Several local chambers of commerce aim to offset stagnant or shrinking revenue from membership rolls by forming nonprofit affiliates that allow them to seek more funding and carry out a broader array of programs.

The trend has taken hold as membership for the 50 largest chambers in Los Angeles County fell for the second straight year, down roughly 1.5 percent compared with 2017, according to the Business Journal’s annual list ranking chambers by budget size (see page 11). The top 50 chambers combined registered a 2 percent drop in members last year.

Membership isn’t down across the board: 20 chambers reported declines in members on this year’s list, 18 were flat year to year, and 12 reported increases.

Yet only one of the chambers reporting an increase in members had a double-digit percentage gain: the Glendale Chamber of Commerce, which added 73 members for a gain of 10.4 percent.

We’ve had a lot of new businesses open in the city as new mixed-use developments have come online over the past couple years, and we’ve been able to recruit a substantial number of those to the chamber,” said Judee Kendall, chief executive of the Glendale chamber.

Glendale was an exception as most chambers either held steady or reported drops in members.

“A lot of smaller and newer businesses simply aren’t joining chambers,” said Pamela Kissel, chief executive of the Calabasas Chamber of Commerce, which reported a 20 percent drop in members, the largest on the list.

The slight drop in membership overall did not correspond to a drop in chamber budgets, which rose a cumulative 4 percent this year compared to 2017. One reason for the increase − membership dues rose at many chambers.

The Los Angeles Area Chamber of Commerce remained atop the list with the largest budget of $14 million, up from $13.2 million last year, despite a 3 percent decrease in members to 1,600. New Chief Executive Maria Salinas took the helm at the Los Angeles chamber in August from longtime predecessor Gary Toebben, who retired in June.

New status

Higher membership dues help offset some of the declines in membership, and several organizations have gone a step further with nonprofit affiliates, which allow them to seek outside funds and expand the range of services they offer – and also require a different structure.

Most chambers have traditionally sought 501(c)(6) nonprofit status under the Internal Revenue Service code, which is the designation for business associations that provide services for their member companies. The vast majority of funding for 501(c)(6) organizations comes from dues paid by members.

The dues are not tax deductible, however, which limits the ability of chambers to substantially raise membership fees. (Chambers can and do tap corporations and members for greater sums for event-related sponsorships.)

At least two local chambers – the Burbank Chamber of Commerce and the Pasadena Chamber – have formed 501(c)(3) affiliates in the past couple of years. The designation of the affiliates denotes charities that serve segments of the general population. The Long Beach Area Chamber of Commerce, meanwhile, is considering reactivating a long-dormant affiliate.

Having a 501(c)(3) designation allows an organization to seek unlimited funding from outside sources, including government agencies, private foundations and major corporations. Such donations are considered tax deductible for the contributors.

The Burbank chamber is looking to use its 501(c)(3) to obtain outside funds to set up business assistance and retention programs for that city’s general business population, according to Chief Executive Tom Flavin. He said the move earlier this year came after two successive updates of membership rolls that removed roughly one-fourth of the businesses. He added that many businesses trimmed from the rolls simply stopped paying their dues while others either closed down or moved outside the city.

“If this is happening in good economic times, we don’t think the current chamber business model of a 501(c)(6) nonprofit is viable long-term,” Flavin said. “So we’ve got to look for new sources of funding.”

He said the chamber’s 501(c)(3) affiliate will seek greater funding from companies within Burbank, where Walt Disney Co. is the biggest corporate presence, and grant funding from government agencies and private foundations. The money will go toward business assistance and retention services that can be used by all city businesses, regardless of whether they are chamber members.

Some business retention services are offered by the city of Burbank and the Los Angeles County Economic Development Corp., but there is no central location for businesses in Burbank to turn to, Flavin said.

“It’s all about providing value to the business community,” he said. “If providing value means helping them resolve parking, housing or code-enforcement issues, that’s what we should be doing,” he said.

Pasadena placement program

The chamber in nearby Pasadena set up its 501(c)(3) affiliate about a year ago, so it could continue to provide a workforce development program it had been operating with the Pasadena Unified School District through a four-year state grant. The program provides job training and placement services to PUSD students.

Pasadena chamber Chief Executive Paul Little said in an email the grant funding is due to run out next year.

“We wanted to create a means to fund these ongoing efforts because the initiative is important and we can see the impact it has on students, even in this short period of time,” he said. 

Forming the affiliate allows the chamber to seek funds from major corporations; Wells Fargo & Co. has been among the initial contributors.

The Greater San Fernando Valley Chamber of Commerce also received a contract to run a job placement program, but that chamber’s Chief Executive Nancy Hoffman Vanyek declined to provide further details, including whether the contract came through a 501(c)(3) affiliate.