As Chamber Seeks Footing, City Ponders Biz Boost

For the past eight years, Kathy Severson has spent this Valentine’s Day week up to her eyeballs in last-minute details for the ’s annual dinner, its biggest fundraising event of the year.

That stress pales in comparison to the limbo Severson faces right now.

The chamber’s longtime chief executive has been on furlough for the past six weeks, a product of the organization’s money woes. It missed its financial targets for the latter part of 2010, owed Severson back pay and its board of directors put Severson on indefinite furlough to avoid hemorrhaging more money.

“My heart and soul has been in that job,” said Severson, a 26-year resident of Mill Valley. “It’s more than a job, it’s part of my identity and it’s very hard to detach. It’s not like I ever really wanted to leave.”

While Severson struggles with uncertainty, chamber and city officials are searching for the road ahead. Many say the chamber’s woes provide an opportunity to rethink the broader issues around the city’s business climate and the chamber’s role in that effort.

In an economy that continues to flounder, there are a number of questions on everyone’s mind: What is the best way to promote the city’s economic vitality? What are the roles of the chamber and City Hall in that strategy? And who the heck is going to pay for it, and how?

Just a few months ago, the San Francisco Giants were , and City Councilman Garry Lion, a longtime member of the Mill Valley Chamber of Commerce’s board of directors, was feeling pretty good about the chamber’s prospects. New City Manager Jim McCann from Calistoga, where he strengthened ties between City Hall and the chamber, and he intended to do the same here.

Severson felt the same way and was quite impressed by McCann's interest in forging strong ties between the city and the chamber.

But the euphoria around the Giants’ run wasn’t a blessing for the chamber. The organization’s annual , one of its three major fundraising events for the year along with the annual dinner and the in June, was held on Oct. 28, the same day the Giants blew out the Texas Rangers 9-0 to take a commanding 2-0 lead in the World Series. The Bay Area was riveted, diverting attention from the business expo, and it fell nearly $6,000 short of expectations.

Given the razor thin margins under which the chamber operates, as well as lagging new memberships and renewals, paying the bills became a concern, particularly payroll, and the chamber’s line of credit was maxed out. By the end of 2010, Severson was being furloughed and the chamber’s office manager, Denise Meehan, was taking a leave to battle illness. The chamber is currently being staffed sporadically by volunteers.

The chamber’s annual budget of approximately $200,000 comes from a variety of sources but leans heaviest on annual membership dues and the aforementioned trio of events. Even the slightest dip from one of the sources spelled trouble.

“This was not rocket science,” said Steve Bajor, a member of the chamber’s board. “We were out of money.”

Membership dues had lagged, and unfortunately for the chamber, its membership base didn’t have far to fall, as it has hovered at around 350 of the city's approximately 2,400 licensed businesses, a large portion of which are contractors and freelancers.

The subsequent turmoil hasn’t exactly bolstered confidence in members up for renewal in 2011, with as many as 30 percent of members choosing not to renew yet.

“I’ll pay my dues once the chamber figures out what they’re going to be doing,” said Denise Carletta, co-owner of . “A lot of us are simply waiting to see what’s going to happen.”

Larry “the Hat” Lautzker, owner of on Throckmorton, said the chamber suffers from a chicken-and-egg conundrum.

“Without the membership, the chamber doesn’t have any money to do anything,” he said. “But if it doesn't have the revenue, it’s hard to get people to join by proving your worth.”

“I don’t think it’s going to improve anytime soon,” Bajor said of the low membership rate. “Right now, it’s a face-to-face thing. We’re talking to people who haven’t re-upped.”

The recent turmoil isn’t the first time it has hit hard times financially. In March 2009, Severson asked the city for $10,000 so it could meet its monthly financial obligations, citing lapses in membership renewal payments, loss of some chamber event sponsorships and low revenue from the annual dinner.

The City Council gave the chamber the money in exchange for sponsorship of events and other programs, but the organization is on bad footing again two years later.

In short, no. Chambers have been hit hard by the economic downturn, with a similar problem of trying to attract new members but not having the membership revenue to do the kinds of things that attract new members. In January, the Antioch Chamber of Commerce laid off its longtime chief executive officer because of continued revenue decline.

Bajor has said he would like to see the city dedicate some of its annual revenue from the transient occupancy tax (TOT), the tax added onto every hotel bill in town, directly to the chamber.

In Novato, for instance, 15 percent of the chamber of commerce’s annual budget comes from TOT money, but 70 percent of that approximately $95,000 a year isn’t used for operations but goes straight to marketing and advertising of Novato as a tourist destination.

But Mill Valley does little to promote itself as a destination, and its TOT revenue goes to the general fund. Bajor said he would like to see that change. Although it has declined in recent years, Mill Valley’s TOT revenue remains a decent revenue source, bringing in $471,443 in 2006-2007, $481,786 in 2007-2008, $400,943 in 2008-2009 and $374,248 in 2009-2010.

“The city is not overly excited about giving up any money that is going into the general fund,” Bajor said. “It’s one of these balancing acts and there just isn’t any money anywhere.”

The City of Mill Valley doesn’t contribute any money out of its General Fund to the chamber directly, but it does fund it indirectly in several ways. First, the chamber has facilitated the city’s employee parking sticker program, selling as many as 245 permits at $60 per permit twice a year. The maximum amount of annual revenue the chamber could possibly generate from the program is $29,400, but with store closings and a small employee base downtown, the number has been close to $15,000 in recent years, according to Severson.

The city also allows the chamber free use of the tiny office in the city-owned building that also houses the , and provides occasional support for events like .

But that’s a far cry from sending TOT money to the chamber, for example, and at its annual retreat in late January, the City Council didn’t seem anxious to change that course.

“We already put a good amount of money into the chamber,” said Councilwoman Stephanie Moulton-Peters. “We should talk about how to leverage that money better.”

Bajor insists the chamber board is optimistic about the organization’s future.

“We have to be clear to the business community,” he said. “We are still very much a functioning organization.”

Bajor said the chamber board has been reinvigorated by the turbulence.

“There’s a good thing about crises in that people tend to rally and support each other,” he said. “That’s what’s happening here.”

The board has also agreed to rotate leadership on a monthly basis, with Bajor taking the helm this month. Stan Gassman of BSC Sustainability Services ceded the chairman’s role at the end of 2010 and the board didn’t elect a new chairman, Bajor said.

“We were a headless organization for whatever the reason,” he said. “This new arrangement is unusual but it’s a cool way to get everybody some in-depth experience at managing the chamber.”

Bajor said the chamber hopes to be in the black by June and have some sort of paid staffing that month, though he said it was too early to say who that will be or how it will be structured.

Lion noted that chamber’s short-term problems are a hurdle to any long-term fix. Without Severson to spearhead the annual dinner this weekend, for instance, its postponement leaves the chamber without its largest annual fundraiser of the year.

“That would’ve help restore the chamber back to health,” Lion said.

While Bajor and the chamber board map out a comeback, city officials are examining the bigger issue of the city’s economic vitality and how the chamber fits into it. The Business Advisory Board (BAB), which arose from the city’s business task force in 2010, made a splash with several campaigns, including the (RSVP), which has sold more than 2,500 permits that let 94941 residents park in a metered parking spot for free for two hours in an attempt to boost local business.

The BAB, which had a one-time budgetary allotment of $35,000, also coordinated a guerilla marketing campaign for the Fall Arts Festival and built a Facebook page that has garnered more than 300 active users.

“The business community is looking for a sense of where the council wants to go,” Reynolds said. “However we proceed, there has to be some participation on the city’s part.”

The council directed McCann to work with Reynolds and a representative from the chamber in crafting an economic vitality plan for the city for 2011 and beyond. The report will outline a number of options and possible ways to pay for them, and will be delivered to the council at a special meeting within the next few months.

“There is great value in the work you have done,” Moulton-Peters told Reynolds. “We need to keep the relationships and campaigns going.”

One option that has made the rounds a number of times over the years is a business improvement district (BID), in which every business within the district pays a fee and revenue being spent directly on things like promotional events. 

“That would probably be the most attractive right now,” Lion said, citing the success of the BID in downtown San Rafael. “We would propose how it would be organized and what the assessment would be.”

The draw of a BID is that the annual fee for each business would be much lower than a chamber membership, for instance, because all businesses within that district would be assessed.

Whereas a chamber membership starts at $225 a year, fees for a BID would be assessed on every business within that district, so the per-business fee would far less, Lion said.

The biggest question for a BID would be structure. Would it apply to all four of the city’s commercial areas, or just to downtown? And if included areas like Miller Ave., how would city officials ensure that the needs and expectations of each distinct area were met?

It’s clear that while there is plenty of interest on economic vitality among merchants and city officials, but there remain more questions than answers. One of those questions is the future of the chamber itself.

“We can’t not have a chamber,” Carletta said. “It just needs to be restructured. I think Kathy is fantastic. But it can’t be a one-person show.”

Although her ties to any future iteration of the chamber are very much in question, Severson agreed.

“I still believe that the chamber is a vital part of the community,” Severson said. “But I have a very personal reason to feel that way. I believe in it.”

Mark Essman, chief executive of the Marin Convention and Visitors Bureau, said all parties involved need to be willing to embrace change in an economy that demands it.

“To a lot of people that have been around a long time, change is a bad word,” he said. “But with the economy the way it is now, either you change or you go away, and that’s what’s happened here.”