The Los Angeles Deferrals
The Dodgers are dodging money.
Last month, the Los Angeles Dodgers signed Shohei Ohtani to a 10 year, $700-million contract: the largest amount in sports history. This jaw-dropping contract should have been the only blockbuster move the Dodgers made this offseason, granted they would be paying one individual 70 million for the next 10 years. Ohtani did not want the Boys in Blue to be tied down to one contract this offseason. Therefore, the Japanese superstar and the Dodgers’ Baseball Executive, Andrew Friedman, agreed to defer $680M of the $700M contract.
Let’s Break This Down
On paper: $700M for the next 10 years = $70M each year
Deferral: $680M off of $700M = $20M for the next 10 years
The next 10 years: Ohtani will make $2M each year
So… what happens to the other $680 million to his contract? Glad you asked.
Contract ($2M annually) “expires” in 2033
The rest of it: $680M for the next 10 years = $68M each year
Shohei Ohtani will be receiving money from the Los Angeles Dodgers until 2043.
Mayhem.
Is this legal? Is this good for the sport? What does it mean for the Dodgers? I’ve asked myself the same things 700 million times.
As crazy as it sounds, this massive deferral is legal under the the current collective bargaining agreement (CBA). According to the CBA, deferred money is limitless.
The state of California is pissed off because they can’t tax Ohtani as much as they were hoping since he will only make a significantly smaller amount over the next decade. Furthermore, it wouldn’t be surprising if Ohtani flees California after his contract expires in 2033 in order to escape higher taxes when he will be making $68M a year.
Ohtani is not the only athlete to defer money. Boston Celtics’ Kevin Garnett retired in 2016, but has received $5M annually with the rest of the contract ending this year. New York Mets’ Bobby Bonilla signed with the organization in the year 2000. Bonilla makes $1.19M annually ending in 2035. It happens in sports. We just haven’t seen it been done at such a high degree.
Just because it happens doesn’t mean it’s necessarily good for the sport. There is clearly no salary-cap in baseball. What that means is really good players are going to expect to get paid. Small-market teams won’t be able to cash in on potential Hall of Famers. Instead, they will be forced to get crafty like Billy Beane’s Moneyball A’s in 2002.
The Dodgers found a loophole in the MLB system and stretched it as far as the eye could see; made it visible to the world. This tremendous deferral has allowed them to sign more tremendous players like Yoshinobu Yamamoto (12 years, $325M), Tyler Glasnow (5 years, $136.5M), and Teoscar Hernández (1 year, $23.5M). Oh yeah, Hernández’s contract also has a $8.5M deferral from 2030-39. But wait, there’s more. An injured Clayton Kershaw has not made a decision if/where he will play next season. It is possible that the Dodgers will defer their most prized possession.
Other Dodger Deferrals
Mookie Betts signed a 12 year, $365M contract from 2021-33. $115M is deferred from 2033-44.
Freddie Freeman signed a 6 year, $162M contract from 2022-27. $57M is deferred from 2028-40.
162-0?
The Los Angeles Dodgers have won the MLB offseason after getting swept in the first round of last season’s playoffs. For Dodger fans, buckle up. If this team wasn’t under a microscope in previous years, there will be more pressure than ever to win it all with a potential All-Star lineup and bullpen this upcoming season. World Series or bust.
