It’s July 1st again which means it’s Bobby Bonilla day. That means that today the Mets will pay a man who hasn’t played a professional game since 2001, $1,193,248.20. The Mets will continue to do this every July 1st until 2035. This deal is just so weird it needs to be talked about.
Let’s go back to the 2000 MLB season where the New York Mets still owed Bonilla $5.9 million for that season and didn’t want him any more. A deal was reached with Bonilla’s agent Dennis Gilbert to attach an 8 percent annual interest rate to the money they owed. The interest clock began in 2000 and the first payment was made in 2011. The last will be made in 2035. The total amount the Mets will pay Bonilla is $29.8 million.
The deal is frequently made fun of because it means the Mets have a 55-year-old still on their team payroll. Mets fan are reminded of this every year when this day comes. They were able to use Bonilla’s $5.9 million from 2000 to acquire Mike Hampton for $5.75 million. The Mets also made it all the way to the World Series in 2000 before losing to the Yankees. Hampton became a free agent after the 2000 season and the Mets received a compensation pick in the 2001 draft. The Mets used this to pick David Wright, who became the face of the Mets for many years. They did then actually get use out of the money they freed up.
The Mets had another reason for accepting this deal too. The math actually would’ve checked out. The Mets’ owners had many investment accounts with Bernie Madoff. Even if Madoff returned 10% (which was lower than his normal reported returns), the Mets would still have a lower payout rate on their deferred contract than the interest rate they agreed to with Bonilla. If Madoff did return 10%, the Mets would have grown their $5.9 million to $16.83 million. If Madoff returned the usual 12-15% he said he was, the Mets would have grown their money to anywhere between $20.52 million (12%) and $27.45 million (15%). Even after paying Bonilla $1.2 million every year, the Mets would have made a profit. Now, obviously this became a problem when Bernie Madoff was found to have conducted the largest Ponzi scheme in history. Over at least a 17 year period, he defrauded thousands of investors of tens of billions of dollars. So now the Mets made nothing off of Bonilla’s money and lost more money in the whole Madoff situation.
Most people think Bonilla got a steal with this deal, but I’m not so sure. If Bonilla took the $5.9 million in 2000 he might have been just as well off or even better off. This is all due to the time value of money. Basically a dollar today is worth more than a dollar tomorrow. ESPN writer Darren Rovell wrote a piece about Bonilla including a section which talked about doing “the math by using a conservative strategy of putting that $5.9 million into the market in January 2000, when this deal was struck. We put 60 percent of the money in stocks and 40 percent in bonds and rebalanced the portfolio to those percentages at the start of each year following our gains in each area. Going back historically, we learn that Bonilla would have aggregated $16.5 million by December 2015. Through the deal the Mets gave him, he collected only $5.9 million by December 2015”. Really, it depends what he would’ve done with the money to see if he got a better deal or not.
This is a crazy deal that may have been a lose-lose or Bonilla might be on top. Either way, he gets $1.2 million today. The funny part to me is just that they still have to pay a guy who hasn’t played since 2001. When looking at the Mets’ payroll, they actually have two other retired players’ salaries they are still paying. They pay Bret Saberhagen (54 years old) $250,000 every year until 2029 and they owe Carlos Beltran (41 years old) $3,142,857 this year. These types of payouts are more common for recently retired players, but the deferred contracts like Bonilla’s and Saberhagen’s are much more unusual. Finally, just for the fun of it, let’s just see 10 big-name players Bobby Bonilla is making more money than this season.
It’s just crazy that a player retired for 16 years is still making over half a million more than these guys.