Turns out two-way superstar Shohei Ohtani’s “crazy” record $700 million Dodgers deal isn’t so crazy after all.
It may not be crazy, but with stunningly immense deferred monies in the deal, it certainly is wild.
Ohtani’s new contract is still a record, but deferrals his own agency at CAA accurately called “unprecedented,” were revealed to be $68 million of his $70 million annual salary — about 97 percent — and make the deal a lot more sensible for the Dodgers than first believed.
Yes, that’s right, the two-time MVP will be paid $2 million a year during the contract’s term, from 2024-2033, then $68 million a year the following 10 years, from 2034-43.
Since no interest will be paid by the Dodgers on the deferred monies, the contract is being valued at $460 million or $46 million a year by MLB for CBT (competitive balance tax) purposes based on an expected 4 percent interest rate. (If rates are higher, it will be turn out to be worth less than that.) Fabian Ardaya of The Athletic first reported the amount of the deferrals.
The value is calculated even lower, at $28 million a year, for Qualifying Offer purposes (where MLB figures the top 125 salaries to determine qualifying offer values), since a 10 percent interest rate is used.
The deferrals will aid the juggernaut Dodgers’ ability to be competitive at least during Ohtani’s 10-year term, as the cost for him is less than that of a utility player. (The Dodgers — winners of the NL West 10 of the last 11 years, don’t need all that much help either.)
The Dodgers are known as a team that uses deferrals, but word is that Ohtani was more than willing to do large deferrals to help the team do more — at least for the 10 years he is contracted to be there.
The Dodgers have been employing deferrals in recent years and have significant (albeit much smaller) deferrals in previous deals for superstars Mookie Betts and Freddie Freeman. Betts’ $365 million deal was valued at closer to $290 million at the time, for instance. They also sought deferrals in offers for other superstars they pursued, including Gerrit Cole, who wound up signing with the Yankees for $324 million over nine years, with no deferrals.
There is no rule stipulating any limit on deferrals, so the deal is allowed by rules, an MLB person said. The Ohtani deal has yet to be announced, so it’s not yet official.
Ohtani’s off-field earnings, estimated at close to $50 million a year, allowed him to agree to such steep deferrals. Ohtani has never seemed to be about the money, anyway, as he knew he’d make a fraction of his worth for several years when he first joined MLB six years ago as an Angel.
The deal is still a record, however they look at it, as the previous record was longtime Ohtani teammate Mike Trout’s $426.5 million deal, and previous free-agent record was Aaron Judge’s $360 million deal.
It isn’t known what the other teams bid for Ohtani, but it wouldn’t be surprising if other teams offered as much or more than a $46 million average salary. The Ohtani derby was unusually private but the belief all along was that the Dodgers had an advantage as the most consistent winner in the game that also happened to be not far from his backyard — it’s 46 miles from his Newport Beach home to Dodger Stadium.
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