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.

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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.

About Brien Jackson

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. 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…..

  2. 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.

  3. 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.

  4. 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. 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.

  6. 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.

  7. 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.)