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Post by notstarboard on Dec 11, 2023 18:34:52 GMT -5
If the Dodgers can pay a guy $68 million every year for a decade to not step on the field once for him, I don't want to hear anyone complain about contract length ever again. These teams can just cut these guys if it ever becomes a problem. The issue is AAV, not strictly paying someone not on the team. Ohtani's AAV while not playing for LA will be $0.
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Post by foreverred9 on Dec 11, 2023 18:36:18 GMT -5
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Post by scottysmalls on Dec 11, 2023 18:40:20 GMT -5
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Post by awalkinthepark on Dec 11, 2023 18:42:19 GMT -5
If the Dodgers can pay a guy $68 million every year for a decade to not step on the field once for him, I don't want to hear anyone complain about contract length ever again. These teams can just cut these guys if it ever becomes a problem. The issue is AAV, not strictly paying someone not on the team. Ohtani's AAV while not playing for LA will be $0. And I think those issues are overblown. If you need to go 2-3 years longer than you would like to get a guy, you can manage that salary being on your books if it goes sideways. Not to mention longer deals mean you have a reduced CBT hit during the early years of the deal.
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Post by foreverred9 on Dec 11, 2023 18:46:32 GMT -5
Oh shoot, I see it now, buried in the middle of the table. So take 24M off of that and they are at 218M off of a threshold of 237M. Spotracs has placeholders in for arb awards too. ADD: which they just updated, confirming the 218M.
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Post by kjkramer on Dec 11, 2023 18:48:52 GMT -5
So the Dodgers will now 100% sign Yamamoto by Friday is my guess. Then Roki next year?
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Post by Foulke_In_Athol on Dec 11, 2023 18:54:09 GMT -5
So why haven't teams used deferred money payments to sneak (I know they have to a lesser extent) under the tax threshold for years now. I mean it seems so obvious if you're a veteran who really wants to win just offer yourself to the best teams in the league that are up against the tax for 90% deferred money. The luxury tax hit is basically being decided by the players now. If your team needs a star closer at the deadline and they don't want to go over the tax renegotiate your deal, and become the hometown hero.
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Post by wOBA Fett on Dec 11, 2023 18:55:14 GMT -5
I seriously wonder what kind of security Ohtani has in that $680MM. There is no way Ohtani left that much money unsecured.
Also this kind of liability on the books could render the Dodgers unsellable in the event the Dodgers ownership group ever defaulted on their operations and the MLB took control over the franchise. That's a scary thought for the MLB and why soccer teams have "Financial Fair Play" limits on spending.
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Post by orion09 on Dec 11, 2023 19:01:20 GMT -5
One final way to look at this: Ohtani has averaged 8.7 fWAR over the last two years. Aaron Judge has averaged 8.5 fWAR. Judge was a year older than Ohtani will be, and got $40M AAV/9 years. If I had to guess, Ohtani will get something like $43.5M AAV over 10 or 11 years. Well, as it turns out, this wasn’t that far off.
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Post by scottysmalls on Dec 11, 2023 19:06:03 GMT -5
Imagine in 9 years the Dodgers ownership sells the team and the new owners have to write the retired Shohei Ohtani checks for $68M per year
(obviously that would be factored into the cost of any acquisition I just still imagine a frustrating exercise in practice)
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Post by wOBA Fett on Dec 11, 2023 19:11:35 GMT -5
Imagine in 9 years the Dodgers ownership sells the team and the new owners have to write the retired Shohei Ohtani checks for $68M per year (obviously that would be factored into the cost of any acquisition I just still imagine a frustrating exercise in practice) Bigger concern would be the Dodgers franchise racking up billions of unpaid deferred liabilities on future contracts then defaulting on the debt and sticking the MLB with a bankrupt franchise they can't find a seller for.
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Post by scottysmalls on Dec 11, 2023 19:15:34 GMT -5
Imagine in 9 years the Dodgers ownership sells the team and the new owners have to write the retired Shohei Ohtani checks for $68M per year (obviously that would be factored into the cost of any acquisition I just still imagine a frustrating exercise in practice) Correcting myself it sounds like my post was wrong: The Dodgers have to fund the money each year anyways (I assume that means setting it aside in some untouchable account or whatever), so the new ownership in this scenario would be on the hook for "only" the non-discounted amount or about $15M per year I believe.
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Post by wcsoxfan on Dec 11, 2023 19:34:20 GMT -5
A few notes on Ohtani's deferred payments:
1. Each year the Dodgers must provide funds for the deferred payments with a check of funding each quarter (correct via Norm). I'm guessing the Dodgers are restricted from removing funds from the accounts to assure it doesn't disappear. MLB and MLBPA are checking.
2. Ohtani got a 460/10yr deal - the 700/10yr report is likely from the agent and is less accurate (although he will eventually get the 700mil in a devalued state)
3. Any advantage the Dodger received in terms of CBT AAV would be from the later years in the contract having been devalued. In other words, there's no clear advantage for CBT purposes for the team to give Ohtani 700/10yr with deferrals rather than 460mil up front. BUT there may be a disadvantage in general on long-term contracts without deferments because the proceeding years (in this case years 2-10) are not being accurately devalued. I can't say for sure whether MLB has a method for handling this (there could be predetermined schedules of payments which are required).
4. Assuming the Dodgers can make greater than 5% on the money withheld for Ohtani, they could profit long term. I would expect this to be the case to a slight extent.
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Post by foreverred9 on Dec 11, 2023 19:40:56 GMT -5
This should be accounted for very similarly to how a pension would be accounted for.
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Post by iakovos11 on Dec 11, 2023 19:54:45 GMT -5
This should be accounted for very similarly to how a pension would be accounted for. Exactly. Just like a large company's pension has to be funded sufficiently to account for their future obligations, so must this "private pension" or deferred compensation arrangement be funded appropriately. It wouldn't be subject to ERISA, but I think there are IRS regulations and/or DOL regulations that would govern these type of plans.
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Post by redsoxfan2 on Dec 11, 2023 20:05:45 GMT -5
Ohtani and the Dodgers basically just killed baseball.
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Post by ephus on Dec 11, 2023 20:07:02 GMT -5
This should be accounted for very similarly to how a pension would be accounted for. the Dodgers are funding Ohtani’s annuity. It’s good old fashioned corporate compensation.
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Post by Oregon Norm on Dec 11, 2023 20:11:10 GMT -5
A few notes on Ohtani's deferred payments:1. Each year there's a check on the funds of the deferred payments to assure that the money is there. I'm guessing the Dodgers are restricted from removing funds from the accounts to assure it doesn't disappear. MLB and MLBPA are checking. 2. Ohtani got a 460/10yr deal - the 700/10yr report is likely from the agent and is less accurate (although he will eventually get the 700mil in a devalued state) 3. Any advantage the Dodger received in terms of CBT AAV would be from the later years in the contract having been devalued. In other words, there's no clear advantage for CBT purposes for the team to give Ohtani 700/10yr with deferrals rather than 460mil up front. BUT there may be a disadvantage in general on long-term contracts without deferments because the proceeding years (in this case years 2-10) are not being accurately devalued. I can't say for sure whether MLB has a method for handling this (there could be predetermined schedules of payments which are required). 4. Assuming the Dodgers can make greater than 5% on the money withheld for Ohtani, they could profit long term. I would expect this to be the case to a slight extent. Each quarter, actually. That's what's written in the Article you posted. And yes, it's explicitly to check that there's been no funny business with the cash. This looks like a full-employment program for financial advisers who can manage the risk and grow those funds so that the team benefits mightily from the deferment.
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Post by wOBA Fett on Dec 11, 2023 20:12:06 GMT -5
This should be accounted for very similarly to how a pension would be accounted for. the Dodgers are funding Ohtani’s annuity. It’s good old fashioned corporate compensation. Would trigger present income recognition for Ohtani under 409A
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Post by Oregon Norm on Dec 11, 2023 20:14:52 GMT -5
I seriously wonder what kind of security Ohtani has in that $680MM. There is no way Ohtani left that much money unsecured. Also this kind of liability on the books could render the Dodgers unsellable in the event the Dodgers ownership group ever defaulted on their operations and the MLB took control over the franchise. That's a scary thought for the MLB and why soccer teams have "Financial Fair Play" limits on spending. The Dodgers have to show that they've got investments that are growing to meet those future obligations. Anyone with enough money to buy the team will likely be savvy enough to have those investments transferred as part of the deal.
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Post by ephus on Dec 11, 2023 20:15:25 GMT -5
the Dodgers are funding Ohtani’s annuity. It’s good old fashioned corporate compensation. Would trigger present income recognition for Ohtani under 409A Come on, IRS, save baseball!
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Post by wOBA Fett on Dec 11, 2023 20:32:53 GMT -5
I seriously wonder what kind of security Ohtani has in that $680MM. There is no way Ohtani left that much money unsecured. Also this kind of liability on the books could render the Dodgers unsellable in the event the Dodgers ownership group ever defaulted on their operations and the MLB took control over the franchise. That's a scary thought for the MLB and why soccer teams have "Financial Fair Play" limits on spending. The Dodgers have to show that they've got investments that are growing to meet those future obligations. Anyone with enough money to buy the team will likely be savvy enough to have those investments transferred as part of the deal. Hopefully those financial investments aren't overly risky in an attempt to make more money because $680MM in unpaid obligations is quite the albatross on any set of financial books. Also makes you wonder if MLB does implement "Financial Fair Play" limits on spending to prevent other clubs from incurring massive debt in order to have liquid cash to invest in the market.
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Post by Chris Hatfield on Dec 11, 2023 21:48:25 GMT -5
If Ohtani had signed for 10/460 a week ago would anyone have cried shenanigans?
They're just putting the money in trust for him, essentially.
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Post by crossedsabres8 on Dec 11, 2023 22:57:18 GMT -5
This is pretty genius by Ohtani's team because he simultaneously gets to be the highest paid athlete of all time and also look like he's altering his contract for the betterment of the team.
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Post by wOBA Fett on Dec 11, 2023 23:16:32 GMT -5
If Ohtani had signed for 10/460 a week ago would anyone have cried shenanigans? They're just putting the money in trust for him, essentially. Ohtani better hope the owners that purchased their team with a TV deal don't get aggressive with those trust investments.
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