Derek Jeter signs 1-year, $12 million contract with Yankees

Patrick Smith

The shortstop's new contract helps the Yankees lower their payroll counted against the luxury tax.

New York Yankees shortstop Derek Jeter signed a one-year, $12 million contract to remain with the team in 2014, reports Bob Nightengale of USA Today.

Jeter could have opted for free agency and signed elsewhere by declining his $9.5 million option for next season. The Yankees increased his salary to $12 million in order to keep the veteran, according to Nightengale.

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Why a raise, though, given he was injured and ineffective in 2013? The shortstop's bump in pay actually lowers the Yankees luxury tax commitments in 2014. If Jeter would have accepted the club option, the average annual value of his contract would have been around $15 million in 2014. By signing a one-year deal, Jeter lowers the AAV to $12 million, actually helping the Yankees potentially stay below the targeted $189 million luxury tax line.

Wendy Thurm of Fangraphs explained how average annual value works for determining a team's luxury tax figure:

...multi-year contracts are given an average annual value (AAV) for assessing the luxury tax, meaning a contract that calls for $10 million in Year 1, $12 million in Year 2, $15 million in Year 3, and $20 million in Year 4 counts as $14.25 million toward the threshold each season. Signing bonuses are also added in to figure out a contract's AAV.

Jeter signed a three-year, $51 million contract before the 2011 season, or a deal for $17 million per year. Player options are included when determining the AAV, though, so Jeter's AAV was actually $14.75 million per year due to the then $8 million option year, saving the Yankees money against the luxury tax even as they spent more than that for Jeter season-by-season.

As it currently stands, Jeter receives a raise while the Yankees lower their luxury tax commitment for 2014.

Jeter only appeared in 17 games for New York, batting .190/.288/.254. The veteran never fully recovered from a broken ankle he suffered in the 2013 playoffs, which greatly limited the strength in his left leg and kept him off the field most of the year.

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