MAD RIVER GLEN COOPERATIVE
BOARD OF TRUSTEES
MINUTES OF MEETING – Final
November 5, 2005
After due notice, a meeting of the board of trustees of the Mad River Glen Cooperative was convened at 8:10 AM on November 5, 2005 on the 3 rd floor of the Basebox at Mad River Glen Ski Area in Fayston , Vermont .
Trustees Jay Appleton, Paul Finnerty, Mary Schramke, Jed Kalkstein Bill Reynolds, Steve Mackenzie, Geordie Hall were present. Deb Steines was present on the phone. Rick Moulton was absent. Also present was President Jamey Wimble as well as several shareholders.
CALL TO ORDER:
Jay Appleton called the meeting to order at 8:10 AM.
APPROVAL OF MINUTES
Upon motion duly made by Geordie Hall and seconded by Bill Reynolds, it was unanimously
VOTED: To approve the minutes of September 10, 2005.
The minutes from the town meeting were also accepted.
The Management report is attached for reference. One addition to the management report – a perk test was done on the lots at the end of Ridge Road and nothing perked for potential building.
October financials were not available yet but revenue was above budget for October. One item of note was that Mad Card revenue is up 31% from last year.
This needs to be reviewed every year; Jamey Wimble recommends we do not do a patronage rebate this year, as we need to reserve all funds for the single rebuild and other capital projects. We need to be financially conservative. Deri Meier made the comment that the rebate would be after depreciation and amortization; in which case we did not have a profit therefore there should be no rebate.
Motion: To accept managements recommendation for no rebate fiscal year 2004/05.
Upon motion duly made by Jed Kalkstein and seconded by Bill Reynolds, it was unanimously
VOTED: To approve the recommendation made by management.
Single Chair Rebuild Update
Jamey Wimble reported that engineering on the single is progressing. It looks like we will use our existing diesel engine as back up which could save as much as $50,000. The sand blasting of the towers will be doable but we are still looking at alternatives for the parking lot as traffic would have to be stopped for the helicopters and the painting could be an issue when cars are passing. He is trying to keep this part of the project away from the road and there is a possible area near the old mid-station on the double chair that could function for this project, which would be preferable. The price on the manufacturing has gone up as details are being worked out but nothing has been finalized yet. The engineering phase would begin first; and last through the winter, and a 10-20% financial commitment would need to be made prior to this phase. The deconstruction of the old single would begin immediately after ski season.
Christine Graham joined the meeting at 8:45 AM; and Al Russell and Deri Meier from the SCFC were also in attendance.
Single Chair Finance Committee Update
Geordie Hall, the Chair of the committee introduced Christine Graham and began the presentation of the report.
There was a list of 45 potential interviewees for the feasibility study; Christine Graham interviewed 23 people for her study and observed that this was typical. She asked the same specific questions of all individuals, these interviews were confidential and no one was specifically quoted. The group interview was quite diverse and opinions were reflective of this diversity.
The majority of interviewees liked the possibility of placing names on chairs but those opposed were of such a strong opinion she would not suggest placing names on chairs. Some individuals were against fundraising and felt this should be handled in a business like manner. Others did not see this as a ‘needy’ situation and would not consider this as a charitable endeavor. People did like the idea of selling the chairs but the sales prices quoted were much lower than the SCFC thought they would sell for. Many stated we should be cautions because we are weather dependent and we should not take on debt to do this. Most thought shareholders would be the primary source of funding. The core majority thought that $300-650,000 would be feasible from fundraising; there was a discrepancy from what they thought we could raise versus what they would give. Chrisitne is suggesting we could raise $700,000 from all sources. She discussed the tax-exempt status; she felt it was imperative that we have a tax-exempt possibility for individuals to give. We need to have a tax-exempt umbrella in place prior to beginning fundraising. She felt there was an avenue for recognition but those against it were very opposed and vocal about not doing it. A way to recognize individuals or memorials needed to be explored. She tested a $1.5 million pyramids and the general consensus was that was not possible. Several interviewees felt an assessment should be made to all shareholders but Christine did not feel this was possible; she also did not see the possibility of a large donation from any corporate or foundation source. She did a lot of research on foundations that were interested in skiing or preservation of environments in VT and analyzed their history of giving. Most fund ski competitions and clubs. She felt most major gifts would be in the $10-20,000 levels and would be very surprised if one or more individual gave $50k.
Charlie Tipper commented that Eric Friedman discussed what MRG’s importance was in the VT community; their conversations met with a positive response for fundraising for MRG. He questioned whether there was a disconnect between fundraising for the replacement of the single versus preservation of the single. Charlie questioned whether we reached far enough outside the community for potential fundraising. Christine stated if you were going to broaden the fundraising approach it would be a very different type of campaign. You need to target your community and gear the fundraising based on that decision. Based on her interviews she got a strong statement that those most likely to give to the cause were shareholders and people that skied at MR and currently active. Their may be some giving outside the shareholders but she would start with them. Many potential donors wanted to see a plan and know what others would be doing prior to making any commitment. This will require face-to-face requests for donations, and 100% commitment from the board and everyone on the committee to set an example. Who does the asking and who does the giving is extremely important in the early stages.
She recommends postponing the construction of the single until the fundraising plan is in place and a certain percentage of donations are in place. You need a strong case statement and business plan in place prior to approaching people for donations. What will make people give is their nostalgic feelings rather that logic needs for the single and preservation; the campaign plan will need to strike a balance. The plan needs to be in place to show individuals where all the money is coming from for the plan. One of her recommendations is that the first phase be a ‘silent’ period where you go to your major donors to secure donations between 40-60% of the total campaign to kick off the campaign before you go public. You can adjust your goal up or down based on the percentage received from the silent period. Christine suggested we begin fundraising at an initial target of $700,000 and adjust if necessary. Her timeline is over 18 months with an additional 6 months if required and that you have two winters involved in the campaign including the silent phase for one winter and one winter for the public phase. Construction should not begin until after the fundraising campaign is almost done. A fundraising campaign after the chair is installed people will be less interested in giving once the project is completed; she felt there could be a significant loss of funds but putting a number on it was difficult. People interviewed were very negative about chair sales and felt it would be taking money from operations to pay for the single chair.
The composition of the committee needs to represent both skiers and non-skiers if that is whom you expect to approach for donations. She recommends not selling the chairs until the end of the fundraising campaign as many individuals would buy a chair and feel that was their contribution. Also the chairs will bring a wide disparity of pricing at the beginning of the campaign versus the end of the campaign and that could create a negative feeling from those that paid $10,000 versus $1,000. The gala should be towards the end of the campaign in the public portion of the project. Focus should be place on foundations that have already given to Vermont projects. There was a long list of corporations that might give, but potential donors were not in favor of going this route and having corporations involved in Mad River ’s business.
Bill Reynolds asked what the impact would be if MR were on the National Historic Register, Christine felt it would be a benefit.
Geordie Hall’s presentation on the SCFC – Some of the discussion may be deferred to executive session because of confidentiality. Goals of the committee are 95% complete- have identified potential 501c3 partners; have competed the report, looking to authorize discussion with the 501c3, and begin planning the fundraising campaign. Share sales should continue through the co-op, chair sales should not be tied to the single.
Funding of $700,000 from fundraising, $800,000 from other sources. The committee feels the $700k is low. People on the committee and the board did not come forward with potential donors; knowledge of those individuals may need to come from other individuals rather than those involved with the campaign. Administration of the campaign will be a massive effort. The committee feels their part is done and the remainder of the effort needs to be transferred to MR staff. Must have tax-deductibility. PTV and SMF have been approached. There will need to have a partnership agreement signed off on. Wally Tapia, CPA works with both foundations and feels it is possible to have an arrangement with either. This partner MUST be in place before donations can be accepted. Many interviewed preferred SMF, but do not have the staffing in place to handle a fundraising of this magnitude. SMF can be involved but should not be a major player. Preservation Trust of Vermont has the capability to be involved at this level and would like to talk to us about being a partner. A working partnership needs to be with an organization that parallels our goals; there needs to be a preservation agreement in place to accomplish this partnership. We need to document what we want to preserve; there are benefits to having this type of documentation in place so everyone knows what theirs responsibilities are.
(At this point meeting minutes were taken by Bill Reynolds)
Geordie continued presentation from SCFC, with assistance of Al Russell, Deri Meier, Charlie Tipper.
Jay Appleton – requested that the board take action on various issues related to the single chair refurbishment
Motion made by Steve MacKenzie, second by Mary Schramke
Motion to transfer from the SCFC to Board’s Finance Committee responsibility for implementing back up financing
VOTED - Passed by unanimous vote.
Geordie Hall requested that the board consider a motion to authorize the SCFC to discuss 501(c)(3) partnership agreement with PTV and SMF
Upon motion duly made by Jed Kalkstein and seconded by Bill Reynolds,
Motion - to authorize the SCFC or its successor to discuss a fund raising partnership with PTV or other similar entity and to enter into discussions to define a Partnership Agreement.
Jamey noted his concerns about how the shareholders will perceive the partnership and the potential of ill will if it is believed that Board has given away the farm
Jay commented on the partnership being worth a half a million dollars.
Christine noted that the only way to get tax exempt status is for there must be something given up by the cooperative in exchange for receiving tax exempt funds.
Finnerty stated that he was unclear about the PTV is getting in return,
Christine Graham responded that they are getting a commitment from MRG that the single chair would be preserved
Contributions would be funneled through the PTV; there would be an administrative fee that would allow PTV to cover their costs of administering the contributions. By assisting MRG with the single chair fundraising project, PTV would be fulfilling their mission of protecting historic structures in Vermont
VOTED: Unanimous vote in favor of the motion
Jay Appleton indicated that there should be a discussion of the time line for starting the project. Jamey needs to know now whether the project will be started this year.
Jed Kalkstein stated he does not feel that he has sufficient information to make the decision as to whether the project should go forward in 06 or be delayed until 07. Jed indicated that the go – no go decision has to be made today and that he would like to have a month to further discuss this decision to determine if the decision can be broken up into pieces. Jed proposed that we look at the possibility of paying for the project in pieces by setting up a schedule of payments to the vendor so that they get the initial deposit and then receive payments for engineering, long lead time drive components. Purchasing the drive components would guard against the risk of a rise in steel prices. Jed didn’t feel that there was a need to commit to a final decision on December 15.
Mary agreed with Jed’s proposal and indicated that we would have a lot of information in January and February that we don’t have today.
Jamey indicated that he doesn’t like the thought of having money and commitments out there with out having financing nailed down. There are two main concerns are the 501(c)(3) status will not be in place that soon and that governs the ability to obtain financing. The second main concern is that Christine Graham has completed a comprehensive feasibility study and has recommended that we delay construction.
2007 construction – not really a concern
MRG does not have a code compliance problem that requires us to build in 2006
MRG staff and outside engineers have looked at the existing single chair and do not see any structural/mechanical problems that needs to be dealt with right away
Christine recommends that construction be delayed until 2007.
Banks line of credit is limited to a year and the terms might be subject to change.
Stephen MacKenzie – Eric Friedman put together a very comprehensive fundraising plan, not significantly different than Christine’s plan. Haven’t seen any convincing reason for delay and concerned about shareholder’s reaction to delay.
Jamey – Eric’s plan was predicated on starting the fundraising in July ’05.
Eric – Very compelling reason to put construction off to do it right.
Jamey Wimble– I have worked at four different ski areas and have seen projects that have been slammed together. We have time to do this right, his experience is that if a job is rushed late in the season we will pay for it in the long run.
Stephen MacKenzie – If Management is not ready to do the construction then, okay to delay but if delay is only attributed to fundraising. Very concerned about shareholders reaction to delay. If there is going to be a delay in the construction, it will be very important that the decision be explained very clearly to the shareholders.
Jay Appleton– Concerned about incurring debt and we are a weather dependent business. If we do saddle ourselves with a lot of debt and we go into some low snow years we will be exposed. We should hear from the shareholders.
Jed Kalkstein– The finance committed concluded that we can bear the cost if the past is any indication of the future.
Geordie Hall– We do not currently have the money. 900,000 is our bank debt, we have 375,000 in the capitol reserve fund, that is 1,275,000, our goal is 1,500,000. so we currently have a $225,000 shortfall.
Charlie Tipper – It comes down to whether the partnership agreement needs shareholder approval then there has to be a delay. If the board feels that they do not need shareholder approval to enter into the partnership agreement then he believes that we should not delay.
Deri Meier– This fundraising opportunity is our one big shot, we need to do this right. It is not optimal to start this year. Deri recognizes the downside of delay but the reasons can be properly explained to the shareholders. Deri supported delay from a fundraising perspective.
Shawn Kalkstein (shareholder) – Disagree with Deri on issue of delay. The only thing that supports delay is Christine’s assertion that once the single construction is completed, fundraising enthusiasm wanes. MRG is at the cutting edge; the history of MRG is contrary to conventional thinking. We will loose momentum if we delay.
Karen Kalkstein (shareholder) – Agrees that the coop needs to resolve the issue tax deductibility right away but does not support delaying construction. Taking the lift down will create urgency and enthusiasm and pressure to get new lift built.
Mary Schramke – frustrated over delay, concerned that work won’t get done without pressure.
Lu Putnam (shareholder)– we should move ahead with construction. Shareholders will be upset, especially if there are problems with the single like last year.
Charlie Tipper (shareholder)– Key issue – Does entering into the partnership agreement with PVT need shareholder approval. Charlie believes that the board should create a task force to resolve this issue.
Deb Steines – Sense of urgency can be recreated. The shareholders she has spoken with felt that financial stability was more important that moving forward. Not in favor of debt. Wants to go forward with minimal debt. She is more concerned with financial stability and our responsibility to the Cooperative than what the shareholders think. We need to explain to the shareholders the reasons for any decisions.
Bill Reynolds agreed with Deb Steines that it would be unwise to go forward if the 501(c)(3) issue is not nailed down. We have a recommendation from a professional fundraiser who recommends delaying the project. Reynolds commented that he was concerned about what the shareholders think, but we have a fiduciary responsibility to the cooperative to go forward in a sound planned fashion. We don’t have the answer to a fundamental question regarding 501(c)(3) status. To forge ahead without the 501(c)(3) issue nailed down would not be a sound decision.
Jed Kalkstein– No one is saying that we should go forward, not ready to make the decision. We have only had a few days to review Christine’s report, the finance committee has not yet talked about dept, and we have not considered whether it is possible to segment the project in a way that breaks down the 1.5 million cost into smaller numbers over time. I want to know what the implications of any decision are but we don’t have to make the decision yet.
Geordie Hall indicated that Christine recommended delay in order to do a proper job of fundraising. Geordie asked Christine if the coop decided not to delay the construction would that impact her willingness to work on the fundraising campaign.
Christine responded that as she indicated before she would only be willing to work on the fundraising campaign if the 501(c)(3) tax deductibility in place. Once the 501(c)(3) is in place then she will be willing to work on the campaign. If the campaign is started in March then she will assist the coop in attempting to raise the money in 9 months. She doesn’t think that it will be easy to do in 9 months. It has been her experience that fundraising generally takes longer than you think.
Geordie advised that his involvement in the SCFC has been very extensive over the past couple of months and that he will not be able to continue at the same level of involvement. If the project is going forward under a tremendous time table to get things done then he will have to step down. The SCFC will have to be reorganized. Its very hard to get people engaged and involved in this cooperative, it takes time and selling.
Charlie recommended waiting a month to see how the 501(c)(3) issue is resolved
Jamey advised that the Act 250 process is starting right now, it will be a problem if we have to submit act 250 paperwork and then withdraw it later. Also, as we get closer to the ski season, office is getting lots of questions from shareholders. Jamie advised that he didn’t see that a lot of the questions being answered in December. Still a lot of other thing need to be put in place.
Eric Friedman commented that coop stewardship and proper management has put us in a good position. The coop has socked money away and bought flexibility. The cooperative didn’t have that luxury with the double. The cooperative has the opportunity to capitalize MRG for the future. A lot of stuff doesn’t get done because we don’t have the money. Raising the money for the single chair would free the coop to pursue these other projects. We should delay the construction. Delay will be seen as a positive thing, i.e. not rushing the project.
MOTION was made by Geordie Hall: to delay refurbishing the single chair for one year.
Seconded by Bill Reynolds
Voted: 4 in favor (Geordie Hall, Bill Reynolds, Jay Appleton, Paul Finnerty), 3 opposed. (Jed Kalkstein, Steve MacKenzie, Mary Schramke), Motion passed
Bill Heinzerling commented that the PVT are good folks, this is an emotionally charged issue and if cooperative delays construction it will let people down. He also commented that there are safety concerns.
Bill Reynolds asked Jamey if he had any concerns about the safety of the single operating for another year and if there will be any difficulty complying with Labor and Industry code if the project is delayed a year.
Jamey responded that they had no concerns about the safety of the lift. There are no guarantees that the lift won’t break but he advised that a new lift would be no different. Any lift can have mechanical problems; he has seen brand new lifts have their gearboxes explode. Safety code wise the cooperative will not be sacrificing anything by waiting a year.
Paul Finnerty commented that delaying construction would maximize the fundraising opportunity. The strategic plan states that the cooperative should make every effort to minimize debt. When the shareholders voted to refurbish the single chair they didn’t give a timeline. A vote to postpone construction in order to maximize fundraising is not in conflict with the will of the shareholders. If we fall short on fundraising it will effect the cooperatives ability to pursue other capitol projects such as the purchase of the 20 th hole, patrol building, birdland chair. The prudent approach would be to take the time to maximize fundraising capacity because that will give us more options in the future.
Geordie Hall– requested that the board take up the issue of reauthorizing the SCFC to start working on planning the capitol campaign.
Motion made by Mary Schramke and seconded by Steve M.
MOTION: to authorize the SCFC to continue the process of developing a recommended organization with Christine, start the partnership agreement process, start the planning process where appropriate including: chair sales, tax deductible contributions, retail, foundation grants and public funds
Passed by unanimous decision
Executive – no action
Finance – No action.
Facilities – no action
Board Development – no action
Personnel – No action.
20th - No action.
Shareholder Relations – no action until ski season.
Shareholder Comments –
There being no further business to come before the board, the meeting adjourned at 12:45 PM .
Respectfully submitted, Deb Steines
A true record.
Debra Steines, Secretary