It appears there might be more leeway than previously thought in what Hal Steinbrenner called a “requirement” during 2012 spring training — that the Yankees cut their payroll to $189 million by 2014 to avoid stiff luxury-tax penalties.
A person with knowledge of the team’s thinking said Friday that although the intent still is to try to get to that threshold, the Yankees will not do so if it comes at the expense of fielding a contender. “Providing a championship team” will take precedence, the person said a day after the Yankees were swept out of the ALCS by the Tigers.
On March 1 in Tampa, Hal Steinbrenner, who rarely speaks with the media, publicly discussed his financial plans as they related to the luxury tax.
“I’m a finance geek. I guess I always have been,” he said. “That’s my background. Budgets matter and balance sheets matter. I just feel that if you do well on the player development side and you have a good farm system, you don’t need a $220-million payroll. You don’t. You can field every bit as good a team with young talent.”
Steinbrenner said that day that the development of some of the young arms in the organization would play a major role in helping the Yankees cut payroll. But many of the pitchers mentioned either produced inconsistent seasons (Ivan Nova and Phil Hughes) or non-existent ones because of injury (Michael Pineda and Manny Banuelos).
A big portion of that $189 million is taken up by commitments to big-contract players such as Alex Rodriguez, CC Sabathia and Mark Teixeira. And if the Yankees don’t extend Robinson Cano, who has a favorable club option, this offseason, he will require a king’s ransom when he hits the free-agent market.
The Yankees have paid the luxury tax every year since it took effect in 2003, including $13.9 million in 2011 on their $212.7-million payroll. Boston ($3.4 million) was the only other team to pay in 2011. Steinbrenner wants to trim payroll to avoid a 50-percent luxury-tax hit if it isn’t at the threshold of $189 million after the ’13 season.
The Yankees currently pay at a 40-percent rate on the amount of their payroll over $178 million, a figure that includes the average annual values of contracts plus benefits. For purposes of the tax, the Yankees’ final payroll in 2011 was $212.7 million.
Under the new labor agreement, the Yankees’ rate would increase to 42.5 percent next year and 50 percent in 2013 if they continue to exceed the threshold.