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For what it’s worth, in the past 23 years the Cardinals have been in the World Series 4 times and have won it twice, and the Dodgers have been in the World Series 3 times and have won it once.
For anyone wondering if MLB will challenge or cancel Ohtani's contract: The answer is unequivocally no. There is a specific article in the collective-bargaining agreement that addresses this. And it's very clear: Deferred money is limitless — even $680 million of $700 million. pic.twitter.com/DGNK0JulED
— Jeff Passan (@JeffPassan) December 11, 2023
Agreed, mud, but the past is the past and times have changed.
In the last eight years, the Cards have missed the playoffs four times and made it four times. Two were first place finishes and two were Wild Cards. In their 15 post-season games, they lost 11 and won just one series of five.
In the last eight years, the Dodgers made the playoffs all eight years. (In fact, their current streak is 11 years.) In seven of the eight years, they finished in first place. (The other year, they were one game out of first.) They won 45 of their 84 playoff games and 11 of 18 series in that time. That includes playing in three World Series and winning one.
Brian and Mud,
Statistics can be a funny thing depending on the point you are trying to make, eh?
Anyone paying attention knows that the last time the Cardinals had a truly contending team was the first half of the 2015 season – before injuries and age (and the Cubs) caught up with that group.
Since then there was 1 appearance in the NLCS (2019) and not much else and even that ended with a sweep.
Times do change and these days, for better or worse, the rate at which things change is accelerated due to ‘technology’.
We are sitting on 8 years of pretty much blah baseball by St. Louis standards and – it’s time for another run of truly contending baseball.
Here is more on Passan’s article that includes more details. Basically, according to MLB’s CBT rules on deferrals this is a $460M contract, not a $700M contract. It seems like accounting tricks to me that will need to be addressed in the next CBA. The bottom line is that the Dodgers are only paying Ohtani $2M per year for the next ten years so yes they can obviously afford to acquire several more big time players if they want to.
Why Shohei Ohtani's Contract Structure Is Not A Luxury Tax Dodge https://t.co/3lbEnQc6As pic.twitter.com/D2tG5novGX
— MLB Trade Rumors (@mlbtraderumors) December 12, 2023
Must be a new loophole with the most recent CBA?
I see on Cot’s we didn’t get Arenados 30mil deffered at a lower CBT tax total, but that contract was worked before the most recent CBA.
I heard them talking on MLB Radio this morning about the Ohtani contract. If I understood them correctly, they use the present value of the deferred money and come up to the $460 million figure. For the luxury tax, that would be a $46 million hit every year for the next 10 years.
Forsch31, heard the same and it makes sense to me from a contract valuation point of view. Shirt-term, the Dodgers get a better answer from a CBT perspective. However, the Analyst did make the point that the Dodgers will be shelling out $68M a year in deferred money for ten years to a guy who will not be playing. So, they still have to fund the contact in these years without a hit to CBT.
The other interesting point in this conversation – Ohtani made this offer to all suitors. The Dodgers were not alone in evaluating this proposal.
So Ohtani is making about the same baseball salary in 2024 that Paul DeJong is? Something is wrong the system.
Actually, if I understand correctly, the Dodgers have to fund 95% of the deferred money at the beginning of the contract. They can’t put off the expense until the time the deferrals start.
By fund, do you mean place the funds in a custodial account? That is an account that holds the funds until time of distribution?
I basically have been trying the last few days to write what this article says.
Jeff Gordon wrote:
“The Dodgers excel at player development. They hoard prospects. They trade shrewdly. They have financial resources few teams can match, yet they spend them wisely. They navigate the collective bargaining agreement artfully. The franchise does everything well, which explains why it has reached the past 11 postseasons and won 100 or more games in five of the past six seasons.”
Gordo: The smart got smarter when the Dodgers landed Shohei Ohtani https://t.co/XWAg62qMSq
— STL Cardinals News (@STLCardsNews) December 13, 2023
So Ohtani is making about the same baseball salary in 2024 that Paul DeJong is? Something is wrong the system.
Haha, gscott! You must be forgetting PDJ plays very good defense at the most important position on the field, while Ohtani is just a DH.
Now if Paulie could somehow figure out how to get those 10 additional years of $68 million dollar annual payments down the road…..
By deferring, Ohtani simply did what all of us everyday folks have to do with social security. Do I take a lesser payment beginning at age 62, or do I wait until 70 and get larger payments, i.e., when am I going to die? Ohtani must be thinking he’s not going to kick the bucket over the next 20 years. Although, I suppose if he does, his estate will still collect all the deferred money, unlike what happens with social security. But hey, he’s not even married, is he? His dog will be set for life though.
forsch31 said:
Actually, if I understand correctly, the Dodgers have to fund 95% of the deferred money at the beginning of the contract. They can’t put off the expense until the time the deferrals start.
and 1964cards then asked:
By fund, do you mean place the funds in a custodial account?
Here’s my clarification based on wording in the current CBA. I also read an LA Times article which says pretty much the same.
Deferred money has to be funded by the second July 1 after the season in which it is earned. So it’s done on an annual basis, not all at the beginning. Plus, the present value of the deferred amount is what must be funded, not the full deferred figure.
So let’s look at 2024 when Ohtani will earn $68 million in deferred money (deferred until 2034). That has a present value of approx $46 million today. So, the Dodgers must fund just the present value by July 1, 2026, to cover the $68 million they’ll have to pay Ohtani in 2034. Then, you do the same thing again the next year, i.e., Ohtani will earn $68 million in deferred money in 2025 that will actually be paid in 2035.
The funding for the deferred payments has to be in cash or readily marketable securities.
I can take a guess at where the “95%” figure came from that forsch31 stated. The CBA stipulates present value calculations use a 5% annual discount rate. You can think of that as an annual percentage rate at which a given amount of of money loses purchasing power (sort of like an inflation rate, or an interest rate at which your money can grow over a year). A 5% annual discount rate applied over a 10-year deferment period, like we are talking here, will take the present value way below 95% of the deferred amount.
One could easily write the exact same praise about the Tampa Bay Rays – except for the results. The reason the Rays haven’t made the playoffs 11 years in a row and haven’t won more than 100 games EVER is very simple – $$$$$$. They don’t have the resources (or don’t choose to use them) to add the big bucks guys from the outside to push themselves to the top.
Today, the Cards are a lot closer to the Rays than the Dodgers, IMO. (Which is how this whole discussion began long ago. Historically, yes, the Cards and Dodgers are similar in many ways, but recently, no way. Not even close.)
On second thought, maybe not the Rays, either. TB has made the post season five years in a row after missing five straight in a much tougher division than St. Louis plays in.
Ohtani contract valuation: $437,830,563*
*this is how the union is valuing it now but there are obviously different ways to figure it based on interest rates
the number remains $46M a year for CBT purposes even though this is $43.8M
— Jon Heyman (@JonHeyman) December 13, 2023
Shohei Ohtani, Dodgers
$437,830,563/10$70M/yr ($68M/yr deferred w/o interest, payable $68M/yr each July 1 of 2034-2043) – 2024-2033.
If specific change in personnel, Player may opt out at year’s end
Interpreter. Suite at home. Player will donate to club charity. Full…
— Jon Heyman (@JonHeyman) December 13, 2023
The personnel mentioned are reportedly the principal owner and PBO.
The 46mil annual CBT amount on Ohtani’s salary is in line with the Trout, Rendon, Betts, etc., amounts. Ohtani’s is just the next guy to raise the ceiling a significant AAV amount.
The Dodgers do not need Ohtani’s cash to fund their roster. It’s easier to list the past seasons when they didn’t exceed the CBT limit. Guggenheim could go all Cohen on the league if they chose to.
Ohtani’s idea, so they have a long term strategy too. Residency? Taxes? Who cares right? That’s his business model.
The baseball impact is they added 46mil to their CBT total on one player for 10yrs and the contract will look good for 5-ish yrs. Probably good enough for LA. They eat negative field value as good as anyone, especially when it’s a cash cow for the org in all aspects.
One could easily write the exact same praise about the Tampa Bay Rays – except for the results. The reason the Rays haven’t made the playoffs 11 years in a row and haven’t won more than 100 games EVER is very simple – $$$$$$. They don’t have the resources (or don’t choose to use them) to add the big bucks guys from the outside to push themselves to the top.
I agree with this comparison. And where did the current Dodger PBO come from? Of course the Rays.
But while the lack of $$$$$ may have prevented the Rays from making the playoffs 11 years in a row, that doesn’t apply to the Yankees, Mets, Red Sox, and Angels. Those teams don’t do all of the other things necessary to build a consistent winner.
So let’s look at 2024 when Ohtani will earn $68 million in deferred money (deferred until 2034). That has a present value of approx $46 million today. So, the Dodgers must fund just the present value by July 1, 2026, to cover the $68 million they’ll have to pay Ohtani in 2034. Then, you do the same thing again the next year, i.e., Ohtani will earn $68 million in deferred money in 2025 that will actually be paid in 2035.
Euro, I heard on a podcast that the way it works is that the entire deferred amount has to be placed into an account once a year for MLB to view. In this case it would be $680M. Supposedly, the team could move the money out of that account the very next day and put itwhereever they wanted. I think I saw this on a podcast hosted by David Samson, former president of the Marlins. He claims this is why the Dodgers are one of the very few teams who could pull this off because not every team would have $680M lying around for this kind of purpose even for just one day.
Here is the link to the podcast. The remarks about funding deferred compensation start around the 12:30 mark but the entire video is worth a watch.
Ohtani’s cap hit, minus his salary, has the CBT overage taxes covered for 10 seasons. Build what you want.
gscott, a lot of fail in what that guy is saying. Admittedly I just listened to the part you pointed me to, but that part is certainly false if the current CBA is to be followed. After that, I didn’t feel compelled to listen to Samson bellow any longer.
First, some contract facts, regardless of what the CBA says. These are vital to this discussion. Ohtani’s contract earnings by year are as follows.
2024 = 70MM (68MM deferred to 2034)
2025 = 70MM (68MM deferred to 2035)
2026 = 70MM (68MM deferred to 2036)
2027 = 70MM (68MM deferred to 2037)
2028 = 70MM (68MM deferred to 2038)
2029 = 70MM (68MM deferred to 2039)
2030 = 70MM (68MM deferred to 2040)
2031 = 70MM (68MM deferred to 2041)
2032 = 70MM (68MM deferred to 2042)
2033 = 70MM (68MM deferred to 2043)So, each of the 10 years in the contract has a 10-year deferment of $68MM. Today’s present value of $68MM deferred by 10 years is $44MM, when calculated per the factors specified in the CBA (e.g., 5% discount rate). When you add $44MM to the $2MM they will actually pay him each contract year, you get $46MM. Multiply that by 10 years and you get $460MM. That’s why this contract is spoken of as a $460MM contract, and not a $700MM contract, when talking about things like the luxury tax and funding of the deferred portion. That’s why the present value of the deferments is 10 X $44MM = $440MM, not $680MM.
Now let’s look at a couple of relevant CBA references that are discordant with the podcaster’s statements. This is from Article XVI of the 2022 – 2026 Basic Agreement (CBA), beginning on page 89. The bold emphasis is mine. It says deferred compensation:
“…..must be fully funded by the Club, in an amount equal to the present value of the total deferred compensation obligation, on or before the second July 1 following the championship season in which the deferred compensation is earned.”
The above CBA quote is key to understanding how the podcaster errs in two ways. First, it’s not the total $680MM deferment that must be funded. It’s the present value ($440MM) of the deferment. Second, it’s not all funded upfront at the beginning of the contract. It’s funded year-by-year since that’s the way Ohtani’s contract is structured. If Ohtani’s contract deferment was for all $680MM to be paid in 2034, then yes, it would all be funded in 2026. That’s the example the podcaster gave, all deferred money was paid in one year after the contract in his hypothetical. That’s not how Ohtani’s contract is structured.
The next absurd thing you heard in that podcast is the Dodgers would have to “show” MLB the funding of $680MM (wrong) for just one day a year (wrong again), and then could do whatever they want with the money (wrong yet again). Here comes that pesky CBA Article XVI again. Since this post is already so long, I’ll put it in a separate post to follow.
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