CLOSED SESSION March 17, 2014 Present: Chairman Debnam, Commissioners Cody, Elders and Greene Jay Coward, Co. Atty., Chuck Wooten, Co. Mgr. and Pat Parris, Clerk Chairman IDebnam called the closed session to order. Minutes: Commissioner Greene moved to approve the December 2, 2013 Closed Session Minutes. Commissioner Elders seconded the motion. Motion carried. LEGAL: Update on the two lawsuits (I) 2012: Tax Foreclosure: County of Jackson vs. Vera and Eugene Moor (2) 2013: Vera and Eugene Moor vs. Jackson County, Je?Goss (in his capacity as the commissioner) and Smolq? Mountain Land Inc. TOWN OF SYLVA ABC STORE: Mr. Wooten stated that Paige Roberson, Town Manager and Mayor Moody came to see him last Friday and presented him with the Town of Sylva?s (Town?s) proposal. Mayor Moody emphasized this was a starting point and there is still some discussion with his board on some of the points. Tentatively a meeting is set for Monday, March 24, at 9 am. with him, Chairman Debnam, Mayor Moody is planning on bringing another council member and Ms. Roberson. The meeting will be at the Town Hall. Wooten?distributed a copy of Town?s proposal. I. ASSETS: Sylva ABC Store Building: The Sylva ABC Store building belongs to the Town of Sylva. The merged Jackson County ABC Board could either pay rent at a fair market value to the Town of Sylva or Jackson County could buy into the building ?s ownership. An ABC Store must be maintained inside the Sylva municipal limits. Mr. Wooten stated the Town has always contended that the Sylva ABC Store is a Town asset. This was a sticking point in the last conversation because technically the building was deeded to the Sylva ABC Board. There is nothing on a ?nancial statement that suggests that the Town is owed anything from the ABC Board as far as a loan they may have made on the startup of this store which took place in 1967. His point of View onthis building has always been that the money used to buy the building Was from store pro?ts, from the sale of liquor, which was the only source of revenue they had. The way the legislation was written is that Jackson County is a 50% partner in all the pro?ts. He looks at it as undisturbed pro?ts in the form of a building. His opinion is that the County has a half ownership in the building but that is a big point of contention with the Town. They want sole ownership of the building and the merged ABC system should either rent or buy into the building. Bank Account: The Sylva ABC Board would dissolve their current bank account with the I funds going to the Town of Sylva per the 1967 legislation. The Town of Sylva and Jackson County would both buy into the merged ABC system as equal partners. Mr. Wooten stated that it is the Town?s contention again that once the normal distribution of pro?ts have been distributed and everything settled, any money left in the bank account is the Town?s money. Again, the only money left in the account is undistributed pro?ts so the County should be entitled to half. On June 30, 2013, the Sylva ABC Board had $643,000 in the bank, liabilities of about $340,000 which is accounts payable, distribution payable, and etc. But the interesting thing about it is by statute - the ABC Board must maintain a minimum working capital and make sure it has enough money to pay its bills. 'It is a calculation that the minimum amount they have to maintain is $81, 063, the maximum amount is $526,907, their current balance is $526,462 so they are within $345 of their maximum amount. The Town contends it should get all of that working capital. His contention is that half of the cash belongs to the County. Inventory: Similar to thebank accounts, in order to be equal partners in the joint venture, Jackson County would pay the Town of Sylva for half of the valued inventory. The current inventory would then be owned by the joint ABC system. Mr. Wooten stated the merged ABC system should buy the inventory, but half of that money should come back to the County, because once again it is from undisturbed pro?ts. Pro?t Distribution _Pro?ts (after State Statute Distributions) should be distributed 60/40 with 60% going to Jackson County and 40% of pro?ts, or the guarantee of $1 60, 000 /year, whichever is greater, being distributed to the Town of Sylva. $160, 000 is the 5-year average of profits. Mr. Wooten stated the Town is proposing a 60/40 split and that is what was previously discussed. The County would get 60% and the Town 40% plus the Town being guaranteed $160,000 so they would be held harmless. The only reason the County got into this issue to start with was the County recognized that once the Cashiers store opened the Town?s revenues were going to take a hit. $160,000 to the Town is a signi?cant revenue source to their budget. That was the consensus with the earlier group. The Town also put in an in?ation factor and some other stuff, but has now taken the in?ation factor out. State Statute Distributions a. ?Law Enforcement: Pursuant to N. C. G. S. 819-805(2) 5% of gross receipts must be used for law enforcement. This amount should be divided and distributed equally to the Jackson County Sheriff?s Department and the Town of Sylva Police Department. Mr. Wooten stated that by statute 5% must go to law enforcement. The Town wants that money split equally between the Town and County. b. Alcohol Education and Rehabilitation: Pursuant to N. C. GS. 7% of the gross receipts should be used for alcohol education and rehabilitation divided and distributed equally to the Jackson County Sheriff ?s Department for the DARE. program and to the Sylva Police Department for Alcohol Law Enforcement Office and the Be A Responsible Seller (BARS) class. In addition, this distribution could bene?t both the Sheri??s Dept. and the Sylva Police Dept. by funding expenses associated with the containment and transportation from the hospital to the rehab facility. Mr. Wooten stated the Town wants this split equally between the Town and County. V. Composition of ABC Board a. Number of Board Members: The jointly merged Jackson County ABC Board should be compiled of ?ve members. b. Appointment of Board Members: Two board members should be appointed by the Town of Sylva, Two members should be appointed by Jackson County, and the ?nal member should serve as the Chairman and be approved by both governing bodies. Mr. Wooten stated what the County proposed earlier was three/two with the County having three appointments and the Town having two. The county should have the majority of the board appointments. c. Terms: The ABC Board members will serve staggered terms. Two members will be appointed for a one year term, two members for a two year term and one will be appointed for a three year term. Mr. Wooten stated this has been discussed. V. General Manger The General Manager of the joint system should be stationed/located at the Sylva store to keep - the manager?s o??ice in the county seat. VI. Internal Record Keeping System The merged ABC System will adopt the current accounting and internal record keeping systems of the Sylva ABC Board until such time that the Jackson County ABC Board has suf?cient time to evaluate the system and make changes as they deem appropriate. Mr. Wooten stated this definitely needs to be done. VII. Review as Necessary If for any reason the agreement needs to be reviewed, then both forming entities will meet to resolve issues and make amendments as necesSary. Changes to the merged agreement must be approved by both the Jackson County Board of Commissioners and the Town of Sylva Board of Commissioners. . It appears the biggest sticking point is ownership of the building. It is titled in the ABC Board not Town of Sylva. The Sylva ABC Board has not been paying the Town rent; however, if the ABC Boards merge, the Town wants to charge rent. Mr. Wooten suggested that if negotiations get that far and the building is such a big point, let the Town have the building and the ABC Board pay rent, but take the rent out of the $160,000 guarantee. The County would guarantee $160,000 as a'combination of ?rent/plus pro?ts? not $160,000 plus $43,000 in rent. Mr. Wooten stated he has a copy of the most recent ABC Store audit and there is nothing in it showing that the Town is due, anything other than the normal distribution. The building is listed on the ?nancial statement as an asset of the Sylva ABC Board. The building has a book value of $288,800. Commissioner Cody stated the County paid for half of the building with its reduced pro?ts. Mr. Wooten stated he thought so too. The merged ABC Board should pay for the ?xtures, computer system, and all .the moveable equipment, but the County should get back half of those funds. A new bank account will be opened as the Jackson County ABC Board and everything goes through that bank account. The Sylva ABC Board bank account pays all their outstanding payables, outstanding payroll, etc. and when everything is said and done from what is left in the account, two checks should be written; one to the Town and one to the County. He said that Laura Leethe ABC Commission, explained that the two boards need to settle everything in the bank as 50/50. Chairman Debnam stated that the only sticky point (page 2, Section 3) where it talks about what would happen if there was an election and the Town decided to vote out alcoholic beverages. ?Close said store and shall thereafter cease to operate the same and within said three months the town control board shall dispose of all alcoholic beverages on hand, all ?xtures, and all other property in the hands and under the control of said board and convert the same into cash and turn the same over to the Town Treasurer.? It does not state what the Town Treasurer is supposed to do with it. Mr. Wooten stated that whatever is done, this does not need to be made a point of contention. If the County sees that it is not going to get anywhere then stop and move on. The County does not want this negotiated in the press. Mr. Wooten stated that Peggy Queen, Store Manager, recently reported to the Sylva ABC Board the potential revenue loss they were going to have as a result of losing all the clubs in the south end of the county. As a result, they were talking about cutting staff, but then they ?nally realized if the Boards merged, the staff could keep their jobs and the Town can keep the same amount of revenue. He stated there could be some advantages and it would make life a whole lot easier if the merged ABC system accepts the manager and the system in place and just move right on. Peggy Queen is an excellent manager and is doing a great job, she was 4th in the state last year in the percent of pro?t, so she runs a really tight ship, knows how to buy the liquor and doesn?t keep any more inventory than she needs, but she will not be there all the time. They have hired an assistant manager who is supposed to start work the ?rst week in April. He previously worked for the software company that they now use. He brings a lot of experience of knowing the system but has never operated a liquor store. Commissioner Cody stated that upon reviewing Mr. Hannon ?gures, the issue boils down to an $82,000 a year pro?t that the Sylva ABC Board would be losing. If the County takes half of that hit too, then that is $41,000. So it appears all the headache is over $41,000 a year and the ownership of the building. Chairman Debnam stated the Town talks about the pro?t they make but never ?gure in a building payment or rent in their pro?t. It is easy to show a big percentage if you are rent free. Mr. Wooten stated he does not think the Town will back off of the building. Chairman Debnam stated he would like to see the merger - but half the money, inventory and building belong to the County. How can the County tell the taxpayers that it gave up half a million dollars in assets? Commissioner Cody stated he would like to expedite the opening of the Cashiers store and immediately open one in Qualla if possible. Then, the Town would see the error of their ways. He was of the opinion that a Qualla store will out sell Cashiers. Commissioner Elders stated a Qualla store will not damage Sylva since it is closer to Bryson City. Commissioner Cody stated the start up costs for Qualla should be no more than the costs for Cashiers. Mr. Wooten responded he thinks it would be less if there is an available site rather than building a new store. The Catamount Inn may be willing to add on to its facility. Mr. Wooten stated the Town of Highlands is realizing the potential revenue loss when the Cashiers store opens. Mr. Wooten stated he and Mr. Coward have discussed that it is conceivable that the County may be looking at the division of the Sylva store/assets erng. Mr. Coward suggested getting an independent opinion on how the dollars should ?ow. Mr. Wooten suggested calling the auditor in charge of the County?s audit. The estimated cost is probably $3,000 to $5,000 because the? CPA would need to do some research. He thinks he can get a proposal fairly quickly. The Town might respect anopinion more if it comes from a CPA, assuming he has the same opinion as the County. He thinks he can have a proposal by the next board meeting. Mr. Wooten stated that now that the Cashiers building is moving along, they are planningon interviewing candidates for manager at their meeting next week in order to have someone on board by the middle of April. They hope to open in May. Mr. Wooten stated the County ABC Board has a contract for all ?xtures. They also have a contract for the software system, which is different from Sylva. It gets messy. They have already made a commitment and he is not sure if they can get out of it now. They have told him they need to start drawing down money so Mr. Coward is preparing a Promissory Note so the County can make advances to pay for ?xtures. Consensus: Mr. Wooten will call the Town Manager and inform her of the County ?s points of concern and let her canvas the Mayor and see if there is any wiggle room. If not, there is no reason for a meeting. After the CPA proposal is received, reviewed and neither party is willing to negotiate on any point, the County will write the Town a letter thanking them for the offer and state now is not the time to consider a merger. - There being no further business, Commissioner Greene moved to adjourn the closed session. Commissioner Cody seconded the Motion. Motion carried. Patsy C. Farris, Clerk W. J. Debnam, Chairman