MLS targets roster reinforcement with new allocation money initiative

The introduction of Targeted Allocation Money provides teams with more resources to sign top-end players. It comes with a few caveats, though.

MLS approaches player spending with careful consideration and prudence. It is a hallmark of the league from its earliest days. The single-entity structure implemented at the outset created a way to manage costs and plan for the future from a collective perspective.

There is room for different opinions within the process. MLS allows for teams to chart their own courses within the structural underpinnings of the system and push those boundaries as far as they can stretch. There are mechanisms in place to allow for lavish Designated Player spending and restrictions imposed to ensure competitive balance for teams without the resources or the willingness to match those expenditures.

As part of the Collective Bargaining Agreement negotiations held earlier this year, MLS investor/operators agreed to fund an initiative to bolster player spending. Instead of simply increasing the player budget by a certain amount (though the cap did rise modestly), they eventually devised a different approach after considerable debate and established a concept called Targeted Allocation Money.

KEY POINTS: MLS TARGETED ALLOCATION MONEY

   
AMOUNT $100,000 per year / $500,000 over five years
HOW MANY PLAYERS ARE ELIGIBLE? Up to three in a given year

IS IT TRADEABLE? Yes
CAN YOU BRING IT FORWARD? Yes — One team could bring all $500,000 forward and use it this summer, if it so chose

CAN YOU SAVE IT FOR A RAINY DAY?

No — Any remaining funds from a given year must be used during the following year

(EX. Team X uses $50k of $100k allotment this year. Team X receives standard $100k next year. Team X now has $150k. Team X must use at least $50k by end of next year.)

CAN YOU COMBINE IT WITH REGULAR ALLOCATION MONEY?

No
HOW DO YOU USE IT? * Buying down the budget cost of signing a new player

  * Buying down the budget cost of re-signing a player

 

* Buying down the cost of a DP to non-DP status

(NOTE: Club must acquire DP of equal or greater investment at the same time)

  * Trade it

Every MLS club will receive $100,000 per year over the next five years in additional funds to invest in their roster, the league announced on Wednesday. The new mechanism includes all of the complexities and stipulations often found in MLS regulations, but it is straightforward in its purpose, according to MLS executive vice president Todd Durbin.

“We tried to keep it as simple as possible and consistent with our existing rules,” Durbin said in a phone interview. “In that regard, we decided to release the funds essentially as allocation money. The money is used in a way that is essentially the same as regular allocation money: It’s used to buy down salary budget [charges], you can trade it. The one parameter: we wanted to make sure that teams were spending this money on players that were earning a certain compensation threshold.”

The decision to target players earning salaries slightly above the maximum salary budget charge of $436,250 falls in line with the league’s well-established spending philosophy. MLS plunges capital into the top (Designated Players) and the bottom (Academy system) of the player pool while taking a more tempered approach to wage increases in the middle of the curve. Those measures are designed to increase the quality of play in the short-term and the long-term by combining established stars with upcoming talent capable of improving competition and quality within the squads.

In this case, the Targeted Allocation Money aims to expand the number of players at the top end of the squad and improve the options available to fill the fourth, fifth and sixth players on the roster. This particular mechanism — in theory, at least — allows teams to figure out ways to acquire or re-sign one or more max-plus players without using a Designated Player spot.

As an enticement to expend capital and secure those sorts of players, these funds come directly from the league office. Investor/operators pay out of pocket to cover the difference between the maximum salary budget charge and the actual compensation for Designated Players. That reality naturally creates some separation between the teams, but this mechanism treats all teams equally. Targeted Allocation Money can cover the difference when teams either acquire a new player from outside the league or re-sign players already under contract to pave the way for new DP signings.

“By providing these funds at the league level, it gives every team the same opportunity to improve their rosters,” Durbin said. “That was a significant guiding force behind it.”

There are strings attached to ensure spending and protect the intent of the rule. Teams cannot combine Targeted Allocation Money and regular allocation money on a player’s budget charge. If a team chooses to buy down an existing DP with Targeted Allocation Money, then it must immediately invest in a new DP with an equal or higher charge. Teams may bring forward money from future years to complete a deal in the present, but they cannot go more than two years without applying those funds or trading them away.

“Rather than saying it had to be spent every year, what we decided was that if you didn’t spend the $100,000 in a particular year, you didn’t have to, but by the end of the next year, you had to make good,” Durbin said. “That way, we hope we’ll strike the right balance between allowing teams to be smart in how they use the money and then make sure we drive product quality.”

Driving product quality is an expensive process. MLS — as it has shown in the past with its emphasis on efficiency with its expenditures and its willingness to tweak regulations when situations arise — likes to engage on its own terms. It remains to be seen whether this plan will exert a substantial impact in its present form as the secondary transfer window opens, though.

The extent of the expenditures here ($10 million over five years for the existing 20 teams, plus prorated portions for expansion teams as they enter the league) is significant in MLS terms, but it is a rather modest sum for the teams themselves ($100,000 represents about three percent of this year’s salary budget of $3.49 million — actual spending from team to team is also considerably higher than that salary budget figure) and for other teams around the world. It is also worth noting that the teams would still need room to accommodate the remaining budget hit or hits of the players involved — in this particular season, that mandate could prove difficult for some teams pushed up against the salary budget limits. In the totality of those circumstances, the sums are incremental, not revolutionary.

At this point, the primary function — at least at the outset — is perhaps to provide teams with more flexibility to pursue their own philosophies and strengthen their squads. Some clubs will try to splash the cash in big chunks to land one player or use this money to sign another expensive player or two to a more modest salary. Others might prefer to spend some of the money on a current player in a bid to maintain continuity and use the rest to import fresh talent as mandated. And a couple of teams might even try to parlay this money into tangible assets in the form of draft picks or established MLS players instead of walking down the anticipated path.

The injection of more resources across the board is a necessary and welcome step. MLS and its teams need to commit more capital to playing budgets to push the league forward. This step is not an ultimate solution for a league with overall salary expenditures well behind the top leagues in Europe, but it is a help to the situation as it stands now. The key now is to see what sort of impact it ultimately exerts in the years ahead and what further changes it might prompt down the road.