Chamber Head: Financial Troubles Past

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First of two parts

The Newport Beach Chamber of Commerce has been around in one form or another for more than 100 years, making it one of the city’s oldest businesses, albeit a not-for-profit one.

It is also one of the city’s most high-profile organizations, annually staging both the Taste of Newport and the Christmas Boat Parade and deeply involved in city politics.

But now, critics citing continuing financial problems are focusing a more critical spotlight on the chamber and questioning its ability to survive.

The Independent undertook a review of the Newport Beach Chamber’s financial health by obtaining the organization’s IRS filings, known as 990s, for the fiscal years 2008, 2009 and 2010. Although not required to pay taxes as a 501(c)(3) organization, the Chamber and other nonprofits do have to file the 990s, showing sources and amounts of income and types and amounts of expenditures.

The Chamber has yet to file a Form 990 for 2011, so that information is not yet available.

The picture these financial documents paint of the current financial health of the Chamber is far from robust.  Simply put, the Chamber has been losing money for at least the past three years straight.  And losing it in large amounts. According to the IRS documents, the chamber lost just under $142,000 dollars in fiscal year 2010. In 2009 and 2008 the numbers were similar.

Critics cite these and other figures and claim the Chamber’s very existence may be in jeopardy due to financial troubles and mismanagement by the group’s key players.

Chamber officials on the other hand say that, despite financial difficulties in recent years brought on by the recession and old financial arrangements that were harming the Chamber, they have taken the steps necessary to survive for the foreseeable future.

Richard Luehrs, the president and CEO of the Newport Beach Chamber of Commerce, acknowledged last week that the Chamber has been “slipping the last couple of years due to the economy,” but insisted that the chamber has restructured its finances and eliminated the prime causes of his organization’s financial problems.

He says anyone predicting the financial demise of the Chamber doesn’t know what they are talking about.

Leuhrs explained that Chamber’s primary financial problem was a nearly four-decade-old land lease that the group was locked into until last year on the building it owned and occupies at the corner of Jamboree Road and Santa Barbara Street, at the entrance to Newport Center.

Although the chamber owned the building where it is housed, it did not own the land. The land lease, initially owned by the Irvine Company, was later sold to a third-party investor. The lease according to Leuhrs had a binding clause allowing a “market rate” increase in 1999. Leuhrs said this increase caused a massive, 10-fold spike in the chamber’s lease payments.

Then, in the economic downturn, office rental rates for the building itself – a key source of income for the chamber – dropped dramatically.
Leuhrs said that an agreement reached last year with the landholder relieved the Chamber of that financial burden.

Meanwhile, Leuhrs says, the Chamber has been experiencing a decline in revenue at least for the past five years, with membership falling “in 2007 from 1,000 or so to little over 700 today.”

That loss of revenue, according to Leuhrs, also had a dramatic effect on the chamber’s bottom line.

The Chamber’s 990 forms show that revenue from memberships has hovered right around $350,000 annually since 2008.

But Leuhrs told the Independent that this year he is seeing a surge of new members joining the Chamber.

“We have signed up about 30 new members,” he said.

When asked to comment on reports of disarray and imminent financial collapse at the Chamber, Leuhrs scoffed at that notion with a polite chuckle.

Leuhrs said the organization is making the needed changes, and is looking to partner with Visit Newport Beach Inc. a for-profit marketing organization that promotes the city of Newport Beach.

“We have been and continue to be in discussion with them,” Leuhrs said.”We had a meeting last week and have one coming up this week.”

When asked about whether or not the Chamber was considering selling the Christmas Boat Parade to Visit Newport Beach, as has been reported, Leuhrs wouldn’t comment directly, saying the discussions between the two organizations are private.

Gary Sherwin, the president and CEO of Visit Newport Beach, declined to be interviewed for this report.

Another source familiar with the discussions, who is not authorized to speak in behalf of Visit Newport and so did not want to be named publicly, said that an offer of $100,000 dollars had been made to the Chamber for the Boat Parade, but “the Chamber wanted a million dollars” so the two groups did not come to an agreement.

Next week: This year’s Taste of Newport, its impact on the financial stability of the Chamber, and the Chamber’s evolving relationship with the city of Newport Beach.

 

 

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