If you haven’t heard of Bobby Bonilla Day, allow me to tell you a story. The year was 2000 and the Mets were pretty good. Bobby Bonilla was a good player near the end of his career, but he and the New York Mets were not exactly seeing eye-to-eye. Thus came the proposition. The Mets wanted to release Bonilla, but they still owed him about $5.9 million. For some reason, the Mets wanted to defer that payment. Maybe they had something special they wanted to do with the $5.9 million, maybe they were looking to invest in a replacement with it. Who knows? All that matters is that Bonilla agreed (and then played a year for the Cardinals).
That agreement is what we see to this day. For ten years the Mets were able to defer payment to Bonilla, but in return, beginning July 1, 2011 the Mets would have to write a check to Bobby Bonilla in the amount of around $1.9 million until the year 2035.
At first glance this looks terrible for the Mets. They are going to end up paying Bonilla like $45 million instead of the $5.9 they originally owed. We understand the time value of money, though, right? That a dollar in 2000 is not the same value as a dollar in 2011 which is not the same value as a dollar in 2035? There is also a thing called compounding interest. When we consider all that, if Mets took that $5.9 million and invested it at a normal rate of return* by 2035 they will have likely broke even with the Bonilla agreement.
So in this deal everyone wins, really. Bobby Bonilla has set up a nice pension-type-deal for himself, right after the deal the Mets acquired pitcher Mike Hampton for around $6 million — Hampton went on to win 15 games for the Mets with a 3.14 ERA and 4.6 fWAR —, and we all get a day to laugh at the Mets for being hilarious (even though they might not really deserve it).
*Of course, the Mets ownership at the time was pretty invested in Bernie Madoff, the Ponzi Scheme guy, so in the end they might have still Metz’d the whole thing up.
Happy Bobby Bonilla Day!
Bobby Bonilla Day: Celebrating compound interest and a New York Mets mistake. : Planet Money : NPR
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