Yanks’ Lesson for New York: An All-Star City Can Slump Too

With baseball’s postseason in full swing, Yankees fans may feel left out and wondering: What happened? The team that has taken five World Series since 1996 didn’t make it to October—and hasn’t won a championship in four years.

The Yankees’ dominance of baseball coincided with its hometown’s own extraordinary boom. As it gets set to elect a new mayor, New York City can take a lesson from its beleaguered ball club. Things change—and sometimes spending more money than anyone else is a liability, not an asset.

How did the Yankees make it to the top, winning four sets of rings in the half decade before 2000?

Good players, including the core four: captain Derek Jeter, pitchers Andy Pettitte and Mariano Rivera and catcher Jorge Posada. And good management and luck, particularly during the late ’90s and early 2000s.

But what else helped?

Money, particularly over the last several years. With a $233 million payroll the Yankees have the most expensive workforce in baseball; only Los Angeles rivals them. No. 3 Philly comes in at $170.4 million, 27 percent behind.

Though the Yankees have become famous for their well-paid workers, Yankee Stadium wasn’t always such an extremely lucrative place to work—er, play. In 1990 the Yanks spent $18.9 million. But 12 teams spent at least $18 million that year, including seven that spent more than $20 million.

By 2000 the Yanks had broken away from the pack with a $92.9 million roster. Only one team—L.A. again—came close. Three others spent more than $80 million. And while many teams’ payrolls fluctuated from year to year, the Yanks’ consistently went up.

What happened? The Yankees felt comfortable committing to splash out big bucks—for years on end.

Why would they think that was okay?

New York’s 1990s tech boom made TV rights to games worth big bucks to broadcasters and cable outlets looking for flush viewers. Attendance rose—up 60 percent between 1990 and 2000—as ticket prices went up too.

It’s no coincidence that at the height of the next decade’s real estate and credit boom—2006 and 2007, respectively—the Yankees broke ground on a $1.2 billion stadium project and signed the highest-paid guy in baseball, Alex Rodriguez, to a 10-year deal worth $275 million.

Fast-forward half a decade and those decisions don’t look smart. To pay for its vanity real estate venture and its not-so-star star player, the Yankee organization has tried to jack up ticket prices—and attendance is down. With 3.3 million visitors last year, attendance is far off the 2007 peak of 4.3 million, and is nearly back down to levels last seen 13 years ago.

And spending $29 million annually now on A-Rod—whose past performance may have been juiced by steroid use—makes it harder to replace now-retired players such as Rivera, Pettitte and Posada.

When you fall, you fall fast—but you can’t cut the budget back that fast to start fresh, even though the Yankees are now trying.

New York can commiserate only too well with the bombing Bronx Bombers.

Over the same 13 years, the city’s budget has more than doubled, from $26.4 billion in 2000 to $54.4 billion (not including federal and state grants).

Just like the Yanks, the city made spending decisions based on an economy that may no longer exist. Wall Street could not stay in a pre-2007 boom forever.

New York still benefits from its steroid injection—the Federal Reserve’s low interest rate policy, which helps the other guys in pinstripes by pushing up bank profits. But Washington will revoke that needle at some point.

Like the Yanks, the city is spending more and more on past successes rather than future ones.

Just as the team must devote 12.4 percent of its payroll to A-Rod’s past glories, the city must shell out $8.3 billion—15.2 percent of its budget—to pension benefits. That makes it harder for the city to invest in the infrastructure and services it needs to attract new people.

The front-runner in the mayoral race, Bill de Blasio, thinks this is okay. His fiscal prescription is a half-a-billion-dollar-a-year tax hike on the rich.

A look at the Yanks’ off-empty home-plate seats shows that the rich will only pay so much—especially if they don’t think they’re getting enough bang for their buck.

Nicole Gelinas (@nicolegelinas on Twitter) is a contributing editor to the Manhattan Institute’s City Journal.