The Redondo Beach Chamber of Commerce and Visitor’s Bureau and the more than $600,000 in annual funding it receives from the City of Redondo Beach came under intense fire Tuesday night as the City Council reexamined its contract with the Chamber.
But every major hotelier in the city and several small business owners filled council chambers and offered a passionate defense of the Chamber, fending off any immediate action to terminate the contract.
“I came here to make a motion to cancel the contract,” said Councilman Bill Brand. “I wasn’t expecting this kind of support.”
At issue was the long standing agreement between the City and the Chamber for the funding of the Visitor’s Bureau. The contract, first established 27 years ago, gave the Chamber a tenth of the city’s Transit Occupancy Tax (the TOT, or “bed tax” on hotel stays) in order to promote the city as a tourism destination through the Visitor’s Bureau.
City Attorney Mike Webb, at the request of Councilman Steve Sammarco, prepared a report on the history of the contract. Webb said that in the 1970s and 1980s, the city paid the Chamber on a strictly fee-for-service basis for some of its promotional activities. But in 1990 hotel operators came forward with a proposal to increase the TOT tax they paid from 9 to 10 percent, with the increased revenues all allocated towards the establishment of the Visitor’s Bureau. The City backed the proposal, increased the TOT, and that agreement has continued since. In 2005, when the TOT was increased from 10 to 12 percent, the Chamber also received increased funding, Webb noted, as its 1 percent allocation effectively became 1.2 percent.
Other aspects have also significantly changed in recent years. With the building of three new hotels along the Marine Avenue corridor, TOT revenues have dramatically increased, from $3.7 million in 2012-2013 to $4.3 million in 2014-15; the city’s payments to the Chamber increased from $369,314 to $591,749 in that timespan.
“We saw hotels opening and [TOT] increased recently,” Brand said. “That is partly why this came under scrutiny, because it started to be a lot of money. It’s now going to be $700,000, and it’s going to be a lot more.”
Additionally, the city waives roughly $30,000 in fees for signature Chamber events, such as the Lobster Festival and the Super Bowl 10k, providing police, fire, and public works staffing at no cost.
The Chamber has also grown more aggressive in its political advocacy efforts. Its newsletter has long staked out political positions, but in recent years the Chamber’s political action committee has increasingly backed local candidates. Last year, the PAC contributed $28,000 in independent expenditures toward candidate Christian Horvath, who was subsequently elected to the council.
“The reality is we are having this conversation because of the Chamber PAC,” Horvath said at Tuesday’s meeting.
The Chamber has long contended that its political activities are entirely separate from the promotional work it does on behalf of the City; the funds it receives from the TOT tax represent about a third, or 34 percent, of its overall budget. Most of its funding derives from member dues and events.
Chamber CEO Marna Smeltzer said that the financial relationship with the city is not that uncommon, citing a survey of chamber of commerces in Western U.S. states indicating 56 percent had similar ties with their cities.
“This is not unusual,” she said.
Smeltzer also emphasized that the revenue is essentially a self-tax by hoteliers.
“Residents to not pay into this tax,” she said.
Resident Donna Rae disputed Smeltzer’s arguments. She said she’d surveyed 10 area chamber of commerces, including Hermosa, Manhattan, Huntington Beach, Playa del Rey, and Newport Beach, and most derived no income from their cities. Brand noted the only nearby chamber that is paid by its city is Torrance’s, which he said receives about $40,000 annually.
“What you do here is unusual,” Rae said. “You may have done this forever, but it’s not what happens up and down the coast.”
Rae also argued that the city is ethically remiss in that it should not only avoid conflicts of interest but all appearances of such conflicts.
“If the money was not going to subsidize the Chamber, the money would be going to the general fund used for police officers, firefighters….So to suggest the money going to the chamber is not my money, is not the citizens’ money, is I think a mistaken notion,” Rae told the council. “You are the stewards of my money, and my trust.”
Hoteliers emphatically argued that the money has been well spent — that, in fact, the increasing TOT revenue is in no small part due to the effectiveness of the promotional work the Chamber does. Representatives from Crowne Plaza, Best Western, the Portofino, Shade Redondo, Redondo Beach Hotel, and the three hotels on Marine Avenue all said that the Chamber’s work has been essential to their success.
Rebecca Elder, an area director for Noble House Hotels, which owns the Portofino, said the Chamber has very directly brought the hotel increased business, strategizing to attract more airline crews as a “baseline business” and getting Redondo promotional magazines on board flights. She said the Visitor Bureau website, VisitRedondo.com, has become one of the top internet sources for bookings locally — and that the site, unlike Expedia and other hotel deal aggregators, takes no commission. Portofino general manager Duane Rohrbaugh said that VisitRedondo.com direct bookings to the hotel have seen a big uptick, going from 348 in 2014 to 809 a year ago.
“I fully support the Chamber and I hope everyone makes the right decision,” Rohrbaugh said.
Several business owners likewise credited the Chamber for their success. Jessica Ibarra, the owner of A Basq Kitchen, said the restaurant located in Redondo partly due to built-in benefits of having a Visitor’s Bureau so effectively marketing the area.
“It’s because of them we are such a success,” she said. “As soon as we opened, they were helping book events in our space. Right away, I was invited onto the tourism board, to actually sit as a member…I was amazed because it’s really transparent how the money is being used, and they are very open to other suggestions for how it is best used.”
John Gran, head of the North Redondo Beach Business Association, said that if the Visitor’s Bureau wasn’t promoting the city as a tourist destination, the city would need to contract somebody else — and few marketing professionals, he noted, would know the lay of the land the way the Chamber does.
“This is probably the best bang for the buck as far as putting in the money and promoting Redondo Beach,” Gran said.
Todd Loewenstein, a former school board member and current candidate for City Council, argued that relationship essentially amounts to a public agency funding a private enterprise through taxpayer dollars through a “no bid” contract.
“This is a private organization that has almost $1.5 million in assets in the bank,” he said. “No other city in the area funds their chamber of commerce to this extent…All this is at a time we lack crossing guards to protect our kids.”
Resident Eugene Solomon suggested the matter represented a violation of government code in that public funds go toward private political purposes. He further argued that the Chamber is in breach of its contract with the city by contracting out some of the promotional work without city approval.
“I’m sorry, the Chamber can do great things, but this is utterly broken,” Solomon said. “If something is broken, you fix it, or replace it with something better.”
The council appeared sympathetic to both the criticisms and defenses of its relationship with the Chamber. Councilwoman Laura Emdee said the timing was apt, as the contract ends in June.
“Thank you, Mr. Sammarco, for bringing this up, so we can start a conversation now, so we can have a robust contract for June,” Emdee said, making a motion to receive and file. “Because all we can do is do better together.”
Mayor Steve Aspel noted that the city realizes savings in having the Chamber responsible for an economic development position that formerly was city staff. But he also agreed that the existing contract could be improved. He said capping city payments to the Chamber may be an option.
“Contracts are meant to be renegotiated,” he said.
Brand said one requirement going forward, if he were to continue to support the city contracting with the Chamber, is that the PAC be disbanded.
“This is not about ending the Chamber of Commerce by any means,” Brand said. “But it does require a very hard look.”
