Bonilla’s Millions

When the New Year kicked in, talk of the Mets turned from looking towards the future to taking a not-so-fond trip down Memory Lane regarding one of the most disliked and controversial characters in Mets history.   Nope, I’m not talking about Richie Hebner.  I’m talking about Bobby Bonilla.

While there is much to be said about the Mets ownership lack of baseball acumen, and even in recent years being linked to a scandalous international Ponzi scheme, this deal is not nearly as bad as it looks on paper.  Invested long-term, I would say that it was even a good deal, benefiting the Wilpons just as much as the Bonillas.  Back when I was completing my MBA, I actually used this as a case study – I no longer have my backing documents or spreadsheet, but with reinvestments and compounded interest, the Mets have made money off of that initial $5 million while Bonilla has not.  So while they are paying him out something like $29 million over the next 25 years, chances are they’ve made their money and are reinvesting it again.  Hopefully, not with another Ponzi scheme.

For Bonilla, it’s sort of like choosing the lottery lump sum payout versus annual payments.  There are tax implications for the lump payout for the winner; the annuity is guaranteed money but is taxed per year therefore not as big of a hit.  While Bobby, from my understanding, is being paid from another fund, not impacting the current payroll from what I understand and adding on to the time value of money, I remember that the dollars and cents of it really wasn’t that far off if he got paid in 1999 or over the course of 25 years.

I won’t bore you with those details here.  But let me give you some lay examples to bring the transaction to light.

In Austin Powers: International Man of Mystery, Dr. Evil comes back from being frozen for 30 years and re-emerges in the 1990s.  He requires a ransom of (cue the pinky) “one MEEELLLION dollars” or in non-evil terms, one million American dollars.  When his number two man Number Two says that amount would get laughed at in the 1990s, he asks  then for “One hundred BEEEEEELLLION dollars!”

Think about that for a second.  To us ordinary working-class folk, one million dollars seems plenty, right?  To a corporation or small republic, $100 billion is certainly a lot but billions of dollars are spent weekly in the stream of corporate transactions.  The most telling part in Dr. Evil’s demands though is that in the course of 30 years, an acceptable ransom has gone up by five additional zeroes. (Meanwhile, when Dr. Evil goes back to the ‘60s and tries to hold the world hostage again, he is laughed at by the $100 billion request, being told it was an imaginary number).

The Bobby Bonilla deal is not THAT bad of a deal and will not be as much of an albatross or worrisome as some make it out to be.  I mean, he signed a $29 million/five-year contract in 1992, 19 years ago.  Today that player would be considered “cheap,” a STEAL even or at the very least a player who probably is on the downside of his career.

Back in 1999, $5 million was and still is plenty of money no doubt, especially owed to a player who didn’t contribute much and had more ill-will than good over that time.  Factor in the time value of money, we know that was once $5 million in ’99 money is not worth anywhere near what $5 million is today.  Yes, I know, boo hoo, but he’s got a family to feed right? (That was sarcasm)

Yes, I get it.  Bobby Bonilla represents everything that’s bad from the Mets’ past.  He is the poster-child of the Worst Team Money Could Buy, and possibly our last image of him was playing cards with Rickey Henderson during the critical Mets/Braves NLCS in 1999.

Our last-ing impression of him will be the fact that he will be “employed” by the Mets for the next 25 years.  However, I am here to defend the ownership of the Mets and say it was actually a decent deal on their end, from a business standpoint.  Yes, I know, where’s the rock salt?  Has Hell frozen over?  I’m actually defending the Wilpons.  Yes, I know, it happens from time to time, but I do give credit where it is due.

That’s not taking away from Bonilla.  Deferred payments are pretty par for the course in contracts; however, you don’t hear a lot about them in baseball due to the fact they are mostly incentive driven (like, a pitcher will have hit X-amount of innings for a deferred payment to kick in or some crap).  Please note, I have no record of Bonilla’s terms with the Mets, but it may or may not have included that deferred payment provision (bonus points if someone can find that for me).  It was a brilliant negotiating tactic, if that was in fact what happened in the board room when they “bought him out.”

If Lenny Dykstra is any cautionary tale, fact is most retired sports figures do not handle their money well or have a long-term game plan.  This was a win-win situation for both sides.  Sure, you would like the Mets to put the screws to him but the Players Union says there’s this thing called a contract that guarantees money, so they’d have had to pay him anyway.  Why not work it out to the best of their ability?

There is a faction that says the Mets should have just paid him his money and cut ties immediately.  Well, sure I certainly agree with that.  However, we are not privy to what happened the day he was released by the team.  There could have been a standoff or it could have simply been written in his contract, fully expecting to, you know, not play cards during a playoff game.

I think what’s happened is that we people who don’t earn player salaries, tend to look at this as an excess of the Player’s Union, lack of a salary cap and that players are overpaid.  Hey, no kidding!  This was not meant to be a piece defending the Mets management nor Bobby Bonilla himself.  It’s a way of saying, hey, there actually are smart business transactions happening in the Mets management.

And in an evil parallel universe, while the Mets are again paying Bobby Bonilla, a parallel universe could unfold and the Mets might do the opposite of what they did during his Worst Team Money Could Buy era and actually have a decent record.

Hey.  You never know.

Until then, the only piece of financial advice I will ever give is to take the annuity payment if you ever win the Mega Millions.  It’s the best case scenario for everyone.