Shohei Ohtani's historic contract with the Los Angeles Dodgers will see him defer $68 million of his annual $70 million salary, sources familiar with the deal said Monday, significantly lowering his new team's payroll and potential tax burden.
The Dodgers announced Monday they had signed the two-time MVP, after Ohtani had agreed Saturday to a 10-year, $700 million contract, by far the richest in the history of North American professional sports. A source said then that the majority of the contract would come in deferred money; under this structure, however, Ohtani is deferring more than 97% of his earnings. The deferred money -- totaling $680 million -- will be paid to Ohtani between 2034 and 2043, a source said.
The deferrals were Ohtani's idea, a source close to the situation said, motivated largely by the thought of helping the Dodgers sign other players and made easier by his massive off-the-field earnings. Ohtani is believed to make upward of $45 million annually through endorsements, a source said, making him clearly the most marketable player in Major League Baseball. The Los Angeles Angels were believed to make more than $20 million annually off that same marketability during his tenure there.
"Dodger fans, thank you for welcoming me to your team," Ohtani said Monday in the team's news release. "I can say 100 percent that you, the Dodger organization and I share the same goal -- to bring World Series parades to the streets of Los Angeles."
Ohtani's cost toward the Dodgers' competitive balance tax payroll -- which typically uses the average annual value of contracts, in this case $70 million, but discounts deferred money -- will be about $46 million after each season. That puts the combined cost of Ohtani, Freddie Freeman and Mookie Betts toward the CBT payroll at somewhere in the neighborhood of $100 million annually. The luxury tax threshold sits at $237 million in 2024.
The collective bargaining agreement does not place a limit on the amount of money that can be deferred, but teams have to set aside the present-day value of the deferred money -- in Ohtani's case, around $44 million in cash each year -- in an escrow account.
The Dodgers created a 40-man-roster spot for Ohtani and relief pitcher Joe Kelly on Monday morning by sending reliever Victor Gonzalez and infielder Jorbit Vivas to the New York Yankees in exchange for shortstop prospect Trey Sweeney.
"On behalf of the L.A. Dodgers and our fans everywhere, we welcome Shohei Ohtani to the Dodgers, the home of Jackie Robinson, Sandy Koufax and Hideo Nomo, three of the sport's most legendary and pathbreaking players," Mark Walter, chairman of the Dodgers and Guggenheim Baseball Management, said in the team's release. "Shohei is a once-in-a-generation talent and one of the most exciting professional athletes in the world. Our players, staff, management and ownership look forward to working together with Shohei to help the Dodgers continue to add, improve and strive for excellence on the field. Together with Shohei, we will work to help grow the number and breadth of people around the world who enjoy the excitement of Major League Baseball."
The Angels, with whom Ohtani spent the first six seasons of his MLB career, bade farewell to him on social media Monday night.
"Shohei Ohtani is a generational player and it was an honor to watch him make history throughout the six seasons he spent in an Angels uniform," the team posted. "We feel extremely fortunate that Angels fans were able to witness him redefine what is possible in our sport. We thank Shohei for his many contributions to our franchise and the game of baseball. We wish him the best during the next chapter of his career."
The Athletic first reported the details of Ohtani's deferrals.
ESPN's Jeff Passan contributed to this report.