Obligatory Cliff Lee posting

If this sounds forced, know that it is. I’m more than sick of Indecision 2010: Cliff Lee Edition. As far as updates go, I think this is absolutely the one thing I wanted to read:

No more years. No more dollars.

If Cliff Lee is waiting for the Yankees to up their offer before deciding between The Bronx and Texas, the saga is going to continue.

Nope, not even a “mystery team” will force the Yanks to up their already extravagant Chinese Menu offers. Which is fine by me. If he wants the Yanks, great. I’m going to be ecstatic if that’s his decision. If he wants Texas, I will be disappointed but no tears will be shed. The Yanks will have a heckuva battle ahead of them next year no matter what.

Until we get real info, we’re going to have to deal with all of the “tea leaf reading” done by everyone. I’m sick of it and I am sure you are as well.

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UPDATE: Buster has his latest “heard this” (via Twitter):

Heard this: Darek Braunecker, the agent for Cliff Lee, has been in touch with the Yankees today and said the process is on-going;stay tuned.

Sigh. We will, Buster, because we have no choice.

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Cliff Lee’s Worth (The “No Panic” Edition)

To start, let me express my gratitude to Dave Cameron at FanGraphs, who has written a series of posts using the Wins Above Replacement (WAR) statistic to value the deals made this off-season with Carl Crawford, Jayson Werth and others. Cameron is a guru of WAR, so I feel comfortable following his approach in examining the Yankees’ offer to Cliff Lee. Cameron has valued the current crop of free agent deals at $5 million per each WAR to be added by the free agent in question. Looking at this in simplest terms, Cliff Lee has produced about 7 WAR over the past three years, making him worth about $35 million for each of those years.

(Does $5 million per WAR seem high to you? It seems high to me, too. But most experts value WAR in free agency at between $4 and $5 million per WAR. Cameron has estimated a dollars per WAR figure that has been steadily growing towards $5 million per WAR. In a moment, I’ll consider what Lee’s value might be at a price per WAR below $5 million, but for right now, rest assured that the $5 million per WAR figure for free agents is a real number employed by real experts.)

What will Lee be worth in future years? We can expect Lee’s performance to decline as he gets older. Cameron estimates a 0.5 drop in WAR each year. Others estimate a 10% annual drop in WAR as a player enters his declining years, and I’ll use that estimate since it is the more conservative for a top performer like Lee. If we assume that Lee will still be a 7 WAR guy in 2011, and that Lee’s WAR will decline by 10% per year thereafter, here’s what Lee should be worth for the next 7 years:

By these figures, Lee is a relative bargain at $23 million per year.? Sure, per these projections, Lee will be worth a lot more than $23 million per year at the beginning of the contract, and will be worth a? lot less than $23 million a year at the end of the contract, but these projections show Lee’s average value to exceed $23 million, and that’s all we can ask for.

If you think I’ve overvalued WAR at $5 million per WAR, then here’s the same chart shown above, with WAR valued at a more conservative $4.5 million per WAR:

At $4.5 million per WAR over 7 years, Lee would be worth a little less than $23 million per year, but not a lot less.? So again, the deal proposed by the Yanks for Cliff Lee still appears to be a reasonably fair deal for both sides.

What if Lee’s performance begins its decline in 2011, and not in 2012?? Here are the numbers for that scenario, using a $5 million per WAR calculation:

Charts 2 and 3 turn out to be identical.? In both charts, the Yankees may be overpaying for Cliff Lee, but only by a small amount.

Let’s consider another factor used by Dave Cameron in his analysis, an inflation factor.? The cost per WAR from free agents is steadily increasing.? Cameron uses a 5% inflation factor for some of his analyses on FanGraphs.? Let’s incorporate 5% inflation into our prior graph and see where it takes us:

Now Lee is a relative bargain again.? What if we incorporate 5% inflation, but assume a lower cost per WAR of $4.5 million?

No matter how we vary the assumptions, Lee appears to be worth somewhere between $20 million and $25 million per year over 7 years.? This leads me to conclude that the Yankees did not panic when they offered Lee a 7th year on his proposed contract, reports to the contrary notwithstanding.

What would it take for this contract to go wrong for the Yankees?? Let’s drop our inflation assumption to 2%, and use the lower $4.5 million per WAR figure, and in addition let’s assume that Lee’s performance declines by 15% instead of 10% per year.? Where would that leave us?

This is one place where the Yankees have cause to worry.? Of the factors we changed, the most significant is the 15% projected annual decline in Lee’s performance.? Everyone understands that by 2017, Lee is not going to produce 7 WAR per year — and that’s OK, so long as he’s producing? two or three WAR per year at the end of the contract.? The Yankees don’t expect Lee to be worth $23 million a year at age 39, but they need Lee to be worth Andy Pettitte money in 2017 — $10 million, $12 million, $15 million a year — in order for this contract to pay off for the Yankees.

So … this is one scenario where the Lee contract may prove to be a loser:? Lee’s performance may decline with age more sharply than the Yankees have projected.? Of course, there are plenty of other things that might go wrong between now and 2017.? Lee could be injured in a skiing accident.? He could blow out an elbow or a shoulder.? His arm could mysteriously “go dead”, like Javy Vasquez.? I’ve run 6 projections for you , but truth is, life is a difficult thing to project, pitching even more difficult, and long-term pitching projections still more difficult.

Meaning what?? Meaning that luck will play a substantial role in determining whether this contract offer (if accepted) turns into a winner or a loser for the Yanks.? A lot of unlucky things can happen to Cliff Lee and his left arm between now and 2017, and in order for this proposed contract to work out, the Yankees and Cliff Lee will have to avoid nearly all of these things.

But there’s no other course open for the Yanks. The Yanks have made a good offer for Cliff Lee, but luck enters into every offer in free agency, and the Yanks must roll the dice and hope for the best, whether it’s Cliff Lee they’re pursuing, or Zack Greinke, or someone else.? In Vegas, you or I can avoid the gaming tables, but running a baseball team is different.? There’s no choice other than to play.

Given this reality, the Cliff Lee deal offers the Yankees a reasonable chance for success, and I hope that Cliff Lee soon signs on the dotted line.

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I want Cliff Lee, but if he wants Texas, so be it

Good e-migo Maury Brown tweeted this not that long ago, and he’s right:

After lat night, if the Yankees add an eighth year to their offer, this will be more about losing to the Rangers than getting Cliff Lee.

The Yankees are in bed with over $618 million of committments through 2018, just ahead of Evil Empire II who are now on the hook for?almost the same amount over the same period of time:

The Red Sox have $594.75 million in salary commitments through 2018, not quite $19 million less than the Yankees’ $613.28 million. The Yankees’ committed dollars are just a little more than 3% greater than those of the Red Sox.

This should not be “CLIFF LEE AT ANY COST”. It just shouldn’t, but it feels like it’s turning into just that. Sure, if Lee stays in Texas, it’s possible Pettitte decides to hang ‘em up, too. That would leave two gaping holes in the rotation. Cashman could very easily* try to?trade the entire farm system for Zack Greinke or lefties Johan Santana or Francisco Liriano. We’ll address that if it comes to that, to be sure.

* It would be easy to try, not easy to execute; just wanted to make that clear.

My colleague Larry, in discussing the success of the RedSox over the last week, puts it quite well and we can adapt the rational thought for Cliff Lee:

As a Yankees fan, all I can say is congratulations. There’s no way I can feel bitter about the Sox’s success in this week’s winter meetings. The Sox did what the Yankees usually do (and may still do, before this post-season is over): they parlayed their money advantage into the signing of a couple of terrific ballplayers. IIATMS, that’s the way the game is played.

If the Yanks are outbid, they’re outbid. It would be among the rarest events in the baseball world, but it can happen. We’ll have to lick our wounds and just go out and play like mad this Spring and Summer.? World Series titles are not awarded in December. There are games to play.?? That’s what every other team has said after a Yankees spending spree. Now it’s our turn, IF Cliff Lee lands in Texas.

If he chooses the Yanks, we’ll hear all about “the Yanks are buying a title” yet again. It is about the money.

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And if Lee takes Texas’ tax-advantaged money:

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Pettitte leaning towards playing; Cliff Lee rumor

I can’t say I have been counting on this, but this does not shock me (Davidoff Twitter) at all:

Andy Pettitte is leaning toward a 2011 return to the #Yankees, according to an industry source.

Qualifies as news, I guess. It’d be great to have Andy back for a final go-round. Although his leverage would be infinitely higher if the Yanks didn’t land Cliff Lee.

Oh, maybe you heard this today, too:

An industry source said Monday the Yankees have offered Cliff Lee nearly $140 million over six years, but Lee continues to hold out for a seventh year. Neither Lee’s camp nor the Yankees would confirm those numbers. The Boston Globe has reported the Yankees offered as much as $120 million over five years.

I’ll believe it when I see it. Six years is a lot; seven is crazy for a 32 year old. At some point, this deck of high priced cards is going to collapse, or someone’s going to be eating a ton of dead cash.

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And the race for Cliff Lee is underway; Siberia favored (w/Update)

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The free agent signing window is officially open. Early odds on favorite: Siberia.

“Cliff,” our source said, “would go to Siberia if they offered him the biggest contract.”

With the Yanks set to make their first offer any day, we’ll be right on top of things all along the race route with our refreshment stand and sliced oranges.

UPDATE (11/7/10, 10:07pm) The Yanks have reportedly already made contact with Cliff Lee’s agent. Game on.

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The Battle for Cliff Lee (Texas and Taxes)

Let’s start with basic principles.? The first state to get a crack at Cliff Lee’s income is the state where he lives.? Cliff Lee currently lives in Arkansas.? Arkansas has a state income tax, with a top rate of 7%.? So long as Cliff Lee resides in Arkansas, he’s going to have to pay state income taxes regardless of whether his baseball team is based in Texas or New York.

Of course, it’s possible for Cliff Lee to move his family to Texas, in which case he won’t have to pay income taxes to Arkansas.? But Cliff Lee can do this even if he plays for the Yankees.

If this sounds simple to you, good!? Because I’m about to make things a lot more complicated.

Certain states?impose income taxes on people who work in that state but live in another state.? These taxes are called “nonresident income taxes”.? I bet a lot of you are familiar with these taxes.? If you live in New Jersey or Connecticut and work in New York, you’re subject to New York’s nonresident income tax scheme.? ?New York’s top income tax rate is 6.85%.? So if Cliff Lee works in New York, his income earned in New York is going to be taxed in New York regardless of whether he lives in Arkansas or Texas.

Let’s make this more confusing.? Even if Cliff Lee pitches for Texas, he’s going to have to pay New York’s nonresident income tax.? Why?? Because regardless of the logo on Cliff Lee’s jersey, sometimes Cliff Lee pitches in Yankee Stadium.? If Lee performs in New York, he’s subject to the nonresident income tax.? It doesn’t matter whether he pitches for the home team or the visitors.

This is the situation for every major league baseball player.? When Derek Jeter plays in Anaheim or Oakland, he becomes subject to California’s nonresident income tax.? If the All-Star Game is held in Chicago, every all-star becomes subject to Illinois’ nonresident income tax.? ?Most baseball teams are located in states with non-resident income taxes.? The only exceptions are the Mariners, Marlins, Rays, Astros and Rangers.

You have to pity the poor guy who prepares? Derek Jeter’s tax returns (or envy him, since he probably makes a lot of money).? Half of Jeter’s Yankees salary is taxed by the State of New York.? But Jeter plays 9 games each year in Boston, so Massachusetts gets to tax 1/18 of this income.? If Jeter plays three games in Oakland and four in Anaheim, then California gets its share of 7/162 of Jeter’s baseball salary.? Of course, these fractions need to be adjusted if Jeter plays in the All-Star game or makes it to the post-season.? To make things worse, there are cities such as Cleveland and Philly that impose city income taxes on nonresidents.? And when Jeter travels to Toronto … well, let’s leave Canada out of this discussion.

But let’s turn our attention back to Cliff Lee.? Regardless of where Lee plays or lives, he’s going to pay state income taxes to a bunch of different states, and he’s going to file state tax returns that will probably take up the better part of a file cabinet.? But there are things Lee can do to reduce his overall tax burden.? For example, Lee could remain with the Rangers and move his family to Texas.? If Lee’s residence and team were both based in Texas, Lee would not face state income tax liability for the 81 games he played each year in Texas.? In addition, he would not pay state income tax to any state for the games he played in Tampa Bay and Seattle (which, as you doubtless remember, are both located in states that don’t have an income tax).

But if Cliff and Kirsten Lee remain residents of Arkansas, it may not matter from a state income tax standpoint whether Lee remains a Ranger or joins the Yankees.? So long as Lee resides in Arkansas, he’ll owe state income taxes to that state for all of his income, regardless of where he earns it.? True, if Lee becomes a Yankee, he’ll play 81 games in New York, and that will increase the amount of nonresident income tax he’ll have to pay to the State of New York.? But whatever Lee has to pay to the New York tax collector can be deducted from what Lee has to pay to the authorities in Arkansas.? So long as Arkansas has a higher income tax rate than the one in effect in New York, Lee’s overall income tax burden will not be affected by wearing pinstripes.

That is, so long as Lee remains a resident of Arkansas … and does not move to a state with a lower tax rate than the one in effect in New York.

(The amount of money in the Arkansas State Treasury WILL be impacted by Lee’s decision … but that’s a topic for another post on someone else’s blog.)

I’m certain all this is perfectly clear.

Now, about that report that Lee was recently seen buying cowboy boots …

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