The Dodgers Seem to Have Inspired a Local NHL Team to Use Contract Deferrals
Moving money around for the sake of the team is a skill that apparently doesn’t stop with MLB franchises.
The Los Angeles Dodgers have utilized deferred money to still give players their promised money in the contract, but doing it in a way where an amount will be received in the future so that the team can have more fiscal flexibility in the present day.
Shohei Ohtani, Mookie Betts, Freddie Freeman, Tommy Edman, Will Smith, and the newly signed Blake Snell all have at least $20 million of deferred money in their respective contracts.
About 30 miles south of Dodger Stadium, the Anaheim Ducks of the National Hockey League seem to have taken note on these economically savvy contracts.
The Athletic’s senior NHL columnist Pierre LeBrun reported that Frank Vatrano, a 30-year-old left wing for the Ducks, is signing a three-year, $18 million contract extension. In a rare case for the NHL, half of this money will be deferred with payments starting in 2035.
Starting in 2035, Vatrano will receive $900,000 a year for the next decade. According to LeBrun, the current Duck plans to not live in California by then and will not have to deal with the state’s income taxes, where they rank No. 1 in the nation.
Vatrano is not the only one saving money in this deal. Anaheim now pays $4.57 million annually instead of the $6 million they would pay without the restructuring.
Although this is a very clever way to move money around, the details on Shohei Ohtani’s 10-year, $700 million deal are still mind-boggling over a year later.
Ohtani makes just $2 million a year from the Dodgers as $68 million of the $70 million is deferred to 2034. The remaining $680 million in the deal will be paid out without interest from 2034 through 2043.
As much as the Dodgers are wrongly accused of doing so, they did not in fact create contract deferrals. The first deferred-money deal in Major League Baseball was back in 1985 with Darryl Strawberry.
Darren Rovell of ESPN recalled in a 2016 article that the New York Mets “deferred 40 percent of [Strawberry’s] 1990 $1.8 million team option ($700,000) at a 5.1 percent interest rate. The deal, which pays out $1.64 million from 2004 to 2033, was obtained through a life insurance company.”
ESPN’s Jeff Passan said it best in a recent article:
“Deferrals themselves aren’t all that advantageous. Teams still need to put away large sums of cash to cover the eventual payments. They’re a tool, not a strategy. The strategy for Los Angeles is to load up on high-ceiling talent, backfill with depth, ensure its farm system is always pumping out players and maximize its significant financial advantage with solid organizational practices. It’s easy to hate because it’s exactly what they should be doing.”
Photo Credit: Jayne Kamin-Oncea-Imagn Images
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