LIFE OF LUXURY
Japan star can help Yanks get under tax threshold
All 30 teams could pursue Shohei Otani. Most will because of how little he will cost compared to the talent of arguably the best pitcher and hitter in Japan.
He may be more important to the short-term goals of the Yankees, however, than any other team.
Because the Yankees want to compete for a championship next season and drop under the $197 million luxury- tax threshold. And because Otani comes with the allure of huge talent and small cost, he fits so ideally with the Yankees’ twin ambitions.
Brian Cashman could not be more definitive than he was last week, telling me: “We are getting under the threshold next year.”
That will frame the Yankees’ entire offseason. Now, the organization has made strong statements about wanting to do this before, but always with caveats. This was caveat-free. Plus, ownership is driving this as much as baseball operations.
Hal Steinbrenner has said for years the Yanks should be able to construct persistent contenders without $200 million-plus payrolls. In the past, there was some lip service to this and always a hedge. I do not see that this time.
Steinbrenner has become more reasoned and seasoned as an owner. He has recognized that the long-held Yankees way under his father of buying older, famous players will — in the way the game is played and legislated now — lead to an expensive, inflexible, corroding roster. Plus, Steinbrenner has gained the confidence not to blindly honor his father’s legacy.
After the 2013 season, with the chance to plunge under the threshold, Steinbrenner overreacted to the exit of Robinson Cano. There appeared to be concern of being labeled cheap and not having the willingness to do what George Steinbrenner would do to win, and the Yanks splurged for Masahiro Tanaka, Jacoby Ellsbury, Brian McCann and Carlos Beltran that guaranteed an inability to drop below the luxury-tax line not only that year, but years to come, and even complicates matters now.
Still, this is the f irst time since then that the Yankees have a chance, and I do not think they are simply stating a company line. The new collective bargaining agreement made the penalties for being over the tax even more odious, especially for repeat offenders such as the Yankees. Plus, getting under the tax even one time means becoming viewed as a firstt i me offender t he next t i me a team is over, thus, resetting what the Yankees would be taxed from 50 percent of every dollar over the threshold (and 92 percent at certain payroll levels) to 20 percent.
That is pertinent in particular with the 2018-19 free-agent class setting up as potentially historic with headliners such as Bryce Harper, Manny Machado, Clayton Kershaw, Charlie Blackmon, Josh Donaldson and Andrew Miller. The Yanks could finish off a championship-level roster by dipping into that talent, and even if it drove them over what would be a $206 million threshold in 2019, the penalties would not be as harsh if they were under in 2018.
Which is why Otani is so alluring. Under the new CBA, because he is not yet 25, Otani is limited how much he could get paid in a one-time bonus to what teams have in their international signing pool.
If Otani were a true free agent, he might get $30 million a year on a long-term deal. But he is going to get less than $5 million as a bonus, and whoever wins the bidding for him will have to pay a $20 million posting fee to Otani’s Japanese team, the Nippon-Ham Fighters, but that does not count toward the luxury tax.
The Yankees are believed capable of paying just $3.25 million, the very interested Dodgers $300,000. Because no team can pay big, this will be so much about pure recruitment, assuming that the negotiations and payouts are aboveboard (there is a lot of worries of circumvention).
But under the rules for international amateur spending, the bonus would not count toward the luxury tax, only his major league salary, which is likely to be about the major league minimum of $545,000 for 2018.
And because the Yankees will be counting every penny toward $197 million, getting a star for that little to help their rotation — and possibly their DH situation as well — would fall into the invaluable category.
It will be part of a math game the Yanks play between now and the end of next season. Yes, the Yankees remove the large pacts of Alex Rodriguez and CC Sabathia from the docket, but it still is going to take discipline to drop under $197 million. Here’s why (salaries will reflect how they are used for luxury-tax purposes, which is average annual value on a long-term contract).
The strong l i kelihood is Tanaka is not opting out, so if you include him along with the others still under long-term deals in 2018 — Ellsbury, Aroldis Chapman, Brett Gardner, Chase Headley, David Robertson and Starlin Castro — plus the $5.5 million charge for what the Yanks owe Brian McCann as part of his trade to Houston, it is $112.8 million.
The Yanks could trade from this group. But the player they would want to move most — Ellsbury — would require eating a substantial portion of his contract (which counts toward the tax payroll) or taking back a bad deal. The easiest to move — Gardner and Robertson — are players/leaders the Yankees would want to hold next year to go for it.
All 30 teams will be charged roughly $14 million in 2018 for items such as medical, pension and insurance. So that is $126.8 million.
The Yanks face the arbitration process with Didi Gregorius, Sonny Gray, Aaron Hicks, Dellin Betances, Adam Warren, Austin Romine and Tommy Kahnle. Some of those players could be traded or non-tendered. But, for now, they would have to budget about $35 million. So that is now $161.8 million.
The rest of the roster has to be filled out, and even if it is done with guys near the minimum salary — such as Greg Bird, Aaron Judge, Gary Sanchez, Luis Severino, etc. — that would still be about $7.5 million. Just to get it to a round number, let’s say it was $7.2 million, and the running total is now $179 million now. The budget must include at least $5 million for callups during the season, probably more. But let’s say that and get to $184 million. Do you want to have at least a $5 million war chest for July trades? That conservatively gets you to $189 million. And remember, it is not like the Yanks want to budget to get to just under $197 million, because that would run the risk of going over by a little, which would keep them in the penalty.
So imagine if they could get a $30 million talent in 2018 for $545,000 toward the tax payroll. It is why Otani is way more than a luxury to the Yankees.