NAMC’s 2016 Public Policy Update

There appears to be growing public perception that nonprofits acquire excessive overhead – administrative operating and other costs not directly spent on client services – even though for-profit overhead cost is typically about 35% vs. 12% compared to 14% for nonprofits, according to Nancy Berlin of California Association of Nonprofits

Berlin was a panelist earlier this month for NAMC's annual Public Policy Update which was attended by 28 nonprofit leaders at the Monterey County Bar Association offices.

Nonprofits provide about one million jobs in California, Berlin added, and generate about 15% of the gross product for the state.

She urged everyone to know how to justify their overhead costs. Nonprofits have to do a better job of promoting their message and explaining the cost of the work they do. This can help with getting contracts, as well as setting norms and best practices. She noted that the Charity Navigator Icon, which may be on your website, reinforces ranking nonprofits by overhead as a percentage of cost. It is much better to focus on accomplishments, which directs attention to the value of your work.

She noted that, according to federal regulations, you can claim a 10% indirect cost rate or share documentation if actual costs are higher, and negotiate for a higher rate. There are OME guidelines for indirect costs. Many people think 10% is the ceiling for overhead when, in reality, it is the floor. There is a need for training in how to best allocate and recoup overhead costs. CalNonprofits offers such trainings, including webinars. Its “Overhead Project” helps nonprofits effectively explain and account for their overhead.

Nancy discussed CalNonprofits’ opposition to Assembly Bill 2855, currently in Appropriations, which would require a link to a nonprofit’s 990, in 14 point type, on every page of a nonprofit’s website, and a link to the Attorney General’s report card on all fundraising communications, including flyers, websites, letters, etc. Over 800 organizations have opposed this bill, including NAMC. This bill would not increase transparency; however, it would create extra work for nonprofits. She said, “The fact that people feel these types of bills are necessary indicates we have more work to do in promoting our messages and how we pay to provide the good work we do.  Cal Nonprofits is looking at this issue and will talk more about details of how to do a better job in the fall.” To learn more, and to keep updated on this bill’s status, see this Fact Sheet on CalNonprofits’ website.

One important way we can work together is to ‘Vote Your Mission’: encourage staff, leaders, volunteers, donors, and constituents to vote. Nancy provided 2 buttons for us to share; one says “I work at a nonprofit and I vote” and the other says “I volunteer at a nonprofit and I vote.” She encouraged us to visit the CalNonprofits website to find other tools and suggestions.

Bill Kamp, Mayor of Pacific Grove, spoke about fees and taxes levied by cities, and Barbara Meister, Public Affairs Director at Monterey Bay Aquarium discussed the admissions tax proposed by the Pacific Grove City Council. Mayor Kamp said that the City of Pacific Grove is a kind of non-profit.

· It is required to have a balanced budget

· It has a mission.

· It provides public safety, a library, City infrastructure, etc.

· It is governed by a charter, articles of incorporation, etc.

· It has enterprise activities

· It seeks grant funding and also delivers services for a fee

· It can receive bequests

He said that Pacific Grove needs to increase revenues for the long-term success of the city. Those can come from real estate and business license fees, increasing transient occupancy taxes, or an entertainment admissions tax. He noted that there is a cap on sales and property taxes and most taxes have to be approved by voters; but very few people want to tax themselves. This leaves few options to increase revenues.

Ideally, tax revenue would be in proportion to the benefit received. For example, the Aquarium, movie theaters, concerts, etc. have a large impact on traffic, parking, etc. but it is hard to quantify the relationship between that impact and the additional income that is generated for the community through visitors paying for lodging, restaurants, etc. The PG City Council recently introduced a ballot measure to add an admissions tax at entertainment venues or events and places of amusement, such as races, movies and concerts. It would apply to the Monterey Bay Aquarium.

Barbara Meister said that she appreciates the difficult decisions city leaders must make to keep their cities healthy and understands the need to seek new revenue sources. She believes that an admissions tax is justified for a sporting event or if the city has made investments for which it needs to recoup costs. However, it does not make sense for the Monterey Bay Aquarium to be subject to an admissions tax, for several reasons:

· The Aquarium was started with private funding with the mission of conservation and education; advocating for the health of the world’s oceans. It is not primarily for recreation or entertainment.

· No city funds went into the Aquarium.

· The gift and book stores and restaurants already pay sales tax.

· The Aquarium brings in tourists who pay into the community by patronizing restaurants, hotels, etc.

40% of Aquarium revenue is from admission tickets, which barely covers front line staff and keeping the buildings open. The balance of its funding comes from membership, fundraising, endowments, donations, grants, etc. The Aquarium is willing to collaborate with the cities of Monterey and Pacific Grove to leverage income opportunities, such as at the Tin Cannery, which has been rezoned and will create new opportunities to generate revenue.

Thanks to Shannon Graham, Aurelio Salazar and Susan Breen for contributing to this article.