How I'd Change the Salary Budget (and Why)

“We do need to continue to figure out ways to improve the quality, and some of that is going to include spending money. Hopefully over time we begin to find a balance where if you have highly compensated players on your roster it doesn't compromise your ability to have the rest of the depth in your roster that continues to provide the quality we're all looking for as a league."

Adrian Hanauer


There have been many threads, probably thousands of posts about the salary cap. Realistically, It isn’t going to be removed. Salary caps are now firmly established in professional sports in the United States, and MLS is no exception.

Personally, I think the designated player rule has been a good tool for getting marketable players into the league. I also think MLS addressed some of the very low wages for younger players in the most recent CBA. My concern is that the salary limitations restrict teams’ ability to hold on to good, veteran players who aren't worth DP wages, but are nonetheless invaluable to improving the overall quality of the league.

In what follows, I propose modifying the rules in order to specifically target retaining four groups of players: MLS veterans with four years of service; MLS graduates of the Generation Adidas program; international players and non-MLS domestic players who have national team experience. To pay for it, I propose letting teams fund the additional payroll, acknowledging that not all will choose to do so. Finally, I am going to share some data from Europe about when payroll spending disparity seems to unbalance a league.


The Salary Budget

Last year, the salary cap was reportedly $2,675,000, which applied to the roster of 18 to 20 players on an MLS roster.

http://www.socceramerica.com/article/43328/younger-dp-rule-slights-home-based-talent.html

It is worth noting, however, that the typical league salary budget is significantly higher than the cap, as Don Garber noted in his State of the League speech in November, 2010:

“Most of our clubs are spending between $3.5 million to $4 million on their salary budgets. That is not counting Designated Player salaries. That is with allocations and other things that they're able to do, in essence, to become a fully funded MLS club salary budget. We've increased the amount of allocation money. It is up to almost $10 million in 2011.”

http://www.mlssoccer.com/news/artic.../transcript-commissioner-garbers-state-league

Current salary budgets today is presumably at the high end of the range Garber noted – about $4 million per team.


How the Cap and the Designated Player Cap Charge Make Retention of Quality Players Difficult

This season, the rules provide that if a player is paid more than $350,000, the team must either use allocation money or pay the overage themselves – thus making him a designated player. For players 20 or younger, the cap hit is reduced to $150,000, and for players between 21 and 23 the cap hit is $200,000. (In addition, if a young designated player occupies a team’s third DP slot, they do not have to have to "buy" that slot by paying the one-time $250,000 fee.)

http://www.sbnation.com/soccer/2012/2/16/2803063/2012-mls-roster-rules

Reducing the cap charge (or cap “hit”) for young players certainly helps, but still any team that has three designated players must dedicate a significant portion of their cap to those players.

Adrian Hanauer explained the challenge:

“You can either have three highly compensated players and really boot-strap the rest of your roster, or you can try to balance your roster without highly compensated players. In doing the simple math, if you have a roster of 20 senior players and three of them are taking a million of the cap, then 17 of them are taking up $1.5 million -- which is about $88k per player, and that's a challenge." There aren't too many established quality players who will work for $88k, after all.”

http://espn.go.com/sports/soccer/news/_/id/5476270/dp-salary-issues-remain-mls-continue-growth

The choice currently is to either limit the number of designated players – players who do help the league market its product – or really squeeze the pay of everyone else on the roster and send the other veterans and promising (but expensive) younger players packing.

It’s a Hobson’s choice.

At least broadcasters seem to think that high profile, highly compensated players help sell the league, as L.E. Eisenmenger reported in April, 2010: “We were lucky to have [Donovan and Beckham] in MLS Cup and the ratings show that,” Christopher Alexopoulos, ESPN’s producer for soccer programming told me. “The ratings show that stars bring people to the television set. Stars are really important to selling the game on television.”

http://www.examiner.com/pro-soccer-...ond-designated-player-purchase-slot-for-third

The problem, of course, is that if a team has designated players – players who have some marketing value beyond their on-field contributions -- there is little room in the budget left to compensate valuable veterans or promising younger players, even those who may be sold later for more money.

The league needs high profile players, but purging a roster of talented younger players is especially painful according to Hanauer:

“For players who are 23 or 24 years old and could be in our league for 10 years and could be massive stars, we should be encouraging teams to sign them and not create salary caps and player rules that inhibit that in any way."

http://espn.go.com/sports/soccer/news/_/id/5476270/dp-salary-issues-remain-mls-continue-growth

To be fair, MLS has tried to make it easier to sign younger players to higher contracts through its recent expansion of the DP rule, but the rule is limited both in the number of players who can qualify – it doesn’t add DP slots, it just reduces the cap charge for certain players --and in scope, as Ridge Mahoney noted in Soccer America (emphasis mine):

http://www.socceramerica.com/article/43328/younger-dp-rule-slights-home-based-talent.html

At a time when MLS is pouring resources into academies to develop younger players – home grown stars – it seems to have done very little to modify its rules to make it easier to retain those players after they have some experience and near the end of their initial contracts.

And it isn’t just promising young players who are hard to retain, it’s also veterans – those players who will never be marquee stars, but are the glue that holds the team together. Sounders owner Joe Roth explains, “I’d like to be able to keep a core group of players. Growing up in New York, players played an entire generation for the Yankees or Dodgers or the football Giants. I think that’s a missing component in today’s sports. You can’t keep track of where the players are going.”

http://www.soundersfc.com/News/Articles/2012/01-January/Joe-Roth.aspx


My Proposal

First, I would establish a salary floor of $4 million per team – essentially the high end of the current actual average salary budget provided by MLS to each team. I call this amount the “Base Budget” which would be provided by the league to every team. (Given the changes I suggest below, the league may choose to scale back on allocation money in order to equalize the Base Budget for every team, but MLS could still provide some allocation money beyond the Base Budget if it chooses to – it’s their choice).

Note I am not really injecting new dollars into the payroll here by suggesting the $4m number, but I am trying to provide for less variation from team to team -- right now the league is handing out allocation money both for doing poorly and doing well (CCL), which is something of a push-me pull-you.

Second, once the pay of a “Qualifying Player” (which I define below) exceeds $200,000, I would allow his team to make an election: they could count every dollar of pay between the $200,000 threshold and $600,000 (that is, three times the threshold) against the Base Budget and have the league pay the salary, or they could pay the overage beyond $200,000 themselves and exceed the Base Budget by up to $400,000 on that player.

What would this achieve?

For teams seeking to pay promising young players or needed veterans more, they could do without absorbing a disproportionate amount of the pay in their cap. OTOH, for teams that want the equivalent what today is a less expensive DP and lack allocation money, they could fund up to $600,000 through their league provided Base Budget without any charge to themselves.

Who is a “Qualifying Player”?

Players who are not designated players but either (a) have been in MLS for four full seasons, or (b) are a graduate of Generation Adidas, or (c) occupy an international slot, or (d) domestic players with less than four years of MLS service but who have played at least five times for their national team.

The idea is to focus these new dollars on young emerging players who have not yet reached peak sale value or veterans who have value to the organization but are not realistically DP candidates. (Note DP players are essentially unchanged, but the teams could elect to allocate up to $600,000 of their salary budget to a DP salary, not just $350,000 as now – for teams with a single DP, it actually would lessen the burden on the owner to pay as much of his salary).

How much additional spending would this allow? Again, because only certain players qualify, it won’t result in a huge jump in the current $4 million salary budget, but an ambitious team with perhaps four or five players could spend as much as $400,000 more on each of them – perhaps $1.6m - $2m at the high end, although my guess is perhaps $400,000 - $800,000 would be more typical. It would be at their discretion.

Third and finally, I would limit total payroll spending to three times the team’s Base Budget. In other words, if the Base Budget is $4 million, total payroll spending, including the league provided Base Budget together with payments to Designated Players and Qualifying Players funded by the team (and any other allocation money MLS still might give out), could not exceed $12 million. That’s the top limit, or “Max Cap.”

Practically, for teams like LA, if they want three designated players they won’t be able to spend as much on Qualifying Players as others might, although even LA could spend more than they are spending under the current rules. For example, if Grant Wahl’s numbers from last year are correct, LA could have spent just over $1.4 million on Qualifying Players on top of their $10,978,593 payroll (remember, the cap charge would drop the cap hit on Designated Players to $200,000 too), while New York would have had to cut payroll to get to the $12m cap. No other team would have been impacted by the overall cap of $12m

Even with the max cap of $12m, the Qualifying Player rule would mean more payroll spending – that’s what it is designed to do – and yes it isn’t likely to be equal. Some teams will use this to spend more on their rosters than others do.


How Equal Do Payrolls Have to Be for a Competitive League?

There is a legitimate concern when one team can spend more than another that the competition will suffer and that a handful of teams will dominate the league. Fans look at the duopoly of Spain or Scotland (at least, until a few days ago) and fear with justification that such dominance of a few clubs can’t be healthy for a league. The problem is that the current salary cap doesn’t really equalize spending now thanks to the designated players, but it does strip successful teams of valuable players who cannot all be financially rewarded with a boost in pay reflective of their role in their team’s success, as Ives Galarcep recently noted in an article for Fox Soccer:

http://msn.foxsports.com/foxsoccer/usa/story/la-galaxy-test-mls-limits-on-american-soccer-020812

What better way to keep up with the Joneses than to knock the Joneses down a peg or two?

Of course, the fact is that spending is hardly equal now. Last year, Grant Wahl calculated the payrolls of every MLS team and compiled the list you see below. Yes, the payrolls changed over the course of the year, but when Wahl ran his numbers New York was spending 6.3 times as much as Chivas USA did on players.

Here’s Wahl’s list:

1. New York: $15,666,639
2. Los Angeles: $10,978,593
3. Chicago: $5,559,103
4. Toronto: $5,214,381
5. Seattle: $3,118,103
6. New England: $2,983,032
7. Dallas: $2,924,318
8. Kansas City: $2,905,107
9. Philadelphia: $2,886,399
10. D.C. United: $2,881,530
11. Columbus: $2,808,203
12. Colorado: $2,710,113
13. Salt Lake: $2,645,721
14. Houston: $2,565,875
15. San Jose: $2,518,590
16. Chivas USA: $2,477,548

http://sportsillustrated.cnn.com/so...yer-salaries-crunching-the-numbers/index.html

That’s quite an imbalance. MLS argues that it maintains competitive balance despite this disparity by forcing teams with designated players to purge other quality veterans and younger players as noted above, but does MLS really have to do that in order to maintain a competitive league?

Put another way, if we took out the designated player labels and just looked at overall payroll, just how imbalanced does payroll spending have to be before a competition is dominated by only a handful of big clubs?

UEFA looked at this issue in its Financial Benchmarking Report for FY 2010. Specifically, UEFA looked at the average combined personnel and net transfer costs of the four biggest spending clubs in the top division of every European league and compared them with the average combined costs of other clubs the division. What UEFA found was that in leagues where a few teams tend to dominate the league, spending is very imbalanced. For example, in Spain, the top four clubs spend 6.4 times more on personnel and transfer fees than the rest of the La Liga clubs. In Scotland, the number jumps to 8.6x. Greece is 9.8x, the Ukraine 12.8x and in Portugal the big clubs (presumably Porto, Benfica, Sporting and Braga) spend a staggering 16.6x on average more the rest of the league. Little wonder you see the same clubs at the top of the table in these countries. But in places like Germany, Switzerland, Norway, even France, where the ratio drops to 3.5x – 2.5x, the leagues are far more balanced. Only England has a ratio of 3.x without the same level of competitiveness (but here some clubs like Man City just outside of the top 4 were spending very heavily and make the league look more balanced than perhaps it is). The information is on page 70 of the report for those who wish to read it.

You can download it here:

http://www.uefa.com/uefa/footballfirst/protectingthegame/clublicensing/news/newsid=1585473.html

There is a lesson here, IMO. Spending doesn’t have to be equal for competition to flourish. Indeed, it is possible to have very competitive leagues – and both France and Germany are highly competitive right now -- where bigger teams spend even three times the average of the others, but the scales tip quickly if that ratio moves over 5.0x.

If MLS limits total payroll spending to 3x base salary budget and retains a playoff system, I believe the league will remain very competitive even if most teams elect not to spend anything beyond their base salary budgets. Of course, should LA and NY spend $12 million and the majority of the clubs spend anything beyond the base salary budget the ratio won’t even be 3x – probably closer to 2.5x – which would still make MLS once of the most balanced leagues in terms of payroll spending.

In addition, even if bigger spending teams have an advantage over a long season, in a short playoff series much of that advantage can be negated. MLS won’t turn into La Liga.

But going forward it will be able to keep more of the players it wants to keep IMO.

My main concern about your idea for 3x base spending is that it opens the door to go further. Slippery slope and all that. I do agree that 3x or less would probably be competitive but I don't believe that it would stay at 3x.

Remember that payments to Qualifying Players are limited to $600,000 though.

Even so, I think it's important. There are some good young players in MLS now and soon -- very soon, I hope -- MLS will have even more of them who will quickly finish their original deals. They may not be worth DP slots at that time, but they may command $500k or so from some other league. Right now, even paying them $300,000 takes up a big chunk of cap space and makes it very difficult to also take a $350,000 cap hit for a DP, let alone two.
These young players -- the best of the academies hopefully -- are potentially valuable assets. MLS needs to modify the cap to allow teams to keep them if they wish, rather than sell them early (at a lower price) or let them walk away on a free transfer just when they are becoming important contributors.

MLS has rules to allow highly paid players, but they aren't well suited to retain the players they successfully develop and pay them more moderately ($350,000 - $600,000).

I'm not talking about a huge number of players -- again maybe three or four per team at the most -- but outside of the marquee DPs I think they are the key to the future.

It's always interesting to me to analyze the league's growth in terms of addressing needs and weaknesses. I think it's easy to can get caught up in this overly simplified idea that league growth will be a linear progression of the salary cap.

For instance, after the designated player rule really kicked off the league's momentum, more attention could be given to the bottom end of player salaries in the CBA negotiations. Later, the league mandated that each team have it's own academy, and more recently, brought back the reserve league.

For me personally, the next big issue isn't how the league is going to grow its revenues and reputation. I think by and large the league has that figured out: developing players and embracing the soccer fan. That's not to say MLS is doing all of that to perfection right now, but clearly that's the direction the league is going in for the foreseeable future and there's a lot of opportunity. What MLS needs to do next, is what you touched upon. It's making that group of players (The talented 23-24 year olds that are looking for their 2nd contracts, and who could become MLS lifers) stronger as a category.

I see that as a more logical step for MLS given it's structure rather than simply bumping the cap an extra $2-3 million. It'll certainly be cheaper and may well be more of a surgical and effective way of accomplishing something more specific.

One thing that makes this discussion somewhat difficult is the looming TV deal negotiations in 2014, as pressure from networks could prod the league to move in a different direction in return for increased fees.

Actually, I thought this would actually be more expensive, and for that reason I thought it unlikely MLS would make that kind of jump. Again, I really do think most MLS payrolls are really funded by the teams themselves now (via the capital call), and a majority haven't seen the need to increase them. Rather than fight that out, boiled down, this rule change will allow a team to keep a couple good young players in the fold for perhaps an additional $800,000 out of their pocket -- it doesn't inflate the entire salary budget.

What's more, I really think the cap charge doesn't serve either the big spenders or the small spenders well. The cap hit makes it very tough to have multiple DPs and that's usually the focus of the debate, but I also think it's unfair for more modest spenders to have to dig into their pocket to pay the salary over $335,000 even though for a single $500,000 player they may well be able to fit him in their salary budget anyway -- why force them to take on even more cost if they have cap room?

But we're on the same page generally -- I think the league needs a plan to keep some of these young guys in the fold.

1) There should be simpler/more transparent ways of managing the financial health of the league.

(which is why I am against these unknown allocations numbers, among other things).

2) The budget floors are basically contracts that the unions bargain for and the HQ won't impose them on its own owners.

3) The main and the ever so developing problem with the current DP system as it pertains to the cap is that this creates a huge gap between the top and the bottom players, the proverbial Beckham-crossing-to-Alan-Gordon event.

4) As pointed in the OP, the current DP/cap system allows too large of a gap between the haves and the have-not's. (On the other hand, Seattle should have gotten a higher level DP player than Fernandez because, once you swerve into a DP territory, it doesn't really matter if you spend $5M or $500K). Hypothetically, a very wealthy owner/huge soccer fan could buy three exceptional players (and an exceptional coach) and make mockery of the entire league because his 3+8 will be better than anyone else's 11.

Thus, I propose (as I have in the past) to give the owners a two-three tier salary cap exception, which could be applied either to a given player or the entire roster under contract.

It might work like this - Team A buys a DP tier player and choose to keep him off the books. Such plan would work in case of a Thierry Henry or David Beckham. Team B might simply decide to "buy" itself a write-off, so it wouldn't need to have a single or a double DP + a bunch of very mediocre players but could choose to simply have a higher general cap.

The key is figuring out the balance between that one great player and an increased overall cap - should a club throw in $1 into the common kitty for each $ it spends over the budget or should it be able to have an increased cap by simply taking it off the league's books. Or should there be some sort of a break point up to which an owner could subsidize the team by himself and beyond which, he should pay a levy to the the league's HQ.

In theory, however, it can be made very, very simple - each team can have a certain cap (let's say $3.5M-$4M) + up to $1M in personal cap allowance (the owner pays it fully) + $2M in "taxable" salary allowance, where each dollar spend costs another dollar thrown into the common pot.

This would make the overall payrolls range from ... $2.5M that the Chivas were paying to ~ $6.5M for a team that exhausts its cap allowances.

Beyond that, one could permit an off-the-books DP signing too, which might push the top teams into that $12M-$15M range.

However, hope is that the meat of the teams would be somewhere between $4M and $6M - of which, it'd be likely that ~ 80% were spent on 10 field starters - so the very top spending clubs didn't have much the dreaded 3/1 spending advantage over the rest of their peers.

PS. I am also far more in favor of selling the players and then re-signing them at a much later stage of their careers for a free rather than keeping the player at home while he should be testing himself in better leagues.

BigSoccer needs to send me regular emails:

"You have now spread enough rep to give some to triplet1 again"

As a soccer fan without a home team, I wouldn't be against it. It clearly makes the league deeper, which means that injuries and fatigue won't hurt as much and there could essentially be 20 Fredy Monteros on some teams.
So there would be less ups and downs and the overall quality of play should improve.
It would also mean better performance in the CCL.

------

the reasons why MLS wouldn't do this:

A. This helps rich teams retain their academy guys, but what about those poor teams? I guess they'll look to sell their talent to Europe. And if that's not an option, they'll trade them to Sounders at discount who can then resign them. It's not a pretty picture.

B. It limits star power.
It's nice to spend 6 mil on a Beckham if your choice is Beckham or no Beckham. Or rather, Beckham or whoever else is available. But it's a very hard decision if Beckham eats half of your hard cap.
The most efficient way to use that 12 mil would likely be to sign something like three 1-2 mil DPs + 10-15 "mini-DPs" at 600k apiece.

C. It would almost certainly boost overall league spending. You make the rich teams stronger, the poor teams will have to do something about it. Right now, no one is scared of Beckham or Henry that much.

D. Imbalance. 3x payroll may not kill balance completely. But it's much more extreme than the current model, regardless of how much gets spent on Beckham or Henry.
I don't think the league is ready to go there, at least while it's still expanding into new markets.

------

As a fan, I don't care about balance and star power all that much.
Then again, I have no home team, and I'm already hooked up.

In the end, it's about what will help MLS grow. Retaining "glue guys" is nice. But is that what sells the product, especially in new markets? Is it wise to reduce balance and deter from signing big names?

I'm in favor of some new exceptions that would help sign and keep some of the academy youngsters.
I do think such exceptions are coming at some point.
But I don't think they will limit the DP system. Or hurt balance.

I think MLS is more likely to expand the current "2 homegrowns" rule, whereby you can sign 2 well paid academy players, they don't count against the cap and the league pays their salary.
There are many ways to adjust that rule going forward. You could raise the salary, you could increase the number of roster spots or apply it to a wider range of players.
But I think that would be more in line with what MLS is trying to do, as it wouldn't discriminate poor teams and wouldn't deter from signing expensive stars.

Actually, I think (and intended) it to make it easier for lower spending teams to keep at least some of thier best academy players. After all, how will they keep them now? If there is a promising young player it might be possible to keep him a few more years for a $600,000 deal, but to do that today they have to make him a DP and shell out an additional $250k each year from your own pocket. This at least gives them a choice of trying to squeeze the $600k under the league provided salary budget. That could be done by eliminating one roster spot, which the rules now allow.

I think there is more flexibility here for lower spending teams.

As for limiting star power, again it's only in the extreme. As I said, LA can have it's DPs and still have some cash left over for these players. Only New York is impacted, and had this kept them out of the Marquez deal that might not be so bad.

But without some mid - range salary exception, I think MLS is going see some good young players it has invested in either walk away, or it will be foreced to sell them early so they at least get something. That's foolish IMO.

but you can do that now via allocation money.

(*edit* i tried to calculate allocation per team here, but the best i can do is roughly 500k-800k range. that would mean 2-3 600k "mini DPs" per team)

What your proposal does is make allocation numbers official and equal for all team instead of 'hidden' and dependent on results as they are right now.
We fans wouldn't have to guess anymore. I don't think it helps the team though.

In terms of actually giving new options, this proposal mainly does that for rich teams.

What I mean by limiting star power is not that they can't get stars.
It's just not sensible anymore.

For one, these stars get paid that much because they are stars. Beckham is hardly 10x better than Fredy Montero at this point.
But more importantly, soccer is not basketball, you need 11 players, or even 20-30 players if you are going after several trophies.
It's just wiser to spend money across the roster rather than focus on a star or three.

MLS enables teams to ignore this right now with DP rules and low cap.
It makes a ton of sense to get a Beckham and sell some jerseys. He's still pretty good, and it makes no difference to you on the pitch if you pay him 6 mil or 600k.
But is it still smart to pay Beckham 6 mil under 12 mil hard cap?
What if the Sounders don't go for star power and get a Montero type at every position and on the bench? They would have to be considered heavy favorites.

Although it's possible I didn't understand how DP system works in your proposal:

i couldn't understand why it's not 1 mil, i thought it's probably a mistake, but maybe you meant that DP salary counts differently?

The DP cap charge would drop from $335,000 (now $350,000) to $200,000 under what I've suggested.

As for the allocation money, I've not only disclosed it, I've tried to equalize it. We really have no idea how the nearly $10 million in allocation money is distributed, so it's hard to say if a given team can use it or not to pay players in a manner comparable to this mid-range exception I've proposed. What's more, they need enough allocation money to do it for the entire length of the contract -- no guarantees of that now.

With respect to DPs being less "valuable" -- not sure I agree with that, but I'm going to think about it a bit before responding on that point.

You do realize that you just posted an entire book? could you please give me a few of the more important points so i don't have to spend a day reading you post? thanks

if it's not an interesting enough subject for you to read it, why would you want to get involved?
And why would someone write a short version for you so you could then state an uninformed half-assed opinion?

i see. but wouldn't that difference still count towards the "hard" cap?

ohh i missed that you actually had data on the amount of a.m.
so if it was close to 10m for 18 teams, and it has been increasing by around 15% every two years (I can't find the source at the moment but Garber said something along those lines last season), it should presumably be ~600k per team this season.

Good point, you are equalizing allocations and making them more predictable.
So maybe the solution would be to do just that, rather than give all this leverage to rich teams on top of it?

I'm not sure about specific formula - maybe there's a need to convert part of cap into more a.m. so there could be more of these "mini-DPs".
Or maybe the better approach would be to replace a.m. or part of it with several "off budget" exceptions that would only be used for specific categories of players like you described.
Or introduce an upper limit for these "buydowns" so the max salary for these "mini DPs" would be 600k instead of 350k+all allocation money you can spend.

These specifics are debatable.
As well as benefits / negatives of the current a.m. system.
But if it's about poor teams, then it could be worked within the salary budget.

IMO, there's no reason to change the DP system. Or to favor rich teams when it comes to resigning these guys.

Nothing like a bunch of clowns who live paycheck to paycheck trying to figure out the best way to spend millions of dollars on a niche sport.

Do you walk into a public restroom and get upset about people taking shits in there?

Only when people don't flush. That's the great things about automatic flush valves, they don't let the turds linger.

The downside is that they've taught a generation of kids they don't have to flush at home.

heh. did someone call a time-out in the "How I would build a stadium" discussion?

Honestly, it seems as if the simpler way to get to the same result within this context is to raise the salary cap while holding the DP charge to where it is right now. If the goal is to create more cap space in order to be able to sign those young players to the next contract, then that would do it. Personally, I would prefer to see allocation money eliminated and the cap grown to accommodate the difference, so the salary budget is less opaque than it is now.

As of right now, it seems as if most of those mid-level players are not leaving due to money, as many of them are reportedly taking less to play in countries like Denmark and Sweden. I do agree with triplet1 in that it should be a goal to keep players like Jozy Altidore around for one more contract than they are now. They will still probably leave eventually, but maybe Brek Shea is an example of what is possible without changing the process so drastically.

The problem with that is a lot of new dollars have to be pushed into the system and I'm not sure where they are going to come from. Like DPs, a good chunck of the additional money is intended to come from the I/Os -- beyond that I tried to keep it revenue neutral. But I wanted some outside limit so that the league wouldn't keep adding players funded outside the salary budget until it tipped the competitive balance of the league -- hence the Max Cap at 3x the total salary budget.

But you and others have raised some interesting and fair points, and I've tried to show some of the details below.

First, is Garber’s claim that team payrolls are actually between $3.5m - $4m now accurate? I think so, but there are two numbers we need to add into last year’s salary cap of $2,675,000 for the 20 man roster in order to get there. Remember, it’s a 30 man roster, although the cap itself really applies to the senior roster of 20 players. Last year Guillermo Rivera did a nice piece on the Chicago Fire’s cap and concluded the payroll for players 21-30 on the roster was about $609,000; even though several were at $42,000, the Fire also had two Generation Adidas players. In other words, I think there are more dollars flowing now to the bottom of the roster than people realize.

http://www.chicagonow.com/fire-confidential/2011/05/a-look-at-the-fires-2011-salary-cap-situation/

For the purposes of this discussion, I’m going to assume the non-senior part of the roster – players 21 -30, have a slightly higher payroll than Rivera’s calculation for the Fire -- $620,000.

Next, we have to add in allocation money. Although it isn’t reported, Garber said it was just under $10 million. If you pro-rate the $10 million in allocation money between all of the teams (and, yes, I rounded up), you get $555,555 per team (i.e., 1/18th of $10m). To keep the math easy, I’m going to use $555,000.

With those adjustments, here’s what typical payroll would have looked like last season:

Senior Roster Salary Cap (Players 1-20): $2,675,000
Allocation: $555,000 (i.e., 1/18th of $10m, rounded down to the nearest thousand)
Players 21-30: $620,000
Total Salary Budget: $3,850,000

If allocation dollars were distributed evenly, each team would have had about $3,230,000 to spend on its 20 man roster last year. Add in a number comparable to what the Fire spent on players 21-30, and you can see where an MLS team would indeed be spending $3.5 - $4m on payroll, just as Garber said.

Interestingly enough, teams do not seem to have used that allocation money to buy players out of DP status nearly as much as I would have thought, however. The player wages listed on the union website are as of May 1, 2011, so not every DP is listed since several joined MLS after that, but if you compare the May 1 wage list with the league’s list of DPs you will find only a handful of players who were paid over the $335,000 threshold who were not DPs with wages funded in part by I/Os. All of them made under $500,000, and most were $350,000 or less:

May 1, 2011

LA Beckham David -- $ 6,500,000.04*
NY Henry Thierry -- $ 5,600,000.04*
NY Marquez Rafael D -- $ 4,600,000.00*

LA Donovan Landon -- $ 2,300,000.00*
CHI Castillo Nery -- $ 2,038,062.50*
TFC de Guzman Julian -- $ 1,910,746.00*
LA Angel Juan Pablo -- $ 1,250,000.00*

VAN Hassli Eric -- $ 900,000.00*
DAL Ferreira David -- $ 705,000.00*
SEA Montero Fredy -- $ 636,000.00*

CLB Mendoza Andres -- $ 595,000.00*
DC Boskovic Branko -- $ 525,366.67*
NE Joseph Shalrie -- $ 500,000.00*
NY DeRosario Dwayne -- $ 493,750.00
RSL Morales Javier -- $ 452,500.00*
HOU Ching Brian -- $ 412,500.00
COL Casey Conor -- $ 400,000.00
PHI Mondragon Faryd -- $ 396,666.67
SEA Fernandez Alvaro -- $ 366,666.67*
VAN Demerit Jay D -- $ 350,000.00
NE Feilhaber Benny -- $ 346,000.00
SJ Convey Bobby -- $ 336,000.00

* Indicates a Designated Player

http://www.mlsplayers.org/files/May 1, 2011 Salary Information - By Club.pdf

http://pressbox.mlssoccer.com/content/current-designated-players


That suggests to me a “mid –range” cap exemption for players making $400,000 - $600,000 could be a useful tool in retaining players. It would allow more players to be added in the pay range of Conor Casey to Andres Mendoza without taking up DP slots to do so.

I’ve set forth below three examples of how I envision it could work, in each case assuming a team also had three DPs (in order to illustrate how much DP spending could still occur) collectively earning $7.5 million. Note I’ve left the cap charge at last year’s $335,000 rather than try to average it for the new “young DP” numbers. Once again, this assumes every team in the league has a Base Budget of $3,850,000 – that is, about what Garber says the average is now:

Example One (DP Cap Charge $335,000 per player)

Seventeen Senior Players (Non-DPs) -- $2,225,000 ($130,882 avg.)
Three DPs (Cap Hit) -- $1,005,000
Players 21-30 -- $620,000
Total Base Salary Budget -- $3,850,000
Portion of DP Salaries Paid By I/O -- $6,495,000*
Total Wage Bill -- $10,345,000
Max Cap (3x Total Base Salary Budget) -- $11,550,000
__________________________
*I/O would also have to pay $250,000 for the third DP slot

Now I’ll repeat the example lowing the cap charge to $200,000 – remember I’m suggesting this would be an election by the team, so they could either put the dollars from $200 - $600k under their cap or pay for them – here the I/O had elected the lower cap charge to $200,000 for each DP, which has the effect of raising the amount of money available to pay the other 17 players on the senior roster:

Example Two (DP Cap Charge Reduced to $200,000 per player)

Seventeen Senior Players (Non-DPs) -- $2,630,000 ($154,705 avg.)
Three DPs (Cap Hit) -- $600,000
Players 21-30 -- $620,000
Total Base Salary Budget -- $3,850,000
Portion of DP Salaries Paid By I/O -- $6,900,000*
Total Wage Bill -- $10,750,000
Max Cap (3x Total Base Salary Budget) -- $11,550,000
__________________________
*I/O would also have to pay $250,000 for the third DP slot

Lowing the cap charge has freed up money for the rest of the roster. Now, in the next example, I’m going to reallocate some of those dollars to two “Qualifying Players” each making $600,000 and each costing a cap hit of $200,000:

Example Three (with Two Qualifying Players)

Fifteen Players (Non-DPs) -- $2,230,500 ($148,667 avg.)
Three DPs (Cap Hit) -- $600,000
Two Qualifying Players (Cap Hit) -- $400,000
Players 21-30 -- $620,000
Total Base Salary Budget -- $3,850,000
Portion of DP Salaries Paid By I/O -- $6,900,000*
Portion of Qualifying Players Paid By I/O -- $600,000
Total Wage Bill -- $11,350,000
Max Cap (3x Total Base Salary Budget) -- $11,550,000
__________________________
*I/O would also have to pay $250,000 for the third DP slot

That’s five highly compensated players and 15 other senior players with higher average pay than currently available to a team with 3 DPs. What’s more, there’s still about $200,000 left to use, which could be used to fund higher DP salaries or another Qualifying Player at less than $600,000. Alternatively, one of the three DPs could be sacrificed to up the salaries of the other two DPs or add more Qualifying Players.

I’ve thought about chungachanga’s point that this is actually too big a disincentive to bring DPs in, and he’s right that if a team has a single very expensive DP -- $5 million or more – the 3x Max Cap will limit how many Qualifying Players they can afford or potentially what the other DPs can make. Still, a $4 million DP, a $2.5 million DP and a $1 million DP would fit under this cap, together with two Qualifying Players making up to $600,000 each, and 15 more players having a higher average pay than now. It would also be possible to pull perhaps $200,000 out of the pay going to the other 15 senior players – now up to $148,667 on average – and direct that to another Qualifying Player or the DPs.

It provides flexibility to mix and match.

Lower spending teams that haven’t used DP slots often admittedly get less flexibility – they can always make those younger players DPs now under the current rules if they wish – but they get some help because they can manipulate the cap charge. If they want to take a lower cap charge, they can do it. Conversely, if they want the league to pay as much as $600,000 of a player’s salary as part of their salary budget, they can do so. Several DPs made less than that last year, and some I/Os probably would welcome having a higher earning player or two on their roster without writing an additional check for his wages, as they must now do for a DP (unless they have allocation money).

To sum it up, I've tried to create a "mid range" salary exception to retain younger players at a level between $400,000 and $600,000 which:

(1) doesn't mandate all owners pay more for it;

(2) doesn't destabilize the overall competitiveness of the league; and

(3) doesn't have such a high cap hit when combined with other DPs that it isn't usable because there would be no money for the rest of the roster.

I agree with triplet1 that there should be some mechanism to keep mid range talent and teams intact but I am not sure I fully agree with the way he intends to do it. But one thing that I think would help which is something I have suggested before is to allow the teams to decide how much of a cap hit a DP takes. If a team like LA decided that it wants to take all of the DPs off the books that saves them a million dollars and would allow them to keep 3 or 4 mid range players who are making the higher end of the pay scale.

But this helps smaller market teams too. If they sign a player for 500k as an example maybe he takes 200k cap hit which might allow them to go out and get another player in the same range. It gives them the ability to sign better players with out totally crippling their cap space or their budgets.

Even if one wanted to stay within the current cap, it's almost easier to "allow the the allowance" to apply to the entire team. Since it can be done already, the only addition would be to increase its amount and make it public.

There's got to be a sweet wage spot for signing the reasonable quality South American players - Mexico can't sign them all, since they have stricter 5-player limits - and it's likely to be between $250K to $750K. (Anyone worth more ends up in Europe, anyone worth less stays home).

Spending about $5M, a relatively minor increase over the current average, should allow this type of an investment with a much more evenly distributed roster wage-wise.

In fact, if I were MLS, I'd try to compare how the free market leagues in the European football allocate their funds, regardless of how large their budgets are.

As I played around with the numbers, I considered simply raising the maximum cap to 3x the base salary with no other sub limits -- no DPs, no cap charges, just one third of the payroll would come from the league and up to two-thirds would come from the I/O subject to a total cap amount of 3x the base salary budget.

I backed away from that because I thought it was less targeted and, therefore, could inflate wages for existing domestic players beyond market levels. I also thought it would potentially put so much pressure on some lower spending teams it wouldn't ever be approved.

But it's certainly a lot easier to administer and more flexible for the teams.

I understand the fear of inflating the prices of current talent, but I think this solution would be better for all concerned. Maybe you wouldn't have the Henry and Beckhams of the world, but it would provide for a lot of mid-level talent that has fled to stick around longer, or not leave period. It would also give the league a PR boost to say that the cap is now $10.5 million, of which $3.5 million comes from the league.

The other big advantage that I think this would have would be a clarity in the salary budget that simply does not exist right now. One of the criticisms that MLS takes at the moment is that the player acquisition rules are byzantine and opaque. This would eliminate some (but not all) of that, and when that list comes out from the MLSPU, everyone would know exactly where each team stands in relation to the cap.

They also waste lots of water, I cover the sensor with toilet paper to save flushes.