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Rafael Devers Extension Goes Into Effect In 2024 For Luxury Tax Purposes

By Anthony Franco | January 10, 2023 at 10:06pm CDT

The Red Sox agreed to a massive contract extension with Rafael Devers last week, committing to their star third baseman into the 2030’s. The deal tacked on $313.5MM in new money to buy out ten would-be free agent seasons and keep Devers in Boston for the bulk of his career.

That $313.5MM was tacked onto a $17.5MM salary to which the parties had agreed the day before to avoid an arbitration hearing for his final season of eligibility. Chris Cotillo of MassLive reports (Twitter link) the deal was structured to go into effect for the 2024 campaign, a notable development for luxury tax purposes. The average annual value of a contract counts against a team’s luxury tax ledger. Devers’ deal will come with a $17.5MM tax hit for the 2023 season — reflecting the previous one-year agreement — before recalculating for the 2024-33 campaigns bought out by the extension.

Alex Speier of the Boston Globe reports some additional specifics on the extension. Devers receives a $20MM signing bonus, followed by his established $17.5MM salary in 2023. He receives salaries of $27.5MM annually from 2024-26, $31MM per year from 2027-30 and $29MM salaries between 2031-33.

According to Speier, some of that money will be deferred. Doing so will bring the deal’s luxury tax hit for the 2024-33 campaigns to a bit above $29MM. Jon Heyman of the New York Post reports (Twitter link) that $7.5MM in salary will be deferred each season, and the deal’s net present value is actually at $291.53MM after accounting for those deferrals. According to Heyman, the deal also contains a one-time assignment bonus worth $2.5MM in the event Devers is traded. A ten-year, $313.5MM contract without any deferrals would’ve had a luxury tax number of $31.35MM.

That’s a small benefit to the Boston organization over the long haul. The more immediate relief for the club comes in structuring the agreement so Devers’ 2023 CBT number remains at $17.5MM. That’ll keep Boston’s overall tax number around $211MM after factoring in projected salaries for arbitration-eligible players. They’re roughly $22MM south of the $233MM base tax threshold, leaving them a fair bit of spending room before hitting that mark.

The Red Sox have set a press conference for tomorrow at 11:00 am EST to announce the deal. Devers, chairman Tom Werner, team president Sam Kennedy, chief baseball officer Chaim Bloom and skipper Alex Cora will all attend.

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View Comments (34)

Comments

  1. DeGrom Texas Ranger

    4 weeks ago

    Net present value doesn’t work like that. Inflation would be way higher than what is assumed. Now, it’s another thing if we are saying net value relative to what it would be if an even amount were paid each season. However, inflation alone is 2-3 percent and has hovered around this range the last 100 years or so, and it has been very close even just looking at the past 30 years. A dollar in 10 years is worth at least 30% than now. The math is either represented very poorly, or it’s poorly calculated. Accounting net present value for tax purposes will likely be different, though. Depending on how much is deferred, this could be accurate based on projections, but “NPV” is very misleading here. Please clarify that. NPV is used to mean 2023 equivalent value, not value from 2023-2032. https://www.investopedia.com/terms/n/npv.asp

    Reply
    • FL02

      4 weeks ago

      You are correct here. But the more I read on this deal, the more it looks like a discount. Ten years is a long time, in ten years 100$ will feel like 35$

      Seems like he took a discount to stay in Boston.

      Reply
      • DeGrom Texas Ranger

        4 weeks ago

        Yep. It seemed he would get 350-400 without deferred money. I intended to say 30% less at least above, though each payment isn’t 10 years in the future. Still, even assuming it’s effectively all the money at once in 6 years (if we assume the payments are identical), this is way too high.

        Reply
        • FL02

          4 weeks ago

          Boston got a bargain. Or is Devers just not that good! Money talks …

        • DeGrom Texas Ranger

          4 weeks ago

          Defense is overvalued by some and undervalued by some, so there would be a huge gap. The Red Sox maybe settled in the middle. His defense has to take away some value, though.

        • jopeness

          4 weeks ago

          I think he has settled in Boston and therefore has s guaranteed 29m over the next 10 years, knowing Boston will put teams together opposed to other r markets that may fizzle

        • Fever Pitch Guy

          4 weeks ago

          FL – Devers was an overpay, he shouldn’t be compared to other elite infielders who are much stronger defensively. I think most of us feel he will likely be a 1B or DH within 5-7 years, I believe that is factored into the contract.

        • deweybelongsinthehall

          4 weeks ago

          Papi was always getting less than a two way player and it’s likely even his agent understood a comparison to a truly great two way player was unfair.

        • JoeBrady

          4 weeks ago

          If anything, it would seem like the contract is more front-loaded. I’d like to see the final terms, but if the contract starts with an immediate $20M bonus + a 1st year salary of $27.5M, your total 2024 salary is $47.5M. And years 4-10 only average $30M each, instead of the $31.35M.

          With these terms, I see no way to discount the contract from $313.5M to $290M, and it doesn’t even look close.

    • mcmillankmm

      4 weeks ago

      When I read this article, I was not expecting the bulk of the comments to focus on the one reference to net present value.

      Reply
      • DeGrom Texas Ranger

        4 weeks ago

        There are only 9 comments so far. It’s all on one thread. Regardless, this is incorrect: “That suggests the contract’s net present value is actually somewhere around the $290MM range.” from an economic value standpoint. It should be clarified that this 29 MM aav is only for accounting purposes.

        Reply
        • BeforeMcCourt

          4 weeks ago

          You do realize it says “for luxury tax purposes” which means “accounting purposes only”… right?

        • GASoxFan

          4 weeks ago

          I’m curious how the deferred money does or doesn’t stack with the deferred money Chris sale will be getting

        • JoeBrady

          4 weeks ago

          I’m not sure the writer has all the details. Sale’s deferrals were huge, going out as far as 20 years. Nothing that the writer wrote shows any serious deferrals

  2. Braves83

    4 weeks ago

    So as far as math goes your saying there is a chance??!?

    Reply
  3. JC#1

    4 weeks ago

    The contract Devers signed to avoid arbitration was $17,500,000 for 2023. The new contract starts in 2024. This was expected (Boston has used this before to stay under the CBT. This fact gives more money (than some calculated) to find a SS and 2B in 2023.

    Reply
    • Horace Fury

      4 weeks ago

      Yes, this is very good news. I was seeing on Cot’s and Roster Resource a CBT hit of about $30MM for 2023, which maybe would make sense if the whole deal had been reconfigured the way it was reported (11 yrs. 331MM). But the $17.5 had just been agreed to for 2023, and I’m glad it stayed that way. I guess the reporting was incorrect because the contract in its entirety and full provisions had not been available to the press.

      Reply
  4. GASoxFan

    4 weeks ago

    Notice all, John Henry once again expected not to attend.

    It appears newspapers must be making a comeback, he is too bust to attend the largest ever contract issued by the crown jewel franchise of the entire sports group.

    Reply
    • johnsilver

      4 weeks ago

      Had to have his blessing (not to mention his cash) to do this thing, but do kind of wonder why he’s not seen with the team when moves are made, like he used to be as much as before.

      Age perhaps being some, the sports group which now owns several teams across multiple sports leagues? Good question. GASox

      Reply
  5. bigdaddyt

    4 weeks ago

    I mean who cares if it does cause their not going to be competing anytime soon

    Reply
    • GaryWarriorsRedSox

      4 weeks ago

      If you understand how the baseball salary cap works you wouldn’t have made that statement.

      What this means is they’re punting on this year to get below the line, again. Sure we’ve heard this before but signing Devers means they’ll spend NEXT winter? That’s the implication.

      Reply
      • bigdaddyt

        4 weeks ago

        Oh I get it but the teams bad, can’t use free agency to plug every hole in that roster or else their gonna have a payroll higher than the Mets and still finish 4th.

        Reply
        • GaryWarriorsRedSox

          4 weeks ago

          True !!

        • GASoxFan

          4 weeks ago

          Only way to eliminate the payroll of the mets and finish 5th is eliminate the weakest link – bloom.

          They want their cake and to eat it too… when you’ve got morale in the dumpster (blooms direct fault due to handling of veterans and trades) and no serious push towards winning (blooms failures in roster construction and misguided hemorrhaging of cash on reclamation projects, sign-to-flip attempts, and buying bad deals to get fringe lottery prospects) then any free agent is 1) going to demand an overpay eliminating ANY serious ‘hometown’ discounts, and, 2) you’re an undesirable FA destination meaning you pay more for what few guys are willing to come to town.

          So, you pay more, for less, meaning even more roster holes in a repeating spiral.

  6. SODOMOJO

    4 weeks ago

    Do our Boston fans here see him as a 1B long term?

    Reply
    • humphrey x boegarts

      4 weeks ago

      I think he’ll stay at 3rd as long as possible, then move to DH

      Reply
    • GASoxFan

      4 weeks ago

      He makes so many errors at 3b I couldn’t imagine having him at 1b, it’d be a disaster.

      Really, he doesn’t belong at 3b and is a liability there. He *should* be a dh based on ability unless he gets his butt in gear, gets better physical conditioning, and, most importantly, spends IMMENSE time on drills to improve his fielding at 3b.

      Reply
      • Tiger_diesel92

        4 weeks ago

        Some guys that move off 3rd to 1B does great for their careers, I mean they have cassas to play there too. You don’t want a full time dh while trying to rotate players around.

        Reply
      • drtymike0509

        4 weeks ago

        Can’t be much worse than Cordero over at 1st last year. That wasn’t his fault at all but it was painful to watch at times

        Reply
  7. Thec’s

    4 weeks ago

    Devers offensive numbers more than justify his contract! He is a 300 million dollar player!

    Reply
  8. oot

    4 weeks ago

    I don’t pretend to be an accountant but Speier’s comment, “Devers receives a $20MM signing bonus, followed by his established $17.5MM salary in 2023,” could be interpreted as a way to boost Devers’ 2023 salary without causing the Sox to exceed the tax threshold for that season. Also, since some of the money will be deferred, could that include some of the bonus?

    Reply
  9. JoeBrady

    4 weeks ago

    Good news on the luxury tax. The $22M will help us cover the cost to replace Story, plus some more.

    Reply
    • GASoxFan

      4 weeks ago

      Or, had you spent story’s money plus 80m on Bogey you’d still have a silver slugger SS who was rock solid dependable to start games, and, just look to fill a hole at 2b

      Instead, now you’ve got nothing particularly good up the middle infield at all, how prophetic all the talk about story having a glass arm and being unable to throw from SS turned out to be.

      Reply
  10. ctguy

    4 weeks ago

    These 10 year contracts rarely age well. Hopefully Devers stays healthy.

    Reply

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