The first reports about the Orioles new contract with Chris Davis reported it as a seven year contract worth $161 million dollars. That probably conjured an idea in your mind that the Orioles would be paying Davis $23 million per year for the seven years of the contract. That's a lot of money. It turns out that's not what they will be doing, because ESPN's Buster Olney reported on Saturday afternoon that the contract has deferred a significant amount of its value beyond Davis's playing career.
According to Olney, the Orioles have deferred a total of $42 million dollars of the contract. What that actually means is that the O's will pay Davis $17 million per year for the seven contracted years. Each year, $6 million is deferred. So instead of the $161 million over seven years, the fact is that over the next seven years the O's will be paying Davis $119 million.
The money will come due eventually, with Davis structured to receive a $3.5 million payment each year from 2023-32, with an additional $1.4 million coming each year from 2033-37. That is an interest-free deferral, which is actually a pretty big victory for the Orioles. While it may invite comparisons to the infamous Bobby Bonilla Mets situation, there's not a whole lot of actual similarity. Yes, the Orioles will be paying Davis for a long time, but I think it's pretty safe that he'll do more for the Orioles than Bonilla did for the Mets on that contract.
What does it matter that the O's will owe Davis $3.5 million in 2024? Who cares? So they won't be able to sign the 2024 version of Everth Cabrera. They might not have the payroll to cover the 2028 version of Brian Matusz. There will be an impact, but we can only hope that whoever is in charge of the O's at that time - and the owner probably won't even still be Peter Angelos, who's 86 years old - is not going to be hampered by any of that. They should not be. It's a lot of money to you or I, but it's not a lot of money to a baseball team a decade from now, especially when weighed against the benefit it might provide right now.
In the meantime, what it means is that the Orioles will have an extra $6 million to play with each year for the life of the contract. That's most significant over the next three years because that's when the existing Orioles core will still be here. That's money they can spend to supplement that core.
Adding $17 million for Davis to the 2016 payroll puts the Orioles at an estimated $134 million, which is just about $10 million more than where they ended last season. That could change slightly depending on the outcome of the salary arbitration for Zach Britton and Brian Matusz.
Maybe they'll put some of it to use in the rest of this offseason by doing something crazy like signing Yoenis Cespedes for a year. Maybe they'll hold it back to pay all of the extra draft picks they'll have this year compared to last year, or they'll put it aside in order to take on salary midseason. There are a number of possibilities, any of which will be helpful to the Orioles of the present and near future. That could even be money that goes into making sure that the Orioles can keep Manny Machado and Adam Jones beyond 2018.
The amount of the deferred money also goes a long way towards explaining how the $154 million from a month ago turned into $161 million. Though some hot take machines have fired up their mockery about how the Orioles bid against themselves - a fair criticism on some level - the $42 million being deferred really means the Orioles will be paying the Orioles much less than once discussed over the seven playing years of the contract.
When you're talking about $17 million per year, you're really saying, OK, Davis needs two be a two win player per year to earn this. He'll bank some surplus in the years before he's expected to really decline, and even once he does, as long as his decline isn't a complete plummet off of a cliff, it still won't be too bad of a deal.
And in the meantime, the Eutaw Street home run champion stays with the Orioles. Davis has hit 161 home runs as an Oriole. How high on the franchise home run list do you think he can climb with seven more years to hit dingers? I'm looking forward to finding out.