Did you know the Mets are still paying Bobby Bonilla every year?
Bobby Bonilla was a prominent Major League Baseball (MLB) player who played for eight different teams during his career. He was renowned for his excellent hitting abilities and his high salary, which was among the highest in the league at the time.
In 2000, Bonilla was released by the New York Mets but still had $5.9 million remaining on his contract. Instead of paying him the full amount upfront, the Mets and Bonilla's agent agreed to a unique deferred payment plan. Under this arrangement, Bonilla would receive annual payments of $1.19 million starting in 2011 and continuing until 2035, for a total payout of $29.8 million.
The deferred payment plan was based on the Mets investing the money they owed Bonilla to earn a higher rate of return than the interest they would have to pay on the deferred payments. The Mets hoped to make a profit and save money in the long run.
However, the plan didn't work out as anticipated. The Mets faced financial challenges in the years leading up to Bonilla's first deferred payment in 2011, caused by poor on-field performance, declining attendance, and losses related to the Bernie Madoff scandal. As a result, the team wasn't able to invest the money they owed Bonilla in the way they had hoped.
When Bonilla's first deferred payment became due in 2011, the Mets were still struggling financially. They asked Bonilla to defer the payment until 2014 and offered him an additional 8% interest on the deferred amount. Bonilla agreed, so he would receive a total of $1.2 million in 2014 instead of the original $1.19 million.
These deals are now known as "Bobby Bonilla Day," celebrated by Mets fans every year on July 1st, the day that Bonilla receives his annual deferred payment. The day has become a symbol of the Mets' financial troubles and their inability to escape the shadow of Bonilla's deferred payment contract.
Critics have panned the Mets for the deferred payment plan, but some argue that it was a wise business decision. By deferring the payments, the team freed up money in the short term to invest in other areas, such as player acquisitions and stadium improvements. Although the interest rates offered to Bonilla were high, they were still lower than the rates the team would have paid on a conventional loan.
In addition, the deferred payment plan has given the Mets some financial flexibility in recent years. In 2020, the team faced a significant drop in revenue due to the COVID-19 pandemic and was able to defer payments to Bonilla and other former players, which helped them manage their cash flow during a challenging time.
Overall, Bobby Bonilla's deferred payment contract has become a legendary story in the worlds of sports and finance. While it didn't work out exactly as planned, it offers a valuable lesson in the importance of financial planning and flexibility.