The Yankees, MLB payrolls, and “mega-contract” distribution

Earlier this week, Joel Sherman reported that the Yankees were “monitoring the elite shortstop group rather than participating in it, waiting to see if a market collapses.” He then proceeded to speculate two reasons why the team might be willing to prefer a stopgap rather than an elite shortstop like Carlos Correa or Corey Seager (or even a very good one like Trevor Story or Marcus Semien).

The first reason, that the team does not want to block Anthony Volpe or Oswald Peraza — two top shortstop prospects who could be ready to break into the big leagues as soon as 2022 or 2023 — is plausible, although it would be a stupid move by the organization. As Jesse wrote last month, “Prospect depth should never preclude the addition of proven talent.”

As for the second reason, Sherman begins by stating the following:

If the Yanks do a third mega-contract, they want to see if that can be with a star they know. [Aaron] Judge is the best homegrown and most popular Yankee since Jeter. He has proven he can thrive in New York. Historically, the Yanks retain that type of player.

The New York Post writer and MLB Network Insider then quickly argues that this is a flawed way of thinking. The flaw he is referring to, however, is not with the inherent logic of the decision, but in the idea that extending Judge is the right move, rather than signing a star shortstop. “But take emotion out of it,” he says. “If the Yanks are going to sign just one from a high-end shortstop such as Correa/Seager or Judge long term, which makes more sense?”

In this case, I have an issue with the premise, not the result. What, after all, is a “mega-contract?” Do they already have two (Gerrit Cole and Giancarlo Stanton), or just one (Cole)? And are they really limited to three?

Complicating this discussion is the fact that, for the most part, the Yankees have historically paid more attention to the annual AAV used for luxury tax calculations than the total dollar amount of a contract. That’s not to say they don’t care about the length and total value of the contract; it’s just that, on a year-to-year basis, the luxury tax salary is more significant.

Let’s sidestep the question of what entails a mega-contract — it is, in many ways, a meaningless term — and instead dive into what teams actually worry about when structuring their rosters: guaranteed contracts. Below is a chart that indicates how teams distribute the amount of guaranteed money they keep on their payroll among players (highest-paid player for each team is on the left, lowest on the right). To keep the graph at a normal size, I used just the top 12 teams in total current payroll for the 2022 season.

Note: All payroll info is from Spotrac.

At this point in time, the Yankees are actually fifth in the league in guaranteed money, behind the San Diego Padres, Houston Astros, Chicago White Sox, and Los Angeles Angels, in that order (the Los Angeles Dodgers would normally slot in here as well, putting the Yankees sixth, but I have elected to ignore Trevor Bauer’s $34 million since his future is uncertain, to say the least). While this ranking will certainly change — this doesn’t include arbitration estimates, and both the Yankees and Dodgers will pay a premium here — it does show that while the Yankees do have a lot of money invested in guaranteed contracts, they don’t have an abnormally large amount, either.

Plenty of those contracts, however, are less notable, reflecting either smaller deals given to role players or relief pitchers and — especially in the case of the White Sox — contracts given to players to buy out years of arbitration and delay free agency. What happens when we isolate just the three largest contracts — the amount of “mega-contracts” that Sherman says the Yankees “might” want to hand out?

Here, the Yankees find themselves surging all the way to … fourth, jumping the White Sox and Astros but being passed by the crosstown New York Mets. Again, the amount of guaranteed money here is high, but not absurdly so. But what’s more interesting, to me, at least, is not where the Yankees stand in this ranking, but how they got there. The Angels split $91.7 million between Mike Trout, Anthony Rendon, and Justin Upton — i.e., the best player in baseball, a big-ticket free agent third baseman, and an outfielder at the tail end of his contract. The Mets have invested their $76 million in Francisco Lindor, Jacob deGrom, and Robinson Canó, while the Padres their $75.7 million in Manny Machado, Fernando Tatis Jr., and Yu Darvish.

As for the Yankees? The trio comprises Cole, Stanton, and Aroldis Chapman. They are the only team with a high payroll that has a relief pitcher as their third highest salary; even the White Sox, who have handed out large contracts to relief pitchers like they’re the 2017-19 Yankees, do not have a reliever in their top three salaries. While we’re not going to go too much into detail on this here, that is a mismanagement of payroll that should not continue. And when you expand it to the top five contracts, it’s even worse — Zack Britton, who will almost certainly not throw a single pitch in 2022, will be making $14 million.

Fortunately for the Yankees, both relievers will see their contracts expire after the 2022 season, freeing up $31 million in guaranteed money right in time for Aaron Judge to hit free agency — I doubt that’s a coincidence. In fact, let’s pretend for a moment that this is exactly what happens, which would give the Yankees two contracts worth over $30 million (Cole at $36 million and Judge at $31 million). Add that to Stanton’s $22 million (remember, the Marlins are kicking in money that offsets the salary) and you have $89 million invested in three players, second only to the Angels. Add on DJ LeMahieu’s $15 million, and you’re at $104 million, which is also second to the Angels (they are adding the $21 million invested in Noah Syndergaard). Again, this is a high value, but not abnormally so.

Can the Yankees support these four players for the next several years? Turns out, they can rather easily, as literally the only other player under contract through the 2025 season (the furthest into the future that Spotrac goes) is Aaron Hicks, and he will be in the final year of his deal (the team has an option with 2026 with a $1 million buyout). LeMahieu, meanwhile, will be in his second-to-last year, leaving only Judge, Stanton, and Cole on the roster in their late-thirties.

Can they support these three players and add a top shortstop this winter without blowing the rest of the league out of the water in terms of payroll? Ultimately, that depends. If you’re looking at just long-term guaranteed contracts, then not really — adding $30 million for a shortstop would bring the Yankees’ top four guaranteed contracts to $119 million, or $7 million more than the Angels’ top four contracts.

But if you’re thinking of total payroll, adding the results of arbitration to the guaranteed contracts, then it’s a much easier sell. The Yankees, after all, are already going to pay Judge an estimated $17 million this year, which means that his hypothetical $31 million contract that we’ve been using really only requires the money from Britton’s expiring deal, not Chapman’s $17 million. Applying Chapman’s money to the shortstop for 2023 and beyond means that the team needs to come up with only an additional $13 million or so. It’s a lot of money, to be sure, but not exactly a ridiculous increase.

Of course, at the end of the day, this is merely a thought exercise, an academic quest to see whether or not the Yankees can afford to add both a Judge extension and an elite shortstop to their payroll without completely blowing the rest of the league out of the water in terms of payroll. In reality, they absolutely have the money to do whatever they want here — it’s just a question of how far they’re willing to go.