Kahnle. He’s going to miss all of 2021. I don’t see him getting that month.

          • Yanks317

            I agree, but I think starters generally run 12-16 months while relievers can be back faster (10-13 months). Love Kahnle, I hope the yanks sign him up for a lesser sum and have him rehab. But the 2.7m bet that he’ll come back without any issues and pick up right where he left off with minimal time before the playoffs? Too rich given the financial landscape. Is it going to stink if he pitches all of August and September and into the playoffs we’ll for another AL contender? Yep.

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