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Alden Gonzalez, ESPN Staff Writer
LOS ANGELES — Blake Snell‘s introductory news conference took place amid commotion. The two-time Cy Young Award winner sat behind a dais in the right-field corner while bulldozers and cranes dotted Dodger Stadium’s playing surface, excavating massive piles of dirt to make room for new batting cages and clubhouses that will soon outfit the old ballpark’s interior, a renovation that will cost tens of millions of dollars.
These days, it seems, the Los Angeles Dodgers don’t even blink at the cost. A franchise that was already among the sport’s wealthiest has elevated into an even higher financial stratosphere, a reality made obvious by recent business.
Snell’s contract represents the Dodgers’ fourth nine-figure addition in less than 12 months, occurring one offseason after deals for Shohei Ohtani, Yoshinobu Yamamoto and Tyler Glasnow. Tack on Mookie Betts, Freddie Freeman and Will Smith, and those are seven nine-figure contracts totaling more than $2 billion in guaranteed money on one roster — nearly half of which is deferred through 2046. And though they are not looked upon as favorites for Juan Soto, sources familiar with the process say the Dodgers made a highly competitive offer to the superstar outfielder who is expected to sign for more than $600 million — simply because they can.
All of it has coalesced into outrage from fans outside of L.A., triggering claims that the Dodgers have exposed some sort of loophole. That they’ve rigged the system. That they’ve broken baseball. Asked if that is indeed the case, president of baseball operations Andrew Friedman smiled politely, his attempt to hide the indignation felt by the Dodgers’ principal decision-makers when presented with that narrative.
“I think,” Friedman said, “we’re rewarding our incredibly passionate fans.”
Friedman spent much of his Tuesday availability fielding questions about the inordinate amount of deferrals sprinkled throughout his payroll. With Ohtani, Betts, Snell, Freeman, Smith, Tommy Edman, Teoscar Hernández and J.D. Martinez, the latter two not currently on the team, the Dodgers owe eight players a little more than $1 billion in deferred money from 2028 to 2046. The next-closest teams, the New York Mets and the Boston Red Sox, owe $137 million and $130.5M in deferred payments, respectively, according to numbers compiled by Spotrac. No other team has more than $50 million deferred.
Friedman, hired 10 years ago to oversee the Dodgers’ baseball operations department, downplayed the role of deferrals in the team’s strategy, calling them “a lever” to find “overlap” in negotiations while adding that there is “no hard-and-fast rule” toward the concept.
“I think the Shohei one is just jarring to people because it’s so different, and I think the others just unfairly get lumped into that,” Friedman said. “But I think it’s kind of a lazy narrative.”
The Dodgers didn’t include deferrals in Yamamoto or Glasnow’s contracts. Their initial offer to Snell, sources said, was straightforward, with deferrals only tacked on later as a mechanism to get the guarantee to a higher place. But while it’s true that more than half of the team’s total is made up of the $680 million that is deferred on Ohtani’s $700 million deal, the Dodgers will also owe Betts ($115 million deferred), Snell ($66 million), Freeman ($57 million), Smith ($50 million) and Edman ($25 million) significant amounts of money after their contracts expire.
Players and their agents are often open to deferrals because they boost the total guarantee of a contract, allowing agencies to tout larger deals and players to have higher comps that bolster free agent prices. Teams benefit in a multitude of ways — by lowering their hit toward the luxury tax, providing themselves with more cash on hand and profiting off the investments that fund those deferrals. But industry sources caution that the benefit is not as outsized as one might presume.
“If it were really that beneficial,” a rival general manager said, “we’d see a lot more of this.”
The competitive balance tax payroll, used to determine where teams reside relative to the luxury tax threshold, takes into account the present-day value of deals and averages them out over the length of a contract. So even though Ohtani is only making $2 million annually as a player, his yearly cost toward the luxury tax threshold is about $46 million because, for this purpose, his contract holds a present-day value of $460 million. Snell’s cost toward the luxury tax is a little less than $32 million — a slight savings from the $36.4 million it would’ve been had the deal not included deferrals, but theoretically not much of one when you consider the total guarantee would have been smaller in that case.
The more tangible benefit is cash. The Dodgers actually paid Ohtani just $2 million to win an MVP award while putting together the first 50/50 season in baseball history in 2024 and will pay him just $2 million to perform as an elite two-way player in 2025. In that sense, it’s the biggest bargain since the advent of free agency. The savings, however, are not necessarily the Dodgers’ to spend. Most of the aforementioned $46 million must be stowed away annually in what amounts to an escrow account that holds the deferral commitments until they’re due.
The collective bargaining agreement contains some language that stipulates teams must invest that money in safer, more liquid accounts that might possess a lower yield but also mitigate the risk of franchises being unable to foot the bill and going into bankruptcy. But rival executives believe there is some leeway nonetheless — enough for a team such as the Dodgers, owned by a multitude of savvy investors, to profit further off those investments. By how much is hard to decipher.
“It’s just how you account for it,” Friedman said when asked about the risk of having so much money tied to the distant future. “You have to fund a lot of it right now and having that money go to work for you. We have a lot of our ownership group from a financial background and can have that money going to work right now and just making it not something that sneaks up on us. We’re not going to wake up in 2035 and be like, ‘Oh my god, that’s right, we have this money due.’ We’ll plan for it along the way.”
The Dodgers, who are still expected to re-sign Clayton Kershaw and are also hoping to bring Hernández back, are currently in line for a 2025 payroll of roughly $210 million, second behind only the Philadelphia Phillies. Their CBT payroll projects to $285 million, according to Spotrac — $40 million more than the second-place Phillies and $85 million more than the third-place New York Yankees. The Dodgers are all but guaranteed to exceed MLB’s highest luxury tax threshold in the two years remaining on the current collective bargaining agreement, which means drafting 10 spots later and paying tax surcharges of up to 110%.
They’re suddenly operating as if none of that matters, and a lot of that circles back to Ohtani. For the revenue he generated in his first season in L.A., which blew away even the most optimistic projections. For the World Series he helped them win, triggering another financial windfall. And, perhaps most importantly, for the massive deferrals he volunteered in his contract — all with the expectation that the Dodgers would use the savings to continually surround him with high-end talent.
“That pledge and commitment we made to him,” Friedman said, “we take it seriously.”
Friedman navigated through his first six offseasons as Dodgers president of baseball operations without handing out a single nine-figure contract. Bryce Harper became a free agent at just 26 years old during that time, and the Dodgers offered a four-year, $180 million contract, hoping a stalled market would prompt the superstar outfielder to agree on a shorter deal with a higher annual value that would allow him to reenter the market at 30.
The Dodgers were attempting to be opportunistic then. Now they’re unabashed aggressors, constantly willing to stretch themselves to get deals done. And though Friedman continues to talk about the importance of “keeping one eye on the future and one eye on the present,” and thus maintaining a minor league system good enough to minimize external needs, there’s no question the Dodgers are operating at a different level at the moment.
They’re doing practically whatever they want — and making no apologies for it.
Source: www.espn.com