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Mad River Glen Cooperative

Board of Trustees Meeting

Minutes – Saturday, September 13th, 2014

 

After due notice, a meeting of the Board of Trustees of the Mad River Glen Cooperative was convened at 8:00 am on Saturday, September 13th, 2014 on the third floor of the Basebox at Mad River Glen Ski Area (“MRG”) in Fayston, Vermont.

 

 

Trustee

Attendance

Trustee

Attendance

Elkind (Chair)

Present

Holtan

Present

Tobin (Vice-Chair)

Present

Lesure

Absent

Anderson (Secretary)

Present

Liu

Absent

Stetson  (Treasurer)

Absent

Palola

Phone-in

Bowen

Phone-in

 

 

 

Also present were President Wimble and four shareholders.

 

8:09 AM   Call to Order

 

Chair Elkind welcomed the assembled and asked for shareholder comments.

 

Shareholder Craig Keown presented a letter to the board expressing dismay at the decision to start charging senior (over 70) shareholders for lift services. He gave a passionate speech about his family’s long time support of Mad River Glen and his concern that MRG was changing. He suggested charging all shareholders a small amount or raising the APR instead of charging seniors. He contended this was a fundamental change in the MRG bylaws and called for a vote by the shareholders to approve that change.

 

The board responded that considerable thought and discussion went into the decision to make the change and the fact it had been suggested by other senior shareholders.  The board discussed his contention and unanimously agreed it was not a fundamental change requiring a vote by shareholders.

 

8:24 AM   Review & Approve Minutes of June 14th, 2014 (Action)

 

 

Motion

Made by

2nd by

Aye

Nay

Abstain

To approve the minutes of   June 14th, 2014

Trustee Elkind

Trustee Holtan

6

0

0

 

 

 

8:27 AM   Review board and committee calendars for 2014 / 2015

 

Green and Gold is October 4th. There is no October meeting and there may be one on November 8th.

 

The next planned meeting is December 13th at 8:00am (5:00pm if the mountain is open)

 

 

8:33 AM   Review Summer Board and/or Executive Committee Actions

 

  • Waive the Cooperative’s right of first refusal on Bakewell property just below the parking lot

The executive committee met via phone conference on Thursday July 21st to discuss the ROFR on the Bakewell property. After thorough review of the costs to develop the land for parking and for snowmaking water storage, they unanimously agreed it was fiscally imprudent to obtain the property and instructed President Wimble to have counsel release the right of first refusal.  

 

 

8:35 AM   Management Report and Snowmaking update

 

 

President Wimble presented the board with his management report.

 

Operations:

 

The Single Chair was load tested this summer and everything went fine. So we are good for another 7 years. There was a question as to a variance we received on the chair design but that matter was cleared up and we now have copies of the documentation for future reference.

 

Outside crew has been busy with lift work and trail work to help make our ski surface more resilient.

 

President Wimble has received prints of storm water drain design for the parking lot and is working with Friends of the Mad River and VTRANS on grants to cover the cost of this project.

 

 

Share Sales:

 

We sold 2 shares against a budget of 0 for the month of August. We have sold 28 shares YTD. There are 20 shares on the list to be tendered.

 

Financials:

August financials were good. We finished up $13,000 ahead of budget NOI. We are projecting a $166,000 loss for fiscal year end 9-30-14. We have $134,000 of cash on hand as of August 1. We still owe $150,000 back to our line of credit. We plan to pay that back after all our preseason money comes in October 15. Preseason sales for August were on pace with last year which is good.

 

 

8:42 AM   Snowmaking

a)         Summary of snowmaking analyses and conclusions (Jamey)

b)        What is the board’s preferred option for snowmaking

1)     Which option

2)     Implications to the capital campaign

3)     Implications to our business model

4)     Implications to our customers, shareholders, pass holders, etc.

 

Prior to the meeting President Wimble had provided the board with a detailed and extensive snowmaking analysis.  The complete report is available to shareholders in the office upon request.

 

 

In the e-mail he wrote “We will hopefully be making a decision on where we are looking to go with snowmaking at the meeting on the 13th. Attached is the study from sno.matic, an analysis on operational revenue and expense impact of snowmaking, and the operational philosophy article that is going in the area guide this fall. We have put a lot of effort getting information and wanted you to have plenty of time prior to the meeting to review material. In short the recommendation from management is to repair upgrade existing system at this time. The economics and current water constraints do not make sense at this time. However, by upgrading what we have still leaves the door open in the future if economics and water resources should change.”

 

The report detailed three options shown below.

 

 

 

Option 1

 

 

Option 2

 

Option 3

 

Existing System

 

 

Snowmaking to 2300'

 

Snowmaking to top of Lift 2

Mountain and Feed Piping

 

 

 

$774,997

 

$1,428,164

Valve houses

 

 

 

$20,000

 

$57,500

Fan Wiring

 

 

 

$67,702

 

$67,702

Compressor Pad

 

 

 

$27,500

 

$34,000

Water Intake

 

 

 

$32,500

 

$140,000

Reservoir

 

 

 

$0

 

$350,000

Reservoir Pumphouse

 

 

 

$155,000

 

$220,000

Main Pumphouse - lower

 

 

 

$137,500

 

$192,000

Main Pumphouse - upper

 

 

 

$0

 

$182,000

Snowguns

$140,000

 

 

$187,500

 

$282,000

Controls

 

 

 

$20,000

 

$20,000

Pumps

$20,000

 

 

 

 

 

Electrical Supply

$150,000

 

 

            $150,000

 

            $150,000

Piping

$75,200

 

 

 

 

 

Subtotal

$385,200

 

 

$1,422,699

 

$2,973,366

Contingency (15%)

 

 

 

$213,405

 

$446,005

Engineering estimate

 

 

 

$30,000

 

$40,000

Permitting estimate (excluding well)

 

 

$35,000

 

$35,000

TOTAL

$385,200

 

 

$1,701,104

 

$3,494,371

Additional Electrical Investment

 

 

 

$464,000

 

$464,000

GRAND TOTAL

$385,200

 

 

$2,315104

 

$4,108,371

 

 

There was considerable discussion on all three options including financial as well as shareholder concerns.  This led to a motion  to approve option number one.

 

 

Motion

Made by

2nd by

Aye

Nay

Abstain

 

On consideration of the current analysis of costs, availability of water and land, to proceed with Option One at this time, which replaces the existing system in a manner consistent with the possibility of future expansion should that expansion be determined to be desirable and feasible in the future.

 

Trustee Bowen

Trustee Tobin

6

0

0

 

9:20 AM   Fund Raising committee update (Annika)

Trustee Holtan presented the board with the following update.

 

 

Fundraising committee update 

 

a)         Progress update

-       The Campaign Cabinet has held 3 meetings this summer.  During the summer, the Cabinet & management worked to identify the use of funds raised based upon needs at the mountain and shareholder priorities. 

 

-       The Cabinet developed the Case for Support with the advice of Demont Associates.  The document will serve as source material for the capital campaign and links the business objectives with the overriding goal of preserving and protecting the future of Mad River Glen.   The Case details the project needs and rationale.  It also expresses the relation of needs to the vision for the Mad River Glen Co-op and sets the tone for future campaign communication.

 

-       SMF treasurer, Penny Parson, is a member of the cabinet and has been working closely with the team in all phases of the campaign development.

 

-       A sub-committee of the campaign, the Business Planning Advisory Committee, held their 2nd meeting in July to review & discuss the snowmaking options and incremental revenue modeling.  Since May, the BPAC has reviewed existing operating budgets, projected capital expenditures and preliminary 10-year pro-forma budget.  The committee has advised and suggested appropriate changes, refinements and additions.  We anticipate an additional meeting to finalize recommendations and answer outstanding questions on tax issues.

 

 

b)         Taxability of grants made to MRG by SMF

 

-       The BPAC raised the issue of the taxable status of grants made to MRG from SMF.  Jamey contacted a lawyer, Laddie Lushin ,who specializes in cooperative law & accounting and has been a friend of the Co-op since its founding.  Laddie Lushin advised that under section 102(a) of the IRS tax code “gross income does not include the value of property acquired by gift, bequest, devise or inheritance.”  A grant is considered a gift.  In addition the Co-op has a distinctly public benefit as expressed in the Article of Incorporation: “to preserve and protect for present and future generations.”  He concludes that the Co-op could file tax returns under the 102(a) interpretation.

 

-       In early August, the Co-op’s auditors (Mudgett,Jennett & Krogh-Wisner in Montpelier) reviewed Laddie Lushin’s opinion and responded to Jamey. They suggested a few options that need to be discussed further including:

  • The Co-op can file tax returns under 102(a) interpretation but there is no guarantee that the IRS will accept the interpretation. 
  • Obtain a private letter ruling from the IRS in advance.  This is costly $10,000.
  • Continue filing form 1120 with the IRS & form CO-411 with the State of VT.  Grants would appear as taxable income.  The Co-op would rely on net op loss carryover to offset future income.  Also, future capital asset improvements would significantly increase depreciation deductions.  However, the BPAC pro-forma analysis shows that not all of the future income would be offset by net op loss.

 

c)         Spending Priorities

 

-       A Minimum Needs table by initiative has been developed based upon the Co-op’s CapX needs through 2020.  Over 40% of the needs are allocated to the Mountain Preservation initiative. It also begins to build a Preservation Endowment.

 

-       Skier Safety & Services not only includes the new Patrol building with room for Ski School staff and seasonal rental lockers but also the renovations to the Rental & Repair shop once the current lockers are moved.

 

-       Youth & Family Development includes necessary renovations to the Birdcage and access to potable water plus an expanded ski school area in the Basebox.

 

-       Community Preservation is dedicated to Basebox improvements to enhance the customer experience and reduce overcrowding while retaining the traditional simple and rustic character.  The target dates for the Basebox improvements are:  Summer 2017 - complete Basebox design, Summer 2018 - construction (Community Preservation and Youth & Family Development).

 

 

 Trustee Holtan also provided the board with the revised Case for Support that reflects input from trustees and management.  The fundraising committee seeks board approval of the case, "Preserving our Paradise," and the Minimum Campaign Needs table within the document.

 

 

The board reviewed the report and discussed the minimum needs portion of the proposed campaign.

 

This led to a motion

 

Motion

Made by

2nd by

Aye

Nay

Abstain

To approve the Mad River Glen Capital Campaign minimum needs as presented by the Campaign committee.

Trustee Holtan

Trustee Elkind

6

0

0

 

 

The board also reviewed the Case for Support document provided which also led to a motion.

 

 

Motion

Made by

2nd by

Aye

Nay

Abstain

To approve the Case for Support statement as written and authorize the Campaign committee to continue to make minor revisions as necessary.

Trustee Elkind

Trustee Tobin

6

0

0

 

Bob Demont had joined the meeting via the phone conference and he both thanked and complemented the MRG staff and Campaign committee on all the hard work they’ve done on this project.

 

The board also discussed what to communicate at Green and Gold weekend regarding the Campaign.

 

 

10:00 AMAction Item Review

 

Action Item

Responsible Party

When

Create a campaign structure with sub-committees.

Board

ongoing

Continue to refine the Snowmaking Study for costs and possible return on investment.

President Wimble

completed

 

 

Chair Elkind finished the meeting by asking for shareholders comments.

Shareholder Betsy Pratt questioned if we were running a business or a charity and we should strive to get more people here during the mid-week.

 

 

 

10:05 AM          Executive Session –Personnel review.

 

.

 

11:39 AM          Adjourn

 

Motion

Made by

2nd by

Aye

Nay

Abstain

To adjourn

Trustee Elkind

Trustee Anderson

4

0

0

 

 

 

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