New MLS process twists its already labyrinth-like financial underpinnings

By Ridge Mahoney

Those who want to start crunching salary numbers to closely track how teams wiggle their way under the salary cap will be left frustrated and disappointed.

The MLS Players Union has released the 2015 salary figures, but once again, those numbers do not reveal precisely how players’ contracts impact each club's $3.49 million salary cap. Nor do they reveal how clubs use funds to get the salaries of some players under the $436,250 threshold for Designated Players.

The latter is of particular interest as MLS has introduced a new resource, Targeted Allocation Money, clubs can utilize to get the salaries of new or current DPs under the $436,250 threshold. The process further twists the league’s already labyrinth-like financial underpinnings.

By using TAM to “buy down” the salary of defender Omar Gonzalez so it fits under the DP threshold of $436,250, the LA Galaxy has opened a DP slot for attacker Giovani Dos Santos.

The base salary for Gonzalez is listed as $1.2 million and his total compensation is $1.45 million. The exact figure used by teams and the league office to keep financials in order is a secret, which shrouds the process. But how does the Galaxy get Gonzalez's $1 million-plus salary under the $436,250 threshold?  It doesn't have enough TAM -- every team has been allotted $100,000 per year for the five-year CBA term -- even if it uses up its entire allotment this year to get Gonzalez's salary under the $436,250 threshold. More likely, his salary the Galaxy must reduce has been prorated and is significantly less than the salary figures listed.

Likewise, Portland has used TAM -- a smaller amount, presumably -- in the same manner to knock down the salary of forward Fanendo Adi and open up space for attacker Lucas Melano, formerly of Lanus, the same club from which the Timbers signed fellow Argentine Diego Valeri two years ago.

One can assume that the Timbers used about half its five-year allotment of TAM to knock down Adi’s contract -- base salary $651,500, total compensation $664,000 -- so he fits under the DP limits. Adi is a good example of players in the high six figures – as is Valeri ($550,000) -- who are the most likely candidates for the use of TAM.

Scanning the MLSPU salary list reveals some apparent contradictions. Last year, Sporting Kansas City upgraded Matt Besler and Graham Zusi to DP deals; on the 2015 list, their base salaries are each $650,000. Last January, the team reacquired Roger Espinoza and his base salary is listed as $750,000, but he’s not a DP. The same situation and same base salary applies to Mix Diskerud of NYCFC. What’s up with that?

Teams can use regular allocation money to buy down the cap hits of players they have re-signed or acquired, and there are also other rules about how signing bonuses and other auxiliary payments affect the cap hit. When the league officially released details of what TAM is and how it can be used, one restriction cited was regular allocation money (RAM) and TAM cannot be combined on the same contract.

If Chicago wants to add a DP, it could usa TAM buy down the deal of David Accam (base $650,000) or Kennedy Igboananike ($800,000) but not Shaun Maloney ($1.55 million). The Sounders’ Osvaldo Alonso(base $748,000) is another candidate on a team brimming with ambition and spending power.

Teams with very high-earning DPs – such as Toronto FC and New York City FC and, now, the Galaxy – won’t be able to use TAM directly but TFC and NYCFC can certainly get value for it in trade.

Since the league doesn’t reveal amounts of allocation money used in deals, commissioner Don Garber and team executives can say they are striving for greater transparency while doing the opposite. With two TAM deals in the books already and more surely on the way, the league’s financial operations will get murkier, not clearer.
5 comments about "New MLS process twists its already labyrinth-like financial underpinnings".
  1. R2 Dad, July 18, 2015 at 1:50 p.m.

    The only way MLS will alter the single entity configuration is via the courts. The murkiness of the transactions will eventually lead to suits by players/agents, clubs or the IRS. But this might take 20 more years to occur. Eventually the money will attract elements not as benign as the current curators of this arrangement.

  2. Glenn Auve, July 18, 2015 at 4:55 p.m.

    The league will collapse if they keep twisting the rules to help a few teams with deep pockets. It will be NASL/Cosmos all over again.

  3. Soccer Madness, July 19, 2015 at 12:24 p.m.

    I thought they said $60,000 was minimumj? I see a few salaries at $50,000.

  4. Santiago 1314, July 20, 2015 at 4:43 p.m.

    I think You all are confused...You see; the New CBA didn't take effect until 3rd Blue Moon of the 4th TRImester(??is that possible), so therefore You have to Buy-Down the Up Clause, before you can Add your 4th DP (Oops, did I type that out Loud??)(I meant 3,, 3,, 3.. Follow the swinging Crystal)... Nothing behind the Green Curtain..."These are NOT The Droids you are Looking For"..

  5. James Madison, July 20, 2015 at 9:05 p.m.

    Glenn Auve has it right. Unlike in some nations, the key to long term MLS success is competitive parity. The MLS is putting competitive parity at risk by favoring the two NY teams and the LA team (or two, when the second materializes), just because that is where the owner monry and tv revenue is concentrated.

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