by John Darer CLU ChFC MSSC CeFT RSP CLTC
In December 2023, the Los Angeles Dodgers agreed to sign Shohei "Shotime" Ohtani to a mammoth $700 million, 10-year contract, the largest salary any professional sports team has paid in American sports history.
The Los Angeles Dodgers will pay Ohtani, who will be 30 on July 5th, $2 million annually for the first 10 years and DEFER $680 million, which will paid out over the following 10 years from 2034 to 2043. The Dodgers will save about $24 million in annual luxury payroll taxes as a result.
Competitive Balance Tax | Glossary | MLB.com
What Is a Deferred Payment Agreement and How Does It Benefit the Team and the Athlete?
Deferred payments refer to a clause in a contract that allows a portion of an athlete's earnings to be paid later instead of immediately. This can be advantageous for teams facing financial constraints or athletes looking to maximize their earning potential over an extended period. However, it also means that the athlete will receive the deferred portion of their compensation later. Teams like to keep more money on their balance sheet.
Bobby Bonilla Deferred Payment Agreement
Bobby Bonilla signed the subject New York Mets contract on December 2, 1991. It was the largest contract in MLB history at the time. Every July 1st from 2011 to 2035 (when Bonilla will be 65), the New York Mets pay Bobby Bonilla — who retired from the game at the end of the 2001 season (23 years ago) — $1,193,248.20 as a part of his buyout deal. Assumed Interest Rate in the deal was 8%. Considering where interest rates were at the time the contract was executed (see link below), it was not unreasonable.
40 Years of U.S. Interest RateVisualizings (visualcapitalist.com)
As deferred payment agreements are a common practice in sports. Bobby Bonilla Day would be a nothing burger without the "pickles" of a dead convicted felon named Bernie Madoff who scammed investors and destroyed his family. Is that an example worth celebrating?
"That said, Bonilla’s circumstances are special enough that journalists began referring to July 1 as “Bobby Bonilla Day. Part of what made Bonilla’s situation unique was that Mets owner Fred Wilpon was heavily invested in the massive Ponzi scheme run by his pal Bernie Madoff that promised a guaranteed 10-15% return each year". Source: Yahoo Finance July 1, 2019
Bobby Bonilla Day is Yesterday's News
So when you boil it down, Bobby Bonilla Day is yesterday's news. Bonilla's deal was not even as good as Ken Griffey Jr. or Manny Ramirez and now Shohei Ohtani. It's simply the butt of a joke on the Mets former owners that certain people celebrate. Nothing looks worse than insurance agents and certain settlement consultants and firms who use the Bonilla story, which was not an annuity (let alone a structured settlement annuity) to attempt to drum up sales.
In my prior blogs I have suggested that it's time to stick a fork in Bobby Bonilla Day.
Annuity.org Revives Tired "Bobby Bonilla Day" for the Ides of March. Why? - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com) April 6, 2022
How about it? It's " "Sho-time" now! I'm not the only one! Report of Shohei Ohtani's Dodgers Contract Being Deferred Led to Bobby Bonilla Jokes (ktsm.com)
Last updated June 12, 2024
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