TAM Funds: A Red Bulls Primer

The silly season got a little bit sillier this year when Major League Soccer announced another new mechanism for teams to sign high earning players. Targeted Allocation Money (TAM) will provide each team with $500,000 to be used at any time -- incrementally or all at once -- over the next five years. With a new administration bent on manipulating MLS roster rules to its advantage, it is safe to assume Ali Curtis will consider a number of ways to leverage this tool to improve the squad in the near and long term.

TAM: What It Is

The MLS release detailing the new regulation offers a concise explanation of what TAM is, while many of the more minute details are left to general managers and team executives. The $500,000 provided to teams over the next five years is essentially an extra serving of allocation money, which teams currently use to acquire players or to pay down player salaries so that they fit under the cap. Targeted Allocation Money, however, comes with the extra stipulation that it must be spent on players earning more than $436,250.

The first, only, and most famous example of TAM being put to use will be the LA Galaxy's use of these funds to add Giovani Dos Santos. The Galaxy already have three designated players, and would thus be unable to add Dos Santos, given his reported salary of up to $9,000,000. However, the Galaxy should be able to pull off the move by adding the Mexican international by using TAM to buy down Omar Gonzalez's current salary (reported by the MLS Players Union to have been $1,250,000 base in 2014) to below $436,250.

If you pride yourself on your mathematical abilities, you will notice that $436,250 + $500,000 (the total TAM available to the Galaxy over the next five years), still does not cover the total of Gonzalez's salary. It is possible the Galaxy would only have to buy down half of Omar's salary, given the midyear introduction of the rule and acquisition of GDS, meaning they would only need to use $188,000 if the Union numbers are accurate. Or, they could have to buy down half his salary to half the max ($218,125), meaning they would have to use $406,875 this year.

Thus, the Galaxy will either need more TAM to buy down their DP defender this year, or need to acquire more TAM if it hopes to hold onto Robbie Keane, Steven Gerrard, Dos Santos, and Gonzalez beyond this season. The team can do this by trading to acquire TAM from other teams, one of the four possible uses for these funds:

• Clubs may use the funds to sign a new player provided his salary and acquisition costs are more than the maximum salary budget.
• Clubs may re-sign an existing player provided he is earning more than the maximum salary budget.
• Clubs may buy down the budget charge of an existing Designated Player (no longer making that player a DP) provided the club concurrently signs a new Designated Player at an investment equal to or greater than the player he is replacing.
• Clubs may trade their Targeted Allocation Money to another club.

The Red Bulls are in a unique position among MLS teams, in that they could potentially use their TAM in any of the above ways over the next five years. While they could hoard the majority of it, the team will be required to spend or $100,000 of their TAM by the end of the 2016 season. Thus, Ali Curtis must explore all potential avenues for using that $100,000 -- or possibly more -- over the next year.

Use 1: Sign a New Player

This option is perhaps the most straightforward at Curtis' disposal. Before the secondary window closes, TAM could either go toward the transfer fee (if applicable) or the salary of a new player making more than $436,000. The most obvious choice would be Shaun Wright-Phillips, the brother of Bradley Wright-Phillips who has been training with the team in recent weeks. A laundry list of other options are also available, and could fill a variety of needs for the team during the Secondary Window.

The Red Bulls could conceivably gets SWP or a player of a similar caliber for $500,000 a year (a $250,000 pro-rated hit against the cap for the remainder of the year), and then use TAM funds to buy down the salary further to fit within this season's cap. We can't be sure exactly what the team's cap situation looks like at the moment, but given the release of Andrew Jean-Baptiste, the unexpected retirement of Peguy Luyindula, and the recent loaning out of Dane Richards, Curtis should at least have some money to play with, which could be augmented with the help of TAM funds.

Use 2: Re-sign an Existing Player

Dax McCarty is in the third year of the contract he signed before the 2013 season. Only he, his agent, and the Red Bulls FO know how long that contract goes for, but whenever it does run out, he will be a free agent under the new Collective Bargaining Agreement, since he has been in the league for more than eight years. There's a good chance Dax will be looking to sign a new contract at above the maximum, given that other elite defensive midfielders around the league (Osvaldo Alonso, Kyle Beckerman, and Matias Laba) are designated players, and since his current salary -- including retention funds from the league -- most likely already approaches that number.

Additionally, it is possible the Red Bulls would use TAM to buy down the contract of a player already making above the maximum. While his current salary figure is unknown, it has been widely speculated that Sacha Kljestan's cap hit, similar to others like Mix Diskerud, may have been bought down with allocation money when he was signed so that he would not count as a designated player. If Kljestan is making more than the maximum, the Red Bulls could once again buy down his cap hit below the maximum this offseason, but this time would use TAM rather than regular allocation money.

Use 3: Buy Down an Existing Designated Player

This usage is rather unlikely, given that the Red Bulls already have two open designated player spots. In order to make use of this mechanism, the Red Bulls would have to sign a player making more than the team's only DP, Bradley Wright-Phillips, which would free them to buy down BWP's salary from ¯\_(ツ)_/¯ to something below $436,250. Unless the striker is making just barely more than the maximum, it would be foolish to spend large sums of TAM to buy him down below the designated player level since the team has plenty of DP spots available.

Use 4: Trade It

Here's where it gets exciting. While the Red Bulls could certainly use TAM in any of the above ways, they certainly don't need to. Other teams, like the Galaxy for example, are in a more pressing situation. Regardless of how much TAM will be required to pay down Gonzalez's contract for the rest of this year, the Galaxy will need substantially more in the offseason to hold onto its current crop of players. Even if Gonzalez or Keane does depart, an ambitious team like the Galaxy would certainly look to use TAM funds again over the next five years.

The Seattle Sounders are in a similar situation. Designated player Osvaldo Alonso falls on the lower end of the DP salary spectrum, and is a prime candidate for a buy down to a non-DP contract, opening the door for a higher paid option should Sigi Schmid, Garth Lagerwey, Adrian Hanauer, and co. decide to dip into the transfer market this summer or in the offseason. According to Jason Kreis, NYCFC have cap room to spare, and thus may look to add another player above the maximum, but who would not count as a DP since their three spots are filled. If NYCFC do choose to wisely add a center defender buy yet another immobile center-midfielder, they will surely be in the market for TAM funds.

Toronto FC have filled their three DP spots, but, following the retirement of veteran defender Steven Caldwell, should have a fair chunk of cap space now available that could be filled by a player above the maximum, provided they have sufficient TAM funds to buy their cap hit down. The Vancouver Whitecaps, Portland Timbers, San Jose Earthquakes, Chicago Fire, Philadelphia Union, Real Salt Lake, and Orlando City similarly have three designate players, but could use TAM funds to acquire a new player above the maximum.

This is all a long way of saying that a significant market exists for TAM funds. A litany of other clubs are more desperate for TAM simply because they have filled their three DP slots, while the Red Bulls have built their squad around several midlevel players rather than a few who make above the max. Furthermore, a team like the Galaxy doesn't merely need $100,000 in TAM funds from another team; they will need $500,000 from multiple teams if they want to hang onto all of their high earning players for multiple years to come. The economics of supply and demand tell us that this type of market could create quite a premium for TAM funds that could fetch a high price at the bargaining table, in the form of draft picks, international roster spots, or players.

While MLS' bevy of rules combined with the secrecy of player terms make player-for-player trades all but impossible to predict, it is safe to say fans should expect a fair return on traded TAM funds. Given the glut of attacking options ahead of them in LA (Keane, Gerrard, Gyasi Zardes, Jose Villarreal, Sebastian Lletget, Alan Gordon, Edson Buddle, Bradford Jamieson IV, Raul Mendiola, etc.), starlet Jack McBean and Iona grad Ignacio Maganto might be on the table should the Red Bulls be willing to part with some of their TAM funds. The Sounders already had to cut Kenny Cooper this year in order to get under the cap, and would probably entertain the idea of offloading Chad Barrett's veteran contract in exchange for TAM funds to use now or in the future.

Prediction

These funds, given the current trajectory of the team, most likely will go toward re-signing a current player at above the maximum salary. Whenever the time comes for contract negotiations with Dax McCarty, Lloyd Sam, or Matt Miazga (if he chooses to stay), the team could re-sign each player at exactly the maximum ($436,250, a reasonable figure for any of these players on a multi-year contract), and gain $100,000 in cap room by buying their cap hit down to $336,250 using TAM funds.

However, if teams follow the Galaxy's lead and go all in now, a supply shock could drive the value of remaining TAM funds through the roof in three or four years time, leaving the Red Bulls in prime position to trade them away for a much greater return than $100,000 in cap space.

What do you think? How should the Red Bulls make use of this new mechanism? Let us know in the comments!