Quote:
Originally Posted by Senator Clay Davis
Passan broke it down pretty well, but the deferrals essentially are an accounting trick to bring down the annual cap value. So while $700 million is the true value of the contract, because of the deferrals the actual cap value is going to be much lower. And the marketing aspect truly makes this impossible to fully evaluate for maybe 15-20 years after the contract is done. If this creates 10 million lifetime Dodger fans in Japan, then the contract is arguably a discount.
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I'm curious to see what the actual cap hit is. That 8.5% is not the correct number, the discount rate is, and that is more like 5%. To get it to a 40-50 cbt hit, then that would be some crazy deferrals, like not getting anything for 10 years, or getting half the money now and have in 20 years. If the deferrals are really that crazy, then it is misleading to even call it a 700 million dollar contract as 70 million 20 years from now is really only worth 25 million now. The team could essentially invest 25 million for each of his playing years, and pay him out 70 million a year starting in 2043, and I would say it it is really a 250 million dollar contract. It's not cap circumvention at all, but rather exaggerating the value of the contract.
I doubt the deferrals would be that extreme though. The most reasonably heavily deferred contract I could see is to pay him 35m/year for 20 years, and in that case the cap hit would be more like 56m/year.
Also, how do the Dodgers monetize 10 million Japanese fans? That would mostly benefit the league more than the team.