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Targeted Allocation Money and You

MLS finally unveiled its newest salary rule. We create extremely hypothetical situations to see how it could work and how the Fire could use it or burn it.

With the new Targeted Allocation Money rule, this man could no longer be a Designated Player.
With the new Targeted Allocation Money rule, this man could no longer be a Designated Player.
Mike DiNovo-USA TODAY Sports

After weeks of escalating talks about a mysterious Core Player rule and the not-so-secret ambitions of the L.A. Galaxy pursuing Mexican superstar Giovani dos Santos, many MLS fans were wondering how the league would allow the defending MLS champions to add virtually a fourth Designated Player.

The league answered that question Wednesday with a nifty new budget rule called Targeted Allocation Money that should only put more pressure on low-investing teams to up their game. No, this does not seem to be a back-room conspiracy to make sure the Galaxy win the next 10 MLS titles. It is a financial tool that rewards high-spending teams for investing in the league and bringing in quality players while also pressuring low-spending teams to bring in top talent with free money.

So let’s take a look at how this will work.

The general idea is that the league is giving each team $100,000 every year for the next five years to use on DP-quality signings. The official league release said the money is given out to teams over five years, but really clubs have the option to use the $500,000 in a lump sum move if they so wish.

The money can only be used to bring in a player over the maximum salary budget charge of $436,250 OR – and this is a VERY BIG OR – reduce the salary level of a current Designated Player to the $436,250-level or lower in order to open up a Designated Player spot. If a club chooses that route, the club must then a sign a Designated Player of equal or greater value to the player that previously occupied that Designated Player slot.

For example, because the 2015 salary numbers are not out, let’s just say Omar Gonzalez of the L.A. Galaxy makes $936,000. The Galaxy can say "Hey MLS, we want all $500,000 of our Targeted Allocation Money this year." Great. They get their money and they put that $500,000 toward Gonzalez’s salary. Omar’s official salary is now $436,000, which is under the maximum charge, meaning he is no longer a Designated Player.

Bruce Arena then can go to Giovani dos Santos and say "We need to pay you at least $936,000 (Omar’s previous listed salary) but here is $9 million because there is no limit."

This is a beautiful thing for teams willing to spend. It’s an especially beautiful thing for previously cheaper teams that have a change of heart and decide they want in on the spending spree.

Let’s take this completely hypothetical situation as an example. For a high spending team like LA, all $500,000 of that Targeted Allocation Money is needed to open up a Designated Player spot. But let’s say the Chicago Fire are paying Shaun Maloney $500,000 this season (I have no clue). The Fire could use only this year’s $100,000 in Target Allocation Money to bring Maloney’s salary out of the Designated Player spot and open it up for a new signing. Maybe Andrew Hauptman says "What the hell, throw $7 million at Chicharito." (I know that’s not enough). In that hypothetical situation, you get both players and still have $400,000 in Targeted Allocation Money for the next four years.

Of course, cheap teams can still be cheap and actually help rich teams get richer. If a club does not use its $100,000 in Targeted Allocation Money this season, the club must use or trade $100,000 of it next season. The MLS is forcing teams to use this free $500,000. Unfortunately, cheap teams can just chip away at existing Designated Player contracts or, more likely, trade the $500,000 to teams like LA who could use the money all over again.

I actually sort of enjoy this financial flexibility on first reaction. Reports are already swirling this money would allow clubs like San Jose to spend down Chris Wondolowski’s contract or Sporting Kansas City to bring down Graham Zusi’s contract in order to open another DP slot. Seems like a nice situation to be in.

We’ll see how this ultimately plays out, but I like Kevin Egan’s suggestion. Spend it all and spend it now. You never know when the rule can change. A team like the Fire can bring in a $1 million player for virtually half the price.

It’s important to note I am no expert on this and these are hypotheticals. It is very possible no player on the Fire roster is making more than the $436,250. The money can only be used to sign or re-sign players who earn more than the maximum salary budget charge but are not Designated Players.