MLS Explained: Targeted Allocation Money

Major League Soccer is an enigma in many ways to the rest of the football (soccer) world. A league without promotion and relegation, but with league-owned player contracts is certainly unique. Among these defining characteristics is the Bitcoin of the soccer world: Allocation Money.

The league acknowledged it existence several years back, but it was not until during the 2017 SuperDraft that the league started to disclose amounts associated with trades. The league assigns allocation money with two designations: General Allocation Money (GAM) and Targeted Allocation Money (TAM). In the plainest terms, these forms of allocation money represent a regulated amount of money that teams can use to sign players or allocate to existing contracts to keep the club’s player salaries under the salary cap. This is just about the extent of league transparency, however, as only league officials know just how much of this enigmatic currency is in circulation.

A club acquires allocation money through several methods. The most common that is publicized is through trades with other clubs. According to the MLS, a team must trade no less than $75,000 dollars in a single transaction, but official confirmation of exact amounts were withheld before 2017. The subjectivity of the minimum trade amount came into question during the 2017 SuperDraft when Minnesota United received $50,000 and a later draft pick for the No. 25 overall pick from the Philadelphia Union. Whether or not the later trade makes up for the missing $25,000, it is clear that allocation money in MLS is highly subjective.

Other acquisition methods include, but are not limited to, receiving a transfer fee for from a player who leaves the league, qualifying for and competing in tournaments (such as the Open Cup and CONCACAF Champions League), missing the playoffs (in regards to preserving parity), being an expansion team, or even selling off two of their eight Homegrown “Off-Budget” roster spots.

Targeted Allocation Money as distinguished from General Allocation Money by it “strategic” is used by clubs to retain players that will “make an immediate impact on the field.” Once again the league uses a plethora of words to give an utter-lack of definition. Delving deeper into the Collective Bargaining Agreement of 2015, however, the ambiguity dissolves as it becomes clear that the players who make an immediate impact on the field are those defined by the Designated Player rule. So, in summary, TAM is used exclusively in conjunction with the DP designation.

In 2017, a player must earn more than maximum budget charge ($480,625 annually) to qualify for TAM. By doing so, Clubs are able to use a portion or all of their available TAM to convert a Designated Player into a non-Designated Player by reducing (buying down) his salary budget charge to no less than $150,000. In other words, if a club would like to add a player whose salary would exceed the maximum budget charge but all three DP slots are fill, they can use TAM to free up a Designated Player slot to sign the desired player at an investment equal to or greater than the player he is replacing.

If you have made it this far your brain is probably fried, but you are not alone in that feeling.

Behind all these words attempting to explain a complicated and cumbersome process utilized by the league to recruit World-Class talent, Targeted Allocation Money can be explained in a single sentence. So if someone asks you to explain TAM, simply tell them: “Targeted Allocation Money is a process in which funds are used to increase the talent pool in the league, while also helping to retain the existing talent in an ever increasing competitive environment that is professional soccer (football).”