Davis Signs With Baltimore (7/$161M, incl $42M deferred)

[Ohfan67]

Just read the deferred money discussion. Good stuff. The contract is not an albatross. Get us a pitcher and find a few nuggets and lets play ball.

[birrman54]

It doesn't seem like 3.5M/yr seven years from now should have any significant impact on our roster flexibility - potentially it could be up to ~170M by then, so you're talking about 2% of the budget. It drops to roughly 1% or less 2032. If Angelos (or Orioles) set aside $15M now and contributed just $1M/yr over the next 7 that covers 3/4 of it (presuming roughly 6% return)

I think that's where the "money is only available for Chris Davis" talk comes from - you obviously can't offer deals like this to every free agent. But it should let the O's act as though we signed CD for 7/119 - which could make him a tremendous value.

[DrungoHazewood]

This whole thing is kind of hilarious. First, I love Davis but I don't love the contract.

But the OH faithful never fails.

I WANT A BIG PAYROLL! Happy now? NO ITS SPENT ON THE WRONG PLAYERS

ANGELOS WILL NEVER SPEND OVER 100 MILLION ON A PLAYER!! Well, he just did. BUT IT SHOULD HAVE BEEN ON SOMEONE ELSE!

There are people who are only satisfied with solutions that can't happen.

[BradyBunch]

The original offer from Angelos included deferred money so it would not have been 7/150 when adjusted for inflation. We won't ever know the details of that deal, but I think it is safe to assume that Boras did not get the short end of the stick during the final round of negotiations. Angelos is a hard*** so he and Boras probably split the difference.

Of course, but we can safely assume the Orioles didn't increase the front loaded dollars either. I'd guess those 2033 to 2037 years are the extra $7m give or take a few hundred thousand. That's 17 years from now. Lot of those dollars will be eaten up by inflation and that $7m just invested in something that gives me 5%, that's $16m. Now that other $35m has 7 years. $35m@5%= $49m.

So when we look at this, adjust for inflation and remember there is gonna be $22m that the Orioles will keep in their pocket due to interest on deferred money. That's $22m Boras left on the table as the contract doesn't include Davis be paid interest nor adjusted for inflation.

So the argument that Boras got what he wanted or the Orioles paid an extra is hogwash. Boras knows his client will not get $161m and that $7m is the Orioles basically throwing in inflation protection for the first $35 deferred.

[Number5]

The original offer from Angelos included deferred money so it would not have been 7/150 when adjusted for inflation. We won't ever know the details of that deal, but I think it is safe to assume that Boras did not get the short end of the stick during the final round of negotiations. Angelos is a hard*** so he and Boras probably split the difference.

Somewhere along the line, I read that the difference between the 7/$154 figure that Boras was releasing and the 7/$150 the Orioles were releasing was the effect of the deferred money.

[ReclaimTheCrown]

...so this thread has turned into an economics class.

Funny (and true). But it is helpful; I wouldn't have been able to figure it out otherwise.

I did try to comment on what this deal means for our club in terms of maximizing the confluence of Davis' presumed good years in this contract and the final years of Jones' and Machado's existing contracts, but people want to talk math and economics. I was always more a government and history guy myself. Oh well lol

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[ReclaimTheCrown]

Somewhere along the line, I read that the difference between the 7/$154 figure that Boras was releasing and the 7/$150 the Orioles were releasing was the effect of the deferred money.

My sense is that, although we'll likely never know the specifics of the deferrals of the first offer, this is the better contract for the club. I doubt we would have increased the offer, but we needed to do so in terms of at least total dollars so Boras could get his public win.

At least that's what I'm hoping.

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[Babypowder]

All the deferred money definitely makes me hate it less. It's still a super risky contract for a guy I think has a significant chance of being completely finished by 33/34. His offensive profile is still volatile and a 7 year deal is scary. Yeah 17 a year isn't as bad as 23, but 17 is still a lot of coin if you're getting nothing for it for 3 or 4 years of the deal.

[Ripken]

Well, I'm getting excited. The team is almost set.

Fister or Latos?

One more bat? Cespedes on a 1 year?

[BohKnowsBmore]

All the deferred money definitely makes me hate it less. It's still a super risky contract for a guy I think has a significant chance of being completely finished by 33/34. His offensive profile is still volatile and a 7 year deal is scary. Yeah 17 a year isn't as bad as 23, but 17 is still a lot of coin if you're getting nothing for it for 3 or 4 years of the deal.

What makes you think he's more likely to be done by 33/34 than another player?

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[DrungoHazewood]

What makes you think he's more likely to be done by 33/34 than another player?

There is some evidence that TTO players, taken as a group, age less well than more rounded players, taken as a group. We'll see if Davis does that or not.

[BohKnowsBmore]

This whole thing is kind of hilarious. First, I love Davis but I don't love the contract.

But the OH faithful never fails.

I WANT A BIG PAYROLL! Happy now? NO ITS SPENT ON THE WRONG PLAYERS

ANGELOS WILL NEVER SPEND OVER 100 MILLION ON A PLAYER!! Well, he just did. BUT IT SHOULD HAVE BEEN ON SOMEONE ELSE!

This is pretty funny.

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[BohKnowsBmore]

There is some evidence that TTO players, taken as a group, age less well than more rounded players, taken as a group. We'll see if Davis does that or not.

Thanks for this reply.

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[25 Nuggets]

There is some evidence that TTO players, taken as a group, age less well than more rounded players, taken as a group. We'll see if Davis does that or not.

Right. Like someone else mentioned, he could be like Jim Thome who OPSed .922 at age 35+, mostly in the AL as a DH, compared to .970 through age 34. Or he could be like Ryan Howard. We'll have to cross the bridge when we get there.

[AZRon]

There is a formula that the MLB and Players association use to evaluate the average annual value of a contract for luxury tax purposes. It's been collectively bargained to use that one formula. Supposedly, Olney used the official formula.

I've posted the applicable language from the current CBA below.

As I read it, for purposes of determining the Average Annual Value (AAV), MLB does not deduct any salary deferrals.

Here is the language from:

ARTICLE XXIII Competitive Balance Tax

E. Determination of Salary

(2) Average Annual Value of Guaranteed Multi-Year Contracts

A Uniform Player's Contract with a term of more than one (1)

championship season (Multi-Year Contract) shall be deemed to have a Salary in each Guaranteed Year equal to the Average Annual Value of the Contract (plus any bonuses subsequently included by operation of Section E(4) below). Average Annual Value shall be calculated as follows: the sum of (a) the Base Salary in each Guaranteed Year plus (b) any portion of a Signing Bonus (or any other payment that this Article deems to be a Signing Bonus) attributed to

a Guaranteed Year in accordance with Section E(3) below plus © any deferred compensation or annuity compensation costs attributed to a Guaranteed Year in accordance with Section E(6) below shall be divided by the number of Guaranteed Years.

Also,

(6) Deferred Compensation

(a) Definition Deferred Compensation shall mean any Salary payable to a Player pursuant to a Uniform Player's Contract in a Contract Year after the last championship season for which the Contract requires services as a baseball player to be rendered.

(b) Attribution

(i) Deferred Compensation shall be included in a Player's

Salary as if paid in the championship season to which it is attributed under a Uniform Player's Contract. If a Contract does not attribute Deferred Compensation, the Contract shall be treated as if the Deferred Compensation was attributed equally to each of the Guaranteed Years in the Contract.

(ii) If the Deferred Compensation is to be paid with interest at an effective rate that is within one and one-half percentage points of the Imputed Loan Interest Rate for the first Contract Year covered by the Contract, then the Deferred Compensation shall be included at its stated value. Otherwise, the Deferred Compensation shall be included at its present value in the season to which it is attributed, said present value to be calculated by increasing any such payments by the Contract's stated interest rate, if any, and then reducing such payments back to their present value by applying as a discount rate the Imputed Loan Interest Rate for the first Contract Year covered by the Contract. If the terms of a Contract are confirmed by the Association and the Office of the Commissioner before the Imputed Loan Interest Rate for the first Contract Year covered by the contract is available, the Imputed Loan Interest Rate shall be the annual Federal mid-term rate as defined in section 1274(d) of the Internal Revenue Code for the month preceding the month in which terms are confirmed. If a Uniform Player's Contract uses the date or year in which a Player retires as a triggering event for the commencement of payment of the Deferred Compensation, it will be assumed for purposes of calculating Salary under this Article only that the Player retires on the day that he reaches age 40 or at the end of the Contract, whichever is later. © An Annuity Compensation Arrangement is an agreement in a Uniform Player's Contract whereby the Club promises to purchase an annuity to pay the Player after he is no longer required to render services as a baseball player under such Uniform Player's Contract.

(i) The portion of the cost of the annuity to be paid by the

Club while the Player is required to render services as a baseball player under the Contract shall be included as Salary for the Contract Year in which such cost is to be paid.

(ii) The portion of the cost of the annuity instrument to be

paid by the Club after the Player is no longer required to render services as a baseball player under such Contract, if any, shall be treated as Deferred Compensation attributable pro rata over the Guaranteed Years of the Contract at its present value as calculated pursuant to paragraph (6)(b) above. Any compensation that the Player is scheduled to receive pursuant to such Annuity Compensation Arrangement shall not be considered Salary or Deferred Compensation.