New York Yankees: Why the Fiscal Frugality Strategy Will Work

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New York Yankees: Why the Fiscal Frugality Strategy Will Work
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The New York Yankees will hoist another Commissioner’s Trophy down the Canyon of Heroes in the near future.  When they do, the team’s bank account will have extra zeroes in it.

Yankees managing general partner Hal Steinbrenner publicized the team’s intent to lower payroll under the $189 million threshold to avoid paying the luxury tax.

Unlike his father, the late, great George Steinbrenner, Hal has a financial background and believes the team can compete without a bloated payroll.  He has said “a thousand times” the Yankees “will field a championship-caliber team.”

The Yankees must make changes to how they’ve historically done business for new strategy to work. Several teams have proved that developing your farm system, not overspending on free agents, wins championships.  The organization's new strategy will work in the longer run and here's why.

 

The farm system

Remember when the Yankees debuted four rookies named Derek Jeter, Jorge Posada, Andy Pettitte and Mariano Rivera in 1995?  They eventually became the core four and led the Yankees dynasty in the 90s, winning three championships in four years, five in total. 

Will it be déjà vu all over again?  The organization is banking on it.

The Yankees plan to rely on their minor league prospects and young pitchers Ivan Nova, David Robertson and Phil Hughes for years to come.  According to ESPN's Keith Law, the Yankees farm system has several position players with plenty of offensive power to contribute in the future.

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Prospects Mason Williams, Tyler Austin and Gary Sanchez can potentially help the Yankees after their debut in 2014, according to Bleacher Report MLB Prospects Lead Writer Mike Rosenbaum.

The Yankees will have plenty of roster spots for these prospects since they only have five players under contract for 2014, not including players eligible for arbitration. 

 

San Francisco Giants proved it

Teams like the defending champion San Francisco Giants and other franchises such as the St. Louis Cardinals have proved you don’t need the highest payroll to win.  Both teams have won two championships each in the last decade, mostly with players they drafted, signed and developed.  

In 2010, the Giants had the ninth-highest payroll at $98.6 million, while the Yankees spent $206.3 million.  In 2012, the Giants had the eighth-highest payroll at $117.6 million, $80 million less than the Yankees’ payroll (not including luxury-tax payments).  By not having a large payroll, the Giants can sign their own players to big deals when the time comes and not go over the luxury-tax threshold.

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Players like Matt Cain, Madison Bumgarner, Buster Posey and Pablo Sandoval are all returning to the Giants and all are 28 years of age or younger. 

By developing their prospects, the Yankees can experience similar success to the Giants and the Yankees dynasty teams.

 

Fewer record-breaking contracts

By creating a self-imposed budget, the Yankees will avoid dishing out several record-breaking multi-year, multi-million dollar deals at the same time.

Between the 2008 and 09 seasons, the Yankees signed Alex Rodriguez, CC Sabathia, Mark Teixeira and A.J Burnett, making them among the highest-paid players in the league.  In 2010, the Yankees had the four highest-paid players in the league and didn’t win the championship, nor have they won since then.

Now, the Yankees have several aging veterans with declining production owed millions for another four or five seasons.

 

Overspending is not working

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Many Yankees fans and media members have been critical of the organization’s reluctance to sign free agents this winter, but overspending doesn’t win championships.

The Yankees’ payroll since 2001 has increased over 75 percent according to USA Today, from $112 million-plus to $197 million-plus, with only have one championship during that time to show for it. 

The organization’s insatiable thirst to win championships has cost them over $225 million in luxury-tax bills alone.  They're the only team to pay the luxury tax every year since its inception in 2003. 

If the Yankees want to remain competitive for years to come, they must reverse this culture of wasteful spending.

 

There is no need to panic about the Yankees' new fiscal strategy.  The development of younger talent and lower payroll will lead to more championships.  

Although the plan is not popular, Hal Steinbrenner and the organization are planning for the long-term future, which wasn't always the case when the boss was alive. 

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