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Monday, July 02, 2018

Mets celebrate Bobby Bonilla Day by writing huge check

Promnesia ....Deja Vu ..... Groundhog Day .....

“I know Bobby is happy about it”, his agent said.

Lest we forget Posted: July 02, 2018 at 06:50 AM | 42 comment(s) Login to Bookmark
  Tags: bobby bonilla, contract, fred wilpon, madoff ponzi, mets

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   1. Adam Starblind Posted: July 02, 2018 at 04:04 PM (#5704036)
This should be no problem as long as the Wilpons can keep getting that steady 11 percent return year after year through those split strike conversion strategy investments.

Hm, what's that?
   2. Barry`s_Lazy_Boy Posted: July 02, 2018 at 04:14 PM (#5704046)
people wondered whether getting 8% interest was a good deal. At the time, we were having double-digit inflation


No, we had a 3.39% CPI in 2000, with lower rates in 1999 and 2001. The last time we had double-digit inflation was 1980.

In 2000, people thought pets.com was valuable, so that may have been what he was thinking.
   3. asinwreck Posted: July 02, 2018 at 04:21 PM (#5704054)
Obligatory reference to that contract Ted Turner signed Bruce Sutter to in 1984 that the Braves are still paying Sutter. Sutter gets $1.12 million annually through 2021, and then gets $9.1 million to finish the contract in 2022. (And Bonilla played far better for the Mets than Sutter pitched for the Braves.)
   4. PreservedFish Posted: July 02, 2018 at 04:35 PM (#5704063)
Is there some way a regular, patient American can sign one of these contracts where we get paid oodles of money late in life?
   5. Hank Gillette Posted: July 02, 2018 at 06:07 PM (#5704121)
Obligatory reference to that contract Ted Turner signed Bruce Sutter to in 1984 that the Braves are still paying Sutter. Sutter gets $1.12 million annually through 2021, and then gets $9.1 million to finish the contract in 2022. (And Bonilla played far better for the Mets than Sutter pitched for the Braves.)


So, why is Bobby Bonilla the poster person for deferred payment contracts and not Sutter*?

Besides, Bonilla provided as much value for the Mets in the past three years as Albert Pujols has for the Angels at roughly 5% of the cost.

The real laugher is that the Mets are “pinched” by an annual payment of $1.2 million. That’s roughly what they pay the batboy now, isn’t it?

Wait until USA Today learns that after Max Scherzer’s seven year contract ends in 2021, the Nats will still be paying him $15 million a year until 2028.

* After reading the FA, I see why. Bonilla is getting paid until 2035**.

**Although with that $9.1 payment Sutter gets in 2022, and considering the time value of money, the contract values are closer than you might think.
   6. Pat Rapper's Delight (as quoted on MLB Network) Posted: July 02, 2018 at 06:38 PM (#5704133)
So, why is Bobby Bonilla the poster person for deferred payment contracts and not Sutter*?

I figured it was because #lolmets.
   7. Voodoo Posted: July 02, 2018 at 06:44 PM (#5704138)
My favorite part about this story is that we'll continue to get this thread every year until at least 2035, but I'm sure by then it will be so cement s into lore that we'll have an annual thread to talk about it when when the payments stop.
   8. Pasta-diving Jeter (jmac66) Posted: July 02, 2018 at 08:05 PM (#5704205)
this article and this one claim it wasn't such a bad deal by the Mets and not necessarily a great deal for Bonilla
   9. snapper (history's 42nd greatest monster) Posted: July 02, 2018 at 08:13 PM (#5704215)
this article and this one claim it wasn't such a bad deal by the Mets and not necessarily a great deal for Bonilla

The article is using an 8% return. According to their math, Bonilla made slightly less than 8%. That's a fantastic return on a AAA asset. Player contracts are guaranteed by MLB.

He would have had to take significant equity risk to even hope to achieve 8% in the capital markets. And he wouldn't have gotten it. Since 2000, the S&P 5000 has earned 5.5% p.a. with dividends reinvested.

The deal has been a huge win for Bonilla.
   10. Nasty Nate Posted: July 02, 2018 at 08:14 PM (#5704217)
so cement s into lore
get off my lawn with your 2030s lingo!
   11. Copronymus Posted: July 02, 2018 at 08:15 PM (#5704218)
A guy on Twitter did a thread of a whole bunch of these. What I took from it is that the Nats in particular have gotten really into the idea of deferred payments. While I get why you'd want to throw in a little sweetener to guys like Zimmerman or Murphy, and I get why you might want to spread out the pain from some of the big contracts they've given out over the last few years, whose idea was it to give Rafael Soriano $2 million a year from now until 2024?
   12. Pasta-diving Jeter (jmac66) Posted: July 02, 2018 at 08:43 PM (#5704236)
A guy on Twitter did a thread of a whole bunch of these.

if those are accurate, the deferred deals for Griffey, Jr and Chris Davis seem much worse than Bonilla's
   13. QLE Posted: July 02, 2018 at 08:44 PM (#5704238)
So, do the deferred payments make Edmonds, Saberhagen, and Santana feel better about their treatment by the BBWAA?
   14. Cowboy Popup Posted: July 02, 2018 at 09:36 PM (#5704296)
So, why is Bobby Bonilla the poster person for deferred payment contracts and not Sutter*?


Pssh. That ##### Sutter never so much as brought a deck of cards to a game.
   15. Walt Davis Posted: July 02, 2018 at 11:27 PM (#5704346)
the Nats in particular have gotten really into the idea of deferred payments.

Yep. In terms of lux tax, you get the pain out of the way in the short term while obviously paying less in the short term. Especially if you're not planning to push up against the lux tax, it's a win-win for the team.

From that twitter set:

the Mets deferred 40 percent of Darryl Strawberry's 1990 salary of $1.8 million at a 5.1 percent interest rate to be paid from 2004-2033. That payment was later sold by the IRS to the highest bidder in 2015.

1) How'd the IRS get involved? Did Straw get busted for tax fraud or is it Wilpon-related?
2) How much did the IRS get? The price on $720 K at a guaranteed 5.1% with 18 years to go ought to be a pretty set price yeah?

(That's how I'm reading "40% of salary of $1.8 M")

There are others although I wonder if they're picking up on deferred bonuses. Heyward's $20 M bonus is deferred until 2024-2027, after the contract runs out. (I thought he got it earlier if he opts out but Cots doesn't say that.)

The Scherzer contract is a form of bureaucratic beauty that can only possibly make sense to an accountant.

$50 M signing bonus but $5 M paid in 2015 and the remainder deferred until 2019-21

Only $10 M in salary in 2015 (total $15 M with bonus), only $15 M for 2016-2018.
For 2019-21, his salary is $35 M per ... but it's deferred in its entirety. The deferred bonus brings him to $15 M actually paid in these years.
As noted in the tweet, for 2022-2028, he gets $15 M per which is the deferred 2019-21 salary.

So it works out as a 14/$210 M contract at $15 M per year but he only has to provide his services for 7 years. I still don't know what the point is of paying out the bonus while he's playing while deferring all of those salaries rather than just deferring the bonus (and some of his 2019-21 salary) until the end of the contract ... probably cuz somebody had their Excel spreadsheet set up to handle one complication but not the other.

I wonder if any of these were buyouts to get the guy to retire or re-worked deals to give the club a little extra payroll when they needed it. I thought that might be the case with Braun's but not according to Cots.
   16. Sweatpants Posted: July 02, 2018 at 11:35 PM (#5704350)
Obligatory reference to that contract Ted Turner signed Bruce Sutter to in 1984 that the Braves are still paying Sutter. Sutter gets $1.12 million annually through 2021, and then gets $9.1 million to finish the contract in 2022. (And Bonilla played far better for the Mets than Sutter pitched for the Braves.)
The contract that is still being paid to Bonilla isn't the one that he signed after leaving the Pirates. When playing for the Mets under this contract, Bonilla had a 49 OPS+.
   17. Hank Gillette Posted: July 03, 2018 at 01:00 AM (#5704375)
1) How'd the IRS get involved? Did Straw get busted for tax fraud or is it Wilpon-related?
2) How much did the IRS get? The price on $720 K at a guaranteed 5.1% with 18 years to go ought to be a pretty set price yeah?


According to Sports Illustrated, Strawberry had unpaid federal taxes from four different years, so I guess they were seizing his assets.

The buyer paid $1.3 million, which is slightly more that the present value of an 18 year annuity paying $8,891.82 a month at 5.1% ($1,255,118). Of course, in 2015, the chances of finding an insurance company that would pay 5.1% on an annuity was roughly 0. As far as I can tell, if you bought an annuity today for a set number of years between 15 and 20, the implied interest rate would be about 3%.

So, the buyer got a slight bargain, which is typical for an auction where the value of the item can precisely be determined.

   18. Walt Davis Posted: July 03, 2018 at 01:47 AM (#5704382)
Somebody here needs to keep an eye on that sort of stuff. Next time a relatively small MLB-deferred payment comes up for auction, we should form a consortium to buy it. Note, I refuse to play for the Mets or Cards but it would be fun to see YR's head explode if we were all on the Yanks' payroll.
   19. The Ghost of Sox Fans Past Posted: July 03, 2018 at 03:20 AM (#5704391)
Bonilla took this deal because his wife said he'd blow the money an end up broke if he just took his salary as contracted.

I was going to object to characterizing these payments as AAA-rated because bankruptcy of a team could kill or maim them. Then I realized how much money MLB teams have been making. Never mind.
   20. PreservedFish Posted: July 03, 2018 at 04:43 AM (#5704394)
The contract that is still being paid to Bonilla isn't the one that he signed after leaving the Pirates. When playing for the Mets under this contract, Bonilla had a 49 OPS+.


Actually, according to one of the articles linked above, Bonilla also still receives deferred payments from that contract too. I think it was $500k per year, half paid by the Mets, half by the Orioles.
   21. Never Give an Inge (Dave) Posted: July 03, 2018 at 05:32 AM (#5704395)

#19, yes, I have often said that the most valuable part of the deferred deal for Bonilla was that it prevented him from blowing his money the way so many professional athletes (and other celebrities) do. Although as demonstrated above, I guess he could have sold the contract if he had wanted to.
   22. Adam Starblind Posted: July 03, 2018 at 06:51 AM (#5704397)
The contract that is still being paid to Bonilla isn't the one that he signed after leaving the Pirates. When playing for the Mets under this contract, Bonilla had a 49 OPS+.


And he was a real dick about not starting.
   23. Fancy Crazy Town Banana Pants Handle Posted: July 03, 2018 at 07:19 AM (#5704402)
Yep. In terms of lux tax, you get the pain out of the way in the short term while obviously paying less in the short term. Especially if you're not planning to push up against the lux tax, it's a win-win for the team.

That is not how the luxury tax works Walt. It is based on the AAV of the contract, including all deferred payments.

Teams are allowed to account for interest in deferred payments, but the rate is based on the federal mid-term rate. So if you are paying more than about 2.5% for the deferment, you end up increasing the value of the contract for luxury tax purposes in every year. And that is the only real effect deferments have on the luxury tax burden of a team.
   24. Sweatpants Posted: July 03, 2018 at 09:04 AM (#5704419)
Actually, according to one of the articles linked above, Bonilla also still receives deferred payments from that contract too. I think it was $500k per year, half paid by the Mets, half by the Orioles.
Well, shut my mouth. Apologies to asinwreck.
   25. VCar Posted: July 03, 2018 at 10:07 AM (#5704461)
Actually, according to one of the articles linked above, Bonilla also still receives deferred payments from that contract too. I think it was $500k per year, half paid by the Mets, half by the Orioles.


I'd forgotten Bonilla was still a good player during his 1.5 years with the O's. Until I checked his #'s, the most memorable thing I could come up with was him pushing Cal out of the dugout to take his victory lap the night he broke Gehrig's record.
   26. The usual palaver and twaddle (Met Fan Charlie) Posted: July 03, 2018 at 10:16 AM (#5704472)
Never gets old. :eyeroll:
   27. McCoy Posted: July 03, 2018 at 11:17 AM (#5704572)
My earliest memory of Bobby Bonilla is my dad bemoaning that the White Sox traded him to the Pirates. He of course bemoaned about this only after Bonilla looked to be good. So around 1989.
   28. What did Billy Ripken have against ElRoy Face? Posted: July 03, 2018 at 11:21 AM (#5704581)
I remember Bonilla as a White Sock on his 1986 Topps Traded card. A few years later when he became a big deal (would have been when I was around 12), one of my friends had a Bonilla autograph model glove. Even back then, we thought that was a pretty terrible endorsement.
   29. vortex of dissipation Posted: July 03, 2018 at 12:55 PM (#5704657)
This can't be real, can it? A Dick Stuart endorsed first baseman's mitt?
   30. Karl from NY Posted: July 03, 2018 at 01:57 PM (#5704698)
Is there some way a regular, patient American can sign one of these contracts where we get paid oodles of money late in life?

Sure. If you want an income of $1 million per year, investing $50 million in a stable bond fund will do it.
   31. Karl from NY Posted: July 03, 2018 at 02:01 PM (#5704702)
Since 2000, the S&P 5000 has earned 5.5% p.a. with dividends reinvested.

This is a selective endpoint that starts from the peak. From its lows in 2003 or 2008 to the present, the S&P has returned more than twice that.

That Bonilla's deferral returned more than the market was a lucky accident of timing, not some fundamental truth.
   32. karlmagnus Posted: July 03, 2018 at 04:00 PM (#5704889)
This is a selective end point too, when the market is ludicrously overvalued. I'll bet Bonilla's 8% will look damn good by 2035.
   33. PreservedFish Posted: July 03, 2018 at 04:09 PM (#5704904)
People use 7-8% as a rule of thumb for long-term return on big US equities. If you can get a guaranteed 8%, you've probably made a damn good deal. There's a chance that you miss out on a stock boom, but the insurance against a crash or just sluggish growth should be well well worth it. I think it's a no-brainer.
   34. dlf Posted: July 03, 2018 at 05:09 PM (#5704980)
For what its worth, since Buffett took over Berkshire in 1965, the S&P has returned 9.9% annually
   35. RMc Has Bizarre Ideas to Fix Baseball Posted: July 03, 2018 at 06:37 PM (#5705035)
why is Bobby Bonilla the poster person for deferred payment contracts and not Sutter

Because Bonilla was black and a "problem child". (And, of course, #lolmets.)
   36. Walt Davis Posted: July 03, 2018 at 09:22 PM (#5705158)
That is not how the luxury tax works Walt. It is based on the AAV of the contract, including all deferred payments.

Perhaps I wasn't clear. I'm perfectly aware the lux tax is based on the AAV, hence that's why that pain is gotten out of the way early. But the Nats are in fact actually only paying Scherzer $15 M a year while he's playing for them, putting extra money in their pockets in the short term (or helping them to balance actual short-term costs and revenues while putting a better team on the field now). And as I said, if you're not pushing up against the lux tax, it doesn't matter one bit to the team that the contract is counted against the lux tax at its AAV. They will of course still be paying him $15 M a year for 7 years after this contract. That might interfere with their cash flow down the road but won't count against the lux tax ... barring changes.

And it's not strictly at its "AAV," it is at a slightly discounted rate. For lux tax purposes, Scherzer's contract is treated as 7/$201, not 7/$210. Which might be what you meant about the 2.5% discount rate.
   37. Walt Davis Posted: July 03, 2018 at 09:34 PM (#5705167)
A Dick Stuart endorsed first baseman's mitt?

I used to have a Billy Williams model 1B glove ... he made 93 career starts there.
   38. Infinite Yost (Voxter) Posted: July 03, 2018 at 10:47 PM (#5705213)
Is there some way a regular, patient American can sign one of these contracts where we get paid oodles of money late in life?


Yeah, go back in time and convince Boomers that paying their taxes and union dues is worth it because ####### over their children and grandchildren on purpose will end badly.
   39. ERROR---Jolly Old St. Nick Posted: July 04, 2018 at 12:05 PM (#5705306)
people wondered whether getting 8% interest was a good deal. At the time, we were having double-digit inflation

No, we had a 3.39% CPI in 2000, with lower rates in 1999 and 2001. The last time we had double-digit inflation was 1980.

Other than 1973 through 1982, inflation hasn't really been that much of a problem for the last 90+ years. But between January of 1973 and December of 1982 the CPI rose 129%.
   40. Jay Z Posted: July 04, 2018 at 01:23 PM (#5705325)
Yeah, go back in time and convince Boomers that paying their taxes and union dues is worth it because ####### over their children and grandchildren on purpose will end badly.


Money is a renewable resource. It can't be destroyed.

Now if the money goes out of the country, and you favor the money in the USA, that's something else.
   41. snapper (history's 42nd greatest monster) Posted: July 05, 2018 at 09:40 AM (#5705449)

This is a selective endpoint that starts from the peak. From its lows in 2003 or 2008 to the present, the S&P has returned more than twice that.

That Bonilla's deferral returned more than the market was a lucky accident of timing, not some fundamental truth.


No.

As PF already said, 8% AAA corporate (guaranteed by MLB itself) is a better risk-adjusted return than equities.

8% for sure, vs. an expectation of 10% with lots of risk, is a no brainer.
   42. snapper (history's 42nd greatest monster) Posted: July 05, 2018 at 09:41 AM (#5705450)
Money is a renewable resource. It can't be destroyed.

Not true, inflation destroys the value of money.

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