Matthews: Yankees Could Actually Benefit From New CBA

It may be difficult to believe, but Major League Baseball’s new collective bargaining agreement, despite have only incremental increases to its luxury tax threshold and a potential 92.5% fine for big-time spenders, may wind up working to the advantage of the New York Yankees, traditionally the biggest contributor to baseball’s “competitive balance” slush fund.

Part of that is due to a subtle rule change that adds a surtax that only kicks in when a team is at least $20 million over the threshold, which will be $195 million — up from $189 million — in 2017.

Part of it is due to the tax relief baseball gives teams that built new stadiums recently, a provision the Yankees can take advantage of while other big-spending teams like the Chicago Cubs, the Boston Red Sox and the Los Angeles Dodgers, all of whom play in old ballparks, cannot.

And part of it is due to the natural course of the Yankees roster, which is getting younger, and by definition, cheaper.

Some of the provisions of the new CBA are interesting — new financial guidelines for signing international players, a shorter minimum DL stay and the abolition of that ridiculous All-Star Game determining home field for the World Series rule — but if you are a Yankees fan, the only part that really concerns you are the new rules concerning revenue-sharing and the new luxury tax threshold, and how much it will cost the Yankees to exceed it.

In fact, there has been talk for years now that owner Hal Steinbrenner was obsessed with getting his payroll below the threshold if only to stop “subsidizing” the rest of baseball through his club’s luxury tax payments and MLB’s revenue-sharing rules.

Well, it appears you can all stop worrying. The days of unlimited Yankee spending are over, and have been since The Boss gave up control of the club. But that doesn’t mean there won’t be plenty of opportunity and incentive for Hal to take the rubber band off and compete for top free agents again.

According to discussions I have had with baseball sources familiar with both the CBA negotiations and with the thought processes of the Yankees hierarchy, the club is actually quite happy with the new deal.

“The new CBA doesn’t hurt (the Yankees) at all,” a source told me. “In fact, it actually makes (their situation) a little bit better.”

Previously, multiple offenders like the Yankees were charged 50% on every dollar they spent over the $189 million threshold. That will still be true under the CBA, but the dreaded surtax, which could raise some clubs’ bill to a whopping 92.5 percent of excess payroll, does not kick in until a team spends at least $215 million — $20 million over the new threshold. That first level of surtax is 12%, rising to 40% for first-time offenders who blow past the threshold by at least $40 million, and tops out at 42.5% for two-time offenders.

That could cripple a team like the Dodgers, who have been averaging $60 million above the threshold for the past three seasons. But is it unlikely to make much of a dent in the Yankees, whose approximately $225 million payroll for 2016 should come down significantly through attrition.

Not only are the Yankees on the verge of ceding their traditional spot as baseball’s highest-payer of luxury taxes, they might winding being as low as fourth on the list.

Although the Yankees have $136 million already committed for 2017 to just nine players, including the retired Alex Rodriguez ($21 million) and the recently-traded Brian McCann ($5.5 million), there are enough rookies and second-year players on the 40-man roster that it is hard to imagine them being much over $215 million in payroll this season, even if they choose to splurge on an Aroldis Chapman or an Edwin Encarnacion.

And the luxury-tax bill on that kind of a payroll — approximately $8 million — is bite-sized enough even for a self-proclaimed finance geek like Hal Steinbrenner to swallow. And after CC Sabathia ($25 million) and A-Rod come off next season, there will be that much more cap space along with a slightly higher threshold ($197 million). By the time the Yankees lose the salaries of Chase Headley and Brett Gardner, a combined $24 million after the 2018 season, and the threshold rises to  $206 million, it will be time to start the bidding war for Bryce Harper.

So the magic number is no longer $189 million, or even $195 million. What it is, is $20 million over the threshold. As long as the Yankees stay close to that, the new CBA is unlikely to hurt them nearly as much as the old CBA did.

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