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What Freddie Freeman’s contract means for Dodgers’ payroll, luxury tax & expectations

2021 Gatorade All-Star Workout Day
“A large contract with the Dodgers, you say?”
Photo by Justin Edmonds/Getty Images

The Dodgers made official their signing of Freddie Freeman on Friday, inking the All-Star first baseman and former MVP for six years.

Freeman’s total contract is $162 million, though $57 million of that is deferred over 13 years, through 2040. Greg Beacham at the Associated Press has all the details:

Freeman will make $27 million a year with Los Angeles, but $7 million is deferred in each of the first three seasons and $12 million in each of the last three for a total of $57 million. That money is payable in installments of $4 million each July 1 from 2028-35, and $5 million each July 1 from 2036-40.

In other words, here are the Dodgers’ annual payments to Freeman:

Salary

2022: $20 million
2023: $20 million
2024: $20 million
2025: $15 million
2026: $15 million
2027: $15 million

Deferrals

2028: $4 million
2029: $4 million
2030: $4 million
2031: $4 million
2032: $4 million
2033: $4 million
2034: $4 million
2035: $4 million
2036: $5 million
2037: $5 million
2038: $5 million
2039: $5 million
2040: $5 million

Deferred money isn’t new to the Dodgers, though not nearly as worrisome as when former owner Frank McCourt dragged the team into bankruptcy. Mookie Betts, for instance, has $120 million of his 12-year. $365 million contract deferred into annual payments through 2044, twelve years after his contract ends.

The deferred money just lowers the net present value of the total contract, which lowers how the deal counts toward the competitive balance tax. Betts’ contract averages $30.4 million per season nominally, but with the deferrals it’s considered roughly $306 million in total, which averages out to just over $25.5 million per season toward the CBT.

The net present value of Freeman’s contract with the deferrals is estimated by the players union at $148,195,494, per Jack Harris of the Los Angeles Times. That would count as $24.7 million per season for CBT purposes.

With Freeman on board — plus Tyler Anderson at $8 million, and Danny Duffy at “roughly $3 million” — the Dodgers payroll for competitive balance tax purposes is estimated to be nearing $290 million, the fourth and highest tier under the new collective bargaining agreement. That figure counts the full salary ($34 million, by average annual value) for Trevor Bauer, who is currently on administrative leave while under investigation by MLB.

The Dodgers last year paid $32.65 million in luxury tax on a payroll of $285.6 million. By going over the threshold for a second straight year, the Dodgers rates for going over the various tiers would be 30 percent (over $230 million), 42 percent (over $250 million), 75 percent (over $270 million) and 90 percent (over $290 million).

But at the same time, despite the high dollar figures, the Dodgers have an uncommon amount of payroll flexibility. Only Freeman, Mookie Betts, and Chris Taylor have guaranteed contracts past 2023. They’ll have Walker Buehler and Will Smith likely earning big money in salary arbitration in 2024, and by then they will have a number of choices to make with seven team options after this season, plus Clayton Kershaw, Cody Bellinger, and Julio Urías reaching free agency within the next two years. But the point is the Dodgers have the flexibility to make those choices.

“If you look at the last five years, there’s been a decent amount of roster turnover, as there is everywhere,” Dodgers president of baseball operations Andrew Friedman said Friday. “Only made possible for us to stay at the level we have, and to have the future outlook is that we have is ownership, and then our baseball operation staff and the work that they do, has put us in position where I can argue that the next five years outlook is better than what we accomplished over the previous five.”

The previous five years is a very high bar to clear. The Dodgers from 2017-21 won three pennants and one World Series, and at 451-258 (.636) had the best five-year stretch in franchise history.

But with Freeman and Betts on board, it’s understandable that Dodgers expectations are through the roof.