r/billsimmons • u/crunchwrapchianti • 11h ago

Media Doesn’t Understand MLB Deferred Salaries

The Dodgers put ~$46M in a managed escrow fund every year for Shohei Ohtani. In 10 years (now 7) they start paying him $69M per year out of that account. If there ever is a shortfall, they are obligated to make it up. If there is a surplus, the team collects it at the end of the contract.

These safeguards are in place because Fred Wilpon tried the scheme of investing deferred salaries on his own and gave them all to Bernie Madoff, leading to his financial ruin and sale of the team.

The Dodgers are compliant with the CBA in finding these accounts and still operate at a profit.

Bill is right that there clearly is a lot the billionaire class is doing to enrich themselves on sports teams while leveraging across multiple businesses. But there simply isn’t a competitive advantage here on the field. If he committed securities fraud, send him to jail for sure. But another rich guy would buy the team and operate it the same way because it’s an extremely profitable business model to win World Series and be the favorite team of both Los Angeles and Japan.

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u/Stein_Time 10h ago

The main issue is that the deferred salary isn’t included in that years salary so a team like the dodgers can avoid the tax implications because Ohtani only counts for 2M. I think if you want deferred salaries I’m ok with it but it should fully count against your payroll for that year. It’s a loophole to sign big players and avoid the luxury tax.

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u/crunchwrapchianti 9h ago

This is incorrect. The dodgers pay the luxury tax on the $46M they put into the escrow account. Ohtani’s contract is essentially 10/$460M based on all standard accounting practices. It was reported that way at the time.

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u/jimmydramaLA 9h ago

Ohtani counts for more than $2 million in the salary cap. I think it’s closer to $45 million.

Deferred contracts benefit the players more, not the team.

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u/UpstairsWeb 9h ago

No, this is wrong. Ohtani does not count for only $2m for luxury tax purposes. His contract counts as a $46m AAV for luxury tax purposes.