Targeted Allocation Money: MLS explains newest acquisition method

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Major League Soccer announced Wednesday the creation of a new mechanism to acquire talent, one that can help teams add star power without going over the allotted three Designated Player roster spots.

MLS's new Targeted Allocation Money mechanism is designed to incentivize teams to invest in a very strategic type of player, league executive vice president Todd Durbin told on Wednesday.

“We believe that one of the areas that we need to continue to invest and invest more in are players that are in that $450,000-to-$1 million range,” Durbin said in a phone interview. “We believe that that is going to have the most immediate and profound impact on the quality of play in the league.”

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MLS will provide each team in the league immediate access to $100,000 per year for the next five seasons—a total of $10 million across the league—to “invest in their roster outside of the player salary budget.”

Any amount, up to the full $500,000, can be brought forward to sign a player immediately, but franchises must use their yearly allocation by the end of the next season.

This is to encourage teams to spend the money, but also to spend it in a way that meshes with their existing philosophies on where it would be best spent. Giving teams until the following year to spend the $100,000, Durbin said, balances the league’s desire to see it spent with the kind of thought that should go into making investments in players.

As with traditional MLS allocation money, teams can also trade targeted allocation back and forth. If they don’t want to spend it on a player, they can trade it to another team.

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“There are three things that are all sort of working together,” Durbin said. “One is, you can go out and sign new players. Two is, you now have resources to keep important existing players that you might have lost overseas traditionally. And then, I think the third part about it … is that we’ve just injected $10 million into the system, and the money is tradable, so it’s going to start to flow in the background efficiently.”

Players bought with targeted allocation money will earn more than the maximum league salary ($436,250 in 2015), but they will not be considered Designated Players. Targeted allocation money can be used to buy down a player’s DP contract, but the club must then sign a new DP with an investment equal to or greater than the player he replaces.

It’s also a mechanism of equal opportunity that further encourages MLS’s model of parity among its franchises. While MLS teams must foot the bill for any DP contracts they sign, they all receive the same amount of targeted allocation money via the league budget.

“This was an area that everybody thought was [of] strategic importance,” Durbin said. “There’s an equal collective investment, and every team has the same opportunity.”

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This new rule came out of the collective bargaining agreement bartered between the league and MLS Players Union in March, which Durbin said he believes is still in the process of being ratified by the players. Simply raising the overall salary cap further wouldn’t necessarily result in teams spending more in the range targeted allocation is meant for, but requiring them to spend this $100,000 per season should, he said.

“I think what the owners and the league believe is that we want to incentivize teams to spend in an area that we believe is of strategic importance,” Durbin said. “When you look at the way our rosters are put together, what we like to try to do is provide some sort of parameters around certain areas, but then try to give teams as much discretion as possible.”

The targeted-allocation mechanism had no exact structure until this past month, but because it grew out of the CBA negotiations, teams should have been aware for some time that additional money was on the way. As such, teams might already be in position to put the new mechanism to use via new player signings. Reports have suggested that the LA Galaxy, who already feature three DPs, could use the new method to acquire Mexico star Giovani dos Santos, adding him to a core that already features Robbie Keane, Steven Gerrard and Omar Gonzalez.

“One of the areas that we think we should be investing further in are players that we think are going to be difference-makers on the field—and immediate difference-makers on the field,” Durbin said. “We just put $10 million into the system to improve and add additional high-quality players into the league.”