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2000-960-Minutes for Meeting October 05,2000 Recorded 10/19/2000VOL: CJ2000 PAGE: 960 RECORDED DOCUMENT STATE OF OREGON COUNTY OF DESCHUTES *02000-960 * Vol -Page Printed: 10/20/2000 10:51:19 DO NOT REMOVE THIS CERTIFICATE (This certificate constitutes a part of the original instrument in accordance with ORS 205.180(2). Removal of this certificate may invalidate this certificate and affect the admissibility of the original instrument into evidence in any legal proceeding.) I hereby certify that the attached instrument was received and duly recorded in Deschutes County records: DATE AND TIME: DOCUMENT TYPE: Oct. 19, 2000; 4:48 p.m. Special Meeting (CJ) NUMBER OF PAGES: 32 MARY SUE PENHOLLOW DESCHUTES COUNTY CLERK K UN HED OCT 2 0 2000 ��261X1. 4A66 MINUTES MEETING OF MEMBERS OF DESCHUTES COUNTY OCT 19 PM 4:48 FAIR BOARD AND OTHERS sl-'- � I ,! ,.:j "" .COUNTY CLEF�K THURSDAY, OCTOBER 5, 2000 DESCHUTES COUNTY ADMINISTRATION BUILDING 1130 NW HARRIMAN ST., BEND David Bishop, Chair of the Deschutes County Fair Board, opened the meeting at 5: 35 p. m. Present at the meeting were David Bishop, Lee Smith, Jim Diegel and John Leavitt, Deschutes County Fair Board; Ron Nelson, Deschutes County Fair Association; and Deschutes County Commissioner Tom DeWolf. Also in attendance were Mike Maier, County Administrator; Rick Isham, County Legal Counsel; Barney Lerten and Anne Aurand, representatives of the media; and Mike Daly and Charles Brewer, citizens. BISHOP: We have a quorum here. Our intent for tonight's meeting was to ratify the agreement of transition between the Deschutes County Fair Association and the Deschutes County Fair Board. To my knowledge as of this afternoon, no agreement had been reached. In principal there are some misunderstandings and disagreements, but I think the framework is there. ISHAM: I drafted a few agreements that are not completed because I got stopped cold on some things that I felt I had not completely thought through. The first agreement was a simple termination agreement, where the 1994 agreement between the Fair Board and the Fair Association would be terminated effective October 9. The second agreement was one that was also relatively simple, except in dealing with the issue of assumption of liability. In dealing with liabilities, I was looking at things like outstanding bills, obligations to be paid, line of credit, and things like that. Minutes of Meeting: of Representatives of the Fair Board, Page 1 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ISHAM: It became clear to me that the issue of liabilities may be much larger than that. There may be issues of wrongful termination, possible sexual harassment claims, things that I had not factored into my thinking. I realized that other than the bills and the line of credit, I really don't know what other potential or existing liabilities, liquidated or not, are outstanding. These are things you cannot put a price tag on. It kind of stopped me cold in the process of trying to look at the transfer agreement. With all due respect, I told Greg that I would work up a draft, but this is one issue that I need direction on in terms of going back to Greg. The second issue is with respect to the Fair, and I think that it would be fair to say that in regard to the Fair Association operating the Fair, there's not a disagreement. When I first wrote the agreement, I put in there something to the effect that the Fair Association could apply to do that, and set forth some things that needed to be mentioned. When talking with Greg, though, I didn't feel that there was complete closure on that. So I think I need direction from the Fair Board as to where I should go on those two issues. To tell you the truth, the second one is the simplest. One thing we can do is to attach a list of bills that the Fair Board will be asking the Board of County Commissioners to consider in terms of making these businesses whole. It's something else to leave the contingent liabilities back in the hands of the Fair Association, which may not have the capacity to deal with them. BISHOP: I think we need to keep our options open. We need to look to you for guidance to keep us out of jail. In the spirit of keeping our options open, it's a very difficult thing but a prudent thing. We have a fiscal responsibility and commitment back to the Deschutes County taxpayers and I would expect that they would want nothing less from us to assume no additional risk by getting into this agreement. Whatever we can do to eliminate financial risk, whether it be the promotional view or assuming contingent liabilities from complaints and other potential litigation that could surface out there, we need to stay clear of that. If that means, "I don't know", that this is more of a legal question, if that means having DCFA sever all employer - employee relationships before we take anything on, and if we take anything on, then any employee that is still out there comes on as a contract employee. Minutes of Meeting: of Representatives of the Fair Board, Page 2 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: In the same spirit, we need to keep our options open. Some of the people have been great employees but may or may not make a long-term fit. I would want to keep those people available and/or around until we hire a CEO, and he or she or it - meaning the management company - could determine what the organizational structure might look like, and whether those employees fit. Most importantly, as the Fair Board, I don't want to assume any contingent liabilities, be it financial or otherwise. In the contract we talked today about the wording with Greg as any potential liabilities out there. We're talking about accounts payable and the returned checks. This morning, at the Redmond Executive Association meeting, another account payable from the Redmond Kiwanis club surfaced. I don't know how many more accounts payables are out there - that's a contingent liability, because we asked to have those on a list, and it showed up later not on the list, and we haven't agreed to do that. But yet the prudent thing is to protect the community. I think that it is incumbent upon us to get our arms around it to the very best degree we can, and I still don't think that's good enough. We can't be too cautious. ISHAM: Let me explain how I see some of this issue. Let's say that there was an interaction with an employee of the Deschutes County Fair Association and another Deschutes County Fair Association employee, and that interaction was unlawful. The County and the Fair Board fall under the Oregon Court Claims Act. Under this Act, your employees and agents are entitled to a defense. They are not entitled to a defense if the action was malfeasance or willful and wanton behavior. It's an archaic way of saying that it was unlawful, not falling in the scope of their employment. As a Fair Board and as a County, you cannot agree to pay that even if you wanted to. So it creates a very difficult situation when you come up with something like a wrongful discharge or some other action arising out of it. Some might be covered, and some might not be. My sense of it is that the Board of County Commissioners is going to have some difficulty not knowing about those types of claims if there is a true potential for that. NELSON: If insurance was in force then, do they have an obligation to pick up a defense on any claim? Minutes of Meeting: of Representatives of the Fair Board, Page 3 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ISHAM: They may or may not, it depends. What happens typically if there is insurance, that they may defend under certain circumstances. NELSON: Would it have the impact of shrinking the risks of all the parties if there had been insurance in place? ISHAM: Could be. That's an aspect I hadn't even thought of at this point. That's the next step. We have to be careful and make sure that any insurance contractual rights are then transferred, assuming that there is not a contractual provision in the insurance policy that might prohibit that. That might be an avenue to follow. There may be a way to state those things that are not transferred. That's not really what the Fair Association is looking for. They want to close the door and go forward. MAIER: I don't know if the Fair Board realizes that the County is fully self-insured. The Board may not want to step into that fog, which could be very risky to the County. DEWOLF: Can a contract not only be written but upheld in court that draws a line between the liabilities that we would take on, and potential additional liabilities that we may not want to take on? Could it be specific enough? Can we assume only those we know and exclude future unknowns? ISHAM: There may be some that are going to show up gradually, and you will have to decide whether to pay them. MAIER: Couldn't all of the vendors be contacted and asked to submit their claims, like you would in a bankruptcy proceedings? ISHAM: The way it works in bankruptcy is that the debtor has to list all the creditors, and that's why if you are in that situation you list everyone you have ever done business with, even if you don't know if there is an outstanding bill from them out there. If you don't list someone who might have a claim and later, even though it has been discharged, if that person had a bill and you didn't list him or her, then they are entitled to be paid. Minutes of Meeting: of Representatives of the Fair Board, Page 4 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ISHAM: The other thing is that there are certain things that the Fair Board and the County agreed to in the three-part agreement. The first one was that the Fair Board appointed the Fair Association as its agent to operate the Fairgrounds. Along with that the Fair Board is acting as a public entity, as is the County. The Oregon Court Claims Act says that agents of the public entity are entitled to a defense to torts. Torts mostly fall into the category of negligence, but it does not include contracts. There is no indemnity for a contract. Additionally, an agent cannot bind the principal - the Fair Board or the County - for debts. So there are limitations. There might be some duties that the Fair Board and County might have to do with respect to a tort, but it would have to be carefully worded because if an individual is liable and it's not attributable to the Fair Board or the County, that employee may be on his or her own for an unlawful act. I had focused on the bills, but David Bishop expanded my mind today. I realized that I had not thought that problem all the way through. I think there has to be somewhat of an understanding of what we're going into. Once we have agreed on that, we can draft language that would take care of it. DIEGEL: Excuse my simplicity, but basically, where are we? BISHOP: We don't have an agreement. To summarize, there are three major bullet points that we think are very important. The first is a real stumbling block, whether we are willing to give the attorney for the Fair Association what he wants. He wants a written commitment in this contract to allow DCFA to continue to put on the Fair. For that, there are three strong items that they must do. First, they must have a detailed operational plan, and they should be able to do it by rote, as they have been successful in doing so in the past. Secondly, they have to have a financial plan with a timeline. The County budgeting system would be utilized, with all the money going in and out of the County budget. That would include cash controls and things that have been lax in the past. The third and final thing is leadership. Who is going to be leading that ship, because at this point I can't say that we have 100% confidence in the leadership as it has been in the past. It's gone awry and it needs to change. Minutes of Meeting: of Representatives of the Fair Board, Page 5 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: As I told Greg Lynch, I don't know if the word needs to be quite as strong as veto power, but we need to have consensus that we have the right people steering the cart for the Fair Association. Those three things I feel are really pivotal. The other thing we were asked, as Rick mentioned, is to pay off any and all financial obligations of DCFA. We have a number of parts there. The big one is the checks that have been bounced, and the other is the payables that continue to arrive. Before we do that, we must have an exact list provided by DCFA of what we are expected to pay back, as well as agreement if we're going to have a workout schedule with any of the creditors. That's real important. I don't know where that is, but I, like Rick, have had tunnel vision on paying back bounced checks and accounts payable. Any other contingent liability out there that we can measure, I think we do not need to assume; and we expressly will consider getting involved and asking the Commissioners if they can find the money to reimburse those vendors. I have never been involved in a supplemental budget process at the County. DEWOLF: There will be an invitation extended to the Fair Board to attend the supplemental budget work session on October 17th at 2 p.m. BISHOP: That's where we are. DCFA wants a commitment to be allowed to do the Fair, and they are good at it; but they need to have prudent management and good plans. If they come to us, we'll have this all budgeted and will come to the County for requisitions. As long as we know in advance and there is a plan, everyone has a better comfort level. I want to thank Greg Lynch for asking Ron Nelson to step up to the table, to be our liaison to that facility and the DCFA staff and Board. If anyone call pull this all together to move us in the right direction, I believe Ron is it. DIEGEL: I agree. Ron's reputation is good in the region. To be honest, the only relationship I feel I have right now with DCFA is remotely through Ron. I have had negative experiences with the other players in the past, and I do not have that trust there. Minutes of Meeting: of Representatives of the Fair Board, Page 6 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 NELSON: It will take everyone's hard work to get through this. I'm only one person, and there are a lot of issues. I'm flattered by the kind words. I'm willing to commit to doing my share, and I would like to ask you to give the Association members a chance, through me, so they can step up to do their share. DIEGEL: There are some players I will have a negative reaction to, coming from direct experience. SMITH: If we get to the point where communications completely break down, perhaps we could use Dispute Resolution Services. They are very good. LEAVITT: I think we can work with Ron. There may be some that we may not be able to. ISHAM: I wrote down a clause that says that prior to the budget process the Fair Association would submit an application to the Fair Board for inclusion in the Deschutes County budget process to operate the Fair in 2001. After talking with David, he mentioned these items would easily fit into that. Greg Lynch said that it has to be stronger than that, that the Fair Association would be entitled to run the Fair and entitled to the funds to do so. I can't put a number into the contract, as this amount is an unknown. We can't blindly commit when we don't have a solid number. DEWOLF: I won't commit future budget committees to a contract like that, even if we have a solid number SMITH: I agree. I think this has to be dealt with separately. I would sign a letter of intent and leave it at that. ISHAM: Obviously the terms would be unknown in the short term anyway. Greg wants certainties, and of course is pushing for the strongest position for his client. We can't get there from here, though; it's too strong of a commitment. Minutes of Meeting: of Representatives of the Fair Board, Page 7 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: We can outline what we'll agree to, and condition the operation of the Fair on specific things. ISHAM: Every contract has an implied covenant of compliance. SMITH: I am concerned about comments made on Monday night regarding position. I strongly recommend putting the 2001 Fair off the table, and figure out the rest, first, which is more urgent at this point. Don't hold this up on the Fair portion of a contract. BISHOP: I don't think the Fair Association has a position of strength at all. We're the ones coming to their aid. If the Association has another resource, if they feel they have financial assets, they should sell, pay off their debts, and move on. We all realize most are not marketable assets. From a financial resource, there is really no other way than to come to the County and the Fair Board for help. We're saying that we're willing to help on the issue of the Fair, if the Fair Association can get all its ducks in a row, they should do the Fair. They do a good job with the Fair, but they continue to encumber us with their resistance. We may have to consider an alternative plan. There's no management plan in place. There desperately needs to be one. We don't want to play hardball, but we do need some movement and compromise from the DCFA. I don't sense that at all. MAIER: Tell me if I understand this. What they are objecting to is having some performance expectations and standards in running the Fair. Are they objecting to having a plan? That's a minimal requirement. BISHOP: Those are businesslike requests that they have not followed in the past. It's very prudent to ask. Minutes of Meeting: of Representatives of the Fair Board, Page 8 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: If in this agreement the intention was stated that the Deschutes County Fair Association would operate the Fair under these conditions: an acceptable operational plan and an acceptable financial plan through the County's budget process. With those contingencies, would the Fair Board accept having that as part of this agreement? SMITH: We need to have all contingencies covered. You can't give them a blank check. NELSON: The Fair Association needs to talk about it. It's a whole different dynamic. Rick, was Greg representing to you that he wants a hard number in the agreement up front? ISHAM: I don't know whether that is his absolute position. The Fair Association has no assets. I think everybody agrees that in order to put on the Fair there needs to be money prior to the Fair. Greg's goal is to establish with some level of certainty that the cash will be available early enough in the calendar year. If not money, they want funds committed for the issuance of purchase orders. MAIER: You can't commit that until you go through the supplemental budget process. That will probably take us until the end of the month. BISHOP: I asked Dick Donaca before Monday's meeting whether he feels they have the records to go in and backtrack a timing and accounting structure to create the financial analysis that we need. I'm not supportive of giving anybody cash with what's happened during prior years, but I am supportive of creating a mechanism whereby that cash can be made available on a systematic and ordinary basis. Beyond that, if we did agree to give $500,000 to DCFA and let them move forward as they have in the past, what are the taxpayers going to say? If we allow DCFA to set sail again, as a vendor or prospect, what do you think the odds are they will right DCFA a check for deposits? The County is credible; the DCFA is not. The confidence is gone. Minutes of Meeting: of Representatives of the Fair Board, Page 9 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 NELSON: Would this be the process each year from now on? BISHOP: Elton said a month ago that by your bylaws, you aren't to make a profit; and if you do make a profit, it all goes back into the Fairgrounds. Why would we not have to have it this way into perpetuity? If the money were always supposed to go back into the Fairgrounds, wouldn't it make sense for the Fair Board or Association to make a commitment with the County that if there is excess revenue, it stays with the Fairgrounds? MAIER: Assuming this is structured as other accounts have been, there would be a separate account for the Fair; the monies would not go to the Fair Association, but would just go to the Fair fund. The Fair Association would act as a contractor and submit their bills. It would stay under the County and be a dedicated fund for the Fair. DEWOLF: It would be somewhat like a service district, like Black Butte Service District. We don't step in operationally, but they have a Board that presents their budget, and that's our role. We help with the budgeting to keep the district operating and functioning as it should. MAIER: That's the way it's done in most places throughout the state. It's kind of a department. DEWOLF: Then the Fair Board then presents a budget to us for Fair, for year-round operations of the Expo Center, and construction. NELSON: I wasn't under the impression that we would continue to operate as a department. thought it was just until we got back on our feet and operate like we had prior to the new construction. Minutes of Meeting: of Representatives of the Fair Board, Page 10 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ISHAM: I discussed this with Greg. I think there was an understanding that those public funds would be handled as public funds through the budget process. It is pretty clear that if there is a subsidy and things go well and it is profitable, Greg said they are willing to carry those funds forward as restricted funds. He indicated that if there is a need for a facility improvement for the Fair, but not necessarily a public improvement, then the Association wants permission to use those funds. Greg does not want all of the funds run through the County. BREWER: I feel that these should not be separate. You need to think about the improvements as being used year-round. DEWOLF: I will not support anything that doesn't go through the budget process. It protects the taxpayer and protections the Fair Association as well. They need to think about the personal liability potential. This needs a public process that follows all the rules. We're talking about maybe a million dollars, and it needs to be paid back. It may be years before everything is made whole again. First, it's the right thing to do; it's a clean process. Secondly, it protects all parties. And we all need to be on the same page. 1 1.13 N WIN' We thought it was Deschutes County anyway. In the realm of the northwest, people don't know the difference; vendors think of it as Deschutes County, not some association. BISHOP: During this transition, that's whom they will be dealing with. If we had these checks and balances a year ago, we would have stopped this problem a long time ago. In the Deschutes County budget process, credibility is maintained and there is financial integrity. MAIER: A lot of this is premature until the Fair Board gets the expertise it needs. That will provide a lot of direction in how you identify a good operational plan, how we will receive the money and so on. We're kind of in the dark now, since there is no interim manager in place. Minutes of Meeting: of Representatives of the Fair Board, Page 11 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 SMITH: Don't pull the rug from underneath the obligations due. I would make it a high priority to meet those obligations of the Fair Association. Secondly, I think the paragraph that indicates we will use the Fair Association to conduct the Fair, subject to approval of a financial plan and so on, all of it falls under that. There is no reason for us to try to figure out a structure now, and I think the Association is going to have to accept that. If they want the financial plan locked in stone before they sign, then we'll never come to an agreement. The third thing is that within 90 days I hope we have the expertise, knowledge and experience in place to provide good business management. I cannot imagine signing an agreement and asking someone with expertise in the field to be bound to it. That would be a tragic mistake. DALY: I know the Fair Association people pretty well. I think we need both parties to agree to a manager. DEWOLF: There are three parties. DALY: Okay, three parties. The one special person should be one that all parties have confidence in. Then you'll see the Association and everything else just flow right along. Hiring someone from the outside or from back east won't sit well, especially with the local people. BISHOP: Well, Mike, I'm a local person from Redmond and I don't feel that way. DALY: If all three agree on one person that they are comfortable with, I think it will go a long way to resolving conflict. BISHOP: That's perhaps very good advice. However, you have advice, DCFA's attorney has advice that is on maybe totally different issues, and not being able to have a commitment to have the Fair run by DCFA in this transitional agreement is - and he didn't say this, but I believe - is a deal breaker. Minutes of Meeting: of Representatives of the Fair Board, Page 12 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: The Association did a good job in the past, but shot itself in the foot every month and now shot itself in the head. They're saying help, but they're saying they have a strong position in negotiations. And I'm saying first of all they've done it to themselves; and secondly, we are here to help but we're not magicians. What is the prudent way to move forward? We don't need an agreement with DCFA to move forward. They need an agreement to hold them whole financially if they want to move forward. We don't need that to move forward. ISHAM: What Lee has suggested is significantly stronger than what I drafted. Everyone is assuming that the Association wants to run the Fair. We're trying to hone in on some solutions. They can apply to operate the Fair, and the Fair Board must decide if they don't. In order to have a Plan B, if the Fair Association doesn't perform, it's up to the Fair Board if that's its position. SMITH: A letter of intent would work, subject to the satisfaction of certain conditions. Everyone wants the Association to put on the Fair. I move that we include in the transition agreement a statement that the Fair Board will contract with the Fair Association to run the Fair in 2001, subject to the conditions detailed - satisfactory operational plan, financial plan and approval of the leadership. DEWOLF: The reality is that if you have an acceptable operational plan and an acceptable financial plan, that's really the only things you need to protect yourselves and for us to protect ourselves. BISHOP: That's your opinion. ISHAM: I can propose some language for the Board's review tomorrow. DIEGEL: I second that motion, assuming a cost center approach would be used for budgeting. We need a cost center or fund for the operation of the Fair, one for the Expo Center, and a cost center for capital improvements. The governing body or the department manager for that is the Fair Board; the department manager for the Fair cost center is the Fair Association. Minutes of Meeting: of Representatives of the Fair Board, Page 13 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 MAIER: I still think it would be the Fair Board. The Fair Association would be a contractor to the Fair Board. SMITH: In the budget process, there are a lot of line items for the various departments before they will contract with someone. DIEGEL: And that's the model I think we're talking about for the next couple of years. MAIER: Remember that a new, outside management firm may set it up differently. I have no idea what kind of financial model they would use. LEAVITT: Do we need to set a time limit in this motion? NELSON: It will need to be done in conjunction with the County's budgeting process. MAIER: We start working on the budget after the first of the year, so the timeline fits with the Fair. BISHOP: We need a time frame for the plan. The plan should actually be ready on September 1St, because it is a yearlong event. Right at the end of the Fair being over, things begin again. NELSON: If this is the model that is chosen, with a financial plan and a business plan, it will dovetail with the County's budgeting process. I have not discussed this with the other members of the Fair Association, so I can't commit to anything certain. 1 0.1 R WIN' Crooks County has the same type of arrangement. It used the same basic model to go from red ink to black ink. DIEGEL: I call the question. Minutes of Meeting: of Representatives of the Fair Board, Page 14 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 VOTE: Unanimous "ayes ". BISHOP: Now we'll talk about the money. ISHAM: I propose that we have a list of all operational liabilities, with a caveat if something is undisclosed but not material - there are liabilities under the Oregon Court Claims Act that we agree to assume and we should be responsible for those. We need to be very careful stating our limitations under the Act are so that it cannot be misconstrued that if there is an unlawful act, we will assume the liability; nor will be indemnify someone who acted outside the Fair Board's and County's responsibilities under the Act. ISHAM: We also should not commit to anything that would be covered by the Fair Association's insurance. However, it's not an even fit between the insurance and the Act. BISHOP: We need to give Rick some guidance here. Under the umbrella of a financial guarantee, we need to take care of the unpaid bills and line of credit, and the non - sufficient funds checks. Once we identify and quantify those, what does this Board want to recommend to the Board of Commissioners? DEWOLF: The difficulty is finding the money. We can get there, but it's problematic, difficult and has impacts. As part of the $462,000, there's a contract with the rodeo in November, there's a bank loan out there, a catering contract that I haven't seen, and a Cameron Clark contract out there. Are those services going to be necessary? I don't know. How do we make whole on this? I don't know where the money has gone for tickets that have been sold at the Fairgrounds. There are at least four things there that can help us or hurt us. BISHOP: We need to work on the NSF checks and unpaid bills, and true, cancelable contracts to eliminate payables, and the legitimate contracts that we'll have to put into the supplemental budget. Minutes of Meeting: of Representatives of the Fair Board, Page 15 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: There's another piece that I wasn't clear on. If we accept the liabilities on contracts, there are certain liabilities that are quite large. If we just accept them, we are accepting them at the terms they were written. What I am suggesting is that before signing a final contract that those should be renegotiated first. If we're going to accept these liabilities, you have to agree to do X, Y, Z. BISHOP: Ron, can you help analyze the contracts to possibly reduce the liabilities attached to those contracts? NELSON: We will work to do this. BISHOP: What's the general consensus regarding the bounced checks, the liabilities and the line of credit? SMITH: We have no obligation to assume the liabilities but there is a consensus we can't just ignore them. Is this being negotiated between the County and the Fair Association? What is the role of the Fair Board, if any? DEWOLF: There are no negotiations of this type taking place. This is why we're getting the budget committee back together. If the timing on some of these payables could be extended over a period of years, it makes the County's job easier. What I'm trying to say here is that this needs to be finalized before we come to a final agreement with the Fair Association. We are not negotiating outside of the Fair Board on the payment of these bills. MAIER: Maybe you need a recommendation or an endorsement of support, but it has to be subject to the County budget committee's work. We have to go through a publication and a hearing process. SMITH: As a Fair Board, it seems to me that all we are doing is making a recommendation. Minutes of Meeting: of Representatives of the Fair Board, Page 16 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: We may have to be the conduit to statutorily get the money from the County to the Fair Association. Other than that, I don't feel any obligation to assume this indebtedness. We don't want to lose sight of the goal here. We only have funding for staff until midnight on Monday, October 9. We can't protect ourselves from any unforeseen contingent liabilities, from employees or other vendors. I believe we need to come down to the core stance as to where we are in spirit. If we're not willing to absorb and pass on these debts, to recommend it to the Board of County Commissioners, then so be it. If we are, I think we need to be concise in providing the numbers that are needed by the budget committee. ISHAM: If there are truly debts, and we went to a fire sale, they would be discharged. So the theory on which we can go forward is that there are assets of the Fair Association, that are in essence are sufficient to cover the liabilities. A supplemental budget is not necessary to sign the agreement. The supplemental budget is necessary to account for those in the supplemental budget. You could sign the agreement; it would not be unlawful for the Board to sign it. What Mike's saying for the Board of Commissioners is that he wants to pay them out of a supplemental budget. The creditors will need to be told in the very near future that this is our supplemental budget process and they will have to wait. Some may not want to wait. MAIER: It's possible that the budget committee doesn't approve it, too. ISHAM: There's a possibility that the Board does not approve it. One of the things that this agreement is intended to do is that it basically wipes the slate clean of a whole bunch of problems and agreements and positions that have actually interfered with the relationships of the parties instead of facilitating them. I see the 91h as the "do it" date, and let's see what happens. We've got to operate after the 9th, but we can't operate under the model that we've got going right now. DEWOLF: Is David correct that we cannot protect ourselves from unknown liabilities if we sign this contract? If some employee sues a boss out there, are we assuming that liability if there was an illegal act? Minutes of Meeting: of Representatives of the Fair Board, Page 17 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ISHAM: If there was an illegal act, the answer is no. If it was negligence or attributable to some act back through the system, then the answer is yes. BISHOP: That's another topic. We need to talk about payables and cancelled checks. We've also got to talk about employee considerations here. SMITH: Rick raises an excellent point that I had not considered and hadn't heard mentioned before. If there is going to be a recommendation from the Fair Board to put these liabilities into the supplemental budget process, there also has to be something in there about the assets. There are several paragraphs in the agreement that give the Fair Association equity interests in a whole lot of the facilities and infrastructure and lands out at the Fairgrounds. Those have to be set aside, at least to the extent in respect of equaling the amount of liabilities. DEWOLF: That has already been agreed to verbally by Greg Lynch. That's kind of the exchange. In exchange for paying off the bills, the Association has no claim on any assets - real, fixed, equipment, nothing. There has been a disagreement about the value of the assets. The Association thinks they have $3 million worth of assets for the Association. There are people with differing opinions who don't believe that, since everything that the Fair Association does is to benefit the Fair, it's not like they could walk away with it. To clear that up, to avoid lawyers and courts over that, this is kind of the agreement. They give up any interests and we wipe the slate clean. My only concern is being able to get through our budget process; this means negotiating with some of these larger entities and some of these long-term contracts before finalizing it. (County Counsel Rick Isham had to leave the meeting at this time) BISHOP: We're getting outside the boundaries of the payables issue. What are the spirit and the feelings of the Board members as to what our recommendation might be to the Board of County Commissioners and ultimately the supplemental budget committee. John, what's your feeling? Minutes of Meeting: of Representatives of the Fair Board, Page 18 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 LEAVITT: Let me think about it a minute. DIEGEL: I am favorably inclined to recommend that the checks that were returned as non - sufficient funds be paid by the County, and the outstanding payables be wiped clean, with the caveat that we also get a full release and conveyance of all of the other disputable issues. BISHOP: By the way, it is in the agreement; it's not a bone of contention. DIEGEL: I am concerned about all of the small businesses out there that have been left holding the bag. I feel that we need to find a way to make them whole. NELSON: There's another aspect to that, too. These are the same people that we are going to need to come back for future events. We need to realize this potential fallout. SMITH: I think we need to cover the outstanding debt. I recommend that to the County. There are a couple of things that concern me. One is I think that very definitely the message needs to be put across that this is done in support of the small businesses. This is not a commitment by the County to write blank checks for all of the revenue shortfalls of the Fairgrounds. Which then goes to the next issue. As I understand it from Monday's meeting, this thing is still capable of hemorrhaging anywhere from $60,000 to $80,000 per month. I think sometime we need to be looking at how those shortfalls are going to be addressed. Not tonight, though; let's just address the issue of the outstanding bills. LEAVITT: I agree with Jim, but I believe that we could still be getting bills in three or four months from now. DIEGEL: I think these will just need to be paid as they come in, assuming there are no large surprises out there; and would be treated as that month's expense. Minutes of Meeting: of Representatives of the Fair Board, Page 19 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: Would we go as far as to say that we would recommend for approval by the County Board of Commissioners, subject to the approval of the supplemental budget committee, to cover the costs of an itemized list of indebtedness? DEWOLF: If you are going to make a motion, one thing that would help me to approve this request would be to specify that the larger amounts in here be negotiated over time. BISHOP: Okay. So how about if we leave it to the bounced checks and the accounts payable at this point in time. The accounts payable must be reworked, subject to the reassessment of a contract committee. By the way, I asked Ron Nelson and I asked Lee if they would work together on some of these issues. DEWOLF: On the list that was prepared by Dick Donaca, accounts payable includes those NSF checks. And everything below there is separate - estimated expenses, line of credit with Columbia River Bank, the Cameron Clark contract and the rodeo contract. Those are the kinds of things that would be renegotiated. BISHOP: Thank you for clarifying. DIEGEL: I would so move. SMITH: I second. VOTE: Unanimous "ayes ". NELSON: Tom, with great respect for your feelings about the value the Association places on signing over its equity interest, it might be helpful to all of us to say that while it may be questionable exactly what that is, how much that might be worth, it is being thrown in the pot in an effort to resolve additional disputes. Minutes of Meeting: of Representatives of the Fair Board, Page 20 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 NELSON: That is worth something, if not anything more than some good will. Right now, that might be more valuable than anything else we could do. Perhaps this could be brought up at the appropriate times with the budget committee or with whomever else might be interested in what we're doing here. DEWOLF: I respect that. NELSON: It may be worth a lot to all of us to get that point across. BISHOP That's an excellent point, and I would sure ask you to share that with Greg. That spirit is not anywhere close to being included in the agreement. LEE: May I suggest that the Association consider changing its name so that at some point the Bulletin can get it straight, who is the Association, who is the Fair Board, and who the Board of Commissioners is. BISHOP: The next item I'd like to bring up is the employee issue. Because there are contingent obligations out there, until they can be identified, what is the feeling on how we deal with employees? MAIER: I have discussed this with Rick and with Greg Lynch. It would be cleaner for the Fair Board if there were no Association employees at all during this transition. My recommendation would be that everyone is let go. It's my understanding that there is no one with Express under contract now. The only employees now are those with the Fair Association. If we proceed on Tuesday or Wednesday, it would be a lot cleaner if we had an interim manager or committee, that they make those decisions from that point on - we can afford you, we can't afford you, and so on. At that point they could be contracted, not County, employees. Minutes of Meeting: of Representatives of the Fair Board, Page 21 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 MAIER: This gives us more flexibility, since we don't know how things will be going from that point on. Otherwise, if they are considered County employees, you get into issues of letting someone go, seniority, the union, and more. Under contract makes it a lot easier, and you get away from issues such as wrongful discharge. It's better to start anew. I don't think there would be an objection from Greg. BISHOP: I don't think that Greg has a leg to stand on in that issue. That's water under the bridge as far as the Fair Association is concerned. LEAVITT: I know we need to start clean, but that doesn't mean that some of those people couldn't be hired back. MAIER: No, I'm not saying that. Where we end up, whether there are public employees working out there, or employees of some management company, or employees working through Express, it gives us that flexibility. We obviously need some employees. BISHOP: Conceivably the same people who are there today could be there Tuesday morning; it's just a matter of who their employer is. DEWOLF: The thing that I had asked a week ago was that we find out who are the absolutely essential people who know where the light switches are, know how to unlock; and how many people are needed for this. We haven't gotten that yet. What you mentioned earlier - the $60,000 a month payroll - if we can cut that labor piece down, it makes it more possible to get us through to Fair next year. By Tuesday, when these people become contract employees, we've got to have the names of the key people that are working there now. BISHOP: We're now a public entity. What are our requirements in selecting a management company? We have Express Personnel. There's Mid -Oregon Labor Contractors. There's Barrett Business Services. My point is, there is more than one contractor company out there. Minutes of Meeting: of Representatives of the Fair Board, Page 22 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 MAIER: We go through an RFP process each year. We do it every year, and we solicit input. We come off of the main contract bid we have with public works, and we use Express. I would assume that we would continue to use Express. At some point the Fair Board can do an RFP process itself. NELSON: While we're looking at payroll as a liability, it can also be an asset. The phone rings every day. There are opportunities every day. A quick response to the question about essential personnel is that we we're pretty thin right now. I think we need to exercise some balance here, even though that's a big amount each month. It has potential of being an asset and bringing in revenue. NELSON: There's another element in that, too. This is another area where we're going to need to use some raw feelings. We have, to the extent that we can, to look at them as an asset and think about what they can do to help bring revenue in. Even though there might have been some hard feelings, we're working at getting past that. I would be happy to examine this issue with others, so that I don't end up coming back and saying that there are eleven people out there and we need them all; and someone saying that can't be right. MAIER: What we're really missing is some management capability. I would assume that would be a real quick step. that the Fair Board would want to do. You need someone to direct the staff. NELSON: The phones are still ringing, and there are events that we need to prepare for, and we still need skilled people. DEWOLF: My feeling would be that's exactly right, but I would see almost a suspension of the sales efforts at this point - for thirty or sixty days - not booking anything, but will call you back. If we don't book anything, we don't create any liabilities. We also aren't creating assets, but it keeps us flat. We need management in place. MAIER: We need to develop some kind of interim operations plan. Minutes of Meeting: of Representatives of the Fair Board, Page 23 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 NELSON: I think we can do that, and I think we can collect inquiries and the management team can review them. Know that if we pass up an opportunity today, we never get that one back. They may come again at another time, but you never get that one back. At the same time, we don't want to move forward unprepared. If we collect these and can review them, selecting the ones we can successfully commit to, that might be a good option. BISHOP: Tom, my feeling on that is anything we can do - our working committee, whoever that might be - that could minimize the financial risk of the operation of this facility, is what we should do. The Bend Chamber of Commerce currently has eight clients to book and they'd like to come to the table; but apparently there has been some exclusive side deal with COVA to bring those things together. We'll need to address all these side and handshake deals that are apparently out there. If we can make money at those items, i.e. reduce the financial risk of the events, I'd like to keep that open as an option. I would like to leave it up to Lee and Ron to make the business judgments as to whether it makes sense or doesn't. DEWOLF: The piece that is missing at this moment is whether someone has a way to know what the break-even amount is on an event. We need to develop an absolute knowledge of what would make money. BISHOP: We are talking about fixed and variable expenses, and fixed and variable revenue. If we have the opportunity to have variable revenue that covers variable costs, we don't need to know to the exact penny what the costing of that building is. As long as it covers and makes a little money, that's probably more important than having the cost accounting, which we will have hopefully someday soon, to price the products and services accurately. It must be done. It will be done. (A general discussion took place about this subject matter.) NELSON: We all want to get to a point that keeps the doors open successfully to minimize the expenses and risk. Minutes of Meeting: of Representatives of the Fair Board, Page 24 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: Recognizing that the FMCA construction project is one thing, and the Fair itself is one thing, and the Expo Center year-round operation is one thing, and construction reserves are another, these four big things are absolutely interrelated. If we have a $60,000 a month payroll and we have an absolute limit on what we're able to find in a supplemental budget, it reduces our ability to succeed with the Fair. If we need $400,000 to start the Fair but because of payroll expenses now, we can only come up with $250,000, how do we put on the Fair? That's why I'm getting at. BISHOP: If this Board is comfortable with that process, we've stepped beyond the concept of what we're going to do with the current employees of DCFA when and if we have to take over next Tuesday. Is the Board comfortable in making a motion to allow the management committee - I mean Ron, Lee, Mike and maybe Rick - is this Board comfortable in appointing authority to this committee to do what's right with these employees? MAIER: If the Association lays them all off, they will be eligible to collect unemployment. It gives them an option to collect unemployment, or to be considered for rehire. NELSON: So the Fair Association would be the one to lay them off. BISHOP: Yes. We would have to ask them to do that. NELSON: That's something that needs to come before Rick and Greg. That's something that is beyond my skill level. DEWOLF: It's already been agreed to. MAIER: What I've recommended here is not a secret. Minutes of Meeting: of Representatives of the Fair Board, Page 25 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: It appears to be appropriate that this Board, my motion, give them authority to act on our behalf DIEGEL: I would so move. LEAVITT: Second. VOTE: Unanimous "ayes ". BISHOP: Regarding the PRCA contract, we have a real difficult situation here, and it's probably not open for discussion as there are too many variables. DEWOLF: I would like to ask a question. Can we get this contract situation, this agreement situation, finalized by Monday? If I recall, I'm not sure that we can hire people through Express Personnel on Tuesday without having that contract finalized and in place on Monday. NELSON: I think you can make your motion subject to Counsel. MAIER: I am assuming that this agreement is going to be approved by Monday. BISHOP: The agreement that I've seen does not address employees. Employees are not in the agreement. DEWOLF: I understand that. But if something blew up and we didn't have an agreement on Monday, what happens on Tuesday? MAIER: Either the people work voluntarily or they leave. Minutes of Meeting: of Representatives of the Fair Board, Page 26 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: They wouldn't be compensated. I think that we prudently, subject to our management committee, should have Express Personnel prepared on Monday to come on board. MAIER: The only other option out there would be a request from the Fair Board and request they extend the monies. BISHOP: That's a possibility, but we need to move on as a Fair Board. There have been ample opportunities for our lawyers to negotiate. The issues are no different today than they were thirty days ago. MAIER: Just for the Fair Board's knowledge, since we didn't know what was going to occur, arrangements have been made to bring in staff from building services, the road department, the finance department in the event that everyone vacated the building and left the doors open. It's not going to sit there empty and be vandalized. The County has got a huge investment in this facility, so if Tuesday morning presents an emergency, we'll do whatever is necessary from the County's point of view if the Fair Association abandons it. I don't think we'll get to that point, as I think we will get something worked out. But we haven't been just sitting here. NELSON: I hope we can find a way of giving these employees some comfort. A lot of what has happened is not their fault. There are some good folks who really need their jobs, and are capable. We do need to move quickly so that we can give them some sense of comfort that they are going to survive all this. DEWOLF: I don't want to be heartless. But I must say that we have to make this thing survive. That's the highest priority. There are people there who need their jobs and I respect that. There are people who absolutely expect the services that the County provides in so many other areas that could be impacted here as well. Minutes of Meeting: of Representatives of the Fair Board, Page 27 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 BISHOP: Ron, it's incumbent upon the Fair Association to make that transition, and to make that softness. We're there to receive them. Quite frankly what they do and what they get paid may not change one iota. It's not meant to be vindictive. We have a business and a political entity that we must be responsible to, and we're supportive to keeping those folks there - many of them are very good and are doing very good things. That being said, there is not a lot that we can do other than be willing and ready to maintain their employment if they so choose. The message must be conveyed by you, and the termination must be conveyed by you, meaning the Fair Association. LEAVITT: And it needs to be done soon. They're all out there, wondering what is going on. DEWOLF: And it is incumbent upon Ron and Lee and Mike to deal with this tomorrow if at all possible, so that we know who is staying. SMITH: I suggest all employees be transitioned, if they want, then decide who is essential. It is impossible to assess between now and Monday who is essential and who isn't. BISHOP: This would give the employees an opportunity to think about it over the weekend. They know the time clock is ticking. NELSON: There are a thousand things that need to be sorted out. Benefits, salaries, vacation time, seniority - this needs to be conveyed. SMITH: I don't think we can take on the liabilities of the association. NELSON: There are a whole host of other issues associated with this. Minutes of Meeting: of Representatives of the Fair Board, Page 28 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: I suggest that you make that case with Michael. If you could find an hour tomorrow by telephone or something to work through this specific issue, that would be helpful. DIEGEL: I think also that you can rely on the expertise of Express, if you are going to use them. It needs to be done quickly and fairly. DEWOLF: I just don't want this issue to end up being a reason for not dealing with this. BISHOP: I ask that the Fair Association make sure their overall gross compensation stays the same. (A discussion occurred among the group as to the level of benefits, salary, insurance, etc). SMITH: Our primary responsibility is to the taxpayers. BISHOP: I would like to meet with Charlie (Brewer) of the PRCA right after this meeting to talk about their contract. It is too open-ended an issue to address as a group tonight. On another issue, 4-H/Extension needs to move, and wants to rent 5,000 square feet in one of the buildings; evidently there is some space where chairs are normally stored in the North Sisters building. There are a number of different exclusive agreements out there that I don't know if this Board wishes to assume. For example, there's an exclusive arrangement with COVA for offsite sales; the Bend Chamber and Redmond Chamber can't get there from there. We need to either ratify those or let the parties know that they are null and void. Regarding the contract with Cameron Clark - I'm shocked that he hasn't contacted us. Minutes of Meeting: of Representatives of the Fair Board, Page 29 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 DEWOLF: He has contacted me. Sorry, I forgot to say anything. Of course he wants the contract to continue. I don't know much about the contract, and it's a recommendation that clearly needs to come from you. BISHOP: We need to be smarter on it, and I would hope that he would partner with us. I'd like to see a copy of the contract before speaking with him. The catering contract, the same. Part of the FMCA contract includes catering, and that is a significant revenue item for the facility. The current catering contract was extended through the end of the year, and we will either need to accept and rewrite it under the Fair Board, and/or extend it, and/or go out for bid. MAIER: It has never been bid before. However, you could do an RFP and could have a list of acceptable caterers instead of designating just one. (A general discussion ensued about catering, the operation of the kitchen, etc) BISHOP: I have asked the Commissioners to identify the scope of work of Dick Donaca for the financial review. I was hoping for a full financial statement, or at least a balance sheet. It's incomplete. We need to rehire him to complete that, in my opinion. DEWOLF: You're exactly right. In addition to that we need a recreation of an overall budget for the Fair - a cost accounting with a timing structure. BISHOP: The engineering RFP process is to be completed tomorrow, and that decision will need to be made. MAIER: The financial review happened so fast, I think it would be good at some point to talk with Marty and then sit down either with Dick or with Moss Adams, another company we use, to get an agreement so everyone knows specifically what is expected. We sent Dick down there to find out how big the hole is, which he did. Minutes of Meeting: of Representatives of the Fair Board, Page 30 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 SMITH: I have a question. If a check comes into the Fair office on Tuesday morning, where does that check go? MAIER: I assume that the severance agreement will indicate the check will be endorsed over to the County. SMITH: Shouldn't it be an escrow account or trust fund or something? MAIER: We can do that. DEWOLF: Probably. Because you have an entertainment account out there that is listed in Donaca's report as one of the offsetting assets. So it probably should be an escrow account. MAIER: I am assuming that all the dollars that come in can be set aside by Marty until we get through the supplemental budget process. We are anticipating that some monies will come in. BISHOP: Regarding the supplemental budget process, when can those vendors and small business owners expect to receive cash to cover checks and outstanding bills? MAIER: I'd say thirty to forty-five days. SMITH: I counted 36 checks under $100 each on the list. We could pare that list down really fast by getting rid of all checks for under $500. BISHOP: Do we need to reconvene, or does anyone want to reconvene, tomorrow morning at 8:00 a.m.? Or do you want to wait until we ultimately have to reconvene early next week as well? Minutes of Meeting: of Representatives of the Fair Board, Page 31 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000 ----------------- (The consensus was that there was no reason to meet in the morning.) BISHOP: Assuming that the attorneys will have the document authored and agreed to by Monday afternoon, can we get together early Monday? (A general discussion resulted in a decision on meeting at 4: 00 p.m., Monday, October 9, at the Fairgrounds office in Redmond.) Deschutes County Fair Board Chair, David Bishop, adjourned the meeting at approximately 8:20 p.m. Respectfully Submitted, cl _ Bonnie Baker Acting Recording Secretary Minutes of Meeting: of Representatives of the Fair Board, Page 32 of 32 Pages the Fair Association, the Board of County Commissioners and Others Thursday, October 5, 2000