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April 9, 2020

While helping biz through crisis, struggling chambers left out of stimulus funding pool

By Michael C. Bingham

Since the coronavirus hit with full force a month ago, local and regional chambers of commerce throughout Connecticut have scrambled to reinvent themselves and their mission on the fly to reflect the reality of the economic shutdown.

After “non-essential” businesses statewide were shut down by Gov. Ned Lamont’s executive order in mid-March, many chambers refocused their efforts to “100-percent business support — of members and non-members alike,” said Garrett Sheehan, president of the Greater New Haven Chamber of Commerce. That meant throwing their member companies a lifeline for survival.

Now the chambers themselves are the ones that need help.

As their own business members are facing unprecedented economic pressures, chambers too are feeling the pain. Membership dues, which can account for one-half or more of chamber revenues, have in many cases slowed to a trickle, especially from small companies whose own revenue streams have run dry. Big-ticket money-making events like annual meetings, expos and awards shindigs are on hold indefinitely.

And while many of their member businesses scramble to access hastily crafted stimulus lifelines like the U.S. Small Business Administration’s (SBA) $350 billion Paycheck Protection Program (PPP) and Economic Injury Disaster-Relief Loans (EIDL), chambers themselves are in many cases left out in the cold.

Under the U.S tax code, chambers of commerce are 501(c)(6) non-charitable non-profit organizations. Significantly, 501(c)(6) were not deemed eligible under the hastily drafted legislation that produced the Paycheck Protection Program last month. (The difference between these entities and the better known 501(c)(3) designation is that donations to the latter group are tax-deductible, while gifts to the former are not.)

“We were told that 501(c)(6)s were cut out of the CARES [federal Coronavirus Aid, Relief & Economic Security] Act with the exception of being able to apply for the EIDL loans,” explained Lynn G. Ward, president of the Waterbury Regional Chamber and also president of the Connecticut Association of Chamber of Commerce Executives. “Now we’re being told that they’re looking at chamber applications for those loans and considering us as ‘marketing coops’ and they are denying those applications.”

Moraima Gutierrez of the Connecticut district SBA confirmed in an e-mail Thursday morning that 501(c)(6) organizations “are ineligible to apply.” However, she added, “Some chambers are structured as 501(c)(3)s,” which would qualify them to apply.

Even as chambers try to help their members access dollars to keep their doors open, the business groups are themselves suffocating. Many have laid off staff, while looking for once-unthinkable ways to pare costs. Or worse: On March 31 the half century-year-old Business Council of Fairfield County closed the doors of its Stamford headquarters for good, laying off its staff of nine.

“Right now we are servicing our 1,000 members remotely,” said Ward of the Waterbury chamber. “But we are now at the point that we have to reduce staffing [from 11 to six] because we’re not going to be able to hold events for a long time. I have an executive committee meeting today and I’m going to be showing them a plan to reduce our overhead to compensate for no event income and a reduction of membership dues by 30 percent of where we were last year.

“We are going to be providing as much service as we can with a skeleton crew,” she added.

Many smaller municipal chambers have one or at most two staff members — so the options to pare costs are limited.

“Chambers are being hit really hard because a lot of our revenue — 50 percent or more — comes from events,” agreed Sheri Cote, president of the Shoreline Chamber of Commerce, which represents some 650 companies in Branford, North Branford and Guilford. Cote has already laid off two of her staff of six, with another open position going unfilled at least for now. “When you take the events away, our revenue is impacted hugely.

“Then you have your members, who are either out of business temporarily [e.g., restaurants, health clubs] or struggling to maintain their normal business,” Cote added. “So your membership dues are in question.”

Nancy Dudchik, president of the Hamden Regional Chamber, is more succinct: The exclusion of business groups from federal stimulus packages is “truly horrible,” she said, “business-crushing.”

The ‘glue’ comes unglued?

“The frustration is mounting,” added Bill Purcell, president of the Greater Valley Chamber of Commerce, which represents some 500 member businesses between Beacon Falls and Shelton, many of which depend on the chamber for information, advocacy and collective action during an unprecedented economic emergency. “We’re the glue that holds it together,” Purcell added.

“We’ve all had to make [economic] adjustments — every chamber across the state,” said Purcell. “We’re going through the same thing our business members are going through. We’re all in the same boat.”

Since the COVID crisis hit with full force last month, many chambers have filled the programming and service breech with weekly or even daily webinars offering much-needed information to members as well as a welcome opportunity to connect, albeit virtually, with other human beings outside the prison walls of their own living-rooms.

“Almost overnight, we’ve had to execute: We’ve done things in two weeks that might have taken a year to get going,” said New Haven’s Sheehan, whose chamber moved rapidly and aggressively to fill the programming void with informational webinars and virtual meetings with elected officials that take place almost every weekday. The GNHCC has even experimented with streaming “networking” get-togethers.

“Our interactive webinars are here to stay, we’re using more video and unique platforms to communicate like a new texting service,” Sheehan added. “Now we’re planning to turn some of our events into virtual affairs [permanently], and more if we cannot have large gatherings this fall.”

And even when the pandemic recedes and the business climate normalizes — it’s certain to reflect a new normal. 

Ward is skeptical that, even after most business people have returned to working in office environments, they’ll want to attend large events.

“We don’t believe that will open the floodgates for people to want to go to an event with 400 people in the room — or even 100,” she said. “Will people be able and willing to network in person? Are they going to have the budgets to go to events, or to sponsor and market their companies through the chamber?”

It’s a prospect that seems more likely by the day — even as the COVID curve begins to flatten in hotspots like New York City. There’s Just one problem with substituting webinars for seminars, workshops and networking soirées — they generate no revenue from participants. At least for now.

Hope for ‘Phase 4’?

The issue goes beyond Connecticut to impact the 62,000 or so chambers and other 501(c)(6) business and professional associations nationwide. 

“It’s a big blow to all of us because it doesn’t show the respect for the chamber of commerce industry that is so respected, successful and depended-on for businesses,” said CACCE head Ward.

According to a letter sent this Wednesday by Tom Sink, president of the Concord, N.H. Chamber of Commerce to fellow members of the New England Association of Chamber of Commerce Executives, “Chambers have been shut out of receiving funds through the CARES act Payroll Protection Plan, and now there is some indication that chambers may not be eligible for the EIDL grants.” It urges other NEACCE members to sign and circulate a petition imploring administration and congressional leaders to support 501(c)(6) organizations in the next COVID-19 aid package.

In addition, groups like the U.S. Chamber of Commerce and the American Association of Chamber of Commerce Executives have petitioned Congress to make non-profit business-advocacy groups eligible for federal stimulus dollars.

For now the chambers are hoping that a much-discussed fourth phase of federal stimulus funding will bring 501(c)(6) groups into the fold.

“We think there’s a window of opportunity now to include the chambers, and recognize the value that chambers provide to their communities,” said Purcell.

“We are lobbying heavily to be in the next [stimulus] package,” said Ward. “But there’s no guarantee on that.

But it had better happen soon.

“It’s not going to be pretty in a month or two, many of us will not be here anymore,” said the Hamden chamber’s Dudchik. “If the federal government doesn’t wake up and realize we are not lobbyists and opens funding, we won’t survive.”

Dudchik

For others, at least, hope springs eternal.

““We expect to come out of this stronger than ever,” said the New Haven chamber’s Sheehan. “We are using this time to work on long-term projects and make more connections with the entire business community.”

“It’s ironic that the organizations [chambers] that are going to help businesses during this time to come out of this are the organizations that they’re hurting the most,” Ward said. “It makes no sense.”

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