MINUTES

The Board of Directors of Brooktrails Township Community Services District met in regular session October 11, 2005 at 7:00 p.m. in Brooktrails Community Center.

A. PLEDGE OF ALLEGIANCE

B. ROLL CALL
Roll call showed the following Directors present: Ziady, Horrick, Pohlson, Skezas and Orth. Also present were General Manager Chapman and District Counsel Neary.

REPORT ON CLOSED SESSION
None.

C. ADDITIONS/ADJUSTMENTS TO THE AGENDA
None.

D. MINUTES OF PREVIOUS MEETINGS

1. September 27, 2005 – President Orth noted that the date at the top of the first page needed to be corrected to read September 27, 2005. Director Pohlson moved to approve the minutes with this correction; Director Skezas seconded and the motion carried unanimously.

2. Review of Accounts Payable Report and authorization to issue checks.

Director Skezas moved to approve payment of the accounts; Director Horrick seconded and the motion carried unanimously.

3. Ron Runberg – Annual Report of Golf Course Operations.

Mr. Runberg prefaced his remarks by saying that the golf course is headed in the right direction. He noted that volunteer help has made possible a number of the improvements in the past year. He said the slogan for the golf course is "Emerald of the North." He noted Ukiah recently more than doubled their annual greens fee, while we went up $20.00, and he is seeing more players from Ukiah.

President Orth noted that the District will be struggling for some years to come with the results of the years of cumulative loss, and it was wonderful to see Mr. Runberg bringing the golf course around. Director Pohlson commented about how the account “depreciation” affects the financial picture, and how we will be dealing with that into the future. She hoped to see money rolled back into the course in future for improvements and said there will not be profit-sharing. She commented that Mr. Runberg could make a 5-10 year projection for changes he would like to see, and that, when profit-sharing could be considered, these long-term changes should also be considered. Director Pohlson then commented on the condition of the bridges, abutments and footings. Director Pohlson said she would like people to recognize that our golf course is the only one with a stream with salmon migrating through it, which we have protected. Mr. Runberg said he was told it was the second-longest salmon run in North America.

Director Skezas asked about Mr. Runberg's wages; Director Horrick noted a draw was included in the financial statement. An audience member commented that across the country, the old 18-hole courses are not doing as well as 9-hole courses. Mr. Runberg agreed that the 9-hole course appeals to a larger demographic group, and that golf is down 14% in California, although our own greens fees have increased.

Mr. Runberg said he would like to purchase the golf course pro shop in the future. He said the electrical breakers pop all the times, and he can't run the air conditioning because of this, and he runs out of space for tournaments. He said the District would never lose possession of it, but would have zero maintenance. He could then expand the shop at his own expense and be able to sell it as a business in the future. Mr. Runberg was not sure how such an arrangement would be structured. President Orth commented that Director Pohlson's request for a 5-10 year plan was desirable. Direction was given to counsel and staff to figure out the options for this; President Orth advised that this should include options for Chipp's House too. Mr. Runberg said he would present a long-term plan next year. Director Skezas moved to accept the report; Director Horrick seconded, and the motion carried unanimously.

4. Report on statement of cash flows for June 30, 2005.

General Manager Chapman said that the cash flow statement was being presented at the request of Director Skezas from the last meeting. In its simplest form, a cash flow statement is a "snapshot in time." He reviewed the entries on the statement attached to his report. Director Horrick asked whether depreciation affected the debt; General Manager Chapman said no, but depreciation was (1) a non-cash item in terms of cash flow statements, and (2) reflected a book value decline of an asset over time. He said a cash flow statement was harder to understand than an income statement. Director Pohlson asked whether we would still have depreciation if the loan were paid off. General Manager Chapman said the depreciation reflected primarily the purchase of the irrigation system for $184,000 in 1994, and that depreciation was different than reduction of the principal on the loan. Director Pohlson then pointed out that the life of the loan and the life of the infrastructure did not coincide. Mr. Chapman said he would review the lifespan for the irrigation system, and said the irrigation pipes have a longer life span than the pumps. President Orth commented about the replacement of degrading steel pipes at the golf course with PVC. The conversation then moved to seismic movement and the potential for pipe breakage at the golf course

Director Skezas asked if owing the Water Fund was legal. District Counsel Neary responded that as long as it is a recognized liability on the balance sheet, it is. He then discussed the need for the intent to pay back this liability to the water fund and noted there was a methodology for interfund transfers. He further elaborated that at the beginning of the year, you can use available General Fund money to subsidize an internal enterprise district, as long as it's later evened out. You can use water money as long as you know golf or fire money is coming in during the year. General Manager Chapman recounted that on June 30, 2004 we had $178,000 in the General Fund, but that the auditor made a huge adjustment on July 1, 2004 and now the General Fund has gone to a minus. He said we will do an analysis in the next few months, after we receive our audit from Terry Kreig, and also raise the question of an accelerated loan payment back to golf. He reminded the Board that the General Fund still had approximately $90,000. He said he believed we would be able to adjust the $62,000 loan payment schedule for the outstanding sewer payment. He said if we had not had to deal with ERAF, we would have been able to do what our budget suggested we could do all along, but he said he certainly recognized that we now have a problem to deal with.

District Counsel Neary gave an example whereby, for example, on July 2 you were spending money for the fire district, but you did not necessarily have any money coming in for the fire district until December. The answer to this was using other sources of revenues. He said with retroactive accounting and standards, that adjustment needs to be recognized on the District books; he said he believed a retroactive application is all that's required and that you can spread it out over several years. General Manager Chapman repeated that he felt the problem was solvable, although not necessarily by June 2006. He reminded the directors of the District's being $50,000 in the red five years ago.

Claudia Reed of the Willits News asked why the original debt from Golf to the Water fund had increased. General Manager Chapman tried to separate the issues of money owed to the sewer fund versus cash deficit owed to the water fund. By dissolving the Golf fund, Terry Krieg transferred all the expense against the General Fund, but the assets (i.e., capital equipment, land) went to the 800 balance sheet account. Ms. Reed asked again why the balance increased. Mr. Chapman said on June 30, 2003 it was $38,825. President Orth said a lot of that was because we had a District employee working on a golf course. When the state took $116,000 from the General Fund (i.e., ERAF shift), we lost our flexibility. Had this not happened, President Orth summarized, we would not even be having this present discussion. Mr. Chapman added the biggest liability the District will have for the golf course is insurance, unless we have a major pump capital repair problem. Ms. Reed asked again why the debt increased from $38,000 to $85,000. Mr. Chapman said that between 6/30/03 and 6/30/04, we had an employee maintaining the golf course, and that this was an expense.

Director Horrick and Mr. Chapman continued to attempt to clarify the issue for Ms. Reed. Mr. Chapman said that if we had not spent $95,000 on the fire truck and CFIP, we would have been able to repay much of this debt. However, the District took advantage of the fire truck opportunity when the grant was announced. Repayments had already been scheduled via the budget, but the District seized the opportunity to purchase the fire engine and utilize the grant funds, based on the assumption of continuing health for the General Fund. Then the ERAF cut happened in November, 2004; the state cut $116,000 from the General Fund. President Orth and Mr. Chapman commented that had we known this was going to happen, we would have done some things differently.

5. Consideration of BPOA Community Center lease renewal.

General Manager Chapman summarized the benefits that the Center provided for the community. The present lease expires November 30, 2005. He suggested that the lease be considered again in three years after the post-ERAF General Fund situation is better known. He pointed out that the District is supporting the golf course as a community asset, but with a healthy General Fund, there was no reason why the District couldn't better support this community asset as well, which is used by more Brooktrails people than the golf course. He proposed to raise the rent from $60/month to $90/month and cut out the pay telephone ($54/month). Director Ziady asked how they would call for help in a medical emergency, and Director Skezas said there is a pay phone across the parking lot by the golf pro shop. Director Ziady said that propane and electricity were going to escalate, and she felt there should be a trigger mechanism for BPOA to participate in the extra expense, should this occur. Director Horrick hoped that in three years we will be better able to contribute to community center expenses. Director Pohlson said she felt the current arrangement was good, and that if we have extra money in future, the District office should be replaced instead of subsidizing BPOA. Warren Miller, BPOA president, said he couldn't make any comments until he heard something from this Board to take to the BPOA. He said any increase would probably be passed on to rentals.

Bob Houtz of Harrah Place said BPOA has been pretty healthy monetarily for some time. He asked exactly how the heat and electric were being paid for on the building. General Manager Chapman then read a portion of his staff report dealing with propane, and said he has to consider fairness to the ratepayers as well as BPOA, and it would be questionable to take on more of the of the costs right now when the General Fund has taken a hit from the auditor. Mr. Houtz thought that BPOA could wait three years and help pay their share of utilities.

Director Horrick said the $30/month rent increase would probably be far less than the increased cost for propane and electricity to the District. Director Pohlson voiced that the annual rent is now $720; the cost of propane was $1,277 for the Center last year alone, and the electricity was $1,227. She noted that the District was paying for using the room by this subsidy. Director Ziady said she appreciated everything the BPOA did, but there was a countrywide problem in energy costs which will impact this District. While BPOA accounts for 29% of the total propane cost, the total cost must be paid, and she felt we needed to ask BPOA for help. President Orth suggested that a rental fee surcharge could be put on as the energy costs increase and said everyone will understand that.

General Manager Chapman said his point was that once the General Fund recovered in a few years, we should take another look at the District's level of support. He made a comparative statement about how much the District supports the golf course, another great asset. He then asked for direction. Director Ziady said she had taken into account the rent increase, but wanted a trigger point where BPOA contributed more towards electricity and propane. She said Mr. Chapman's $5/gallon trigger point was too high.

Director Skezas then pointed out that the lease says that BPOA pays rent and the District pays utilities; he said as long as he has been treasurer of BPOA, they have received and paid a "utilities" bill from the District. The contract was referred to as stating BPOA would pay rent (page 2) and the District would pay utilities (page 4). District Counsel Neary commented he wrote the first lease back in the 1970s, and the original arrangement was BPOA to pay $1.00 a year and the utilities. In 1993 the District decided that because the District used the room quite often, it should pay for part of utilities, and that was how the shift happened. Direction was given to staff to better refine the “trigger mechanism” for propane and electricity. Director Skezas said BPOA would meet October 12 and not meet again until the lease expired. Director Ziady moved to extend the lease another 30 days. Director Pohlson seconded and the motion carried, with Director Skezas abstaining.

6. Consideration of purchase of Ford Ranger utility pickup (water/sewer department).

General Manager Chapman reviewed the need to purchase this vehicle, which would be smaller and more economical than the older 1996 Ford 250. The low bid received for this truck was $15,430.67. Director Skezas moved to approve purchase of the 2006 Ford Ranger 4WD pickup truck for a price not to exceed $16,000.00. Director Horrick seconded. Roll call vote was as follows:

AYES: Directors: Ziady, Horrick, Pohlson, Skezas, Orth
NOES: Directors: None
ABSENT: Directors: None

7. Fire Department '86 Ford Bronco – Consideration of donation to Hopland Fire Department.

General Manager Chapman discussed that because some other fire departments were in worse shape than we were, the District would gladly donate our 1986 Ford Bronco to the Hopland Fire Department. By resolution, the truck would be declared surplus and its donation to the Hopland Fire Department "as is" authorized. Director Ziady moved to adopt Resolution 2005-21 for this purpose; Director Pohlson seconded. Roll call vote was as follows:

AYES: Directors: Ziady, Horrick, Pohlson, Skezas, Orth
NOES: Directors: None
ABSENT: Directors: None