Deciding whether Juan Soto’s future contract will top Shohei Ohtani’s record-breaking $700 million, 10-year deal with the Los Angeles Dodgers can be subjective, given the significant amount of deferred money in Ohtani’s agreement. Ohtani’s deal includes $680 million in deferred payments payable from 2034-2043, which can be valued in current dollars in different ways.
Ohtani’s agent, Scott Boras, does not prefer deferred money and believes teams may not insist on delaying the cash. “I think it’s much less of an issue than it was before,” Boras said. “Deferral as a mechanism for me, is it: Will it impede my ability to get the greatest asset I can acquire? And the answer to that is, I don’t think they’re going to want to do anything that impedes their primary pursuit and goal.”
Some teams, like the Washington Nationals, are open to deferring compensation. However, others, like the St. Louis Cardinals, view it as a way to “kick dollars down the road.” The exact value of Ohtani’s deal is difficult to determine, as the interest figure used for discounting, set by the collective bargaining agreement, is the federal mid-term rate.
The regular payrolls of Major League Baseball teams use the prime rate set by JPMorgan Chase plus 1%, which dropped to 9% this offseason. Deferred compensation must be funded by the second July 1 after the season in which it was earned, discounted to a present-day value at a 5% rate. Los Angeles owes over $1 billion in deferred payments to Ohtani and other players between 2028-46.
Not all teams agree on the value of deferred compensation. Some, like the New York Mets, consider it a unique situation, while others, like the Dodgers, believe it is a responsible way to fund the payments. The exact valuation of Ohtani’s deal may depend on individual perspectives.