The Los Angeles Dodgers have adopted a buy now, pay later approach to free agency, agreeing to millions of dollars in deferred payments to minimize the luxury tax.
According to ESPN, the Dodgers owe more than $1 billion in player contracts through 2047, including Edwin Diaz, who just signed a three-year, $69 million deal.
Additionally, Shohei Ohtani, Mookie Betts, Blake Snell, Freddie Freeman, Will Smith, Tommy Edman, Tanner Scott, and Teoscar Hernandez are on the books for the next 20 years.
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According to the projections after the Diaz signing, the Dodgers will pay $102.3 million in 2038 and in 2039.
The bulk of the deferred money is from Shohei Ohtani’s $700 million deal. He will be owed $680 million from 2034 to 2043.
Betts will be owed $115 million in salaries over the years, along with $66 million to Snell, $57 million to Freeman, $50 million to Smith, and $32 million to Hernandez, $25 million to Edman, and finally, Scott will be owed $21 million.
Edwin Diaz agreed to give up $4.5 million per year, payable in installments.
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The Dodgers have the luxury of deferring these payments, knowing that revenue and funds from ownership will continue to be available.
It allows continued investment in the team, making the most of the current dynasty and leaving the financial problems for down the line, when the natural cycle of competition has them out of contention.
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There is also the incoming curveball regarding the salary cap that is supposed to come with the following collective bargaining agreement.
The Dodgers will likely be hampered in their ability to spend as much, allowing for cost reductions so the deferred money does not become a problem.
Los Angeles still has plenty of time to make more key additions, namely in the outfield, which could tack on more money to their growing salary sheet now and in the future.
Kirby Lee-Imagn Images
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One Response
I love what the D’s have done in recent years performance wise, but I’ve got to wonder if they aren’t mortgaging the future? Is the team income going to continue to grow to support 100M off the top? Will MLB’s greed of trying to monetize everything cause a collapse of the cash cow they’ve currently got going? Will fans rebel against $100+ seats? Perhaps it’s the true test of which players want a ring and which want the money now? And or how much do they trust the team business? Lots can change between now and the late 2030s. Bankruptcy? Would the players still get their deferred compensation? Or be left holding the bag?
I understand the basics of how the numbers work, although not an accountant, but there are lots of unknowns in the future. Not that I’m privy to the details of the contracts either, but it would give me cause for concern if it was my future pay.