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Chamber Executive Article Archive

Capital Campaigns

By Chris Mead

ACCE’s Horizon Initiative report, which identifies the eight influences that will shape chambers over the coming decade, encourages chamber professionals to think beyond the next mixer and focus on transformative issues like education, economic and workforce development and transportation. Yet it’s hard to act on a transformational agenda without the funding to back it up. The special pushes known as capital campaigns or multiyear funding campaigns are one means by which chambers have accomplished things far beyond the ordinary run of chamber business.

A Brief History
Almost since the first chamber in North America was founded in 1768 in New York, members have pooled their money for special purposes. For example, chambers in the nineteenth century would scrape together money to attract conventions or fairs or to encourage railroad companies to put a stop in their communities. Buildings, too, were fair game. In New York, for example, the chamber erected a building in 1902 that still exists today, at 65 Liberty Street in lower Manhattan. (Today it’s the office of a Taiwanese bank.)

Atlanta became the epicenter for these campaigns in the twentieth century. The Forward Atlanta campaign of 1926–29 was a response to the real estate boom in Florida and the desire to capture some of that business for the Georgia city. The Atlanta Chamber raised $668,000, primarily for the placement of advertisements in northern newspapers touting low costs of the South and the business climate of Atlanta specifically. Soon Nabisco, Chevrolet and other companies had arrived, giving Atlanta a leg up on its aspiration to become the business capital of the South.

The Great Depression caused a hiatus in the Forward Atlanta effort, but it relaunched in the 1960s, again with a push to market the community. This time the leader of the campaign was Ivan Allen Jr., chair of the chamber, and son of Ivan Allen Sr., who was an active board member of the chamber during the Forward Atlanta campaign of the 1920s. Other chambers followed suit.

These fundraising efforts tended to be spontaneous, however, not systematic. That changed in the 1970s when a young membership staffer at the Atlanta Chamber came up with the concept of a sustained campaign, separate from the chamber’s standard membership work, aimed at a community purpose. A typical campaign would raise pledges that would cover a program over a three-, four-, or five-year period. Organizers would start with a “feasibility study,” questioning key potential investors to see if they liked and expected to back the campaign. If the tea leaves were good, the campaign would proceed.

This young man was named Howard Benson. The firm he started in 1977, National Community Development Services (NCDS), continues today to provide capital campaign consulting services. NCDS has raised more than $1.7 billion for communities, with chambers as often as not the lead organizations for these local efforts.

In 1983, a fundraiser for the University of Notre Dame, Tom Suddes, set up a new company, The Suddes Group, which began to help with chamber and economic development projects as well. Suddes pioneered the idea of having professionals intimately involved in direct solicitation.

The influence of both companies extended far beyond them. They set the tone for more ambitious fundraising for economic and community development. And some of their employees went on to found other firms. In fact, virtually every company in the field today can trace its roots to either NCDS or The Suddes Group.

In 2016, ACCE created its Capital Campaign Council, made up initially of four leading companies serving chambers today: NCDS, Resource Development Group, Funding Solutions and POWER 10 Capital Campaigns. This report includes comments from top executives of each of those firms as well as from chamber executives.

Today’s Landscape
Just how big a market is there for chamber-led fundraising campaigns? Tom Mucks from Funding Solutions, Inc. estimates that there are 50 or more chamber-led capital campaigns per year. Some yield less than $5 million, but others are larger than $10 million. And the occasional campaign raises $20 million or more. Without the benefit of an extensive study, we can comfortably conclude the combined annual amount is in excess of $100 million per year.

Another way to see how broad this field has become is to look at the leading metro markets. Rob Radcliff, principal at Resource Development Group, specializes in these communities. Recently he studied 53 of the largest urban markets, with SMSA totals of one million or more people. Of them, 43 had large chambers or separate economic development organizations that raised significant private money in focused campaigns for regional economic development. (Some of the largest markets tackle regional economic development another way, through major public agencies such as the City of Chicago or the Port Authority of New York and New Jersey.)

The minimum size for a campaign? Mucks believes that a campaign that raises less than $100,000 per year is too expensive for the cost of raising the funds. Most fundraisers agree that a typical full-service campaign will cost $150,000 to $200,000, not varying much on the size of the campaign. It would not sit well with investors to spend $150,000 or $200,000 to raise $500,000. It is possible, however, for a chamber to consider a lower-cost mix of a professional fundraiser aided by a team of volunteers to take on smaller fundraising projects.

At the same time, small communities can have large campaigns. The chamber in Alexander City, Ala. (population 15,000), raised $1 million. The chamber in Madison, S.D. (population 6,500), raised $2 million. Big campaigns and big ideas can come from small places. Imagine a chamber with a budget of $150,000 that suddenly has $600,000 or $700,000 and can do things never dreamed of before. These kinds of stories have caused campaigns to spread from place to place, especially across the South, Midwest and Rocky Mountains.

Indeed, while the current chamber capital campaign market may be something like $100 million or more annually, the potential market is much larger, according to POWER 10’s CEO Sean Mikula. “Every chamber should be doing that,” he says. He notes that each year, some chambers try capital campaigns for the first time. Very few of them abandon those programs when it’s time to do another round.

There are things to avoid with capital campaigns. Above all, don’t try to raise new money to do old tasks more comfortably.

What to Fund
Not long ago, a chamber executive told a capital campaign consultant that she’d like to raise funds to landscape the outside of the chamber building and move furniture from the first floor up to an upper floor. Needless to say, the consultant wasn’t optimistic about investor response to those projects.

There are things to avoid with capital campaigns. Above all, don’t try to raise new money to do old tasks more comfortably. Capital campaigns are for special projects. Never should someone say, "We need more money. What about this [campaign]?"

RDG’s Rob Radcliff indicates, "If a campaign is seen as just another revenue stream, it can only succeed one time." Investors will realize their money was squandered on overhead and unmeasured results and they won’t re-invest.

If the campaign succeeds in achieving its programmatic goals (1,000 new jobs, better test scores, or whatever the objectives might be), the campaign should get the credit: the value add that comes from the extra dollars invested needs to be highlighted as something above and beyond what the chamber otherwise would have been able to accomplish. Otherwise, Radcliff says, it’s hard to convince the investors to pitch in for any follow-up campaigns down the road. The chamber should be "crisp" about the extra value for the extra money, rather than just lumping it into everything else the chamber does.

Tom DiFiore, president of NCDS, puts it another way. “It’s not about the money,” he says. “It’s about change.” Are the investors getting the change they want?

And the change shouldn’t be vague; it needs to be measurable. And it must be focused.

It’s natural for a community to want a dozen or 20 projects completed, especially when a new source of funds – the chamber’s capital campaign – appears. But this is a mistake, as it’s best to focus on doing just four or five things well, Tom Mucks says. It’s impossible to do 20 things perfectly on any budget. No CEO can stay on top of all of those deliverables.

Organizational Reinvention
A capital campaign, if handled correctly, can change everything. An example is what Jason El Koubi and his team have done at One Acadiana in Louisiana (formerly the Greater Lafayette Chamber of Commerce). El Koubi saw that his region was the third largest economic area in the state but lacked a distinct identity. What would it take to provide that identity? At the start, a strong and well-funded business organization, handling both chamber and economic development work, would be the key. One Acadiana raised a phenomenal $15 million to make this happen.

"Where we are today far exceeds the wildest dreams of all involved," El Koubi said. The old chamber had eight staff; One Acadiana has 20 and may grow to 24. One Acadiana looks beyond Lafayette to a nine-parish region comprising 680,000 people. It’s poised to make the region a hotbed of economic growth and a place where people want to come and raise their families. El Koubi said he had seen a similar process happen when he worked under Stephen Moret at the Baton Rouge Area Chamber of Commerce. (Moret has since moved on to become the president of the LSU Foundation.) In both cases, an ambitious attempt at economic revitalization started with an equally ambitious attempt to raise funds.

Marc Jordan, CCE, president and CEO of the North Myrtle Beach Chamber of Commerce and Convention & Visitors Bureau in South Carolina, began a capital campaign under limiting circumstances: a population of fewer than 20,000 people and no large companies. How do you raise economic development funding from a business base dominated by restaurants, t-shirt shops and beach hotels? But he succeeded, in part by taking a member’s suggestion of putting on a $1-per-night voluntary surcharge on hotel bills. The result? The chamber raised $3.2 million for a five-year program of work, a program that has comprised nearly every major achievement of the chamber over that period. The campaign united the business community for the first time and created a private-sector driven culture that didn’t exist before. It’s also helped the chamber stake a leadership position in regional and state public affairs that it didn’t have previously.

Going It Alone
More and more engagements of capital campaign consultants are for precisely that – consulting. Feasibility studies for the market in a community, always a part of fundraising, have become more common, Radcliff says. He’s also asked to do governance work, to advise on the type of structure that would best allow a chamber to deliver strong results for the money invested in a campaign. In addition, chambers are volunteering to do more work on a campaign in return for paying less to the consultant. No longer are capital campaigns – if they ever were – one size fits all.

And there are plenty of local chamber executives who feel confident enough to raise big money on their own. Says, Radcliff, “by far our biggest competitor is, 'Let's do it ourselves.”

One example of a successful chamber fundraiser is Ron Bunch, CEcD, president and CEO of the Bowling Green Area Chamber of Commerce in Kentucky. From the 2009 ACCE convention in Raleigh, where the late Dr. Stephen Covey spoke, Bunch learned about “The Leader in Me” program in schools. Over 18 months, Bunch raised $1.4 million to put the program in all the schools in the county. This was the first time in the country that the teachings had been installed in an entire county’s K-12 system.

Another executive doing it on his own is George Swift, president and CEO of the Southwest Louisiana Chamber-Economic Development Alliance in Lake Charles, La. He used a company for his first campaign but plans to do the second one, for $4.5 million, on his own in partnership with his chamber colleague Avon Knowlton. If he faces a problem, it’s that things are too good. Thanks to the area’s liquefied natural gas industry, relatively immune to the downturn in the rest of the energy industry, local planned business investment is $97 billion, the highest in the nation. Some people think, “If things are this good, what do I need the chamber for?” Yet growth brings needs with it just as recession does.

Chris Hembrough, president of the chamber in Springfield, Ill., is raising between $4 million and $5 million for the chamber’s next five-year campaign. By May 2016, after only five months, he was already up to $3.3 million in pledges. He knows all the people to ask, having raised money for a local charity in a previous job. Hembrough told his board, “Why pay someone else to talk to the people we already know?”

These and others run capital campaigns on their own. Usually, however, a chamber will not attempt a campaign unless it has previous experience with a consultant. Doing a funding push without any education is difficult and can lead to disappointing results.

One reason consultants are so prevalent in the field is that their cost is relatively low compared to the funds brought in. The industry guideline is that the consultant costs should not exceed 10 or 15 percent of the total money raised (although for smaller campaigns with a goal of, say, $1 million, the consultant’s percentage might necessarily be higher).

In larger communities and larger campaigns, the consultant’s price becomes proportionately very low. Imagine an $8 million campaign for which the consultant’s fee is $250,000. That means that the consultant receives just over three percent of the money raised.

Opportunity Costs
As consultants are quick to point out, the do-it-yourself model can be expensive for some chambers. One way is in foregone income. Note the example above, in which the consultant raised $8 million. Now, imagine that the chamber CEO attempts the same campaign, but without much training in fundraising of this magnitude. Perhaps he or she will raise $6.5 million – still a great sum, but quite a bit less than what the consultant was able to obtain: net after the consultant’s fees, a total of $7.75 million. By going it alone, the chamber has left $1.25 million on the table.

There’s also the opportunity cost of the chamber work that does not get done while the chamber executive and senior staff are raising the money. If the chamber’s important work is being put aside, there could be problems that detract from the promise of the campaign.

Finally, there is the cost of the staff time used to raise money. Rarely do chambers account for the cost of this time. There’s a decent probability that the expense of this time may exceed what the consultant’s fees would have been.

Economic Development Fits
It would take thousands of words to detail all the advantages and disadvantages of running business attraction and other “core” economic development activities through a chamber of commerce vs. a separate organization. To be brief: the chief benefit most often cited for a separate economic development organization is its relative ease of accepting government funds. For chambers, which are tasked sometimes with criticizing government, it can occasionally be difficult to bite the hand that feeds it with program funding and/or incentives.

But hundreds of chambers have found a way to blend public and private funding for economic development and maintain a robust advocacy program. And these chambers can play on the numerous advantages of chambers in economic development, chiefly that they know business.

Neither of these structures (chamber-led or standalone economic development) is perfect, which explains why hundreds of communities cycle between one and the other, in a “grass is greener” process of organizational realignment that ACCE’s Mick Fleming diagramed in his civic “circle of life.”

All this matters because whichever organization is tasked with the lead role in local economic development is most likely to be the one in charge of fundraising campaigns. When the chamber’s in charge, it must represent not only its members but the entire community. For example, if part of the economic development work involves business retention, the chamber and/or its affiliated economic development group must work to keep all major employers in town, not just those that have joined the chamber. This may sound obvious, but it can be a difficult adjustment for many chamber employees, who are used to providing services to chamber members only.

Tom DiFiore, president of NCDS, says he finds the combination of a chamber and an affiliated economic development organization to be the ideal client. A standalone economic development organization can be mostly “transaction-oriented” – aiming specifically at getting deals done to grow local jobs and investment. That’s a valuable role, but when combined with the chamber, something extra can emerge. Chambers can embody vision. Their broadly representative nature, in which any business person can join and participate in some way, makes it possible to project a credible view of the community’s future. This inspiration is the stuff of campaigns.

What if a chamber does not have the lead role in local economic development? There can still be opportunities to engage in imaginative and important projects that do not conflict with the local economic development group’s activities.

An excellent example is the Santa Rosa Chamber of Commerce in California. This chamber is accustomed to thinking big and creatively, having started in 1922 the process to erect the world famous Golden Gate Bridge. A couple of years ago, the chamber embarked on a successful $2.5 million, four-year capital campaign, according to Tammi Matthias, the organization’s vice president of development at the time. To differentiate the chamber from the Sonoma County Economic Development Board, the capital campaign focused on supporting the local food and technology sectors, two key growth clusters with strong existing players. With the first campaign having shown fruitful results, the chamber plans to begin another when the initial campaign has run its course.

One consultant notes that trends in economic development are favoring more chamber involvement. When the hottest activity was business attraction, separate economic development organizations were the logical homes for multiyear funding campaigns. Now that activities centered on existing industry support – talent and workforce development, business retention and entrepreneurial activity – are in greater demand, so are the chambers that are by their nature reasonably well equipped to handle them.

Money flows toward the organization that is seen as the one that gets things done. This is a rule of civic life that Rob Radcliff emphasized. The ostensible mission of an organization is less important to investors than its perceived competence. Investors seek deeds. Whether you’re called a chamber or an economic development organization or something else – can you take $1 million or more and make your community stronger and better?

Who Invests?
In the past, banks and utility companies led the charge on most economic development campaigns. Many still do. But deregulation and consolidation in both the banking and energy industries have taken their toll on local giving in many cases.

Tom DiFiore of NCDS says that increasingly hospitals and other health-related institutions have climbed to the top of the ladder. These institutions often have deep local roots; many cannot move and must make the best of their communities. Some of them have difficulty attracting doctors and nurses to town. Making the town or city more welcoming and pleasant to live in thus becomes a key goal of these medical service providers and they’re willing to contribute to economic development campaigns that share the same goal.

POWER 10’s Sean Mikula says nontraditional donors are sources worth exploring, too. Of the $350 billion given to 501(c)(3) organizations per year, only five percent comes from businesses, he indicates. Families, private individuals, and foundations offer an immense source of opportunity, especially for community-related causes such as education and placemaking. Perhaps a family won’t fund the plan as a whole but might pay for a distinct part of it, such as the beautification of a part of downtown.

Filling the Need
Capital campaigns are behind many chamber achievements. If the past fruits of these campaigns could somehow be plucked out of the physical landscape, most cities would not look the same. Private funding has been the catalyst for countless public dreams.

Not every chamber conducts a capital campaign or similar fundraising push. When another organization in the community is already raising money for economic development or related purposes, it can be disruptive if not antagonistic for a chamber to attempt to duplicate the feat. But when there’s a need the chamber is uniquely equipped to fill, one that can’t be handled in the day-to-day course of chamber management, starting a capital campaign can be the right decision.

It’s hard to tell what’s achievable without exploring the options. What ideas excite local business people? What’s a deep-seated problem of the community that executives might pay to tackle? Somebody needs to have the initiative to find out what’s important and who is willing to do something about it. Paul Laskowski, executive vice president of the St. Joseph County Chamber of Commerce in South Bend, Ind., explains one of the keys to the financial and programmatic success of his chamber over the years: “We’ve never been afraid to ask.”

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