Lincoln/Logan County Chamber board president explains financial dilemma

[December 27, 2017] 

LINCOLN

On Thursday, December 21st, the Lincoln/Logan County Chamber of Commerce Board hosted a meeting for the membership to try to explain what happened that forced the Chamber to lay off all staff and close its doors. The Chamber board decided on November 15th to shut down the offices of the Chamber and take a step back to evaluate its financial situation and determine how to move forward.

On Thursday evening, Board President Greg Basford led the 90-minute discussion with a group of about 60 people, all Chamber members, at the Elks Lodge in Lincoln.

He opened by saying that over the years mistakes have been made that hurt the Chamber. He said the actions of the boards involved had been with the best of intentions, but those mistakes were now playing a role in the financial mess the Chamber is in. He said first, the board wanted to tell the membership “we are sorry it has gotten to this point.”

He said the problem didn’t happen overnight, it had taken a number of years. He said that the board knows there is a loss of confidence in the Chamber, and also a loss of trust.

Basford said the Chamber is in existence to serve its membership. It relies solely on the payment of membership dues to survive, but had been trying to do so on an “unsustainable financial model.”

Basford said it was now time for the board to face the brutal facts of the situation, and figure out how to move forward.

He explained that since the formation and dissolution of the Alliance, the membership had been declining. He said the Alliance, while it may have been a good idea, came with “bad karma.” It was not supported by the membership or the public, and it was not properly executed. He punctuated the comment saying that the Alliance was created by “good people trying to do the right thing.” However, it failed.

Basford said that the Chamber Board has spent the past several weeks trying to understand what happened, and how to recreate the Chamber. He said that the board feels the Chamber is worth having and asked, “Is anyone else advocating for business?”

Some of the issues that brought the Chamber to the breaking point included holding unsuccessful events. He noted that the Lincoln Balloon Festival had been a money drain more often than it had been profitable. With the decline in membership and the change in the membership tier structure, the organization on the whole had been “dramatically underfunded.” Basford said this had left the staff in the position of spending their time trying to figure out how to pay the bills instead of serving the membership.

Basford talked about the new membership tier structure that had been implemented a few years ago. The idea had been good and at the time made a good deal of sense. The theory had been to offer a tiered structure with a variety of services. The services offered automatically with membership would depend on the level of membership a business chose. There would also be an Ala Carte menu of services offered to every member at additional costs.

The hope had been that with the choice of services, a member business would buy more and that would drive up the revenue to counter balance or even exceed the dollars lost by offering less expensive membership dues.

What really happened was that members took advantage of the lower cost dues, and did not make ala carte purchases. Basford said the Chamber now has about 237 members. Of those 80 percent had chosen a membership level of $350 or less. Of that 80 percent, half were paying in only at the $100 level. The gross revenue from memberships was not enough to support the Chamber.

Basford also talked about the layoffs. He said that the membership structure included membership renewals scattered throughout the year. In September the renewals dried up and there were zero dollars to pay staff. The board had no choice, they couldn’t keep staff with no way to pay them, so all three; Cathy Wilhite, Kari Adams, and Tina Rusk had to be let go.

Basford said the number of staff at the Chamber was also an issue. The board had researched other Chambers and found that for a county the size of Logan, one full time person with possibly a second part-time person was all that was really needed.

Basford said moving forward, if the Chamber can re-open, there will be only one employee. He said there would not be a “Chamber President,” but just one person in an administrative position.

In the new structure, as it is outlined now by the board, there will be a greater focus on “value added” services such as customer service trainings, business development programs and other educational opportunities.

The new structure will maintain the Leadership Academy, the Annual Chamber Golf Outing, Business Afterhours events, and other business networking opportunities.

The new Chamber will pursue the legislative affairs component and will host political forums.

The board will also investigate and utilize State and National Chamber resources.

Basford said what it will not do, is get involved in anything that should be considered tourist promotion. This equates to the Chamber is bowing out of all local festivals including the Up in Smoke BBQ/Pigs & Swigs, and the Balloon Festival.

Research of other Chambers also resulted in the board finding that most Chambers set the due date for membership fees to occur all at one time, such as at the first of the calendar year. This way, he said those Chambers collect all the money they can count on in a year at one time, and they budget according to the cash they have on hand.

Basford said what the board is facing now is a “mountain of debt” that it has deal with. The debt is largely due to losses from the Balloon Festival. He also said that the past Leadership Academy events had been “under sponsored.”

Basford was asked how big that mountain of debt actually was. He said it was roughly $80,000.

Darin Powell questioned the loss of money. He said that when he was on the board in 2011, the Chamber had a net cash reserve of $126,000. He wanted to know how the Chamber lost the $126K plus another $80K in six years.

Basford said that was a question the board was not yet able to answer. Frankly, they didn’t know the exact places where the money was lost.

Powell said that he was hard pressed to support the Chamber now, until they could tell him what happened to all that money.

Other questions were posed as to how the board could not know where the money had gone.

Sal Pollice, also a member of the board, said that the board was given figures that they assumed were correct, but they were not. He said there had been a compounding effect of several things that led to the Chamber being in this position. It was noted that one error they had found already was an issue with Chamber Bucks. It was noted that in 2009 Chamber Bucks had been “moved” in the wrong manner.

Questions arose about the audits, and the request from the Lincoln City Council for an independent third party audit.

Pollice again spoke saying that the audits had been done, and even so, the board could not tell the membership what exactly happened to the money.

Sarah Faith of Stewart Solutions said that she agreed with Powell, the Chamber has to tell the membership where that money was lost, if they expect the membership to support them in the future.

Basford also noted that there had been some accounting issues and there was a four to five month period when the financial records could not be reconciled. Basford went on to say that indeed the membership deserved to have answers to their questions about the money.

Patrick Doolin said that the Chamber needed to hire someone to figure it all out. He wen `1t on later to suggest that the Chamber hire a third party for a complete audit. He suggested that in 45 days, the board come back with reconciled numbers and a ‘clear picture” of what happened. He said then the membership would have a better foundation for its decisions.

Doolin also felt that the board had to present a plan that will have value to the members. He said, “If we don’t see value in the Chamber, then we are just spinning our wheels.”

Many in the room agreed with Doolin, and the board said they would take action to get that third party audit and bring a clear picture back to the membership.

Shawn Taylor asked about the Chamber Bucks that local businesses are now holding. There are many businesses that had accepted Chamber Bucks, but did not get them turned into the Chamber and cashed out before the organization closed its doors. Basford said for now, businesses should just hold on to the Chamber Bucks.

Karen Hargis asked if the Chamber could form a 501(c)3, not for profit component so as to accept charitable donations that can be tax deductible. Currently the Chamber is a 501(c)6, which cannot accept charitable donations. Basford said that was already in the works.

Michelle Bauer, who was at the meeting as a local business owner and Chamber member, went back to the value of the Chamber. She wondered if the board should conduct some type of survey to ask members what they consider to be of value.

Chamber Board member Doug Luken said that also was already in the works. The Board is drafting a survey for the membership asking them what they want and need from their Chamber.

Asked what the Chamber needed immediately to start coming out of this mess, Basford confirmed that there needs to be an influx of money. The proposed request is that the membership pay its 2018 dues immediately, regardless of when they might be due in the course of the year. This will give the Chamber operating cash to move forward.

There is also a need for new board members. Basford said there was a need for five new board members for 2018.

In addition, the Chamber has to move out of its current offices by December 31st. Basford said they have no place to go yet, so there are office items that need to be stored. If anyone could help with that it would be greatly appreciated.

Basford added that the board is looking for a new location, smaller and as inexpensive as possible.

Lincoln City Treasurer, Chuck Conzo, asked another question about the Chamber Bucks. He wanted to know of the $80,000 needed, how many dollars of that was in outstanding Chamber Bucks? Basford estimated about $15,000.

Chamber bucks are purchased at the Chamber office, many times by local employers to give as gifts, or local folks who try to support buying local by utilizing Chamber Bucks instead of gift cards or cash. Then, once given, the bearers can use the Chamber Bucks at any time within an extended period. Many times Chamber Bucks will be good for multiple years. These outstanding bucks have been paid for by the buyers, but are currently not usable by the bearers. If the Chamber is able to rebuild itself, the outstanding Chamber bucks are part of the debt payout.

Basford also noted that the board had contacted an attorney as soon as they discovered the financial dilemma. They had been advised to pay the essential bills and let everything else go. Essential bills included the Chamber storage spaces, credit cards, and utilities including internet. Basford had explained that the utilities with internet were essential because the Chamber uses a web based program called Chamber Master, and the board needed to be able to utilize that program.

Other topics discussed included that the board is looking at how to restructure the membership fees so that the dues will still be within reason for the membership, but at the same time add to the cash flow of the organization.

During much of the evening, Basford struggled with the embarrassment of the situation. He apologized on behalf of the board for the situation the Chamber was in, and said it had been a very difficult thing for the board to face. He said that now, they wanted to be honest with the membership and lay it all out there for the members to see and to know where the organization is at the moment.

He continued to state throughout the evening, that the role of a Chamber is very important, as the Chamber is the advocate for local business, and that is needed very much. He said that the thought of bankruptcy had been difficult, he said he didn’t know what bankruptcy would like for a Chamber, but what he did know was that it wasn’t something the board wanted to do.

Basford said the board had contacted many of the unpaid vendors, and the creditors in general had understood the situation and said they would be patient and wait for the board to come up with a viable plan for debt reduction.

At the end of the night, Doolin offered a thank you to Basford and the board saying he knew the evening had been a difficult one for the board and particularly for Basford who had been in the hot seat all evening.

The final result of the evening is that the Chamber is still closed. The board will hire a third party auditor and will come back with answers to the questions of where the money went. Beyond that the future of the Chamber is still uncertain.

[Nila Smith]