Mapping Out the Yankees’ Offseason

With MLB’s Winter Meetings on the horizon, the offseason is very much underway. After the fourth consecutive year of Postseason defeat, Yankees fans righteously possess a thirst for a roster that stands above the rest of the league. However, there remains concerns that the Bronx Bombers are less willing to break the bank this offseason as compared to years’ past. If that holds true, some familiar faces may have played their final game in Pinstripes.

The Potential Departures

Batting Title winner D.J. LeMahieu is far and away the best player from last year’s team to hit free agency. LeMahieu has been absolutely fantastic in his two seasons in New York, owning a .336 average with 36 home runs in his 195 games. At 32 years old, contract length will be a major factor in where LeMahieu decides to suit up next.

The Yankees’ starting pitching rotation may see a majority turnover this offseason. Masahiro Tanaka, James Paxton, and J.A. Happ are all free agents, with Happ being the least likely to return.

The longest tenured Yankee last season was Brett Gardner, the 13-year veteran. The Yankees declined Gardner’s club option, as expected, and any plan for Gardner to get regular at bats next season would likely require him to sign elsewhere. Aaron Hicks is set to be the starting centerfielder and Aaron Judge is a lock to start in right field. But left field is where the debates begin. The job would surely belong to Giancarlo Stanton if the Yankees were able to rely on his health to play 150+ games in the outfield. Instead, Stanton will likely be the designated hitter for the majority of 2021. That leaves Clint Frazier as the current starter in left, and puts Gardner in a position to, at best, share at bats with him. The Yankees definitely need the outfield depth, since Gardner possesses the ability to play centerfield, something Frazier is unlikely to get the chance to do.

The next departure to free agency came by way of a DFA and rejected minors assignment. Reliever Tommy Kahnle opted to become a free agent rather than take a demotion. This all occurred because Kahnle underwent Tommy John surgery and was entering his final season of team control. With the option on the table to cut ties and reduce payroll, the decision was strictly business.

The final player to become a free agent did so on the day of the league’s non-tender deadline. The Yankees did not tender a contract to reliever Jonathan Holder, thereby making him an unrestricted free agent. Holder was entering his second year of arbitration eligibility and was due for a small raise from his $750,000 salary in 2020 (prior to the adjustment for a shortened season). Instead, the Yankees opted to let Holder go and can fill the roster spot with a player making the league minimum $570,500.

The Option

Not every player that was facing free agency this offseason made it quite that far. The Yankees have already exercised their option to extend shutdown reliever Zack Britton. The lefty will remain in town for two more seasons at a price of $27 million total. Although the amount is high for a reliever, it is not outrageous for Britton given his production in New York. The sinker-baller had a 1.89 ERA in 2020.

Roster Notes

Starting pitcher Domingo German was reinstated to the Yankees’ 40-man roster after serving a suspension for violation of the league’s domestic abuse policy. German last appeared in a big league game on September 18, 2019. Although he was placed back onto the team’s roster, doubt has been casted as to whether German will ever pitch again for the Yankees. Team owner Hal Steinbrenner was a guest on ESPN Radio’s “The Michael Kay Show” when he stated, “I have to absolutely feel comfortable that he deeply, deeply regrets and is sorry for what he did, and I absolutely have to be comfortable with the fact that he’s turned his life around.” German also announced his retirement on Instagram in July, before retracting the statement and saying he would pitch again. There is also no certainty that German remains a viable rotation option after spending over a year away from the team, but the answer to all of this will come this offseason.

The Yankees third-string catcher from the 2020 season was Erik Kratz. Kratz, 40, announced his retirement this offseason. The third-string catcher position, although not a glorified one, is always tapped into in the course of a full season, so the Yankees will have to either promote or acquire a player for the job.

The Money

In 2019, the Yankees spent just over $280 million on payroll (with league taxes). This exceeded the Competitive Balance Tax Threshold of $208 million (taxed at 30% last season), then exceeded the next threshold of $228 million (taxed at 42% last season), and also exceeded the third and final threshold of $248 million (taxed at 75% last season). Before league taxes, the Yankees spent $258.39 million. After the tax calculation, the organization owed another $22.2 million.

This season, the league thresholds increase by $2 million per level. However, the Yankees tax rates have also increased for each level, as they would be clearing each for a third consecutive season. The first threshold is set to $210 million and the Yankees would be taxed at 50% (up from 30% last year). The second threshold, at $230 million, would result in a tax of 62% this season (up from 42% last year). The third threshold, at $250 million, would result in a tax of 95% this season (up from 75% last year). Payroll is only taxed on the amount that is over each threshold (e.g. if the Yankees end up with a 2021 payroll of $211 million, they would be taxed 50% of $1 million, which is the amount over the threshold, resulting in a tax payment of $500,000. They would not be taxed 50% on the entire payroll amount of $211 million simply for going over the threshold).

As for what this means for General Manager Brian Cashman and the New York Yankees, the objective is clear: to get below as many of the thresholds as possible. Doing so while putting together a team capable of winning the franchise’s 28th World Series Championship, however, is a tougher task, especially when one considers the current state of the Yankees’ payroll for the 2021 season.

Current projections, via Spotrac, have the 2021 Yankees roster, as is, with a taxable payroll amount of roughly $188.57 million. This number is under each of the three tax thresholds, but does not include any future signings, even of players that were on the 2020 team and are currently free agents, such as LeMahieu, Tanaka, and Gardner. In all likelihood, the Yankees will attempt to stay below the $210 million initial threshold, with the more realistic fiscal scenario being somewhere between the $210 million and $230 million marks.

Staying under the $210 million amount should benefit the Yankees for multiple seasons, barring drastic changes in the next Collective Bargaining Agreement (CBA), as the current CBA is set to expire next offseason. If the next CBA maintains the tax thresholds and its rules, the Yankees’ base tax amount can drop to 20% if they remain under the $210 million (the current base tax amount for them in 2020 is 50%). Thereafter, the base amount would remain under 50% for at least another season, giving the Yankees additional financial flexibility moving forward.

But avoiding the luxury tax altogether does not seem likely in 2020. For example, if the Yankees re-signed D.J. LeMahieu at an Average Annual Value (AAV) of $20 million, that would immediately boost the Bombers to a payroll of $208.57 million with the ultimate need to acquire multiple pitchers, an extra-outfielder, and a third-string catcher. My full expectation is that the Yankees will spend over $210 million, yet remain under the $230 million threshold in order to avoid paying the steep 62% luxury tax rate on overages for the second threshold.

The Yankees would also avoid the ridiculously high 95% tax on each dollar spent over the third threshold amount of $250 million. Also, as a small consolation for avoiding that number this offseason, the Yankees’ top draft pick would not be moved back ten places in the next MLB Draft, and the team would only be taxed at 92.5% for going over the third threshold if they did so next year (only a 2.5% decrease, but it is something). Here is how the Yankees can fare this offseason while remaining under each level of Competitive Balance Tax doom.

The High-Spending Scenario

The highest amount I can see the Yankees allowing for payroll heading into the 2021 season falls between $235-$240 million. This would put the organization below the third tax threshold, while also giving wiggle room to make in-season acquisitions and adjustments. In the best case scenario, this leaves the Yankees with $51 million to dish out in free agency and acquire in trades. There cannot be a best case scenario without including the retention of D.J. LeMahieu, so we can pencil him in for the estimated $20 million AAV that seems to be his fair price point. That leaves another $31 million for other players. To make this very clear, re-signing D.J. LeMahieu would remove from consideration any chance the Yankees sign Trevor Bauer or trade for Francisco Lindor. LeMahieu would block Bauer financially (we have Bauer projected to earn $33 million AAV) and would crowd the infield to the point where the benefit of acquiring Lindor would be diminished. Either of these three players may end up on the Yankees, but it would be safe to assume that any acquisition of one would eliminate the chances of obtaining either of the others.

The Yankees would then get creative to try to fill out a rotation and add bullpen and outfield depth. Masahiro Tanaka would likely cost around $13 million for a multi-year deal. Given this high-spending scenario, it would be difficult to believe that the Yankees would let Tanaka walk if they have the flexibility to retain him. Perhaps they can pursue other options, like signing Corey Kluber or re-signing James Paxton, but those acquisitions would not bring any certainty to the rotation that so desperately needs just that. Taijuan Walker, Garrett Richards, and Jake Odorizzi form the next set of veteran free agents that the Yankees can pursue for starting pitching help. Each of the three are projected to earn between $7 million and $14 million per season in their next contract, so they are viable options financially. My instinct tells me that if the Yankees are to bring back LeMahieu and then obtain a middle of the rotation starter, then it would be Tanaka. The Yankees would then have $18 million remaining to acquire a little more bullpen and outfield depth.

This year’s class of relief pitchers in free agency is as deep as ever. The top flight of relievers makes up of five of the six relievers that were finalists for the Reliever of the Year awards in the AL and NL in 2020. Liam Hendriks won the award for the AL, then Alex Colomé, Brad Hand, Trevor Rosenthal, and Jeremy Jeffress all finished in the top three of their respective leagues. The free agency class also features former All-Stars Blake Treinen, Shane Greene, and Mark Melancon and proven veterans Archie Bradley and Keone Kela. In this spending scenario, the Yankees could definitely acquire one of these top bullpen arms and still have room to add another few players.

The Medium-Spending Scenario

If the Yankees do not decide to enter the second luxury tax level, the next plan could be to go over the first level, but stay below the second. In order to comfortably remain under $230 million for the 2021 season, the Yanks would likely commit to roughly $220 million in payroll heading into the season. That means they would have just about $31 million in spending money for the offseason. Of course, the Yankees can still sell off some pieces that are due to make significant money this season, but the Yankees rarely trade MLB-level talent away, so it is difficult to formulate a plan that includes the Yankees making a trade where they are trading away a greater salary than they would be taking on. There have been rumors about the possibility of trading reliever Adam Ottavino and his $9 million price tag by tying him to a prospect in order to make a prospective deal more attractive to a trade partner. However, the idea of relinquishing a prospect and a useful bullpen arm in order to obtain slight flexibility and save on possible luxury tax implications might not be the best option.

In this scenario, the Yankees would not be able to sign Bauer. Signing LeMahieu or trading for Lindor would still be on the table, but the moves afterward would be slightly limited. Alternative veteran free agents that the Yankees can target include outfielders Michael Brantley and Kyle Schwarber, or shortstops Andrelton Simmons and the all-too-familiar Didi Gregorius (he has hinted that the Yankees might not be the best fit for him). With $31 million to play with and the existence of a dire need for starting pitching, the odds of signing more than one of those players are probably not very high. One other free agent that fits the same category is Ha-Seong Kim, the shortstop posted by the KBO after he just completed his age-24 season, hitting 30 home runs and stealing 23 bases for the Kiwoom Heroes. Kim would come with a healthy salary (likely in the $5-$10 million range) plus an estimated $7 million posting fee.

The Yankees can package together one starting pitcher, one shortstop or outfielder, and a reliever, yet likely stay just below the $230 million. If the club decides to retain LeMahieu or trade for Lindor, they would have to pursue a lower level, higher risk starting pitcher (e.g. Mike Foltynewicz, Jose Ureña, or Carlos Rodon) and a second-tier reliever (e.g. Aaron Loup, Joakim Soria, or Kirby Yates) in order to remain below the target amount. Digesting the departures of players like Tanaka, Gardner, and possibly LeMahieu would be tough for Yankees fans.

The Low-Spending Scenario

If Brian Cashman is told to get the Yankees under the $210 million Competitive Balance Tax for the 2021 season, then acquiring free agents would not be the only item on the agenda this offseason. The Yankees would also be shopping some veteran players in order to shed payroll. They would not be able to sign D.J. LeMahieu, unless they were able to shed significant payroll in a trade and use minimum salary players to fill the roster. This remains highly unlikely. They would have no chance at signing Trevor Bauer. However, things could get interesting in a push to trade for Francisco Lindor.

If the Yankees do not sign LeMahieu, Tanaka, Paxton, or Gardner, they could make a push for Lindor as a plan to spend big in upcoming seasons. Lindor is estimated to receive $19.5 million in arbitration this season, according to Spotrac. This is where Ottavino may enter a trade proposal, but the rest of a potential deal may upset some Yankees fans. The Yankees would likely have to include a player like Luke Voit or Clint Frazier in order to help offset payroll, along with a prospect. The central focus of the trade would be to acquire Lindor while remaining under the tax threshold, which would knock down the rate of taxes in future seasons. Then, the next move would be to extend Lindor long-term. After that, the Yankees and their reset luxury tax rates would be able to add pieces in free agency classes throughout the next two seasons.

This particular scenario would make it all but certain that the Yankees would lack the firepower needed to win in 2021, but could lead to a significant roster upgrade in 2022. Of course, the Yankees can stay under the $210 million amount simply by staying as they currently are and only adding a few cheaper puzzle pieces, like re-signing Brett Gardner, signing a middle-of-the-rotation starting pitcher, and a veteran reliever. However, doing so would not put the Yankees in any better position for 2022, other than resetting tax rates.

The Ellsbury Situation

As it stands, former outfielder Jacoby Ellsbury accounts for $5 million towards the Yankees’ 2021 taxable payroll. The MLBPA filed a grievance in 2019 against the Yankees after the team refused to pay Ellsbury his future salary. The team accused Ellsbury of receiving medical treatment for a baseball-related injury without the team’s consent, which would amount to a violation of his player contract. There is no timeframe publicly set for when the grievance will be decided, but a Yankees victory against Ellsbury would free $5 million from this season’s payroll. Additionally, a favorable team ruling would negate just over $21 million of taxable payroll from the 2020 season, which would reduce the Yankees’ 2021 tax rate for the third threshold back to first-time offender status, meaning the third threshold would be taxed at 92.5% instead of 95%.

The Manager

Aaron Boone is entering the fourth and final season of his managerial contract with the New York Yankees. There are no indications that it will be his last. If anything, one can forecast multiple seasons ahead for Boone in The Bronx. While rappeling a 22-story skyscraper with Boone during a charity event, Cashman recently told Will Cain on FOX News, “I've had three managers. Ten (years) with Joe Torre, ten with Girardi and hopefully ten more with Boone.” That was not the first time Cashman indicated a desire to keep Boone around, so the fact that it is Boone’s final year of his first contract should not carry much weight when considering the chances of him leaving.

The Offseason Ahead

Ultimately, the Yankees will need to spend in order to field the best team. Shedding payroll in 2020 can lead to increased flexibility in the future, but there are major concerns the team needs to address sooner than later. This offseason will tell us if Gleyber Torres is the shortstop moving forward. It will tell us if Brian Cashman trusts Clint Frazier to play in the outfield on a regular basis. It will also indicate Cashman’s level of trust in the current starting rotation. Over the next four months, the 2020 Yankees will dissolve and the 2021 Yankees will come into formation on the other side.