Arbitration case: Should the Tigers give Max Scherzer a multi-year contract?

Max Scherzer has a 43- 27 record with a 3.88 ERA in three seasons with Detroit, and he led the league in strikeout ratio in 2012. Like fellow rotation mates Rick Porcello and Doug Fister, Scherzer is eligible for arbitration once again this winter. Like Porcello, this is the second off season that Scherzer is arbitration eligible. But unlike Porcello, who was eligible for the first time last winter as a "super two", Scherzer has just two seasons left under club control, and is set to be a free agent after the 2014 season.

Scherzer made $ 3.75 million in 2012, a figure that was agreed to between his agent and the Tigers last January. At that rate, he provides excellent value, considering his 16- 7 record, 3.75 ERA, and his league leading K/9 rate of 11.08, which led all major league starting pitchers. For reference, Justin Verlander was third in the league at 9.03.

The Tigers acquired Scherzer in the same trade that brought Austin Jackson and Phil Coke to the Tigers, sending Curtis Granderson to the Yankees and Edwin Jackson to Arizona. In his three seasons with Detroit, he has posted double digit wins every year, averaging over 14 per season. His 4.6 WAR was seventh among AL starting pitchers in 2012, and his 3.27 FIP ranked fourth.

Scherzer has become a legitimate number two starting pitcher, even if the Tigers have three deuces in their rotation. Scherzer is projected to receive about $ 7.5 million for the 2013 season. That’s still a bargain by comparison with what a pitcher with comparable credentials would receive as a free agent. One need look no further than the five year, $ 80 million contract that the Tigers just gave Anibal Sanchez to see that. It stands to reason that Scherzer should get about the same amount if he were a free agent this winter.

There is no question that extending Scherzer is not the Tigers’ top priority as far as contracts are concerned. Justin Verlander also has two years remaining on a five year, $ 80 million deal that will pay him $ 20.1 million in each of the next two seasons. Extending Verlander has to be the top priorty asfar as extensions go.

Dave Dombrowski has not had good luck with extensions since coming to Detroit. In fact, it seems that almost every extension that he signed turned into a bad contract before the contract expired. The notable extension was Placido Polanco, and there are contracts to Verlander and Miguel Cabrera in progress that are going pretty well.

Contracts given to starting pitchers, such as Jeremy Bonderman and Nate Robertson, have blown up in Dombrowski’s face. Bonderman was given an extension of four year, and $38 million, and Robertson got $ 21 million for 3 years. Both players had serious health issues plague them before their contracts expired, and neither pitcher was much use after being let go by Detroit.

Bonderman and Robertson were given extensions prior to the time they would have been eligible for free agency. In such a deal, the club assumes the risk that the player might get injured or his performance might not be what it has been, while the player gets a guaranteed big pay day in exchange for giving up a couple years of premium earning power.

I was critical of the Tigers for giving Bonderman such a deal. Worse yet, Bonderman had yet to put together two solid half seasons on the mound, but was paid as if he were a proven star. Yes, he was a promising young pitcher, but he was not proven. I think that Scherzer has surpassed the level of performance where Bonderman was at the same point in his career, contract wise.

A starting pitcher who can hold down a rotation spot for an entire season approaching league average performance will generally receive upwards of $ 10 million per season on the free agent market, unless there are health concerns. Many will get multi year contracts and multi million dollar salaries. An effective, healthy starting pitcher is the most expensive commodity in the game.

Signing Scherzer to a multi year contract extension might be more difficult, and more expensive than it seems at first glance. It takes two parties to agree on a contract extension, and Scherzer’s agent may not advise him to forego a potential Sanchez like deal, which he stands to get if he can remain healthy and effective for two more seasons. In the interim, he can get around $ 18 million for two seasons before testing the free agent waters.

Yet, in order to make financial sense out of an extension, the Tigers would need to receive a discount off what they’d have to pay Scherzer for his two remaining seasons of arbitration eligibility plus, say another two seasons of free agency. Let’s say that he’d get 7.5 million in 2013, $ 10.5 million in 2014, and $ 15 million for two seasons of free agency after that. The total would be four seasons and $ 48 million.

Why should a club assume the risk of paying a player what they’d have to pay anyway if he were healthy? There’s no discount, no real upside to the club in that deal. The Tigers would need to see some savings off that amount to justify a four year extension. Say, four years at $ 40 million.

On the flip side, let’s say that the Tigers are not able to do an extension that makes financial sense for them. They’d then have to either trade Scherzer for a nice package of prospects, or let him play out two seasons with the team and either pay him free agent rates or make him a qualifying offer and receive a supplemental first round draft pick as compensation after the 2014 season.

Recent transactions would seem to indicate that the Tigers are built to win now, but that they’re not afraid to make long term financial commitments to get the right players on the roster. Common sense would dictate that the priorities should be to keep Justin Verlander and Miguel Cabrera around as long as possible. After that, they have pitchers such as Doug Fister, Anibal Sanchez, Drew Smyly, and Rick Porcello all under contract for more seasons than Scherzer.

Where Scherzer fits into their long term plans, or whether he fits in to their long term plans is something that only Tiger management knows for certain. In the short term, Scherzer will be the most expensive of their seven arbitration eligible players this winter, but he is still a bargain by comparison with what it would take to replace him.

Next: A look at the arbitration case of Rick Porcello, complete with comps that can also be used for Scherzer as they're both second year, arbitration eligible starting pitchers.