SBJ/November 26 - December 2, 2007/This Weeks News

Debate highlights MLS salary cap split

MLS owner-operators recommended a 2008 budget that increases the league’s salary cap 4 percent to $2.3 million a team, with $125,000 in additional money for signing bonuses and transfer fees. The decision came after a prolonged debate at a Nov. 16 board of governors meeting that highlighted a divide among owners over what players should be paid as the league expands.

The proposal is expected to be approved by the competition committee.

Owner-operators weighed two options for player salaries for 2008 during the meeting. The first would see the salary cap rise to $2.3 million a team, while a second would see it increase to around $2.5 million.

No owner-operators were willing to comment on the record about the vote because Commissioner Don Garber threatened to fine anyone who spoke about it.

Sources familiar with the discussion said the Kraft family (owners of the New England Revolution) and Hunt Sports Group (FC Dallas and Columbus Crew) favored a modest increase in the salary cap consistent with previous years’ growth of 4 to 5 percent, while New York Red Bulls representatives favored pushing it beyond $2.5 million per team.

The debate reflected a philosophical divide between the two groups as the young league continues to wrestle with when and how to spend on players. Traditionally, the Kraft and Hunt contingents have favored controlling player costs and minimizing expenses to foster steady league growth, while AEG (Los Angeles Galaxy and Houston Dynamo), Chivas (Chivas USA) and Red Bull have favored spending more on players to improve the quality of play and increase interest in the league.

The board extended Landon Donovan’s
salary exemption for another year.

League executives reached consensus by putting forward a proposal that would see the salary cap rise 4 percent, allowing teams that wanted to spend more the ability to do so, but not at the detriment of those that wanted to control spending.

Most players have a 5 percent increase written into their contracts with MLS, so the 4 percent salary cap increase keeps pace with that and means that most teams won’t have to cut players to remain under the cap.

As a single-entity league, MLS picks up the cost of player salaries for each team. The only cost it doesn’t cover is for each team’s designated players, such as David Beckham and Juan Pablo Angel, who count only $400,000 against the cap and are typically paid more than $1 million. The bulk of their salary is paid by their team.

Expanding the designated player rule fueled much of the salary discussion, sources said, because a decision had to be made over what to do with the Galaxy’s Landon Donovan, who earned $900,000 in 2007 and has a no-trade clause in his contract.

When the designated player rule was passed last year, Donovan, FC Dallas’ Carlos Ruiz and the Kansas City Wizards’ Eddie Johnson were given one-year exemptions from counting as their team’s designated player because their contracts were signed before the rule was established.

All three players were set to become designated in 2008, but the board reached an agreement to extend the players’ exemption for another year.

The vote was a significant victory for the Galaxy. Because Beckham occupies the team’s only designated player slot, the Galaxy avoided having to trade for a second slot for Donovan, who likely will count $325,000 against the cap — the same as any other team’s second designated player — but won’t cost another player or a draft pick as well.

By contrast, the New York Red Bulls enter the 2008 season with two designated players, Claudio Reyna and Juan Pablo Angel, who both count against the cap. The team also gave up former captain Amado Guevara to get a second designated player slot in 2007.

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