The Dodgers’ Clayton Kershaw shakes hands with co-owner Mark Walter as he receives his National League Championship ring during a pregame ceremony prior to a game on March 29, 2018.
(Mark J. Terrill / Associated Press)
Here, it gets more complicated.
Under MLB’s collective bargaining agreement, deferred money in player contracts “must be fully funded by the Club, in an amount equal to the present value of the total deferred compensation obligation, [within two years of when] the deferred compensation is earned.”
That means, while the Dodgers will only pay Ohtani $2 million directly each of the next 10 years, they will also have to set money aside in the near-term that will cover the deferred payments he is owed in the future.
Here’s how it works:
In 2024, Ohtani will “earn” $2 million in salary, and $68 million in deferred payments. By July 1, 2026, the Dodgers will also have to show the league how they plan to fund the $68 million that will come due in 2034.
The CBA requires only that the “present value” be funded within that two-year period. According to a person with knowledge of how the league calculates such contracts, the present value of that $68 million payment in 2034 is worth about $46 million in today’s money (since money in the present, thanks to inflation, is worth more than money in the future). Also, funding mechanisms can include cash or “readily marketable securities.”
So, in 2024 and 2025, the Dodgers’ only commitments will be to pay Ohtani his $2 million salary.
From 2026 until the end of the contract, the Dodgers will have to pay Ohtani his $2 million salary, plus show the league they have another $46 million set aside in, let’s say, an escrow account (or some other financial instrument) that will theoretically be worth the full $68 million deferral payment when it comes due.
For a financial giant like the Dodgers and their ownership group, that shouldn’t be much of a problem.
Dodgers chairman Mark Walter is the chief executive of Guggenheim Partners, a financial services company that manages more than $295 billion worth of assets. The Dodgers themselves boast an $8.35-billion television contract.
One more note: That $46 million total could grow over time, depending on larger economic factors.
