MLS Creates a New Rule… Again: Targeted Allocation Money

10
Jul

It can’t be denied. Major League Soccer is a league on the rise. It may never catch on to the level of the Premier League, Bundesliga, and La Liga in their respective countries and it may never challenge the NFL, NBA, MLB, and NHL in the States, but it’s on the rise nonetheless. They’re working on getting top-tier talent from the Americas to come play in MLS, especially USMNT players and Mexico’s stars.

MLS has been successful in luring late-career stars into the league with high salaries – for them – but haven’t gotten over the hump of getting young players in or close to their prime and lure them away from Europe’s leagues. There have been marginal successes on that front with players like Sebastian Giovinco, David Accam, and Diego Valeri plying their trade in the U.S. But, the gems so far in the league have been reserved for the likes of David Villa, Steven Gerrard, Frank Lampard, Andrea Pirlo, and Kaka. MLS won’t take the next step until they find a way to fill out rosters with more effective mid-tier talent. There is simply too great a gulf between the Designated Players and the rest of their teammates.

What can be done? MLS is going to add another rule to their salary cap, creating confusion that rivals only the NBA salary cap. This time, the league is getting what the MLS office has coined “Targeted Allocation Money.”

What is it? Well, Allocation Money generally allows teams to do several things. Most important to the general observer, it allows a team to “buy down” a player that is currently taking up one of the three valuable Designated Player Slots. When a player’s salary is bought down using allocation money, the player no longer counts as a Designated Player. This doesn’t affect the player’s actual salary of course, but it affects the salary cap sheet.

This is likely the very mysterious, single entity structured MLS way of creating another Designated Player slot so that the L.A. Galaxy can sign Giovani dos Santos while not creating another Designated Player slot. Regardless, it will have the effect of doing so for many teams.

What’s so special about this Targeted Allocation Money then? Well, there is a good amount of it for one. The league is pumping in $10 million worth of allocation money into its teams over the next five years. Each team will see $500,000 over five years, yes $100,000 per year. That’s a nice chunk of change for a team but what use will it really go to? Most Designated Players in MLS make much more than the $500,000 over the full five years and so they aren’t eligible to be bought down to a regular salary slot from the use of this targeted allocation money.

But, there are teams that have a cheaper Designated Player at the moment and could use this system to buy them down and sign a new, very high level DP. As mentioned above, this is what the Galaxy are planning to do. Omar Gonzalez is currently about $1,000,000 worth of cap space right now as opposed to guys like Giovinco who make about $7,000,000. The Galaxy now have $500,000 of the money they need to buy down Gonzalez to the $350,000 threshold to take the DP away from his name.

The other key to remember here is that the teams have to use the money each following year. They don’t have to use their $100,000 this season, but they must by the end of next season, either through signing players, buying down contracts, or trading the money. It will be interesting to see if any teams are aggressive in trading for allocation money to attempt to sign another star. It could be an interesting tack to take if it fits your team’s structure.

In the end, this just forces teams to contemplate spending themselves or to trade their money so that someone will spend it on increased talent. The league knows that it needs to increase the level of play across the whole roster, but it is in no mood to listen to full free agency or a less restrictive salary cap right now. This is the route they have taken to protect their stability, brand, and…well…money.

About the author: Colby Rogers

Colby is the Editor-in-Chief, Founder and Lead Contributor to Other League. Also a law student focusing on Labor & Employment law and intersections with law and sports. You can find him on Twitter via @Colby_OL.