DP’s and Allocation Money

Posted on by Peter C

I suspect you’ve all heard by now about the rule change in MLS regarding Designated Players. Here is the transcript of the press conference in which the changes were outlined in detail by Todd Durbin of MLS. One thing that emerges from this is the heightened importance of one of the leagues more arcane intricacies, allocation money.

From the MLS website(the old one, I didn’t even bother trying to find this info on the new site) …

A club receives allocation money for (1) poor performance during the preceding MLS regular season; (2) the transfer of a player to a club outside of MLS for value; (3) roster purposes due to expansion status; and/or (4) exceptional circumstances as approved by the Competition Committee.
Each year the MLS Competition Committee determines the allocation amount to be made available to each team. Allocation money can be traded by teams. Allocation money does not count against a team’s salary budget and can be used:

  • To sign players new to MLS (that is, a player who did not play in MLS during the previous season).
  • To re-sign an existing MLS player, with League approval.
  • In connection with the exercise of an option to purchase a player’s rights or the extension of a player’s contact for the second year provided the player was new to MLS in the immediately prior year.

    Allocation money cannot otherwise be used to buy down the salary budget number of players already under contract to the League, nor can allocation money be used to buy down the budget number of a Designated Player.

    The section in bold is the big change. According to the press conference.

    clubs have the option of “buying down” the budget charge of a designated player with allocation money. The reduced charge may not be less than $150,000. Allocation money are funds, separate from the club salary budgets, provided by the League based upon finish in the previous season, fees collected for the transfer of a player abroad, expansion or exceptional circumstances. Allocation money may be used to reduce the portion of a player’s compensation that counts against a club’s salary budget in connection with signing players new to MLS, or re-signing existing MLS players at the end of their contracts.

    In practical terms, under the old DP rules, if a team had 2 DP slots(RBNY) and used both of them, the team’s salary cap would take a hit of $750,000(415k + 335k). Now, if you have $370,000 in allocation money laying around, you could use that money to drop the salary cap hit to $300,000 for two DP’s. This of course also means you need enough allocation money to ‘buy down’ the salaries of any player(s) with current compensation between $335,000-$415,000 as they would otherwise fall into the DP salary range and would need to be declared DP’s. Some players that fall into that category are: Brian McBride($385,300+), Jaime Moreno($355,000), Sharie Joseph($450,000), Taylor Twellman($420,000) and Dwayne DeRosario($425,750). These numbers were taken from Player Salary Information page of the Major League Soccer Player’s Union website. And of course, the same applies to the 3rd DP. Should a team want to pony up the $250,000 that a 3rd DP slot will cost them, it begs the question, who knows how much allocation money teams have on hand? Good luck finding that out.

    It going to be very interesting to see what moves are made(or not made) this season. The first window to obtain players closes on April 15, the next window opens July 15, after the World Cup.

    p.s. I have never indulged in rumors, but this one was just too juicy and somewhat applicable to the DP story. Sorry I lost the link to the site where I originally saw it…

    Barcelona allows Thierry Henry out of the last year of his contract and permits him to move to MLS for no transfer fee. In exchange, MLS grants Barcelona a team franchise for an expansion fee of zero.

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