12 December 2023

Only $20 million out of $700 million? Ohtani and the Dodgers pull off the biggest stunt of all time

By pestfood.com

Ohtani and the Dodgers pulled off a “masterstroke.

On December 12, ESPN, The Athletic, and other local media outlets reported that Shohei Ohtani had signed with the Los Angeles Dodgers. The unthinkable had happened.

Ohtani agreed to a 10-year, $700 million contract with the Dodgers. An average of $70 million per year. Given that the first-year luxury tax threshold for the 2024 season is $237 million, that’s a lot of money, accounting for about a third of that alone. The average annualized value is calculated by dividing the total amount by the length of the contract.

However, Ohtani and the Dodgers used a “dipper” clause to defer (delay) the payment of his salary, thus lowering the total. At the time of the deal’s signing, local media reported that a “record-breaking” amount of money would be deferred.

“Record-breaking” was an understatement. According to local media, Ohtani deferred more than 97% of his salary. Of the $70 million per year, $68 million was deferred for 10 years. For each of the 10 years he plays for the Dodgers, he will only receive $2 million in salary ($20 million for 10 years) and the remaining $680 million for the next 10 years starting in 2034.

The “deferred” salary is included in the total salary at a certain “discount rate” based on the general logic that the value of money decreases over time. Local media noted that if the $680 million is discounted at a set rate, the “real value” of Ohtani’s contract would be around $460 million. This means that only $46 million of his total salary is included in the calculation, not $70 million per year. 랭크카지노

It’s a “massive maneuver. There have been plenty of examples of teams utilizing deferred salary to reduce their total payroll, but nothing like this to bring it down from $70 million to $46 million. The Dodgers were the first team to use the disabled list to make a move that helped eliminate the 10-day disabled list for pitchers.

The Dodgers’ big move gave them a lot of breathing room in managing their payroll.