Shohei Ohtani Contract with the Dodgers-Jeff Passan Explains This MASSIVE Payday
This is a first. No other man, athlete or elite player in Major League Baseball has ever been paid a $700 million contract. Also, no team has wanted to give out such a deal because it would drastically reduce and limit funds to properly round out a roster. However, that all goes out the door for a two way player who is literally the best in the league. ESPN’s Jeff Passan quickly breakdowns the Shohei Ohtani contract with the Dodgers; showing how this massive deal will not cripple the Los Angeles franchise.
First of all, we all know that the Dodgers’ pockets are DEEP. However, spending big still comes with negatives. Like unfriendly taxes.
Will this little aspect affect the Dodgers? Not at all. Passan reveals,
“I’m going to explain why Shohei Ohtani’s $700 million contract with the Los Angeles Dodgers will not equal $700 million in terms of MLB accounting or the present-day value of the deal.
When money in a contract is deferred, the competitive-balance tax number — the luxury tax — is discounted. With a source saying a “majority” of Ohtani’s contract is deferred, the discount could be significant. Typically, a CBT number is the average annual value of a deal — in this case $70 million. But depending on the size and length of the deferrals, Ohtani’s CBT number is likelier to wind up in the $40-50 million-a-year range, an enormous benefit for the Dodgers.”
Shohei Ohtani Contract with the Dodgers-Jeff Passan Explains This MASSIVE Payday
Okay, so the Dodgers are catching a break. This exception will allow LA to not only fund Shohei’s unheard payday; but make the team even stronger. Regarding this Jeff Passan goes on to mention,
“The deferrals also affect the net present value of the deal. There’s a rule of thumb across all walks of life: Money today is more valuable than money tomorrow, inflation being what it is. When you defer money, you’re taking less. The Dodgers are operating in an environment in which the prime rate is 8.5%. And with money today being so pricey, it lowers the present-day value of the deal by a significant margin.
Regardless, in the end, Shohei Ohtani will be paid 700 million US dollars by the Dodgers. It’s an obscene amount of money. It’s just going to be seen as less by the league’s accounting — and will allow the Dodgers to add even more around Ohtani as they try to win a championship.”
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