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Targeted Allocation Money mechanism allows Sounders to add Designated Player

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MLS has injected $500,000 into each team's budget, meaning someone like Osvaldo Alonso would no longer have to occupy a DP spot.

Joe Nicholson-USA TODAY Sports

The next phase of Major League Soccer's Designated Player rule is officially upon us. The league announced on Wednesday the creation of something they are calling "Targeted Allocation Money," a pool of money that will inject $500,000 into each team's budget over the next five years. The new money can only be used on players who make more than the maximum salary cap hit (currently $436,250) and in order to use the money, team's must immediately bring in a new Designated Player.

While technically not a new Designated Player spot, as was rumored, the effects of the new money are the same. Effectively, the money is designed to make someone like Osvaldo Alonso -- whose full compensation is believed to be in the $600,000-a-year range -- no longer a Designated Player. Removing Alonso's DP tag would allow a team like the Seattle Sounders to add another higher-priced player.

"We believe that one of the areas that we need to continue to invest and invest more in are players that are in that $450,000-to-$1 million range. We believe that that is going to have the most immediate and profound impact on the quality of play in the league.

- MLS Executive Vice President Todd Durbin to Sports Illustrated

As you might imagine, the new money creates some new wrinkles to MLS roster rules. Here are some of the highlights:

  • Each team will have access to a pool of $500,000 over the next five years and can spend it all at once if they so choose to. Theoretically, a team could buy down a player making nearly $1 million a year to a non-DP or spend it on up to three players making around $600,000 each.
  • The money is designed to be used in $100,000-a-year increments, with teams being incentivized to spend at least that much within any two-year period.
  • Unused TAM will be rolled into the next year's salary budget, but can't be kept any longer than that.
  • Teams will need to use TAM by either buying down a player's salary and bringing in a new high-priced player or trading it.
  • TAM can not be used on one player in conjunction with regular Allocation Money.
  • TAM was conceived as part of the still-unratified Collective Bargaining Agreement, and teams were apparently aware of its vague parameters.
  • Like regular Allocation Money, TAM can only be used on new players and new contracts.
  • Unlike regular over-budget spending on Designated Players, individual teams are not responsible for the money, further incentivizing teams to spend the money.

None of this qualifies as anything as ground breaking as a new DP spot, but it does inject at least $10 million of spending into MLS over the next five years and will almost surely lead to many more players making at least $500,000 a year.

"This was an area that everybody thought was [of] strategic importance," Durbin told SI. "There's an equal collective investment, and every team has the same opportunity."