On This Date: Mets Release Bobby Bonilla, Agree On Salary Deferral Deal

Let’s step into our special Amazin’s time machine and set the dial back to January 3, 2000, the day the New York Mets released Bobby Bonilla and agreed to that so-called infamous annuity to defer his remaining salary.

The Situation

The Twin Towers are standing over downtown Manhattan, and Shea Stadium stands tall in Queens. The Mets have just finished a strong 1999 season, going 97-66 and finishing second to the Atlanta Braves. Led by their young manager Bobby Valentine, the Mets’ hitting stars are Mike Piazza (.303 with 40 home runs and 124 RBIs), Edgardo Alfonzo (.304 with 27 homers and 108 RBI), and John Olerud (.427 OBP, 96 RBI). On the base paths, Roger Cedeno had 66 stolen bases the previous season of 1999 and the ageless Rickey Henderson (.315/.423/.466 and 37 stolen bases) had opposing catchers in fear. The staff ace was Al Leiter (13-12 with a 4.23) and the bullpen had two closers, John Franco with 19 saves and a 2.28 ERA and the recently acquired Armando Benitez (22 saves and a 1.85 ERA).

In 1999, in game 163, the Mets beat the Reds 5-0 in Cincinnati before beating the Diamondbacks in 4. In the League Champion Series, the Mets lost to the Braves 4 games to 2 who went on to get swept by the cross-town Yankees.

What is GM Steve Phillips to do as he looks to gain some starting pitching?  The Mets’ 1999 payroll was $71 million, well above the penalty threshold of $59 million, and with arbitration and contract increases is set to increase to $90 million in 2000, the fifth highest in the game, behind only the Yankees, Braves, Dodgers and Red Sox.  In December of 1999, the Mets’ are set to pay a 37 year old disgruntled outfielder who had hit only .160 the prior season $5.9 million in the coming year.  Bobby Bonilla is that reserve outfielder and he is threatening “fireworks in the new millennium” if he does not play regularly.

The Deferral

Rather than take up a roster spot for a poor defensive outfielder with a bad attitude, the Mets will release Bobby Bonilla.  To avoid having almost 7% of the team’s payroll taken up by one player, Mets GM Steve Phillips and Bonilla’s agent, Dennis Gilbert, (who also represented Barry Bonds, Jose Canseco ad Danny Tartabull) turned the $5.9 million owed to Bonilla in 2000 into an annuity that would cost the Mets no cash for 11 years and provide Bonilla with money well into a normal worker’s retirement.  The only question was to what interest rate would the money be deferred at?

With the deferred amount annuitized at a mandated 8% interest, the payout schedule which began in 2011 is as follows:

Date                                               Payment           PV Factor          PV Value
7/1/2011                        11         1,193,248.20         2.3316            511,763.70
7/1/2012                        12         1,193,248.20         2.5182            473,855.28
7/1/2013                        13         1,193,248.20         2.7196            438,754.89
7/1/2014                        14         1,193,248.20         2.9372            406,254.52
7/1/2015                        15         1,193,248.20         3.1722            376,161.60
7/1/2016                        16         1,193,248.20         3.4259            348,297.78
7/1/2017                        17         1,193,248.20         3.7000            322,497.94
7/1/2018                        18         1,193,248.20         3.9960            298,609.20
7/1/2019                        19         1,193,248.20         4.3157            276,490.00
7/1/2020                        20         1,193,248.20         4.6610           256,009.26
7/1/2021                        21         1,193,248.20         5.0338            237,045.61
7/1/2022                        22         1,193,248.20         5.4365            219,486.68
7/1/2023                        23         1,193,248.20         5.8715            203,228.41
7/1/2024                        24         1,193,248.20         6.3412            188,174.45
7/1/2025                        25         1,193,248.20         6.8485            174,235.60
7/1/2026                        26         1,193,248.20         7.3964            161,329.26
7/1/2027                        27         1,193,248.20         7.9881            149,378.95
7/1/2028                        28         1,193,248.20         8.6271            138,313.84
7/1/2029                        29         1,193,248.20         9.3173            128,068.37
7/1/2030                        30         1,193,248.20       10.0627            118,581.82
7/1/2031                        31         1,193,248.20       10.8677            109,797.98
7/1/2032                        32         1,193,248.20       11.7371            101,664.80
7/1/2033                        33         1,193,248.20       12.6760               94,134.07
7/1/2034                        34         1,193,248.20       13.6901               87,161.18
7/1/2035                        35         1,193,248.21       14.7853               80,704.80

29,831,205.01                            5,900,000.00

As shown above, the money was deferred at 8% interest.  As required on page 36 of the 1997-2000  Basic Agreement between the players and MLB:

A uniform annual interest rate, equal to the total of the prime interest rate in effect at The Chase Manhattan Bank on the immediately preceding November 1, plus one percent, rounded to the nearest full percentage point, shall be applied with respect to the following matters:

(1) the calculation of the “discounted present value” referred to in Article VI(A)(4) above, unless the Club and Player mutually agree otherwise;

(2) the calculation of the “present value” referred to in Article IX(F)(1)(b) above;

(3) the calculation of the interest referred to in Article XII(A)(3) above;

(4) the calculation of the “present value” referred to in Article XVI below.

The Mets actually were able to defer the money owed, up to 35 years, at a below mandated, below market rate. And for the first 10 years of that deal they were earning in upwards of 10 percent or more (Thanks Bernie) on the amount annuitized without paying out one dollar.

In the end it looks like Bonilla made out like a bandit cashing in at $29.8 million dollars. But in actuality both sides come out pretty even in present value of money earned and paid out. There were other benefits on both sides.

How else did Bonilla benefit?

Bonilla would have earned and been taxed on his $5.9 million in 2000 on NY State taxes.  By not collecting any money until 2011, Bonilla is paying taxes in his home state of Florida, which does not have a state income tax.  In addition, by not collecting the money until retirement, Bonilla avoided having a portion of his money taxed by states that have “jock taxes” which are states that tax the money earned on the road in states that do have an income tax (looking at you California) such as the Dodgers, Giants, Padres and inter-league games with the A’s and Angels.

How else did the Mets benefit?

Besides deferring money owed for up to 35 years at a below-market rate, immediately after Bonilla deferred his entire salary, Steve Phillips cleared enough payroll to swing a trade in which the Houston Astros dumped an equivalent salary on them in the form of Cy Young runner-up Mike Hampton in his last year of arbitration and Derek Bell. In exchange the Mets sent Houston Roger Cedeno, Octavio Dotel and minor leaguer Kyle Kessel who never made the Show.

In 2000, Hampton won 15 games for the Mets and led the team with a 3.14 ERA.  He won 2 games in the League Championship Series against the St. Louis Cardinals and was named NLCS MVP as the Mets won the pennant for the first time since 1986.

After the 2000 season, Hampton signed with the Colorado Rockies and the Mets received a compensatory pick between the first and second rounds.  The Mets’ pick – David Wright.

Conclusion:

Without Mike Hampton, the Mets probably would not have won the 2000 NL pennant, and without David Wright, the Mets history would have far more losses in it than it does.  This July 1, let’s remember that the Bobby Bonilla salary deferral was done as required by the Basic Agreement – and all three parties (Bobby Bonilla, the Mets, and us Mets fans) gained from the deferral.

About Carl Aridas 22 Articles
Mets fan since the Wayne Garrett/Craig Swan/Joe Torre days, Carl works as a bank consultant during the day, but at night enjoys writing baseball articles for Fangraphs, Hardball Times, and Metsmerized Online. He joined as a MMO Rookie of the Year hopeful in 2016 and has been a Mets fan for more than 40+ years.