MLS Announces New Targeted Allocation Money and Homegrown Player Funds

Major League Soccer has announced a new annual Target Allocation Money (TAM) for all MLS teams for the 2016 and 2017 seasons as well as additional funds tied directly to Homegrown Players (HGPs).

MLS teams will now have $800,000 budgeted in addition to the current salary cap for 2016 (approximately $3.6 million) and the $500,000 TAM that was announced in 2015 to be used over the course of the current Collective Bargaining Agreement which ends in 2015.

Now, why MLS just didn't raise the salary cap is an interesting question, but as always, there is a method to the madness as MLS Deputy Commissioner Mark Abbott explains from the above linked article:

"By injecting an additional $37 million into the system, our clubs will be able to strengthen the depth of their rosters by signing more high-quality players. We saw immediate dividends this past season with the initial investment in Targeted Allocation Money, and our owners believe that additional spending -- especially for players who will impact the middle of our rosters -- will make MLS even more entertaining and compelling."

Essentially, TAM is a way of bridging the gap between max-salary cap players and designated players. In the beginning of 2014, I lamented that Jose Goncalves' contract situation was mostly caused by his salary being over the max salary cap hit but not significantly over where the Revs needed Goncalves to be a DP. Goncalves might not be the best example, LA Galaxy's use of TAM on Omar Gonzalez to sign DP Giovanni Dos Santos last year probably is, but the league is committing almost $37M in additional funds basically to players.

There was a dead zone around the $500K-$1M salary game that needed to be addressed, again the between max cap and DP players, and the league has recognized this with the new TAM funds. Now teams can go out and get more players like Jose Goncalves in the $500K-$1M dollar range without using a DP spot, adding depth and value to teams rosters.

Also from the above linked MLS release, is the list of how TAM can be used:

• TAM can be used to sign new players or re-sign current players that earn between $457,500 and $1 million;
• TAM can be used to buy down a player contract to free up a Designated Player slot. If that happens, the club must simultaneously sign a new Designated Player at an investment equal or greater to than the player he is replacing;
• Teams are not permitted to combine TAM and general allocation money on a player. Either TAM or general allocation money may be used on a player in a single season, not both;
• TAM money can be traded by clubs;
• The minimum budget charge for a player signing that uses TAM funds is $150,000; Any part of the $800,000 in TAM funds that go unused in 2016 will carry over to 2017;
• Teams are allowed to commit, but not use or disburse, 2017 TAM funds toward a 2016 player contract;
• Any of the $1.6 million in TAM funds per team that go unused by the end of the 2017 summer transfer window will revert back to the league.

Perhaps of more interest to clubs could be the additional $125,000 on Homegrown players in each of the next two seasons. The additional funds can be spread across multiple players, and it would appear this money doesn't count against the cap either. Meaning the New England Revolution could give spend more on salary to Diego Fagundez, Scott Caldwell and Zachary Herivaux without actually spending against the salary cap.

Since this is an new and evolving MLS roster mechanism there's a number of ways teams can use it. With the free agency period underway and the possibilities of trades there's endless potential for TAM in MLS.