DAVIS FOOD COOPERATIVE, INC.

BOARD OF DIRECTORS

MEETING MINUTES


November 5, 2007


Call to Order


The regular monthly meeting was called to order at 7:05pm at the Davis Food Co-op Conference Room, 620 G Street, Davis, California, by Darius Pazirandeh, President.


Roll Call:

Directors Present: Julie Cross, April Kamen, Danyal Kasapligil, Darius Pazirandeh, Doreen Pichotti, Steve Reynolds, Jack Young, Janie Booth (arrived 7:32)


Directors Absent: Debbie Eernisse, Lucas Frerichs, Joy Rowe,


Staff Present: Kenna Krueger, Doug Walter, Eric Stromberg, Paula Osborne


Guests Present: David Thompson


Roles:

Facilitator: Julie

Time Keeper: Julie

Notetaker: Mandy Dawn


The Secretary determined that notice of the meeting was duly provided as required by Bylaw Art. VIII §6(C), and that a quorum of Directors was present under Art. VIII §6(B).


Member Comments: David Thompson: 1. Regarding the surplus if DFC uses Union Bank: switching banks means a loss of $37,500 over 15 years for Davis Cooperative Development Fund. Ask that Fund be given part of the surplus. Asking for DFC Board attention, support, contributions for DCDF. Doesn’t know if Staff should vote on surplus plan if they contributed to the report. 2. Regarding the proposed 0% interest loan to Pachamama. Feels this isn’t transparent; not everyone knows they can apply for loans from DFC. The loan to Equal Exchange has a 5% return. David sees a conflict of interest in the Board suggesting where money be spent, favoring a supplier. Asked if particular suppliers get free ads, other benefits.


A letter from members Richard Cushman and Beverly Lozano raises worry about high shelves causing difficulty for some shoppers.



Consent Calendar


Presented: Consent Calendar Items

Retained by unanimous consent:


Removed by objection:


Motion: Steve moves and April seconds to adopt the consent calendar as amended

Motion is adopted unanimously.


Agenda Review


Amend Agenda by

striking GP3 from item 4.3 (will do in Dec)

striking gp8 from item 5.1 (Julie & Deb aren’t ready)


Motion: Darius moves and Doreen seconds to adopt the agenda as amended

Motion carried unanimously



Reports

Presented: General Manager's Reports

-E2 – We lead in ethical business practices.

-B1 – General Executive Constraint

-B10 – Communication & Counsel to the Board

-B11 – recycling and reuse

-B11 – Reinvestment plan for renovation savings


Discussion: Julie Cross noted for the record that she contributed to E2 and B11 Reinvestment, and would not be able to vote on accepting them. Darius thanked Eric for the B10 report and noted that the refund and annual audit are good info. Discussion: B10 – Not having a legal opinion in time, the refund was issued in order to be safe. Now we know that we can retain the refund – okay with IRS and State of CA.


7:32pm Janie arrives


Jack: Wants an update on reinvestment when time comes. Julie: wants Board to make a motion or Task Force. Put on agenda for Dec. for GM to take this over.


Motion: Darius moves and Jack seconds that Board direct Eric to report back when there is action on reinvestment.


Discussion – Kenna – ideally this would be worked into the budget for Board approval in Dec 2008. The 15 year period won’t start for a year, none during construction.


Darius withdraws motion.


Discussion of interpretation of 4.1E – a response to the October motion for Eric to come up with a public commitment to reinvest money saved by obtaining a loan from Union Bank. April: 4.1D – How will we pay for the floor resealing at $90,000? Eric: Our contingency plan says we may go over budget 10% for unforeseen problems. Kenna: The full proposed project is beyond our budget and so not all will be done; we may need to take money from another part of the project. Darius: This is a commitment to invest, but not these organizations specifically. David: Visiting members only receive the agenda, so our commentary is uninformed. Julie: If your concerns are not addressed tonight, we’ll send you a letter. Kenna: Board don’t hold us to these numbers, in case of low profits. Eric: Will resubmit next month with wording for the possibility of change. Steve: Budget for next fiscal year we’ll look at it there? Kenna: Yes. Eric: Then we have budget control. B11 to be resubmitted in Dec.


Motion: Doreen moves and Darius seconds to accept GM reports on E2 & B11 Reinvestment as presented

In Favor: April, Danyal, Darius, Doreen, Steve, Jack, Janie

Abstained: Julie


Motion: Darius moves and Janie seconds to accept GM reports on B1, B10 and & B11 Recycling and Reuse as presented

Motion carried unanimously



Presented: by Doreen, the monitoring report on GP4

Monitoring only: All have revised version. Doreen: reporting compliance on all except section 6. Explained additions. Steve: How specific do we need to be with reporting member requests to GM? Julie: can’t monitor non-written requests. Darius: consider first reading instead of motion. Section 6 – Put interpretation in so all can understand your view. Darius’ interpretation: B8E – Do a monitoring report when issues come up; if something egregious comes up, take emergency action. Use of the correspondence secretary isn’t appropriate. How much does Board need to know about President’s actions?

8:05pm David leaves.

Julie: make it own paragraph, “Pres. Will advise board of any action taken outside of his normal duties.” Know about the exceptions, not routine. Doug: implicit and implied won’t work for Policy governance. Julie: for first reading – did correspondence secretary thing make sense? Yes. 1 year term. Darius: made first reading of GP4. I would vote against interpretation of 6. Revise for Dec. – Doreen will do. Second reading in Jan, third in June.


First reading instead of Motion: accept monitoring report on GP4 as presented


Presented: by Julie, the monitoring report on GP5

Discussion: Darius: Amend G to say if it appears to be a Task Force, it is one. First agree on what policy means, then decide if we want to revise it. Doreen: thought H1 should read noncompliant. Darius disagrees, Doreen withdraws noncompliance. Darius: Policy addresses the formation of small powerful insular groups, ensures an end date for all task forces.


Motion: Janie motions and April seconds to accept monitoring report on GP5 as presented

Motion carried unanimously


Julie proposes e-mail changes and put on the consent calendar in Dec.



Unfinished Business

Presented: By Doreen on behalf of Deb, a motion


Motion: Julie moves and Doreen seconds that the corresponding secretary procedure be implemented for this Board year with Steve appointed as corresponding secretary, and that the third reading of GP4 policy revisions be considered in June.

Motion carried unanimously


Recess at 8:20; reconvene at 8:35.


Julie calls us to order. Danyal left at the break.


Motion: Julie moves and Doreen seconds to excuse Debbie, Lucas and Joy for being absent tonight..

Passes unanimously.


Presented: By Jack, a discussion of the winter retreat

Discussion: Jack – clarifies: Thought Board might do strategic planning, sharpen policies at the retreat. End statements need work. Consultants need more lead time and need more money to hire one. Wants team to help select consultant, this next week, not in Dec. Julie: Working on the ends at retreats is normal, also the current big issue. Jack: Consultants want to help us with policy governance. Janie: Policy governance consultants make work for themselves by saying we need that help. Must carefully consider what is being offered. Doreen: still need strategic planning task force, $1000/ 3000? Steve: Yes, but can redirect money from task force. Julie: Ends need to be shortened; use a local facilitator to decide what we want to do with the ends and then choose a facilitator to help us get there. CCMA is on West coast in June, consultants are cheaper then. Darius: Our ends have a lot of means in them, too much specificity. Monitoring is not controlled enough to be useful. We’re close to Policy Governance, but don’t need to follow it to the letter. Look at big picture, not get sucked into details. Kenna: Likes Policy Governance, but the Board spends its time monitoring, leaving little time for leadership. Could use help. Darius: any objection to plan to improve ends at retreat? Nope. Doreen: No strategic planning at meeting?

Paula leaves 9pm

Jack: Frustrated with Policy Governance, but wants to see it at work, then maybe try something else. Steve: need more focused ends before we get strategic plan. Darius: can Jack and Steve make a decision on facilitator/ consultant this week? Doreen: can try, but not be bound to that. Julie: Need e-mail asking when board members are available.


David returns: 9:08pm


Motion: Darius moves and Steve seconds to revise the authority of the winter retreat task force to spend up to $3500, with approval of the president, and is authorized to contract with a consultant or facilitator.


Comments: Julie: Can’t vote for that much money. Comfort at $2500. Jack: prep day too. Darius: Task force is Jack, and anyone else who wants to participate. Julie: Darius is by definition on every task force. Doreen: Usually to spend that much money should need whole board’s approval. Call the question.

Approved: Janie, Steve, Darius, Jack

Opposed Julie, Doreen, April

Motion carries


Presented: By Janie, a discussion of B-11

Discussion: Janie: Policy is written to initiate a renovation, not on the process of the renovation. Worked on rewrite. First reading – will word-smith over e-mail. Jack: Include financing as a stand alone topic to say where money is coming from. Janie: Policy needs to direct, not limit. Eric: point A – need to define scope of overruns. C – need to include budget VS master plan (the four phase design concept). We plan each phase in detail as we go. Kenna: Insurance monitoring is going to be important during construction. Eric is reporting and Janie is relating significant financial information to the Board. Order of the day is called.

Motion: Darius moves and Jack seconds to accept a first reading of B11

In Favor: April, Julie, Darius, Doreen, Jack, Janie

Opposed: Steve


New Business

Presented: by Kenna a discussion of the Pachamama Loan

Discussion: Kenna: The criteria for DFC to loan money: Need based – as in the loan to Sacramento COOP. Pachamama coop is local. Work to est. more stringent criteria? Board gets requests and makes decision. Darius: No interest loans cost us. Eric: Pachamama is willing to pay interest. Kenna: Pachamama has a horrible balance sheet, great business plan. This may make or break them. David: Still don’t know if there’s any conflict of interest. Julie: Do any of the directors or staff have a conflict of interest with Pachamama they’d like to declare? (No declaration.). Steve: Collateral? Eric: Coffee inventory. Steve: Wants to see interest & security. Doreen: How did they find out we might consider a loan? How do other organizations find out? Eric: Pachamama’s GM knows about our loan to Sac COOP. We know about this org., they are based in Davis, we were their first customer. They are in tenuous position. Need working capital. Doreen: how do we avoid appearance of favoritism? Darius: cost of zero % loan is about $6000 cost, but if they are in dire straights, push interest payments toward end. Suggests making Pachamama decision tonight and put transparency on next month’s agenda. David: Board went to members to get approval of remodel loan without complete information. Now a loan to Pachamama, who asked Twin Pines for a loan, but that Board didn’t consider it. No collateral, no track record, favoritism, no one knows about it. A lot of coops in Davis would like to ask the DFC for money. Need external review. Here you’re the only ones who have risk. You received loan approval from members and then are turning around and risking it. Need wording for how loans will proceed, be reviewed, etc. Julie: Any loan you have to consider not being repaid. In favor of local business and coops. Talked extensively with Pachamama, will support loan, want interest. Kenna: If do loan, charge 5%, payable after one year. The next year will make or break them. Changed mind. Don’t think we should do this with our loan. Fiduciary responsibility looks bad with this timing. Steve: Offer 6 month pre-payment on coffee? Doreen: Want more process in place. Establish more fairness. Timing is bad. Alt. ways? Encourage other coops to pay ahead of time?


Darius: Moved the order of the day. Second Jack

Motion carried unanimously


Presented: by Doreen on behalf of Debbie, Member Linkage event for November is appetizers with the Directors this Friday at the Wine Tasting. Debbie isn’t available, Julie and April have to work, Lucas and Joy are sick – can anyone volunteer? Janie and Darius volunteer.


Presented: by Kenna, a review of the preliminary Patronage Refund data

Discussion: Kenna: Patronage refunds – Board has right not to allocate back to members. $60,000 saved if we don’t send patronage refunds. Recommend not sending patronage refunds. Eric: Two sets of wording: I. $259,442 is set aside in accordance with article V, Section 4B(1) for the purpose of restoring Capital. 2. $259,442 is set aside as a reasonable reserve for necessary business purposes. Going into period of large cash expenditures, Board has right to hold capital for needs of business. Therese Tuttle says yes, prudent to say as much. No refund to full members either. Board would need to pass these resolutions this month. Doug: Coop would need to inform members. Jack: Transition from giving patronage refunds to need to preserve cash? David: All retained profits on which we would pay corporate tax. Wash as to whether you’d have cash? Kenna: Pay tax 38.7%, or do mailing, checks, etc. Difference is $60,000. David: More and more Coops are using patronage refunds. REI – part of loyalty is refund. You will probably come out ahead if you send out 20%. Build equity, strength with lenders. Opportunity to tie members into process. Eric: Kenna’s math says we come out ahead with no refund. Kenna: Give all cash away over a 5 year period. Every dime of profit given away in cash. Doesn’t help us in the long run. No refund would get us into a position to pay off our loans. Save tons on interest. Darius: Could keep retained dividend for 15 years. Can’t believe dividend is reason people shop here. This is for the long term of the coop. Use as an opportunity for Member Linkage. Julie: Lack of a refund is not a novel idea to members.


Motion: Julie moves and Darius accepts I. The net profit for fiscal year 06-07, listed as $259,442, is set aside in accordance with article V, Section 4B(1) for the purpose of restoring Capital. 2. The net profit for fiscal year 06-07, listed as $259,442 is set aside as a reasonable reserve for necessary business purposes.


Comments: David: Aren’t we in a position to keep the money and not pay taxes? Kenna: But we do need to give it away in 15 years. Darius: No money back and we’re gonna pay taxes, or we’ll keep it and give it to you in 15 years. Darius: Distribute some, keep 80% of dividend to pay off Union Bank. Eric: State considers it a retained dividend. Darius: Makes sense if we explain it well. Steve: Important to pay dividend, influences buying.


David leaves 10:21pm


Doug: Not convinced refund is good idea. Refund is chance for linkage, not linkage itself. Bylaws are clear: patronage refund is third in importance. 15 years of keeping track of people’s $10, etc. Eric: A lot of this money will go to the state if we can’t find people. Doreen: Every year or just this year? Kenna: Will probably show a net loss for 3-5 years, no refund.


Janie leaves 10:30pm


Kenna: Impossible to est. how much would go to state after 15 years. May lose more money this way. Need decision to file taxes this year. Eric: Could convene special meeting. Kenna: Review around Nov 25. What more information is needed? Darius: Resistance is more work. My values say retain refund, but I don’t understand where extra work is coming in. Want to defer to judgment of management. Julie: Last year tried to do retained earnings. Why not this year? Eric: Last year: retain it for 5 years. Julie: Uncomfortable with no opinion letter from attorney, Terese. Eric: We received wording from her over phone. She will issue a letter. Julie: We were burned last year. Kenna: Special Board meeting in two weeks? Steve: Anything we can do over next 15 years with bylaws to simplify escheatment / tracking people in a University town? Change our membership agreement? Doug: There is a difference between escheatment and dividend. Julie: No decision means no patronage refund and must pay taxes for Dec 15. Eric: I am concerned that much of Board is gone. Darius: I’ll try to call a special meeting for Nov. 12th or 19th. Kenna: potentially make decision at Dec 3 meeting, but that puts pressure on tax preparation. Not a good option. Steve: Worst case, file return, amend.


Motion tabled: Darius moves and Julie seconds to table.

Tabled unanimously.



Meeting Evaluation

new procedure


Next Meeting – December 3


There being no further business to come before the meeting, it was adjourned at 10:45 p.m. by a motion made by Darius, seconded by Julie, and passed unanimously.



/s/ Julie Cross, Secretary


__________________________________ ___December 3, 2007______________

Secretary, Davis Food Cooperative, Inc. Date Approved