MLB Mailbag: - MLB Commerce Rumors

As we speak’s epic pre-Winter Conferences mailbag will get into the Dodgers’ deferrals, the golden AB concept, traded Padres prospects, the Blue Jays’ failure to increase Vladimir Guerrero Jr., Triston Casas and Boston’s paths ahead, the Cubs’ plans, the Giants and draft decide forfeiture, and far more.

Elden asks:

I not too long ago learn that the Dodgers now have over $1 billion in deferred salaries on the books even when the signal no person else. I admit that they’ve some fairly deep pockets and may climate virtually any monetary storm however how is that this not a manipulation of the CBT guidelines? Granted that costs go up all them time however their deferred cash alone is 4X the primary tax threshold How is that this good for baseball?

To not decide on Elden, however followers haven’t got a seat on the collective bargaining desk between house owners and gamers, so “good for baseball” is essentially irrelevant. At that desk, there’s “good for house owners,” and “good for gamers.”

The gamers like having the choice of deferring cash. In February, union chief Tony Clark advised Jack Harris of the L.A. Occasions, “We would like the gamers and their particular person illustration to have as many instruments within the instrument bag to work with groups to search out widespread floor.”

Loads of groups like having this selection as properly. Sure, the Dodgers have deferred a ton of cash, greater than any membership in current reminiscence. However every kind of contracts have included vital deferrals, for instance Boston’s Rafael Devers extension or the Nationals’ signing of Max Scherzer. Dodgers president of baseball operations Andrew Friedman appropriately mentioned, “I believe the Shohei one was simply very excessive. However if you happen to set the Shohei contract apart, the remaining are all throughout the norm and customary working process that plenty of groups have achieved. However I believe the Shohei one is simply jarring to individuals as a result of it is so completely different and I believe that the others simply unfairly get lumped into that, however I believe it is form of a lazy narrative.”

If there’s one factor informal followers love, it is a good lazy narrative. However why are the Dodgers doing a lot of this? Fabian Ardaya and Ken Rosenthal of The Athletic wrote about it in March, suggesting advantages corresponding to “decreasing their short-term money obligations, enabling them to low cost luxury-tax numbers and creating flexibility in negotiations with gamers.”

I’m not a finance professional, however I would say the primary profit is decreasing short-term money obligations. After two years, groups should put the typical annual worth in an escrow account, however they will make investments all of that and develop it till the participant must be paid. And naturally, if you happen to’re solely really paying Shohei Ohtani $2MM proper now, you may spend extra on gamers than if you happen to had been paying him $46MM.

It is value contemplating, too, that the invoice ultimately comes due. If the Dodgers owe retired gamers, say, $150MM in 2035, that looks like it might cut back their flexibility even when the cash was invested alongside the way in which. However what in regards to the Dodgers’ aggressive stability tax manipulation?