MINUTES
of the
MEETING OF THE COMMISSIONERS
of the
BUFFALO RAPIDS BOARD OF DISTRICT I
Terry, Montana
August 19, 2009
The Special Meeting of the members of the Buffalo Rapids Project Board District I Commissioners, at Terry, Prairie County, Montana, was held on the nineteenth day of August, 2009, at 8:00 a.m.
There were present and participating at the meeting:
Ray Roethle
James Whitmer
Don Buxbaum
Ric Holden
Also present and participating were David Schwarz, Secretary, Pat Davis, Assistant Secretary, Barry Rakes, and Jim Finneman.
District I President Don Buxbaum called the meeting to order, stating that all necessary and advisable business be conducted during this time.
Thereupon, District I President Don Buxbaum announced that a quorum was present so that the meeting was legally and lawfully ready to transact business.
The special meeting of the District I Commissioners of the Board of Buffalo Rapids project was held to discuss the issue of the setting the assessment for District I in lieu of a letter of default from Stockman Bank.
Stockman Bank of Terry, Montana delivered to District I President, Don Buxbaum, and Board of Control President, Ray Roethle, a notice of default on Promissory Note No. 2340036283. The letter stated that in the meeting of the Commissioners for the District held on June 15, 2009, discussions were held concerning the issue of setting the 2010 assessment for the District. At that meeting the commissioners reviewed the budget for the 2010 operational year and set the assessments at $34.50 per assessable acre to cover operational costs as well as service debt payments. At that same meeting, the Commissioners were advised that the District auditors, Strom & Associates, P.C., had recommended that the 2010 assessment be set at $39.94 per assessable acre to cover those same operating and debt service requirements. Based on the financial information presented to Stockman bank, it appears that the District has under-assessed its members $5.44 per assessable acre. This would result in a budgeted short-fall of income in the amount of $88,264.00 for its 2010 operating year. This represents a violation of the District’s loan covenant, as above-described, and constitutes an Event of Default under the District’s Loan Agreement dated September 24, 2008. The District is hereby notified that the District is in default on Promissory Note No. 2340036283 for not adhering to the affirmative covenant stated in paragraph 3 of the “Addendum to Business Loan agreement”, as above described. The District has 30 day from the date of the letter as to how they intend to cure said default. Addendum to Business Loan Agreement, which provides: “Annual Budgets. As soon as available, and in any event, within 15 days of the beginning of each of Borrower’s fiscal years, Borrower will provide Lender with a copy of Borrower’s approved operating budget for the then-current year, which shall show, at a minimum, that Borrower is assessing amounts sufficient to make Borrower’s payments of principal and interest under the Loan, together with all expenses associated with Borrower’s annual operations.”
Dave Schwarz started the meeting stating that he recommended that District I raise their assessment for the 2010 operating year an additional $3.00 per acre, to equal a total raise for the following year of $4.50.
Barry Rakes stated on behalf of District II that he would like to state that if District I does not raise their assessment to the recommended amount it could have a direct affect on District II.
Mr. Ric Holden stated that he did not agree that District I should raise their assessments, and that all they had to do was prove to Stockman Bank that what they had done was sufficient. He stated that he did not know where the bank got their figures, but the budget that they had revised at the June meeting was balanced.
Dave reported to the members of the Board of District I that the auditors suggested raise in assessments were not based on Buffalo Rapids budget, but from factual figures from prior years, and the upcoming years’ expenses. Dave felt that an additional $3.00 per acre increase in assessment would cover future expenses, and build a reserve for District I for any future unforeseen expenses.
Barry Rakes stated that District I really hadn’t raised their O & M portion of their assessment in quite awhile. The last time they raised it was for the replacement of the pumps, but not for the operation and maintenance portion of the Project.
Jim Finneman stated that he still had some producers asking questions about the pickup that was sold to Dave Schwarz. Jim stated to the Board that he was told that if that happened again there would be trouble in his Division. Barry Rakes and Dave Schwarz asked who it was that had talked with him. Jim refused to give a name. Dave Schwarz said that if these people had any question, why they were not coming to him to ask him about it. Dave stated that it seems to be that it is always somebody “said”, but never a name. Dave also stated to Mr. Finneman that he did not know what he was talking about because he was not on the Board at that time. Dave stated to the Board that he was sick and tired of some of the Board members talking behind everyone’s back, talking with each other before Board meetings, or getting together and discussing issues in between Board meetings. Dave Schwarz informed the Board that if the meeting of the Buffalo Rapids Project Board of Control continued to be a contentious as they have been he will turn in his resignation. Dave expressed to Mr. Jim Finneman and Mr. Ric Holden that he had had enough of trying to deal with them on the Board. He did not believe that they were there to better Buffalo Rapids Project. Mr. Schwarz pushed away from the table and stated, “I do not have to sit and listen to this. Mr. Dave Schwarz left the meeting at that time.
Commissioner Barry Rakes announced to the Board that Dave Schwarz had resigned. Soon thereafter, Commissioner Rakes announced to the Board that if Dave leaves the employees are “going to go Union.”
Barry Rakes stated that he had had enough of trying to deal with them too. He expressed that it seemed to him that the only person he hears from at the Board meeting is Ric Holden. Barry stated to the Board that they do not realize what Dave Schwarz has done for the Project. He feels that certain members of the Board are on a “witch hunt” for Dave. Jim Finneman stated that all he wants is accountability. Don Buxbaum stated that the questions that they have are coming from their producers. He felt that as a Board member it was their responsibility.
Pat Davis expressed to the Board that they may not realize what they had just done if Dave Schwarz has left the Project. Dave has brought in a lot of money and improved the Project immensely. She expressed to the Board that if Dave has left the Project who did they think would continue where Dave left off. Jim Finneman asked her where all the money went. Pat replied that the money was in the improvements in the Project. The main reason that the Project is in financial trouble is because of the failure to raise assessment when they should have been.
Pat explained again to the Board how the Grants worked and how to read the documents that are presented at each Board meeting. She stressed that each Board member should look through and examine the claim form that are available for review at each Board meeting. If any of the commissioners had questions about how the money of the Project is being spent, it is explained in detail on the claim forms.
Pat made copies of the Stockman Bank loan Addendum to Business Loan Agreement for all Board members to review.
James Whitmer spoke with the Board that maybe they had not taken all things into consideration when they had set assessment at the June meetings. He felt that they had not allowed for any catastrophic expenses and possibly not set aside enough money to build up reserves quickly enough. He felt that if they had a major breakdown with any of the pumps in District I the District would not have the money available to complete the repairs, and possibly not a bank that would loan them the money to keep the District operating. James stated that he was nervous about putting the extra money that they would raise assessments into the O & M portion of the taxes. He would like to set aside a certain amount of the raise in assessment into a debt repayment account and keep it separated for future use if needed.
Mr. Ron Pisk, President of Stockman Bank, Terry branch, was invited to speak at the Board meeting by the District I commissioners. He arrived after the meeting was already in session. He explained to the Board what the letter of default meant. Ron Pisk stated to the Board that the letter of default was based on historical costs of the Project, the recommended raise of assessment from the auditors, and a budget presented to him by Dave Schwarz. He expressed to the Board that lowering costs or raising assessment were their only options. He stated that the bank could not see where the budget was balanced for the operating year of 2010.
James Whitmer asked for the bank’s view if the District made an aggressive move to pay off the loan and put money into reserve accounts. Ron Pisk replied that the bank has always been support of Buffalo Rapids and would like to see them succeed.
Ric Holden asked Ron Pisk if it seemed more prudent to build a reserve or to pay the loan off faster. Ron replied that it is always a good idea to build a reserve and that he supports that concept. Ron Pisk informed the Board that an auditor’s report does not have the flexibility to determine any change in outgoing costs and reduction in operating costs, where the Board had that option to change those budget figures and reduce costs. The auditors work on a factual basis for costs and income for the Project. Mr. Pisk also stated that the bank will always keep on record the letter of default, but it may or may not impact the future if the Project needs to work with Stockman at another time. Ron Pisk asked the commissioners of District I to elect an individual of that District to speak with Ron in the case that Dave Schwarz has resigned. On a motion made by Ray Roethle, and seconded by Don Buxbaum it was decided that James Whitmer be the person of contact for Stockman Bank for District I. All in favor. Ron also stated that if Dave Schwarz did not resign, he would only speak with the Project manager. Ric Holden asked Mr. Pisk if he had been given the revised budget drafted after the Board’s June special meeting. Mr. Pisk opened his file and showed the Board the budget that Mr. Schwarz had presented to the bank. James Whitmer asked for clarification as to when the bank had received the budget in the bank file. It was determined that the project manager, Mr. Schwarz, had not presented the balanced June budget generated by the Board at the June Board meeting. Mr. Holden told Mr. Pisk that the Board had been told by the project manager that the bank was not concerned with the Board’s budget but based the bank’s evaluation of solvency on the auditor’s report. Mr. Pisk stated that they would consider both pieces of information as valuable to their evaluation of the project financial health. Mr. Holden told Mr. Pisk that the Board now had a balanced budget and the Board would get him a copy of the revised budget in order to address the issues of default in the letter. Mr. Ron Pisk left the meeting at that time.
The members of District I Board of Commissioners reviewed the 2010 proposed budget and with corrections and additions it was accepted on a motion made by James Whitmer, and seconded by Don Buxbaum. All in favor.
Mr. Ray Roethle had to leave the meeting because of prior commitments and put in writing that Mr. Ric Holden vote in his stead for the meeting of August 19, 2009. The request was approved on a motion made by James Whitmer, and seconded by Don Buxbaum. Before Mr. Roethle departure he stated that he would like to see assessment go up a least an additional two dollars per acre.
After much discussion between the District I Board of Commissioners it was resolved that Assessments for the 2010 operating year, were set as follows. Conditions of a Sunset Clause was established for the debt repayment portion of the tax increase. On December 01, 2012 money that has been set aside for the debt repayment fund will be eliminated, at which time the Board will revisit and vote on the continuation of that tax at that time. On a motion made by James Whitmer and seconded by Don Buxbaum it was
RESOLVED, That the District I Assessments for the 2010 operating year be set as follows:
O&M $26.50
Equip Reserve $ 3.00
System Rehab $ 0.50
Repayment A $ 1.00
*Repayment B $ 4.50 *Glendive 1 Bond repayment
Debt Repayment $ 2.00
Total $37.50
All in favor, motion carried.
Next meeting will be held on September 09, 2009, at 7:00p.m.
There being no further business to be considered, and no objection, the said meeting of the District I Commissioners of the Buffalo Rapids Project adjourned.
ATTESTED:
________________________________ ____________________________________
Pat Davis, Assistant Secretary Don Buxbaum, District I President
of the
MEETING OF THE COMMISSIONERS
of the
BUFFALO RAPIDS BOARD OF DISTRICT I
Terry, Montana
August 19, 2009
The Special Meeting of the members of the Buffalo Rapids Project Board District I Commissioners, at Terry, Prairie County, Montana, was held on the nineteenth day of August, 2009, at 8:00 a.m.
There were present and participating at the meeting:
Ray Roethle
James Whitmer
Don Buxbaum
Ric Holden
Also present and participating were David Schwarz, Secretary, Pat Davis, Assistant Secretary, Barry Rakes, and Jim Finneman.
District I President Don Buxbaum called the meeting to order, stating that all necessary and advisable business be conducted during this time.
Thereupon, District I President Don Buxbaum announced that a quorum was present so that the meeting was legally and lawfully ready to transact business.
The special meeting of the District I Commissioners of the Board of Buffalo Rapids project was held to discuss the issue of the setting the assessment for District I in lieu of a letter of default from Stockman Bank.
Stockman Bank of Terry, Montana delivered to District I President, Don Buxbaum, and Board of Control President, Ray Roethle, a notice of default on Promissory Note No. 2340036283. The letter stated that in the meeting of the Commissioners for the District held on June 15, 2009, discussions were held concerning the issue of setting the 2010 assessment for the District. At that meeting the commissioners reviewed the budget for the 2010 operational year and set the assessments at $34.50 per assessable acre to cover operational costs as well as service debt payments. At that same meeting, the Commissioners were advised that the District auditors, Strom & Associates, P.C., had recommended that the 2010 assessment be set at $39.94 per assessable acre to cover those same operating and debt service requirements. Based on the financial information presented to Stockman bank, it appears that the District has under-assessed its members $5.44 per assessable acre. This would result in a budgeted short-fall of income in the amount of $88,264.00 for its 2010 operating year. This represents a violation of the District’s loan covenant, as above-described, and constitutes an Event of Default under the District’s Loan Agreement dated September 24, 2008. The District is hereby notified that the District is in default on Promissory Note No. 2340036283 for not adhering to the affirmative covenant stated in paragraph 3 of the “Addendum to Business Loan agreement”, as above described. The District has 30 day from the date of the letter as to how they intend to cure said default. Addendum to Business Loan Agreement, which provides: “Annual Budgets. As soon as available, and in any event, within 15 days of the beginning of each of Borrower’s fiscal years, Borrower will provide Lender with a copy of Borrower’s approved operating budget for the then-current year, which shall show, at a minimum, that Borrower is assessing amounts sufficient to make Borrower’s payments of principal and interest under the Loan, together with all expenses associated with Borrower’s annual operations.”
Dave Schwarz started the meeting stating that he recommended that District I raise their assessment for the 2010 operating year an additional $3.00 per acre, to equal a total raise for the following year of $4.50.
Barry Rakes stated on behalf of District II that he would like to state that if District I does not raise their assessment to the recommended amount it could have a direct affect on District II.
Mr. Ric Holden stated that he did not agree that District I should raise their assessments, and that all they had to do was prove to Stockman Bank that what they had done was sufficient. He stated that he did not know where the bank got their figures, but the budget that they had revised at the June meeting was balanced.
Dave reported to the members of the Board of District I that the auditors suggested raise in assessments were not based on Buffalo Rapids budget, but from factual figures from prior years, and the upcoming years’ expenses. Dave felt that an additional $3.00 per acre increase in assessment would cover future expenses, and build a reserve for District I for any future unforeseen expenses.
Barry Rakes stated that District I really hadn’t raised their O & M portion of their assessment in quite awhile. The last time they raised it was for the replacement of the pumps, but not for the operation and maintenance portion of the Project.
Jim Finneman stated that he still had some producers asking questions about the pickup that was sold to Dave Schwarz. Jim stated to the Board that he was told that if that happened again there would be trouble in his Division. Barry Rakes and Dave Schwarz asked who it was that had talked with him. Jim refused to give a name. Dave Schwarz said that if these people had any question, why they were not coming to him to ask him about it. Dave stated that it seems to be that it is always somebody “said”, but never a name. Dave also stated to Mr. Finneman that he did not know what he was talking about because he was not on the Board at that time. Dave stated to the Board that he was sick and tired of some of the Board members talking behind everyone’s back, talking with each other before Board meetings, or getting together and discussing issues in between Board meetings. Dave Schwarz informed the Board that if the meeting of the Buffalo Rapids Project Board of Control continued to be a contentious as they have been he will turn in his resignation. Dave expressed to Mr. Jim Finneman and Mr. Ric Holden that he had had enough of trying to deal with them on the Board. He did not believe that they were there to better Buffalo Rapids Project. Mr. Schwarz pushed away from the table and stated, “I do not have to sit and listen to this. Mr. Dave Schwarz left the meeting at that time.
Commissioner Barry Rakes announced to the Board that Dave Schwarz had resigned. Soon thereafter, Commissioner Rakes announced to the Board that if Dave leaves the employees are “going to go Union.”
Barry Rakes stated that he had had enough of trying to deal with them too. He expressed that it seemed to him that the only person he hears from at the Board meeting is Ric Holden. Barry stated to the Board that they do not realize what Dave Schwarz has done for the Project. He feels that certain members of the Board are on a “witch hunt” for Dave. Jim Finneman stated that all he wants is accountability. Don Buxbaum stated that the questions that they have are coming from their producers. He felt that as a Board member it was their responsibility.
Pat Davis expressed to the Board that they may not realize what they had just done if Dave Schwarz has left the Project. Dave has brought in a lot of money and improved the Project immensely. She expressed to the Board that if Dave has left the Project who did they think would continue where Dave left off. Jim Finneman asked her where all the money went. Pat replied that the money was in the improvements in the Project. The main reason that the Project is in financial trouble is because of the failure to raise assessment when they should have been.
Pat explained again to the Board how the Grants worked and how to read the documents that are presented at each Board meeting. She stressed that each Board member should look through and examine the claim form that are available for review at each Board meeting. If any of the commissioners had questions about how the money of the Project is being spent, it is explained in detail on the claim forms.
Pat made copies of the Stockman Bank loan Addendum to Business Loan Agreement for all Board members to review.
James Whitmer spoke with the Board that maybe they had not taken all things into consideration when they had set assessment at the June meetings. He felt that they had not allowed for any catastrophic expenses and possibly not set aside enough money to build up reserves quickly enough. He felt that if they had a major breakdown with any of the pumps in District I the District would not have the money available to complete the repairs, and possibly not a bank that would loan them the money to keep the District operating. James stated that he was nervous about putting the extra money that they would raise assessments into the O & M portion of the taxes. He would like to set aside a certain amount of the raise in assessment into a debt repayment account and keep it separated for future use if needed.
Mr. Ron Pisk, President of Stockman Bank, Terry branch, was invited to speak at the Board meeting by the District I commissioners. He arrived after the meeting was already in session. He explained to the Board what the letter of default meant. Ron Pisk stated to the Board that the letter of default was based on historical costs of the Project, the recommended raise of assessment from the auditors, and a budget presented to him by Dave Schwarz. He expressed to the Board that lowering costs or raising assessment were their only options. He stated that the bank could not see where the budget was balanced for the operating year of 2010.
James Whitmer asked for the bank’s view if the District made an aggressive move to pay off the loan and put money into reserve accounts. Ron Pisk replied that the bank has always been support of Buffalo Rapids and would like to see them succeed.
Ric Holden asked Ron Pisk if it seemed more prudent to build a reserve or to pay the loan off faster. Ron replied that it is always a good idea to build a reserve and that he supports that concept. Ron Pisk informed the Board that an auditor’s report does not have the flexibility to determine any change in outgoing costs and reduction in operating costs, where the Board had that option to change those budget figures and reduce costs. The auditors work on a factual basis for costs and income for the Project. Mr. Pisk also stated that the bank will always keep on record the letter of default, but it may or may not impact the future if the Project needs to work with Stockman at another time. Ron Pisk asked the commissioners of District I to elect an individual of that District to speak with Ron in the case that Dave Schwarz has resigned. On a motion made by Ray Roethle, and seconded by Don Buxbaum it was decided that James Whitmer be the person of contact for Stockman Bank for District I. All in favor. Ron also stated that if Dave Schwarz did not resign, he would only speak with the Project manager. Ric Holden asked Mr. Pisk if he had been given the revised budget drafted after the Board’s June special meeting. Mr. Pisk opened his file and showed the Board the budget that Mr. Schwarz had presented to the bank. James Whitmer asked for clarification as to when the bank had received the budget in the bank file. It was determined that the project manager, Mr. Schwarz, had not presented the balanced June budget generated by the Board at the June Board meeting. Mr. Holden told Mr. Pisk that the Board had been told by the project manager that the bank was not concerned with the Board’s budget but based the bank’s evaluation of solvency on the auditor’s report. Mr. Pisk stated that they would consider both pieces of information as valuable to their evaluation of the project financial health. Mr. Holden told Mr. Pisk that the Board now had a balanced budget and the Board would get him a copy of the revised budget in order to address the issues of default in the letter. Mr. Ron Pisk left the meeting at that time.
The members of District I Board of Commissioners reviewed the 2010 proposed budget and with corrections and additions it was accepted on a motion made by James Whitmer, and seconded by Don Buxbaum. All in favor.
Mr. Ray Roethle had to leave the meeting because of prior commitments and put in writing that Mr. Ric Holden vote in his stead for the meeting of August 19, 2009. The request was approved on a motion made by James Whitmer, and seconded by Don Buxbaum. Before Mr. Roethle departure he stated that he would like to see assessment go up a least an additional two dollars per acre.
After much discussion between the District I Board of Commissioners it was resolved that Assessments for the 2010 operating year, were set as follows. Conditions of a Sunset Clause was established for the debt repayment portion of the tax increase. On December 01, 2012 money that has been set aside for the debt repayment fund will be eliminated, at which time the Board will revisit and vote on the continuation of that tax at that time. On a motion made by James Whitmer and seconded by Don Buxbaum it was
RESOLVED, That the District I Assessments for the 2010 operating year be set as follows:
O&M $26.50
Equip Reserve $ 3.00
System Rehab $ 0.50
Repayment A $ 1.00
*Repayment B $ 4.50 *Glendive 1 Bond repayment
Debt Repayment $ 2.00
Total $37.50
All in favor, motion carried.
Next meeting will be held on September 09, 2009, at 7:00p.m.
There being no further business to be considered, and no objection, the said meeting of the District I Commissioners of the Buffalo Rapids Project adjourned.
ATTESTED:
________________________________ ____________________________________
Pat Davis, Assistant Secretary Don Buxbaum, District I President
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