Sponsored by the Hokie Club’s Drive for 25: The “Drive for 25” initiative seeks to increase membership in the Hokie Club to 25,000 members in order to provide student-athletes with scholarships for a Virginia Tech education, as well as the resources necessary to compete athletically at the highest levels. Click here to join us today!
When the Drive for 25 was announced on December 12, 2016, there were fewer than 11,000 members of the Hokie Club. We began tracking the numbers a couple of days later using the Drive for 25 website, and as you can see, there has been substantial growth over a full calendar year.
December 14, 2016: 10,609
December 6, 2017: 12,273
(Note: The membership figure peaked at 13,635 at the end of the last Hokie Club giving year, on June 30th, 2017. When the new giving year starts on July 1 and renewals are sent out, the number drops, and it will build to a peak again on June 30, 2018. That’s why you may have seen the number reported in various places appear to drop in recent months.)
That’s an increase of 15.7 percent, which is a good start, but that increase was driven in large part by the new per-seat minimum donations for football and men’s basketball. The Hokie Club got an initial boost in membership from the per-seat minimums which probably won’t be replicated in coming years.
If the Hokie Club reaches 15,000 members by the end of this giving year (June 30, 2018), and then adds another 1,000 new members a year, they would reach their goal of 25,000 members at the end of June, 2028.
Will it happen exactly like that? Maybe, maybe not. I don’t know anything about fundraising, but I assume that you can expect an initial surge because of the newness factor of the program, and then things will level off a bit. Or, maybe they won’t. Maybe things will stay steady at around a thousand new members per year, or perhaps they’ll even go up with a great football season next year. We’ll see.
I’m sure we can expect some new members to drop out this year, especially some new additions from far-away states who can’t take advantage of season ticket benefits. That’s natural. However, new members will continue to be added, and if we use the past experiences of Bill Lansden and Whit Babcock as examples, the overall number of Hokie Club members will continue to grow. Lansden and Babcock are good at this part of the business.
For the Hokie Club priority ticket donation deadline that ended on March 31, 2017, donations for the Hokie Scholarship Fund were up 65%, and total athletic department donations exceeded $30 million for the first time in history. In all, the athletic department took in nearly $33 million in donations. Overall, you can’t ask for a better start to the Drive for 25 campaign.
In fact, overall giving to the university is up as well. According to this article, 35,000 donors contributed to Virginia Tech during the 2016-17 fiscal year. Overall, there was a “62% increase in donations compared to the year before and more than double what was raised two years earlier.” The university took in $162 million, which is very important, considering (according to the article linked above) Virginia Tech is only 17% funded by the state these days. That 62% increase almost exactly mirrors the 65% increase in Hokie Scholarship Fund donations.
That makes sense, considering there have been big changes in University Development over the last couple of years. Charlie Phlegar was hired as Vice President for Advancement at the university level, and Bill Lansden was brought in to run the Hokie Club. Phlegar is a Tech graduate, and previously served as the chief fundraiser for Cornell University. Combine these two hires with Whit Babcock’s strong background in fundraising, and a lot has changed in advancement, both on the university side and in the athletic department.
Ramifications of the New Tax Law on the Drive for 25 and Hokie Club Donations
Many of you are wondering how the new tax legislation that was recently passed by Congress will affect the Drive for 25, Virginia Tech athletics, and college athletics as a whole. If you aren’t familiar with the new legislation, this line from a recent email from the Hokie Club sums it up…
“As you are likely aware, the current IRS code allows for gifts to be 80 percent deductible if giving such a donation provides the right to purchase tickets for seating at athletic events. Under tax legislation passed by Congress this week, the ability to deduct charitable contributions associated with the purchase of tickets would no longer be available, effective January 1, 2018.”
In other words, if you are a Hokie Club member and you use your Hokie Club membership to purchase benefits (i.e., football and basketball season tickets), your donation will no longer be 80% tax deductible. That’s not a big deal for folks who don’t donate a lot of money, but for those who donate multiple thousands of dollars to get good tickets and prime parking spaces, it could potentially have an impact come April 15, 2019.
However, it’s still far too early to assess the potential impact of the new legislation.
“We do believe there will be an effect, but at this time it is too early to predict,” Bill Lansden told TechSideline.com in an email. “We are working with our industry peers to come up with a universal policy on how to counteract the new policy to alleviate as much of the negative effect as possible.”
One of the things the Hokie Club is doing is allowing people to send in their 2019-20 donations early.
“We did send an email to donors indicating we would accept their donation for the 2019-20 season,” Lansden wrote.
Here’s more information from the Hokie Club’s email that Lansden references:
“While the Hokie Scholarship Fund giving deadline for 2018-19 benefits is March 31, 2018, it may be to your advantage to consider making your Hokie Scholarship Fund gift for 2018-19 benefits, and/or pre-paying for future years, prior to the end of this 2017 tax year to guarantee tax-deductibility under current tax law. If you are choosing to pre-pay for future years, please note this in the comments section when making your gift online or in the memo line if you are paying by check.”
Still, that doesn’t answer the long-term question: how will the new tax legislation affect donation levels to Virginia Tech, and all other major college programs? We probably won’t have that answer for several years, but the Hokie Club is working with their “industry peers” to find ways to “counteract the new policy.”
For those who donate to the Hokie Club but receive no benefits from their donation, a plan could be in place that could potentially see them being able to claim a 100% tax write-off.
“For those donating to support Hokie Athletics and our student-athletes by making an annual gift to the Hokie Club, we are working on being able to provide them an option to not accept benefits, thus have a possible 100% tax write-off,” Lansden noted.
In other words, if you are a Hokie Club member from Arizona who donates for the betterment of the athletic department and does not receive the benefits of season tickets, your donation could potentially be 100% deductible in the future. Still, if you’re from Richmond and you receive the benefits of season tickets and a parking pass from your donation, you might be wondering what the future may look like. Unfortunately, the view is still murky.
Another Implication of the New Tax Law: Taxes on High Salaries
Some people think the changes will have a major effect on college athletics, because the new legislation goes beyond removing the law that makes donations 80% tax deductible. According to this article from the USA Today, it will tax major college programs who pay their coaches a lot of money.
This line sums it up best…
“Like other non-profit organizations, colleges will be responsible for paying a 21% excise tax on annual compensation above $1 million that goes to any of the organization’s five most highly compensated employees.”
Here’s an example paragraph from that article…
“Based on pay for the 2017 season, 65 public schools would have faced a combined total of about $30 million in tax just for their football coaches.”
Examples given in the USA Today article: Cincinnati could face up to $500k in new taxes. Iowa State may be paying out up to $700,000 in taxes. Alabama could face a $1.2 million tax for Nick Saban’s $7.125 million salary. Here’s a good quote from Iowa State athletic director Jamie Pollard.
“That figure will have to either be passed on to ticket holders and donors, or taken out of the budgets of sports that are not … being targeted by the federal government,” Pollard said in an e-mail. “It is ironic that the compensation paid in those two sports, by sheer market pressure, will actually now generate an additional financial burden for athletics directors to try and solve in our industry. It will be interesting to watch the new wave of creative ideas and suggestions that will be developed by lawyers, agents and financial advisors, to try and get around the new excise tax.”
All of those numbers come from the USA Today article linked above. It’s good reading, if you are interested in the business of college sports.
In short, athletic directors are going to have to start shelling out more money, while at the same time facing the possibility that they’ll bring in less revenue thanks to donations no longer being 80% tax deductible. It won’t have a huge effect on some of the nation’s bigger programs. Per this USA Today report, Alabama made nearly $19 million in profits in fiscal year 2015-16. Florida made $20 million in profits. Other schools are running easily in the black as well.
It’s different for some other schools that might be breaking even, or perhaps even running in the red. Iowa State made just under $100k in profits in 2015-16, and now they face an additional $700k in taxes. The new legislation could effectively push the Cyclone athletic department from the black into the red. For the first time in years, Virginia Tech ran in the red in 2015-16, with $83.7 million reported revenue and $84.6 million in reported expenses. How will that affect the Hokies in the future? It’s too early to tell.
How much it affects the Hokies depends on the fan base. This is a critical juncture for Virginia Tech athletics, and college athletics in general, and it’s hard to get a feel for how the fan base will respond to new changes. If you’re a Hokie Club member, you can help us get a read on things by choosing an option in the poll below.
(Note: Will Stewart contributed to this article.)