Commentary

Targeted Allocation Money joins MLS family of strangeness but it just might work

By Ridge Mahoney
(@ridgemax)

Yet another method by which MLS teams can add players and confuse observers has been adopted.

Once again, Major League Soccer has taken a weird road that almost makes sense

In case you haven’t seen it, this is the passage from the MLS Rules and Regulations that defines its new mechanism for acquiring players:

“Targeted Allocation Money 

Announced on July 8, 2015, each MLS club will receive $100,000 per year for the next five years ($500,000 total) in additional funds, referred to as Targeted Allocation Money, to invest in their roster outside of the player salary budget.  

Targeted Allocation Money may be used in four ways:

  • Clubs may use the funds to sign a new player provided his salary and acquisition costs are more than the maximum salary budget.
  • Clubs may re-sign an existing player provided he is earning more than the maximum salary budget.
  • Clubs may buy down the budget charge of an existing Designated Player (no longer making that player a DP) provided the club concurrently signs a new Designated Player at an investment equal to or greater than the player he is replacing.
  • Clubs may trade their Targeted Allocation Money to another club.

MLS clubs may bring forward a portion or all of their allotted Targeted Allocation Money, up to $500,000, to be used in a single season on up to three players."

Is this far more complicated than it needs to be? Of course. This is MLS. What did you expect? Simplicity? Clarity? Logic? Dream on!

By adopting this new mechanism, MLS has infused its teams with an additional $10 million to spend on players ($100,000 per team for 20 teams for five years). Teams can’t sit on the money indefinitely; money not used in 2015, for example, must be used during the 2016 season or it will expire.

(The same holds true for the regular allocation money teams receive each season by myriad means. That money also comes with an expiration date. In past seasons it had to be used up by May 31 of the following season. So money given to a team of missing the playoffs in 2012, if not used in 2013, expired during the 2014 season.)

A team isn’t shackled to the $500,000 amount it has been provided in Targeted Allocation Money; it can accrue additional amounts through trades and other transactions. But the catch is this: a team can only use this money if it also signs another player making the same amount of money or more than a current DP.

So if the Galaxy signs Mexican international Giovani Dos Santos, for example, it realistically has one option:

It can use TAM to buy down the contract of its lowest paid DP, Omar Gonzalez, and sign Dos Santos to a contract valued at the same salary or higher.

Gonzalez’s base salary in 2014 was $1 million (figures for 2015 haven’t been released). So the Galaxy would need more than its allotted $500,000 to fit his salary under the $436,250 threshold, and also needs to fit his number under its salary cap. 

As a midseason DP signing, Dos Santos’ salary would only count for $218,125 against the cap for the remainder of the 2015 season. The departure last week of midfielder Stefan Ishizaki, who is returning to Sweden for family reasons, strips his salary ($200,000 in 2014) off the books, so the move – at least short-term – would be more or less a wash.

The Galaxy used similar methods in August 2011 when it added Robbie Keane to existing DPs Landon Donovan and David Beckham, but it then needed to clear a lot of cap space in the offseason to be compliant for 2012. Gregg Berhalter, Chris Birchall, Frankie Hejduk, Jovan Kirovski and Donovan Ricketts were among the players trimmed off the salary budget of the 2011 league champion.

In case you’ve forgotten, the Galaxy repeated in 2012, so a significant salary dump didn’t carry over to performance.

(Under the new TAM rules, team also has the option of buying down the contract of new DP under the full-season $436,250 threshold. That wouldn't be realistically available in the case of Dos Santos, who is rumored to be asking for in the range of $6 million.)

Speculation from fans and the press regarding which teams might use TAM are focused on the teams that already have three DPs, but how teams have stocked those spots varies wildly. TAM won’t help Toronto FC buy down one of its multi-million-dollar DP deals, and the same is true for New York City FC. 

Players earning between $500,000 and $1 million are the most likely candidates to be “targeted” and even if a team has to sign another player to fill the vacated slot, there’s plenty of money in play between TAM and regular allocation funds. While these monies can’t be used on the same player, there’s nothing – well, except for the salary cap and roster limits -- to prevent a team from using TAM to buy down the contract of a current DP and spending regular allocation money to acquire a new player, as per current policy.

If Seattle finds a player it wants to sign as a DP, it can use TAM to buy down the contract of Osvaldo Alonso – supposedly earning in the range of $500,000 to $600,000 – this year so he fits under the max charge of $436,250, and use other funds to acquire the new player. Or it can keep Alonso as a DP and sign the new player to a DP contract, and use TAM to reduce that salary rather than Alonso’s. The players' individual compensation is not affected, as they would be if a contract was restructured or reduced. Only the sum used in salary-budget charge and allocation money is altered.

A team can use TAM on as many as three players, and since more than two dozen DPs aren’t much above the $436,250 threshold, this mechanism could be utilized in many cases. High-priced DPs enhance the league’s image and notoriety, but league officials know that teams can also improve by finding the right players at salaries in the high six figures.

To take the Galaxy again as an example albeit with a lower salary, it got good value out of Ishizaki, who didn’t put up amazing numbers – six goals and 12 assists in 50 games – but provided a wide thread on the right flank, did a decent job on set plays, and fit right into the system and strategies of head coach Bruce Arena.

While the adaptation of TAM is criticized as yet another method by which MLS can favor its biggest teams, much of the Galaxy’s success in the past few seasons stems from excellent production from role players such as Juninho, Ishizaki, Marcelo Sarvas (traded last winter to Colorado), Baggio Husidic, and others. With TAM, it can significantly upgrade a position at a somewhat reasonable cost.

Dos Santos would cost a lot more than Ishizaki and so for the Galaxy the question is simply one of bang for buck. And such decisions will also be faced by teams that can’t spring for a Sebastian Giovinco or Frank Lampard, but have a line on a player or two in the $700,000 range who can make a significant difference.

In fact, for many teams unable or unwilling to commit the resources as do the Galaxy, Red Bulls, Sounder, NYCFC or Orlando City SC, shrewd use of TAM may be their best method of staying competitive.

Sporting Kansas City won the 2013 title and has since rewarded Matt Besler and Graham Zusi with lower-end DP deals. (They each were on the books last year for $600,000). SKC could sign a player in a similar salary range and use TAM to cover the expenses. Real Salt Lake, FC Dallas, D.C. United, Portland, New England and Vancouver are other examples of good teams that might believe what they need to break through is just one more quality player, or two, rather than a blockbuster earner in the gazillions

2 comments about "Targeted Allocation Money joins MLS family of strangeness but it just might work".
  1. Gus Keri, July 9, 2015 at 7:29 p.m.

    Although complicated, it's a good rule. Some teams can sign up to 6 DPs if they want: 3 original DPs and 3 through the new rule. But the number of multi-million-dollars-salary players will stay the same: up to 3 only.

  2. Glenn Auve, July 9, 2015 at 11 p.m.

    so, as always MLS makes up rules in order to allow LA to sign the player they want.

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