Summer Landscaping: Approaching the Trade Deadline

Just six days from the trade deadline, the New York Yankees find themselves in the tall grass. Another season marred by injuries up and down the roster and some underperforming players have put the Yanks in a tough spot. Their post-All Star Game streak has kept them in the hunt, but it’s hard to see it continuing for much longer without reinforcements. That said, the team’s long-term financial goals make things more complicated than usual. As they approach the deadline, the Yankees will be forced to navigate some treacherous terrain.

State of the Franchise

2021 Season

The Bronx Bombers sit in third place in the American League East with a record of 50-46. They are nine games behind the division-leading Boston Red Sox and 4.5 games back from the second wild card spot, currently occupied by the Oakland Athletics.

FanGraphs projects that the Yankees will post a 37-29 record over their last 66 games (which gives them the third-best projected winning percentage in all of baseball in that span after the Los Angeles Dodgers and San Diego Padres). At 87-75, that would put the Yankees in sixth place in the American League and out of the playoffs, two games short of the Athletics’ projected finish. Of course, that’s contingent on the 56-43 A’s going just 33-30 the rest of the way. FanGraphs gives the Yankees a 32.4% chance to make the playoffs and a 3.1% chance of winning the World Series.

Where They’ve Been and Where They’re Going

Stepping back from this season for a second, let’s take a look at where the latest Yankee core stands. This group has made the playoffs every year since 2017. They’ve been to the American League Championship Series twice and lost in the American League Division Series to the 2018 World Series champion Red Sox and pennant-winning Tampa Bay Rays in 2020. Aaron Judge, Aroldis Chapman, Zack Britton, Gary Sánchez, Chad Green, and Jameson Taillon are all free agents after the 2022 season. Luis Severino is a free agent after 2023. A new collective bargaining agreement (“CBA”) will be negotiated this fall (and probably drag into the winter); with potentially radical changes to the arbitration system on the horizon, Gleyber Torres may reach free agency sooner than after the 2024 season. The same is true for Gio Urshela (after 2023), Luke Voit (after 2024), Jordan Montgomery (after 2024), Domingo German (after 2024), Jonathan Loaisiga (after 2024), and Miguel Andújar (after 2024).

When you consider the current state of the roster, it feels like the window for this iteration of the New York Yankees is closing. This core might only have two more chances at a championship, and one of those is looking pretty slim right now. The time for urgency has come.

That being said, doomsday pronouncements are probably premature. You may have heard about the upcoming free agent class. There are the shortstops, which looks like a position of need for the Bombers: Corey Seager, Carlos Correa, Trevor Story, Javy Baez, and even a rejuvenated Brandon Crawford looks like an attractive stopgap lately. Other notable position players you might not mind picturing in pinstripes: Freddie Freeman, Kris Bryant, Michael Conforto, Anthony Rizzo, Chris Taylor, Marcus Semien, Starling Marte, Tommy Pham, Joc Pederson, and Kyle Schwarber (not to mention Nick Castellanos, who could opt out). And the starting pitchers: Max Scherzer, Clayton Kershaw, Justin Verlander, Carlos Rodon, Kevin Gausman, Noah Syndergaard, Marcus Stroman, Zack Greinke, Anthony DeSclafani, Robbie Ray, Alex Wood, Eduardo Rodriguez, Alex Cobb, and Jon Gray among some other interesting names. If this Yankee core is on the precipice of a break-up, there are more than a few ways the team can re-tool through free agency this off-season. From that vantage point, the Yankees look primed to blow past the competitive balance tax (“CBT”) threshold in 2022 as they bolster the roster for another championship run.

Competitive Balance Tax

What makes things tricky for their 2021 run is that the Yankees would prefer to stay under the $210 million CBT threshold this season to reset the penalties before a potential 2022 free agent bonanza. The Bombers were over the $206 million CBT threshold by about $28 million in 2019. In 2020, they exceeded the $208 million CBT threshold by approximately $31 million. FanGraphs estimates that the Yankees current payroll for CBT purposes is around $206.5 million while Spotrac estimates about $209.9 million. Either way, the Yankees will have to get creative if they want to make any significant moves at the deadline while staying under the CBT threshold.

Having exceeded the CBT threshold in the last two seasons, if the Yankees exceed it again in 2021, they would be subject to a 50% tax on the amount by which they exceed the $210 million threshold (up to $20 million over) this season. As third-time CBT payors heading into 2022, they would incur the harshest possible penalties under the CBA if they were to go over again next season.

The structure of the CBT for 2022 and beyond will be determined by the new CBA. The uncertainty of whether there will be a new structure and what that will look like alone isn’t a bad reason to reset their CBT payor status for 2022. But the potential to go comfortably over the 2022 threshold as first-time payors makes the proposition even more compelling.

Let’s assume things stay the same (a big assumption given the tenor of the upcoming CBA negotiation) and the Yankees exceed the CBT threshold for the third and fourth consecutive times in 2021 and 2022. In addition to paying the 50% tax on the first $20 million over the initial CBT threshold, if the Yankees exceed the threshold by more than $20 million, anything they spend over that initial $20 million in overage is subject to a 62% tax up to $40 million over the threshold. At more than $40 million over the threshold, the Yankees would be subject to a 95% tax on the amount they go over $40 million above the threshold. Those penalties are compared to the first-time CBT payor penalties below.

CBT ThresholdFirst-Time CBT
Payor Penalties
Third-Time CBT
Payor Penalties
Initial Threshold
(less than or equal to
$20 million over)
20%50%
First Surcharge Threshold
(greater than $20 million
but less thanor equal to
$40 million over)
32%62%
Second Surcharge Threshold
(greater than
$40 million over)
62.5%95%

At $20 million above the initial threshold level, the Yankees would save $6 million in CBT payments. They would save another $6 million at $20 million above the first surcharge threshold. If they go as high as $10 million over the second surcharge threshold, that’s another $3.25 million saved, for a total of $15.25 million saved at $50 million over the CBT threshold. That may not seem like a lot of money, especially for the New York Yankees, but those savings could go a long way towards building greater roster depth, winning a free agent bidding war, or being used elsewhere in the organization. And if the Yankees go more than $40 million over the CBT threshold, regardless of whether they are a first-, second-, or third-time CBT payor, their first draft pick in the following year’s Rule 4 draft will be pushed back ten spots (which, according to Craig Edwards’ research on draft pick valuation, would cost the Yankees just under $5 million in value if the season ended today).

Exceeding the CBT threshold would affect the Yankees’ pursuit of this offseason’s top free agents in another way. Teams can offer their pending free agents a qualifying offer, a one-year contract with a salary equaling the average of the top 125 salaries in baseball so long as that player (i) has never received a qualifying offer before and (ii) spent the entire season with his most recent former team. If a player rejects a qualifying offer and signs with another team, the signing team is subject to Rule 4 Draft pick and international free agent signing bonus pool forfeiture based on its payroll status. If the signing team is a CBT Payor, it must forfeit its second- and fifth-highest draft picks in the upcoming season’s Rule 4 Draft as well as $1 million of its international signing bonus pool. If a CBT Payor signs multiple free agents who have been offered qualifying offers, they must also forfeit their third- and sixth-highest draft picks in the upcoming season’s Rule 4 Draft. If the Yankees stay under the CBT threshold, however, they would only be subject to forfeiture of their 2nd-highest selection and $500,000 of their international signing bonus pool for their first qualifying offer free agent signing and their third-highest Rule 4 Draft selection if they sign multiple free agents with qualifying offers attached. Retaining two extra draft picks (along with the Rule 4 Draft signing bonus pool allotments associated those picks) and the $500,000 of international signing bonus pool money would give the Yankees a greater opportunity to continue to supply talent to their minor league system.

Farm System

Most public evaluators have the Yankees farm system ranked as middle of the road. At the start of the 2021 season, MLB.com and Baseball America ranked the Yankees 18th, The Athletic’s Keith Law had them 14th, and ESPN’s Kiley McDaniel ranked them 15th. FanGraphs, the outlier of the bunch, currently has the Yankees farm system ranked fourth overall.

Regardless of their ranking, the evaluation of the minor league system is consistent: a deep system heavy with high upside players who are probably a few seasons away but not many impact players close to the Major League level. Estevan Florial was just re-called to help in the beat-up outfield. Deivi Garcia has struggled in AAA this season. Clarke Schmidt likely won’t return from a right elbow strain until September. For all their stuff, Luis Gil and Luis Medina are still struggling with control issues in the minors. It’s possible the Yankees turn to Oswald Peraza to start at shortstop in 2022 or even bring him up this September, but outside of that, it’s hard to envision any major impact coming from within this season.

Team Needs

Other than Gerrit Cole, Aaron Judge, and the resurgence of Gary Sánchez, not much has gone according to plan for the Yankees this season. Their MLB ranks in FanGraphs’ WAR at each position so far in 2021 are listed below.

C1B2B3BSSLFCFRFDHSPRP
2.5 (6th)1.2 (16th)2.3 (12th)1.2 (17th)1.3 (19th)-0.4 (28th)0.7 (23rd)2.5 (8th)0.8 (10th)9.0 (7th)4.4 (3rd)

Surprisingly, the position players have been the problem for the Yankees in 2021, particularly left and center field. Injuries to Luke Voit and a trip back to Earth for DJ LeMahieu have given the Yankees middling production at first base. Gio Urshela has regressed a good bit, and Gleyber Torres’ has been struggling for almost a full calendar year now (though, he appears to finally be breaking out of it). Still, the Yankees don’t have much choice but to keep playing LeMahieu, Urshela, and Torres.

The Yankees are also an extremely right-handed heavy lineup, and it’s shown in the numbers. They have a 112 wRC+ against left-handed pitching in 2021 (the fifth-highest mark in the league), but that number falls to 94 wRC+ against right-handed pitching (just 16th overall).

Given all of their injuries and lack of production, it makes sense for the Yankees to target outfielders at the deadline. If they expect Voit to miss extended time, they might even consider some first or second base options. With their woes against right-handed pitching, left-handed bats also make sense for the Bombers. If a starting pitching upgrade presents itself, the Yankees would be wise to listen, but the team will likely look to the returns of Luis Severino and Corey Kluber as its deadline additions and assemble a playoff rotation from Gerrit Cole, Severino, Kluber, Montgomery, Taillon, and German (if they get there). Given the bullpen’s recent breakdowns, adding relief help is tempting, and the Yankees may do so if they can find a cheap upgrade, but they should stay focused on left and center field, first and second base, and left-handed bats.

Potential Paths

Buy

Reports about the Yankees’ activity so far make it seem like the front office is full steam ahead on the Buy train. They have been linked to Trevor Story, Starling Marte, Joey Gallo, and Max Kepler in addition to rumors that they’re looking to bolster to the bullpen. Given the FanGraphs and Spotrac CBT payroll estimates, it will be difficult for the Yankees to add at the deadline and stay under $210 million. But it’s possible that the Yankees could make the money work through some clever roster maneuvering and/or by trading away more valuable prospects so the selling teams defray more 2021 salary.

The consequences of exceeding the CBT threshold are not disastrous. It may not stop the Yankees from making one or even several significant moves in the 2022 free agent class. But with that talented free agent class waiting and accelerating arbitration salaries and potential extensions for Aaron Judge, Gleyber Torres, and Gary Sanchez coming, it would be ideal for the Yankees to reset in 2021 if possible. Turning the focus from the near future to the present, the Yankees aren’t just trying to bolster their playoff roster at the deadline. They’re trying to improve their second half roster to give themselves the give themselves the best possible chance of making the playoffs. Missing out on the opportunity to reset only to miss the playoffs would definitely sting.

That being said, this team has been knocking on the door of a championship for the last four seasons. The franchise hasn’t won it all since 2009. The farm system is in a decent spot and can withstand the hit it would take to add Major League talent now. Any prospects moved would likely be higher-risk types in the low minors who won’t debut for some time. The best course of action may be to give this core the best possible shot at having at least two more chances at a ring by pushing in all their chips now.

Stand Pat

The Yankees don’t necessarily have to do anything. They’re projected for the third-best record the rest of the way (though, this includes significant playing time from Voit at first base and Clint Frazier and Andújar in left field ) and to finish neck-and-neck with the Athletics for the second wild card. A sudden A’s losing streak could make the Yankees playoffs chances look a lot better. They wouldn’t risk exceeding the CBT threshold or somewhat deplete their improving farm system. But as more injuries pile up, if the Yankees don’t get good news on certain return timetables, the 2021 season could slip away from them soon, possibly leaving 2022 as this group’s last chance at a championship.

Sell

Selling doesn’t really seem like it’s in the realm of possibility, but it’s worth thinking about. It’s possible that the Yankees playoff chances are overstated by FanGraphs’ projection system. After all, they’re largely predicated on the Yankees being the third-best team in baseball and the Athletics playing almost .500 ball from this point forward. Projection systems have great value, but that’s a tough common sense sell. If the Athletics continue on their current pace, they’ll win 92 games. For the Yankees to reach that mark, they’ll have to go 42-24 the rest of the way (a 103-win pace over a full season). It’s certainly possible, but that’s a run this Yankees team just might not have in them this season, even with a few deadline additions. From that perspective, selling could be the prudent move.

It wouldn’t be a major sell-off, but the Yankees might be able to improve their farm system further and gain some future payroll flexibility by moving a few pieces without doing major damage to their 2022 roster. Teams are always looking for relievers at the deadline. Chapman and Britton are set to make a combined $30 million (with the CBT payroll hit being about the same) in 2022. Chapman’s recent struggles aside, he and Britton would be two of the better bullpen options available and likely to fetch decent prospects in return. Rougned Odor could be an interesting addition for teams in pursuit of a second baseman or infield depth. Someone might even take a flyer on Corey Kluber’s health to give themselves another arm for the stretch run and postseason. The days of getting Gleyber Torres or Clint Frazier and Justus Sheffield in return for top shelf relievers are gone, but the prospects netted in a small sell-off could provide valuable future role players, players to be moved in future deals, or even an unexpected superstar.

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