CFC Fees Review, in Light of Current CFC Finances

[Bob Armstrong]

Motion 2009-06 was passed by the Governors yesterday, December 8. This motion rescinded the July 2008 CFC AGM motion lowering annual memberships, and raising rating fees, among other things.

Earlier, in GL # 2, released about October 10, CFC President David Lavin, stated:

" A number of motions have been tabled in this Governor's letter. I support motions ...and 2009-06. I stated when running for the CFC Presidency that we need a holistic solution to the problems that the CFC is facing. These ad hoc motions moved by Barry Thorvardson and seconded by
Garry Gladstone [ these motions amended the July AGM motion; they were motion 2009-07 - elimination of the tournament playing fee ( popularly called the " tournament membership " ); motion 2009-08 - instituting a 40% annual membership discount to first time CFC 'ers ] do not take into account the overall operating budget of the CFC.
Financial decisions made in a vacuum are foolish in the extreme. Until the effect of the implementation of SwissSys, the outsourcing of the book and equipment business to FEN, and the implementation of the new ezine are clear, we lack the information required to make an informed decision on what membership and rating fees should be. ."

The Grassroots' Campaign partly agreed with David. They had sponsored the motions 2009-07 and 2009-08 , and also motion 2009-09 ( reducing the junior rating fee from $ 5 to $ 1 ). So they withdrew these motions, to clear the way for motion 2009-06 to be voted on, cleanly, without having to deal with amendments to it.

With the July AGM motion, and its fee changes slated for Jan. 1, 2009, now gone, there can be a full review of CFC fees, in the light of current CFC finances.

A number of the outstanding CFC financial issues David mentions in October, which he felt had to be known before CFC fees could be dealt with, have now been brought to conclusion, or are in process , close to being concluded ( implementing SwissSys; winding up the CFC Retail Business; establishing the new On-Line Chess Canada ).

So are we now in position to have the CFC do the needed " full review of CFC Fees , in the light of current CFC finances" ? Is this a priority with the Governors? If so, what form will this review take? Will it be Executive driven, with consultation only with the Governors? Or will it be broader, and involve receiving input from ordinary CFC members? These are important questions/decisions.

Some members have expressed their views on Canadian chess websites, that they feel their memberships were reduced in value with the termination of the print magazine Chess Canada, but there was no lowering of the annual membership fee ( and the anticipated lower fee under the July AGM motion is now gone ). Others have said that rating fees are a more acceptable way for CFC to raise revenue than high annual memberships. Others have seen the devestation of chess in Canada if tournament memberships are eliminated. Will this interest in CFC Fees be tapped by the Governors?

The Grassroots' Campaign, in sofaras it has dealt with CFC fees, wishes to make the following submissions to the review, if possible:

1. that the tournament playing fee ( “ tournament membership ) be eliminated;

2. that there be instituted a 40% discount on annual membership for first time CFC ‘ers;

3. that if CFC Junior rating fees are raised, they not go beyond a 100% increase ( that is, from $ 0.50 to $ 1 );

4. that in general, CFC Annual Membership fees be reduced, and rating fees raised ( this arises out of our original restructuring platform position that if finances supported it, we would seek reductions in annual membership and/or rating fees ). Given CFC finances currently, it would seem that the CFC cannot afford to lose revenue on fee changes, so the reduction of any annual fees must be at least offset by raises in the rating fees( a revenue neutral change ).

Will the Grassroots' Campaign be allowed to make these submissions within the context of whatever " Review " the CFC carries out?

Will this review be done in a timely manner, early in the new year?

A few issues and questions that now arise in the light of the passing of motion 2009-06 - they require answers.

Bob

[Bob Armstrong]

One of the live issues, raised by the July 2008 AGM motion on CFC Fees ( now rescinded by Motion 2009-06, passed November 8 ), was the concept of CFC shifting the raising of general revenue from annual membership fees to rating fees. The July AGM motion had sought to do this. It lowered the annual membership fees ( adult - to $ 30 from $ 36; junior - to $ 20 from $ 24 ), but raised rating fees ( adult - $ 5 from $ 3; junior - $ 5 from $ 0.50 ). The Governors have now rescinded this, but are they in favour of the concept of shifting revenue raising toward rating fees? After all, there has been a lot of member criticism of the cost of annual memberships, especially after the print Chess Canada magazine for members got axed.

Reviewing the CFC 2007-8 finances is instructive in this regard. In CFC’s 2007-8 financial year, CFC took in from rating fees approx. $ 25,000. It was originally proposed by the Grassroots’ campaign that this be doubled to $ 50,000 [ adult rating fee would go to $ 6/ player/ event ( from $ 3 ); Junior rating fee would go to $ 1 ( from $0.50 ) ]. This was to shift CFC’s general revenue burden from membership to rating fees, as a more acceptable way to get general revenue – basically, a more “ user-pay “ system. This would give CFC an extra $ 25,000 revenue.

In the same year, CFC took in approx. $ 50,000 from membership fees of all kinds. With the extra $ 25,000 from increased rating fees, CFC would now have to raise only $ 25,000 from membership fees, or a reduction of 50 %. This meant annual membership fees could be decreased by 50% [ annual adult membership could go to $ 18 ( from $ 36 ) and annual junior membership could go to $ 12 ( from $ 24 ) ].

What happened at the Incoming Governors AGM in July, was that the annual adult membership was reduced, but only to $ 30 and the annual junior membership to only $ 20. However, the rating fees increase was greater than the membership decrease. This way, the AGM governors " increased " the overall revenue with these changes, which they thought was justified by the poor financial situation of the CFC. The Grassroots' proposal, on the other hand, was " revenue neutral " ( what was gained by the rating fee increase, was lost by the membership reduction ) ].

It will be up to the governors in the full review to choose between these 2 models ( assuming they accept the general premise of shifting revenue from membership toward rating fee ). Can they live with a " revenue neutral " fees change in tough economic times, or do they feel they have to raise more money for CFC in making these changes?

And what are the arguments against raising rating fees?

What do you think the governors should do?

Bob

[Valer Eugen Demian]

... should be one of the benefits of being a member to CFC. Charging more for it to compensate for less members is a clear example of the expression "the road to ruin is filled with good intentions"!...

[Peter McKillop]

Hi Bob. To the best of my recollection I've been a CFC member continuously since the fall of 1976. My membership expired on Dec 1/08. I don't plan on renewing it until the executive and governors make some decisions about the CFC's future business model, and make those decisions public.

[Bob Armstrong]

Hi Peter:

Good strategy - flush them out of the bushes! :)

David Lavin did post that he was going to update the CFC Business Plan he provided to the Governors earlier this year ( but not to the public ), over the holidays, and that he would then post it on this website. I also note, in a negative vein, that Governor Ken Craft has posted that he didn't consider David's document a " business plan ".

I guess you'll have to evaluate it, and then decide whether to rejoin the CFC.

Bob

[Ken Craft]

I'm sure the revised version will be more of a business plan. I think the first document is best described as a discussion paper.

[Bob Armstrong]

Hi Ken:

A full CFC fees review in the light of current CFC finances should be instituted by the Governors immediately after CFC President David Lavin releases in the new year, his " updated " business plan.

Given the financial situation of the CFC, the issue of how CFC raises revenue must be front and centre early in the new year. And by then we should have the May 1 - October 31, 2008 CFC 1/2 year interim financial statement and will have a handle on current CFC expenses ( ED. Bob Gillanders posted that the target date for the financial's completion was next week - Monday, Dec. 15 ).

Bob

[Bob Armstrong]

In preparation for the expected full " CFC Fees Review ", to be held by the CFC Governors in early 2009 ( after the release of the May 1 - October 31, 2008, 6-month interim CFC Financial Statement; and after the CFC President, David Lavin, posts early in the new year, his " updated " CFC Business Plan ), the Grassroots' Campaign reviewed its tentative submission ( which was partly based on its 3 motions - 2009-07, -08, -09 [ see GL # 2 ] - which were subsequently withdrawn so submissions could be made to the CFC Executive ). Our reconsideration of our proposals tried to take into account in particular, the opinions put forward by some organizers on the elimination of the tournament playing fee ( = " tournament membership " ). The Grassroots' Campaign is still consulting on their platform, and are continuing dialogue with a number of individuals who want to see some amendments to the tentative proposals. We would be pleased to receive your input here on our " tentative " platform on CFC fees.

The Grassroots' Campaign " tentative " CFC Fees Submission now reads as follows ( and this version currently has the support of 18 of the original " Endorsers " of the original CFC Restructuring Platform ):

1. Annual Membership/Rating Fees:
that in general, CFC Annual Membership fees be reduced, and rating fees raised ( this arises out of our original restructuring platform position that if finances supported it, we would seek reductions in annual membership and/or rating fees ). Given CFC finances currently, it would seem that the CFC cannot afford to lose revenue on fee changes, so the reduction of any annual fees must be at least offset by raises in the rating fees ( a revenue neutral change ).

2. Junior Rating Fee:
that on no account shall the junior rating fee be increased more than 100% ( that is, at maximum a raise from $ 0.50 to $ 1 )

3. 50% Reduction in Annual Membership Fee:
that, specifically, the CFC Annual Fees should be reduced by 50% ( adult – from $ 36 to $ 18; junior – from $ 24 to $ 12 ). The Rating Fees should be increased by 100% ( adult – from $ 3 /player/event to $ 6; junior – from $ 0.50 to $ 1 )

4. Tournament Playing Fee ( = " Tournament Membership " ):
that the tournament playing ( “ membership “ ) fee shall be eliminated; as an alternative to this proposal # 4, though only lukewarmly supported, the tournament playing fee can be kept, but it shall be increased 100% ( from $ 10 to $ 20 ). However, if proposal # 3 is adopted, then the tournament membership fee shall still be eliminated.

5. Membership Discount to 1st time CFC'ers:
that, if the tournament membership is eliminated, there be instituted an annual membership discount of 40% for first time CFC’ers. If the tournament membership fee is not eliminated, but goes to $ 20, then this discount shall not be instituted.

The Grassroots' Campaign would be pleased to receive all comments as they finalize their submission to the CFC Governors. You can post here, or e-mail me, the Grassroots' Campaign Coordinator ( bobarm@sympatico.ca ) .

Bob

[Bob Armstrong]

One issue canvassed in the past has been the elimination of a separate membership fee. Is this possible?

I suppose the CFC membership fee could be eliminated. It could be that all players in a CFC-rated tournament automatically became annual CFC members at no separate charge.

But the CFC's only other source of income is rating fees. For the CFC to maintain the level of annual membership/rating fees revenue of 2007-8, it would have to triple the rating fees ( adult - to $ 9 from $ 3; junior - to $ 1.50 from $ 0.50 ). It could be renamed the " CFC Surcharge ", and be advertised as a separate part of the entry fee when entering a CFC-rated tournament. This would certainly be an attractive change for players who only play one or two CFC tournaments a year.

But, for example, it would be more costly for those who play a number of CFC tournaments a year. But it would not be too bad. For example, the Scarborough CC holds 5 rated tournaments per year. Currently an SCC member pays $ 41 per year ( annual membership - $ 36 + $ 15 ( 5 tournaments @ $ 3 each )). Under the " surcharge " proposal, he would pay $ 45 per year. This is an increase of only $ 4 per year. And I doubt most CFC members play 5 tournaments per year.

So, thinking outside of the box, I suppose a totally " user-pays " system, with no $ membership, would be possible too.

What would be the downside of such a system ( one I fear is that the CFC would have less revenue under this system, because the " surcharge " fees will not in fact cover the loss of membership revenue ).

Bob

[David Lavin]

First of all, a good business plan is a discussion document. Far too many plans just sit on a shelf and get ignored. That said, there was virtually no discussion of the document at all which is unfortunate. Hopefully Bob is right and the members will have more energy for the debate on the future of the organization.

Bob, maybe I'm missing something but it seems that you are juggling numbers to address the philosophical issue of membership revenue vs ratings revenue. However, just as importantly, we need to address the fact that the CFC has not had sufficient revenues to pay its bills over the past number of years. We've done a good job of slashing expenses and there is still some room to move there. But $75,000 in revenues doesn't go very far.

And Peter, not to be argumentative, but I assume that the primary reason people are members is to play in OTB tournaments. When I became a member in 1973 the fee was higher (adjusted for inflation), there was no magazine, and there was no store. I joined the CFC because there was an incredibly active chess club and a vibrant chess scene and I wanted to play in tournaments. $8 per year allowed me to play over 50 rated games a year. To me, the biggest issue is how do we encourage TD's and organizers. If there were more tournaments you wanted to play in, perhaps the fee wouldn't seem so high.

[Bob Armstrong]

Hi David:

Thanks for posting - I think it is helpful for the members to hear your perspective from time to time.

You are right that I have focussed on " revenue ", and basically the major 2 sources, membership and rating fee. I have not talked about expenses, because I am awaiting the May 1 - October 31, 2008 6-month interim financial statement ( in November, Bob Gillanders had posted that their target completion date was Dec. 15 - did we make that?? ). I fear that though you may have made progress, there is still going to be an unacceptable loss in the first 6 months, with little expectation of it changing for the 2008-9 year....unless more and more drastic changes to expenses are made. The Grassroots' Campaign restructuring was more severe than what you have done. But we wanted to give you time, and see whether the efforts you did make would get us down the road a ways at least. We feel you have still not made the necessary cuts to bring CFC back into the black. The interim financials will tell a lot I think. Then we can deal more incisively with the " expenses " side of the equation.

And I agree that tournaments are critical to CFC's health. More tournaments means more members and more rating fees which means more revenue to the CFC to pay the bills. CFC must find new ways to encourage the development of new organizers, and to partner with existing organizers to make them thrive.

But I feel that a very neglected and critical part of tournament promotion, is promotion of chess to the general public. We must make the general public interested in : " What's all the hype about OTB tournament chess?? " We need to get new players into the game, and especially the internet players. We have to get them willing to try " OTB Tournaments ". Once they do, they'll be hooked - it's better than internet tournaments !

Bob