Mookie Betts’ contract extension includes $115 million in deferred money
Mookie Betts made history last week. The 12-year, $365-million contract extension he signed with the Dodgers gave him the second-richest total deal —13 years for $392 million if his original $27-million salary for 2020 is included — in Major League Baseball history. It bested Mike Trout’s record extension of $360 million. The $65-million signing bonus is also the biggest.
But the contract’s details change its effective worth. The MLB players’ union estimated the extension’s present-day value is $306,657,882. Why? Because Betts will receive payments over 24 years, not 12.
Betts’ contract includes $115 million in deferred money. Betts will have $8 million deferred from his base salary in each of the extension’s first five years. The deferrals jump to $10 million each of the next two seasons and to $11 million over each of the final five seasons through 2032. Betts will turn 40 that October.
Betts will receive the deferred money in annual installments every July 1 in the 12 years after the deal expires — from 2033 through 2044, when Betts will celebrate his 52nd birthday. If he continues his career trajectory, he’d likely already have been inducted in the Hall of Fame.
The deferrals are without interest. If Betts is traded, the future deferrals are voided, and the annual salaries are converted to present-day money. The contract would, as a result, increase in value. A trade is the only way Betts will not spend the duration of the contract with the Dodgers; the deal doesn’t include a no-trade clause or opt-outs.
His signing bonus will also be divided. He’ll receive the money every Nov. 1, from 2021 through 2035. He’ll receive $5 million each November during the contract and $5 million in the three years after the deal is over.
The Dodgers consider the perils of travel after many Miami Marlins test positive for COVID-19, and revenge over the Astros’ sign-stealing is secondary.
Giving that money to Betts as a signing bonus and not as part of his annual salary allows Betts to take home more money. Salaries are taxable based on where games are played. Bonuses are taxable in the player’s home state. Betts is a resident of Tennessee, which doesn’t have a state income tax.
The financial plan doesn’t change the average annual value of the contract for competitive-balance tax purposes; it remains $30.417 million, according to Cot’s Baseball Contracts.
Betts’ deal also stipulates he’ll donate $100,000 each year to the Dodgers’ charity foundation and have a suite on the road.
Here are the details for Betts’ contract:
Signing bonus: $65 million (payable between 11/1/21 and 11/1/35)
2021: $17.5 million ($8 million deferred without interest)
2022: $17.5 million ($8 million deferred without interest)
2023: $20 million ($8 million deferred without interest)
2024: $25 million ($8 million deferred without interest)
2025: $25 million ($8 million deferred without interest)
2026: $25 million ($10 million deferred without interest)
2027: $25 million ($10 million deferred without interest)
2028: $30 million ($11 million deferred without interest)
2029: $30 million ($11 million deferred without interest)
2030: $30 million ($11 million deferred without interest)
2031: $27.5 million ($11 million deferred without interest)
2032: $27.5 million ($11 million deferred without interest)
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