The Los Angeles Dodgers being allowed to give Shohei Ohtani a deferral-ridden 10-year contract may have revealed a hidden MLB stance about how they favor Dodgers success.
Over the weekend, two-way superstar and reigning American League MVP, Shohei Ohtani, ended his second foray into MLB free agency. And as many had expected for months, he decided to take his talents to the Dodgers for many years to come. However, the contract the Japanese great signed was unique in two major ways.
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For starters, the 10-year, $700 million deal that Ohtani signed was the richest in North American sports history. While it was a number far higher than the $600 million expected, the former Los Angeles Angels star was always expected to shatter previous contract records. However, how the deal is paid out was truly shocking and unusual.
Soon after reports came out that Ohtani was headed to the Dodgers, it was revealed that the contract was filled with massive deferrals. Instead of making close to $70 million per season, the AL MVP will instead be paid $2 million a year. Then, starting in 2034, he will be given $68 million a year when he is likely retired from the sport.
This will now allow LA to pursue more free agents this year and in future offseasons since they won’t be bogged down by one player accounting for $70 million on their yearly payroll. Plus, it keeps their payroll tax costs far lower than it could be.
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While the structure of the deal is shocking, on Monday Fabian Ardaya of The Athletic reported that an unusual contract like this one is allowed under the current collective bargaining agreement.
“Baseball’s collective bargaining agreement makes clear that there is no limit on how much salary a player and team can agree to defer,” he wrote. “The CBA also includes a net-present-value calculation for luxury-tax purposes — a calculation that estimates the value of a player’s contract on a season-by-season basis. That’s how the $46 million figure is determined.”
Does MLB favor Los Angeles Dodgers’ success over other teams?
In the end, the Los Angeles Dodgers played within the rules of the MLB CBA, however, what is a bit curious is that the San Diego Padres tried to put together a last-minute deal with Aaron Judge last year that would have also helped them avoid payroll taxes. However, they were reportedly persuaded away from completing that deal by MLB.
“There is word [the Padres] were contemplating a deal for $400 million-plus over 14 years that would have taken Judge to 44 years old,” New York Post MLB insider Jon Heyman wrote on Dec. 9, 2022. “However, sources say they would not have been allowed, as MLB would have seen the additional years as only an attempt to lower their official payroll to lessen the tax.
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“Padres GM A.J. Preller wouldn’t say what the Judge offer was but made clear in their last-hour meeting that he understood they had no interest in ‘wasting [Judge’s] time’ with a bid near where the Giants and Yankees sat.”
The Yankees ended up re-signing Judge to a new nine-year, $360 million deal. The Padres knew they were not a preferred destination and would have to blow other offers out of the water to land the 2022 AL MVP. Yet, MLB did not seem in favor of the idea as the long-time small-market club had been making big moves to improve their championship hopes the last couple of years.
It is very curious how MLB was reportedly not in favor of that contract from the San Diego Padres -— that was less about deferrals and spreading the money out over more years. Yet, they had no objections to the Los Angeles Dodgers — a team already with one of the highest payrolls in the sport — saving close to $70 million on their payroll for the next decade so they could pursue more stars in that time.
