Addressing the Misconception About a Cano Extension

Last week, there was a report that implied Hal Steinbrenner was ready to ditch the austerity plan:

As another source told me on Wednesday, “This is the first time since George died that it appears a Steinbrenner is actually running the Yankees.”

Translation: That $189 million? Forget about it. Large checks are about to be cut, not payroll.

This was a reaction to news that the Yankees had reached out to Scott Boras regarding an  extension for Robinson Cano. It’s pretty clear that the writer, Wallace Matthews of ESPN New York, jumped to a conclusion. He, like many others, seems to be under the impression that the Yankees have only two options: forego the $189M luxury tax threshold and re-sign Cano, or let Cano walk in order to stay within the budget. The fact of the matter is, the Yankees can have it both ways, if they wish.

Whether you want Cano back or not, don’t buy into this idea. And don’t be fooled into thinking that Hal is ready to spend like his father. I’ll believe that when I see it, and you should too. It’s possible he’ll be ready to splurge for the 2015 free agent class, but that’s a story for another time. After seeing news about the Yankees making a “significant offer” to Cano, I decided to take a look into the repercussions.

So, let’s break down how this works for the Yankees and Cano, assuming he gets a contract worth $25M AAV (remember, the luxury tax payroll is computed using AAV).

Take a gander at this Google document I’ve put together for an entire breakdown of the 2014 payroll within the “Scenario B” tab. You may be familiar with the spreadsheet already from our Big, Bad, Austerity Budget page.

There are some assumptions that are being made, listed as follows:

  1. Derek Jeter accepts his player option, or signs an extension that would match the AAV had he accepted the option ($15.5M). Credit to the Captain’s Blog for the break even analysis.
  2. There are a few arbitration figures estimated, and you’ll see the asterisks denoting this. I used the 40-60-80 theory plus comparisons to similar players in order to come up with reasonable figures. The 40-60-80 theory isn’t always applicable to extraordinary performers, but thankfully in this scenario, there isn’t anything too tricky. For all of the estimates, you can probably give or take a million dollars, but in aggregate it should even out. Plus, I tried to overestimate for some players just to be safe.
  3. There are a few renewals that I pegged at $600K: Cody Eppley, Eduardo Nunez, David Phelps.
  4. You’ll notice I made Austin Romine the starting catcher at $500K, the league minimum. Some other roster additions, at league minimum: Mark Montgomery, Francisco Rondon, and Adam Warren.
  5. Bench Veterans: I plugged in two slots at $1.2M each, or the same amount the Yankees would pay Matt Diaz and Juan Rivera should they make the roster. They may even go cheaper here if they want some breathing room.
  6. Designated Hitter: I allocated $2M, the same base salary for Travis Hafner this season. Cashman will probably look for a similar type player for this spot, as he has the past couple of seasons.
  7. You’ll see that there are a few “Rule V Eligible” spots to fill toward the bottom. Not sure who these will be, but they’ll be paid league minimum.
  8. Players assumed to be lost: Francisco Cervelli (out of options), Cesar Cabral, Boone Logan, Phil Hughes, Curtis Granderson, Kevin Youkilis, Joba Chamberlain, Hiroki Kuroda, Andy Pettitte, and Mariano Rivera.
  9. Again, we’re assuming Cano gets a contract of $25M AAV. I gave him a 7 year, $175M deal for this exercise.

Calculating the guaranteed money and assumptions, where does that leave the Yankees? With $21.2M to play with for a starting pitcher and an outfielder. You’ll notice I allocated $14M to a starting pitcher, and $7M to an outfielder. That doesn’t really matter, as the allocation may vary based on a couple circumstances: third base insurance for A-Rod and the readiness of Tyler Austin and Slade Heathcott. What matters is that they still have $21.2M to play with for two roster spots.

Now, of course they will probably bring in some depth on minor league contracts with a chance to earn some guaranteed money, so that may force Brian Cashman to leave a little extra breathing room.

One other key variable is Rodriguez’ home run milestone bonus for hitting 660. Once he hits it, he earns $6M dollars. The problem with this? It could give the Yankees $6M less to toy with in the offseason. Hopefully, he can attain this mark this season. Regardless, the Yankees still would have breathing room, albeit not as much.

Within the “Scenario B” tab you can see the 25-man roster breakdown on the right. The first criticism that I’d expect regarding this roster composition is how unfavorable it is compared to 2013. This is undeniably true. But that’s the peril of signing Cano to a $25M dollar extension. Things may not be pretty even with him back.

I hope this exercise cleared things up for some people. Now we know that Cano could return with the Yankees still within budget, but is it worth compromising the roster? That’s up for debate.

By Keith Allison [CC-BY-SA-2.0], via Wikimedia Commons

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