The LA Galaxy are expected to sign Mexico star Giovani dos Santos shortly for what is likely to be a league-record salary. Because the Galaxy already have the maximum allowable Designated Players under the league rules, they have to find a way to free up a DP slot. On Wednesday, Major League Soccer announced a new rule that allows them to do just that -- Targeted Allocation Money.
On the surface, this seems like an even more ridiculously shameless way to help the Galaxy than the first high-profile randomly made up MLS rule -- the Beckham Rule, or Designated Player rule. Instead, it's actually a really cool way to screw over the MLS 1.0 owners who are holding the league back.
Hold up. What the hell is regular Allocation Money?
Okay, so you're new here. Before we get started, you need to understand that MLS has such a ridiculously convoluted set of rules that sometimes it seems like GMs don't exactly know how to manipulate them. Toronto FC hired an MLS rules guy to be their GM instead of a soccer or stats guy because it's the most useful skill for a GM to have.
Allocation Money can be used for specific things like buying down a player's salary cap hit or signing new players. Teams have three Designated Player slots for players with any salary, but who only count $350,000 against the salary cap. If you have enough Allocation Money, you can buy down the salary of an expensive player so it is below the DP threshold for cap reasons, allowing you to sign another expensive player. This is the mechanism New York City FC used to sign all of David Villa, Frank Lampard, Andrea Pirlo and Mix Diskerud.
So what is Targeted Allocation Money?
It's a new rule/mechanism announced by MLS on Wednesday. Targeted Allocation can only be used on players making more than the maximum salary charge of $436,250. It cannot be used to buy down the salaries of other players or to pay transfer fees for other players. If you use it to convert an existing DP into a non-DP for cap purposes, you are forced to sign a new DP.
Clubs will get $100,000 per year over the next five years, but they can just use all $500,000 right now if they want.
So why are we just hearing about this now?
MLS made it up during the CBA negotiations, but it would have been a pretty crappy PR move to announce it then, so they held it until right before the summer transfer window opened. It was explained to all GMs last week.
The league couldn't exactly propose a fourth DP slot while crying poverty to the players, but they had to make up some mechanism that allowed rich teams to sign more top players without giving middle-of-the-road players more than the minimum amount they had to in order to keep them happy. This is what they came up with.
Who does this benefit, specifically?
LA and Seattle, mostly. But really, anyone who uses all three DP slots.
But I’d be surprised if this move helps a team buy a player it couldn’t before. That’s 1/4th of the cheapest DP salary on a yearly basis.— Will Parchman (@WillParchman) July 8, 2015
Someone like TFC, who has three DPs who make a ton of money, can't buy down one of their existing ones to open up a new slot. This mechanism basically allows teams to have three DPs and a DP Lite. Or in the case of NYCFC, who had enough Allocation Money from being an expansion team to buy down Mix without this, they get two DP Lites. Toronto can sign someone who barely makes DP money and buy them down, but they can't buy a new star.
LA and Seattle are in really good shape. They each have a fairly cheap DP -- Omar Gonzalez and Osvaldo Alonso -- who they can buy down, allowing them to sign another superstar. While the Sounders are not currently rumored to be close to signing a huge name, they certainly will be soon.
Vancouver Whitecaps, Orlando City, Philadelphia Union, Real Salt Lake, Portland Timbers, San Jose Earthquakes, Colorado Rapids and Chicago Fire are the other teams that have three DPs and can benefit immediately if they choose to spend more money on a new DP.
If low-budget teams don't benefit, can they just refuse to use it?
Nope! Buried at the bottom of the MLS release is the best part.
While 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.
Get what this means?
Basically, every team that does not have or plan to have three DPs has zero use for Targeted Allocation. The league is forcing teams to use it or trade it. If you have no use for it, the best move is to trade it for players or picks, right? Well, the trade market isn't huge. Theoretically, any team with three DPs can use it, but they're not all going to be willing to trade a good player or pick to get more Targeted Allocation. A lot of those teams are still fairly low-budget -- Colorado, for example. The only teams who would definitely be willing to trade something of value for Targeted Allocation are the four big spenders-- LA, Seattle, NYCFC and Toronto.
So the other teams have to a) use Targeted Allocation even though they're already under the cap and it does nothing for them or b) make the rich richer. The only other option is to spend more money. The league is telling its cheapest teams that they need to spend more or willingly tip the scales even more in favor of the teams that are spending. Those are their only two choices.
Then why does MLS have a salary cap? It's time to just blow the damn thing up, right?
The Big Four certainly think so, and the likes of Portland and Vancouver, and probably Orlando and Red Bulls too, wouldn't be bothered by that development either. But the rest of the owners? They'd lose it. They're not having that. They got into this league because the salary cap made it an extremely low-risk investment and they're not going to let some people who actually like soccer screw with that investment.
This sounds like it's good, then?
Yes, even if you're a fan of a team that doesn't spend any money. This will stink for you for a few years, then eventually be a huge positive.
Maybe Clark Hunt, Stan Kroenke, Robert Kraft and the others like them will think about selling their teams if they think the league has become too competitively imbalanced and they have to risk millions more in order to make the playoffs. At this point, MLS is popular and stable enough that they'd make a healthy profit on their investments, so they might be willing to cash out.
Anyone who's going to buy into MLS isn't going to do so thinking that cost controls make it an easy money faucet. They're going to do it because they think soccer is growing rapidly, and that it can make a lot of money with some serious investment, and it's OK if they eat a loss for a few seasons. There are more City Football Groups lying around -- more than there are good remaining expansion opportunities.
Yes, MLS invented a mechanism that allowed LA to sign dos Santos, but they also came up with a really slick way to put the squeeze on crappy owners. This is, unequivocally, a great thing for soccer in America.