What to do with all that allocation money?

Nashville SC General Manager Mike Jacobs has spent significant portions of the past few years accumulating what he calls “the most valuable asset in roster-building:” General Allocation Money. So what is he going to use it for?

Some quick basics on MLS roster rules will be necessary here. I’ll try to keep it fairly high-level but if you want more details, look at this post, this one, (quick detour for some of the things that would make more sense, though I don’t know how many of them I agree with at this stage), and for the full roster rules, look at MLS’s public version of the details.

The Rules

For our purposes right now, just a few key rules are important:

• Basics
  • Teams have a salary budget of $4.9m per year.
  • Teams are given General Allocation Money, which can be spent to fit guys in under that $4.9m total budget, and also to fit individual guys into given roster categories. It does not expire year-to-year.
  • Teams are also given Targeted Allocation Money, which can be spent in similar ways, though only on certain categories of player (it can fund transfer fees and salary budgets for guys who are making over the “maximum” salary). It expires four full transfer windows (two calendar years) after it is given.
  • Expansion teams (this includes Nashville SC in 2020!) are given a mystery amount in allocation money to build their initial rosters. Returning teams get “expansion dilution” payments in GAM, and teams that have a player selected in the Expansion Draft also get a payment for their loss.

• What does and doesn’t count against the budget
  • Only 20 players count against a team’s roster budget in a given season (even though there is room for 30 guys on the roster, the remaining 10 are considered “off-budget” and have salary/age restrictions).
  • The maximum salary budget hit for any given player is $612,500, regardless of how much a player makes.
    • Designated Players’ salaries don’t fully count against the budget – $612,500 for a full DP who plays the entire season. $150,000 or $200,000 for a “young DP” depending on age. $306,250 for a full DP who joins for half the season. The rest of the salary is paid, but doesn’t count against the budget.
    • Other players can make over the “maximum” but their budget hits must be bought down with Targeted Allocation Money so the cap hit is below $612,500.
    • The only guys who fit into the “TAM” category are those making between $612,500 and $1,612,500. Any more than that, and a player must be a DP (though a player in that range can also be a DP), any less and he’s not eligible to have TAM used on him.
  • Transfer fees count against the salary budget in the year they are paid.
    • This made Randall Leal a Young DP for his first year with Nashville. He’s fit into the salary budget through other mechanisms in the two years since (as a TAM player making around $1 million this season).
    • For one player per roster, the transfer fee can be amortized over the life of the deal, so he can fit into the budget without taking up a DP slot if the money is right, or to fit him into a TAM category for multiple years, etc.
    • Transfer fees can be fully bought down using Allocation Money (in the past, only half of a transfer fee could be bought down, just as a player’s salary cap hit could only be reduced to half its original value).
• What it means
  • TAM is no longer tradeable and does expire, so it behooves teams to use all of it each year, while saving their GAM for more flexible use. It was previously tradable but we will get into that in a moment. It is also in the process of being phased out.
  • GAM is tradeable, does not expire, and can be used for a wider range of purposes (including trade). For this reason, it is more “valuable,” though the dollar amount counts the same in a given year.
  • The 2020-21 allocation allotment was $1,525,000 GAM and $2,800,000 TAM. Before any transactions, those combine to effectively raised the salary budget from the $4.9m cash to a max of $9,225,000. In 2022, there’s $100k more GAM available.
  • Some trades that involve allocation money have performance-based triggers for a higher value. For the purposes of this exercise, I’m going to assume that every incentive hits.

On with the show

2020

Using MLS Players’ Association Data for salaries, and publicly available rules and transaction information, we have the following: Nashville SC started with the $4.9 million salary budget, the $2.8m TAM allotment, and the $1,525,000 GAM allotment. They also had the mystery expansion amount that remains mysterious*.

In intraleague trades that the clubs publicized transaction amounts for, Nashville spent a net of $475,000 TAM and $3,215,000 GAM before and during the 2020 season. They also spent unknown amount of TAM (but at least $68,125) to sign Miguel Nazarit. As you can see, this more than exhausted their GAM reserves, so we’re dipping into the expansion allotment (again: mysterious).

Let’s look at Nashville SC’s roster budget, too. Using all the mechanisms we know are available (DP/TAM max budget hit, and only the top 20 players counting), Nashville is left with a spend of $6,406,316. (and had to use $876,762 TAM to get salaries for David Accam, Walker Zimmerman, Aníbal Godoy, and Dax McCarty to a max-number-compliant mark, and to hit the TAM threshold for Nazarit). That means Nashville SC had to spend $1,506,316 to fit under the salary cap.

As noted above, TAM has less long-term value than GAM, so using it all up first is important. From the initial 2.8m, subtract the 475k spent in transactions and the $876,762 on salary budget, and there was $1,448,238 to spend. Spent that against the $1,506,316, and NSC had to use at least $58,078 in GAM to achieve roster compliance.

SO: with all the known sources of incoming/outgoing GAMflow, Nashville is down $1,748,078 in GAM – but has whatever additional secret amount the expansion allotment consists of.

Lot going on there, yes. It’s going to be more important as a reference point going forward than the final number.

* No matter how simplified league rules become, there’s always going to be some aspect of team budgets that remains publicly unavailable. In a global labor market, there has to be something held back from negotiations with entities outside the league to maintain leverage. Per the CBA, that number is at least $1.1m in GAM.

2021

In the 2021 offseason, NSC once again got allotments of $2.8m TAM and $1,525,000 GAM. They received a secret amount in expansion dilution (per the CBA, a minimum of $50k, and if evenly-distributed among existing teams, a minimum of $100k).

In intraleague transfers with known amounts of money changing hands, Nashville SC gained $620,000 in GAM. (Remember, TAM is no longer tradable, so we don’t have to worry about transactions involving it right now). The GAM war chest becomes $2,245,000, and the full $2.8m value of TAM remains available.

So let’s look at the budget*.

When we reduce DPs and TAM players to the amount that counts against the salary cap, we have a much greater roster spend than the 2020 season: $7,773,147. Using all $2.8m in TAM (on the eligible players: Accam, Zimmerman, Nazarit, Godoy, McCarty – it takes 1,412,512 of TAM just to get them max-budget-compliant, and there’s enough space above the minimum budget hit to use it all) leaves NSC with a necessary spend of $73,147 in GAM to get below the salary cap. (They also need to spend $30,916 to get the off-budget guys within salary parameters).

As you can see, that leaves a mere… $2,140,937 remaining. Subtract the deficit from the previous year, and you have a net profit total over two years of $392,859, less whatever we haven’t covered from Miguel Nazarit’s initial transfer fee (plus we’ve recouped whatever was initially spent of the expansion allotment, so that mystery amount is still available).

* There’s an additional complication here because Nashville SC made multiple budget-impacting moves during the season. Since we’re just back-of-napkin-ing it here, I’m not counting Dom Badji against the budget at all after he was traded mid-season. It makes sense with how the on-budget salaries play out, though my estimate as to how it actually works is NSC has to be in budget compliance at the mid-season mark, and gets a pro-rated salary budget hit for him.

2022

The yearly allotments are close to the same: $4.9m roster budget, $1,625,000 in GAM (an increase of 100k), and $2.8m TAM*. We’ll assume the expansion dilution is once again a $100k GAM payment.

Mike Jacobs’s offseason – and in-season – business has been a-boomin’. NSC has traded away GAM on just two transactions (to acquire Teal Bunbury and to acquire the rights to Shaq Moore), and has acquired GAM in a number of transactions. It all has netted out (to date) at $4.4 million GarberBucks.

So. The roster:

With the DPs and TAM players reduced to roster max (along with the other accounting things that are relevant, like Rodrigo Piñeiro only hitting the budget at the 200k U22 mark), Nashville SC’s overall on-budget roster spend has increased only incrementally from the previous year: $7,774,162. Lop off the $4.9m of the salary budget and $636,250 in TAM to get Randall Leal, Aníbal Godoy, and Sean Davis cap-compliant, plus another $2,448 to keep off-budget guys compliant. That leaves a $2,237,912 gap that must be filled by Allocation Money. The remaining $2.1ish in TAM goes a long way, and only $74,162 of GAM is used to get fully compliant.

But there’s a twist: the roster release happened with old numbers, before the cap compliance date. Some of those don’t change the math. Walker Zimmerman is now a DP, but he’s still $612,500 against the cap, the rest of his salary is now just accounted for with a DP slot, rather than TAM. Similarly, Hany Mukhtar’s raise and extension only affect how much that DP deal is costing John Ingram, not the salary cap number.

There’s a big one that does change the math! Nashville signed Shaq Moore this week, and not only is he a player who’s going to be in or near the TAM salary cutoffs anyway, there was also a transfer fee for him (and since all three DP spots are filled, Nashville has to buy down the budget hit of the transfer fee with Allocation money). NSC could amortize his transfer fee over the life of his 2.5-year contract if it makes budgetary sense – mostly to get him into a range where using TAM rather than GAM makes sense – but it’s not necessary given the reserves.

Use $2 million to buy the budget hit off that transfer fee, and Nashville’s all-time ledger is at $2,718,697 (plus whatever that initial expansion allotment was) in Allocation Money – which again the idea is to keep in max GAM while spending TAM first. Take off what is likely to be around $600k for Moore’s salary (we’ll know when the MLSPA release salary numbers again at the end of the year), and it’s in the ballpark of $2 million plus the initial allotment remaining.

* TAM is being reduced over the next several years, with $2,025,000 the amount per team by 2027. The expectation is that it’s phased out completely and there becomes just one form of allocation money in the future.

It means…

We’re not likely capturing the full spend with the numbers we have available. Other transfer fees (in addition to Nazarit’s), agent fees, and bonuses count against the salary budget, but we don’t have a way to account for them without knowing proprietary information that isn’t going to be revealed.

Even salary numbers come from MLSPA, which has every motivation to report the lowest number that could reasonably be described as “honest” in order to keep public sentiment on the players’ side when labor negotiations come around*. That’s absolutely what they should do, but it also means – since it’s a one-sided release – that we don’t know the number that MLS is considering counting against the cap. Also sometimes for some teams the rules just don’t count (not that Nashville is going to be one of those teams).

What we do know is that Nashville should, even after a major signing, be one of the teams that’s got plenty of money to spend going forward. The mechanisms are in place for all (or nearly all) of that money to be un-expiring GAM (while the TAM reserves get tapped out). You can be certain Mike Jacobs is always going to keep some GarberBucks cash on-hand, but there’s still a chance for more moves to be made.

* As they should. Go labor, boo management.