The Yankees will have to re-think their extensions policy

I was going to touch on this in a later post, but RAB’s Mike Axisa beat me to it: the Yankees’ policy of not offering contract extensions to players isn’t really compatible with their suddenly tight budget plans:

These two ideas, getting under the luxury tax threshold and avoiding contract extensions, are technically mutually exclusive. In reality, the two ideas are at odds with each other. Getting under the luxury tax means the team will operate within defined financial limits, but avoiding extensions means the team will also have to pay market value for players. Paying market value and having a hard salary limit are not going to mix well, even with a payroll as large as $189M.

[…]

The Yankees, specifically Hal since he made the comments, want to have their cake and eat it too. They want to stay under the luxury tax threshold in the future and that’s fine even if I disagree with it, but they also don’t want to hand out contract extensions to young players. They can do both, but it won’t be easy.

I’ll go a step further and note that what really makes the Yankees’ no-extension policy work is their willingness to embrace the advantages being the sport’s richest franchise provides. A team like Tampa Bay or Kansas City can save some money and guarantee the services of a talented young player by handing them a contract extension in their first few years in the big leagues, but it’s risky to bet on somewhat unproven players with a commitment you don’t technically have to make. In practice, however, those teams do have to make those early commitments, because if things work out well for the kids, the team won’t be able to afford to pay them market value for their services, and the long-term payroll uncertainty created by their arbitration years can become a hindrance to long-term planning.

The Yankees have been able to avoid this “problem” by doing what they do best: throwing money at it. Brian Cashman has never had to worry about whether or not a young pitcher’s arbitration years salary will over-extend his budget, and everyone knows that (short of doing something really crazy) no other team can financially muscle the Yankees out of the running for any of their own players on the open market. In other words, the Yankees’ strategy has been to pay the extra cost in order to minimize performance related risk as much as possible, and it hasn’t really hindered them at all because that cost was miniscule in relation to the amount of resources they were willing to expend on the team’s payroll.

Now, of course, those available resources have shrunken dramatically, as ownership has imposed a hard salary cap on the team and Brian Cashman has to navigate his way through his prior-existing commitments to put a roster together that can compete while still coming in below the luxury tax threshold. If this is going to be a long term thing (and by all accounts it will be), spending this premium to avoid the need to make any long term commitments to players before they reach free agency will suddenly account for a much bigger burden in terms of opportunity costs.

Born in Southwestern Ohio and currently residing on the Chesapeake Bay, Brien is a former editor-in-chief of IIATMS who now spends most of his time sitting on his deck watching his tomatoes ripen and consuming far more MLB Network programming than is safe for one's health or sanity.

24 thoughts on “The Yankees will have to re-think their extensions policy

  1. chris

    In light of this article Brien, how do the Yankees deal with Cano then? If they need the 189 next year and he wants 22million and NY can live with that great. What if LA offers him 25 and NY can't? Then they lose the best 2b in the game for a draft pick when, if they know his number won't work for them in 2014 before they break camp this spring they could trade him for prospects to a contender or an outfielder with some contract control. Or at least get more value…..

    • BrienJackson

      What's the point of trading the best player on a good team when you're the favorites to re-sign him?

  2. nick d

    You can't trade him before the season starts you have to at least give this team a half year to see if they are in contention. And that is part of what this article is adressing. They should forget their no negotiating during the season bs and try to work something out before he even hits free agency. Now, I know his point of doing extensions was more for younger, somewhat unproven players to be able to lock them up before they get too expensive and cano isn't that. What he is though is in his prime and should be a yankee lifer. I'm fine with losing some players but he is not one of them.

    • mcmastro

      I'm fine with losing Cano if it means that they could gain the prospects they need for the future. Guys like Tyler Austin, Mason Williams, and Gary Sanchez are great, but they are gonna need more of a youth push if they want to win in the future. In my opinion, Cano has all the potential in the world, and despite the great stats he puts up, it almost seems as if he just doesn't care if the team wins or loses. He doesn't have the drive of a great New York Yankee, even if he puts up the stats like one. The clubhouse needs guys who have a mission to win, and he just doesn't seem like that guy.

      • brian

        whoa whoa I've been critical of Cano's failure to make adjustments in the postseason and his sometimes-lazy play… but come on now, he's the best player on the team and figures to be for 3 or 4 more years

        Trading from for value is one thing, letting him walk? Not supporting that

        • mcmastro

          that's why i think it'd be fine to trade him for youth. He's a great hitter,i just don't think he would be worth the contract that the Yankees would be forced to hand him out at the end of the season.

  3. getdownmoses

    Off topic but how were the Red Sox able to get Napoli on a one year deal? I thought he was looking for 3 or 4 and that's why the Yankees weren't interested (same goes for AJ but I understand not wanting him). I'd like to think if we could have gotten Napoli on a one year deal we would have as it would provide some RH power and a much needed catcher. Maybe I'm missing something but it feels like Cashman & the Yankees have really blown a few good opportunities this offseason.

    • BrienJackson

      Napoli apparently has only 1.23965 hips that work.

  4. OldYanksFan

    Napoli has a bad hip. I don't think anyone knows how bad, but he failed the Sox physical, which is why the 3/$39m fell through. I guess for Napoli, the one year deal is 'to prove' his hip is OK, and to cash in next year. If the ARod info is correct, hip problems can be tricky, and really need to be deeply looked out in order to determine how bad they are. The Napoli deal is $5m (cheap) but incentives (GMs, ABs?) could bring it to $13m. So the Sox are sorta gambling with $5m. Best case for them is Napoli's hip stays put, and the Sox get him for 1/$13m.

  5. Derpy

    The problem with the Yankees is giving way too much money to players who really cannot ever justify the contracts. ARod will be a thorn in their side for a long time.

    • BrienJackson

      And by "problem" you mean "problem for the self-imposed cap ownership is pushing." Absent that, those contracts wouldn't matter much at all financially.

  6. mcmastro

    I think if you want to start thinking about extensions and trades, you have to think about what your team is without those players you want to trade/ if they leave next year. Assuming you trade the two guys who are in their walk years, Granderson and Cano, it gives you a lineup of…

    Ichiro
    Jeter
    Youk
    Tex
    Nunez
    Romine
    Gardner

    and then you are left with a need at 2nd and CF, of course this isn't really how the lineup would be set, just how i'd consider it with only 7 options currently. As you can see the lineup is EXTREMELY lacking in power, and not necessarily a lock to score a lot of runs with that bottom half of the lineup either. Cano and Granderson are the two guys with the most trade talk around them, and losing them means losing a shot at the playoffs. So really, they only way we can realistically trade them is if the Yankees are able to gain young, big league talent in the process. Signing them to an early extension would be interesting, but neither of them would probably be worth their money in the coming years.

    • Derpy

      The issue is more like this:

      The Yankees are coming off a good season with essentially the same team, with several players missing. Probably a few wins worth of players. They may be an 88 win team right now.

      Is it worth keeping onto that 88 win team, which could potentially get heavily damaged next season by losing two of its best players, or trading away this 88 win season, winning 80-84 instead, and finding stability/filling holes for the following season?

      Or do you want to keep this years 88 win team for the next few years as is, sacrificing your ability to add in other areas?

      • mcmastro

        it's way too difficult to estimate the wins this teams can put up. Gardner is healthy for a full season, Youk could be a huge addition, an complete unknown at catcher and a full season of Pettitte and Ichiro with C.C at full health as well. And does anybody really think Granderson will be as bad as last year. You could make the argument they will win the same amount of games as last year. The fact is, losing Granderson and Cano zaps all the pop out of your lineup and leaves you banking on your pitching to carry the load for the full year.

        • Allen

          Yes, I do think Granderson will be like he was last year, or at least closer to that than the career year he had 2 years ago. Last year was much more in line with the trajectory of his career, and I expect that to continue.

        • Derpy

          Honestly, I think Granderson is closer to the last year numbers than the previous year. Also, the competition around the league has gotten better. The Redsox should be better, if only it is just a tiny bit better. Orioles should be about the same, just probably with less luck. Blue jays are definitely way, way better. Rays are always good. The west coast teams are all better, except maybe the rangers, who are still very good. Central are better. Other than the Astros, who can surprise you from time to time, the al has gotten better for the most part.

          Right now I see the Yankees as around 88 wins, +/- a few based on luck. For reference, I saw last years team around 90 +/-.

          • mcmastro

            I do think Granderson is not an all-star, but i think he was in a slump nearly all of last year. I expect the average to be closer to .250 than .230. That being said, i've been a huge advocate of trading him because his home runs do not make up for his strike out total, poor defense, and low average. He's in his walk year though, and i'd hate to see him go without getting anything for him.

          • BrienJackson

            Why? The guy's going to be 32 next season, and the Yankees have another centerfielder on the roster with a trio of legitimately good outfield prospects on the way up. Letting Granderson play out this year and then go elsewhere is clearly the most logical way of handling his situation.

          • mcmastro

            Nobody wants to watch players leave knowing that it would have been possible to get prospects for them. Especially because i think they could find somebody to play at a level close to his (minus the hr's) for cheaper, and still get prospects as well.

          • BrienJackson

            1. guess no one wants to see that, but this is a very irrational view of value. What you;d need to do would be to get prospects who are worth more than one year of Granderson to a contending team, which is going to be nearly impossible.

            2. Granderson minus the home runs is…what, exactly?

          • mcmastro

            Well i guess it's just me personally but i don't really value home runs as much as others i suppose. So i see you're point, but the Yankees could get a guy to hit .250 and play better defense than Granderson, and i think that would make up for his lost value of a not so amazing 2.7 WAR he put up last year (even though i do think he won't have as bad of a season as last year). And their are contending teams who the Yankees could trade Granderson to in the NL that i'm sure would overpay for a year of him. I do concede that waiting until midseason to wait and see may be the better route though.

  7. jay_robertson

    Wait til the trade deadline, and then ship out Cano and Granderson. Or – at least, Granderson. No way the S boys keep them both – if Cashman can get something worth more than a draft pick in return, flip Granderson.

    If the geezers blow up and we're 20 games out – send Cano and Scotty on their way, too. Otherwise, with the contracts already on the books, the 2014 cost-controlled Yankees will look like every other bottom tier team – a lineup with CC, Cano, and a bunch of filler. (Yes – it could have been better – but Alex and Tex's contracts are not going to go away the way their talent will.)

    • NYsteve

      Scotty who? Boras?

      • jay_robertson

        yes. Robbie's evil Siamese twin.

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