Pacifica National Board
Finance Committee Meeting - October 25, 2007
A regular meeting of the PNB Finance Committee was convened in the absence of a
quorum at 5:20 pm PDT by Secretary Terry Goodman on September October 25, 2007
with Sandra Rawline serving as Chair Pro-Tem. Quorum was obtained at 5:55 pm.
No minutes were approved.
Present: Dave Adelson (arrived at 6:30 pm), Baruti Bediako (arrived at 5:55
pm), Brian Edwards-Tiekert, Terry Goodman, Lonnie Hicks, and Sandra Rawline.
Absent: Mike Martin, Jane Gatewood, Berthold Reimers, LaVarn Williams.
1) Roll Call and Approval of Agenda (8 minutes)
2) Approval of Minutes 9/26/07 (5 minutes)
3) Next Regular Meeting
4) CFO Report (60 minutes)
a. WBAI Recovery Plan
b. October 1 Status
c. PNB Motions
d. National Office Mail Drops
e. Affiliates Budget
5) Financial Policies & Procedures Manual (5 minutes)
6) New Business (5 minutes)
** Times are for guidance only **
1. Roll Call and Approval of Agenda
The meeting was convened without quorum by Terry Goodman. Sandra Rawline was
appointed Chair Pro-Tem without objection. An adjourned meeting was scheduled
by the members present, which motion was mooted by the scheduling of a regular
meeting after quorum was achieved. The members present decided to waive agenda
approval and hear the CFO report in public session while awaiting quorum. The
proposed agenda was eventually approved without objection on the motion of
Brian Edwards-Tiekert at 6:20 pm.
2. Approval of Minutes
Absent a quorum, approval of minutes was postponed.
3. Next Meeting
Motion from Sandra Rawline that the Finance Committee schedule a regular
meeting for Monday, November 19, 2007 at 8:00 pm EST.
Motion passed without objection at 6:25 pm.
The Secretary will schedule the meeting on both the kpftx and
PacificaFoundation calendars. The CFO will invite Pacifica's new ED to attend.
4. CFO Report
The CFO's report, which began at 5:23 pm, concentrated on the first draft of
the WBAI Recovery Plan, distributed to the PNB and committee members via email
in advance of the meeting.
4a. WBAI Recovery Plan (See Appendix A)
The primary drivers in WBAI's high overhead and consequent budget shortfalls
are its occupancy costs in comparison to other units, especially studio and
transmitter rent and utilities. The CFO outlined strategies being explored to
finance permanent studio relocation and identified short-term measures being
taken to reduce costs and improve cash flow. Goodman requested a chart
comparing salary and related costs to income at each unit. Edwards-Tiekert and
Rawline requested a timeline with target dates, including details on the
administration of cash flow to avoid temporary insolvency.
4b. October 1 Status
The CFO and Treasurers reported on current fund drives beginning at 6:02 pm,
but the intended meaning of this agenda item was not known to the members in
attendance. Discussion of this item was postponed to the next meeting.
4c. PNB Motions
There was no formal report of PNB motions. Committee members were assumed to
know the status of budget approvals and continuing motions.
4d. National Office Mail Drops (See Appendix B)
A written report on National Office mail drops was included in the CFO's email
distribution. Discussion of this item was postponed to the next meeting.
4e. Affiliates Budget (See Appendix B)
A progress report on separation of the Pacifica Affiliates Program budget from
the National Office budget pursuant to a PNB resolution was included in the
CFO's email distribution. Sandra Rawline reported on a related motion from the
PNB Affiliates Committee. There was discussion about whether or not the salary
portion of the budget proposals would require consideration in closed session.
The CFO will consult with the independent auditor on the allocation of income
and expense items to the Affiliates Program. Further discussion of this item
was postponed to the next meeting.
5. Financial Policies and Procedures Manual
The Audit Committee review of the draft manual is complete and it will be
presented to the PNB approval at the January PNB meeting.
6. New Business
Two items of New Business were proposed for consideration at the next meeting:
a Development Director for WBAI and a review of fund drive results as compared
to budget forecasts, including an examination of drive lengths. The proposed
agenda may be amended to allow time for discussion with the new Executive
Director, if she attends.
The meeting was adjourned without objection at 6:37 pm PDT.
Terry Goodman, Secretary
(These minutes were approved on 11/29/07.)
Appendix A - WBAI Recovery Plan
WBAI RECOVERY PLAN:
ANALYSIS AND ACTION ITEMS
AND OTHER FINANCE ITEMS
By Lonnie Hicks
Chief Financial Officer
Prepared for the Pacifica National Board of
This is a report the Pacifica National Board on the finances of WBAI, my
financial analysis of that station, its recovery plans to date and my
recommendations at this point as to the options available to the station and
the Network as well.
The strictly financial problem is straight forward: WBAI has an operating
deficit of 250-300k. Additionally, there back debt of approximately the same
amount. What to do?
The Operating Deficit
The first question is what the cause of the station's operating deficit
situation where this fiscal year the station will likely show a 44k deficit.
The next question is what are the drivers in the deficit scenario the station
Below I take the reader through several possibilities.
First, when we look at salaries, comparing WBAI salaries to the salaries of our
other units we see that salaries as a proportion of expenses are not out of
line as compared to total expenses.
Below WBAI spends only 35% of total expenses on salaries, the second lowest
percentage in the Network (compared to the low figure at the National Office- a
percentage of 26.9 percent.)
Therefore, salaries are not the driver in the station's finances.
Below I chart premium costs as a factor driving the WBAI deficit. As seen below
WBAI has the second lowest total of all of the units tracked totaling only 168k
in premium costs as compared to the highest premium costs-- those of KPFK at
Therefore, premium costs do not appear to be the decisive factor in the deficit
Is it perhaps that the station spends too much for each dollar it raises? It
costs WBAI 77 cents for each dollar it raises which gives it the third most
favorable score of the stations.
Looking at the revenue side we see below trends for the Network as a whole and
also for WBAI on the revenue side. From FY04 to FY07 WBAI lost 1.58% in total
revenue along with PRA at --9.98% KPFA had a small 2/10 of one percent
increase. The National Office total revenue percentage increase was the largest
at 47% the result of its mail drops primarily.
Looking at Listener Support the Network show 88% and 86% increases for PRA and
the National Office respectively with KPFA and WBAI showing decreases of 6 and
11% respectively in Listener Support/Donations.
While Listener support is definitely a factor in the WBAI deficit, as seen from
above it is not a significant a factor as the one examined below.
The driving factor is clear from the chart below. WBAI has the highest rental,
utility and tower costs of any unit in the Network-more than 7 times the costs
of any other unit at 736k.
It is clear that the station must move to less expense quarters.
What Are the Options for WBAI
And the Current Recovery Plan?
WBAI has several good options in the area of locating, moving and buying a
building of its own or relocating to less expensive quarters. While in New York
I met with management discussed and implemented the following:
1. Arranged for the auditors to come to the station for an in person audit on
Wednesday October 16th 2007 to review the current fiscal year books.
2. Changed the signature cards at the bank so that the General Manager can
3. Altered the station bank accounts to eliminate bank fees -saving the
station 20k per year
4. Met with the Chase credit card manager to save the station money on credit
5. Met with representatives of the bank's merchant's services department to
explore the creation of an affinity card for WBAI, where use of this
affinity card would result in automatic small donations for WBAI in
6. Met with a tax-exempt bond broker to identify low cost loan options for
the station to move from its current expensive quarters and to purchase a
building of its own.
7. Met with the Chase bank Loan Officer to explore a loan for the station to
buy a building with a loan from Chase Bank and to create a line of credit
for the station.
8. Identified another lease property which would be less costly to lease.
9. Met with station management to implement a recovery plan which will
a. Speeding up the pledge process immediately by calling all unredeemed
pledges starting October 18th 2007-estimated recovered revenue 30k-
b. Produce cash flow statements and Memsys reports as promised.
c. Implementing the current budget with frozen planned salary increases
and a 5% salary reduction for all staff.
RELOCATION OPTIONS FOR WBAI
The details of relocation involve the following possible options
a. Where the station with 200k already in the bank toward a building
b. Where the station currently pays 30k per month in lease costs
with a 10% escalator would be working toward:
A Securing a Loan from WBAI's Current Bank Chase Manhattan.
Management and I have met with the Bank Loan officer and the likely terms are
8% interest, over 30 years with a loan being processed in 60 days after
locating a property. The new building would be the collateral. A loan 1.5
million is possible. Monthly savings equal 19k. or 228k per year. The loan
would pay for a 800k building in perhaps Brooklyn and 700k would cover build
out and moving costs.
B. Securing a Tax-Exempt Bond Loan
I have met with Roosevelt and Cross a tax-exempt bond broker who offer 6.25%
terms, over 30 years with a loan amount up to 7.4 million dollars. (This would
include the build-out costs (700k and property costs of 6.3 million) It also
assumes that WBAI would occupy 8,000 square feet of a 15,000 square foot
building and would lease the remaining square footage as space for other non
profits or for city programs. This is commonly done and in fact this is the
type space the station currently occupies. Monthly cost= $45,563. WBAI
payment=$22,781. Tenet payments=$22,781 or 3 dollars a square foot. At $15 a
square foot income could reach $112,500 per month. At 23k per month the monthly
savings from current costs would be 7.2k per month or 86k per year.
C. Securing a Special Grant from Congress
A special grant could be pursued from New York Representative Charles Rangle
who could include funds for the station as a rider to an appropriations bill.
D. Securing a Special City Rehabilitation Building
Cities have often derelict buildings which they will sell at little cost to
nonprofits who promise to rehabilitate those buildings as non profit space.
Rehabilitated buildings could cost as much as 1mil to renovate.
The above options have the potential to save the station lease costs,
(currently about 30k per month or 360k per year. The repayment of a 3.2 million
dollar loan for 8,000 square feet would be 19,700 dollars per month a savings
of 10,297 per month or 123k per year. At the end the station would also have a
Relocation is, therefore one component of a recovery plan. The other components
I list below and then I go through each.
Other WBAI Recovery Plan Components
1-Implement the current budget plan which calls for a salary freeze and a 5%
cut back on all salaries.
2-Implement a holiday mail drop for 10k
3-Implement a major donor dinner simultaneous to the Dec 15th event honoring
4-Increase the fulfillment rate working with the National Office
5-Speed up the current drive pledges by calling over 500 pledges and requesting
support and seeking feedback on their drive and pledge experience
6- Put in place new financial controls (already signatories on WBAI bank
accounts have been changed and new procedures for signing checks and
controlling expenses are in place.
7-Explore reducing Credit Card fees-(being explored with Chase Bank)
8-Explore setting up an affinity card with Chase bank for WBAI listeners
9-Hire the Fund Development person the Board motion refers to who would help
coordinate the above components
10- Implement a line of credit to tide the station over cash shortage period. I
suggest 150k to be used only with LSB and CFO approvals with notification to
11. In one year WBAI will have a fund -raising event similar to that which has
been done by WPFW to retire the 300k debt. The new fund Development Person
would lead that effort.
12. The 360k the station pays for the location of antenna on the Empire State
Building might have to be looked at in terms alternative locations for the
antenna. We have begun discussions with Don Mussel our engineer consultant as
to what would be involved in moving the antenna from its present expensive
1. That the CFO commence discussions of each of the relocation options
identified above and make recommendations to the Board of Directors by
2. That the CFO is empowered to implement changes necessary to achieve the
outcomes described above.
Appendix B - Other Financial Reports
National Office Mail Drops
Below find a summary of National Office mail drops over the last three years.
They have produced a 97% return rate from members of progressive organizations
around the United States who want to support National Programming and the
Pacifica Mission These mail drops meet several goals:
1. They publicize Pacifica to progressives who live inside and outside our
local station listening areas.
2. They bring in revenue to support the network infrastructure
3. They are part of a larger strategy where regional mailing lists are
built up for use by local stations.
They have been a very successful strategy for the Network.
|PACIFICA FOUNDATION | | | | | |
|MAIL DRIVE SUMMARY | | | | | |
|SPRING 2004-SUMMER 2007 | | | | |
| | | | | | | |
|EVENT |MAILED |# OF PCS | GROSS | MAILING |NET |
| |OUT |MAILED |REVENUE |COST |SURPLUS |
| |DATE | | | | |
Affiliate Budgeting and Affiliate Costs
Below find a preliminary look at potential component of an Affiliates
budget. I am talking to our Auditors about what kinds of expenses ought to be
allocated to the affiliates budget.
This a new kind of budgeting and has not been done before and expenses which
have been bundled in with other expenses are now having to be broken out.
The questions are:
1. Should affiliate representatives and their travel expenses be charged?
2. What part of Web and autoport expenses should be charged?
3. What part of personnel expenses for National Staff should be charged to
the Affiliate Program?
4. Should the program be charged central services?
5. What part of satellite fees should be charged?
The auditors are here now doing an audit of last years expenses and I have
asked them to come up with their suggestions and they will do so in three weeks-
in time for us to include those suggestions in the first expense statement of
the new fiscal year.
BELOW I REPRINT OTHER SOLUTION SETS TO PROBLEMS
WE HAVE A PROBLEM -THE BAD IDEA SECTION
Note here that bottom line revenue is down 900k compared to last year and we
see that expenses, on projection, are up only slightly. Comparisons are to
FY06. Clearly this is not sustainable especially given that these expenses in
the salary area will annualize in next years budgets. The combination of new
annualized salary expenses of 168K and a month's reserve deficit of 500k will
effectively enervate the Network's financial status. In plain language we will
have a looming cash deficit of 668k dollars-which will grow worse if any
station drive goes bad and grow worse if there are no major gifts to rescue
finances. Gifts are not reliable revenue. In plainer English we will be
utilizing our savings to pay bills- and that is not good. Not good at all.
What are our options?
A few options come to mind.
I have divided them into 3 groups-short term, middle term and long term.
OPTIONS FOR A SUSTAINABLE FINANCIAL FUTURE
Short Term Problems Short Term Solutions
Problem: Cash Flow This is where we will, in October, have to take October
drive funds and pay September bills. These monies (about 600k) will have to be
recouped by stations by:
a. Stations dipping into savings to bridge the gap
b. Stations planning now to increase revenue goals to bridge the gap
c. Stations planning now to reduce expenses by that amount-just to break
d. The Network adopting a financing solution-i.e., setting up a line of
credit to bridge the gap
e. A short term loan to bridge the gap until planning is able to figure
Under all that is, of course, reducing expenses in next year's budgets to
bridge the gap over the next year. Here the presentation of an 18 month cash
flow statement will highlight the problems.
Mid Term Problems and Mid Term Solutions
a. Work with our Union folks to reduce expenses where possible
b. Arrange for a loan against our properties while trying to figure it out
and to avoid layoffs
c. Identify revenue producing strategies to offset the expected expenses
Long term Problems and Long Term Solutions
a, Underwriting. There I have said it.
b. Lease sub carrier bands and/or HD bands- to third parties as revenue
venture The revenue could be substantial (2-3 million) and would
sustainability over the next five years. I will go into this idea in
more detail at
the Board meeting in April.
There are, of course, other ideas out there. We could choose
the best combination
for us. What we cannot do is fail to act.
WE HAVE A PROBLEM -THE GOOD IDEA SECTION
This is a vision of how investment in the digital future can produce revenue.
Parts of the plan are already in place and have been for several years. For
example, we have been cultivating national support for the Network with
National mailings to other progressive organizations with good results. We have
raised over two millions dollars in three years.
The Regional Strategy has also already begun with WBAI, (a mailing is going out
in a week or so.
The Local Strategy has been proposed by the Board itself and a motion has been
passed with will allow stations to move forward if they desire.
All of this is designed to market Pacifica to progressive organization members,
affiliates, the public and local supporters at the same time creating a self-
THE SECTION BELOW IS REPEATED FROM MY LAST REPORT
Meantime how do the Arbitron data look?
We see trends since 1990 to 2006. We are just below the trend line but clearly
our number of listeners is down since last year and the year before-falling to
levels dating back to the year 2000. We have of course, several ideas about
what can be done. Here are a few now under consideration:
1- Re-conceptualize each Pacifica station as a regional Broadcaster-and
market each station to the five or six adjoining states positioning themselves
as the "voice of progressive radio in that given region. In each major region
in the United States thousands of progressive organizations and their members
will and have supported progressive causes and Pacifica with their dollars. I
believe that such support in these times of war and a critical 2008 election
will see that support increase. Millions of pieces of mail have been sent to
members of progressive organizations around the country in the last 4 years and
the response has been very encouraging. We have over 100 regional affiliates
who can also participate in this effort, contribute programming and join our
stations in regional broadcasts and regional fund-raising efforts.
2- Expand the platforms upon which listeners can access Pacifica's
broadcasts. More and more listeners want to download, podcast, access on line,
listen at more convenient times and have radio on their own terms. We should
accommodate those desires and work with those listeners.
3- We need to determine to survey our listeners and find out what
programming they want.
5- We need to modernize our physical plant and our broad cast
capabilities-not to is not wise.
6- We need to offer our staffs training and new ways to allow others to
access our services-satellite
radio, virtual programmers, common licensing, blogging hosts,
new internet Pacifica channels,
increased interactive radio-we need to re-invent street level
radio lifted to a national and
Pacifica's Future, in my view depends upon the following:
1- Increasing our membership and listener ship
2- Expanding our footprint in local communities and expand local community
3- Re-conceptualizing our selves as regional, national, if not
4- Expanding the platforms and the delivery choices we offer listeners
5- Operational zing local voices to national platforms
6- Expanding services to our Affiliate Stations and form closer