MLS to increase spending on player salaries with multi-million dollar investment

After a successful 2015 season, Major League Soccer has stepped things up again by giving teams $800,000 in targeted allocation money for each of the next two years.

NEW YORK — Major League Soccer just wrapped up a 2015 season that was seen as a success on several levels, but for a league still trying to close the gap on the world's top leagues, there is still a ways to go. MLS owners are aware of that, which has led them to approve another significant increase in spending heading into 2016.

MLS teams will receive $800,000 in what is being called targeted allocation money (TAM) during each of the next two seasons, funds which can be used to sign and retain players on the higher end of the MLS pay scale, but who are not designated players. The influsion of $1.6 million per team over the course of the next two seasons comes along with an additional $2 million being invested in homegrown player salaries over the next two years.

“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,” said MLS deputy commissioner Mark Abbott.  “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.”

What TAM essentially does is allow teams to sign more players around the $500,000 and above range, while maintaining the league's limit of designated player slots to three. Every MLS team is allowed to have up to three designated players, players who can be signed for large contracts but who count the same towards a team salary cap as a regular maximum salary player. This allows a team like the LA Galaxy to sign Mexican star Giovani dos Santos to a contract in the $7 million a year range, with only $457,500 of that salary counting toward the team's $3.66 million salary budget.

TAM was first unveiled by MLS last summer, in the form of a $500,000 cash infusion teams could use over the course of the next five years. That money helped pave the way for several successful signings last summer, including Columbus Crew defender Gaston Sauro and Montreal midfielder Johan Venegas, while also helping clear the way for the LA Galaxy to sign Dos Santos.

"It's very clearly earmarked for players in an area where we need to have more players," said executive vice president for players and competition Todd Durbin. "We believe to have more players and greater roster depth, and we believe we need to have more players earning between $450,000 and $1 million a year.

"If you look at the way our spending is, obviously we're spending a significant amount on our designated players, and we're spending a significant amount on a couple of roster spots below that," Durbin said. "What we're really trying to do is drive up the average spend as it relates to the quality of player in that next layer of roster spots."

What TAM allows teams to do is pay down current high-priced players, including designated players, and have their salary cap figure go down, and in the cases of DPs, it can be used to help move a player out of a designated player slot, which then frees up room for teams to sign a new designated player.

One player who stands to be made a good example of how to use the new salary mechanism is Omar Gonzalez. The Galaxy used the $500,000 TAM MLS gave out last summer to pay down his salary cap figure to below the designated player threshold, which freed up a DP slot to sign Dos Santos. That move only covered the Galaxy for the 2015 season though, and it had appeared the Galaxy were going to have to either sell Gonzalez or one of its other DPs (Robbie Keane, Dos Santos and Gerrard). With the new TAM in place for 2016, the Galaxy could use the $800,000 in 2016 to pay down Gonzalez''s cap figure yet again.

The new TAM mechanism will be a boon for teams that already had three designated players on the books in 2016 and were looking for a way to add more high-paid (by MLS standards) players. It can also help teams that aren't looking to add more big-money players because TAM can be trade between teams, so a more frugal team could trade away TAM in exchange for more modestly priced veterans."

While TAM will be used to sign more high-salary players, MLS is also investing in developmental roster spots by giving teams $125,000 per season over the next two seasons to spend on homegrown player signings. That added investment will allow teams to pay homegrown players as much as $175,000 per season without them counting toward the team's senior roster.

“Our academies are developing more first-team players every year, and the additional investment will provide more flexibility to our clubs to sign top young players,” Durbin said.  “We have seen former academy players like Gyasi Zardes, Bill Hamid and Wil Trapp become leaders on their clubs, and we expect many more academy players of their caliber to sign with MLS clubs in the coming years.”