I consider myself somewhat astute financially. At least I made a good living at it. No, not $2MM a year. But I am nowhere close to understanding or figuring out how to take full advantage of the CBT threshold and do it within the rules even remotely in the same league as Nez Balelo/Shohei Ohtani/Andrew Friedman/Mark Walter.
I said this was a business decision, I just did not have the bandwidth to understand just how genius it was.
Chris Mad Dog Russo is having a fit over the deal. I guess his favorite team could not come up with the concept.
Mad Dog Russo is in disbelief when he learns that the Dodgers deferred $680M of Shohei Ohtani's $700M contract.
The highlights…
• It is a disgrace.
• The sport is a joke.
• Rob Manfred should overrule it.
• Just give the Dodgers every superstar. pic.twitter.com/3LHKaCEMoe— Funhouse (@BackAftaThis) December 12, 2023
Russo and Dodger haters just cannot handle what the Dodgers and Ohtani have pulled off. What did they do wrong? How can Manfred veto the contract? Article XVI of the MLB collective bargaining agreement says,
“There shall be no limitations on either the amount of deferred compensation or the percentage of total compensation attributable to deferred compensation for which a Uniform Player’s Contract may provide.”
In other words, defer freely. Which the Dodgers have previously done and obviously will continue to do so.
According to multiple reports, Nez and Shohei brought this concept to the other teams they were negotiating with. Who actually came up with this concept and actualized it is remarkable. It is certainly believed that they did so to drive up the price to the team Ohtani always wanted to play for…The Los Angeles Dodgers. Good for them. They did nothing wrong, and are not deserving of the angst that Russo and Dodger haters are throwing at them…Ohtani and LAD. They played within the rules, and they should be applauded rather than ridiculed.
This concept will be tried for others, especially California athletes who can defer their compensation until they leave the state at the end of their contract, if they so choose. Move to a state income tax free state, and get the deferred payments in their new residential domicile. Brilliant.
I used to hire a specific CPA firm because they had a think tank of very smart people (I mean VERY smart) who conceptualized tax strategies and used their clients as “guinea pigs” to see how the strategies worked with the IRS. We used them, and never got a tax adjustment.
Of course deferred compensation plans have been around for a long time. On a much smaller scale, that is how one’s IRA and 401 K plans work.
Ohtani’s $46MM AAV is still the highest in MLB history. The best baseball player got the highest gross, highest gross AAV, and highest CBT AAV in the game’s history. Who is being cheated, and why should the contract be voided. It is still the highest in MLB history. Just because it was the Dodgers?
I have turned a 180. I now believe that the Dodgers can not only sign Yamamoto, but should be considered the favorite to do so. They have to package some talent for a top of the rotation pitcher as well. They cannot continue to hold onto these prospects in MiLB forever.
Per the chart below, the Dodgers have now deferred $857MM of salaries for three players.
The organization has already “earned” $311.3MM in NPV savings of the $858MM of deferred salaries in today’s dollars. For a team as smart as Dodgers owners are when it comes to deferrals, I am sure they can determine a way of deferring revenue they will be making on Ohtani to offset the remainder of the deferrals.
There is now pressure for MLB to “fix this”. Why? MLBPA will not allow this. This will be a line in the sand negotiation point just as a true salary cap is for MLBPA. If the low revenue team owners do not like the rules, get out of the business. They have already structured the CBA to “punish” the high revenue teams. They already take a huge portion of the teams operating revenue and put it into a bucket to distribute equally to each organization.
It is the owners of those low revenue teams that take that revenue sharing distribution and stick it into their pockets rather than competitively build a potential WS championship roster. Tampa Bay has started to figure this out. Why can’t Oakland and the other low revenue teams. Why is John Fisher still allowed to own a MLB team. He is worth $3BB. Why should the other owners share with him if he does not want to put a competitive team on the field?
If the teams really cared about winning, they would not be hankering for additional expansion. The “have nots” want that expansion money, and could care less that the product on the field will continue to be watered down. You think the number of 5.0 IP pitchers is large now, just wait for the additional two teams.
But the owners will get their expansion $$$$. Fisher is not going to sell until he gets those $$$.
Bottom line, neither the Dodgers nor the Ohtani Group have done anything wrong or sinister. They played within the lines that MLB has drawn. The Dodgers did what every successful organization has done…determine a way of fairly beating the competition.
Now it is time for the other organizations to adapt or sell. But do not expect the Dodgers, NYY, NYM, or Philadelphia to not explore every possible avenue available to beat the competition. MLB should not change the rules. They should encourage all owners to adapt their operations accordingly, or move on.
I guess the Ohtani market is just getting started:
The United States of Ohtani. pic.twitter.com/YMcirtEdmD
— Bill Shaikin (@BillShaikin) December 12, 2023
Hadn’t thought about the tax angle of moving out of state after retiring to collect your payments in a state that has much lower or no state tax.
You may know otherwise, Jeff, but I’d be willing to bet that the State of California has a rule in place that says they consider that money earned in CA even if paid out when the player is living elsewhere.
Saw an interview with Bobby Valentine today in which he spoke at length about Yamamoto. He, of course, managed in Japan for quite a while and has contacts over there who know Yamamoto. He says that Y has a very different and more aggressive personality than Ohtani and he’s positive that Yamamoto will sign with the highest bidder. Time will tell.
The state of California tried to tax income in the past that was earned in the state but was dispersed in a different state. If was and still is defined. My dad received a Cal Pers retirement and moved to Texas. The state of California was unable to tax him and others. Also I’m not sure but I think if Ohtani moves to Japan he avoids federal income tax.
Of course the State will try to tax deferred compensation if the individual moves out of state. But like the IRS, for the state of California, individuals are cash basis tax payers. They pay tax on income received in the year received.
That will not preclude the state from trying to change the tax rules for situations like this. I can see the state putting a limit on the amount of deferred compensation allowed for deferral for tax purposes. Similar to the limit of IRA or 401 K installments.
But the state cannot retroactively change the rules.
It’s all above my pay grade, but I assume the interested parties are satisfied that it’s going to work.
Russo is an uninformed piece of garbage.
Here is some CBA language on funding the deferred compensation. There is a plan, and I have to assume that the Dodgers know exactly how they can fund this going forward. It is unimportant and irrelevant if we understand. Maybe we would like to, but it is not necessary.
Giants, Jung Hoo Lee Agree To Six-Year DealBy Darragh McDonald | December 12, 2023 at 5:18pm CDT
This is somewhat of a surprise for me. I thought Bellinger would end up in SF as the CF. Jung Hoo Lee says he wants to play CF, so maybe that was considered???? Maybe SF will still sign Belli to play 1B. This should have no impact on what SF does with respect to Yamamoto, or Snell, or Chapman.
San Diego was expected to go hard for Lee. They are now going to need to pivot. Bellinger will probably be too expensive. Kevin Kiermaier? Harrison Bader?
Guess we can’t sign everyone although I was hoping we would get him.
I suppose we shouldn’t get greedy and Farhan has had a rough few years.
Damn, Jung Hoo Lee and Arsen Judge is a pretty solid outfield.
Nationals sign for LAD RHRP, Dylan Floro, to a one year contract for $2.25MM, with an additional incentive of $1.25MM if Floro pitches in 60 games.
To make room, former LAD SS prospect, Jeter Downs, was DFA’d.
For more fun, Floro was released during the final week of the regular season to make room on the roster for Brock Stewart‘s return.
Russo isn’t even playing checkers. In fact he can’t even find the gameboard. How these national sport talk people are on the air is amazing. Go research the MLB agreement with the union before you get your panties in a twist. It’s been referred to by many media and our own Jeff D. He says it’s not fair. Why? Because whatever team he follows didn’t think of it or were shortsighted not to do the same thing. Yeah, go tell the player union it’s not fair. Or the owners. See how that might work out. What a whiner. Russo and Patrick Mahomes should have lunch together.
I made a post when the news first came out about the signing of Ohtani on how it wasn’t good for baseball or the baseball fan. Another incorrect initial reaction by me (STB probably just shook his head).
But, after learning about the deferred money I remembered who it was who put the deal together and what they did for a living. Guggenheim Investment Partners. I realized what they going to do to accelerate and increase the value of their original $2.1B investment. Leverage can be a beautiful thing. I wrote that with the deferred dollars the team would pay Ohtani $35-40MM a year for ten years. Throw in a World Series victory or two the value of the Dodgers could possibly reach $10B in five years or so. The investment of $200MM (5x$40) to increase the value approx $5B would be amazing for Guggenheim and would be time to sell and cash out. The new owners would be responsible for Ohtani’s, Betts’, and Freeman’s deferred monies. Not Guggenheim. They get the huge return on their $200MM.
Now that we learn it’s only $2MM a year let’s say for five years, that’s only $10MM invested in Ohtani with the same increased value. I mean these guys have probably had this planned for years. And no leaks from anyone throughout the process. When Dave Roberts made his comments he surely knew that Ohtani was going to be a Dodger and Gomes had a little fit to make it look good.
And, I agree with Jeff D or anyone else who might have brought it up that Yamamoto will be signed for whatever it takes. At this point, why not?
Now, if MLB can find a way to reduce the amount of “crapshoot” in the postseason to increase the chances of the teams with stars to be showcased in the World Series that would be nice.
Carry on….damn right!
I never shake my head at your comments, Ted. I don’t always agree with them, but they’re always well-reasoned and worth the read.
As far as Guggs selling the team and avoiding the deferred payments, when I buy the team, I’m going to negotiate the price and then tell them they need to deduct those payments from the sell price or I don’t sign.
Well, when that happens don’t forget about us at LADC!
(STB probably just shook his head).
Heck, Badger and Bluto shake their head at me all the time. 😎
Farhan said in a conference call today that the Giants were ready to give Shohei the same deal he took from the Dodgers.
He just chose to sign with us. Farhan says he thinks geography was the deciding factor. I think he’s ignoring the chances of going to the playoffs which weighs very heavily in the Dodgers’ favor.
I have been having a long term discussion with a Giants fan up here and he is bitter. It is his observation that SF cannot get any hitters up in SF because of the weather. “The coldest winter I ever spent was a summer in San Francisco.”
Oracle Park is certainly not a hitter’s stadium. But it is a nice pitcher’s park. I guess that Shohei really does like his hitting. Dodger Stadium is an ideal stadium. Jung Hoo Lee signed there, but he is a line drive hitter without a lot of pop.
Not sure if it would work but the Padres supposedly signed Bogaerts to keep him away from the Dodgers. Frisco should see what it would take to get him from SD. SF has money to burn SD doesn’t. It would be a way for SF to buy a bat. It seems hitters don’t want their money. I know this is a Dodger blog how about Busch and Cartaya for Luzardo and Rogers
According to the Trade Simulator, you’d have to add Pepiot or Sheehan to Busch and Cartaya for just Luzardo. If you want Rogers also, you have to add both Pepiot and Sheehan.
Trade simulator says that would be light for Luzardo I might go Cartaya and Sheehan. It would still be light the problem would be Luzardo is a rental. Miami probably wouldn’t do the deal even though the don’t really have any catching prospects.
Marlins recently signed a second catcher, ex Tampa guy Bettancourt.
Now, every team in the MLB can do what the Dodgers did with Ohtani. In fact, that may apply to every pro sport. Financial minds are as important as managers, if not more important. The Corporate Dodgers are leading the way………….
Now hope Dodgers can sign Roki Sasaki, get under the CBT threshold, and really stir up jealousy.
Sasaki isn’t going to be posted this winter.
It’s now official?
Not official but none of the major Japanese newspapers have even mentioned it which leads experts to think it isn’t happening.
I thought he might have contract language that would might let him escape.
You scan Japanese newspapers?
Per Bruce Kuntz, I think:
RHP Ryan Pepiot and Jonny DeLuca are expected to be in the return to Tampa Bay as the Dodgers acquire RHP Tyler Glasnow and OF Manuel Margot
I hope that doesn’t happen.
If it’s Arozarena instead of Margot, I think it’s similar to a trade I simulated!
Wow if it’s Arrozarena. Margot is just a more experienced Deluca?
DeLuca still has a chance to be good whereas Margot has already told us who he is.
I really don’t get the fascination with Glasnow and Giolito. I believe we already have better pitchers in our rotation. Can someone explain why these pitchers keep being mentioned on this board?
Projections.
Glasgow has phenomenal (top of rotation) stuff. Giolito won’t cost much, has theoretical upside and has pitched at the major league level.
Both Giolito and and Glasnow project over 160 innings. Glasnow with an ERA well under 3, Giolito with an ERA just over 4. The Dodgers need starters that hang in there for over 5 innings. I know some won’t believe in projections, but that is how GMs judge value.
Glasgow projects world class museums, art galleries and historic architecture. Consider your lanyard yanked Bluto. I do so because I know you can take it.
Phenomenal? C’mon…………
Phenomenal stuff.
Has there been any mention of how long it will be before Shohei can hit? After his surgery it still seems everyone assumes he will be the DH on opening day.
He will be in the lineup Opening Day.
That’s not a total given but if not it shouldn’t be too much later than that.
Opening day? Which one? They open the season in Seoul Korea on the 20th of March against the Padres. 8 days later, the season opener at Dodger Stadium against the Cardinals. Fans will feel cheated in Korea if he does not make that trip.
Both. He’s got a deal that means he’s on stage. He could stand in the batters box and never swing and there will be millions who show up to watch. I know I will.
Hey, Miguel Vargas just stood there and never swung during last spring training, and I watched that!
Glasnow is, by rumor anyway, on the Dodgers list. Where on the list is only a guess. I’m assuming they are after Yamamoto first, Burnes, Cease, Imanaga, Giolito and ?
I read that Glasnow has a salary of $25 million but cap hit of only $15 million. Maybe somebody can explain that to me.
We’re waiting again. Something important is about to happen.
Last year, the Rays signed Glasnow to a $30 million contract for two years. It was structured to pay $5 million in 2023 and $25 million in 2024. Since the average salary was $15 million that is the AAV in both 2023 and 2024. But if Dodgers acquire him they are still obligated to pay him $25 million. So his cash salary in 2024 is $25 million but AAV is only $15 million.
thanks. I figured it was something like that. If he is ready to perform close to his projections, he’s worth the money.
I am not liking trading Pepiot. He showed a lot. Trade someone else like River Ryan.
I am with you. I hope they don’t trade Pepiot. Not for a rental.
First off, no one on the west coast gives a rats ass about Russo. Typical loudmouth Yankee fan with no brains. Second, Glasnow is a rental, I am not down with trading young talent for a rental, especially a pitcher who struck out hitters 25 percent of the time. I am even less enthused about them trading for a mediocre hitter and outfielder like Manuel Margot. If you make a trade with the Rays, don’t take that slug. Get Arozarena or no deal.
Just for the record, Russo is a Giants fan.
Is there a difference?
Giant’s Yankees, who cares, he is a still a loudmouthed jerk
If there wasn’t a difference, Lee would be playing for the Yankees next year.
Why would Tampa trade Arozarena? He’s a team controlled 3 WAR player in his prime. It would be great to get him but he would not come cheap. Margot? I think we have in house options as good as him. Unless of course they are traded for pitching.
Margot’s splits against lefties are pretty decent, better than against righties, so if it’s him in the trade, maybe just to platoon with JHey, although he’s pretty expensive for just that.
Glasnow AAV – I believe that if a player is traded, the AAV is just figured on the remaining amount due him, so Glasnow would have an AAV for 2024 of the full 25 mil.
This is why there will probably be $ coming with him and Margot in the deal, if that’s the deal.
“so Glasnow would have an AAV for 2024 of the full 25 mil.”
Yes, but not his luxury tax salary. Spotrac has his luxury tax salary at $17m.
As I have said, the Dodgers can afford anyone they want. Who wants to play here is the question. Glasnow would need to put up 3 WAR to earn his salary, and that won’t be a problem if he throws 160 innings of 3.2 ERA. The question I have is, do the Dodgers believe he will do that. And, if the Dodgers can swing a 6 man rotation, Glasnow would fit right in it, especially if that 6 man is led by Yamamoto.
I am not sure where you are looking but Spotrac, FanGraphs (Roster Resource) and Cots all have him at $15.175. That is exactly 1/2 of his 2 year $30.350MM contract.
Here is Spotrac:
https://www.spotrac.com/mlb/tampa-bay-rays/tyler-glasnow-18345/
Here is Cots:
https://docs.google.com/spreadsheets/d/1f7IcjW2zaeekwzASX-s5fFf3DFAZiQAIw-3tbKHCQUY/edit#gid=1520401900
Here is Roster Resource (FanGraphs):
https://www.fangraphs.com/roster-resource/payroll/rays
Not sure why I typed 17. I was looking at 15. My mistake.
The point of course is the Dodgers can afford him and he is right up there with Burnes and Yamamoto on my want list.
Rays trying to again get the best of a trade partner. Glasnow has too much history of injury, is a one year rental, and I have a lot of confidence in Pepiot. I also am intrigued by what DeLuca might do.
Glasnow’s $25MM salary makes me want to include Taylor in the trade. Stone and Taylor or Sheehan and Taylor for Glasnow.
There is a terribly interesting, yet depressing, bit of news out there from Buster Posey. It basically revolves around the idea that San Francisco is in such dire condition with regard to crime, drugs, indecency, that players may not want to go there. What a tragic current environment for a glorious city.
I have heard that from other sources. Homelessness, mental health crisis and drugs, issues that exist nationwide, have hit SF hard. It’s good that someone like Posey is speaking up about it.
SF seems to have been hit hardest of all major U S cities. Hope they can turn it around.
I’m sure eventually they will, it’s too beautiful of a city.
Just how long will it take?
When Yamamoto meet with Dodger brass at the stadium on Tuesday, Ohtani, Mookie, Freddie and Smith were in attendance. Speak of a full court press.
Actually, really good idea to have Yamamoto’s potential catcher in attendance as well in the meeting
That’s the first thing I thought of as well.
Daniel Hudson back on a minor league deal.
Nice move.
If he makes it back healthy, he’ll be a great asset.
If not, nothing much lost.
Has anyone else received this from MLB.com?
https://mi.mlbemail.mlb.com/p/rp/f9314d56ac9392e4/url?mi_u=e13f2c0b279bb3af430ff4619f20681fdcf302a3&total_games=442&top_team_name=DODGERS&top_team_games_watched_1=134&top_team_games_watched_2=67&top_team_games_watched_3=55&top_team_watched_record=81%20-%2053&top_team_minutes_watched=40%2C139&top_team_hours_watched=669%2B&top_team_days_watched=28%2B&total_teams_watched=29&top_month_watched_num=8&top_month_watched_name=AUGUST&total_minutes_ranked=3&top_team_minutes_ranked=2&first_name=&customer_id=244874398&mi_fav_teamname=DODGERS&top_team_games_watched_logo_1=LA&top_team_games_watched_logo_2=ARI&top_team_games_watched_logo_3=SF&top_device=ANDROID%20TV&top_device_minutes_ranked=1&user_type=TMO&partnerId=zh-20231213-1114762-MLB-1-A&qid=2021&utm_id=zh-20231213-1114762-MLB-1-A&bt_ee=cT074Ame4Q4OvvHMgClZuQEs%2F%2BUyoT5Cxi44qwUHNjoNvdO5DhhwAMQyJaAsQZ7x&bt_ts=1702493722757
Looks like I need to get more hobbies.
Sources tell Forbes that the Dodgers are going to use insurance money from Guggenheim Partners. “They’re playing a hedge on interest rates,” says one baseball executive. The hedge involves the tax treatment of the funds. If the Dodgers were to, say, hold treasuries to fund the Ohtani’s deferred contract obligation, they would have to pay taxes every year on any interest received. But if a company like Guggenheim holds treasuries in conjunction with an insurance policy, the interest income grows tax-free. (Neither MLB or the Dodgers would comment on how Ohtani’s deferred payments are going to be funded.)
Why does holding an insurance policy make the interest grow free?
I dunno, but I have a life insurance policy for this very reason I think.
i really like this idea of showcasing minor leaguers during spring training:
https://www.espn.com/mlb/story/_/id/39106980/mlb-feature-top-prospects-spring-training-games
Is Manfred getting into the hang of this Commissioner stuff? Seems like it.
Over 600 hours of watching baseball and you watched 29 teams.
You’ve got to tell me which team you avoided. Or do you even know?