The Galena Territory Association, Inc. 39th Annual Meeting Minutes: Feb. 22, 2014

Following are the unapproved minutes from the 2014 Annual Meeting of The Galena Territory Association, Inc.

President R. J. Winkelhake called the 39th Annual Meeting to order at 1:30 p.m. in the Grand Ballroom at Eagle Ridge Resort& Spa. President Winkelhake welcomed the membership to the meeting. The Board members, Board candidates and special guests were introduced. He acknowledged outgoing Board member Bill Dexter and thanked him for his service to the Association. He also thanked the sponsors of the cocktail party to be held at the end of the day including Eagle Ridge Resort & Spa, Ferrellgas, First Community Bank and Galena Hillside Homes.

It was determined that a quorum was present. President Winkelhake called for final balloting and closed the polls.

It was moved and seconded (Rich Maas, Greg Moran) to approve the meeting agenda as presented. Motion carried.

It was moved and seconded (Greg Moran, Ken Simpson) to approve the minutes of the 38th Annual Meeting held on February 24, 2013, as presented. Motion carried.

2013 President's Report

President Winkelhake reviewed the member statistics and noted that individual properties represent 61% of the 6,800 acres of The Galena Territory, the GTA common properties account for 28%, and Eagle Ridge Resort & Spa owns the remaining 11%. He stated that Territory owners contribute 27% of Jo Daviess County's total property tax assessments, noting that the GTA membership not only supports the county financially, but also through their volunteer efforts.

He noted that the Association's powers and purpose focus on five primary objectives detailed in the governing documents: accept and hold title to common properties, maintain and administer the common properties, administer and enforce the Covenants and Restrictions, collect and disburse assessments, and manage the Architectural Review process.

President Winkelhake then reviewed a number of Board accomplishments during 2013, including work on the Strategic Plan; completion of a Human Resources Assessment to help align our actions to be as successful as possible in achieving our strategic and operational goals; the sale of the Vincent Farm with proceeds to be used to pay for the first phase of the Marina Flood Mitigation project; lowering the 2014 annual assessment; and making tremendous progress to creating a Policy-Driven Organization.

President Winkelhake reported that the Association relies heavily on volunteers and then acknowledged the members of all committees, work advisory groups, and Board members in attendance. He noted that if the Association had to pay for their services the Association could never afford it.

In closing, he complimented the staff on its day-to-day efforts, thanked the committee volunteers and special project teams for their work on behalf of the Association, and thanked the Board members for their time and efforts.

2013 In Review from an Operational Perspective

General Manager (GM) Joe Mattingley reviewed the events of 2013, stating that he wanted the members to remember three things from today's presentation:

1. The GTA is financially sound and healthy.

2. Change is a constant at the GTA as we strive for efficiency.

3. Our strategic focus has succeeded in aligning our planning and budgeting processes.

Financially Strong and Healthy

GM Mattingley then reviewed a chart outlining the GTA and its internal and external relationships, noting that those relationships are continually evolving and it is management's responsibility to maintain and further key relationships for the benefit of all Association members. He also reviewed the Owners' Club usage chart for the past five years noting a sharp increase of usage following the construction of the new Pool/Recreation Complex in 2012.

GM Mattingley then reviewed a number of financial charts including the delinquency and foreclosure history noting that the GTA's delinquency rate is less than 1% which is an excellent position. He reviewed the Major Repairs and Replacements (MR&R) Fund chart showing a strong improvement in funding levels due to savings in projects from 2012 and their impact into future years. He also shared the MR&R expenditures from 2012 and 2013 noting that in any given year expenditures at one amenity might spike, but they tend to equalize the following year. He reiterated that the Association is financially sound and healthy.

INSERT DELINQUENCY CHART HERE

INSERT MR&R FUNDING CHART HERE

He then explained that 51% of the total revenue comes from assessments and 49% comes from non-assessment revenues such as the Key Retention program, Maintenance Services, the Heat/Light program, etc. He also reviewed the cash balances at year end noting that the Association had a total of $3,290,547 in cash on hand in the four funds.

Change is Constant

Change is constant at the GTA and 2013 was no different. Staff continues to adapt to the requirements of the membership, our governance processes continue to change due to state statutes, our services continue to expand, our communication continues to evolve, and planning is driven deeper throughout the organization.

In 2013, a Human Resources Assessment was conducted and resulted in a better alignment of staff functions with the expectations and needs of our members. One example: Steve Birkbeck was hired as the Lake Galena & Marina Manager which resulted in increased revenues and decreased expenses.

The GTA hired Keay and Costello as its legal counsel. Keay and Costello is primarily focused on common interest community association law. During 2013 they assisted the GTA in reviewing the governing documents and bringing them into compliance with the Illinois Not For Profit Corporation Act and the Common Interest Community Association Act. The Not For Profit Act mandated that the Architectural Review Committee membership be adjusted to consist of a majority of seated Board members and this was accomplished in 2013.

Next, the Association tapped into the expertise of their owners to help determine action plans on several key initiatives by establishing three Work Advisory Groups.

1. The Deer Population Control Program Work Group recommended continued culling of the herd with improved communication to owners.

2. The Insurance Work Group recommended changing our previous process of bidding and analyzing policies ourselves to selecting an insurance professional to provide those services for us, including bidding, claims processing and risk management.

3. The User Fee Advisory Group considered a wealth of statistics and recommended not to add more user fees. They did recommend that management do more education and communication to owners, including sharing statistics that refute misconceptions about guest usage.

Propane Co-Op Program

Last year, the GTA asked its members that participate in our Propane Co-Op Program to consider moving towards index pricing rather than fixed pricing. Index Pricing is when the retail price for propane varies on a daily basis depending on market conditions, so the member's price depends on the day of delivery.

This recommendation to switch from fixed to index pricing was based on hard evidence. GM Mattingley reviewed a chart for the last five years showing that over that period of time members would have realized savings on fuel equivalent to, or lower than, if they had purchased using the fixed price method. What could not have been anticipated was one of the worst winters in recorded weather history, basically the equivalent to a 1,000-year-flood analogy with our winter heating season.

INSERT PROPANE PRICING CHART HERE

The end result was a dramatic but short-lived spike in the price of fuel for members on the index pricing method. Based on those events, the true risks of the index pricing program were exposed. While the GTA remains committed to index pricing over the long term, the Association needs to improve its co-op contract with Ferrellgas to better protect against these situational spikes.

Shenandoah Riding Center

Our last change of the year, the Association said good-bye to Justin and Lindley Leahy of Leahy Sporthorses who managed the Shenandoah Riding Center for the past seven years. Following a thorough process, a new team was selected to manage the riding center starting on Jan. 1, 2014.

2013 Strategic Plan Review

Strategy 1 - Engage Our Customers

Susan Miller, executive director of Corporate Services, updated the membership on the major Strategic Plan initiatives from 2013 for Strategy 1 - Engage our Customers, which included updating the GTA's information technology (IT) system. The GTA is unlike most other common interest community associations; it is a hybrid. The GTA is a large-scale property owner Association, and a property management company supporting the eight satellite associations. Add on the not- for-profit activities of the Galena Trading Corporation and things get even more complex. She thanked the administrative team of Dixie Birkbeck, Kim Goodwin, Rise Van lent and Linda Bussan for their expertise in implementing the new IT system.

The next initiative was to repurpose the GTA website. There were several goals for the website redesign: improve navigation, create an expanded owner resource, continued emphasis on the natural beauty of the area, and to establish both a "public" and "private" portion of the site. The public portion is for those guests or future owners looking for information about The Galena Territory; and a password- protected private portion for GTA members to pay bills, check balances, register for events, check budgets, or interact with staff.

Miller then reviewed the site pointing out some features on both the public and private portions. After reminding everyone that not everything will be accessible, the new site launches on March 1. She thanked Jan Hoedebecke, director of Communication, and Jane Holland, web specialist, for their tremendous focus and commitment to this new site. She encouraged everyone to provide feedback as the staff will continue to upload content and refine the site's usability over the coming months.

In 2013 GTA staff members also spent time with several area realtors to learn how the GTA can help support their efforts to market property in The Galena Territory and their feedback was incorporated into the new website.

Finally, the GTA focused on rental property management companies and individuals who rent properties. Seventeen percent of all people who accessed the Pool/Recreation Complex in 2013 used proximity cards issued to properties with rental licenses. Guest information was included on the new website to help guests have the best experience possible when visiting The Territory; those same guests might someday purchase property.

Strategy II - Change the Way We Work

GM Mattingley then reviewed the first initiative under Strategy II, Change the Way We Work. That initiative was to develop the GTA into a Policy-Driven Organization. For an organization like the GTA, which has such a diverse membership, it is vital that the decisions we make are driven through the policies we've developed over time in concert with our volunteer GTA Board of Directors and membership. This provides more fair and consistent governance of the Association and encourages top down management instead of bottom up. The Board has approved 23 of the existing 29 policies that are to be revised to date.

Miller than discussed the second initiative under Change the Way We Work, to Evaluate the Structure and Roles of Standing and Ad Hoc Committees. The committee structures and functions had not been reviewed for several years and it was time to ensure that the committees met current Association needs. The GTA is in the process of moving to a more structured process under which every committee acts on projects assigned to them by the GTA Board.

The next initiative under Change the Way We Work was to Audit and Streamline Financial Communications. In 2013, GTA financial staff made a concerted effort to improve the quality of the financial information shared with the membership. Working with the Budget and Audit Committee and the GTA Board, a policy was developed and implemented that specifies what, when, where and how GTA financial information will be communicated with the membership.

GM Mattingley noted that in 2013 we also continued to make strides in formalizing the Board self-appraisal process and the GM review process. These steps ensure heightened accountability at the highest levels of the Association's governance structure.

The last initiative for 2013 under Change the Way We Work was to strive to limit assessment increases to no more than the previous year's consumer price index or CPI. The CPI for 2013 was 1.7 percent, but the Association didn't need to increase the assessment because of favorable financials: assessments for 2014 actually fell by 3.4%.

Strategy III - Grow Non-Assessment Revenue

GM Mattingley then moved on to Strategy III, Grow Non-Assessment Revenue, focused on increasing property owner services revenues through internal marketing by expanding services to existing and new customers; researching the possibility of expanding the scope of ARC services with new offerings; planning for a GTA-hosted event in cooperation with SRC management; and evaluating other revenue opportunities, such as renting office space to Preferred Properties.

Strategy IV - Preserve Amenity Value

Dave Oldenburg, executive director of Architectural Compliance, then reviewed Strategy IV, Preserve Amenity Value, which is the most important job the GTA has. Successfully managing the amenities helps ensure the most pleasurable experience for our members and guests, plus, it significantly bolsters the value of every property in The Territory.

The one task that consumed the most attention and resources was flood mitigation. The Territory has been subject to four 100-year floods in the past 12 years, with an additional two 1,000-year flood events resulting in repeated damage to the Marina, as well as roads, bridges and homes. The cost from flood-related damage and repairs since 2002 has exceeded $1.6 million. While actions were taken after each flood to limit damage, the 2011 event demonstrated that more mitigation measures were necessary and the Association began working with Fehr-Graham Engineering and the Lake Management and Ecology Committee on a mitigation plan to protect the Marina Complex area. After exhaustive research, a plan was selected, presented to, and approved by, the GTA Board at the January Board meeting. That plan represents the GTA's best opportunity to significantly mitigate future flood damage, protect property, and do so at a reasonable cost.

INSERT SLIDE OF FLOOD MITIGATION PLAN HERE

Oldenburg then reviewed the mitigation plan, outlining the existing location of the Marina facilities and explained the changes that would be included such as relocation of the retention pond, boat pen and tennis courts. Permit applications have been submitted to federal and state agencies and engineering plans are underway; however, most of the work will be done in 2015.

The total cost of the project is $716,000. While there is no FEMA money available, $611,000 of the funds from the sale of the Vincent Farm will be applied to the project and there is an additional $105,000 from the MR&R fund that was already budgeted for the tennis courts and boat pen.

The GTA has started work on a Woodland Management Program. The program will improve the health of the Woodlands; reduce woodland density to allow more light to reach the ground; promote natural vegetation and plant diversity; control invasive species, and address areas experiencing erosion. Included in this program will be future efforts to deal with the emerald ash borer (EAB) situation.

There were several things planned that were not done in 2013. A proposal to turn the Brodrecht Quarry into a storage area for owners was tabled due to the limited interest expressed by the members. The Board tabled a proposal to extend a trail to Thunder Bay Falls Park based on difficult topography and general questions regarding natural trail usage.

2013 Financial Reports

Steve Domeyer of O'Connor, Brooks & Company presented the audited 2013 financial reports. Mr. Domeyer referenced the full audited report, which was included in the Annual Meeting booklet distributed to the members and stated that the footnotes identify significant accounting policies and additional details integral to the financial statements.

O'Connor, Brooks and Company gave an unqualified opinion or, in other words, stated that the financial statements were presented fairly and conform to generally accepted accounting practices. He noted that the accounting methods used have been applied on a consistent basis with previous years and that the supplemental information on reserve requirements and funding are provided for information purposes only and were not audited.

He also reviewed the Statement of Revenues and Expenses, Changes in Fund Balance, and Consolidated Cash Flow reports. The Fund Balance is a measurement of the value of the Association and showed a $.9 million improvement in value on each member's investment in the Association.

The Supplemental Reserve Report is a report showing the funding requirements for the Major Repairs and Replacements schedule and the Long Range Planning schedule. Total funding required is $3,731,000 and available funding is $1,164,600, leaving a shortfall of $2,566,400 if the Association chose to fund at 100%, which the GTA does not choose to do.

It was moved and seconded (Santy Mendez, John Cooke) to approve the 2013 audited financial report as presented. Motion carried.

At this point the floor was opened to the membership to ask financial questions of Mr. Domeyer. There was one question regarding the profitability of the Maintenance Services Program. GM Mattingley noted that the detailed information will be posted on the new private side of the GTA website.

2014 Strategic Plan

INSERT NEW STRATEGIC PLAN GRAPHIC HERE

GM Mattingley then reviewed the changes to the 2014 Strategic Plan. The primary change was the replacement of the word "customers" with "owners," clarifying that our owners deserve 100% of our People, Time and Money. There were several other modifications in the scope of responsibilities and core values. The goals were revised and reordered by priority.

Strategy 1 - Preserve Amenity Value

GM Mattingley reported that the performance metric for this goal is to maintain or enhance amenity value while increasing recreational opportunities. In 2014 we are committed to developing a consistent master plan format to be used for all amenities as we move forward.

GM Mattingley then introduced Corey Morehead of Free Range Chix, the new lessee of the Shenandoah Riding Center. She outlined her background and experience, as well as the background and experience of her business partner, David Rubel. Services include boarding, trail rides, riding lessons, clinics, summer camps, sleigh and wagon rides, and horse shows and competitions. Special events scheduled for 2014 include an Open House and Pig Roast on Memorial Day weekend, the Shenandoah Pro Rodeo on July 4 and 5, an end-of-summer Beach Blast on Labor Day Weekend, a Fear Forest Haunted Hayride on weekends from Oct. 10 - Nov. 1, a Fall Festival and Flea Market on Nov. 1, and Santa will be visiting during the holidays. They also have space for special events such as family get-togethers, meetings or corporate events. She invited everyone to visit the riding center at any time to meet the staff and horses.

Strategy II - Strive for Operational Excellence

GM Mattingley noted that the performance metric for Strive for Operational Excellence will be to improve systems and processes to drive efficiencies that help to reduce or eliminate increases in the Operating Fund portion of the annual assessment.

To enhance sound governance we will focus on our continued efforts to become a policy-drive organization and will monitor and amend, as necessary, state legislation impacting the Association.

Regarding our need to monitor legislation, the passing of the Common Interest Community Association Act a few years ago signaled a more "activist" approach by the State of Illinois toward associations like the GTA. There currently are 20 bills pending that could eventually impact the Association if they become law. This legislative activity requires vigilance and advocacy on the GTA's part, working in cooperation with other common interest community associations in the state to ensure our interests are protected. Mattingley once again expressed the importance of utilizing Doug Sury of Keay and Costello as our attorney as their firm specializes in common interest property law.

In addition, staff will transition to pro-forma reporting and continue efforts to grow non-assessment revenue, assuring that net revenues shall offset net expenses.

Strategy III - Engage Our Owners

The metric for this goal will be to increase owner satisfaction with The Galena Territory as indicated in the net promoter score that we have been tracking for the past three years as part of our annual member survey.

The GTA will work to create a sense of community through volunteerism and activities, and by providing effective two-way communication.

Strategy IV - Create an Awareness of the Unique Lifestyle in The Galena Territory

This is a new strategy for 2014 and the first step will be to establish the foundation for managing our brand's life cycle. Staff will be forming a brand advisory work group to help lay the foundation for solid research, action plans and future budgets.

GM Mattingley clarified that other strategic initiatives will be considered as the year progresses and staff will be tracking our progress to these strategic workloads on a monthly basis with the Dashboard. Watch for it in the Territory Times, on our website, and on the bulletin board at the Owners' Club.

Beyond fulfilling these critical strategic initiatives in 2014, GTA staff also will be working to fulfill the directives from the Human Resources Assessment; transition and grow the Shenandoah Riding Center; and continue to focus on aligning our planning process.

Election Committee Report

Jim Kellar, Chair of this year's Election Committee, reported that there were three candidates running for three (3) three-year positions. The winners, in alphabetical order, were Jack Bernhardt, Sue Hinrichsen and Dennis Scully. There were 33 write-in votes and 11 spoiled ballots. A total of 1183 ballots were cast. There were five bylaw amendments before the membership:

1. Article VII, Election of Directors, Section 3: The membership voted to retain term limits and as such, this bylaw amendment was defeated.

2. Article VIII, Powers and Duties of the Board: The addition of a paragraph requiring individual directors to comply with the Board of Directors Conflict of Interest Policy was approved.

3. Article IX, Directors Meetings, Section 2: The membership agreed to allow Board members to participate in Board meetings electronically and this section was eliminated.

4. Article XI, Committees, Section 4, Budget and Audit Committee: The grammatical changes and several word changes were approved.

5. Article WI, Committees, Section 6, Long Range Planning: The membership supported changing the name of the Long Range Master Plan to the Strategic Plan and that it shall be presented to the Board of Directors for consideration.

Questions by the Membership

The floor was then opened for members to ask questions. Stepping up to floor microphones, members live questions asked about the Emerald Ash Borer, real estate sales, offering events and activities on Saturdays, bringing cable to more areas of The Territory, adding a "Yelp" or "Angie's List" function to the new website, the sale of the Vincent Farm, accessing high speed Internet on a pay-as-you go basis, bringing natural gas into The Territory, and providing more detailed financial statements.

The questions and answers to all the questions asked will be printed in upcoming issues of the Territory Times.

It was moved and seconded (Diane Banas, Joyce Mondala) to adjourn the meeting at 3:50 p.m. Motion carried.

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