• Miscalculation In Yankees Austerity Plan?

    Posted by on January 23rd, 2013 · Comments (2)

    Via Ken Rosenthal -

    The Yankees’ benefits for reducing their payroll below the $189 million luxury-tax threshold in 2014 might not be as lucrative as they originally envisioned.

    The team would realize one financial incentive by meeting its payroll target — a rollback in its luxury-tax rate from a potential 50 percent to 17.5 percent if it again exceeded the threshold.

    But the second anticipated benefit — a rebate in the new market-disqualification revenue-sharing program — might fall well below the Yankees’ expectations.

    Under the labor agreement, the 15 clubs in the largest markets will forfeit an increasing percentage of their revenue-sharing proceeds starting in 2013, and become ineligible for any such money by ’16.

    The revenue-sharing funds that would have gone to those clubs then would be redistributed to payors such as the Yankees. The idea is to motivate certain big-market clubs — the Toronto Blue Jays, for example — to increase their revenues, knowing that they no longer would qualify for revenue-sharing money.

    From that perspective, the plan appears to be working — the Blue Jays, Washington Nationals and Atlanta Braves are among the big-market clubs that anticipate higher revenues next season, according to major league sources.

    Such developments would reduce the size of the market-disqualification pot — and in turn reduce the percentage of that pot the Yankees would receive.

    The Yankees anticipated $10 million from the market-disqualification program if they got below the luxury-tax threshold one time and $40 million if they stayed under it from 2014 to ’16, according to Joel Sherman of the New York Post.

    If those figures turn out to be less than the Yankees projected, it would raise the question of why the team acted so diligently to get under $189 million by 2014.

    Yankees officials, however, maintain that the team’s offseason strategy has not been influenced by future luxury-tax considerations. They say the front office simply is not enamored with the players on the market.

    Then again, maybe the Steinbrenner Kids are just trying to drive down expenses in preparation of selling the team?

    Comments on Miscalculation In Yankees Austerity Plan?

    1. MJ Recanati
      January 23rd, 2013 | 3:00 pm

      I’m curious to know where Joel Sherman got the figures the Yankees anticipate to claw back from the revenue sharing pool. I see from this article (link below) where Sherman comes up with the figure but Rosenthal cites Sherman as if to say that the Yankees anticipate the $10-$40 million in savings when, in fact, Sherman is just telling us in 2011 that this is what the Yankees can expect (with no corroboration).

      http://tinyurl.com/c639czc

      As #2 and #3 of the “Jerkface” guest blog explains (link below), we only know the mechanism by which we can calculate the Yankees’ (and others’) revenue sharing clawback. So, while it is indeed conceivable that the Yankees will get a smaller share of money refunded if teams in the top 15 markets continue to realize revenues, I’m pretty sure the Yankees are aware of how that system works.

      More to the point, one matter (the “austerity”) has very little to do with the other (the revenue sharing reimbursements). The Yankees’ attempt to reduce their luxury tax burden makes sense from a business perspective irrespective of whether they receive revenue sharing refunds or not.

      http://tinyurl.com/au7l4gj

    2. Raf
      January 23rd, 2013 | 5:57 pm

      Forgot to carry the 1…

      :D

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