D.C. United and Toronto FC pulled off one of the more curious MLS trades in recent memory Tuesday, when D.C. sent $225,000 in General Allocation Money to TFC in exchange for $337,500 in Targeted Allocation Money.
The trade didn’t involve any players, but that doesn’t make it uninteresting. In fact, some MLS wonks out there might see the trade as particularly revealing. This is the first TAM-for-GAM deal we’ve seen in which the full amounts of each asset exchanged have been made public. It gives us a data point for how teams value each type of allocation money relative to the other, something we’ve only really been able to guess at prior to Tuesday.
In this case, D.C. and Toronto agreed that $1 of GAM is worth $1.5 of TAM. As several GMs I spoke to Tuesday afternoon told me, that rate makes sense. Here’s the broad explanation why: GAM is scarcer than TAM, and can be used on any MLS player, where TAM can only be used on those making between the maximum salary budget charge of $504,375 and $1.5 million. It follows that GAM should then be valued higher than TAM, even though teams generally use it on lower-caliber players than they do TAM.
The 1.5-to-1 TAM-to-GAM marker is a nice, round exchange rate, but we shouldn’t necessarily look at it as setting the market for the rest of MLS. That’s largely because teams, thanks to the infusion of $2.8 million in annual discretionary TAM that the league announced in December, are now starting with different amounts of the resource.
High-spending clubs like Toronto will likely be able to use all or most of their discretionary TAM, which, it should be noted, can’t be traded. They’ll combine the $2.8 million in discretionary TAM with the $1.2 million given to every team for a total of $4 million in TAM per year. Teams that don’t spend any of their discretionary TAM will only have that $1.2 million in mandatory TAM available to them each season. That’s a big difference.
It’s not exactly hard to figure that the teams that have $1.2 million or $2 million of TAM available will value it more highly than the ones that are playing with $4 million. That’s not rocket science, but it does create motivation for teams to make deals.
This applies directly to Tuesday’s trade. Toronto's budget likely allows them to dip into the discretionary pool as needed to find their difference makers. They do need some GAM to help sign depth pieces, however. They can feel comfortable sending $337,500 of TAM – less than 10 percent of the $4 million likely available to them – to D.C. in exchange for $225,000 in GAM that, as Sportsnet’s John Molinaro noted, will probably help them bring back Tsubasa Endoh and Jason Hernandez.
I don’t know if D.C. will use their discretionary TAM in 2018, but, given their low payroll in recent years, it's not a stretch to think they won't. They have plenty of players capable of providing depth, but they’re short on difference makers. As such, they can feel comfortable shipping GAM that they could’ve used on a role player like Chris Odoi-Atsem to TFC in exchange for TAM that they can instead spend on Yamil Asad.
Tuesday’s trade was interesting, but we shouldn’t view it as completely instructive. The swap gave us a ballpark for how teams value TAM and GAM, but not a set-in-stone exchange rate. Each MLS team is building their roster from a different starting point, with some having significantly more TAM than others. As long as that remains the case, they’ll each value both types of allocation money differently.
