The Role of the Chamber

What is the role of a Chamber of Commerce in a community?

A reader sent me the following in response to my post over the weekend about the most recent campaign finance violation by the Scottsdale Area Chamber of Commerce:

The Chamber of Commerce is most effective when it’s politically neutral. Down the middle. The Scottsdale Chamber…has become a purely political tool, which explains why it is such a non-player when it comes to real issues that impact business development and sustaining/supporting the local business community.

I couldn’t agree more.

This triggered the question in my mind about the role of a Chamber of Commerce in a community and in the politics thereof. Like all good journalists (I’m making fun of myself here, so don’t feel like you have to chime in) I consulted the oracle of journalism research: Wikipedia. Funny thing, they’ve got a great article on Chambers of Commerce, but there’s not a single use in it of the word “politics.”

Most chambers of commerce are organized under the IRS designation of  “501c6,” which is for “business leagues.”  The IRS circular on business leagues further describes chambers of commerce as “non-profit,” and says,

…They direct their efforts at promoting the common economic interests of all [emphasis added] commercial enterprises in a trade or community…

I had to broaden my research out to the world-wide web via Google to turn up an Indianapolis Business Journal article that talks about the ever-increasing political activities of chambers of commerce around the country.

Scottsdale Area Chamber of Commerce

I don’t know all the history behind the Scottsdale Area Chamber of Commerce (and welcome your comments, clarifications, and corrections), but I understand the Chamber used to enjoy an even more cozy (but above board) relationship with Scottsdale city government. Their offices were in a city-owned building (the Little Red Schoolhouse, I believe) for little or no rent, and functioned much like our Convention and Visitors Bureau does today in marketing Scottsdale and leveraging our tourist appeal to ensure prosperity and high quality of living for residents…which has a positive circular influence on tourist appeal, and so on.

However, a decade or more ago the Chamber decided (actually WHO decided is something else) it was going to become more active in promoting a political agenda, including endorsing and supporting candidates for Scottsdale City Council. That meant that it would have to sever formal ties with city government in order to avoid the Arizona State Constitution’s “gift clause,” and avoid campaign finance violations that would ensue from taxpayer funds or resources being used to support certain candidates over others. So, the Chamber moved out of their cozy, charming digs and into a new office north of Camelback.

I don’t know when the practice started of the City paying dues to the Chamber in order to be “a member,” but I know when it stopped. Not long after Jim Lane got elected as mayor in spite of an enormously expensive campaign effort by the Chamber to oppose him, the city council voted to stop giving taxpayer funds to the Chamber. It was a big fight, with strong opposition from the Chamber caucus on the city council, but it was absolutely the right thing to do. Taxpayer money and resources should not be used to support organizations that do political lobbying or endorse candidates.

I believe the primary motivation for the Scottsdale Area Chamber’s shift to political lobbying and campaigning was driven by two big-money interests: Scottsdale Healthcare and housing-boom-fueled real estate development.

Scottsdale Healthcare is the largest employer in the city. Most of their employees do not live in Scottsdale so they don’t represent much of a voter base. However, SHC brings in a ton of money (their CEO Tom Sadvary earns about a million dollars a year) and they occupy two campuses on very significant pieces of real estate, at Osborn and Drinkwater, and at Shea and 92nd Street.

Those campuses were just granted enormous zoning concessions for height and density by Mayor Lane and our City Council. I have great concern about the impact of these concessions on traffic and quality of life for residents who live in those areas, and who transit those areas. However, these concessions were financial windfalls for SHC. With the new density entitlements, the value of their real estate instantly doubled (or more). They can leverage that value to borrow vast sums of money, and have even talked of speculative ventures for their property including captive hotels and condos for patients and their families, executives, visitors, etc.

Development interests are the second big driver for the Chamber’s political shift. The housing boom drove up property values all over the country, and especially here in the Valley of the Sun. Our real estate was under-valued for a long time, and local/state politicians have not been careful in controlling development as it tries to take advantage. This has resulted in several cycles of boom-and-bust, including the commercial real estate disaster in the 80s, and now with the more recent housing crisis.

The very thing that traditionally set Scottsdale apart from other Valley communities–more carefully controlled growth–has also made it an evermore tempting target for big developers. When the ratio between potential profit and property values pushed uphill to a tipping point, the Chamber was the only organized lobbying group in town. Developers (and SHC falls into that description now) became the major funding source for the Chamber, and developers don’t care about long-term success of a community. Their job is to make money now.

In the process of shifting to becoming a developer-funded political lobbying tool, the Scottsdale Area Chamber of Commerce began to neglect its small business members. The “SACoC” or “Area Chamber” still has some pretty good business-to-business mixers, other “business connect” type events, business education forums, and recruiting drives. These fulfill the first three legs of it’s new mantra: “Connect, Learn, Grow, Influence.” However, the big money is on that last category.

North Scottsdale Chamber of Commerce

With Area Chamber’s neglect of its smaller members, and the Downtown geo-centricity of their focus, businesses north of Shea Boulevard, in the Scottsdale Airpark, and areas above that formed and have been flocking to the North Scottsdale Chamber of Commerce. The “North” Chamber just celebrated it’s 5th anniversary, and it is going strong.

I’d like to close this rather lengthy diatribe with a couple of thoughts:

  1. A lot of the discussions in Scottsdale politics lately revolve around “what’s good for business.” I submit to you that the discussion ought to be about, “What’s good for business long-term.” Real estate development is just one of many businesses in Scottsdale. Its focus is transactional, which is by definition short-term.
  2. What’s good for business in the long-term is also good for the community and the residents in the long-term. I’m not talking the bottom line next fiscal quarter. I’m talking about the bottom line in the next quarter century. This brings us to the concept of “sustainability.”

Sustainability is a word that is used a lot these days  and many times the users don’t really understand what it means. Obviously, it has different meanings depending on context, but for this discussion I think it means this: Continuing to improve the quality of life of Scottsdale’s residents by keeping taxes low, property values high, and growing the community character and amenities that accomplish those things.

Development doesn’t cause prosperity for a community, it is only a symptom of prosperity. Keeping growth in check, ensuring that it fits the context of the community, and that it meets high standards are the only way it can help us sustain what makes Scottsdale special.

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