Ohtani to Dodgers

[Fear The Chorizo]

27 minutes ago, sveumrules said:

From the reporting on the Ohtani contract it sounds like MLB has proposed deferral limits in the past, but the union has rejected them.

The easy fix would seem to be to continue to allow deferrals, but ditch the practice of applying the "present day value" towards the CBT.

Maybe the owners will present something similar in the next round of negotiations if this kind of thing continues to happen beyond singular talents such as Shohei.

I think it has to, and it really wouldn't surprise me if it's the other huge market clubs that don't have a quarter of a billion dollars coming into their coffers each year just from TV money that would spearhead it.  

I really could care less how a team moves around actual dollar expenditures to benefit/reduce income or payroll tax burdens paid to entities outside the league (i.e., government) - but for the spirit of the competitive balance luxury tax system to actually work across MLB, which has very marginal revenue sharing in the grand scheme of things, guaranteed salaries, and no salary cap, exploiting the current luxury tax reductions with deferrals at this type of scale that wind up being paid long after a player is on the field absolutely can't become the norm when it allows teams to stockpile silver slugger-type talent in its prime all over the diamond without having to pay the luxury tax penalties to the rest of the league that were designed to prevent an organization from being able to do this longer than 1-2 seasons.

[CheezWizHed]

1 hour ago, Fear The Chorizo said:

Will the deferred money actually hit the LAD luxury tax payroll down the road though?  Even if it fully does, that $20-30m annual accounting value 10-20 yrs from now is much less of a hit to those luxury tax years because of inflation and rising payroll limits.  It's simply not right and more evidence of a broken financial system mlb organizations operate in.

I don't know if it does hit the luxury tax payroll.  I would hope so.  If not, then that should be fixed.

But realize LAD's budget is what it is.  They are spending future money.  No one is going to give him $70M/year.  They effectively gave him something like $46M/year (present value vs. future value for those economic majors in the room).  Perhaps the MLB could do that... but as long as the $$ LAD spends is on their luxury tax threshold the year they spend it, I'm ok with it.

If I get a zero interest loan, I'm ok with buying a $40k car and pay it off the next 20 years (well, maybe not that long, but you get my drift).

 

[Fear The Chorizo]

31 minutes ago, CheezWizHed said:

I don't know if it does hit the luxury tax payroll.  I would hope so.  If not, then that should be fixed.

But realize LAD's budget is what it is.  They are spending future money.  No one is going to give him $70M/year.  They effectively gave him something like $46M/year (present value vs. future value for those economic majors in the room).  Perhaps the MLB could do that... but as long as the $$ LAD spends is on their luxury tax threshold the year they spend it, I'm ok with it.

If I get a zero interest loan, I'm ok with buying a $40k car and pay it off the next 20 years (well, maybe not that long, but you get my drift).

 

I don't like that comparison, because the Dodgers are able to spread out what it costs to sign a generational talent playing for them for the next 10 years over double that amount of time, and did so in a way to also afford adding additional generational talents around an already loaded team because they're pushing that cost far enough down the road that it won't matter to their future payroll bookkeeping.  The fact they were able to defer actually paying about 97% of the contract value in actual dollars to Ohtani until after the term covering years he plays expires is insanity.

More specific to your comparison, I'd be ok with this type of contract if the Dodgers were forced to have Ohtani in their lineup for the next 20 years and suffer the onfield issues that running out a middle aged man would have on their onfield results, if that's how they elect to spread out the costs from a competitive balance luxury tax perspective.  Instead, if nothing changes they'll just have the next 'best player ever' signed and ready to take Ohtani's roster spot well before his current 10 year playing deal expires.

[owbc]

21 minutes ago, Fear The Chorizo said:

I don't like that comparison, because the Dodgers are able to spread out what it costs to sign a generational talent playing for them for the next 10 years over double that amount of time, and did so in a way to also afford adding additional generational talents around an already loaded team because they're pushing that cost far enough down the road that it won't matter to their future payroll bookkeeping.  The fact they were able to defer actually paying about 97% of the contract value in actual dollars to Ohtani until after the term covering years he plays expires is insanity.

More specific to your comparison, I'd be ok with this type of contract if the Dodgers were forced to have Ohtani in their lineup for the next 20 years and suffer the onfield issues that running out a middle aged man would have on their onfield results, if that's how they elect to spread out the costs from a competitive balance luxury tax perspective.  Instead, if nothing changes they'll just have the next 'best player ever' signed and ready to take Ohtani's well before his current 10 year playing deal expires.

I don't think that's true. Between Ohtani, Freeman, and Betts, the Dodgers are pushing a billion dollars (in today's dollars) in dead weight in the 2035-2045 timeframe. 

Additionally, MLB salary inflation has slowed considerably in recent years and will likely continue to be slow moving forward since the era of lucrative RSN deals is pretty much over. 

A top-5 payroll in 2010 was in the $150-$200M range. These days it is somewhere around $250M. In 10-15 years it might be $350M-$400M at most (assuming that big markets like LA can still extract $200M/year from their local TV rights, which is far from guaranteed). 

So the Dodgers have potentially tied up nearly a quarter of their projected payroll in the late 2030s. That's not enough to make them a poverty franchise, but it would absolutely cause issues. Unless they are even richer than we think they are, which I guess is totally possible given their ridiculous TV contract. 

 

[CheezWizHed]

2 hours ago, JosephC said:

There have been a couple media outlets that have reported that Ohtani could avoid paying the high California taxes.  See the following:

https://www.usatoday.com/story/sports/mlb/dodgers/2023/12/11/shohei-ohtani-contract-los-angeles-dodgers-heavy-deferrals/71885939007/

Yet, considering Ohtani earned about $40 million in endorsements last year, easily a record for a baseball player, it’s hardly as if it will affect his modest lifestyle. Besides, deferring such a massive amount of money saves Ohtani from paying about 13.3% in California state taxes. If he moves from California after his contract expires, he’ll avoid the high taxes. Effective on Jan. 1 the state income tax rate increases to 14.4%.

Ohtani doesn't earn the 680 million dollars of deferred money until he is actually paid that money, and he won't be paid that money until the current contract expires...and he may no longer be a resident of that state from that date forward.

Maybe the multi-millionaires have a back door.  Us poor schlubs have to pay it in the state where it is earned (unless the states have reciprocity, but I doubt that with CA). More likely, it is media click-bait.

[CheeseheadInQC]

32 minutes ago, CheezWizHed said:

Maybe the multi-millionaires have a back door.  Us poor schlubs have to pay it in the state where it is earned (unless the states have reciprocity, but I doubt that with CA). More likely, it is media click-bait.

I had the weird experience of working in Iowa but paying taxes in Illinois where I lived but when I was briefly furloughed during the pandemic applying for unemployment benefits through Iowa. Living and working in a border region for a company that operated in both states could get a bit confusing paperwork-wise.

[endaround]

5 minutes ago, CheeseheadInQC said:

I had the weird experience of working in Iowa but paying taxes in Illinois where I lived but when I was briefly furloughed during the pandemic applying for unemployment benefits through Iowa. Living and working in a border region for a company that operated in both states could get a bit confusing paperwork-wise.

There tends to be reciprocity agreements with states but athletes get treated terribly and so often are exempt from that.  Again that is less a burden for top leagues though still annoying but impacts minor league baseball players. No reason minor league players can't get unemployment benefits.

[igor67]

Considering how allergic to debt for stadiums MLB is having these very large future debt obligations is really not good for the league as a whole. And the amount of the deferral is so much more extreme in this case. Having your big ticket franchises hurting their future sale price isn't the look MLB is going for either. 

[Axman59]

5 hours ago, JosephC said:

The Dodgers are still paying him 700 million, why should 34% of that be exempt?

Because the CBA says it is.

[Axman59]

I'm not sure why anyone on this board cares what state, if any, Ohtani pays taxes to or when.

[BlazingGunz]

Had to share this. It’s too good.  

 

[DR28]

1 hour ago, BlazingGunz said:

Had to share this. It’s too good.  

 

Getting Glasnow and Margot, not Arozarena.

[brewcrewdue80]

19 hours ago, JosephC said:

?

700 million does not equal 460 million.  Saying Ohtani is getting paid 700 million, but that 700 million isn't really 700 million...it's really only 460 million because he will lose out on capital gains/interest/dividends that he would have earned from 2024-2033, does not change the fact that the Dodgers will still be paying him 700 million dollars.  If the Dodgers are paying him 700 million dollars, then it stands to reason that the Dodgers should be "charged" 700 million dollars as part of the competitive balance tax.

Right. And having 700M earmarked for his future has to provide him all sorts of options with money credited to him through banks/investing to use to earn(or lose) years ahead to return some(all)? of that money he's losing over time waiting for it.

[tmwiese55]

23 hours ago, Axman59 said:

I'm not sure why anyone on this board cares what state, if any, Ohtani pays taxes to or when.

I mean yea I general I agree, don't break the law and do whats allowed, more power to him.        But from a big pic perspective and all that, rich people should actually pay their taxes instead of finding loopholes and skirting them while us normal people can't.  I think its somewhere in the 400 billion range per year is scammed out this way while we run up a massive deficit for the future to deal with.    Obviously a topic for a way different board though. 

ETA: I think the 400 number is actually illegal stuff but that we don't have the manpower to do anything about.  Number would be even higher (I think a trillion) by closing loopholes and legal things like this and what big corps do. But I may have misread

[owbc]

16 hours ago, Axman59 said:

I'm not sure why anyone on this board cares what state, if any, Ohtani pays taxes to or when.

Isn't the entire concept of taxpayer funded stadiums based on the idea that a big chunk of that investment is going to come back via player salary taxes? 

[Soupbone]

This may have been answered somewhere already. If so I apologize but the questions I have are this. If Ohtani is injured and can't play don't most teams have insurance to cover that? Also, if he never returns to the game and insurance pays the bill, does his salary still count against the CBT?

[torts]

Ohtani apparently has an opt out if max walter loses majority stake in team or andreew Friedman loses his role as prez of Baseball Ops

[jerichoholicninja]

8 hours ago, tmwiese55 said:

I mean yea I general I agree, don't break the law and do whats allowed, more power to him.        But from a big pic perspective and all that, rich people should actually pay their taxes instead of finding loopholes and skirting them while us normal people can't.  I think its somewhere in the 400 billion range per year is scammed out this way while we run up a massive deficit for the future to deal with.    Obviously a topic for a way different board though. 

Rich people don't find loopholes. They create them by buying politicians to make tax laws in their favor.

[MVP2110]

2 hours ago, torts said:

Ohtani apparently has an opt out if max walter loses majority stake in team or andreew Friedman loses his role as prez of Baseball Ops

That's wild

[Team Canada]

7 hours ago, Soupbone said:

This may have been answered somewhere already. If so I apologize but the questions I have are this. If Ohtani is injured and can't play don't most teams have insurance to cover that? Also, if he never returns to the game and insurance pays the bill, does his salary still count against the CBT?

They probably have some sort of catastrophic insurance, yes, but generally that's not something that's ever public knowledge, much less the terms. I don't imagine there's any scenario where his salary doesn't count, unless he retires and the rest of the contract becomes void.

[JosephC]

The thing that gets lost in all of this is what a terrible contract this is from the "baseball value" perspective.

While UCL damage certainly isn't what it once was, and often pitchers come back with increased velocity after Tommy John #1, the success rate of pitchers after TJ #2 is a bit more uncertain.

https://www.mlb.com/news/pitchers-to-have-tommy-john-surgery-twice?partnerID=web_article-share

And I would argue that many of the listed "came back strong" have actually been pretty average.  Eovaldi has the big name, and since the second TJ he has had two 3+ WAR seasons, but in the six seasons following TJ #2 he has averaged less than 2 bWAR per season and is almost a lock to miss at least a bunch of starts.  Daniel Hudson got shipped to the bullpen and has been a 1.8 bWAR pitcher over the last 10 years (that's not 1.8 bWAR per season, that's a total of 1.8 bWAR over 10 season).  Chris Capuano after 2008, wow, I cannot believe the guy even suggested that.  Capuano was an annual 0.35 bWAR player following his second TJ.

I wouldn't be surprised if Ohtani comes back far stronger than any name on this list, but I'd bet just about anything that one more arm injury will end his days as a pitcher.  Doesn't matter if it's a third TJ or a significant shoulder injury, that arm will likely be shot after the next one...which is pretty likely to happen since he will already have had has second significant elbow injury at the age of 28.

No doubt the guy is a great hitter, but over the last 3 years his average annual bWAR/fWAR as a hitter is pretty much right at 5 WAR.  I have no argument, none whatsoever, if you want to argue that his bat makes him a annual 40 million dollar player for 2024 and the next few seasons after that.  But 70 million per year is a ridiculous stretch.

Taking a complete guess, I'd project Ohtani's WAR values over the next 10 years as follows:

2024 = 5.5 WAR as a hitter = 5.5 WAR

2025 = 5.0 WAR as a hitter + 3.5 WAR as a pitcher = 8.5 WAR

2026 = 5.0 WAR as a hitter + 4.0 WAR as a pitcher = 9.0 WAR

2027 = 4.5 WAR as a hitter + 2.5 WAR as a pitcher = 7.0 WAR (predict the next arm injury happens in the last third of this season)

2028 = 4.0 WAR as a hitter = 4.0 WAR

2029 = 4.0 WAR as a hitter + 0.5 WAR as a pitcher = 4.5 WAR (they put him on the mound but due to mediocre performance, decide his days as a pitcher are over)

2030 = 3.5 WAR

2031 = 3.5 WAR

2032 = 3.0 WAR

2033 = 2.5 WAR

51 WAR total.  $13.72 million spent for every 1 WAR received.  That's pretty bad from a $/WAR perspective.  Just pulling one example out of the hat, Fangraphs had Yelich's 2023 value at 33.1 million after a 4.1 WAR season....33.1/4.1 = 8.07 million per WAR.  And as people who follow this will know, dollars / WAR has not increased in quite some time, in fact has decreased as maybe 5-7 years ago a WAR was considered to be worth 9 million.  And that number is based on big-market baseball, as obviously the small-market teams are not going to jump into the free agent markets and give a 3 WAR player a contract that is worth 24 million per season.

There will be the talk from the media that the Dodgers have unlimited funds so it doesn't matter, but it's still 700 million tied up in one guy that could have been spent on different players that returns a better dollar/WAR ratio.  I also wouldn't buy the idea that this will drum up so much more interest in Dodger baseball, as we are not talking the Brewers or Royals here, this is the Dodgers and last time I checked they didn't seem to have any problems selling tickets (or anything else).

This contract has little chance of being a Strasburg or Chris Davis disaster, but I'm pretty confident that in 2034 we will be looking at this contract and saying that it was a pretty bad deal from a "baseball value" perspective.

[brewerfan82]

1 hour ago, JosephC said:

51 WAR total.  $13.72 million spent for every 1 WAR received.  That's pretty bad from a $/WAR perspective.  Just pulling one example out of the hat, Fangraphs had Yelich's 2023 value at 33.1 million after a 4.1 WAR season....33.1/4.1 = 8.07 million per WAR.  And as people who follow this will know, dollars / WAR has not increased in quite some time, in fact has decreased as maybe 5-7 years ago a WAR was considered to be worth 9 million.

I guess you're set on not believing that this is really a $460M deal that's only $700M on paper because of the deferrals? Otherwise your calculations would have come to almost exactly $9M/WAR for his contract.

[Fear The Chorizo]

2 minutes ago, brewerfan82 said:

I guess you're set on not believing that this is really a $460M deal that's only $700M on paper because of the deferrals? Otherwise your calculations would have come to almost exactly $9M/WAR for his contract.

It's a $700M deal - if it was actually a $460M deal, it would be reported as a $460M deal.  Deferrals and other accounting gimmicks to skirt the luxury tax or not, dude is set to be paid $700M dollars after signing on the dotted line...I guess unless the owner or Friedman leave, or some other random occurrence that leads to an opt-out option squirreled deep into the contract legalese.

 

[sveumrules]

1 minute ago, Fear The Chorizo said:

It's a $700M deal - if it was actually a $460M deal, it would be reported as a $460M deal.  Deferrals and other accounting gimmicks to skirt the luxury tax or not, dude is set to be paid $700M dollars after signing on the dotted line...I guess unless the owner or Friedman leave, or some other random occurrence that leads to an opt-out option squirreled deep into the contract legalese.

 

It's been reported as both.

Initial reporting of $700M for clicks. OMG OHTANI GOT HOW MUCH?!?!?! 

Subsequent reporting identified the contract as being only worth $460M in present dollars (pretty much right in line with what was expected following his arm injury) due to the massive deferrals.

For the purpose of dollar/WAR calculations, the $460M figure seems more relevant to me since that is how much MLB values the contract at.

[Fear The Chorizo]

7 minutes ago, sveumrules said:

It's been reported as both.

Initial reporting of $700M for clicks. OMG OHTANI GOT HOW MUCH?!?!?! 

Subsequent reporting identified the contract as being only worth $460M in present dollars (pretty much right in line with what was expected following his arm injury) due to the massive deferrals.

For the purpose of dollar/WAR calculations, the $460M figure seems more relevant to me since that is how much MLB values the contract at.

how much does Ohtani value the contract at?  

The "present dollars" argument is for luxury tax accounting purposes only by the current MLB rules...it's not real $ - real money is Ohtani is getting paid $2M a year in actual "present dollars" during the playing terms of the contract, not the $46M a year which is based on accounting calculations.  

I could care less what the MLB luxury tax/competitive balance assessment of the contract is - and that shouldn't be how WAR/dollar is calculated because if it truly was a $460M contract, more than the Dodgers would've been offering that and then some.  It's only the Dodgers who can afford paying out almost $70M in real money for 10 straight years to a guy who most likely will be retired even before the 10 year playing term expires in ~2034.  The Giants apparently said they had a similar deal on the table, but they've reportedly been throwing huge sums of $$ towards FAs in recent years only to never land them.