Taken for a Ride

State records reveal that as little as 31 percent of proceeds of the Twin Cities AIDSRide directly benefit people with AIDS. Most riders didn't know that when they signed up.

The record 1,700 bicyclists expected to trek the more than 470 miles in next week's Twin Cities-to-Chicago AIDSRide II have been told they'll raise more than $2 million to fight the AIDS epidemic. But an examination of public documents filed by the charities involved reveals that as little as 31 percent of revenue raised, or $627,843, will actually go to help people living with AIDS.

According to the state attorney general's office, last year's ride netted $915,661, or just 44 percent of the more than $2 million raised. This number, however, doesn't take into account the "seed money"--conservatively estimated to be $150,000--anted up by the seven AIDSRide beneficiaries. When the up-front funds are subtracted from the ride's total proceeds, only $765,661, or 38 percent, of 1996 revenues went to AIDS beneficiaries. Those organizations spend still more on their own administration and fundraising, according to state figures, bringing the total AIDSRide proceeds spent to directly benefit persons living with AIDS to 31 percent. Meanwhile, the United Way's Charities Review Council suggests that no more than 30 percent of a nonprofit's budget go toward administration.

Those numbers, which are similar to the breakdown of dollars raised by AIDSRides in other cities, have brought the event under fire from critics who charge that most of its proceeds are spent by the for-profit corporation which organizes the rides and its founder, Dan Pallotta. In Philadelphia and Miami the ride reportedly netted beneficiaries less than 20 percent of revenues raised, even as Pallotta received a salary of more than $280,000. In Pennsylvania, the ride reached a legal settlement with the state; in Florida, some beneficiaries have pulled out of the event.

In 1995, when Pallotta and Associates came to town to scout for organizations interested in investing in the trademarked event, AIDSRide hadn't yet engendered any controversy. Anticipating a decline in public funding, seven small AIDS service organizations--Agape House, Grace House, Open Arms, the Archdiocesan AIDS Ministry, Samaritan House, Hope House, and Clare House--anted up $25,000 each to bring a ride to the Twin Cities. They expected to be more than repaid in the end. And less than two years later, the ride provides some of the agencies with more than half their annual budgets, according to Event Chair Joanne Lucid of the Archdiocesan AIDS Ministry. With charitable contributions perceived as a finite resource, participating agencies can't afford to turn down the $125,000 each the ride nets, they say.

But critics note that if the AIDSRide were managed the way many other fundraising events are, a much larger amount of cash would flow to its beneficiaries. According to the Charities Review Council, the Minnesota AIDS Project, which every year sponsors the local AIDS Walk, spends 7 percent on overall overhead. The MS 150, for example, requires its 2,400 riders to commit to just $150 in pledges and this year raised more than $667,000 for the MS Society, with 76 percent of the proceeds going directly to the charity. The Habitat 500 spends 20 percent of proceeds from its bikeathon on overhead, with the rest going to its main beneficiary, Habitat for Humanity.

Bill Baker, ride coordinator for Pallotta and Associates, chalks up any controversy surrounding the ride to critics' inability to understand the dynamics of such a gargantuan fundraising machine and its necessarily immense overhead costs. The AIDSRide is so big, he says, it sets a "paradigm shift" into motion. While "small-scale" events such as the AIDS Walk never leave the realm of fundraising dinners and movies, AIDSRide contends with the "moving cities" and "personal life-changing experiences" necessary to raising massive amounts of money.

Ride organizers and beneficiaries also often remark that small nonprofit service organizations could never raise such a large amount of money on their own. However, Park House (one of only five daytime service organizations nationwide for persons living with AIDS, and not a beneficiary of the AIDSRide) recently raised more than $110,000 with a single event, the Hollywood 10. Thanks in part to a local fundraising wizard, Park House received nearly all of the proceeds. In contrast, individual AIDSRide beneficiaries receive about $125,000.

AIDSRide contends that its costs top 50 percent of revenues; a promotional brochure boasts that organizers hand out 37,500 granola bars and thousands of pounds of chicken during the five-day ride, for example. In reality, such direct event expenses consume only 20 percent of revenues, according to documents AIDSRide filed with state officials. Additionally, Pallotta and Associates says it receives a flat fee of $150,000 for its work on each ride. But the state attorney general's files reveal $403,136 going to salaries and commissions, with another 16 percent comprising the ambiguous "other" category.

Tom Sullivan of Pro Events International organized the Habitat 500 and numerous other biking-for-charity events here and nationwide. He finds the AIDSRide's expenses "simply ludicrous," and notes that his event depends on local sponsors to meet most of its expenses. "I am personally appalled about the way the numbers are coming out," says Sullivan.

Pallotta and Associates say that their figures are great for such a new, big event. Professional event organizers agree that part of what Pallotta says is true--it is very difficult to ensure a good return on donations made to relatively new, large events. Whereas the MS 150 has been around for 18 years and the Habitat 500 for five, this is only AIDSRide's second year in Minnesota. However, critics counter, there have been about a dozen AIDSRides nationwide, all directed out of the main Pallotta office in California.

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