Guess Who’s Still Getting Paid

Thanks to Paul via @BravesStats for this tip.

You’ve heard of ‘bad contracts’. The Braves have had some. Then there’s the deferred-payment contract. The most famous of these is Bobby Bonilla‘s deal with the Mets. He just got his 2015 check for $1.19 million, which he will continue to receive for the next 20 years (through 2035).

But it’s actually not that bad.

The worst has got to be the one the Atlanta Braves have going with Bruce Sutter. Allow me to quote from a lengthy LA Times article from 1985 – the year that this monstrosity was set up:

Sutter will receive a $750,000 salary for each of the next six years and a minimum of $1.12 million a year for the remaining 30 years of the contract. In addition, he will get the $9.1 million in so-called “principal” at the end.

Let’s spell that out:

1985-1991: $750,000 each year (6 years)

$750,000 each year (6 years) 1992-2021: $1.12 million every year (30 years)

$1.12 million every year (30 years) 2021: $9.1 million, which represents the ‘principal’ dollars that were supposedly placed in a 12.3% interest-bearing annuity back in 1985.

By those numbers, that adds up to $45 million over the 36 year life of the deal. Bonilla’s deferment arrangement totals only $29.8 million.

The LA Times piece is written all about the ‘risk’ to the player, but frankly, most of the risk seems to have been on the club. The interest rates in that era were crazy-high, and could have escalated within the contract’s terms. At this point, of course, the minimum 12.3% figure looks like a steal for Sutter.

The contract more-or-less assumes that the Braves were going to take $9.1 million (other reports suggest $4.8 million) and throw it into an annuity fund somewhere, drawing $1.12 million payments out annually to send to Sutter. Nobody actually knows whether this was done or not, or if the Braves are simply writing checks every year… which I expect is probably the case (which would be to their significant detriment).

Further, if the Braves didn’t set up an annuity, that means 2022 will require a balloon payment of $10.22 million to complete the terms of the contract for the then 68-year-old. Ouch.

The contract was established with the expectation that Sutter would be a Brave for six years: 1985-1991. However, he developed shoulder trouble shortly after arriving in Atlanta, and never was able to pitch effectively. He missed most of the 1986 season, all of 1987, part of 1988, then all of 1989. The Braves released him at the end of that season.

Nice money, if you can get it.