Looking at Finances

Disclaimer: I never took economics in college. I've never balanced a checkbook. In fact, numbers make my head hurt. I also have a very vague understanding of the rules in regard to baseball teams, their finances, the rules of profit sharing, and the salary tax. While this remedial knowledge is suspect at best, please bear with me and feel free to correct any mistakes, errors, omissions, fabrications, etc. Thank you.

Yesterday's New York Post featured an article on how the Yankees can spend so freely and not feel the pinch in these harsh economic times.

The outrage from team owners, rival GMs, and talking heads in the media has been well represented and discussed widely in the weeks since the Yankees first went out on this big name free agent safari. I will spare you those details here and (hopefully) be ahead of the curve in regards to the next big stink involving the New York Yankees and how much money they spend, or in this case, don't spend.

It's no secret that the Yankees are moving into new digs next year. A lot of questions have come up recently concerning this Stadium and how the Yankees plan to pay for it. Some sweetheart deals between the City and the organization have been discovered, but I think the most important thing to remember is that they will be paying for it. In fact they will be paying at least a hefty $1 billion over the coming years for this Stadium project.

The thing is, due to the rules of baseball, because the Yankees are paying a very large out-of-pocket expense to build their own Stadium, they can deduct at least $85 million dollars from 2009's revenue sharing expense. For the record, in 2008 the Yankees committed $100 million, or 1/3 of its revenue, to MLB's revenue sharing policy. When we put it all together, what this all means is that the rest of baseball will have to split and live on a paltry $15 million dollars in 2009.

It's also important to note that the luxury tax threshold is higher this year and will continue to rise as well. Last year the threshold was $148 million. This year it's $155. I'm pretty sure it maxes out at $174 million over the next few years. What this means is that while the Yankees continue to pay this tax every year they commit top dollar to their players, the amount will continually decrease in the coming years if the Yankees continue to cut payroll.

Basically, if they can avoid signing Andy Pettite and keep this year's payroll in the $190's, then cut 26 million plus in the salaries of Johnny Damon, Hideki Matsui, and possibly Xavier Nady for 2010, they could easily get beneath the luxury tax threshold and keep more money out of their hands of their competition. The $126 million extra the Yankees handed MLB will be considerably less in the coming years.

Take note small market clubs. The free ride you get from Yankee money may be coming to a close. If true, the Cashman quote of:
We have the most money, no secret about that. If we combine that with the best decision-making process on a consistent basis, God help the rest of baseball becomes much more of an ominous threat than a rallying cry.