Wall Street Journal - October 1, 1997
Carol Gentry

Stand aside, New England AIDS volunteers. California production companies are taking over major fund-raising events, and they're keeping a chunk of the proceeds for themselves.

Last month, the Boston-to-New York AIDS Ride gleamed like a well-oiled machine with a production crew from Los Angeles, a public-relations agency from Beverly Hills, 3,000 gung-ho cyclists from all over the world, and hundreds of thousands in sponsorship dollars from Tanqueray, Banana Republic, American Airlines and others.

Now AIDS Walk Boston, whose revenue limped in $320,000 below expectations in June, is seeking professional help. Organizers have begun "outsourcing" talks with a Los Angeles company that produces walks in five cities and a decision on whether to turn over the event completely is expected next month.

"We need to grow this event and sophisticate our strategy," says Stephen Mally, development director for AIDS Action Committee of Massachusetts, the group that organizes the Walk.

The problem facing AIDS Walk Boston -- as well as many grass-roots AIDS groups around the country -- is a combination of donor fatigue and complacency. Many former donors put away their wallets after the introduction of promising drug treatments, under the misconception that there's now a cure for AIDS. For some groups, the solution is professionally planned and promoted events that, despite their high costs, manage to deliver more to charity.

It's hard to argue with the numbers. The AIDS Walk in June drew three times as many participants as the AIDS Ride, but only about a third as much money -- about $2.4 million, preliminary figures show, which will be divided among 32 charities. Many participants were low-income families or children who could offer only a few coins or a wadded-up dollar bill.

Meanwhile, the high-gloss Ride pulls in between $6 million and $7 million, with net proceeds of about $3 million to $4 million divided among just three groups: Fenway Community Health Center in Boston and two AIDS charities in New York.

"In the AIDS Ride we've incorporated some strong business strategies to attempt to make this event successful," says Bill Barker, chief operating officer of Pallotta TeamWorks Inc., the company that owns the rights to the Ride. "We hire people who ...understand how a business is run."

But replacing volunteer organizers with paid professionals is expensive. Indeed, some critics of this approach wonder whether the added fees and promotional costs are taking too big a bite out of the proceeds of these events. Higher overhead percentages can be a turnoff to contributors, and have come under criticism from other charities and consumer advocates.

The first Boston-to-New York AIDS Ride in 1995, which was initiated by the production company, turned over about 61% of proceeds to charity. Last year's managed only 48%, according to an audit completed in May. Figures are not yet in for this year's ride, held Sept. 12-14.

Fenway's contract with Pallotta shows the company receives a fee of $180,000 a year above expenses.

Even though AIDS Walk Boston grinds a lot of mileage out of each donated dollar, returning more than 80 cents to services, walk organizers worry that they and other AIDS charities will be tarred with recent negative publicity over the Ride's high overhead costs and fees.

Recently, Pallotta agreed to pay $127,000 to settle charges by the Pennsylvania attorney general that the company did not properly register as a solicitor and misled the public about what share of proceeds the company turned over to charity. Before the 1996 Philadelphia-to-Washington AIDS Ride, Pallotta had announced that 60% of proceeds would go to local charities, yet only 28% actually did. While admitting no wrongdoing, Pallotta agreed to make the payments and maintain proper registration.

A statement from the company traces the incident to a boycott by several groups, and says it was not intentional. Anyway, Pallotta spokesmen say, the Pennsylvania case was an aberration. The company has put on 14 rides that have raised more than $70 million and delivered an average of 57% to charities, they say. Even after recipient agencies take part of the money to cover their own costs, they say, more than 50 cents on the dollar goes to services.

Mr. Barker of Pallotta says a multiday ride is inherently costly to run because it requires intricate planning and a huge support staff.

Not necessarily, says Billy Starr of Wellesley, the director of the Pan-Mass Challenge. His annual two-day bicycle event from Sturbridge to Provincetown raises between $4.5 and $5 million for Dana Farber Cancer Institute's Jimmy Fund, while holding overhead down through corporate support. Pan Mass Challenge gave the fund 82% of its revenue last year, according to audited statements; counting pledges sent directly to Dana Farber, Mr. Starr said, more than 90% of rider-raised revenue went to charity.

Steve Boswell, executive director of the Fenway Community Health Center, says his staff could have treated only half its 700- to 800-patient caseload of HIV-positive patients if it weren't for the Ride money. But he, too, says 50 cents on the dollar is not enough. He says he insisted on cutting the Ride back to three days this year, after last year's four-day ride had what he considered unacceptably high costs. (Pallotta felt three days would be inadequate and agreed to it only reluctantly, according to a note contained in Fenway's contract for the Ride.)

Mindful of these concerns, AIDS Walk Boston deliberately sought out a promoter with a record of keeping costs low. The firm they're talking to, Miller, Zeichik & Associates, had offered limited consulting services to this year's disappointing walk in Boston. But the organizers are impressed with Miller Zeichik's successes in other places, where the company tends to return between 70% and 85% of proceeds to charity.

Craig Miller, chief executive of the firm, is a longtime political organizer who started the first AIDS Walk, in Los Angeles, in 1985. In an interview, he offers several ideas for making the Boston operation more professional. Among them:

• Pre-registration. Until now, donor pledge forms were given out at AIDS Walk sign-up stations, near cash registers at stores and cafes. But since participants didn't have to submit the forms until the day of the event, planners had no idea how many people would show up.
  
  

Mr. Miller prefers sign-up stands that offer applications for would-be participants to mail in. Then the Walk organizers would send out the sponsor-pledge forms to those applicants, along with fund-raising suggestions and materials to help them talk potential contributors into pledging.

• Phone banks. Volunteers would contact prospective participants by phone to enlist them, offer them information and motivate them. In the last few weeks before the walk, they would offer reminder calls to increase the turnout.
  
  
• Promotional materials. As experienced marketers, the professionals would help AIDS organizations "refine the message" with more effective promotions.
  

This year, for instance, at Mr. Miller's suggestion, AIDS groups changed the name of the event to AIDS Walk Boston, because he says the old name, "From All Walks of Life," was a clunker.

(See related letter: "NEW ENGLAND JOURNAL --- Letters to the Editor: In Praise of Volunteers" -- WSJ Oct. 15, 1997)

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