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MLS introduces Targeted Allocation Money to bring in more highly-paid players

$100,000 of Targeted Allocation Money to be given to every team, to be used to attract higher quality players.

MLS Commissioner Don Garber
MLS Commissioner Don Garber
Ron Chenoy-USA TODAY Sports

On Wednesday, Major League Soccer announced a new spending initiative to encourage clubs to spend on big name players. Targeted Allocation Money, which will go into effect immediately, gives every MLS club $100,000 per year for the next five years, and will not count against a team’s salary cap.

Every team in MLS is allowed up to 3 designated players on their active roster who make more than the league maximum salary, currently set at $436,250. Targeted Allocation Money will allow teams to slot in a fourth player who might otherwise be paid more than the league maximum. A team can now "buy down" a player’s salary using their Targeted Allocation Money, to the point where he will cost less than $436,250.

If a club buys down a current player’s salary to less than the league maximum, he will no longer count as a Designated Player, and they will then be required to sign another DP of equal or greater value. If they use Targeted Allocation Money to buy down a transfer player, then it will not affect the club’s current Designated Players.

This type of allocation money is designed to encourage clubs to spend. If a club does not use all of its $100,000 in a given year, they will have to spend the remaining amount in the following year, or trade it to another team. A team can also spend more than their allotted $100,000 per year, up to the full $500,000, but once it is all spent, the team will receive no more Targeted Allocation Money, unless they acquire it via trade.

MLS hopes this stimulus will give all MLS clubs an avenue to acquire higher quality players, without sacrificing league parity. The rules governing Targeted Allocation Money, which were outlined in the 2015 Collective Bargaining Agreement, are designed to give every club an opportunity to add star players, while still avoiding a "rich get richer" scenario that simply adding a fourth Designated Player might lead to.

There’s been no official word yet on how Targeted Allocation Money may affect the Houston Dynamo’s salary cap situation. Houston has two designated players, but only one of them, DaMarcus Beasley, is on the active roster. The other, Erick ‘Cubo’ Torres, is still working through the transfer process and could be delayed.

The Dynamo, sitting at 9th in the Western Conference Standings and missing 4 of their players on international duty, will definitely be looking to upgrade their roster with a difference-making player during this transfer window. Targeted Allocation Money may give them an opportunity to clear enough salary cap room to do so.