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Meeting of the Board of Trustees, December 8, 2001

 

Past Meeting Minutes

After due notice, a meeting of the board of trustees of the Mad River Glen Cooperative was convened at 8:00 a.m. on December 8, 2001, at the Basebox at Mad River Glen Ski Area in Fayston, Vermont. Trustees Bleier, Coleman, Kirkpatrick, Michl, Putnam, Russell, Schultz and Steines were present (Eaton was absent). The Cooperative’s president presided.

 

Call to Order

President Russell called the meeting to order at 8:06 a.m.

 

Shareholder Comments

Deri Meier commented on the 2001 audit results, which he finds disappointing, compared to the 1998 results, the co-op’s previous best year. Weather wise last winter was the best in 10 to 20 years and the bottom line, at best, will be equal to net profit 1998. Revenue was up $600,000 and expenses were up $585,000. He questioned the increases of administration $200,000 versus $120,000 in 1998; facilities $30,000; and marketing $40,000. He feels the 2000/2001 ski season was a missed opportunity. Mad River is no longer a low overhead ski area. We have built up the expense base and shareholder expectation. He thinks future upgrades will have to come from operation profits because shareholder sales will probably not be sustainable long term. He asked the board to take a good look at the expense base and what we can be and what we cannot be during the strategic planning effort.

 

Mr. Russell reserved the right to respond to Mr. Meier’s comments until later on in the meeting since the audit results are an agenda item.

 

Approval of Prior Minutes

After brief discussion, upon motion duly made by Ms. Kirkpatrick, and seconded Ms. Putman, it was unanimously

VOTED: To approval of the November 10, 2001 meeting minutes.

Management Report

The following is the December 8, 2001 Management Report as submitted.

Mountain Operations:

Capital Projects are complete and we should come in around $7,000 under budget on 2001 total capital expense.

Snowmaking will begin as soon as weather permits.

All five lifts are inspected

Scheduled opening is December 14 with the main mountain. If the Practice Slope is operable by December 21 and the main mountain is not, we will go with just the Practice Slope only. Christmas Day we will open at 12:00 noon.

We have been granted $9,900 for the clean up work done in the woods this summer of a possible $10,000 from the State of Vermont.

Mad River Glen party applications and bids are available in the Basebox and on the web site. Individuals wishing to use the facilities for winter or summer fill them out and submit to Glenn Gutterson.

Financials:

September 30, 2001 audit draft is in. Net ordinary income of $338,566 (before depreciation and amortization). Net Income $109,428

Patronage Rebate on this fiscal year would be $23,237 of witch 20% could be collected in cash

Preliminary November P&L. looks good $18,110 under budget (see attachment)

Share Sales:

Sold 2 shares this month against a budget of 7

Andrew has done a lot of work on the shareholder only web page. It has a lot of information on it and we encourage shareholders to use it.

As of 12/3/01, we still had 307 delinquent APR payments

Staff:

Department Heads began full time work 12/3/01. International workers will start arriving 12/16/01

Department Heads and Management met 12/4/01 for pre season briefing and orientation. Feedback was good and moral is great among the group for the upcoming season.

General Discussion

In response to Ms. Kirkpatrick and Ms. Putnam questions, Mr. Wimble stated that it would not be possible to delay the arrival of the ten international employees, and that the housing for them was set.

 

Ms. Kirkpatrick asked if APR delinquent letters would be sent. Mr. Wimble responded that letters regarding the December 1 dead line have already gone out. He expects most delinquent shareholders to pay on their first day of skiing, though the intent of the letters is to avoid everyone paying on the first day. Ms. Putnam added that there is a $25 late fee for payments received after December.

 

Mr. Russell commented that the shareholder web page is up and running, it looks great, and the update ability is much easier. He encouraged board members to visit the site.

 

Mr. Russell noted that applications for rental of the basebox are available online and asked if management was increasing promotion of basebox availability for functions. Mr. Wimble replied that Glenn has done a good job putting material together for potential renters. Functions are booking for the summer. Mr. Russell asked if investments should be made for place settings, glassware and utensils to support this type of use. Mr. Wimble responded that 50 new chairs have arrived, Glenn is stocking up on some items and that Valley Rental is a good source.

 

Ms. Putnam asked if there was any desire to set something up for new years. Mr. Wimble stated that nothing is currently planned and it is probably too late to organize an event now.

 

Mr. Bleier commended management for the attractive dumpster screen. Ms. Putnam added that the hinges on the doors in the ladies bathroom were changed.

 

The board unanimously agreed to accept the management report.

 

November Profit & Loss

(see attached)

 

Mr. Russell questioned the Basebox income and expense. Mr. Wimble responded that the figures are a result of the "Bid and Boogie" fundraiser event for Spring Hill School, and we are still stocking up on condiment items. Mad River donated the facilities and proceeds from the bar to the Bid and Boogie, which was very successful event that received many favorable comments. We covered all of our expenses but did not take any profit. Mr. Bleier asked if there are criteria for donating versus charging for the facility. Mr. Wimble replied that there are no set criteria; management uses best judgment in determining which functions merit a donation of the facility.

 

Financial results of operation for the last month and for the fiscal year to date may be summarized as follows:

Period

Income

Expense

Profit (Loss)

November 2001

$15,517

$93,669

($78,152)

YTD

$462,647

$241,981

$220,666

Cash on hand: $522,000

 

The board unanimously agreed to accept the management report.

 

Capital Projects Update

(see attached)

In response to Ms. Putnam question, Mr. Wimble explained that the restroom ventilation systems are ionizer units, which are guaranteed to eliminate any odor in the bathrooms. Each bathroom has a system that can handle four times the amount anticipated.

 

Mr. Wimble explained that the ‘na’ means the work was deferred and the ‘dash’ means that an invoice is yet to be received.

 

In response to Ms. Steines question, Mr. Wimble explained that the costs associated with trail work and trail work wages was covered by the grant money and most of the actual work was off trail clean up ice storm damage. This report does not include the trail work grant money nor the income received for the sale of the two goomers, therefore the net would be approximately $175,000. Mr. Russell stated that since those incomes fall under capital they should be included on the report.

 

Mr. Coleman asked if folks were please with the new shed. Mr. Wimble responded that all reports have been favorable.

 

The board unanimously agreed to accept the management report.

 

2001-2002 Cash Flow

(see attached)

 

Mr. Wimble explained that this is a budget report and should be use as a tool to be used to input the actual figures to see where we are at any given time. The only actual figure is the October beginning cash balance of $305,603. As noted at the bottom of the reported figures include the $75,000, but do not reflect the fact that that money is in reserve. Prior year $75,000 is not included in this report. Mr. Wimble recommended including the reserve every June of each year. Mr. Michl asked however reported it must be explicit if it is included or not in the figures. Mr. Wimble explained that an actual column would be added for each month as those figures become available. Mr. Coleman noted that over time the board would become familiar with Mr. Wimble reporting methods.

 

In response to Ms. Putnam’s question, Mr. Wimble explained that the Mad Card figures are included in net operating income and as they are redeemed the amount is backed out of the monthly Mad Card figure. The APR figure is mostly Mad Money, and preseason sales figure is mostly passes.

 

The board unanimously agreed to accept the cash flow projection report.

 

2000-2001 Audit Figures

(see attached)

 

Mr. Michl recommending delaying the discussion until after the Finance Committee’s conference with the auditors unless people had specific questions regarding the preliminary year-end audit for the auditors to clarify. He asked Mr. Wimble to coordinate the conference call between the Finance Committee, Sharon Crawford, Jamey Wimble and the auditors. The bylaws require a yearly audit. The cost of the audit is approximately $3,500 not including tax preparation costs.

 

In response to Mr. Bleier’s question, Mr. Wimble responded that he is currently re-evaluating the budget due to lack of snow fall and late for opening day. The commitment has been made to the international employees, though they have the ability to work at other jobs. Many of the other seasonal employees are in the construction trade, therefore have not been laid off from current jobs.

 

In response to Mr. Meier’s earlier questions, Mr. Michl responded that extra monies spent to studying and staffing the basebox in December and January, there were board development expenses and unusual non-recurring G & A for people. Mr. Russell added that the record snowfall did was not received evenly throughout the winter, and the mountain did close twice last winter. Ms. Kirkpatrick added that the board has seen general administration costs going up. Mr. Michl comments that season passes are up $65,000, and we are taking steps to capture revenue.

 

In response to Mr. Bleier's questions and comments on the Mad Card, it was agreed by consensus that the by-laws reference to "preferred access" for shareholders should not be loosely interpreted to mean nor imply that shareholders are entitled to "preferential pricing."

 

Committee Reports

Facilities: Mr. Coleman reported that the Facilities Committee did not meet in November. Bill Heinzerling faxed a letter the Mr. Coleman, which discussed screening of the dumpster and improvements to the bathrooms, which have both been addressed. Mr. Heinzerling’s letter will be passed along to management.

 

There was general discussion about shareholder letters and how they are handled, specifically should they go directly to management or should they go though a committee first. Mr. Russell commented that development of this policy has been tasked to the Shareholder Relations Committee.

 

In response to Ms. Putnam’s comment, Mr. Wimble responded he was working on getting Mad River into the Burlington phone book.

 

Mr. Wimble is developing a facilities program for next year. He will get it to the Facilities Committee by the end of the month, which means the board would see a preliminary list at their January 12 meeting.

 

Mr. Coleman added two items that the Facilities Committee is currently addressing 1) a radiator system to decrease the noise generated by the single chair engine, and 2) a heat recovery system, which the Ski Areas Association and Governor’s are supporting through the energy efficiency programs where money may be available to off set costs. Because these may not be an inexpensive option he does not anticipate implementing either this season. In response to Mr. Russell’s question, Mr. Coleman responded that the estimated cost could be $40,000 with a five year payback back, including the off set monies we could see a practical rate of return. Realistically it will be a project for next summer. Mr. Wimble added that Jim Jeffords’ office is also working on an efficiency program with the VSAA with potentially 0.5 million available to the ski areas on a very competitive basis.

 

Finance: Ms. Steines reported that the last meeting was November 28, minutes were distributed to the board, as previously reported the committee is not moving further on limiting tickets sales. The committee will be discussing the depreciation schedule with the auditors. The patronage rebate program is on the agenda for later in this meeting. The committee plans to continue with the conference call meetings. We also looked at the October financials and discussed the CD and no issues arose. The next meeting is scheduled on January 16 at 3:00 p.m.

 

Mr. Russell asked the Finance Committee to address carrying cash and debt at the same time. Ms. Steines commented that the debt identified in the auditors report is for the leased vehicle.

Mr. Bleier asked if there was a preference for where we would go for future loans. Ms. Steines replied that it would depend upon if we needed a short or long-term loan. Each loan need is looked at individually.

 

Shareholders Loan Finance: Mr. Coleman reported that the group has decided to meet during the ski days in mid January.

 

Shareholders Relations: Ms. Putnam reported that the committee would be meeting this week to discuss shareholder letters, rights and responsibilities, and review of board’s response to the proposed bylaw amendments.

 

Board Development: Ms. Steines reported that the committee is working on a code of ethics, recommendation for committee minutes, and employee/trustee conflict of interest policy. At present, the committee has nothing formal to present to the board.

 

Ms. Kirkpatrick added that the board might want to invite board candidates to the strategic planning meetings to assist in keeping potential new board members informed; also they may represent various stakeholder groups. Ms. Steines responded that the strategic planning process will be ongoing and board member changes are inherent with the structure

Ms. Kirkpatrick suggested that the committee needed to develop a time line for the upcoming elections.

 

Mr. Bleier stated that he feels strongly that the Board Development Committee should be holding public meeting because it is developing rules and format, and the election process and owners should be part of the process. In response to a question by Mr. Bleier, Ms. Steines stated that the Board Development Committee has had no formal meetings, nor executive sessions, nor are they presenting any Committee approved motions for the board to address.

 

Personnel: Mr. Russell reported that the committee has not met because there are no tasks assigned to.

 

20th Committee: Mr. Russell reported that the committee is waiting for site analysis before making any recommendations. He anticipates meeting in the next few weeks.

 

By Laws Revisions

Mr. Russell stated that the Board Development Committee is working on conflict of interest issues; limiting number of employee/trustees on the board, but with Mr. Eaton’s absence will postpone presentation. The recommendations must be complete by the February meeting. Ms. Steines asked that the schedule be emailed out to the board. Mr. Friedman added that the schedule is in the September (?) meeting minutes.

 

Strategic Planning

Mr. Russell reported the board met with Patricia Floyd last month to discuss the possibility of employing her to facilitate development of the strategic plan. Ms. Steines briefly reviewed Ms. Floyd’s qualifications and consulting experience. After discussion of the task on November 10, Ms. Floyd submitted a work proposal. Mr. Russell believes Ms. Floyd to be ideal for the project because she is local, a good fit with the board, and her fee is reasonable. Mr. Michl felt that she would work well with the personalities of the group. Ms. Putnam added that she feels Ms. Floyd will work towards consensus and unifying the group.

 

Upon motion duly made by Ms. Steines, and seconded Ms. Kirkpatrick, it was unanimously

VOTED: To accept the proposal from Lets Talk Work/Patricia Floyd as presented.

 

After thorough discussion concerning when and where to meet, and who would attend the strategic planning meetings, the board agreed to add strategic planning to regularly scheduled board meeting agendas with Thursdays or Fridays, late afternoon or evening, meetings a second choice; the process will be started with the current board, Jamey and Eric; meetings will be open to all owners; meeting in the Basebox if available.

 

Mr. Shultz recommended that shareholder comments be allowed at the end of the meetings during the strategic planning process. Mr. Russell will contact Ms. Floyd regarding scheduling.

 

Patronage Rebate

The following is the Patronage Rebate Summary as submitted by the Finance Committee.

 

Rationale:-

Vermont Co-op law requires a co-op to consider a patronage rebate in years a profit occurs. The decision to declare one rests with the board. Coops are expected to operate on a break-even, non-profit basis with any excess of revenues over expense to be returned to its members in proportion to their purchases. Benefits are based on usage, not investment.

 

While we adopted a Coop structure for predominantly legal reasons, the economic basis for a coop is consistent with our aims of having shareholders spend their skiing dollar with us.

This year is only the second of six when question of a rebate has had to be discussed. Issuing a rebate would send a message to the shareholders and potential shareholders that we are profitable.

 

Mechanics:-

The calculation is relatively simple. The % of net profit to sales is applied to each member’s individual purchases. 20% of this amount as a minimum should be distributed in cash with the balance at board discretion being retained in an individual’s saving account in their name.

 

In 1998, we gave shareholders the option of asking for this 20% in writing and only $349 of the $31,208 total rebate was paid.

 

Listed below are sample calculations to illustrate the mechanics and the impact.

 

1998 Actual

($000)

2001 Actuals

($000)
     

Total Income (000's)

$1640

$2275

Net Income (before rebate)

124

110

% of sales

7.5 %

4.8 % (4.5% rebate)

     

Sales to Shareholders

$414

$516

Shareholder Portion of sales

25%

23%

Rebate to Shareholders

$31.2

$23.2

The impact on individual shareholders varies significantly.

 

Minimal user

Average user

Heavy user

Purchases

$200

$400

$1400.

% rebate

4.5%

4.5%

4.5%

Rebate

$9.00

$18.00

$63.00

20% cash portion

$1.80

$3.60

$12.60

The balance (80%) of the rebate that is not payable in cash is held in the shareholders account. If a shareholder surrenders his/her share the payment is the base price of the share plus the balance of the patronage rebates.

 

Benefits:-

1. Increasing ownership- As MRG becomes more valuable due to continuing re-investment of operating profits, that portion that came from Coop members’ usage remains in their name.

2. Tax benefit - Although we currently have a tax loss carry forwards to cover this year’s net profit, a patronage rebate would shield future income.

3. Shareholder benefit - Symbolically, a patronage rebate would recognize a very successful year, and reduce any pressure for up-front benefits. Criticism of price increases can be deflected as excess income could be rebated to shareholders.

4. Share sales - As a further inducement to buying a share, we could cite a patronage rebate (reduction in cost) in two of the last six years.

5. Increased use of Mad money – a positive for cash flow and added marketing benefits.

 

Costs:-

 

  • Administration – Calculation of rebate and input of data into system. If management so decides the committee would support hiring a consultant to assist with this process.
  • Cost of the rebate itself.
  • Pay out on leaving - On surrendering a share, all of the patronage rebate is payable.

 

Conclusion:-

The Finance committee recommends granting (not granting) a patronage rebate in the amount of $23,237 for 2000/2001. Granting a patronage rebate is an opportunity to reemphasize the Coop’s viability and acknowledge shareholder support. It has tangible tax benefits and represents a small expense at this time.

 

We also would support hiring a consultant to assist with the calculation and automatic feed into our shareholder accounting system to reduce the burden on the office staff.

 

General Discussion

Mr. Wimble pointed out that we are still caring a negative balance under retained earning. It is a labor-intensive task for the staff to put together. We are working on making the task less time consuming. Ms. Crawford will track the amount of time it takes to compile the paper work. Mr. Bleier asked if there was a way to minimize the amount of work by asking the shareholders if they want to roll over the rebate into their accounts and keep doing so until the shareholder otherwise notifies the staff. Ms. Kirkpatrick asked if hiring a consultant would help support the program. Mr. Wimble responded that for initial computer program set up a consultant could be helpful, but for the actual labor part of the program it would not be efficient. Mr. Russell questioned the figure used to calculate the rebate when the coop shows a profit. Mr. Meier responded that expenditures include non cash expenditure depreciation, the idea is that the coop runs at a break even and any extra revenue over expenditure is reimbursed to the shareholders in proportion to their use. Mr. Schultz clarified that the regular P&L profit figure is used in the calculation. Ms. Steines yielded the floor to Mr. Meier, who explained that the figure had to be tie to tax return because it affects the tax liability. Therefore as a practical matter, the figure is our audited P&L including depreciation and expenditures, but not including capital investments. Mr. Monte added that the courts have not interpreted the language of the law; therefore the common meaning is used.

 

In response to Mr. Schultz’s question, Ms. Steines and Mr. Michl explained that the rebate program is a complicated subject and that we need to do a second test before we can determine the shareholders perception of benefit, though it does reflects positively on the health of the coop.

Mr. Bleier asked that the Echo article articulate the fact that purchase of mad money is how we determine what percentage of sales are attributable to the shareholders as apposed to the general public. Also, information regarding additional mad money purchased above the $200 APR is applicable to next season with no risk of losing that additional money. Ms. Steines responded the she would wok with Eric on the article.

 

Upon motion duly made by Ms. Kirkpatrick, and seconded Mr. Michl, it was unanimously

VOTED: To declare $23,237 shareholder rebate for the fiscal year 2000/2001, payable up to 20% in cash with the balance to shareholder accounts, payable March 1, 2002, to shareholders of record December 8, 2001.

New Business/Further Shareholder Comments

 

Mr. Bleier asked for clarification of off the record remarks at a public meeting. Ms. Kirkpatrick responded that off the record comments are usually humorous or frivolous and not included in the minutes.

 

Ms. Steines asked for that food be considered for winter meetings scheduled from 5 p.m. to 9 p.m. Mr. Wimble noted the request.

 

Ms. Putnam asked that a lift up counter be considered to allow access to the racer area when not in use by racers.

 

Mr. Bleier asked how to get the Shareholder Relations Committee recommendations, which were voted down last meeting, on the ballot. Mr. Monte will consult the bylaws to answer the question for Mr. Bleier.

 

Jim Vann stated the shareholder patronage rebate is difficult to understand and a better explanation is needed.

 

Bill Heinzerling stated that he was unclear about how a shareholder should communicate proposals/comments to the coop. Mr. Russell replied that letters should go the management or facilities committee or to the suggestion box. If a proposal is submitted to the board the proposal would then be routed to the appropriate place be it management, a committee or the board.

From the podium, Mr. Bleier commended management and the board going into the season on the positive atmosphere. He requested, as a telemark mecca, the triple crown should offer a tele woman division, which is a growing market and should encourage. As an employee, he requested that management consider facilitating insurance for seasonal employees for a group policy.

 

Kay Fiorenza asked if the rebate program was worth the amount of work it takes to distribute the rebate and questioned the effect on personal income on ones tax returns. Mr. Schultz responded that the board understands it is additional work for the staff and hope that ways can be developed to minimize the additional work, and Mr. Meier explained the rebate is deductible against costs of being a member of the coop.

 

From the podium, Ms. Putnam asked the "no stop no fall’ program be reinstated. It was a long-term tradition. Mr. Heinzerling also supports bringing back the program and suggested that it be managed by the patrol and the reward pins should be brought back.

 

Ms. Kirkpatrick requested that management look into a swipe system since they have changes significantly since they were first evaluated.

 

Adjournment

There being no further business to come before the board, upon a motion duly made by Ms. Steines and seconded by Mr. Bleier it was unanimously

VOTED: To adjourn.

 

The meeting adjourned accordingly at 10:33 a.m.

 

Respectfully submitted,

Margo B. Wade

A true record.

 

ATTEST:

Robin "Rocky" Bleier, Secretary

 

Attachments

 

November 2001 Profit & Loss

Capital Projects Update

2001-2002 Cash Flow

2000-2001 Audit

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