This morning, the Vancouver Whitecaps announced that they had sent $277,500 in Targeted Allocation Money (TAM) to the Colorado Rapids, in exchange for $185,000 in General Allocation Money (GAM). You might be sitting there and thinking “wait…what!”. Does this mean that the Caps essentially gave $92,500 to the Rapids? Not exactly. To understand this trade, we need to explain the difference between GAM and TAM, with regards to how it is used and how much teams acquire.
While the MLS Roster Rules are confusing, they do try to outline the different uses for each of the two types of Garber Bucks©. Let’s start with GAM. For the 2018 season, each club was allotted $200,000 in GAM. If they failed to make the MLS Cup playoffs, they were allotted an additional $200,000. Qualification for CONCACAF Champions League brings with it $140,000, while transferring a player out of MLS or being an expansion club also brings GAM; we will ignore the other minor/complicated ways GAM can be acquired.
Moving to TAM, clubs received $1.2 million for the 2018 season, with an additional $2.8 million in ‘discretionary TAM’. As you can see, teams have substantially more TAM each season than they do GAM. This matters!
The Roster Rules outline the four ways in which TAM can be used by a club.
- Clubs may use the funds to sign a new player provided his salary and acquisition costs are more than the Maximum Salary Budget Charge.
- Clubs may re-sign an existing player provided he is earning more than the Maximum Salary Budget Charge.
- Clubs may use all or a portion of the available Targeted Allocation Money to convert a Designated Player to a non-Designated Player by buying down his Salary Budget Charge at or below the Maximum Salary Budget Charge. If Targeted Allocation Money is used to free up a Designated Player slot, the club must simultaneously sign a new Designated Player at an investment equal to, or greater than, the player he is replacing.
- Clubs may use up to US$200,000 of currently approved Targeted Allocation Money (amounts through 2019) to sign new Homegrown Players to their first MLS contract. It cannot be used on Homegrown Players previously signed to MLS.
In comparison, GAM 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.
- To off-set acquisition costs (loan and transfer fees).
- In connection with the extension of a player’s contract for the second year provided the player was new to MLS in the immediately prior year.
- To reduce the Salary Budget Charge of a Designated Player to a limit of US$150,000.
Yeah, that is an understandable reaction. TAM is mainly used to a) sign a new player to MLS, who makes between the Maximum Salary Budget ($504,375) and $1.5 million; b) re-sign an existing player, who would earn more than the Maximum. With the news that Kendal Waston is now a DP, his salary is an example of where TAM could have been used, to reduce his salary cap hit to the $150,000 reduction minimum; or c) to reduce the salary of an existing DP to below the $504,375 threshold, to sign an even more expensive DP. An example of this would be buying down Brek Shea (or Laba last season), who are just above the threshold, to make room for a high-priced DP (e.g., Hutchinson)
In comparison, the main difference with GAM is that it is used to re-sign an existing MLS player and used to off-set acquisition costs (loan/transfer fee). That is, maybe a $2 million transfer makes a player a DP, but their salary is low. Atlanta's big guys are actually on fairly low salaries. It is the transfer fee that makes them DP.
So, what does this signal for the Whitecaps. It suggests that the Caps may be near the salary cap limit and are looking to reduce a non-DP player’s salary cap hit to sign another player; remember, TAM cannot be used on players making less than $504,375. It might also suggest that the Caps are trying to offset a loan/transfer fee; although, with the open DP slot, this makes less sense. However, it could be that the Caps have $400,000 in salary cap space, and need to free up, for example, $104,375, to sign the DP. Again though, unlikely, as using TAM to buy-down Shea would accomplish same goal.
What I have hypothesized is that they are a) off-setting the loan fee from Jordon Mutch or b) looking to re-sign an MLS player (e.g., David Edgar) and need some additional salary cap space to do it. Given that TAM cannot be used in either of those situations, it means that the GAM, which teams have less of (e.g., international roster spots), was more valuable to the Whitecaps.
Of course, it could also just signify that the Caps have no idea what they are doing, or there are some shady backroom deals going on! I suspect it is more likely my hypothesis though.