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.
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
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.
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!
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.
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………….
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 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?
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.
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.
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.
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.
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.
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 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