Source of Funding Can Set Course of Chambers

Are chambers of commerce business organizations, civic groups or extensions of City Hall?

That depends, chamber officials in the South Bay say, on the chamber’s major source of income.

If a chamber can operate with little or no city subsidy, it can focus its activities on business-related events such as seminars and legislative lobbying, chamber officials say. If a chamber gets a quarter to a half of its budget from city government, it may be required to spread itself among business activities, such as seminars, and promotional events, such as parades and beauty contests.

And if a chamber receives more than half of its income from the city, as do most chambers in small towns without a major company, there is a danger of becoming an extension of City Hall and being at the mercy of the City Council.

The Lawndale Chamber of Commerce, which receives $58,600 of its total $88,600 budget from the city, is clearly at the mercy of its City Council.

The council voted 3 to 2 on Aug. 18 to cut off its subsidy for the Lawndale chamber. Since then, chamber members have implored the council to reconsider its vote, saying that without the city funds, the chamber will be forced to close.

A Cruel Cut

“If you cut off the funds, you cut off the legs of commerce for this city,” Lawndale resident Mark Sinaguglia told the council last week.

The City Council and officers of the chamber will meet on Sept. 15 before the council meeting to discuss restoring the funding. The council, meanwhile, agreed to provide the chamber with $15,000 for the annual Miss Lawndale Pageant, scheduled for late October.

The Lawndale chamber’s problems began in April when it held an election for three vacancies on its board of directors. Chamber members said the organization’s leadership is changing from older, longtime business people to younger members. A member of the old guard, Peter Paley, owner of an auto repair shop who served as president of the chamber for 1982-83, was a candidate but did not place among the top three.

Those election results, however, were invalidated after the chamber’s nomination committee discovered that it should have elected four new members because another director’s term was ending, chamber director Gary Bosley said.

Discovered Bylaw

Before the second election, members of the nominating committee also discovered that a chamber bylaw requires board members to sit out a year before running for a new three-year term. A board majority said Paley, who had been on the board since 1982, should not have been allowed to run in the first election. He was not allowed to run in the second, which was held in July.

Paley complained that the provision did not apply to him because he originally had been appointed to fill a vacancy, and thus was not running for “reelection.”

When the chamber’s board refused to allow Paley to be a candidate in the second election, Paley threatened legal action.

He argued that the chamber’s new leadership is not concerned with the best interests of Lawndale, and that he is fighting to retain the integrity of the chamber.

“Me being on the board is not that important,” he said. “But (what is important) is that they should follow the rules, not just for myself, but for all business people in the community.”

Paley said he has not decided whether to pursue legal action.

The strain between the old guard and the new leadership grew even more pronounced when the newly elected board decided not to allow Roy Allan, a longtime member who had been president-elect, to become president. Board members instead elected Frank Anderson president of the chamber. Board member Mike Lowry told the council that Allan was not chosen because he had sided with Paley and the board majority felt he would disrupt the organization.

Named Treasurer

Allan, who was instead named treasurer, was on vacation last week and could not be reached for comment. However, at last week’s council meeting, Councilman Harold Hofmann, a friend of Allan, said he had received a call from Allan complaining that he had been denied the presidency as he was preparing for his installation.

“He was voted out of office before he was even allowed to serve,” Hofmann said.

Councilmen Hofmann, Dan McKenzie and Larry Rudolph voted to cut off the chamber’s funding when the chamber’s annual contract came up for renewal. The council had originally held up approval of the contract for 30 days to allow the chamber to resolve its problems. But when the contract came back for what had been expected to be routine approval, the funds were cut off.

The three councilmen deny that their vote was to protect friends, as some chamber members have charged. The reasoning behind their vote, the councilmen said, was that the city should provide its own publicity and organize its own activities rather than pay the chamber to do so.

The city has a $25,000 contract with the chamber to organize the Miss Lawndale Pageant, the Youth Day Parade and Santa Claus booth at Christmas. The remaining $33,600 of the city’s allocation comes from a 25% surcharge on business licenses.

No Right

Chamber officials have argued that the city does not have a right to cut off the money because the $25,000 is for specific services and the remainder is merely collected by the city for the chamber.

“The city should not be involved unless the chamber is not doing what you are paying it to do,” Douglas Beaver, a former chamber president, told the council last week.

Former City Councilman James Ramsey, who lost his seat earlier this year when he unsuccessfully challenged Mayor Sarann Kruse, was more blunt: “When you get down to it, it’s none of your business.”

Councilman Rudolph disagrees. “If they are taking money from us then we’ve got something to say.”

Officials in other South Bay chambers said that depending on the city for the majority of a chamber’s annual budget is dangerous.

“When you become too dependent on city funds, they can take it away just as quickly as they give it to you,” said Ernie O’Dell, executive director of the Redondo Beach chamber. The Redondo Beach chamber has a service contract with the city that makes up about 20% of its total budget.

“A city council is likely to be more concerned in an organization that relies so heavily on city funds,” said Robert Seitz, executive director of the Torrance Area Chamber of Commerce. The chamber’s contract with the city provides $41,000, about 7% of the chamber’s total annual budget.

“In essence, it becomes like a city organization,” Seitz said. “If I was sitting on the City Council I would take an interest in them. Of course, I think what the Lawndale City Council did was a drastic measure.”

Business Surcharge

Trudy Smart, manager of the Manhattan Beach chamber, which receives half its annual budget from the city through a surcharge on business licenses, acknowledged that the city could discontinue the practice abruptly.

She said that though she does not expect that to happen, her group will attempt to provide more business-related activities to attract more dues-paying members.

Robert Baird, a Palos Verdes Peninsula real estate agent who is president of the South Bay Assn. of Chambers of Commerce, a group of 19 chambers from the Los Angeles International Airport area to Long Beach, said cities should provide some support for chambers without expecting to control them.

“It is in the city’s best interest to have a healthy business climate,” he said. “There are many organizations that receive financial support from the city that the city does not have any control over. The chamber should not be controlled by the city either.”

David E. Simon, an attorney who is president of the Hawthorne chamber, said a chamber’s primary function is to promote the businesses of the community. However, if a chamber is to be effective, he said, it has to work in partnership with the city.

“There is a fine line between whether our activities are for the community or for businesses,” he said. “Merchants want people to stay here to shop at their stores so you have to develop a pride in the community.”

He said chambers, however, will have to narrow their focus on business activities if they expect to become less dependent on city subsidies or contracts and increase membership.

Average Dues

“Business people have to watch their bottom line financially and they want to know what they will be getting for paying their membership dues,” Simon said, noting that dues in Hawthorne average about $125 a year.

In El Segundo, the chamber has not received city money in three years. Wesley D. Bush, the chamber’s general manager, said that in 1983 the city was having financial problems and that rather than add to them, the chamber decided not to ask for any more money.

The chamber had already begun to wean itself from city support, going from about $30,000 in city money about eight years ago to $15,000 three years ago, when the city subsidy made up about 20% of the chamber’s budget.

The city and chamber divided up community activities, such as the annual fireworks show and the Christmas parade, which had been run by the chamber.

Bush, however, acknowledges that El Segundo was able to do that because of its strong business base. He said that of the city’s 700 businesses, about 550 are chamber members, providing an annual budget of about $175,000.

Bush agrees that chamber must become more business-oriented if they expect to attract more members.

“The days are just about over when you can just put on dog-and-pony shows,” said Bush, who has worked for chambers for 35 years. “Chambers are realizing that’s not their main purpose. They’re starting to leave the hyping to the service clubs.”

The Torrance chamber has been moving toward a more business-oriented focus for the past several years. Torrance, with more than 7,000 businesses--many of those national headquarters--does not have to rely on city subsidies or contracts.

Annual Dues

The Torrance chamber’s Seitz said annual dues range from about $200 for a small business to about $10,000 for a large company such as Mobil Oil, which operates a refinery in the city. This year’s budget is about $600,000.

Seitz said three-hour business seminars are held monthly, prominent speakers are brought to breakfast and lunch meetings and updates on pending legislation affecting business are provided in chamber publications, including a glossy, four-color quarterly magazine.

“Chambers are recognizing that they need to try to get back to financing their programs through their membership,” he said. “To do that, we have to show the business people they are getting a return for their investment.”

BUDGETS FOR CHAMBERS OF COMMERCE:

1986-87 Budget City Contribution Carson $81,021 none Catalina 318,807 60,000 El Segundo 175,300 none Gardena 144,500 30,000 Hawthorne 106,280 20,000 Hermosa Beach 150,000 none Inglewood-Airport Area 140,000 none Lawndale 88,600 58,600 Lomita *40,000 20,000 Manhattan Beach 104,000 56,000 Redondo Beach 204,450 **42,450 Torrance 600,000 **41,300 Westchester-LAX 140,000 none San Pedro unavailable unavailable Wilmington ***50,000 none Peninsula *58,000 Palos Verdes Estates none Rancho Palos Verdes 1,000 Rolling Hills none Rolling Hills Estates 6,000 Los Angeles 4,000,000 none

*1985-86 budget **Service contract with the city ***Estimate Source: chambers of commerce