Tagged: luxury tax

Yankees’ Frugal Ways Can Be Traced To 2007 DUI

On Feb. 15, 2007, the course of history for the New York Yankees took a huge turn and the current state of the team begs the question: What if it did not happen?

Though the Yankees were still be operated ostensibly by managing general partner George Steinbrenner, the actual day-to-day operations were being run by Steinbrenner’s son-in-law, Steve Swindal, who was named the successor to Steinbrenner in June 2005.

Swindal was chosen over Steinbrenner’s two sons, Hal and Hank, because Steinbrenner felt more comfortable with Swindal’s leadership and his vast baseball knowledge.

However, while the Yankees were in the midst of spring training in 2007, Swindal’s vehicle unfortunately cut off in traffic a Pinellas County Sheriff’s Office cruiser driven by a female deputy. A chase ensued in which Swindal’s vehicle was clocked at 61 miles per hour in a 35 mph zone before he was stopped by St. Petersburg police.

Swindal declined to take a Breathalyzer test but failed a field sobriety test and was charged with driving while under the influence.

Swindal’s wife, Jennifer, later that year filed for divorce from her husband and Swindal’s stake as a general partner and chairman of the Yankees’ parent company was bought back by the Steinbrenner family in November of that year. Hal was shifted into Swindal’s role with the club and the history of this franchise was forever changed.

The Yankees were known in the Wild West days of early free agency as the major-league team with the largest saddlebags. Under George Steinbrenner’s regime from when he purchased the team in 1973 through November 2007 the Yankees tossed around millions like pennies in a fountain to lure the free agents they coveted.

In some cases, the elder Steinbrenner would be so ruthless in negotiations with free agents he would even increase a bid that already was more than any rival team was offering – actually bidding against himself.

Of course, that led to such signings as Catfish Hunter, Reggie Jackson, Goose Gossage and Dave Winfield. Between free agent signings and some shrewd trades the Yankees won a pair of World Series in 1978 and 1979 and Steinbrenner and the Yankees were being cursed all around baseball for “buying their way” to prosperity.

Though Steinbrenner’s money did re-establish the Yankees in the late ’70s and early ’80s, the Yankees actually failed to make the playoffs from 1982 through 1994. A combination of some poor signings and trades doomed the Yankees until their minor-league system began turning out a solid of corps of young stars such as Derek Jeter, Bernie Williams, Jorge Posada, Andy Pettitte and Mariano Rivera.

Those players along with the acquisition of Paul O’Neill and the signings of pitchers such as Jimmy Key, David Wells and David Cone pushed the Yankees into an amazing run in which they won four world championships from 1996 through 2000.

Since then the team has only failed to make the playoffs in one season – 2008. They won their 27th world title in 2009 after dipping heavy into the free-agent market in signing pitchers CC Sabathia and A.J. Burnett and first baseman Mark Teixeira.

But in 2003, Major League Baseball instituted its first luxury tax, which was supposed to operate alongside revenue sharing to allow small-market teams to draw money from teams who were over a threshold payroll limit, which was set at $178 million in 2011. All teams shared the remaining revenue.

Only four teams have ever exceeded the established luxury tax limit: the Yankees, the Boston Red Sox, the Los Angeles Angels and the Detroit Tigers. However, only the Yankees and Red Sox have ever exceeded it twice and the Yankees have paid in 95 percent of all the luxury tax since its inception.

When Hal Steinbrenner took control of the team he decided that the Yankees’ philosophy of paying top dollar and ignoring the luxury tax would have to come to an end.

In 2014, the payroll threshold will be increased to $189 million. By a complicated formula set up by the teams, there would be refunded revenue sharing streams for teams who remain under the luxury tax threshold. That gives the Yankees an added incentive to cut payroll below $189 million in 2014.

Not only will the team save money by trimming payroll; they would receive a considerable sum of refunded revenues as well. This explains why the Steinbrenner family informed general manager Brian Cashman that he will have to pass on high-priced free agents and he will have to pass on trading for players with huge long-term contracts.

So Yankee fans have watched a stream of free agents like Albert Pujols, Josh Hamilton, Jose Reyes, Yu Darvish and Yoenis Cespedes sign with other teams instead of with the Yankees. The Yankees are already on the hook for long-term deals to Alex Rodriguez, Sabathia and Teixeira.

Those three contracts alone are worth $73,875,000 plus player benefits worth an additional $10.8 million, which will also count against the $189 million.

That leaves a remainder of a little less than $105,000,000 to pay the remainder of the team’s 40-man roster in 2014.

That is why the Yankees have let Nick Swisher and Russell Martin go this offseason and it is likely that Curtis Granderson will follow them out the door sometime within the next year.

The team will also have another group of expiring contracts such as one of Robinson Cano. Hiroki Kuroda and Andy Pettitte are working this season under one-year contracts.

The question is will the Yankees make an effort to offer Cano a lucrative multiyear contract to remain a Yankee? Can they afford to do it? What will they do with Jeter, who is a significantly aging commodity at shortstop?

Some Yankee fans were quick to point out that if Rodriguez is found to have taken performance enhancing drugs past the 2003 date he previously claimed that the Yankees could easily just void his contract and dump him. But that may be a pipe dream.

First, Major League Baseball must have proof that he did it and then mete out a 50-game suspension. But Rodriguez can appeal the procedure and delay its effect. He also could have the suspension tossed out.

The Yankees would find it very difficult to find relevant clauses in his contract to escape from the $114,000,000 they owe Rodriguez through the 2017 season. The Players’ Association and his agent would certainly fight it and that could lead to a prolonged court battle with no guarantee the Yankees could win.

In addition, should the Yankees lose they would still have to pay Rodriguez and play him. He may not be in any mood to produce much for them either. He gets paid no matter how bad he is. So any thought of voiding his contract is going to have to be very carefully weighed.

The long-term effect of what has been an austerity program the Yankees have been under since the 2009 season ended is that the balance of power in baseball is widening out to teams who have lots of money to spend under the current salary threshold like the Tigers, the Angels, the Los Angeles Dodgers and the Texas Rangers.

These are the teams that have been active in the free-agent market and teams like the Toronto Blue Jays have benefitted from what was a talent fire-sale by the New York Mets and the Miami Marlins.

The Red Sox traded most of their high-priced players like Josh Beckett, Carl Crawford and Adrian Gonzalez away last season to the Dodgers to restock their 2013 roster while keeping well below the looming $189 million limit.

That is why the Yankees’ prospects for the 2013 season are not as bright as they might have been under the old George Steinbrenner regime or the short-lived rule of Swindal.

Would old George or Swindal have allowed the Yankees to wither on the vine for the past three seasons and basically pinch pennies and risk the team missing the playoffs in 2013?

Hal Steinbrenner has already stated quite clearly that he expects the 2013 club to remain a top-quality team within the confines placed upon Cashman and the team’s scouts. The result is the current Yankee roster is full of 40-year-olds like Rivera and Pettitte and players in their late 30s such as Rodriguez, Jeter, Kuroda, Ichiro Suzuki and the newly signed DH Travis Hafner.

Cashman spent a lot of time and effort stocking the minor-league system with talented young players over the past five years and Phil Hughes, David Robertson, Joba Chamberlain and Brett Gardner have provided some support to an aging corps of veterans.

However, the two best minor-league prospects the Yankees have produced in that time, Austin Jackson and Jesus Montero, were both packaged in trades. Jackson was sent out in three-player swap between the Arizona Diamondbacks and the Tigers that yielded Granderson for the Yankees. Montero was sent along with two other players to the Seattle Mariners in return for right-handed pitchers Michael Pineda and Jose Campos.

While Jackson is thriving with the defending American League champions, Granderson has provided the Yankees with two consecutive seasons of 40-plus home runs and a lot of strikeouts. And though Montero has proven to be lackluster on defense as a catcher, his power in Yankee Stadium will be missed in a season in which the Yankees are choosing between singles-hitting catchers Francisco Cervelli and Chris Stewart.

In addition, both Pineda, 25, and Campos, 20, suffered injuries and had their 2012 seasons cut short. Pineda is recovering from right shoulder surgery to repair a torn labrum and he could miss a portion of the 2013 season and may not be 100 percent until the 2014 season. Campos was shut down with a right elbow injury that did not require surgery.

The Yankees have a number of very good prospects within their minor-league system, including a catcher who hits as well as Montero and has better defensive skills in Gary Sanchez, 20. They also have a pair of good-looking outfielders in Mason Williams and Tyler Austin and an up-and-coming star reliever in Mark Montgomery.

But the question is will the Yankees allow these players to develop long enough to make the roster or will they package and ship them out as they have done with Jackson and Montero?

The problem with young players – most especially pitchers – as they develop in the minors is that they need to be promoted to learn at the major-league level. Too often the Yankees pull a player back and ship them back to the minors when they initially fail.

The Yankees did that with Hughes and right-handed pitcher Ian Kennedy in 2008. They both got off to shaky starts (a combined 0-7 record) and the Yankees believed they could not afford to keep them on the roster.

Anyone want to guess what the records of Tom Glavine and John Smoltz were in their first full season with the Atlanta Braves?

Glavine was 7-17 with a 4.56 ERA in 1988 and Smoltz was 2-7 with a 5.48 ERA in 12 starts the same season.

If Glavine and Smoltz were with the Yankees in 1988 they would have been sent back to Triple-A Scranton/Wilkes-Barre for another season and their major-league development would have been stilted. In 1989, Glavine was 14-8 with a 3.68 and Smoltz was 12-11 with a 2.94 ERA.

The point is that players have to learn at the major-league level and when you are constantly shipping them back out they will never learn how to succeed in the major leagues. A good case in point is when the Yankees elected to ship right-hander Ivan Nova back to Scranton in the middle of the 2011 season despite the fact he ended up the season with a 16-4 record.

The Yankees are pretty rough on their prospects. If they are not ready to contribute on Day One they get sent back down. Sometimes players in the late 20s like Colin Curtis find themselves drifting in the Yankees’ system but never even given the chance to play in the majors much.

Then there are the Monteros and Jacksons who succeed just enough in the minors to be traded. Then there are the Kennedys, who are traded and ended up going 21-4 with a 2.88 ERA for the Diamondbacks in 2011. So the Yankees show patience with players like Curtis, who never made it in the majors, and a lack of patience with players like Kennedy, who succeeds with another team.

If the Yankees are to adhere to this stringent luxury tax threshold in 2014 they are going to have to stop making the mistake of trading their great prospects away or, at the least, if they are going to trade them they better get something of real value back for it. They also could benefit by being a bit more patient with their young players when they call them up.

The Montero-Pineda deal is but one example of those mistakes. Cashman can’t afford to do that much going forward.

The Yankees are going to need good young athletes and skilled pitchers coming out of their system on a regular basis to retool this franchise through the end of the decade. It will certainly lower payroll, make the team better-suited for healthy runs at championships and may prove – ultimately – that Hal Steinbrenner had the right approach.

Otherwise, there will be hell to pay and old George will be have cigar smoke coming out of his ears as he rolls around in his grave. If a ghost could ever fire a son, old George will figure out a way to get that done.