MAD RIVER GLEN COOPERATIVE
Minutes of Board of Trustees' Meeting Held on October 7, 2000
After due notice, a meeting of the Board of Trustees of Mad River Glen Cooperative was convened at 9:00 a.m. on, Saturday, October 7, 2000, in the Basebox, at Mad River Glen Ski Area in Fayston, Vermont. Trustees Bleier, Coleman, Eaton, Meier, Michl, Russell, Schultz, Steines were present. Trustee Kirkpatrick was absent. The Cooperative's president, Mr. Eaton, presided. The minutes were kept by the secretary, Mr. Bleier, with assistance from corporate counsel, Peter Monte.
Minutes of Past Meetings
After discussion and upon motion duly made and seconded, it was unanimously
VOTED: To approve as corrected the minutes of the July 1, 2000, meeting of the board of trustees.
Shareholder Comments and Correspondence
The president reminded owners that board operating procedures now deferred the opportunity for owners to make general comments until after the trustees have completed their working agenda for the meeting. The board will entertain comments from owners early in the meeting and at the end of each agenda item and to review correspondence already circulated among the trustees.
Irma Heeter requested information on what steps the trustees were taking to deal with the poor condition of the forest at high elevations and the potential for erosion. The general manager stated that a forester would be at the information meeting scheduled for owners this afternoon and these questions would be addressed in detail.
Mr. Bleier commented that the Cooperative's website be improved by including information now absent. The general manager accepted blame explaining that staff was very busy with details necessary to prepare the ski area for opening and attention to the website would have to await available time.
General Manager's Report
Robert Ackland, the Cooperative's general manager, delivered his report. He circulated a detailed report to the trustees and owners present and summarized its content orally.
Chuck Martin has resigned from his employment. Staff gave him a going away party at the Mad River Tavern. Peter Defreest has been hired to replace Mr. Martin. Peter is a trained Piston-Bully mechanic with over twenty years experience.
Gay Hubbard has been hired for assistance in accounting and marketing.
The general manager is concerned about staffing for ski area operations because of the extremely tight labor market and Mad River's traditional late opening. He has hired employees from the Southern Hemisphere to satisfy the expected need. These new employees need housing, preferably along the established bus route.
A professional forester has completed the forest management plan which used Mr. Appleton's plan as its foundation. Copies have been provided to the trustees. Copies will be available to the shareholders at the informational meeting this afternoon.
The general manager summarized the results of summer operations at the ski area:
Mr. Russell stated that the value of summer camp and naturalist programs could not be measured solely by the financial bottom line. Mr. Schultz agreed. Good public relations and other benefits should also be considered. Mr. Bleier observed that the Naturalist Program in particular responds to the mandate of the Cooperative's mission statement to its educational benefits regarding maintaining and preserving the environment of Stark Mountain. Mr. Coleman concurred generally in these comments.
The general manager did not dispute the non-financial benefits of these programs but observed that his responsibilities required careful attention the financial bottom line. Mr. Meier observed that the Cooperative must remain mindful of its budget because over time, minor deviations will add up and jeopardize the Cooperative's financial survival.
The trustees discussed the balance each felt was appropriate between desirability of programs and afford ability.
The general manager submitted a schedule of publications for the Echo and the Chute publications. Mr. Meier recommended that staff cut back on the Echo schedule. He questioned the wisdom of having an issue in May when the ski season was over. Mr. Bleier objected observing that the May publication is important for publishing the election results as recommended by the board development and communications committee. He observed that E Mail is not a satisfactory answer because only 15% of shareholders have enrolled in the E-Mail distribution list and most shareholders would not otherwise learn of the votetotals, percentage turnouts, and results.
The general manager informed the board that the gear page has been turned over to Alpine Options. The office staff is too busy with ski area business to handle the gear page and Alpine Options offers professional and experienced expertise.
The general manager informed the trustees that the new operating philosophy for the Cooperative was "ESP" — Efficient, Spartan and Professional operations.
Chris Jaquith, an owner, inquired whether there is a single manual for Cooperative policies. The general manager responded that there was no such document now existing. The trustees requested that a policy manual should be prepared at some time in the future.
Share Sales and Shareholder Defaults
The general manager's report included a summary of share sale activities. 19 shares were sold in September (4 newly issued shares and 15 resales of defaulted shares). Total shares for FY 2000 were 104 (the target was 110). The share-sale target for FY 2001 is 80 new shares.
Mr. Bleier stated that he is concerned that the Cooperative has no formal, written policy to define when and what penalty will arise when a shareholder defaults in paying a share subscription or APR (Annual Purchase Requirement). Mr. Eaton requested that management should prepare a written policy; the general manager agreed to do so. The general manager estimated that approximately $18,000 is now owed by shareholders now delinquent on their APR.
The general manager circulated detailed financial statements for review by the trustees. He informed the trustees that staff had made their final year-end adjustments including capitalization of staff labor costs devoted to capital improvements resulting in the following pre-audit calculation of operating profit:
FYE Oct. 2000
Cash on hand at the end of the fiscal year was $276,124 in comparison to $303,000 at end at FYE 1999. The general manager cautioned that this year's cash position is even less favorable than the raw numbers suggest — this year's cash is inflated because APR and seasons pass sales are ahead of last year's. The general manager stated, however, that he is comfortable with the Cooperative's present cash position.
Mr. Bleier requested that the general manager should include in the financial statements the estimated value of labor volunteered by the owners. He stated that a calculation of the Cooperative's resulting avoided costs would encourage more volunteer effort. The general manager cautioned that the calculation would be necessarily speculative and approximate. The trustees requested that the general manager make an estimate of the value of volunteered labor and identify it as being very rough.
The general manager provided a detailed list of all capital projects scheduled through December 31, 2000. The report included a summary of the status of each project, its cost, and a comparison with the budgeted expenditure. To stay within the overall budget, the general manager will delete from the projects scheduled through the end of this calendar year the purchase of a snow machine, renovations to the Basebox kitchen, Basebox chair replacements and carpeting of the third floor of the Basebox.
Irma Heeter questioned the general manager's calculation that the Cooperative's revenues are derived principally from non-owners and asked why the general manager considered this calculation significant. Mr. Bleier also requested clarification of this point. The general manager stated that he had analyzed the Cooperative's revenues for each year. Revenues derived from owners were identified by seasons pass sales and ticket sales to owners. These averaged slightly more than 20 per cent of overall revenues. Recognizing that this calculation does not include cash or Mad Money spent by owners, he estimated that total owner revenues amounted to approximately 30 per cent of the Cooperative's overall revenues. Mr. Meier noted that in 1998, owners' spending was calculated as 31% of total revenues.
The general manager's conclusion from this calculation is that the vast majority of the Cooperative's revenues are derived from non-shareholders, and accordingly, the long term financial success of Mad River Glen and the Cooperative depends upon the Cooperative continuing to attract "outside" patrons. To remain financially viable the Cooperative must concentrate on serving the needs of the general public rather than operating like a private club for the benefit of its owners. The general manager is confident, however, that if management does a good job for the general public it will thereby also do a good job for the shareholders. A corollary to this rule, however, is that staff cannot continue to devote a disproportionate amount of time and effort to satisfy the demands of a relatively small group of owners.
Mr. Coleman suggested that the board of trustees should assume a greater role in dealing with owners and thereby spare staff time to satisfy the business mandates of the Cooperative.
Mr. Eaton observed that the board of trustees is still trying to find a balance between the avoidance of micro management and remaining too aloof from operations. He requests that the trustees continue their quest for the proper balance and requests that owners and staff be patient while the evolution progresses.
Line of Credit
The general manager circulated a proposed commitment letter from Northfield Savings Bank for a $200,000 secured line of credit. He informed the trustees that the terms of the line of credit remained under negotiation between the general manager and the bank including the Cooperative's request that an appraisal be deleted from the loan requirements. The general manager stated that the purpose of the line of credit was to provide a back up source of cash if unusually bad weather depletes revenues during the season or if an unexpected major expense increases costs. There is no plan to draw on the line of credit unless unexpected financial reversals make it necessary. The general manager stated that trustee approval was required for the Cooperative to enter into the loan arrangement with Northfield Savings Bank.
Mr. Meier objected to approving a line of credit because, in his view, (1) the initial reason for a line of credit no longer exists — the line of credit was initially intended to allow the Cooperative to pre-pay its mortgage to Mad River Corporation and Mad River Corporation will not accept pre-payment; and (2) approval of a line of credit from Northfield Savings Bank represents a departure from the Cooperative's present banking relationship with Chittenden Trust Company and he sees no quid pro quo from Northfield Savings Bank to justify this change.
The general manager responded that he is more comfortable dealing with Northfield Savings Bank. The general manager is an unpaid incorporator of the bank and, therefore, is acquainted with senior management. Northfield Savings Bank is also a local institution and its commitment to service was demonstrated by its higher level of personal attention to the Cooperative's request for loan terms in comparison to Chittenden's.
Mr. Michl stated that he favored approving the line of credit because, in his opinion, (1) the timing is right — it is better for the Cooperative to obtain a financing commitment at a time of strength rather than after a financial reversal occurs; and (2) there is a continuing need for available borrowing — the finance committee has determined that $60,000 cash in hand is the minimum required for the Cooperative to operate and this line of credit will establish a reserve to keep cash at this minimum if the unexpected should occur.
After discussion and upon motion duly made by Mr. Eaton and seconded by Mr. Michl it was unanimously
VOTED: That a $200,000 secured line of credit loan from Northfield Savings Bank be and the same hereby is approved on the terms stated in NSB's commitment letter to the Cooperative dated September 25, 2000 (and as such terms may be altered with approval of the Cooperative's general manager); and in connection therewith, that the Cooperative's general manager be and he hereby is authorized for and in the name of the Cooperative to execute and deliver to Northfield Savings Bank such promissory notes, mortgage deeds, security agreements, and other instruments and documents as he may deem appropriate to consummate the said loan, his execution and delivery thereof to be conclusive of his approval of the terms thereof and of his authority under this Vote. (A copy of said commitment letter is appended to these minutes).
VOTED: That the banking deposit resolutions of Northfield Savings Bank for the Cooperative presented to the meeting be and the same hereby are approved and the proper officers of the Cooperative are hereby authorized to execute the same for and in the name of the Cooperative. (A copy of said resolution is appended to these minutes).
Voting: In favor: Bleier, Coleman, Eaton, Michl, Russell, Schultz, Steines
Mr. Meier inquired what process the trustees foresee for draws on the line of credit; specifically, do the trustees believe that the general manager has the authority to draw on the line alone, or is prior approval of the trustees is required? After discussion, it was the sense of the board of trustees that the line of credit would be used only to maintain working capital at the $60,000 level. All expenditures of the Cooperative have already been pre-approved, in effect, by the trustees adoption of the budget. Accordingly, the general manager has authority to draw on the line of credit without further trustee approval.
Mr. Michl objected to the trustees' approval of the general manager making draws on the line of credit without prior trustee involvement and oversight at least during the first year's experience with this new practice.
Mr. Michl circulated to the trustees proposed bylaws and articles of incorporation for the Stark Mountain Foundation. Mr. Michl reminded the board that at an earlier meeting the trustees had discussed the value of establishing a second entity with objectives related to the Cooperative (to preserve and protect Stark Mountain) but separated from direct ski area operations. The principal value is a foundation's ability to attract tax-deductible donations to satisfy financial needs for these common purposes without draining the limited resources of the Cooperative. Mr. Michl cited as possible activities of the foundation land acquisition and help with the single chair re-build.
Mr. Michl stated that the foundation's timetable called for public announcement of its establishment on July 4, 2001. This timetable recognizes the delays expected in obtaining IRS approval of the foundation to confirm that donations to it will be tax deductible.
Mr. Michl explained that IRS rules require that this foundation must truly be separate and distinct from the Cooperative. Accordingly, the Cooperative cannot directly participate in the formation or control of the foundation. Today's discussion, therefore, is informational only. Mr. Michl will proceed personally with the formation of an organizing group to create the foundation and he will keep the trustees informed about its progress and doings. Mr. Michl requested that anyone interested in participating in the foundation should let him know promptly so they can be considered as part of the forming group.
Shareholder Jim Van requested what role the owners can have regarding the appearance of the base area. This question came to mind when he observed the color changes in the recent painting of buildings in the base area. The general manager stated that color selection was a management decision. Staff did consult with owners who were architects and builders, but the ultimate decision was made by the general manager.
The trustees entered executive session at 11:45 a.m. to discuss personnel matters and contract issues. The assistant general manager was invited to attend the portion of executive session dealing with personnel issues. The general manager and legal counsel attended the entire executive session. The trustees resumed open session at 12:35 p.m.
The trustees authorized the president and general manager to meet with Mad River Corporation to discuss the possible purchase of the 19th and 20th holes. It was the sense of the meeting that the Cooperative cannot now afford to enter into an option or a purchase agreement for those properties but would retain its existing right of first refusal to purchase if Mad River Corporation finds another buyer. In addition, the Cooperative should maintain a dialogue with Mad River Corporation for a possible future purchase and the Cooperative should consider joint undertakings with Stark Mountain Foundation, the Vermont Land Trust, and other entities who may wish to participate with the Cooperative in long range planning for this property.
Conflict of Interest
Mr. Eaton presented a draft policy which he proposed for adoption by the board of trustees concerning potential conflicts of interest. The president observed that the trustees have been discussing adoption of a conflict of interest policy since the Cooperative was formed. Past efforts resulted in proposals which were too detailed to be workable. He recommended adoption of the present proposal because it is simpler and calls for case-by-case determinations as questions arise in the future.
After further discussion upon motion duly made by Mr. Meier and seconded by Mr. Coleman it was unanimously
VOTED: To adopt as policy 2000-1 the written conflict of interest policy proposed by the president. (A copy of the policy is appended to these minutes).
There being no further business to come before the meeting, after discussion and upon motion duly made and seconded it was unanimously
VOTED: To adjourn.
Adjourned accordingly at 12:55 p.m.
A true record.
Robin "Rocky" Bleier, Secretary
ATTACHMENTS TO THESE MINUTES: