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Analysis

Targeted Allocation Money: MLS Gets More Complex

The good news: Giovani Dos Santos is probably coming to Major League Soccer. The bad news: MLS made its already-Byzantine player acquisition rules even harder to understand.
BY Brian Sciaretta Posted
July 11, 2015
11:55 AM

ON WEDNESDAY Major League Soccer announced the latest amendment to its player acquisition rules, something called "Targeted Allocation Money." Yes, it's another confusing series of rules dreamed up by a league that seems determined to compete with the Internal Revenue Service in terms of opacity and complexity.

That said, the rule change should allow teams to spend more money on high-end players and lure better talent to the league.

Critics of this latest development will contend that the Targeted Allocation Money was created solely to allow Giovani Dos Santos to play for the Los Angeles Galaxy. These criticisms are not completely without merit but overall it is hard to argue that this isn’t an overall net positive for MLS.

Here is a quick look at how the system is designed to work.

1. Each MLS team will receive $100,000 per year over the next five years for a total of $500,000 to invest in their rosters outside of the salary cap.

2. Unlike general Allocation Money, which may be used to sign any player regardless of his salary, Targeted Allocation Money may only be used to sign or re-sign players who are not Designated Players but who earn more than the maximum salary of $436,250.

3. MLS clubs can use 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 at a time. So in other words, the teams spend their Targeted Allocation Money in advance.

4. Per the rules: "MLS Teams may use a portion or all of their allotted Targeted Allocation Money to convert a Designated Player to a non-Designated Player by buying down, on a prorated basis, his salary budget charge to at or below the maximum salary budget charge. If Targeted Allocation Money is used to free up a Designated Player slot, the club must simultaneously sign a new Designated Player at an investment equal to or greater than the player he is replacing." So what this means is that if a team has a Designated Player who is within range of $500,000 of the maximum salary, the team can buy that player back into non-DP status. If that is done, the team must sign another Designated Player.

5. Finally: “MLS clubs are not required to use their full $100,000 each season, they are required to use the remaining amount during the following year. For example, if a club does not use its $100,000 allotment in 2015, that club must use or trade at least that $100,000 of Targeted Allocation Money in 2016.”

Got all of that? Really? Impressive! Let’s look at the pros and cons.

The Negatives

The most glaring criticism is that this new rule is incredibly confusing—which is laughably typical for Major League Soccer. While North American professional leagues in all sports have complicated acquisition rules, most of these rules focus on the low end of the player pool. Because this rule change focuses on high-end players, it makes it highly unlikely that fans will understand what is possible for their teams regarding the most important players.



Major League Soccer could simply do away with its salary cap, of course, but until Robert Kraft goes to that big Super Bowl party in the sky, rigid cost controls will continue to be part of the league's DNA.

Here's how the Targetd Allocation Money might play out in Southern California: To bring in Dos Santos, the Galaxy will first have to buy down Omar Gonzalez from a Designated Player to a non-Designated Player. The Galaxy can use $500,000 of its Targeted Allocation Money for that but the problem is that Gonzalez makes more than $500,000 above the maximum non-Designated Player salary. So the Galaxy will have to trade for the balance. Then L.A. must sign another Designated Player equal or greater than Gonzalez’s salary: Dos Santos.

Understanding how the process work requires an economics degree, an MBA, or a pathological willingness to study Major League Soccer's desire to keep cheapskate owners happy while still allowing forward-looking clubs to spend money.

The other criticism is that this mechanism is only focused on a limited number of high-end players. It does nothing for rank-and-file MLS players or prospects. In addition, it is likely to make playing time even harder for younger players. For example, will Dos Santos take minutes away from U.S. Olympic forward Jose Villarreal? Is that a good thing?

The Positives

Having said all of that, Targeted Allocation Money is a net positive for Major League Soccer on a few different levels. First, more money means more talent—assuming that the money is spent wisely. In effect, it allows teams to have four Designated Players through the “buy-down” mechanism. The only catch is that all four cannot be of the massive Kaka-level expense. One will need to be around the $1 million per year salary range.

What is also interesting is that the funds do not have to be earmarked to one specific player. The $500,000 can be used in a single season for three players at a time. So it gives a lot of flexibility for teams to either go after a one big fish—a Dos Santos-type player—or pursue up to three solid but non-marquee players. So front office managers who prefer depth over star power can use the money that way—or they can trade it. It does allow for creativity.

Finally, this is going put a dent in the criticisms of parity in MLS. When there are more options and ways to spend money, there is also more risk and more reward. Teams that trade away Targeted Allocation Money could receive quality players in return—or these teams can squander a massive opportunity. Teams with big budgets that are willing to spend money can find ways to keep adding stars to their rosters.

The good thing about Target Allocation Money is that it must be used and decisions must be made. The five-year window also means that decisions on how to spend these funds will last for years.

While it is not happening as fast as some would like, parity is going to give way to a “haves and have-nots” culture in Major League Soccer. And which teams fit into each category will be be determined by the willingness of ownership to spend money. The best-run and most ambitious MLS teams will now have another way to separate themselves from the pack. And this is how it should be.

Brian Sciaretta is an American Soccer Now columnist and an ASN 100 panelist. Follow him on Twitter.

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