Today the Yankees announced that they have re-signed Derek Jeter for one year at $12 million. This, despite Jeter holding a $9.5 million player option, and unlikely to fetch more than that in free agency coming off a year in which injuries limited him to 73 plate appearances.
The Yankees need Jeter, and Jeter knows it. This team could look mighty different next year, and not win very many games. It's good business to keep around a fan favorite and face of the franchise when you don't have a great team to show off—especially if this year is a farewell tour for the 39-year-old, akin to Mariano Rivera's. It couldn't have been that hard for Jeter to squeeze more than he's worth out of the Steinbrenners.
But the real reason is strictly financial. As an option, the $9.5 million would have been counted as part of his previous contract, with an average annual value somewhere north of $14 million. That's the number that would count against the luxury tax, which the Yankees are desperately trying to get under. (They paid $29 million in tax in 2013.) But by signing him to a one-year deal, the AAV is just that $12M—a big savings when trying to get payroll below the magic $189 million mark.
The final tally: In 2014, the Yankees will shell out $2.5 million more to Jeter, but could save tens of millions of dollars because of it.