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MLS announces $37 million investment in Targeted Allocation Money, Homegrown Player funds for 2016-17

Major League Soccer announced on Wednesday that it will be investing an additional $37 million in player compensation over the next two years with the goal of “providing clubs the opportunity to sign more impact players in the middle of the roster and add young Homegrown talent,” according to a league statement.

The additional funds, which supplement the current $3.6 million salary budget per team in 2016, come in two forms: $800,000 of Targeted Allocation Money (TAM) in both 2016 and 2017 and $125,000 in extra Homegrown Player funds for each of the next two years.

TAM was initially introduced in 2015 as part of the new Collective Bargaining Agreement with the MLS Players Union which called for an additional $500,000 for each of the league’s 20 teams to be used during the five years of the CBA (2015-2019). Players like Johan Venegas (Montreal Impact), Gaston Sauro (Columbus Crew SC) and Anibal Godoy (San Jose Earthquakes) were signed with TAM money which allowed their salaries to be paid down to fit under the maximum salary budget charge of $457,500.

“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,” MLS Deputy Commissioner Mark Abbott said in a league statement. “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.”

Here’s how the new injection of TAM funds will work:

  • TAM can be used to sign new players or re-sign current players that earn between $457,500 and $1 million;
  • TAM can be used to buy down a player contract to free up a Designated Player slot. If that happens, the club must simultaneously sign a new Designated Player at an investment equal or greater to than the player he is replacing;
  • Teams are not permitted to combine TAM and general allocation money on a player. Either TAM or general allocation money may be used on a player in a single season, not both;
  • TAM money can be traded by clubs;
  • The minimum budget charge for a player signing that uses TAM funds is $150,000; Any part of the $800,000 in TAM funds that go unused in 2016 will carry over to 2017;
  • Teams are allowed to commit, but not use or disburse, 2017 TAM funds toward a 2016 player contract;
  • Any of the $1.6 million in TAM funds per team that go unused by the end of the 2017 summer transfer window will revert back to the league.

In addition to TAM, teams will also have an incremental $125,000 per season to sign Homegrown players over each of the next two years. These funds can be spread across multiple Homegrown players.

“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,” Todd Durbin, Executive Vice President for Players and Competition, said in a statement. “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.”