Hal Steinbrenner says Yankees payroll is ‘unsustainable.’ What this means for the pursuit of Juan Soto

NEW YORK — The New York Yankees’ $302 million payroll this year is the highest in franchise history. This is the first time the Yankees have eclipsed the $300 million mark, according to Cot’s Contracts. During the MLB owners’ meetings on Wednesday, Yankees owner Hal Steinbrenner repeated a statement often used when discussing next season’s payroll.

“What I always tell you is like a broken record: I don’t believe I should have a $300 million payroll to win a championship,” Steinbrenner said.

This is an important quote to start with when analyzing what the Yankees’ payroll could look like next season, as they would like to re-sign superstar right fielder Juan Soto to a contract that ideally covers the remainder of his career in the MLB. Soto has heard MVP chants in the Bronx over the past month. If those chants come true and he wins his first MVP, the 25-year-old will cash in big time this offseason.

As the Yankees and San Diego Padres kick off a three-game series beginning Friday, it’s a reminder that New York’s front office signed the blockbuster deal between the two clubs last December, knowing that signing a Soto’s contract extension before he hit free agency this offseason was a pipe dream at best. He’s a client of Scott Boras, and Boras’ clients almost always choose free agency to get the biggest payday possible. There are very few examples of notable Boras clients who did not opt ​​for free agency and instead got an extension: Xander Bogaerts and the Boston Red Sox, Stephen Strasburg and the Washington Nationals, Jose Altuve and the Houston Astros and Carlos Gonzalez and the Colorado Rockies. Each player had a relationship of several years with his club; Soto only has a months-long relationship with the Yankees.

Soto previously rejected a 15-year, $440 million contract offer from the Nationals, which would have meant a salary of $29.33 million per year. Boras will push for Soto to earn the highest average annual salary for a position player. Soto could very well receive this considering he will only be 26 years old in the first year of his new contract and will have several years left in his prime.

As a rough guide, let’s say Soto gets a contract worth $41 million per year, which would pay him $1 million more per season than Aaron Judge. A 13-year, $553 million contract would allow Soto to finish his season at age 39. Cot’s Contracts currently projects a $185.12 million payroll for the Yankees in 2025. Adding $41 million would put the Yankees at $226.12 million for just nine guaranteed player commitments. Here is an overview of these salaries:

The Yankees have a $17 million club option on Anthony Rizzo in 2025. If he’s declined, he’ll need a $6 million buyout. If they choose to pick him up, that would bring the Yankees’ hypothetical payroll to $237.12 million. Because the Yankees seem intent on saving money where they can, Rizzo could become a casualty of the team’s pursuit of Soto. Steinbrenner said the team has “a good amount of payroll money in the offseason.”

“Look, I’ll be honest, payrolls at the levels we’re at right now are just not sustainable for us financially,” Steinbrenner said. “They would not be viable for the vast majority of homeowners, given the luxury tax we have to pay. We have considerable amounts of money to withdraw. We didn’t have a lot of money last offseason, that’s why we’re where we are.

Aside from Soto, here’s a look at the Yankees who will become free agents at the end of the season:

The only player on this list who doesn’t have a clear replacement on the 26-man roster or in the minor leagues is Clay Holmes. Since the Yankees traded for him in 2021, Holmes has the eighth-best ERA of all qualified relievers. He’s trending toward possibly becoming an American League All-Star this season, and he’s established himself as one of the best defensemen in the sport. New York Mets closer Edwin Díaz is the highest-paid closer at $19.4 million per season. A salary of $15 million per year would make Holmes the fifth-highest paid reliever. If that were enough and they re-sign Soto for a hypothetical salary of $41 million, that would bring the Yankees’ payroll to $241 million.

It seems unlikely that Gleyber Torres and Alex Verdugo will return to the Yankees next season due to their expected salaries and the cheaper options available in the minor leagues. Caleb Durbin, a 5-foot-6 utility player currently hitting .301/.414/.457 with 20 stolen bases for Triple-A Scranton/Wilkes-Barre, has several high-profile supporters within the organization. Don’t be surprised if he’s the promising prospect mentioned in next spring training for a possible spot on the 2025 Opening Day roster. Verdugo’s likely replacement would be Jasson Domínguez, currently rehabbing from surgery Tommy John surgery.

Having more young players on the roster to complement the veterans will become even more important if Steinbrenner doesn’t want to be a repeat offender in passing “Steve Cohen’s” fourth luxury tax threshold.

“I think I need a good mix of veterans who will have a lot more money, but we’ve also invested a lot of money in our player development system over the last five to 10 years,” he said. Steinbrenner said. “In my opinion, we have one of the best in baseball right now. You can see the young players we are producing. When they’re ready, they’ll get their chance, just like (Anthony) Volpe did, Austin Wells, (Luis) Gil and others. I believe being younger makes you faster. I also believe, whether I’m right or not, that it makes you less prone to injury. We finally have a really good player development system with a lot of guys still coming. They are going to have opportunities.

So let’s say the Yankees only re-sign Soto and Holmes in free agency. The Yankees still need to fill out the rest of their roster. They will have several players eligible for arbitration next season. Here is that list:

It’s still early, but Trent Grisham would be an obvious non-tender or trade candidate. That would help reduce some salaries, but the Yankees are still looking at about $20 million in arbitration for players they would likely keep. The Yankees also have club options on relievers Lou Trivino and Luke Weaver for next season. Trivino has a $5 million option, which the Yankees will almost certainly decline. Weaver has a $2.5 million option for 2025; if he continues to throw like he has, they should exercise him. Volpe, Wells, Gil, Domínguez, Oswaldo Cabrera and Ian Hamilton are all pre-arbitration players.

With the signing of Soto, Holmes and players in arbitration and pre-arbitration, the Yankees are looking at approximately $261 million.

If they don’t re-sign Rizzo, the Yankees could move DJ LeMahieu to first base. This could be the best decision for him, considering his multiple foot injuries over the past few seasons. That would leave an opening at third base.

Cabrera isn’t the best long-term third base option, so they’ll need to fill that spot if that’s the plan they follow. It might make sense for the Yankees to inquire about the availability of two players: Rockies third baseman Ryan McMahon and Pittsburgh Pirates third baseman Ke’Bryan Hayes. McMahon, who has an .891 OPS, is under contract through 2027 and has an average annual value of $11.67 million. Hayes, the son of former Yankees third baseman Charlie Hayes, is having a rough year for the Pirates with an OPS below .700. But he is one of the best defenders. Hayes’ AAV through 2029 is $8.75 million and his contract has a club option for 2030. He could be a potential low-cost candidate.

Complicating Steinbrenner’s wishes to stay below the fourth luxury tax threshold would be Soto breaking the AAV record, but the Yankees’ No. 1 priority this offseason will be re-signing him. What happens next could result in some tough decisions for the front office.

Here’s what the Yankees could look like on the field if they tried to mitigate costs to re-sign Soto:

The Yankees can still field a championship-caliber club by staying below the fourth luxury tax tier. But if Steinbrenner wants to go below the third tier, that would likely make the team worse.

(Photo of Soto celebrating with Aaron Judge: Matt Krohn / USA Today)