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Chambers of Commerce: Do they deserve taxpayer money?

Published March 28, 2009 4:00 pm

The subsidy gap » Some Salt Lake Valley cities kick in lots of cash; others contribute little or none.
This is an archived article that was published on sltrib.com in 2009, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Year after year, then-South Salt Lake Mayor Wes Losser penciled a zero into his budget for the city's Chamber of Commerce.

Erasing government's contribution to the chamber was a bit extreme, Losser now concedes, but he wanted to make the point that entrepreneurs, not taxpayers, should support the business association.

Although Losser slimmed down the city's contribution for a spell -- the City Council always restored some funding -- the South Salt Lake Chamber now receives $50,000 a year from the city, plus free office space, making it one of the valley's sweetest government deals for chambers of commerce.

"Obscene is the word for it," Losser grouses.

South Salt Lake isn't alone in pumping tens of thousands of government greenbacks into a chamber, although its sum seems surprisingly steep compared with the neighboring capital city. Salt Lake City donates the same annual amount to the much-larger Salt Lake Chamber, which represents six times as many businesses and eight times as many residents.

Similar payments are made in West Jordan ($60,000), in South Jordan ($40,000) and in Draper ($35,000), where business backers insist such government payments are propping up economic development, increasing sales-tax dollars and sustaining businesses in a drooping economy.

"If we're able to help the businesses become stronger and stay here and be profitable," says former Councilwoman Stacey Liddiard, president and CEO of the South Salt Lake Chamber, "it will ultimately mean more revenue to the city."

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Chambers' role debated » But some cities offer no financial handouts to their chambers. It's a policy position that Midvale staked years ago to make its business coalition self-sustaining.

So do some governments pay too much? Do others kick in too little? And what role should public entities play in supporting organizations whose purpose is to advance private-business interests?

Those questions continue to wriggle into government-finance discussions across the Wasatch Front.

In South Salt Lake, for instance, Councilman Shane Siwik is urging colleagues to cut the city's chamber contribution to $12,000 or less. But it would take an unlikely reversal for a council that not only accepted Mayor Bob Gray's budget recommendation of $25,000 last year, but also doubled it.

In Taylorsville, officials are negotiating a contract with Chamber West that would offer the business alliance more money, but require specific services. The $6,000 contract would represent a considerable increase from the $353 that Taylorsville paid last year.

And, in South Jordan, the chamber announced this month that it no longer will seek a city subsidy. Instead, the business group will work out a fee-for-service contract to assist in economic development and business promotion.

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Scrapping subsidies » Before this latest funding twist, South Jordan's chamber enjoyed one of the valley's most lucrative government handouts, according to a Salt Lake Tribune analysis. In fact, taxpayers provided 44 percent of the chamber's budget.

Despite that financial footing, the chamber is struggling.

With 182 members, the South Jordan Chamber of Commerce is one of the valley's smallest business associations. Only Magna and a chamber serving Riverton, Herriman and Bluffdale are smaller. Yet the city contributed $40,000 to the group last year. That's more money than allocated by any valley city except Salt Lake City, South Salt Lake and West Jordan.

But times are changing. South Jordan no longer provides free office space and, for several years, has reduced its subsidy by $5,000 annually.

Those changes -- combined with the chamber's small membership and high overhead -- left it in a financial lurch. The association posted a $17,000 deficit last year, spurring officials to assemble an emergency task force this month to figure out how to stabilize the organization.

The result: The chamber eliminated its full-time president and CEO, temporarily suspended its scholarship program, ordered a re-evaluation of its events and determined that it should pursue a fee-for-service contract with South Jordan instead of its historic annual subsidy.

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Paying for results » The goal is to make the chamber self-sustaining, according to acting President Paul Pugmire, a former County Council candidate who is shepherding the reforms as the association's unpaid executive.

"We are very willing, eager and desirous to work on behalf of the community -- and be paid for it -- with performance measures and accountability and reportability," he says. "We don't want a subsidy."

Chambers are inking contracts elsewhere in the valley, most notably in West Valley City and Taylorsville. There, Chamber West is working out agreements that will increase government funding, but also will require a laundry list of services ranging from conducting small-business workshops to arranging site visits with major employers.

The valley's highest-dollar contributor to a chamber, West Jordan, also allocates its money by contract.

So what might these chambers offer? A unified voice for the business community, for one thing. But chambers also supply training for small businesses, publish business directories and promotional materials, sponsor community events such as fireworks shows and parades to pump up foot traffic for businesses, provide policy perspectives as members of government boards and serve as welcome wagons for new businesses that desire a ribbon-cutting or a shout-out on a chamber Web site.

The South Jordan chamber's advertising arm is what lured Sheila Cramer, owner of Academy of Ballet Arts, to the business alliance early this year. With a new studio in South Jordan, she hoped to get her name out on the street.

So for a $230 membership, Cramer was offered a ribbon-cutting, an ad in the newspaper, her name on the chamber's Web site and networking opportunities through regular luncheons.

"I joined because I thought it would grow my business," she says. "It doesn't seem like it's too expensive if it helps."

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An independent voice? » Still, some chambers shy away from the government dole, fearing too much taxpayer support could erode their independence.

That's the case for Chamber East, which serves business communities in Midvale, Cottonwood Heights, Sugar House and Millcreek Township. The association has survived -- and thrived -- for more than two decades with nominal government funding.

It wasn't always that way. Midvale once subsidized the organization. But the chamber became too dependent on public funding, leading officials to wipe out the contribution.

"What we found was the only money that was going into the chamber was what the city was putting in," Midvale Mayor JoAnn Seghini says. "We felt, at that time, to have an effective chamber, it certainly should be at least a shared expense with the city and not totally supported by the city."

Today, the chamber has 400 members and 2.5 full-time staffers.

"It had to be sustainable by the business owners, which gives businesses a stronger voice," Chamber President and CEO Marie Marshall says. "We're completely independent."

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Blurring the public-private divide » The Utah Taxpayers Association worries that chamber independence is being sacrificed in places such as Draper and West Jordan, which rely on government funds for 35 percent and 26 percent of their budgets, respectively.

How can the business community speak out against a government-supported tax increase, Taxpayer's Association Vice President Royce Van Tassell asks, if it has to fret about losing a deep-pocketed contributor?

"We have always been an independent voice," insists Craig Dearing, president and CEO of the West Jordan Chamber. He says government funding never has factored into his chamber's policy positions. The city is like any other member, he says, "we have to agree to disagree."

So where should government draw that fuzzy line between public funds and private enterprise?

Jack Brittain, dean of the University of Utah's business school, says government's interest in promoting economic development and bolstering small business can work in tandem with chambers of commerce. But he suggests a clear delineation of duties and transparency about how taxpayer funds are spent.

"These could be highly symbiotic relationships," he says, "where the chamber benefits from the city's support and the city benefits from chamber support."

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