Changes to the DP rule

[BringBackTheBlizzard]

I'm a bit hesitant to post this given it's April 1st but changes to the DP rule have been announced:-

http://www.mlssoccer.com/content/mls-expands-designated-player-rule

...MLS announced on Thursday morning an update of the Designated Player rule to allow every MLS club to sign two DPs. Teams will also have the option to purchase a third DP slot.

In a mechanism that works similar to a luxury tax in other professional sports, an MLS team seeking a third DP slot would be required to pay $250,000 that would be evenly shared as allocation money with all the other MLS clubs that do not have three DPs...

...Each DP player signing will now count as $335,000 toward a team’s salary budget and $167,500 if the DP is signed midseason. According to the league, the $335,000 figure represents approximately 13 percent of a team’s salary budget. Previously, teams were charged $415,000 against the salary budget for the first DP. A team can also use its allocation money to bring that salary budget hit down to just $150,000...

If this is legit (Ives Galarcep has posted that it is) it instantly frees up 80k against the cap for TFC on JDG's salary. It will also be interesting to see if Dwayne deRosario is now considered to have DP status given he was on a basic salary of 357k last season. The article only mentions Landon Donovan, however.

[TheKottonmouthed1555362307]

I'm a bit hesitant to post this given it's April 1st but changes to the DP rule have been announced:-

http://www.mlssoccer.com/content/mls-expands-designated-player-rule

...MLS announced on Thursday morning an update of the Designated Player rule to allow every MLS club to sign two DPs. Teams will also have the option to purchase a third DP slot.

In a mechanism that works similar to a luxury tax in other professional sports, an MLS team seeking a third DP slot would be required to pay $250,000 that would be evenly shared as allocation money with all the other MLS clubs that do not have three DPs...

...Each DP player signing will now count as $335,000 toward a team’s salary budget and $167,500 if the DP is signed midseason. According to the league, the $335,000 figure represents approximately 13 percent of a team’s salary budget. Previously, teams were charged $415,000 against the salary budget for the first DP. A team can also use its allocation money to bring that salary budget hit down to just $150,000...

If this is legit (Ives Galarcep has posted that it is) it instantly frees up 80k against the cap for TFC on JDG's salary. It will also be interesting to see if Dwayne deRosario is now considered to have DP status given he was on a basic salary of 357k last season. The article only mentions Landon Donovan, however.

I would imagine DeRo could be moved to DP status, I think him and JDG still can lead TFC with the right group of surronding players.

[jpg75]

$335K is what a DP counts against the cap, i doubt it is also the limit at which a player would become a DP. The cut-off has been the Max. salary (unless you use allocation money like Columbus did with Schelotto), so $425K or thereabouts to determine whether a player is a DP.

[BringBackTheBlizzard]

Paul James has a blog entry on the subject:-

http://www.theglobeandmail.com/sports/soccer/james-on-soccer/tfc-poised-to-profit-for-expanded-dp-rule/article1521087/

...The nuts and bolts of this is that the single-entity system stays in place. Successful teams on the business side of things will benefit, as they should, but only up to a point...

It will be interesting to see how Toronto FC react to this ruling – as if they didn’t know it was coming. Looking at their current squad it would be reasonable to postulate that they will use the ruling for at least one more DP spot, if not two, this season. What would be the advantage of waiting longer? It's season four and the city is hosting the MLS Cup.

I agree with his basic premise that the large market teams are going to be helped by these changes. Hope he is right that the flexibility is there with the cap to add extra DPs this season. At a bare minimum one should probably be possible assuming as the press release appeared to imply Dwayne DeRosario isn't taking up one of the basic two slots per team. If allocation money can also be used midway through the season 75k is potentially all it would take against the cap to add a second DP during the summer transfer window and more than that amount has probably already been freed up by having JDG's cap hit adjusted from 415 to 335k.

More info was added on DeRosario's situation in the conference call about the rule changes:-

http://www.mlssoccer.com/content/transcript-media-teleconference-about-mls-designated-player-rule

Question. As far as players who currently make more than that figure, that $335,000 figure, how are they treated?

TODD DURBIN: The way it works, the way the designated player rule works is that it's designed to cap the players you could not otherwise afford with the use of an allocation.

So for example if you have a player that's earning, let's say $435,000, for ease of math, then the team in that situation could accommodate that player simply by using $100,000 of allocation money and buying him down to $335,000. So in that situation, the player would not have to be a designated player. He can actually be used via allocation.

Our general rule is that once you get north of about $475,000 and the $500,000 range, that's when you're in a world where players are transitioning out of the allocation realm and into the designated player realm.

Again, the reason why we implemented the rule was because we knew the way our allocations were set up that the teams who were able to afford players -- sort of the $350,000, $450,000 salary range by use of allocation what we were not able to spend money on -- given our salary budget constraints, were players making more than that or significantly more than that.

So the designated player rule was a mechanism that clubs could sign players that they could not sign in the normal course by use of allocation money.

I won't want to use a salary‑specific example, but if a team was going to re‑sign a player and his salary put him at a point where he would have to be a designated player, then that's certainly possible. But we would look at it on a case‑by‑case basis.

Allocation money will be needed to get DeRosario down to 335k against the cap but I suspect that may already have been sorted out back when he renegotiated his contract.

[jpg75]

^ I don't like his explanation. Is he implying that anyone making over $335K has to have their cap hit brought down to that number or else they count as a DP? What's the point of having the Max. salary ($425K) higher than that if you can't sign a player to a max. deal without using allocation money to bring his cap number down?

The only thing i can think of is that the max. salary has been negotiated down to $335K, but that would be a serious concession by the players...otherwise the max. salary becomes arbitrary.

[JoeSoccerFan]

My interpretation is that you can have players making more than $335k (below the max salary) who do not count as DPs. Their whole salary counts against the cap unless it has been reduced through use of allocation. TFC wouldn't have to "designate" DeRo, but if they chose to it would reduce his cap hit from $400k+ down to $335k. The downside of this would be that they would use up their second DP spot.

[jpg75]

^ That's my interpretation too, but the explanation from Todd Durbin clouds things up. A club should be able to have a player count up to $425K (max. salary) against the cap without counting as a DP.

[BringBackTheBlizzard]

It was the MLS vice-president, Todd Durbin, who stated this on the matter:-

http://www.mlssoccer.com/content/tra...ed-player-rule

So for example if you have a player that's earning, let's say $435,000, for ease of math, then the team in that situation could accommodate that player simply by using $100,000 of allocation money and buying him down to $335,000. So in that situation, the player would not have to be a designated player. He can actually be used via allocation.

I don't think that's much of a change from what happened previously given 335k was already the number for a second DP on a team's roster last season and the maximum salary cap hit for non-DP players. I'm approaching this question purely from an inquiring minds want to know angle based on the most definitive quotes and statements. I think it's worth bearing in mind that Schelotto became a DP for Columbus last season when the Crew ran out of the allocation money required to fund the difference between his salary cap hit and the amount specified in his contract option.

http://www.dispatch.com/live/content/local_news/stories/2008/11/25/crew26.html?sid=101

Guillermo Barros Schelotto will return for another season and could be the Crew's first designated player, a source close to both Schelotto and the team said today.

Hunt Sports Group is willing to make Schelotto a designated player, which it might have to do to pay him the approximately $600,000 salary his 2009 contract option calls for.

http://www.crewxtra.com/live/content/sports/stories/2010/01/12/0112-crew-schelotto-agree-on-contract.html?sid=101

Schelotto made $650,000 as a designated player last season. Designated players can be paid more than the league maximum and only a portion of their salaries count against the cap.

Schelotto will not return as a designated player and his salary cannot exceed the maximum of $335,000. Much as his contracts were structured in 2007 and 2008, Schelotto will be paid more than the figure that will be published by the players union in the spring under the terms of what one source called "a very, very complicated contract."

Mo Johnston has confirmed to the Toronto Sun that nothing changes with regard to Dwayne DeRosario and appears to pour cold water on the idea of a second DP any time soon:-

http://www.torontosun.com/sports/soccer/2010/04/02/13449461.html

...TFC director of soccer Mo Johnston said the new provision “doesn’t change anything” for his club, and added that though it will eventually add star power to the league, he doesn’t expect other teams to be too active until the summer because, “budgets are tight.”...

...Landon Donovan of the Galaxy, for example, was made a DP under Thursday’s rule change.

Whispers dating back to last season suggest that has been on De Rosario’s mind.

However, Johnston quickly shot the idea down.

“DeRo’s under guaranteed contract ($425,750 last season), (this) doesn’t change much,” Johnston said. “He was happy signing his contract.”

That to me implies that they have sufficient allocation money available to keep DeRosario's salary cap hit at or below $335k broadly in line with what Todd Durbin stated in the transcript of the media conference call on the DP rule change and with what appears to be happening with Schelotto in Columbus this season.

[TFCRegina]

^ what Mo really means is, "I'm an idiot and can't manage my budget and signed guys like Carl Robinson to 300,000 dollar guarenteed contracts when they played defensive midfield positions."

[SthMelbRed]

What about this scenario:

MLS Club X wants to sign player Y to a five-year deal with an agreed total contract value of $5 million. In year one of that deal, player Y is listed as a designated player with a salary of $4 million, with only $425,000 counting against the cap. In years two to five, Y is paid a basic $250,000 salary and drops the DP tag. Club X can then strengthen the team around Y by signing further DP players to similiar deals in years 2-5.

How does MLS deal with a club in this situation?

[Cheeta]

^ Doubt MLS HQ would ever agree to such a contract and equally doubt any club's Board of Directors would sit idle while allowing the team manager to purpose such a deal. It's madness. Front paying players leaves waaay too much chance for a club to get burned, and burned badly, should a player under perform, take on injuries, or just plain sour on the team.

But back paying players hold advantages for everyone. Deferring salary used to be quite popular in the NHL at one time. Using your example, that 5 year 5 million dollar player contract could see said player making $350 per year of service with an aggregate deferred salary payout of $350 a year (for two years per year of contract) after the completion of the contract. Could this create a financial handicap for future managers? Absolutely. You could be paying a player for 10 years who isn't even playing for you anymore. But that's the future manager's problem, not the current one. And besides the salary cap may increase enough in the next CB to at least partially off set the longer term liability.

I wouldn't be surprised to learn there are a few contracts like that already in MLS. Amongst other shenanigans which are structured to move a players compensations off the salary cap books.