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The Anatomy of a Yankees Spending Spree PDF Print E-mail
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Written by Maury Brown   
Monday, 22 December 2008 12:58

New York Yankees

The Yankees are spending more for
free agents this off-season, despite
the recession due to a number of factors.

As the New York Yankees go, most everything they’ve touched since George Steinbrenner purchased them in 1973 has been done on a grand scale. Few, if anything, is done small, and this off-season is no exception.

To say that the Bronx Bombers have been on a free agency spending spree may redefine the term. The signings of C.C. Sabathia and A.J. Burnett total $243.5 million, if the contracts run their full course (and according to The AP, by the time the Yankees open at Baltimore on April 6, Sabathia already will have received $6 million of that bonus plus $3.5 million of next year’s salary). And, the Yankees may not be done as there are reports that they are in the mix for Mark Teixeira, a deal that may garner close to $200 million, and/or Manny Ramirez, who is rumored to have been offered a 3-year, $75 million deal by the club.

With the money being thrown around, one can look at some key situations that set the Yankees in motion on this spending spree in the midst of the worst recession in 80 years.

Not Landing Santana – The beginning of this spree most likely has its roots a year ago when the cross-town Mets landed Johan Santana as opposed to the Yankees. Hank Steinbrenner, who now is the voice of baseball operations while younger brother Hal is now Chairman of the Board for the Yankees, said after the season that if he were in control then, as he is now, he would made a push for the ace.

“[Would] Santana have made enough of a difference with all our injuries [in 2008]? I don’t know,” Steinbrenner said. “It certainly would have made us a lot closer.”

Missing the Playoffs for the First Time in 14 Years – As Hank Steinbrenner noted, Santana may have helped, but it’s not entirely certain whether he would have made so much of a difference as to help the club make the playoffs. With Chien-Ming Wang, catcher Jorge Posada, pitcher Joba Chamberlain and slugger Hideki Matsui hit with injuries, the Yankees were cobbled most of the season. For the first time since 1994, the Yankees failed to reach the playoffs, something that must have seemed unfathomable for the Yankees where anything short of winning the World Series is deemed an unacceptable year.

Shedding Player Payroll in Preparation of an Aggressive Off-Season – The Yankees primed the pump for an aggressive pursuit of key free agents by shedding contracts at the beginning of the off-season. Jason Giambi ($22 million club option), Mike Mussina (contract not renewed, opted to retire), Carl Pavano ($13 million club option), Andy Pettitte (has yet to renew with the Yankees and is a free agent) and Bobby Abreu ($16 million club option) all came off the books this off-season. All told, more than $80 million was freed up to work with this off-season.

New Yankee Stadium and Tax-Sheltering – The biggest catalyst for the spending involves how the latest CBA is structured as it pertains to new stadium development. Clubs may write off a portion of their revenue-sharing obligation by deducting bond payments and maintenance costs. By cutting those costs, at a 31 percent rate that is assigned the Yankees as part of the CBA, they are sheltering a sizable chunk of change. Granted, the Yankees pulled in more revenues in 2008 (the All-Star Game, along with interest in the final year of The House That Ruth Built), which may offset what ever tax sheltered revenues that new Yankee Stadium offered this year by way of the CBA (the latest revenue-sharing figures have not yet been released), but the Yankees will continue to use the CBA’s sheltering mechanism throughout 2009, a further incentive for the Bombers to go on the spending spree.

But, the biggest loophole for the Yankees involves the tax-exempt bonds issued to build new Yankee Stadium. Nearly all of the $967 million in bonds that have been issued are tax exempt. To add more salt to the taxpayers’ wounds, the club is looking for an additional $259 million in bonds, all tax-exempt, as well.

The Perfect Spending Storm – Throw all these factors together, and what you have is the perfect Steinbrennerian storm for going after free agents with reckless abandon this postseason. The question is, will it all add up to the baseball promise land of a World Series win, something not done by the Yankees since 2000? The “spending wildly on free agents” model is something that few clubs employ anymore. Only the Yankees embrace it so fully, because the Yankees are the only club that can do so in this recessionary climate. What is certain is that Brian Cashman, Joe Girardi, and Hank Steinbrenner will be under pressure to make it all work. If it doesn’t work for the Yankees, then 2009 will be the mold christened “spending for spending sake" by which all others will be judged.


Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is contributor to Baseball Prospectus, and is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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