If there was any question about the valuation that MLB teams put on quality young arms, it’s been answered this winter – the returns garnered by San Diego and Oakland when they moved Mat Latos and Gio Gonzalez illustrated that a team willing to move a good young pitcher under multiple years of team control could do very well for themselves and accelerate a rebuilding process by getting pieces at several positions that could be long term answers. So, given the prices those two arms have commanded, it shouldn’t be a big surprise that Theo Epstein is exploring the market for Matt Garza, looking to see if he can pull off a similar deal to replenish the Cubs organization with the kinds of young players they need to build around for the future.
However, Garza’s a different asset than Latos or Gonzalez, as his longer track record in the big leagues also means that the Cubs are selling a pitcher who is only going to be under team control for half as long as the other two. Additionally, since Garza qualified as a Super-Two, he’s already on his third trip through arbitration, and his salaries have escalated more quickly than most players that are two years away from free agency. So, while the Padres and A’s were marketing four years of a good young pitcher, several of those years at prices that were just a fraction of what similar pitchers would cost to acquire via free agency, the Cubs are shopping two years of a pitcher whose salaries are somewhat depressed relative to his market value, but aren’t really that much lower than what a team could buy a decent free agent starter for.
So, it stands to reason that the Cubs will get less for Garza than what other young arms have been going for this winter. How much less? Well, let’s look at just what kind of trade value Garza should actually have.
Let’s start with his expected performance. 2011 was a career year for Garza in nearly every respect, but as Josh Weinstock noted back in November, he made changes to his approach that suggest that he could be more likely to retain some of these gains than your average pitcher, and perhaps we should regress his performance back towards career norms less than we would for a pitcher whose new found success was harder to explain. Even with the adjustments, however, it’s still never a good idea to throw out all seasons prior to the most recent one, so we have to consider Garza’s 2011 performance alongside his 2006-2010 numbers.
So, a very modest regression (say, 80% weight on his 2011 numbers versus 20% for his prior career totals) would give us an expectation (using either ERA- or xFIP-, the results are essentially the same) of Garza preventing runs at about 15 percent better than a league average pitcher and an expectation of throwing about 200 innings per season. Since the league average ERA last year was 3.94, that would translate to an expected ERA for Garza of 3.34 – a little higher if traded to the AL, a little lower if he stayed in the NL, but it’s the same value relative to his peers – or a difference of about 13 runs allowed compared to a league average starting pitcher over 200 innings.
A replacement level starter (think Rodrigo Lopez, or someone of that ilk) is generally going to be about 20-25 runs below average per 200 innings, so that projection for Garza would rate him as something around 33 to 38 runs above replacement, or in WAR terms, would make him like a +3.5 to +4.0 win pitcher.
That puts him pretty close to the expected performances of the better free agent pitchers on the market this winter- C.J. Wilson and Mark Buehrle – but Garza’s younger than both and has better stuff, so he’d probably command a bit of a premium compared to those two. Wilson signed for 5/78 while Buehrle got 4/58, so it looks like the current market value for this level of pitcher is around $15 million per season on a long term deal.
Garza’s scheduled to make about $9 million in arbitration this winter, and assuming he has a successful 2012 season, will likely see that number jump up to around $12 or $13 million next year. So, over the next two seasons, he’ll earn about $8 million in salary below his market rate, and he comes with the added benefit of not requiring a long term commitment, so there’s additional value in avoiding the potential negative value associated with giving a free agent starter a four of five year deal. If you think those years will result in an overpay of about $5 million per season, the shorter commitment to Garza would result in another $15 million in savings, making him an asset worth about $23 million.
The total comes out similarly if we just use a $/WAR calculation. If the price of a win in this market is around $5 million apiece, our valuation of Garza would make him worth around $19 million per season, for a total of $38 million in value over the next two years. Subtract out his expected $22 million in salary, and you have a net value of $16 million, but then you’d also garner further value from the potential value of the compensatory draft picks you’d get if he left as a free agent, pushing his value to a bit over $20 million in total.
That’s basically what the Cubs are selling – a $20 million asset, and to get a fair return, they need a package of young players that provide about that much surplus value going forward. Using Victor Wang’s research on prospect valuation, we can essentially put together various packages of prospect types that would equal something close to $20-$25 million in surplus value.
Wang’s research would suggest that a fair return for Garza would be something like a position prospect good enough to be ranked in the #11-#50 range among all players, or if the Cubs preferred a package of players, perhaps a couple of prospects from the back-end of the Top 100. Keep in mind that he did his work on valuations four years ago, so the numbers listed in the article all need to be inflated up a little bit – in fact, getting just one hitting prospect in the #11-#25 range might actually qualify as a solid move in return for Garza, even though the reported asking price is a lot higher than that.
I’m sure the Cubs would love to land multiple premium young talents in return for Garza, but given the fact that they’re only selling two years of service time and that Garza’s salaries are already climbing towards market rate prices, he’s simply not a valuable enough asset to demand that kind of return. Unless the asking price comes down sharply, I’d suggest that most teams are better off pursuing a free agent like Hiroki Kuroda or Roy Oswalt if they want a short term rotation boost, or going after Edwin Jackson if they’re looking for long term value as well. Garza doesn’t offer a large enough short term upgrade or enough significant value in the long run to justify giving up multiple good young players in order to get him.
While he’s a good pitcher who may very well have made a real leap forward last year, at the current asking price, Matt Garza just isn’t worth it. There are cheaper alternatives that would provide a similar level of production and allow those teams shopping for a rotation upgrade to hang onto their stock of prospects while still improving their teams.