The fans in Baltimore love Mark Teixeira. They want to see Mark Teixeira come home and have almost since the day he was taken by the Texas Rangers in the 2001 first round, two picks before the O's would have had the chance to select him. The fans, or at least a large portion of them, think money should be no object in bringing back the hometown hero.
And they might be right. You won't see me crying if the O's "overpay" to get Teixeira in orange and black. But what is he worth? To establish what qualifies as an overpay, we must answer that question first.
Teixeira is a great hitter. A simple average of his batting runs over the past three seasons has him at +31 with the bat. His current in-season MARCEL has him at +38, but that number is a bit high because the monkey doesn't know about park adjustments. Let's call him +30 offensively though even factoring in a bit of regression, that may be conservative.
Defense plus position is next. Teixeira is a good defender. UZR sees him as a total of +15 runs above the average 1B from '05 to mid '07, above average every season. John Dewan's +/- also likes Teixeira to the tune of +15 plays in total, or about +12 runs. Let's give him a +2, then subtract 9 for position so that Tex becomes -7 as a defensive player relative to all players.
So our total projection becomes +24 runs above average (relative to all players) for 2009. Now add in the estimate that the average player is about 20 runs better than replacement, and you've got Tex now as +44 runs above replacement or about 4.4 WAR. What's next? Well, we can use Tango's salary chart found here. First we have to factor in inflation in the free agent market which bumps these values up by about 10% for the 2009 season.
That means that fair value in the free agent market for Tex is something like 7/129M, 8/138M, or 9/143 given that he's a 4.5 WAR player today. Scott Boras apparently seems to want to set the price at 10/230M which means that a team is paying him to be a 6 WAR player. Even the most generous analysis suggests this is well above where Teixeira should be valued and any team that pays such a contract will likely have grossly overestimated his worth.
But at the same time, none of those "fair" contracts seem like what we would expect the premier free-agent hitter, who also happens to be a Boras client, to get for a long-term free agent contract. Of course this analysis was far from sophisticated, and it may be that a rigorous, theoretically solid projection system would value him at 5.0 WAR in which case anything from 7/151M to 10/180M seem like reasonable free agent contracts.
If the Orioles pay him more will it be a bad move? That depends, as there are assuredly some positive externalities above and beyond his on-field value (e.g. his popularity in Baltimore) which could generate enough revenue to absorb some of the surplus salary. On the other hand, paying fair market value for wins is not always optimal in that wins may also be accrued for less than a cost of 4.9M per WAR. Either way I'm hoping to see Teixeira in an Orioles' uniform next season.
**EDIT** I should be using a lower replacement level for comparison to account for the differences in quality between the NL and the NL. In this case about +2.3 WAR for an average player would be appropriate meaning Tex would be about 4.7 WAR. In that case it really becomes easy to say that paying for either 4.5 WAR or 5.0 WAR is the right salary.