Why is July 1 Bobby Bonilla Day?

We’ve all heard stories about professional athletes that have squandered millions in salary and ended up homeless. The following story is not one of those. It is about a great decision made by a major league baseball player who retired in 2001. Thanks to a good agent, high interest rates, and a leap of faith retired player, Bobby Bonilla has been getting a check for $1.19 million every July 1 from the New York Mets since 2011. He will continue receiving a check through 2035 when he is seventy-two years old.

In a recent interview on the podcast Planet Money, Bonilla was asked what he was thinking back in 2000 when the Mets offered to defer his salary for ten years.

“I just always wanted to make sure I had money because I didn’t grow up with cash,” he responded. “One of the fears a lot of athletes have is losing everything, it is a very valid fear, and it is something that keeps all athletes up at night. I just had a real fear, so I said, let me find a way to put some more money away.” Later in the interview, he added, “If it helps athletes really see the advantage of putting away money and not thinking you have to have everything all at once, I think it’s a good thing.”

Early in Bonilla’s career, he was one of the best hitting third basemen in the National League. He was a six-time all-star who would regularly finish toward the top of MVP voting. He was a switch hitter who could hit for average, power, and knew how to draw walks. In 1997 he won a World Series with the Florida Marlins.

However, by 1998 at the age of thirty-five, Bonilla’s skills were in decline. The Dodgers traded him for Mets’ pitcher Mel Rojas in a swap of bad contracts. He still was under contract for two years at $5.9 million a season. The following year, Bonilla partially tore a knee ligament at spring training. He would never be the same player after the injury and only played sixty games for the Mets in 1999 with a .160 batting average. At the start of the 2000 season, the Mets met with Bonilla’s agent, Dennis Gilbert, anxious to work out a deal to defer Bonilla’s salary.

Gilbert, a former insurance agent, structured a deal where the Mets would not make any payments until 2011. They would have to pay 8% interest on the $5.9 million annually until 2035. This turned the $5.9 million into almost $30 million.

Why would the Mets be willing to pay anyone almost $30 million over twenty-five years instead of the $5.9 million they owed Bonilla for the last year of his contract? To understand that, you have to go back to 2000. The Mets were a strong team but needed another pitcher to do well in the playoffs. Deferring Bonilla’s salary allowed the team to acquire pitcher Mike Hampton from the Houston Astros. Hampton was making $5.7 million, so he fit nicely into the Mets payroll. Hampton pitched well for the Mets, winning the National League Championship Series (NLCS) most valuable player award. In the end, the gamble did not pay off, as Hampton lost his only start in that year’s World Series. The Mets would lose the series in five games and then lose Hampton in the off-season to free agency.

Additionally, in 2000, interest rates were not as low as today. The prime rate charged by banks was 9.23%, so an 8% rate wasn’t that extreme at the time. Especially since the Mets ownership was heavily invested with a local business advisor who was was guaranteeing a ten percent return.

Of course, that money manager turned out to be Bernie Madoff, who was running a Ponzi scheme that defrauded his many high-profile clients out of hundreds of millions of dollars. The Mets’ losses were so bad they had to borrow $65 million to pay player salaries. Twenty-five million of that was borrowed from other baseball owners.

These days Bobby Bonilla plays tennis, golf and does work for the baseball players union. And of course, he enjoys going to his local bank and depositing his check from the Mets every July 1. Happy Bobby Bonilla Day.