Many baseball fans (assuming there still are some left) celebrate July 1 not for what usually happens on the field, but for a contract that was cut back in 2000. The Mets, fielding a strong team and unwilling to pay an aging and declining Bobby Bonilla his $5.9 million salary, elected to defer that year’s 2000 salary 11 years to 2011. A nice nest egg for Bobby Bonilla. From there, things got interesting and now every July 1 it’s…
Happy Bobby Bonilla Day.
For a managerial finance class I’m taking this summer, I did the calculations to figure out how Bonilla and the Mets landed where they landed and then explored who won the deal. I would argue it’s a win-win, and I would even lean that the Mets “won” the deal.
Why Is The Payment To Bonilla $1.193 Million Per Year Until 2035?
I wanted to figure out how they landed on these exact terms, and it’s a two-step problem. First, you need to find the value of the original agreement, which was a 10-year deferment of his 2000 salary of $5.9 million. So, you’re finding the value of the deal in 10 years (at the agreed upon 8% return).
Value in 2011: $5,900,0000 x 1.08^10
This is what Bonilla could’ve taken in 2011 as a lump sum. This is what his 2000 salary was worth when the payments began in 2011 (10 years after he last played in baseball).
However, he and his agent Dennis Gilbert smartly figured they could do more to take care of Bonilla for life. Likewise, the Mets ownership had recently been swindled by Bernie Madoff and weren’t exactly clamoring to pay Bonilla $12.7 million. So now, we’re agreeing to a 25-year annuity that runs until 2035, when Bonilla will be 72 years old and 34 years past his baseball career.
$1.193 Million Annuity For Bonilla
So it’s 2011 and the Mets don’t have an extra $12.7M they owe a former player and, on the other side, Bonilla can now be a millionaire until his 70s. Here’s how the deal works, a present value calculation with the $12.7M sum being discounted as a 25-year annuity at an 8% rate of return:
The Mets Had 3 Options
Bonilla hit .160 for the Mets in 1999 and was clearly at the end of his career. Smartly, he learned he could get money from the Mets over a long period of time with an 8% return. The Mets wanted to protect cash in hand at a time when they were firstly competitive in 2000, and then victimized by Madoff a few years later. In sum, here were the 3 options the Mets had in dealing with this contract:
- Pay Bonilla the $5.9 million lump sum in 2000 – which they didn’t want to do.
- Pay $12,737,657 to Bonilla in 2011. That was the value of the $5.9 million deferred for 11 years, as shown above.
- Pay $29,831,205 over 25 years – which is what Bonilla wanted and in 2011 seemed easy for the Mets to do.
So they went through door Number 3.
Bobby Bonilla will be paid $1,193,248.20 every July 1 until 2035. It’s not a huge sum for the Mets, particularly now when their good players are very affordable. So who “won” the deal?
Bonilla, Of Course
Easy thinking suggests the 6-time All-Star won the deal. He is paid $1.193 million every summer until he turns 72. The Mets still owe him this for the next 15 years! He also has a smaller deal with the Mets (as does former pitcher Bret Saberhagen) on top of that.
Plus, he gets the reputation of having won this deal and the prolonged fame that comes with it. Consider Google Trends data for “Bobby Bonilla” searches for the last day, June 30 into the morning of July 1.
As of writing this in the morning of July 1, he’s being Googled every hour as much as he might in a normal day. Here’s another chart, measuring Google searches for Bobby Bonilla from Jan. 2019 to July 2, 2019.
It’s cool being Bobby Bonilla.
The Mets Won The Deal
I lean toward the argument that the Mets won the deal. It’s funny how, in recent years in baseball, owners have squeezed every penny in running their teams. Even owners of teams in big markets with gobs of money, they aren’t in the business of spending. A single penny – that’s the margin of much the Mets won this deal with Bonilla. Here’s how it’s calculated, showing the Mets could’ve paid him the $5.9M in 2000 vs. what they are actually doing through 2035:
A single penny. What the Mets did made sense. Especially if you go back to the time of the first deal. The Mets dumped Bonilla on December 23, 1999 and 11 days later traded for Mike Hampton and Derek Bell (who played pretty well in right field to replace Bonilla). They also used that cash to sign Todd Zeile, who had a 110 OPS+ and started every day at first base. The Mets won 94 games and made it to the World Series, where they lost to the Yankees and Roger Clemens threw a bat at Mike Piazza.
They made the World Series, protected large sums of cash and delayed payment to recover losses from the Madoff scheme. Now as franchise values continue to skyrocket, they cut a check equal to their 15th-highest paid player every year. Meet The Mets!
A Couple More Wacky Bonilla Notes
- When Bonilla first signed with the Mets in the winter of 1991, he was coming off 2 monster years where he was top 3 in the NL MVP voting. At the time, he was the highest-paid player in baseball.
- Bonilla had 2 All-Star seasons with the Mets and was a starter on the 1997 Florida Marlins championship team.
- Bonilla will be paid more money today than 14 of the Mets on the roster. And he hasn’t played for them since the 20th century.
- Mets star Pete Alonso hit 53 home runs last year. He made $555,000.
- According to fivethirtyeight, Bonilla’s career output almost exactly measured up to his career earnings. He made $52.4 million in his playing days and his career WAR is valued at $51.5 million.
In other words, Bobby Bonilla earned every penny of what he’s made.
You can see my entire calculation and how it all works HERE.