MLS invests $37M in TAM, homegrown player funds over next 2 seasons

Major League Soccer is ready for its teams to start spending.

The league announced on Wednesday a $37-million investment in player salaries over the next two seasons, in the form of $800,000-per-year cash injections per team, using the Targeted Allocation Money (TAM) rule.

In essence, each MLS club now has an additional $1.6 million to spend on salaries over the next two years.

In addition, the league is investing $125,000 per team in extra Homegrown Player funds for each of the next two seasons.

"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 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."

The league also outlined the rules of using this investment:

• 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 practical terms, what this allows is for teams to buy down players in order to retain their salaries. For example, the LA Galaxy, currently burdened by the contracts of four Designated Players in Robbie Keane, Steven Gerrard, Giovani dos Santos, and Omar Gonzalez, can use TAM to buy down Gonzalez's salary, so that he may fit within the salary cap.

Gonzalez was on a guaranteed $1.4 million contract for this season. The LA Galaxy would have been forced to sell or trade Gonzalez prior to this rule in order to be roster compliant for the 2016 season.

Coincidentally, the introduction of TAM came in order for the Galaxy to keep Gonzalez last season; the Designated Player rule was also made in order to sign Landon Donovan and David Beckham to the LA Galaxy.