The Morrison Report: Spending Wisely Edition

As long as they’ve been in MLS, the Portland Timbers have played in the designated player market.  The Timbers signed their first DP, Diego Chara, on April 13, 2011, less than one month into their first MLS campaign.  Like many teams around the league, Portland’s record with DPs is mixed – with one fabulous success in Diego Valeri, one fabulous failure in Kris Boyd, one fabulously underrated signing in Diego Chara, and one fabulously short-lived DP in Jose Valencia.[1]

But while the Timbers haven’t been bashful about making big signings, there has been a significant change in the structure of incoming players’ contracts over the course of Portland’s top-flight tenure.

Upon signing Diego Chara, the Timbers gave him the longest contract in the club.  Similarly, when Jose Valencia inked his initial deal, the contract kept him in Portland for the long term.  Even Kris Boyd – despite a disastrous year prior and not growing any younger – was guaranteed two years on his contract with an option for a third.

While Chara’s signing has certainly worked out, as he recently re-upped with the club, and Valencia’s deal was reformed before the ink was dry, the Timbers early major contracts demonstrated a willingness to commit major long-term money to relatively unknown quantities.

Recently, however, the front office has taken a more cautious approach to structuring the contracts of big signings.  Diego Valeri, for example, was brought in on a loan with an option to buy.  While the Timbers eagerly exercised that option before Valeri’s first season was out, they were able to wait until they knew what they had before committing big, long-term money.

Reports about Gaston Fernandez’s contract indicate the Timbers may be taking a similar approach with the player who looks poised to become the third DP on the roster.  On Thursday, South American-based MLS journalist Emmanuel Quispe reported that the Timbers were bringing La Gata in on a one year deal with an option for a second.[2]

The Timbers recent habit, then, is to be more than happy to spend big long-term money on known quantities – as they did on Valeri, Chara, and Darlington Nagbe midseason – but unlikely to make such a commitment to fresh imports.

The result for Portland is a tremendous amount of salary cap flexibility.  Simply put, missed signings happen to even the best clubs with the sharpest scouting systems, and where a player is brought in on a loan with an option, or with only one guaranteed year, the club’s exposure to any mistake is minimized.  While the MLS Roster Rules contain an amnesty clause, clubs can only exercise it once per year.[3]  If a club has two contracts it would like to jettison in the offseason, then, it can find itself in a difficult spot, as the Timbers did with the contracts of Kris Boyd and Franck Songo’o last offseason.  Simply put, structuring big contracts in this way guarantees that the club can wipe the slate clean and start anew in the offseason if things go awry with its signing.

This contract structure is particularly attractive with DPs.  The downside to such deals is they often carry higher per-year price tags than multiyear deals.  Simply put, because the player is only receiving one guaranteed year, he will often demand more money to make it worth his while.  Similarly, a loan with an option to buy, especially for a good player, often comes with a hefty transfer fee due to the favorability to the buying club inherent in the deal.

For salary cap purposes, however, none of these added costs really matter for DPs.  Because the salary cap hit is limited to $368,750, it really doesn’t matter to financially stable clubs if they fork over $750,000 annually for a player on a favorably structured contract that they would have otherwise had to only pay $500,000 in a multiyear deal.  Simply put, the $250,000 of off-book money is a very small premium to pay in exchange for a contract that protects the club’s salary cap flexibility and guarantees they won’t have to pay substantial money down the road for a player that turned out to be a lemon.

The Timbers front office, then, is deserving of praise for its recent diligence in structuring contracts so as to protect the club’s salary cap flexibility while maintaining its willingness to make substantial long-term commitments to players who have proven their worth to the club.

Using this formula, the Timbers have put together one of the best cores of talent in MLS while maintaining the flexibility to build upon that foundation as needed.

And the product of this formula of spending wisely may well turn out to be trophies.

Onward, Rose City!

[1] Valencia was a Young DP for a matter of days when he first appeared in Portland before the Timbers found out he arrived as damaged goods and reworked the deal.

[2] Although it was ambiguous in Quispe’s report, this is presumably a club option, as player options seem to be fairly rare in MLS.

[3] The prohibitive favorite for the Timbers to amnesty this offseason, by the way, is Mikael Silvestre, as the Timbers have a significant amount of money committed to him despite the substantial uncertainty surrounding his return from a major knee injury at the age of 36.

This entry was posted in Gossip and Rumors, TA Blogs and tagged . Bookmark the permalink.

5 Responses to The Morrison Report: Spending Wisely Edition

  1. Tom Argent says:

    Do we know for sure we actually have two current DPs? Would there be any benefit to have somehow restructured Chara’s deal such that a portion of his transfer fee is somehow being applied to his new contract such that he’s still a DP? If not, don’t we have just one? Or am I missing something and Nagbe, for example, has been made a DP (without announcement) via his new deal?

    • Kyle says:

      My understanding is that once you are a DP with a club, you remain a DP. Otherwise, there would not be much to prevent clubs from signing a player to a lucrative DP contract for one year, then lower the contract. Obviously, the player would have to agree to it, but I think the league has rules in place to prevent such a thing.

      • Peter says:

        Nope, Chara resigned and because the transfer fee is no longer a part of the cap hit, he’s no longer a DP.

        Nothing was made official on that until after the article was written. Also, Gaston and Paparrato were both signed below the DP threshold (or enough allocation money was applied to make that happen) so currently the Timbers only have 1 DP in Diego Valeri.

  2. Joe says:

    It is a very smart way to go about doing business, but why not do that with higher profile players. Stoke is talking about getting johannsson for the sum of 8 million. Johannsson would be a young player, huge talent. time with usmnt. You could do a 1 year with option to buy. He has proven himself in top leagues, and on national stage. He scores, and scores a lot. Gaston has hardly even played, and injury prone. Why do we not go for bigger targets and use the same method.

  3. Joe says:

    So why don’t they do a 1 year contract with option to buy. For bigger name players. Player like johannsson. He is a proven player in top flight football. He is a usmnt player, so he will only gain in value and talent, if he stays healthy. Stoke is said to be offering 8 million for johannsson. That is a great price for a young star with huge potential. I just don’t get how this new guy is worth it, with a lack of playing time. Injury prone. Just because he is from Argentina does not make him a automatic dp. MLS needs to raise the salary cap.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>