SoxProspects News
|
|
|
|
Legal
Forum Ground Rules
The views expressed by the members of this Forum do not necessarily reflect the views of SoxProspects, LLC.
© 2003-2024 SoxProspects, LLC
|
|
|
|
|
Forum Home | Search | My Profile | Messages | Members | Help |
Welcome Guest. Please Login or Register.
Recent Posts
|
Post by wcsoxfan on Dec 13, 2023 2:42:21 GMT -5
Possibly (probably?) fake news but the depths of Twitter are suggesting Glassnow & Margot to LAD That would hopefully remove them from the Yamamoto sweepstakes Hopefully, but Dodgers reports have been consistent in their looking for 2-3 starters. They have the money.
|
|
|
Post by wcsoxfan on Dec 13, 2023 2:32:34 GMT -5
Didn't expect so much toxicity from a Bleacher report article. They're not the best, but they do have some good writers (more so covering the NBA) with contacts. Used to be (almost) as bad as Fansided when they first started, but Time Warner is investing heavy into their brand.
I imagine the writer took much of his information from others, but nothing in there that seemed outrageous.
|
|
|
Post by wcsoxfan on Dec 12, 2023 22:56:27 GMT -5
Red Sox could use more triple-A pitching depth.
Only confusing part here is: why didn't the Rays trade him for a PTBNL or cash? Both teams would have been better off.
|
|
|
Post by wcsoxfan on Dec 12, 2023 16:24:23 GMT -5
Time to reevaluate your tiers if Mayer and Yorke are in the same one Tier(1) simply means that they're all top-100 prospects according to Bleacher Report. Here is their full methodology:
|
|
|
Post by wcsoxfan on Dec 12, 2023 16:14:07 GMT -5
For anyone interested, here is the section of determination of salary which details deferred compensation:
|
|
|
Post by wcsoxfan on Dec 12, 2023 11:04:56 GMT -5
I believe a higher interest rate would mean a higher discount rate, which would lower the net present value of future payments. The Dodgers took advantage of that fact with one of the only professional athletes who can afford to defer the majority of his contract and still make tens of millions a year. Honestly, I hate the Dodgers for doing this but I admire them for it too. What you're referring to would have to be a change of past contracts collectively bargained by MLB and MLBPA in a new CBA. The discount is 5% unless the interest rate exceeds 7%.
|
|
|
Post by wcsoxfan on Dec 12, 2023 10:55:43 GMT -5
|
|
|
Post by wcsoxfan on Dec 11, 2023 19:40:25 GMT -5
Theoretically though isn't the purpose of the Luxury Tax supposed to be used as a way of increasing profit sharing throughout the league, not just a way to reign in the big boys? Isn't it supposed to be take from the rich give to the poor. If most of a contract is being deferred isn't that money that is never being touched by the "Luxury Tax" ? ie. meaning overage payments that the league will never see. Money that theoretically is supposed to go to small markets. If big market teams are still getting the big money players, but waiting to pay them when they retire, doesn't that defeat the whole purpose of the Luxury Tax. What about using these deferred payments to skirt draft pool amounts, international signing limits etc. The deferred payments are included in the CBT AAV, simply at a discounted rate of 5% per year to account for the decreased value of money. There is revenue sharing to do much of what you're referring to as well, the CBT amount is far less, but it being accounted for in that real AAV.
|
|
|
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.
|
|
|
Post by wcsoxfan on Dec 10, 2023 12:49:49 GMT -5
Does a deferred payment amount in say, 2040, count against the luxury tax cap in 2040? No, the deferred payments are all accounted for during the life of the contract at a discounted rate approximating the real present day value at the time the salary was earned.
|
|
|
Post by wcsoxfan on Dec 9, 2023 21:57:50 GMT -5
|
|
|
Post by wcsoxfan on Dec 9, 2023 20:16:39 GMT -5
I probably should have worded a bit better. What I'm referring to is the AAV in terms of the CBT - that isn't being manipulated. the '70mil AAV' which is being reported IS being manipulated in a sense, so that the agent can claim a '70mil per year contract!' and all of the sports media can go crazy. But in reality if it's a 70mil AAV contract which is worth 40-50mil in terms of CBT AAV, then it's a 40-50mil contract. So the headline is the only thing being manipulated. The team and player (hopefully) know the real value of the contract and it's reflected in the CBT AAV. The only benefit to the team is if they're short on short-term cash, or they think they can invest the money better than the used rate (which they likely can), but this doesn't help them in terms of the AAV. It is curious to consider whether the team can invest the money better than the player, in which case, both sides may benefit financially. This is helpful, thanks (and chaimtime, your edit was helpful as well)! I think my initial comment was also borne of the seemingly sketchy line between deferrals and additional years – in terms of using them as a means to suppress the AAV. Both here on this board and in other chats (fangraphs, mlbtraderumors, etc.), the question has come up for star players signing contracts that basically take them through the end of their career: why not tack on a whole bunch of extra years on the end to reduce the AAV? The response from the writer/moderator/whoever has generally been the same, that this would be seen as intentionally circumventing the spirit of the rules and the MLB would step in to prevent it. In a nutshell: $700M/10 years with massive deferrals to bring the AAV way down <- this is accepted $700M/30 years without the deferrals <- this would (presumably) be vetoed You can frontload option B if the player is worried about the future dollars being worth less, it wouldn't affect the AAV. Both are structured so that the player is getting handsomely paid well beyond the years when they can realistically expect to still be playing, one is just doing so with "official" contract years and the other is using deferrals.
Again, I'm not saying the Dodgers are doing anything wrong or that it's not good business – it just seems to be a disconnect in perception when the outcome is more or less the same.
No problem! I'm not a hockey fan, and therefore don't know the particulars, but what you're discussing regarding the fake years happened in the NHL (it became a trend) and had a similar response as you suggested, with the NHL cracking down.
|
|
|
Post by wcsoxfan on Dec 9, 2023 20:14:22 GMT -5
Assuming Ohtani has good business managers and agents, they would tell him the $550mil contract is worth more, if that were the case. So this would absolutely work (assuming the 550mil is worth more than 700mil in real-time value). However, the agent wouldn't be thrilled since the contract would appear less impressive. But this scenario is highly unlikely as the deferred payments are financially (not CBT) beneficial to the teams, so team 'B' would be better off with offering a similarly created contract but with a larger overall dollar number; which has the added bonus of making the agent happy. Well so that's my point I guess, let's say the net present value of Ohtani's $700 million contract is something like $550 million in 2024 dollars. Why does that matter at all? That rationale applies to all of these large contracts, and all of the bids on Ohtani. They all get spaced out over many years. I don't get why converting to 2024 is the 'true' value of the deal. I am sure the Dodger's bid was the largest, whether you use the nominal figure or the adjusted figure. So what's the point? Gotcha. It matters because the 'true value' is the value used to create the AAV for the collective bargaining tax charge. For a team over the CBT, the 15mil difference can be significant in reducing payments to MLB and avoid non-financial restrictions like reductions in draft picks. It's all about keeping that CBT number down. Now if we're talking about the Twins...it doesn't really matter. BUT the Twins likely have fewer funds available to pay players (like Carlos Correa) so the deferments help them sign players who they wouldn't be able to pay otherwise.
|
|
|
Post by wcsoxfan on Dec 9, 2023 20:05:57 GMT -5
So if I understand this correctly, it is the deferred amount only that is discounted to a present value, but is it discounted to the end of the contract term (10 years in Ohtani's case) or to the present day and this recalculated each year? Also is that discounted amount then divided by the original term and then added to the contract's scheduled payments during its active time? It's not recalculated each year as there's an agreed upon 5% yearly compounded interest applied to the deferred payments (until the CBA ends in 2026). Based on the excerpt I posted above, I believe the discount is applied to the deferred amount each year. So if Ohtani were to make 20mil in deferred payments in year 3 and he were to be paid for the deferred amount in 23 years (20 years after the payment was earned) then there would be 5% of compounded interest applied for 20 years. But this is just my understanding and I'm less than certain as the CBA wordage can be confusing on where it applies. If you're asking about deferment payments being paid during the time of the active contract, the answer is no - no deferments can be paid until after the years agreed upon by the contract have been completed.
|
|
|
Post by wcsoxfan on Dec 9, 2023 19:52:06 GMT -5
I've been pondering a way for teams to exploit the CBT using deferred payments and I think I've found one (sort of): Player receives a 5 year $105million dollar contract (as reported in headlines) but the actual breakdown is $1mil paid out per year with a $100mil payment coming in year 6 (after the contract has ended) with 20mil deferments from each of the 5 years of the contract. The total real money value of the contract should be $91.59mil, which equates to a $18.318mil AAV rather than the $21mil AAV without deferments. As OP said, unless I’m missing something, this is a way to manipulate headlines rather than AAV. If the real money value of the deferred 5Y/$105 mil deal is $91.59 mil with an $18.318 AAV, how is that different to the player than a simple 5Y/$91.59 mil deal with an $18.318 AAV?The only two areas where there’s potential benefit to the player, as far as I can see, are a) perception (gets to look like he got a bigger deal, which may be important), and b) personal preference (if he would rather have deferred money for some reason, or if he thinks the stock market and thus rates of return will collapse and there’s an arbitrage opportunity, which seems unlikely). It's different because a 5 year deal that pays $18.318mil each year is actually worth less in present day money because there's no accounting for inflation (or the 5% rate used) within the span of the contract. So in real current dollars that contract would only be worth $83.273mil. So a multi-year contract doesn't account for interest while a deferred payment contract does account for an interest rate of 5%. On a short contract this isn't a big deal, but on longer contracts it can be a very big deal. I must point out that I haven't seen this exploited, at least not egregiously (like the Hosmer and Beltre contracts were) so there may be a restriction which I'm missing - but it also could be that the type of contract I suggested would be irregular enough to concern agents and we just haven't seen it happen yet.
|
|
|
Post by wcsoxfan on Dec 9, 2023 18:03:18 GMT -5
So Ohtanti is getting the $700MM because of the interest, but it's actually like $500MM in todays dollar with $200MM interest over a period of years? I don't know all the numbers, but yes, that's exactly the idea.
|
|
|
Post by wcsoxfan on Dec 9, 2023 18:02:25 GMT -5
I've been pondering a way for teams to exploit the CBT using deferred payments and I think I've found one (sort of): Player receives a 5 year $105million dollar contract (as reported in headlines) but the actual breakdown is $1mil paid out per year with a $100mil payment coming in year 6 (after the contract has ended) with 20mil deferments from each of the 5 years of the contract. The total real money value of the contract should be $91.59mil, which equates to a $18.318mil AAV rather than the $21mil AAV without deferments. Typically deferments are spread over long periods of time, and aren't all lumped together, but I didn't find anything in the CBA which says this isn't allowed (let me know if I missed it). The key here is that long contracts don't depreciate the value despite the length, so the CBT AAV calculates a payments in year 5 the same way as it does in year 1, so the more a team can defer until just after the contract expires the more they can reduce the CBT AAV while not greatly affecting the player's compensation. Also, I made up a list of luxury tax loopholes a while back if anyone is interested - but be warned that almost all of the loopholes (the big ones at least) have been closed by subsequent CBAs: forum.soxprospects.com/thread/1392/luxury-tax-loopholes
|
|
|
Post by wcsoxfan on Dec 9, 2023 17:51:16 GMT -5
There was quite a bit of discussion regarding deferred contracts upon Ohtani signing his 700mil deal, so hopefully this thread can separate the discussion (for those uninterested) along with helping anyone who is unsure of how the deferments work regarding the Collective Bargaining Tax thresholds. The current CBA allows for 5% (assuming interest rates don't exceed 7%) compounded interest in calculating the value of deferred payments. This means that a player with 10mil of deferred salary in 2024 (at 2024 value) who will be compensated in 2034, will actually receive 16.289 (estimated) million. It may seem slightly strange to look at it this way though because we're used to seeing it the other way around. A player agent will report the above contract/payment at $16.289mil because it looks better for themselves AND it creates a better headline for sports reporters, but for CBT purposes it would count for only $10mil. There have been some calling shenanigans on the deferred payments as a way to manipulate the CBT, but in reality they're a way to manipulate the headline. The player, agent and team all know the real value (in current dollars) of the contract and this will be reflected upon the CBT calculations at the end of the season by MLB. This is public information but is often overlooked because it doesn't make the initial headline (but it has with Ohtani, which makes this an exception in the reporting). So the trick is on us the fans and not the CBT. As a warning: although I have done some accounting in my past, I am not a CPA and am in no way would consider myself a professional in this field. For those interested in the nitty-gritty, or who wish to form their own opinions, please read the below taken directly from the 2022-2026 CBA (the following excerpt is regarding deferred compensation directly, but there is more regarding this subject within the CBA - link below). Also, I haven't done this in a while, so let me know if I made a mistake with the math or in any other area. www.mlbplayers.com/_files/ugd/4d23dc_d6dfc2344d2042de973e37de62484da5.pdf
|
|
|
Post by wcsoxfan on Dec 9, 2023 17:17:54 GMT -5
Because of inflation. Purchasing power is the same whether it’s less now or more in the future. Not arguing with the time value of money, but the nominal dollar value matters. It's not like another team could have gone to Shohei and offered him 10/$550 and argued that it's the same purchasing power as $700 million. Assuming Ohtani has good business managers and agents, they would tell him the $550mil contract is worth more, if that were the case. So this would absolutely work (assuming the 550mil is worth more than 700mil in real-time value). However, the agent wouldn't be thrilled since the contract would appear less impressive. But this scenario is highly unlikely as the deferred payments are financially (not CBT) beneficial to the teams, so team 'B' would be better off with offering a similarly created contract but with a larger overall dollar number; which has the added bonus of making the agent happy.
|
|
|
Post by wcsoxfan on Dec 9, 2023 16:17:07 GMT -5
The only way it would be a manipulation of the AAV is if the deferral rate used by MLB is less than the actual value of the deferred salary. Based on reports of how a well managed deferment can be invested, then if anything the opposite is likely true. It may be a detriment to the team in terms of AAV. All it manipulates is the ability to promise an amount of money to a player which a team can't afford to pay presently and the ability of the team to invest that money at a rate which generate more value than the deferred payments. It manipulates the agents' to make public claims of achieving astronomical contracts as well as team cash flows, and may manipulate the players if they don't understand that the total value may be slightly less than the number reported, but it doesn't manipulate AAV in the way you're suggesting. You seem to have some knowledge in this area so maybe I can ask for a clarification – You're saying it doesn't manipulate AAV, but all of the sportswriters seem to be implying that it does. Joel Sherman said the contract is "said to have unprecedented deferrals to severely lower annual value". There are others saying the same, like Ken Rosenthal and Jon Heyman. If the deferrals make what should be a $70M AAV contract appear as only $40-50M for luxury tax purposes, is that not doing what I'm suggesting?
I probably should have worded a bit better. What I'm referring to is the AAV in terms of the CBT - that isn't being manipulated. the '70mil AAV' which is being reported IS being manipulated in a sense, so that the agent can claim a '70mil per year contract!' and all of the sports media can go crazy. But in reality if it's a 70mil AAV contract which is worth 40-50mil in terms of CBT AAV, then it's a 40-50mil contract. So the headline is the only thing being manipulated. The team and player (hopefully) know the real value of the contract and it's reflected in the CBT AAV. The only benefit to the team is if they're short on short-term cash, or they think they can invest the money better than the used rate (which they likely can), but this doesn't help them in terms of the AAV. It is curious to consider whether the team can invest the money better than the player, in which case, both sides may benefit financially.
|
|
|
Post by wcsoxfan on Dec 9, 2023 15:44:42 GMT -5
Deferred money is actually worth less, so it's not cheating to account for that. In practice, a lot of players seem to overvalue deferred money relative to what a bank would think, so it's often good business to give it to them. I know it's worth less, and I know it's not technically cheating – but it's surely a blatant manipulation of the AAV rules, no? Like if you take it to the extreme, you could make his salary $5M/year for 10 years and then jack up the deferrals to $1B+ (to account for the fact that the deferrals are worth less, which seems to be the case with this $700M contract anyway). I think most people would agree that's BS and MLB might step in, so where's the line?
The only way it would be a manipulation of the AAV is if the deferral rate used by MLB is less than the actual value of the deferred salary. Based on reports of how a well managed deferment can be invested, then if anything the opposite is likely true. It may be a detriment to the team in terms of AAV. All it manipulates is the ability to promise an amount of money to a player which a team can't afford to pay presently and the ability of the team to invest that money at a rate which generate more value than the deferred payments. It manipulates the agents' ability to make public claims of achieving astronomical contracts as well as team cash flows, and may manipulate the players if they don't understand that the total value may be slightly less than the number reported, but it doesn't manipulate AAV in the way you're suggesting.
|
|
|
Post by wcsoxfan on Dec 8, 2023 19:50:16 GMT -5
Anyone else envision Bob Nightengale camped out in front of Ohtani's home in a white utility van, with telephoto binoculars?
Hope Shohei owns a pair of ray bans, a wig and a trench coat.
|
|
|
Post by wcsoxfan on Dec 8, 2023 14:35:03 GMT -5
Hard to imagine a fairly reputable Dodgers website reporting this if it wasn't true.
|
|
|
Post by wcsoxfan on Dec 8, 2023 14:24:56 GMT -5
I don't get why they couldn't. They're a top 5 team in revenue. They reset their luxury tax and have some money off the books. The Red Sox were 14th in payroll last year. Red Sox 2023 payroll - $167,533,182 Yamamoto- 250/6 puts him at 35.5 Montgomery- 105/5 puts him at 21 Imanaga - 180/6 puts him at 30 That's an additional 86.5 million Payroll of 254 million. That puts them in 3rd in spending last year with all the taxes reset. This is just quick math, but they just saved money from Vedugo. In 2025 they're saving 7 million in Sale, then 20 the year after. Maybe there's a new big expense somewhere in there. I don't see those guys going for much more AAV than that. Henry needs to open his wallet. If Henry lands in the 230 million range then I'll be happy. The number 1 reason why this won't happen is that other teams want to sign good pitchers too. The number 2 reason is that this would be an awful use of resources. Also that is an absurd projection for Imanaga. I completely agree with all 3 of your points, but isn't it a bit unfair to combine them here? If the Red Sox offer Imanaga 180/6, you, I and most followers would be shocked and concerned, but it's almost sure to get Imanaga. Probably the same for Yamamoto at 250/6 (although it's hard to say for sure). Not a fan of blowing away all other offers to secure the player, but if there was a player and time to do it, it would be now for Yamamoto. You could argue the Red Sox did this last year with Yoshida as well, possibly to give them a leg-up on signing Yamamoto (although we don't know for sure whether another team was close).
|
|
|
Post by wcsoxfan on Dec 7, 2023 12:37:55 GMT -5
Do you mean payroll or just what the LT is going to be for this coming year? For their payroll #s I use the Red Sox Payroll Twitter account which seems to do a good job of tallying what they're at. It's not 100 percent correct to a T but it's close from what I've noticed. No I meant for payroll purposes, what the LT is going to be is easy to look up, but that elusive luxury tax purposes payroll is hard for me because I don't know which sites are the most trustworthy and the number is all over the place. I trust the opinions of many in here, and I just rejoined twitter the other day so I'm going to check them out. Thank you. If you're looking for accuracy, I'd suggest also using Cots Contracts still. Comparing the two sources will give you a better idea of accuracy and understanding of why they differ. They have both had errors in the past, but typically the differences are due to differing estimates which can vary substantially (especially with pre-arb player pools and estimated player benefits). Even if you choose to follow one over the other, it's good to have the 2nd for reference. legacy.baseballprospectus.com/compensation/cots/al-east/boston-red-sox/
|
|
|