MLS plans to commit an additional $37 million in league-wide player compensation in 2016 and 2017.
The additional investment includes the expansion of the Targeted Allocation Money initiative ($32 million) and the introduction of $125,000 per year in additional funds to sign Homegrown players ($5 million) over the next two years.
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MLS approved the expenditure during its Board of Governors meeting in Columbus on Saturday. Clubs were notified on Tuesday morning. Those funds are now available for use ahead of the 2016 season.
The decision expands the TAM initiative after its introduction earlier this year. The initial program allowed teams to spend $500,000 over five seasons on players in that space. Although those funds still exist, they are now augmented by this new influx of TAM to increase spending power.
Clubs will receive $800,0000 in each of the next two seasons, but those funds come with strings attached. The 2016 chunk must be committed by the conclusion of the 2017 secondary transfer window, while the 2017 portion must be committed by the conclusion of the 2018 secondary window.
At its core, the TAM initiative is designed to increase the options available to strengthen the starting XI. Designated Players are the primary mechanism used to acquire players at the top of the roster, while TAM allows teams to strengthen on the next tier. A player must earn between $457,500 and $1 million to qualify for the funds, while any team wishing to use those funds on a Designated Player must purchase another DP at the same time. Those measures allow for significant spending outside of the salary budget of $3.66 million in 2016.
“Now you have the ability, essentially to upgrade, two players who are making $250,000 to $300,000 who are now earning $700,000, $750,000 or $800,000 with zero impact on the salary budget,” MLS executive vice president, player relations & competition Todd Durbin explained on Tuesday. “That’s how the initiative ultimately works. And that’s the reason why the initiative will hopefully allow you to go into the international market and now upgrade two, three or four players in your roster [without taking up more] salary budget space.”
The focus is essentially the same with the additional funds committed to increasing spending on Homegrown players. Those players often occupy roster slots 25-28 and draw the minimum salary. The extra funds allow teams to increase those salaries for one or more players in a bid to retain players.
“We have to accelerate the quality of league in two ways,” Durbin said. “One is going to be spending money on the first-team. But, also, I think a very, very important aspect is what happens in the youth development space over the next 3-4 years. Our need to go into the international market and spend on players internationally — at some level — is largely going to be driven by the quality of players that we’re producing. If we’re able to accelerate the growth rate in that space, then that — we believe — is going to have a profound impact not only on the quality of the league, but what that means for what we need to be doing in international markets.”