This is Part III of our sit-down interview with MLBPA Executive Director, Michael Weiner where we touch on (among other things) your beloved New York Yankees and some of the impending issues facing the organization as they creep ever-closer to an era of transition. Obviously any conversation about the current state of the Yankee organization would not be complete without discuss, the much-publicized and much-debated Hal Steinbrenner edict to get payroll below that $189 Million luxury tax threshold. Prior to this season many fans and experts alike were predicting the Bombers demise given their age, injuries, and self-imposed salary cap. Some have even speculated that the Yankees reining in their spending would have a ripple effect throughout Major League Baseball and potentially hurt the game. Weiner, a big Yankees fan in his own right, when asked as to whether the Yankees shedding a significant amount of payroll would have a substantial impact on the game he posited:
"The way the economics of the game have moved, you know have all kinds of teams trying to win and all kinds of times spending a substantial amount of money on players other than the Yankees. Given that, I'm not sure that what the Yankees have decided to do in terms of cutting payroll has the same impact on the game as it might have in the late 90's/early 2000's. They are still the Yankees and are still the premiere franchise in Major League Baseball so what they do is important just like what the Dodgers, Mets, Giants and some other teams do has more importance than would others but it's not as important as it used to be."
Most Yankees fans are probably aware that the organization is trying to get under that $189 million threshold but not everyone knows what exactly the benefits are of doing so. Who better to ask than the man who brokered the most recent Basic Agreement that has seemingly prompted the Yankees to alter the way they do business:
"The incentives as they relate to the 189 figure are as follows and you can make your own determinations about what the Yankees are inclined to do. It used to be that when you got below the threshold but you had been over the threshold for many years, like the Yankees, for 102 years or however long the Yankees have been over the threshold, your tax rate would go down but would do so very slowly. We changed that in the most recent Basic Agreement, you could have been above the threshold like the way the Yankees have been for the last 15 years in a row but if you drop below the threshold your tax rate zeroes out. So obviously if you're below the threshold that year, you don't have to pay any taxes but if you exceed the threshold the following year, you are taxed at the lowest possible rate (17.5%) as opposed to potentially 40 or 50%. If the Yankees decide to take advantage of that incentive to drop their payroll down below $189 million in 2014 so they can go way above the threshold in 2015 and only pay 17.5% instead of 50%, God Bless Em."
The way the Yankees have conducted business for basically the entire history of the franchise and especially during the modern-Steinbrenner has been great for baseball from the perspective of the Union as the some would say, exorbitant salaries they pay out bring up the salaries of other less-talented players. Contracts like that of Alex Rodriguez or C.C. Sabathia function like the proverbial rising tides as the high end money they get at the top of the range bring up everybody else's salaries and that is without question a great thing for the players. As the head of the Players' Union, Weiner tends to agree:
"From a Union perspective, the Yankees overall spend on players over the life of the Basic Agreement is going to be very high maybe even higher than it would have been under the old system because of these lower tax rates and that's one aspect of getting below 189. However, there is another aspect that has gotten a lot of play and that is what we call the "Market Disqualification" provisions of the revenue sharing article. What happens there is this: for many years, the Union has proposed that we look at some objective factors to determine whether a team should get revenue sharing. Such factors range from: how big a city they are, disposable income, TV market size, etc. In 2011, the owner finally agreed to that and they ranked all 30 cities based on a number of objective factors, put a line under the top 15 out of 30 and said: In an ideal world, these 15 markets should not receive revenue sharing."
Weiner continued: "The provisions of the Basic Agreement call for teams that are in this upper 15, who are receiving revenue sharing to be gradually disqualified from receiving that money. This gradual disqualification is going to take place over the next three years starting in 2014 and by 2016 these teams won't be receiving any of the money. The question then arises: What happens to those Market Disqualification funds? If a team like Toronto or Washington or Atlanta, who are in the top 15 but have traditionally gotten revenue sharing, if Toronto would have gotten $15 million in revenue sharing but under the rules they only get half of that money: What happens to the other $7.5 million?
All that money goes into a pot and the other contributors to revenue sharing, the teams that have funded revenue sharing get money from that pot in a percentage in a proportion to what their contribution was. Then teams like the Yankees, Mets, Dodgers, etc get money back from the fund but the amount of money that is going to be in that pot is entirely dependent on what the revenues of these teams are. The numbers that the Yankees have talked about is that they believe if they can get below it in 14 and 15, that they can get a big piece of this Market Disqualification fund. I don't think there's going to be a lot of pay-off there because I really believe and if you look at it; look at teams like Toronto, Washington and Atlanta in terms of what kind of team they're putting on the field and what that's going to mean in terms of their local revenues. The incentives for these teams to increase their local revenues because they are not getting revenue sharing, so they get to keep everything, are very strong. These teams are building up their local revenue to the point that there's not going to be a lot of Market Disqualification funds next year or the year after in my view and the Yankees share of them, should they decide to drop below $149 million isn't very high."
Weiner's contention is that the potential payout and windfall the Yankees may receive as result of dropping their payroll to the Market Disqualification Fund rebate level of $149 would do more harm than good to the franchise:
"The Yankees potential share of the MDF may be high in absolute terms, maybe they save $20 million but given how much money the Yankees make, given how much money the YES Network makes; the idea that you would intentionally ruin the Yankees brand by keeping their salary that low for a couple of years if that was not an appropriate salary to put a competitive team on the field, it just doesn't make economic sense to me. So it's not that I'm afraid about the success of the game because the game has been in an extremely strong financial position and will be regardless of whatever decisions the Yankees make over the course of the next couple of years. I just don't think it makes business sense from the Yankees perspective and we'll see whether or not they do it, we'll see what kind of success the team has this year. However, if the Yankees put a non-competitive team on the field for a couple of years it will hurt their brand and that is going to be worth a lot more than any money they could get from revenue sharing or from tax savings."
The notion that the Yankees would put a non-competitive teams on the field as long as a Steinbrenner at the helm is unfathomable to the rest of the baseball world and the likely outcome of this cost-cutting will be to simply getting under that $189 million luxury tax threshold and not the drastic cost slashing that will enable them to receive Market Disqualification funds. Perhaps some of the young/cost-controlled talent we have been hearing about for a number of years now will finally come through the pipeline and provide the Yankees with cheap, quality players that will enable them to cut costs and remain competitive in a very tough AL East. Only time will tell what this regime will decide to do and we'll just have to sit back and watch how it plays out.
"I think there's a lot of smart people that work for the Yankees and I think in the end that they are going to put the best possible team on the field like they always have, regardless of whether that's below or above 189."
That does it for Part III, stay tuned for the final installment of the series where we continue to talk some more about the Yankees and then take a look forward at some other future issues in baseball.