Anonymous oversees garment industry dude or what about a 3rd DP for the Galaxy anyway?

So, on the heels of the Rumor That Won’t Die – Ronaldinho to LA Galaxy – I got to pondering the actual economics of such a move. Not the economics of paying a guy like Ronaldinho – and his gut – the full amount of whatever it is the parties agree to, or even the relatively modest transfer fee AC Milan are said to want for him (10 million Euros). Let’s face it, AEG is effing loaded. No, the economics here are those of the MLS salary cap. So first, a quick recap of the salary cap and the DP rules.

(1) Salary cap for 2010 is $2.55 million per team. Total.
(2) Each DP counts $325,000 towards that cap.
(3) Each team gets two automatic DP slots.
(4) A third spot may be “bought” by a team paying $250,000 in allocation money to all teams who have chosen NOT to exercise their right to a 3rd spot.
(5) Allocation money, not cold hard cash. So you have to have accumulated that $250K from previous trades, sales of players, “you suck” money, etc.
(6) Allocation money can also be used to buy down player salaries against the cap, so that their “cap hit” is less than their actual cap-eligible salary.
(7) This includes DP’s.
(8) Players who join mid-year count for only half of their annual salary for that first year. This includes DP’s.

With me so far? I know, MLS rules are a study in arcana.

So in order for the Ronaldinho thing to work, not only do the Galaxy and MLS need to shell out serious bucks to the player, pay a transfer fee much larger than MLS is used to paying (Beckham’s transfer fee was a grand total of $0 as was Thierry Henry’s), they also have to figure out how to fit the new player into the salary cap.

So where is the salary cap right now for the Galaxy? Glad you asked. I did a little research and, thanks to the MLS Player’s Union, came up with the following facts:

Total 2010 LA Galaxy players compensation (in total, real, dollars): $11,100,724.61
Total 2010 LA Galaxy base salary (in total, real, dollars): $9,766,039.08
Total estimated 2010 LA Galaxy salary cap hit (in fake, MLS dollars): $2,886,039.00
Total 2010 MLS Salary Cap: $2,550,000.00
Total estimated 2010 LA Galaxy allocation money used: $336,039.00

I don’t know enough about how much each team has stockpiled in allocation money, mostly because (1) I’m lazy and (2) MLS doesn’t really publicize this stuff, but I have a feeling that $336,000 is actually quite a lot of it. (But one has to remember that Generation Addidas players are cap-exempt until they graduate from the program.) This is before we start dealing with the cap hit for a 3rd DP (around $162K for a mid-season player).

A mid-season addition is easier to absorb, but the first full season will cause serious decisions to be made. Complicating this picture are GA graduations, salary increases for cheap players who’ve done well (Michael Stephens is making $40,000 a year and AJ DeLaGarza is making $45,000.), and purchasing players currently on loan (Juninho being my favorite here – he’s only making $70,000). Anyway you slice it, there are budget machinations to go through.

And here’s a final complicating factor. The Galaxy have 26 people on their roster, though I’m sure there are some rules about people on IR not counting (David Beckham) and maybe something about Academy products as well (Tristan Bowen). But the league max is actually 24. So you also have to create some roster space by cutting someone. At least we know that due to the new CBA, players cut at this point in the season get paid for the rest of the year.

Having laid all this out, its still clear that the Galaxy have at least tried to buy Ronaldinho in the recent past, which means they think they can make it work.

But how? How would you make it work? Leave your thoughts in the comments below.

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Category: 2010 Season, Transfer Rumors