Will Juan Soto get a bigger contract than Ohtani? – NBC New York

decide if juan soto Shohei Ohtani’s lead for baseball’s biggest contract could be in the eye of the beholder because of all the deferred money in Ohtani’s deal.

Ohtani agreed to a $700 million, 10-year deal with the Los Angeles Dodgers last December, easily surpassing the previous high set when Mike Trout and the Los Angeles Angels signed a $426.5 million, 12-year deal. until 2030.

Ohtani’s deal includes $680 million in deferred money payable between 2034 and 2043. There are several interpretations of how to value that deal in current dollars:

1. For the baseball luxury tax, the average annual value is set at $46.08 million using a 4.33% discount rate.
2. The players association uses a 5% rate, which puts the value at $43.75 million per season.
3. For regular MLB payroll, a 10% rate results in a rate of $28.21 million per year.

Soto could get a 10- to 15-year deal worth $600 million or more.

His agent, Scott Boras, is not a big fan of deferred money and believes teams may not insist on delaying money.

“I think it’s a lot less of a problem than before,” Boras said. “For me, deferral as a mechanism is: Will it impede my ability to obtain the largest asset I can acquire? And the answer is that I don’t think they want to do anything that would impede their primary pursuit and goal.”

The interest figure used for the discount to determine the value of the luxury tax is established in the collective bargaining agreement as the federal medium-term rate defined in section 1274(d) of the Internal Revenue Code for the October preceding the contract year initial.

That rate fell to 3.7% this offseason, which meant that if Ohtani’s deal had been agreed to this month, his annual luxury tax value would have been approximately $49.3 million. That would have resulted in an additional annual tax bill of $3.5 million for the Dodgers, who would exceed the maximum threshold and pay additional taxes at a rate of 110% on each dollar.

Regular MLB payrolls, which use the same rate as that used to calculate the qualified offer price based on the 125 largest contracts, use the prime rate established by JP Morgan Chase on the preceding November 1 plus 1%, rounded to the nearest full percentage. spot. That figure dropped to 9% for this offseason.

Deferred compensation must be funded by the second July 1 after the season in which it was earned, discounted to its current value at a rate of 5%.

Los Angeles owes deferred payments of just over $1 billion due between 2028 and 2046 to Ohtani, Mookie Betting, Freddie Freeman, Will Smith, Teoscar Hernandez, Blake Snell and Tommy Edman.

“It’s just trying to divert dollars,” St. Louis Cardinals president of baseball operations John Mozeliak said at general manager meetings last month.

Ohtani’s payments represent two-thirds of the total owed.

“It was a unique situation for a club, a unique situation for a player who has very significant earning potential outside of strictly his compensation from a club,” said New York Mets president of baseball operations David Stearns. “Those others are much more representative of what you see in kind of standard contracts in the industry. Each organization, each ownership group will have a slightly different perspective on this, on how they calculate the returns on that deferred compensation.”

Dodgers president of baseball operations Andrew Friedman said his team’s leadership from Guggenheim Baseball Management has the expertise to fund deferred compensation wisely.

“A lot of our owners have financial backgrounds and can have that money working right now,” he said.

MLB proposed during collective bargaining on June 21, 2021 to end the practice.

“For contracts entered into after the effective date of the Basic Agreement, no deferred compensation of any kind will be permitted,” the proposal said, according to a copy obtained by The Associated Press.

That idea was rejected by the union and not included in the five-year agreement that expires in December 2026.

New York Yankees general manager Brian Cashman believes his team’s deep resources encourage players to seek their money as soon as possible.

“We are open to postponements,” he said. “A lot of times players are less open to doing postponements for us than maybe for other markets, but if we can do things that benefit us, of course we will.”