Ohtani to Dodgers

[owbc]

3 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.

If you use the $700M figure then you have to inflation-adjust the $/WAR figure. 

I think it's pretty widely accepted that this was a market rate contract and it never turned into a true bidding war because Ohtani had already picked the Dodgers as his preferred destination. 

[nate82]

2 hours ago, Fear The Chorizo said:

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.

I wonder if this is something with the Giants or just the FA's not liking the team construction.  That is 3 now that have completely bailed on the Giants with competitive offers (Judge, Ohtani and Correa).

[BrewerFan]

On 12/12/2023 at 1:54 PM, 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.

You get taxed on where you're getting paid. Otherwise every player would just buy a home in Texas and say that's where they live(or Florida). You can't circumvent income tax by moving to a state unless...you're employed in that state. 

[wiguy94]

33 minutes ago, nate82 said:

I wonder if this is something with the Giants or just the FA's not liking the team construction.  That is 3 now that have completely bailed on the Giants with competitive offers (Judge, Ohtani and Correa).

They landed Correa. Giants pulled the accepted offer after the physical.

[nate82]

I am wondering if a state or city will challenge this deferred money that it should also be taxed by them and not just the state Ohtani resides in or doesn't if he leaves the country.  In the past the amounts were not as large as what Ohtani will be paid in the future and compared to what the state or city would be taxing Ohtani on if he were to be paid his full amount.  I don't think a state or city will challenge this but it brings up some interesting questions.

 

22 minutes ago, wiguy94 said:

They landed Correa. Giants pulled the accepted offer after the physical.

OK make it two instead of three.  Still two years in a row that the Giants were left to go to prom with mom. 

[markedman5]

 

[brewerfan82]

Let me start off by saying, I am by no means a financial, business, or math wizard, lol, so I'm sure I've over simplified this and/or gotten stuff wrong here and am not using proper terms, etc... And note, I pulled a 4.37% interest rate to make this work. I don't know if that's a realistic rate to expect, but I've seen others use 5% or 6%, so I would think it's on the safe side.

But I wanted to see if I could work through this $460M over 10 yrs vs. $700M w/ deferrals business to verify/better understand how those two figures could be equal. Here's how I see it...

Let's say the Dodgers were willing to go $460M for 10 years, no deferrals. That means they were able/willing to budget paying him $46M each year for 10 years. In this hypothetical situation, that means they spend all of the money budgeted on him each year, leaving no extra money to invest towards the future:

 

Now instead of paying him $46M each year for the first 10 years, they pay him $2M instead and invest the remaining budgeted $44M each year:

 

And this doesn't even take into the whole inflation aspect of paying $68M in 11-20 years being less valuable than paying that much today.

Anywho... anyone smarter than me... am I kind of sort of understanding this correctly? 😀

[endaround]

On 12/15/2023 at 8:21 AM, brewerfan82 said:

Let me start off by saying, I am by no means a financial, business, or math wizard, lol, so I'm sure I've over simplified this and/or gotten stuff wrong here and am not using proper terms, etc... And note, I pulled a 4.37% interest rate to make this work. I don't know if that's a realistic rate to expect, but I've seen others use 5% or 6%, so I would think it's on the safe side.

But I wanted to see if I could work through this $460M over 10 yrs vs. $700M w/ deferrals business to verify/better understand how those two figures could be equal. Here's how I see it...

Let's say the Dodgers were willing to go $460M for 10 years, no deferrals. That means they were able/willing to budget paying him $46M each year for 10 years. In this hypothetical situation, that means they spend all of the money budgeted on him each year, leaving no extra money to invest towards the future:

 

Now instead of paying him $46M each year for the first 10 years, they pay him $2M instead and invest the remaining budgeted $44M each year:

 

And this doesn't even take into the whole inflation aspect of paying $68M in 11-20 years being less valuable than paying that much today.

Anywho... anyone smarter than me... am I kind of sort of understanding this correctly? 😀

Basically, but inflation is baked into the interest rate. Keep in mind the Dodgers, even if they need to escrow the money for legal/contract purposes likely can get better interest rates than the market rate. So while the CBA will value it at $46m per year or so, the Dodgers don't necessarily need to invest quite that much.