San Diego Foundation Goes Broke Celebrating Fleet Week

The nonprofit foundation that runs San Diego Fleet Week, the annual celebration of troops and their families, is flat broke and negotiating with creditors to settle its debts.

It has suffered large losses dating back to 2014, with the deepest deficits tied to its cornerstone event -- the Coronado Speed Festival, according to an analysis of records by The San Diego Union-Tribune.

The San Diego Fleet Week Foundation was $147,157 in the red at the end of last year. The organization has yet to release audited figures for 2016, but recently hired executive director Larry Blumberg confirmed that revenue shortfalls pushed the foundation to the brink of insolvency.

The group's financial crisis has occurred in one of the world's largest concentrations of military might, with more than $23.3 billion flowing through San Diego County last year for troops, veterans and defense projects.

But it's not unusual for nonprofits to experience money woes. The law bars them from raising capital by selling stock, and many smaller charities struggle to squirrel away cash reserves to tide them over when donations and other revenue streams dry up.

Rather than declare bankruptcy, most insolvent nonprofits shutter and alert charity regulators in their state that they plan to dissolve as a corporation -- something San Diego Fleet Week has vowed to avoid.

"I started looking at the financials in the fall, knowing the sponsorship levels and where they were. I had an idea that there were going to be issues at the end of the year," said Blumberg, a retired Navy captain who agreed to work for $1 per year at the foundation when he took on the leadership position in November.

He declined to specify the number of creditors still owed money or indicate the terms that Fleet Week's board offered to liquidate the nonprofit's debts, but he insisted the "vast majority of our vendors have graciously agreed to the settlement."

Lisa Richards, a non-voting member of the foundation's advisory board and a vendor who had catered food for Speed Fest since 2012, said she settled for a fraction of the money owed to her. She urged other vendors to "put this behind us and stay committed to Fleet Week."

"I took a personal loss and I'm not happy about it, but I want Fleet Week to keep running," she said. "The cause is important."

According to Fleet Week's federal tax filings, Richards was the lowest bidder on a food-service contract for four years in a row, averaging about $46,000 in annual invoices. She said not only did her catering company slash the fee charged to Fleet Week over the years, but that employees donated generously to the charity because of their strong sense of patriotism.

Because she wasn't a voting member of the board, Richards said she hadn't realized how precarious Fleet Week's finances had become.

Looking ahead, Blumberg said Fleet Week should be solvent by early 2017. He pledged to stage a revamped series of events for mid-October, minus the Speed Fest.

"I'm optimistic that the doors of Fleet Week will be open. We're under new management, so to speak, and under new leadership," Blumberg said.

Between 2001 and 2015, the foundation spent more than $12.3 million on the yearly program of festivities designed to honor military personnel and their families.

The foundation's expenses have exceeded revenues in more than half the years since the group's founding in 2001, according to public filings it submits to the Internal Revenue Service to maintain its nonprofit status.

During the past several months, the organization has shed nearly half of its 23-member board. In November, it turned to Blumberg to forge settlements with creditors.

Speed Fest -- a series of auto races, car shows and related events -- lost $333,754 between 2007 and last year, but organizers said they stuck with it because they wanted a marquee event to headline Fleet Week.

"The vintage-car guys (were) convinced this is in the best interests of the sailors and Marines. They're putting on a show and you talk about sailors and cars and Marines and cars and stuff like that, and they think that's important," said Blumberg, who recently retired as executive director of the nonprofit San Diego Military Advisory Council.

He said Fleet Week will refocus on core events that salute Navy, Marine Corps and Coast Guard units in the region, including a luncheon and golf tournament to honor enlisted service members, an expanded showcase of local science and technology breakthroughs, and a Sea and Air Parade of warships and planes across San Diego Bay.

These celebrations will be scheduled around the Navy's Oct. 13 birthday instead of occurring over the span of several months, as they have in the past.

"We're not going to do 'Fleet Month' or 'Fleet Quarter' or whatever. We're going to concentrate on a week, maybe two at the most," Blumberg said.

Key corporate sponsors such as Lincoln Military Housing, Navy Federal Credit Union, insurance giant USAA and defense contractors Lockheed Martin and Northrop Grumman have signaled that they'll continue to provide financial support, Blumberg said.

Fleet Week has reported losses in eight of its 15 years of audited returns.

The foundation began charting Speed Fest's revenues and expenses in 2007. The event lost money in six of the nine years it was staged by the foundation.

Although the foundation's revenues peaked in 2007 at nearly $1.4 million, the group still lost $43,506 by the end of that year. While corporate donors and surplus ticket sales sometimes left a nest egg of assets to cover losses during lean times, in other years organizers scrambled to raise new funds to pay off old debts.

At the end of 2012, for example, the foundation finished $89,233 in the red, but organizers scratched up enough new donations and sponsorship deals to catch up and stage the 2013 Fleet Week.

Buoyed by civilian ticket sales to the races, the 2013 Fleet Week finished $1,975 in the black. Then expenditures began swamping revenues in 2014, and by the end of 2015, all of the foundation's assets were depleted.

Blumberg's predecessor at Fleet Week, Brian Sack, echoed him and Richards by saying there "was nothing nefarious going on" that triggered the steep losses.

Sack thought he could overcome the 2016 deficit like the organization had in past cycles, but Fleet Week's board feared insolvency and instead moved to settle with creditors and start over.

"It's a business decision and I can't fault them, nor do I fault them," said Sack, now the executive director of Veterans Week, an event affiliated with the nonprofit group that stages the yearly San Diego Veterans Day Parade.

Billed as the "Race at the Base," Speed Fest attracted between 20,000 and 25,000 spectators annually to North Island's runways -- 10,000 of whom were military families admitted free of charge, according to Fleet Week's federal filings.

The event's organizers faced steep upfront costs every year. "You've got to build all that infrastructure -- bathrooms, water, cooking, grandstands, seating," Sack said.

Fleet Week inherited Speed Fest from the Holiday Bowl, where Blumberg also served as a board member.

In fact, it was Blumberg and three other community leaders who sold the Navy on hosting the vintage-car race at North Island's air station in 1997. Once Navy brass signed off on the event, the team proposed to the Holiday Bowl's directors that Speed Fest be paired with the football festivities. Chrysler signed on as the title sponsor.

By 2007, Chrysler had dropped its sponsorship and the Holiday Bowl jettisoned the event. Speed Fest migrated to Fleet Week but never attracted a permanent sponsor to replace Chrysler.

"Let's just say that it's been a challenge over the years because we did not have that major title sponsor," Blumberg said.

In other large annual public events nationwide, corporate title sponsorship or government aid is key to propping up the bottom line.

Seattle's annual military air show, part of the civilian Seafair celebration, is underwritten by defense giant Boeing. About 39 percent of San Francisco's annual Fleet Week bills are paid by municipal and county grants, according to that group's federal filings.

Blumberg said the foundation in San Diego alerted both the Navy and Speed Fest's Texas-based producers, the Sportscar Vintage Racing Association, that Fleek Week will opt out of the contract, ending the annual racing events.

With Speed Fest in the rear-view mirror, Blumberg said "cash flow is obviously the issue" now at Fleet Week. The nonprofit's board members "dug into their own pockets" to settle many of the bills, he said, and they're exploring more ways to raise money, like a recently staged 5K race.

Blumberg hopes the public will chip in, which is why he's assuring potential donors that Fleet Week will survive.

"We're going to be here even if it's a telephone and I'm the only one at the other end, OK? The ship won't go down," he said.

@ SMSgt Minister Gerald A. Thomas Capt Christopher MuellerCOL Mikel J. BurroughsSgt Joe LaBrancheSSgt (Join to see)Capt Seid WaddellSrA Christopher Wright LTC Stephen F.PO2 Ed C. SFC(P) Hercules Lobo MSG Tom EarleyPVT James Strait Alan K. PO1 William "Chip" NagelSGT John " Mac " McConnellSSG Leo Bell SFC William Farrell LTC (Join to see) SPC Britanny *Winnie* Balthaser Maj Kim Patterson