Tax Reform presents an opportunity for MAJOR DISRUPTION that could soon be realized…
The new Federal Tax code drew plaudits from the attendees of the World Economic Forum in Davos, Switzerland. It has drawn ire, desperation, frustration and now maneuvering efforts by Governors of California, New York, New Jersey, Connecticut, Illinois and Maryland as these states (and their residents) are the biggest losers of tax reform. The other loser of tax reform are College and University Athletic Departments and Organizations that were able to leverage their status as tax deductible recipients of donations until now. Donors once able to engage in tax arbitrage and enjoy the benefit of tax subsidized hobbies and influence no longer have that advantage. This is just the start of a brand new world of College Athletics and it may give small donors more influence than ever imagined.
Mega Boosters are De Facto Owners in College Athletics (Status Quo)
Why become a de facto owner in College Athletics as opposed to owning a Professional Sports Franchise? There are three reasons for going down this route.
- Not able to meet capital requirements of owning a professional sports franchise.
- Conflicts of interest through the nature of the individual’s profession. Phil Knight and Kevin Plank are examples.
- Zero legal liability.
Professional sports franchises are owned by billionaires and celebrity multi-millionaires own minority stakes in teams (Serena & Venus Williams – Miami Dolphins, Bill Maher – New York Mets, Usher Raymond – Cleveland Cavaliers, Will Smith – Philadelphia 76ers).
Mega boosters are not celebrities, but they do typically hold local or regional influence and sport a net worth greater than $100 Million. They are usually not billionaires, but they have accumulated wealth over time and served their target markets for generations. It is not a surprise that the Silver Circle Club at UGA should be coined the Centrum Silver Club.
There is a connection and affinity toward the Colleges and Universities’ Athletic Programs, being connected to them is both ego boost and dedication. It did not hurt that the mega boosters were able to leverage a 80% tax deduction on contributions for their influence by the way of donations.
Large donors are important and they are so important that they can take on the role of activist investors. The donations are more of an investment into the success of the teams fielded and they can lubricate business relationships on a local level. The priorities of the donors is reflected through management.
Small donors are along for the ride. There was a carrot to serve as the incentive and it came along with a stick as well, which creates a Fear of Missing Out effect. The carrot is of course the right to purchase Football tickets at face value. Small donors have no voice and they are easily replaceable.
Writing Letters to Greg McGarity Does Not Help (The Status Quo)
Small donors and non-donors need to ask themselves:
- Do I give enough to warrant Greg McGarity’s full attention?
- Do I have a political position that could help the UGA Athletic Association (UGAA)?
- Am I advocating something minor or something saccharine that would give the UGA Athletic Association positive media coverage and reflect what the overwhelming majority of fans want?
- Am I over the age of 50?
- Am I a man?
- Do I live, work and operate business in the State of Georgia?
Question 1 is the biggest weed-out in the process. Question 2 makes one worthy of exceptional treatment despite not making the donation. Question 3 concerns licensing and overall brand, it is important to still have a connection with the little people and apparel certainly is the pathway to their wallet. Question 4 is about garnering the trust of those in power, youth is unpredictability and revolutionary. Question 5 is about comfort level and understanding that those in power believe women are to be seen and rarely heard. Question 6 is about locality and potential giving, the further away a person is from the State of Georgia, the less likely one is to give to the UGAA.
Most do not meet the criteria of garnering the respect of the Good Ol’ Boy Club. It’s like a 1950s Country Club in its present form.
The Status Quo and Frustration that Exists for Smaller Donors
Sacrificing the purchase of Football Tickets the traditional way is a more worthy consideration than ever. Given the choice between having a voice in Butts-Mehre and having the right to sit in Section 119 for a High Noon game against the likes of Austin Peay, Middle Tennessee State, Vanderbilt and UMass, it may not be a hard choice. Right now, smaller donors are pushed around by the Georgia Bulldog Club (the fundraising arm of the UGAA) and they help determine a major part of their game day experience.
For smaller donors, seats are generally lower quality, missing road game cut-offs is a common experience, the Administration is apathetic to their concerns, and the overall experience has declined. Smaller donors have become third-tier suckers (donors).
Non-alumni are having their loyalties weaponized against their own wallets. They have to hope that those with power and influence will continue to give them what they want. It’s much like the corrupt small district State Congressperson or Senator who knows how to play to the constituency on certain issues when it comes to getting re-elected, but is crooked when it is not time to promote for re-election. The people are thought to be dopes to bite on the red meat and ignore the actual voting record and abuse of power.
For alumni, at least there’s the individual Colleges, Departments and overall funds at the University of Georgia to donate to in lieu of the Athletics aspect, but the non-alumni do not have that connection. The non-alumni are 100% reliant on the Football experience.
Those who contribute to the Basketball Enhancement Fund and donate enough to get lower bowl seating are still getting unsatisfactory performances and a game night atmosphere that is disappointing. The renovation of Stegeman Coliseum is the equivalent of putting lipstick on a pig as far as the overall experience is concerned. There’s just not enough of a commitment to promoting and improving in Men’s Basketball. The game night experience is not synonymous with the amenities and appearance of Stegeman Coliseum. However, the Administration and sycophants would like to promote the false equivalence.
Another problem is that there are Kentucky fans who give to the Basketball Enhancement Fund for lower bowl seats for the Georgia-Kentucky game at Stegeman Coliseum and a different avenue to access SEC Tournament tickets, which inflates the season ticket rolls and explains for empty seating in the same spots every game.
Right now, there is no opportunity that exists to have a seat at the table for the smaller donors. However, there is an opportunity for them to do so and have an influence on major decisions.
Giving directly to UGA only results in getting tickets now, there’s no other motivation to donate directly to the Georgia Bulldog Club. Smaller donors are voiceless and expendable.
Tax Reform Created an Opening: Special Interest Organizations
UGA Athletic Association is ripe for organic disruption.
The voices of the many currently give way to the voices of a handful. It’s like Capitol Hill, our state capitols and county seats. Athletic departments are pay-to-play operations and no longer a tax deductible vehicle, which means that a major incentive to give directly is gone. Gifts that are based on the condition of receiving tickets to Football Games or Basketball Games are too often perceived as endorsements of the current administration.
Welcome to the UGAA’s Biggest Nightmare…
So instead of giving directly, there’s an opportunity for UGA alumni to create an organizational entity (corporation, LLC) that allows many people with common goals, objectives and concerns to come together and get that seat of influence. The money that would have been donated to the Georgia Bulldog Club goes to the corporation or trust and the funds would be used to pressure the University of Georgia Athletic Association to act in accordance with the entity’s demands. It would put smaller donors on equal ground with the liquor oligopolists and affect positive change. Meeting expectations of the organized entity would result in the release of money and the ticketing privileges that come with it.
Not meeting expectations could result in funds being used for brutal attack ads (nationally, locally and regionally), opposition research and exposés. Removing the individual tax deduction on College Athletics giving could turn Athletic Departments from outwardly corporate non-profits into openly bureaucratic political entities. After all, if individual mega boosters can presently dictate hiring and firing decisions, why can’t an organizational entity?
The proliferation of the secondary ticket market and the geographic expansion of Bulldog Nation have changed the demand on season tickets for all sports. The poor engagement between the individual UGA Alumni Association chapters and the University of Georgia Athletic Association is also something that can be exploited.
The UGA Athletic Association will have to constantly negotiate terms.
Here are some good comparisons for the pooling together of donors into one organized entity.
- Insurance Pooling to get lower premiums.
- Enterprise Clients who do more business get more favorable rates based on volume.
- Larger Depositors get higher interest rates on term deposits.
Smaller donors become de facto owners themselves in the quest for accountability and a better deal.
The Tax Deduction is Gone and This Can Be Exploited to the Benefit of All
Without the tax deduction, there is one less benefit to giving directly and making an endorsement with a debit from a bank account. In this new world of fundraising on the College Athletics level, this is an organizational model that could be done anywhere. There may not be just one organizational entity, but several to choose from that meet the needs of those wishing to contribute and join.
This scenario has not been considered because Athletic Departments, media members, and ordinary donors/fans/alumni have not realized that this is a distinct possibility in the new tax regime.
It’s a different form of effective altruism and previously comfortable Athletic Departments that have operated the same way for decades are not ready for this. It’s about to get really cutthroat, but it takes away the undue influence of a few individuals.
Tax reform has created a new populism in the world of the local elites.