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iPNB teleconference meeting Draft minutes
[posted here 12-17-03]

Date: Wed, 17 Dec 2003
From: Carol Spooner
Subject: [DRAFT] Minutes 11/26/03 iPNB Special Meeting re Revised Budgets

[Draft] Minutes

Special Meeting of the Interim Pacifica Board of Directors to Consider revised FYE 9/30/04 Budgets
November 24, 2003 at 7:00 PM Eastern time by telephone conference

Ten Directors Present constituting a quorum: Chair Leslie Cagan, Teresa Allen, George Barnstone, Pete Bramson, Lydia Brazon, Janice K. Bryant, Acie Byrd, Dave Fertig, Ray Laforest (joined late), Carol Spooner

Five Directors Absent: Marion Barry, Dick Gregory, Rob Robinson, Charles Smith, Jabari Zakiya

Also present: Executive Director Dan Coughlin, CFO Lonnie Hicks

The Chair called the meeting to order at about 7:15 PM Eastern time. The meeting was webcast via www.kpftx.org

The Chair reported that the "old board majority" has informed her that they wish to appoint Lydia Brazon to replace Bert Lee, who has passed away. The Chair reported that she had not received a copy of the signed FAX appointing Lydia Brazon because her office FAX is not working, and reported that the Executive Director had informed her that a copy of the signed FAX had been received by the national office, but that the Chair had not yet seen it. The Chair ruled that because written notice of the appointment had not yet been delivered to the Chair of the Board, as required under the Settlement Agreement, Lydia Brazon would not be seated at this meeting.

Motion by George Barnstone, 2nd by Dave Fertig:
That the Chair be overruled and that Lydia Brazon be seated at this meeting as a director appointed by the "old board majority."

Motion Passed
5 YES - Barnstone, Bramson, Bryant, Byrd, Fertig
0 NO
2 ABSTENTIONS - Allen, Cagan
Absent for the vote - Laforest, Spooner

Lydia Brazon was welcomed to the Board. Carol Spooner joined the conference call at this point.

Overview of financial picture from Executive Director Dan Coughlin: This revised FYE 9/30/04 budget projects a sharp drop in listener support revenue of about $1 million. The overall bottom line on this budget for the entire foundation for this year is only a $7,800 surplus. This results in a severe liquidity crisis for the network. WBAI missed its $1.2 million October fund drive goal, raising $800k in pledges. KPFK missed its $900k October fund drive goal, raising $750k in pledges. KPFA is projecting $450k less in listener support this year than last year, although KPFA made its $950k October fund drive goal, raising $971k in pledges. Addressing this reduction in listener support is the key issue facing the foundation this year -- both in the short term and the long term.

Comments from CFO Lonnie Hicks:
To put the $7,800 projected surplus this year in perspective, it is equivalent of a family making $30k per year having only $1.40 per month extra per month to play with. This creates a severe cash flow or liquidity issue. An organization this size should have about one month's operating expenses or working capital in reserve -- our about $1.1million. This working capital is needed because the foundation has to survive between fund drives -- especially at the end of the year between August and November when the October fund drive money comes in. The GMs predicted a drop in listener support and when the budgets came in in September we projected a drop in listener support this year of about $700k. However, based on the October fund drives, it turns out that it's going to be a drop of about $1.3 million. That's what the revised budgets here today show.

Because of the WBAI situation, if the other fund drives don't go well, the network will be functionally bankrupt in January, that is we will not have enough money to meet payroll, both on paper and in fact. This is not true for each station, but it is true for the network as a whole and its overall liquidity. At the moment very few stations actually have any surplus cash in the bank. If, during the course of the year stations fall off their fund drive projections, then they will face a situation similar to WBAI, maybe not as severe, but it will happen.

This plan is to take the first steps. We need to stabilize WBAI because if they continue to lose money at $112k/month they can take the whole network down. If WBAI's fund drive doesn't meet their goal in January, it will take the other stations that have a surplus and put them in the position of using their surplus to pay for WBAI.

If WBAI were to receive a $500k tomorrow, for example, they already owe their venders about $150k, and they owe about $200k in central services. That would leave them with about $150k or about half of one month's operating expenses. So, even in an optimistic situation, serious cuts in expenses need to made to stabilize WBAI.

Question from Lydia Brazon: How much did WBAI give national in "loans" to pay off the debt?

Hicks: WBAI didn't have the money last year to pay their $175k share, they only paid $50k. They were counting on the October drive to come up with their share.

Brazon: Are the stations still going to be repaid at 0.5%?

Coughlin: Last year the national office tried to make a good faith effort by reducing central services by half a percent -- to 19.5%. However, because the debt was so massive, it isn't realistic now to think about repaying the stations.

CFO continues:
He has looked at the audits for the past 10 years. Deficits do happen, and stations and the national help one another. But in the past stations had reserves and cash in the bank to help each other. But this year we don't have any reserves. So, we're in trouble.

Question from Teresa Allen: How much debt have we paid off over the past 18 months?

Dan Coughlin: In January '02 there was about $4.8 million in debt. About $500k was paid by our insurance directly to law firms. Of the $4.8 million in debt, about $2.1 million was in professional services claims. After the insurance payment of $500k to law firms, we settled about $1 million in claims for about 50-55 cents on the dollar. The paper debt is still about $600k, however some of that we will be writing off.

CFO continues:
Last year, while we saw about $1.2 million increase in listener support due to the Iraq war, we also saw an increase in expenses, mainly for staff, of about $1.5 million. This year we are projecting a $1.3 million drop in listener support. So, we must decide what to do about expenses. There are three problems: (1) What to do about declining listener support? (2) What to do about cutting expenses? and (3) What to do about WBAI?

We have some suggestions, in the form of resolutions. But these are just short term solutions to get us through the next quarter.

1) Reaffirm board's September resolution to insure that one month's operating reserves are accumulated at each station this fiscal year (by 9/30/04).
2) That KPFA keep trying and resubmit their budget in January showing the one month's operating reserve of $300k. Their current budget only shows $180k.
3) That each station require every program to be self-sustaining. There may be some exceptions for mission-related reasons, and exceptions could be made by the national board.
4) The recovery plan for WBAI. Their existing budget shows a $372k deficit at the end of the fiscal year. However, WBAI is currently operating at about a $117k deficit per month. I did not project this deficit spending going forward past January. They will run out of money at the end of December. They're still trying to raise money from the October drive. They have about $400k of the $480k the can project from their October drive based on their fulfillment rate. They have not paid their central services, they have not paid their share of the legal debt, and they have not paid about $100k in vendors. That's how they have the money to get through December. They are struggling to come up with other fundraising plans. If they are not able to do it, then there will have to be layoffs. We're going to look at it again about the first of December. If they can raise another $200k by the end of December then they can struggle along for another month. But that doesn't solve the problem.

Question from Carol Spooner:
The budget shows WBAI paying $347,712 in Central Services to the national office this year. That is 20% of their $1,738,560 projected listener support this year. Since deducting the Central Services money results in a $372,354 operating deficit at WBAI at the end of the year, the national office will not really be receiving that money from WBAI. So, shouldn't we plan for that by reducing the projected Central Services income to the national office, and reducing expenses at the national now?

Hicks: If WBAI stabilizes, then they should be able to pay their Central Services. But it is very shaky.

Spooner: At our September meeting we passed a resolution that all stations and the national office need to accumulate one month's operating reserves by the end of the fiscal year. This budget shows national with a deficit of $44,582 including the shaky WBAI Central Services money. With the situation at WBAI, it is probably impossible for the national office to accumulate reserves, but I think the national office should present at least a balanced budget without the WBAI Central Services for this year. I am also not comfortable with approving a budget where the operating surpluses accumulated by KPFA, KPFK, KPFT & WPFW will have to be used to cover deficits at the national office, the archives, and WBAI. The bottom line shows the surpluses at those stations must be used to cover the deficits elsewhere in order to come up with an overall $7,800 surplus for the network, and all the pain at those stations to cut staff and expenses in order to accumulate the required 1 month's operating reserves will be lost in cover deficits elsewhere. There will be no operating reserves at the end of the fiscal year.

Coughlin: This budget cuts about $200k from the national budget presented in September.

Spooner: Because salaries are the biggest item in the national budget, and we have not received a breakdown of the national salaries in the budget, we cannot see what we are giving up this year that we had previously planned to do -- how much are we allocating to affiliates services, to national programming, to KU operations, etc.? We passed a resolution last March that the board was to receive a confidential breakdown the staff salaries in the budgets for all stations and the national office with the budgets. But we didn't get it in September, and we don't have it now.

Hicks: There may be some national staff positions eliminated the end of December or January, depending on what happens at WBAI.

Coughlin: If you look at the audit, the national payroll has dropped about 20% from FYE 9/30/01. But the opposite trend is at the stations. Recommends a separate executive session to cover the salaries issues.

Ray Laforest joined the call at this point.

Laforest: Believes layoffs should be last resort at WBAI.

Byrd: Have we looked into loans?

Hicks: We have two strikes against us: our credit rating is terrible, and our financial statement shows that we have no working capital, so we cannot demonstrate an ability to pay it back. But we are still interested and looking into it.

Brazon: Donor fatigue is a problem. We just had a drive in August. If we had two "soft" drives, we should be worried. But this urgency may be premature.

Allen and Fertig both believe we need to return to more volunteer programmers.

Spooner: Analyzed KPFA's programming fundraising over the past year. Noted that strip programming is not always the biggest fundraiser per hour -- some are and some aren't. But they are also the most expensive programs to produce because it's a full-time job to do a daily program. Some weekly programs produce as much or more support per hour than the strip programs, but don't cost us anything because they are produced by unpaid staff.

Chair: Is the board ready to vote on the budgets?

Brazon: Doesn't want to approve budget without first having a meeting with the GMs and the iPNB to get their views.

Hicks: Without approving the budgets, at least on a provisional basis, they have no spending authority going forward.

Spooner: Not comfortable with approving budgets with deficit spending and without the salaries info. Would like to get that info in the next couple of days and meet again at the end of the week to vote on the budget.

Chair: Recommends provisionally approving budget now for 6 weeks, but meeting in executive session by the end of the week to review salaries info.

Spooner: Prepared to provisionally approve the budget now, except the national office budget, and to pass resolutions to deal with WBAI situation, with the understanding we will get salaries info to review in executive session by the end of the week.

Brazon: Wants to meet with GMs to discuss layoffs and their fundraising ideas before approving budgets. Would like to do that on Friday, as well as address the salaries info.

Coughlin Objects to bringing the GMs into a call with the directors. Believes the National Board has one employee -- the Executive Director. The GMs report to him, not to the board. Doesn't believe the board should get into that level of micro-management.

Chair: There are three things we need to decide on first:

(1) Convening an executive session the end of the week based on receiving salaries info from Dan beforehand, to discuss staffing issues at the national office, and issues concerning functional bankruptcy.

Without objection, the board agreed to do this on Saturday at 9 am West Coast time.

(2) Whether or not to invite GMs to a portion of the Saturday call to get their input and concerns.

Coughlin strenuously objects. Sees a big gulf between the national board and the ED. The board isn't taking his recommendations. Also has serious concerns about providing the salary info. The organizational integrity as to power and authority will be compromised. Pacifica is going down, cannot continue on this path with the situation at WBAI and KPFK and expect to be alive as an organization in a year.

Chair: Sees no contradiction between meeting with GMs briefly and Dan's authority. Believes board should provisionally approve budgets for 45 days now and pass the recommended resolutions now, but should still meet on Saturday.

Motion by A.C. Byrd, 2nd by Fertig:
that the adjusted budgets presented today are provisionally approved for 45 days, with the understanding that the board will receive the requested salaries info this week and will meet in executive session on Saturday to discuss it.

Motion Passed
8 YES - Allen, Barnstone, Bramson, Brazon, Byrd, Cagan, Fertig, Laforest, Spooner
0 NO
1 Abstention - Bryant, who has not yet received her copy of the budgets.
Barnstone Absent from the vote

Motion by Lydia Brazon, 2nd by Fertig:
That we invite the GMs to participate in the first portion of the Executive Session on Saturday.

Motion Passed
7 YES - Brazon, Byrd, Cagan, Fertig, Laforest, Spooner
2 NO - Allen, Bramson
Barnstone absent for the vote

The ED and CFO recommended the following four resolutions for approval by the board:

1) Resolved: The ED and the CFO are empowered to ensure that one month's operating reserves are in place for each station each fiscal year.
2) Resolved: KPFA accumulate one month's operating reserves this fiscal year and that the ED and CFO provide a progress report to the iPNB in 45 days.
3) Resolved: Each Pacifica station before January 15, 2004, review its day-time programming schedule with the goal of having each day-time program be revenue sufficient and financially self-sustaining with a listener base of support.
3a) The ED will review the progress of each station self-sustaining plan and report back to the board by January 10.
3b) Where exceptions are warranted to the self-sustaining requirement due to mission relevance or special circumstances, and a waiver is recommended to the above resolution by the ED, the board of directors will specifically grant such waivers based on criteria it may develop.
4) Resolved: The Core Recovery Plan, see attached, for WBAI presented in meetings with WBAI management, staff, union officials, is to be implemented by the ED, the CFO, and the WBAI GM if local revenue generating efforts do not produce funds needed to sustain the station.

Motion by Spooner, 2nd by Allen
That the ED, the CFO and the GMs are empowered to ensure that one month's operating reserves are in place for each station each fiscal year, with WBAI being exempted this fiscal year.

Motion Passed
9 YES - Allen, Bramson, Bryant, Byrd, Brazon, Cagan, Fertig, Laforest, Spooner
0 NO
Barnstone absent for the vote

Motion by Allen, 2nd by Bramson
That KPFA accumulate one month's operating reserves this fiscal year and that the ED and CFO provide a progress report to the iPNB in 45 days.

Motion Passed
8 YES - Allen, Bramson, Byrd, Brazon, Cagan, Fertig, Laforest, Spooner
0 NO
1 Abstention - Bryant
Barnstone absent for the vote

Substitute Motion by Spooner, 2nd by Allen
That each of the GMs by January 15th shall provide a report to the ED and the board showing the average per hour funds raised (fulfilled pledges) over the last four fund drives, including the October '03 drive, for each of their station's programs throughout the program grid, as well as the cost to produce each program over the last fiscal year (i.e., resources allocated for staff, board ops, and any other expenses for each program, less any grants received).

Motion Passed
8 YES - Allen, Bramson, Brazon, Bryant, Byrd, Cagan, Fertig, Spooner
0 NO
1 Abstention - Laforest
Barnstone absent for the vote

Motion by Spooner, 2nd by Bramson
That the "Core Recovery Plan" presented by the ED and CFO for WBAI and presented in meetings with WBAI management, staff, union officials, is to be implemented by the ED, the CFO, and the WBAI GM if local revenue generating efforts do not produce funds needed to sustain the station.

The CFO explained a 2-pronged plan: issuance of lay-off notices (approximately 14-18 FTE employees) pending revenue generating efforts by the staff and community, and meet again with WBAI management on December 1st to look at whether or not those revenue generating efforts are going to bear fruit by December 31st. If not, then they will proceed with the layoffs. The GM has identified the core staff needed. The union has not agreed to this, and may have some issues concerning seniority and affirmative action.

Motion Passed
4 YES - Allen, Bramson, Cagan, Spooner
1 NO - Laforest
3 Abstain - Brazon, Bryant, Byrd Barnstone and Fertig absent for the vote

The ED asked for clarification on what information the board wants for the Saturday meeting. Spooner clarified that the board wants a list of all staff positions in the budgets and the salaries and related expenses budgeted for each position -- per the resolution passed earlier in this meeting and also at the March 2003 board meeting -- for each station and the national departments. The ED said that the GMs and unions & other staff members don't want this information given to the board because they don't want this information "bandied about" or anyone "targeted" by the board. Board members reiterated that ALL boards need and get this information as part of the budgeting process in order to understand what they are funding. The board cannot look at these budgets and understand what our funding priorities are at the national level because all salaries are lumped together -- administrative, programming, affiliates services -- and cannot monitor or control unbudgeted staff additions at the stations, either, if the board does not know what staff positions were authorized by approving the budgets. This was a problem last year, as staff expansion got out of control. Everyone on the board understands the sensitivity and confidentiality of this information.

The meeting was adjourned at approximately 11:15 PM Eastern Time.

Respectfully submitted,
Carol Spooner
Secretary, Interim Board of Directors

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