Most baseball fans know that July 1st is Bobby Bonilla day. Bonilla will receive $1.19 million every July 1st until he’s 72 years old. It’s a running joke, but soon enough, Bonilla won’t be alone. Chris Davis is set to start receiving deferred payments starting next year as a part of the 7-year $161 million contract he signed with the Orioles back in 2016. He’ll receive deferrals until he’s 51 years old. Stephen Strasburg deferred $70 million in his original 7-year/$175 million contract he signed in 2016 (although that amount has been reduced to $30 million because he opted out of that contract in 2019). His new 7-year/$245 million contract includes $80 million in deferrals. Max Scherzer deferred $105 million in his 7-year/$210 million contract with the Nationals back in 2015. Even the Dodgers are getting in on the deferral fun. They deferred $115 million of Mookie Betts’s $365 million contract and $57 million of Freddie Freeman’s $162 million contract.

The time value of money says that a dollar today is worth more than a dollar tomorrow, and that right there is why owners want deferrals in contracts. They would rather invest that money themselves and have to pay you further down the road when the value of the money deferred has declined. There’s nothing wrong with that and some players are open to the idea of being paid long after their playing days are over. Other players want the money up front and want to be able to control how the money is invested/spent.

There’s no right or wrong here, but it’s important to understand how deferrals work and understand that when the money comes due, it will factor into a team’s budget. That’s especially important for the Nationals who like to defer every dollar they possibly can. The Nationals are paying Rafael Soriano $2 million a year from 2018 through 2024. They’ll be paying Brad Hand $6.5 million over the next 3 seasons. Last season, they paid Matt Wieters $5 million. Smaller deferred payments can add up, but aren’t likely to affect future payroll all that much. The problem is, the Nationals have HUGE deferred payments on the books for the next 8 years and those will affect future payroll.

To my knowledge, ownership and the front office have been fairly quiet on how deferrals will affect payroll, but regardless of what they say, when you’re forking out $15-30 million in deferred payments, that’s going to affect how you operate. For example, next year, the Nationals will be paying $23.5 million in deferred payments to Max Scherzer, Brad Hand, Jon Lester and Rafael Soriano. Trevor Story’s new contract has an AAV of $23.3 million. The Nationals will essentially be paying the equivalent of Trevor Story’s 2023 salary for absolutely nothing. 

In 2024, things get slightly better with the Nationals owing $18.5 million to Scherzer, Hand and Soriano. Then, in 2025, the Nationals owe $25 million to Max Scherzer and Patrick Corbin. Luckily, Corbin’s contract only deferred $10 million, so his deferrals will end quickly. By 2027, the Nationals will have deferrals due to Stephen Strasburg and Max Scherzer (along with any other contracts they decide to defer between now and then), accounting for a whopping $41.6 million in deferred payments between those two players. The Dodgers will pick up Scherzer’s final $15 million deferral in 2028, so the Nationals are off the hook there, but they will still owe Strasburg $26.6 million that season and then $30.6 million in 2029. 

I can’t stress enough how large and quite frankly egregious these deferrals are. Yes, the Dodgers deferred $115 million of Betts’s deal, but for comparison, they did it over 12 years. Betts will never receive more than $11 million a year. Freeman will receive his deferrals over a 13 year period and he’ll never receive more than $4.3 million a year. The Nationals tried a similar approach in their $300 million offer to Bryce Harper before he signed with the Phillies. That offer contained $100 million in deferrals that would have paid Harper until he was 60 years old. To me, that’s a little bit excessive considering the two comparables above pay both players until they’re 50. In essence, the Nationals wanted to be able to make 20+ years of interest free payments to Harper, which he unsurprisingly declined.

The Nationals won a World Series in 2019 in part due to the structure of these contracts which allowed the Mike Rizzo to spend more money up front and stay under the budget that was given to him by the Lerners. It’s important to recognize that. It’s also important to recognize that the structure of those contracts will likely affect how the team operates going forward for the next 8 years and unfortunately, the end result might not be pretty.