American Philatelic Society
Board of Directors Meeting Minutes

August 22-23, 2000
Providence, Rhode Island hode Island

Board of Directors: President Peter P. McCann; Vice Presidents: Gordon Morison, Charles Peterson, Diane Boehret; Secretary Janet Klug; Treasurer Nancy B.Z. Clark; Directors-at-Large: Jeanette Knoll Adams, Lloyd de Vries, Ann M. Triggle, Wayne Youngblood; Immediate Past President John M. Hotchner.

APRL Board: Danforth Walker, Lois Evans de Violini, Ken Grant, William Bauer.

Dealer Liaison: Irving Miller.

Staff: Executive Director Robert Lamb; Controller Scott Frazier; Editor Bill Welch, Project Manager Dennis Gilson.

Guests: Foster Miller, Ken Lawrence, Rob Haeseler, Robert de Violini, Jerry Tierney.

Call to Order:

President Peter P. McCann called the second session of the American Philatelic Society's Board of Directors meeting to order at 10:30 a.m. in the Blackstone Room of the Westin Hotel in Providence, Rhode Island on Wednesday, August 23, 2000. President McCann welcomed the all who were present, especially members of the APRL Board. He introduced Ken Lawrence, Chairman of the ad hoc APS Space Requirements Committee, and asked Dennis Gilson, who has recently been added to the APS staff, to introduce himself.

APS Space Requirements/Match Factory

Lawrence: Inherited a Committee that had done considerable groundwork before he became chairman of it. The original committee was appointed by Randy Neil when he was President of the APS. That was chaired by John Foxworth. He was succeeded by Bud Hennig, who was followed by Bill Bauer. Lawrence inherited the product that all these distinguished predecessors provided, and some surprises.

The Committee Lawrence has been working with consists of Peter McCann who is ex officio, Dr. Hubert Skinner who is an APRL Trustee, Dr. Herbert Trenchard who is another APRL Trustee, Randy Neil who is a former APS President, Dr. Harvey Tilles, George Kramer who has considerable business experience in precisely the areas we are looking at including real estate development and historical preservation, and for a time Cheryl Ganz who has a personal interest and concern in architecture and historic preservation. We have had an enthusiastic bunch of people who have spent quite a few years of work on this project.

We began a long time ago with an assessment of space requirements when we realized we were running out of space. Our original draft that staff worked up consisted of both immediate space requirements and future requirements. These were the figures that were given to the committee when Bud Hennig convened a meeting of the Space Requirements Committee in 1998 in State College. We were advised by a number of experts including political officials, a construction engineer, one of the architects responsible for our existing headquarters, Nancy Ring who is a real estate broker with considerable experience in commercial real estate, and Ken Lawrence.

At that time the Committee also considered a proposal that many of the Board have seen come up once again in the press from Pat Buse who then and still wants us to move to a major metropolitan area. The Committee concluded at that time, after serious investigation of the possibility, that it was financially prohibitive. The long distance moving costs would be enormous, though a one-time expense. Moving staff would be considerably disruptive of the function of the Society. In the kind of metropolitan area he wants us to locate, we could not afford to maintain Society services to members at the current level because the labor market in Washington, D.C., for example, would be prohibitive to what we would be able to sustain the Sales Division. Some of the things Mr. Buse wants us to do we are not legally allowed to do as a non profit tax-exempt organization, such as to engage in political lobbying. This was not a realistic proposal, but the Committee did consider it seriously and came to that conclusion.

Lawrence made his first report to the Board in Portland this February. At that time he ran through in great detail all of the reasons why each of the departments needs more space and how the growth of the Society, particularly computerization, have encroached on and taken over space that previously was allocated to programs that have been squeezed along the way. The Board has also responded to member requests by creating new programs which themselves have required space. We really do need the space. This Board and all the Boards who have received reports from previous Expansion Committees have accepted those requirements.

We did commission a consultant, Dr. Charles Lowry, who was the dean of Libraries from Maryland, to advise us specifically on the space and environmental requirements and projected future requirements of a library of the sort that we maintain. In addition to being a research facility, it is a historical archive to our membership. All of this needs to be understood by a committee planning for expansion.

Since that time we commissioned Hoffman and Popovitch, the most outstanding, creative, and experienced architectural firm in our area, to conduct a feasibility study of our needs. When we originally commissioned them, it was our intention to expand our existing building on the property we own in Patton Township. Bob Hoffman made his report to the Board in Portland. It was a very ambitious and wonderful proposal. At that time we had been advised by the former committee that there were no other commercial properties available in the State College vicinity that would meet our space requirements. The proposal on the table now, the Match Factory, was not known to be available. It was still in the hands of investors who were planning to convert it into a microbrewery. None of the other commercial properties that were vacant in the vicinity were sufficient for our needs. We went ahead and commissioned a feasibility study of expanding the existing facility. Those who were in Portland got to see the drawings and architect's model of the proposal.

When we got back to State College from Portland, two things happened. One was that we got the estimates of how much it would cost us to expand on the existing site. This was in the neighborhood of $4 million. We also commissioned a commercial appraisal of the existing property. When we got that back, that was the real shocker. Because of the economic boom in the area where APS Headquarters is located, the highest best use of the property is not to expand the structure we have or to sell it as an office building, but to tear it down and build something completely different. As a consequence of that, the meaning economically is that if we were to put $4 million or more into the property we wouldn't increase the equity in the property by a penny.

Not having an alternative at that time, Lamb, Lawrence, and Randy Neil made some attempts to explore the prospects for raising the necessary money to do the expansion we presented to the Board. The responses we got were very discouraging. That amount was beyond our reach. We talked to people we thought really could help us and they advised us that much money was too much money.

Then we were faced with the prospect of scaling back considerably and figuring out a way to get incremental space. While we were wrestling with this prospect we became aware that the investors in the microbrewery had failed in their goal and the historic Match Factory in Bellefonte, 10 miles from our present location, was again available. We examined the property. Not surprisingly the first questions we asked were the first questions everybody asked us when we started talking about it. It's on a flood plain. What about that? What about the environmental concerns? Before we even discussed it with anybody else, we had been presented with the studies that had been done that answered those questions in a preliminary way. We had our architectural consultant Bob Hoffman give us a feasibility study of this proposal as a possible destination for APS.

The cost figures compared with the possibility of rehabbing and upgrading the Match Factory building facilities compared to the costs expanding the existing facility were similar. The difference was that if we were to do it there, we would do it with the proceeds of selling the existing building rather than in addition to owning the building. That changed the economic equation considerably, but it was still beyond reach of what we were looking at. Unless we could figure out a way to find suitable and compatible tenants to share the property with us on a long-term basis, even that was not something we could pursue. Providentially there, Lamb found out the Post Office was looking for a new home in Bellefonte. It has outgrown its existing downtown space. One of the buildings that our original feasibility study proposed to demolish was just about the size and configuration the Post Office has been looking for. That put the project into a mode where it really began to seem feasible. It was at that point that most of the Board came to State College in June to see the property itself and hear the proposals from the local officials.

At that time Lawrence's committee made its unanimous recommendation that the Match Factory be purchased subject to satisfactory answers to the contingencies we were concerned about, such as reassurance on environmental concerns; doing our own independent evaluation of the flood plain; consulting with our own specialists on any questions that might be outstanding, and securing a suitable tenant for the space that we are hypothesizing as the future home of the Bellefonte Post Office.

The Board made no formal decision at that meeting because it was not a called meeting, but the sense of the Board was that the Committee should continue to go forward with the proposal by answering a series of questions, most of which were posed by Janet Klug. We have done our best to answer every question that every person has asked. It was in connection with that and in the development of a business plan for this proposal that Lamb found Dennis Gilson.

All the members of the Board and Library Trustees received copies of a large binder full of reports as a result of the Committee answering the questions. This led to a second round of questions. A smaller packet of additional information was then sent to the Boards. We have done our duty as we have been assigned to do it. It is the Committee's unanimous recommendation that, subject to those contingencies that we have stated all along, we acquire the Match Factory.

For those who were not privy to the information that was distributed to the Board, Lawrence explained the kinds of information it contained. The Match Factory is on a designated flood plain. There have been at least 2 hundred-year floods in Bellefonte in the time that the Match Factory has been there. In neither of the floods did water get into the facility that we are talking about rehabilitating. The building that did suffer flooding is on the Tallyrand Park side of the property that is scheduled for demolition and to become an extension of the park. The reason why water did not get in is because the people who built the Match Factory in the first place understood what they were building. The ground floor level of the slab is elevated at least four feet on the low side. It is about the level of a loading dock above the surrounding property. Gini Horn also believes every library needs an emergency plan in place because ground water flooding is usually the least likely source of flooding in a library. We recently had a flood at APS Headquarters from a broken pipe. Lawrence has these concerns about the Match Factory, but also the same concerns about the existing facility because three years ago when we had a record snowfall, the roof over the library was buckling and a similar building a few blocks away did collapse with enormous damage to the building inside. At that time Gini Horn was forced to put her emergency plan into effect by removing the especially rare and irreplaceable items out of the library and into safe, secure storage until the snow dissipated. We hired people to shovel off the roof.

We have hired the best professionals we could find to serve as our consultants and give us their best wisdom. We want to go into the project with our eyes open, understanding any risk that does exist and what kinds of preparations need to be made in the face of it, and all the costs we can expect to face. We feel those answers have been favorable in every instance. Now is the time to make the decision to go forward with the vision and to make it happen.

Triggle: Thanked Lawrence for his work on the Committee. According to a report we have, it says that Bellefonte has indicated they will assume liability under Act 2 for environmental hazards. Is the word liability there covering Act 2, or is it for the whole chemical clean-up should that happen? Or is it for the $500 which is the liability to get the necessary release from PA DEP?

Lawrence: It is Lawrence's understanding that if there is anything that needs to be cleaned up, Bellefonte will clean it up.

Triggle: Understood that, but wondered how to interpret that liability.

Lawrence: Would refer that to the Board. Tell David Flood what you want it to mean and he will see to it that we get it.

Flood: We have nothing yet in writing with the Borough of Bellefonte. There are two ways of covering future liability, and there is future liability with chemical waste. That can be covered with a bond. The Borough of Bellefonte also enjoys one very nice benefit that most sellers do not. They have the power to tax. So if they guarantee if something happens down the line we can get them to pay for them. Also in Pennsylvania there is a law that encourages development of old industrial sites. In certain conditions, the state will waive future liability for themselves, the community, and the municipality in the future.

McCann: But to answer Triggle's question, the Borough would assume all liability for any future chemical cleanups.

Flood: That was his understanding.

Peterson: Should this Board vote in a positive manner to go forward to acquire the property or to do any other kind of construction, will part of that process be the establishment of a project manager or a special committee that will report back on a milestone basis so that the Board again has a chance to review it? We should have stop points along the way before we totally commit our nest egg.

Lamb: Normally in an architectural project there is a professional project manager. The architectural firm can be the project manager, or we can select a project manager apart from that to manage the project and the contractors. Lamb was not yet sure how best to proceed. Both are equally acceptable. We first need to go into an architecture selection process and ask the architects to give us a proposal on not only the design of the building but also how the management would take place. We should listen to their advice and make our minds up from that. That would be one of the ways we would have to judge the qualifications of the architect so there would be a professional manager. From the Society's point of view, Lamb proposed to appoint Dennis Gilson to have an office on the site and work with the project manager to represent the Society's interest and monitor progress on a day to day basis. We would not appoint a committee. We need professionals to manage the project.

McCann: That partially answered Peterson's question. The other part was about oversight in terms of the Board of Directors of the Society and the APRL Trustees. This is not a process by which we turn a switch and everything happens. This is a step by step process over which a number of months this Board and the APRL Trustees will be reviewing this process. We will probably have to take a number of votes on specific instances, such as when or if we want to sell our present building.

Lawrence: Our last meeting with Hoffman we worked up a timeline. In order to make this work as efficiently as possible the first step would be to get requests for proposals from architects and engineers. We need our own committee to review those proposals and choose one. At each stage when we would be doing one of those things, we will need a committee to choose the contract. Lawrence assumes it would be a committee of both Boards and that it would be reporting to both Boards in real time as these events happen.

Lamb: Any time a project of this magnitude is undertaken, there are risks. One of Lamb's jobs is identifying what those risks are and minimizing the risks for the Societies. There are two issues that are really significant that would require us to review it all over again. There are also incidental issues that are going to come up. There will be a lot of little problems along the way, most of which Gilson can solve with the contractor without ever coming to us with them. Some of them will be serious enough to have to come to the Board. There are only two problems that can make the project unworkable from our point of view. One of those is if we get into it and the architectural bids are well beyond anything we have projected due to the fact there are hidden problems we have not yet found. That would be a fairly easy issue to deal with. We would either change architects or revise the scope of the project. If that occurs, we don't do 18 buildings, you do less than that. If it is one building that is a problem, it might be easiest just to demolish the building and forget about it. We have built in enough latitude that we have space even if we have to demolish a couple of buildings. That is a big issue that would have to come back to the Board.

The second issue is the tenants. Without a major tenant in the block warehouse building the financials in this building do not work for us. We cannot afford to do the project without that tenant. The tenant we have been talking about is not the only one. There are others that could work as well, but it is going to be a whole lot more difficult to find another tenant that would be as good as a possible government entity being there. If, for some reason, we don't get that tenant, Lamb would want to come back to the Board and maybe convene a special meeting to review where we are.

The other kinds of things we can deal with. If they affect the financials, for example the flood insurance is three times what we think it will be, we can work with that. If we don't get the tenant, we have to consider seriously if we can go ahead with the project.

We have to hedge our bets with this. If the Board approves the project, Lamb would like to move immediately to solicit for architectural firms. That is a very important foundation stone for us to have in place. We need to have architecture firms come in to give us bids and then we start to cover that first contingency. The second thing we would start to do is begin working closely with our potential tenant in Bellefonte. We have to fully understand their decision process and know when their decision is going to be made. When we have that tenant signed up, we are safe in going ahead full bore with the project.

Triggle: Understood some of the contingencies that had been discussed. Some we have directly with Bellefonte. The other contingencies are for our own use that really have nothing to do with Bellefonte. Are we hoping to clarify the Bellefonte ones before we get involved with our own?

Lamb: Absolutely. When we deal with all the contingencies, we will have to do so systematically. The Bellefonte ones are not very troublesome.

Klug: What is Lawrence and his Committee asking of the Board today?

Lawrence: To approve the report of the Committee and to authorize the Executive Director to go forward.

Lamb: We need a decision to proceed. Lamb would need to hire a real estate person to help us find tenants. It is not too early to begin finding tenants for the building.

Klug: Would this vote include an offer to purchase the Match Factory from Bellefonte?

Lamb: We ought to do either an option or a purchase agreement, but the purchase would be contingent upon finding a suitable tenant for the block warehouse.

Klug: Actually we have 8 or 10 contingencies we have discussed thus far.

Motion: To accept the report of the Committee and go forward with the proposal. Moved by Klug. Seconded by Triggle.

Morison: Is the Post Office talking about putting a carrier station in there? Will the main post office be closed, or will it continue and this will only be a carrier station? The question of parking for the post office is a little bit different if it is a carrier station..

Lamb: It is Lamb's understanding that it was being looked on favorably up the line of the post office bureaucracy. The Postmaster did not have final approval to even solicit yet. However, the Postmaster has said this would become the main Bellefonte Post Office, with the carrier sorting in the back and a retail facility in the front. The current post office building is much too small, but it would be retained as a retail facility only. This would become the main post office. He does have some aspirations to bring in some regional sorting activity. We would talk to him about buildings 1 and 2 if that materializes, but that is not on the table at this time.

Morison: There will be adequate parking around the facility?

Lamb: Yes. Parking is not an issue.

De Vries: Once we sell the existing building, aren't we committed?

McCann: We are a long way off from that. We are not considering selling the building at this time. That would have to come back and would require another Board vote.

De Vries: One of the reports we received said this is the time to move. Now is when the market is best.

McCann: This is the time to start the process, but signing a sales contract is going to be contingent upon all these other things. Selling our present building is really not an issue yet. It would have to come back to the APS Board and APRL Trustees for approval before we would do that. It will have to be reviewed again by the Board at that time.

Lamb: Does not recommend selling the present facility until the time we have a tenant lined up for the block warehouse. That has to be the contingency for the final purchase in Bellefonte. Once we have that contingency out of the way, then we can look at selling our present facility.

Lawrence: Would like our real estate broker to be working the market on our behalf. Even though everybody would be told we are not ready to sign a sales contract yet, but we should let it be known we are looking for bids as we are going forward.

De Vries: Most of the experts we have reports from are from Centre County/ State College area. Have people come in from outside the area? People who might not have civic pride?

Lawrence: The biggest development in the area across the street from APS was done by a firm that moved from New York state.

De Vries: The people who have looked at the Match Factory and have said it was structurally sound or that it would be a good move if there were no environmental problems all seem to come from State College, or Bellefonte, or Boalsburg.

Lamb: The environmental auditor was from Pittsburgh. We want to get State College people, and when you are dealing with an architectural firm, one would hope none of their decisions are colored by civic pride. If you ask an architectural firm if a building is a sound building, you expect a sound response.

Lawrence: They are liable for it. To not give a straight answer is malpractice.

De Vries: Dr. Lowry advised us what to do with the existing building.

Lawrence: He was advising us about our requirements. He was not giving us architectural advice.

De Vries: But he said some things such as it is hard to do remodeling of an existing library because of the danger to the books. Did he have any opinion on the suitability of the Match Factory for our library?

Lawrence: We haven't asked him. We asked Gini Horn and it was her opinion that being able to start from scratch and do things right from scratch is a great bonanza. We gave Lowry's report to our architect so that in their projections about what we need to do they understand the requirements he worked up for us, not just the square footage but also the environmental requirements.

McCann: McCann's biggest concern about the project is cost containment. What we have is a reasonably good estimate on the structural integrity and cost. We aren't happy just having one estimate. One of the contingencies would be to get at least two more bids from other companies and making sure that the numbers we have are in the right ballpark and not way under or over inflated. If we start to do something and get two bids back that are $2 million more than the original one, we have some problems and we would need to reexamine the project. We have a number of contingencies, but we have to start somewhere.

Adams: What is the economic history and health of Bellefonte as a source of tenants?

Lawrence: It is hard to comment on it in a way where history tells you a lot because what our newspapers have been full of lately is that every piece of property that is within striking distance of the new Interstate development is suddenly gold. What has been farmland for 200 years suddenly is being bought out. That is the cheapest and least accessible property. Everyone is expecting that as the Interstate goes in, that area will see the same sort of development with hotels and restaurants that we have already seen in our own area. It will take a little longer to get to that point.

Welch: When Interstate 99 is completed in 2002 Bellefonte will become a neighborhood of State College. You will be able to get to the hospital or football stadium from Bellefonte in 10 minutes. It will take longer to get from the north end of town to the south end of town than that. There will be a much more diverse roster of possible tenants at that point than there might be at the moment or that there would have been historically.

Lawrence: Brought clipping files of the economic development of the region for anyone who is interested in looking at them.

Adams: Assuming the project goes ahead 100% as planned, what would be the impact on our year to year operating budget? It will be a larger facility. What do we anticipate in additional costs?

Lamb: There will be two areas of impact. One will be debt servicing. At the current rates, for every million dollars borrowed on a fifteen year loan, it costs $121,000 a year in debt servicing. That is why tenants become extremely important to us.

The second issue is maintenance. This is a bigger facility to maintain. Again this makes tenants important to us because some things such as air conditioning and heating costs will be more economical for us if we have tenants who are sharing those costs. The actual maintenance of the building will take three people, whereas where are now requires only one person. We estimate that our maintenance costs would triple.

Adams: Would we need an additional person to manage the tenants?

Lamb: Yes, we would. We would not get into the tenant management business as such. Lamb envisioned hiring a company to do that. We did not want to manage the tenants ourselves. Even so, we would need a director who is responsible for the building. We included that in the three people we were talking about.

Lawrence: On the other hand we would experience a personnel savings in no longer being responsible for the retail end of the post office. That would be a benefit.

Triggle: Asked if the Post Office as a tenant would pay their share of rehabbing the space they use.

Morison: Believed that would be negotiable.

Lawrence: One reason why we need to have bids from architects is because we need to select our architect right away so that our architect can work with theirs and with the town of Bellefonte. One of the advantages the Hoffman firm enjoys in working with us on this is that one of the members of that firm used to be a post office architect.

Triggle: We would still need to do the structural rehabbing, though. It is unclear if the $4.7 million total rehab costs includes just the APS space, or also the tenant's space.

Lamb: The $4.7 million rehab cost estimate includes exterior of all of the buildings except the block warehouse. The block warehouse does not figure into that at all. It has to be negotiated with the Post Office on how they want to do it. What it does not include is build out of any potential rental space. In commercial real estate it is typical to rehab the exterior structure and some rough interior work. Then the tenant comes in and is responsible for what they want done on the interior of the structure.

There is one discrepancy some may have noticed. There are not rehab costs for buildings 1 and 2 because when that study was done we were planning to demolish those two buildings. There are demolition costs for those buildings in the study. We found out there was a historical significance to those buildings. The rental potential would cover the relatively inexpensive costs of rehabbing them.

Lawrence: When the Board toured the Match Factory members of the Expansion Committee were there, too. Lawrence was especially grateful for George Kramer's presence because he is savvy about all this rehabbing. When he looked at those buildings he said don't demolish them because if we can't get $15 a square foot for them as rental space, we can get $5.

Dan Walker: In Lawrence's report it is stated we need two major tenants, not just the Post Office.

Lawrence: Said he expects two. Our calculations are based on the most conservative possibility which is just the Post Office. We are fairly confident that we will be able to fit up and rent the end building.

Lamb: We are getting a lot of interest in rental space. We really do need a real estate person to begin screening some of these requests because there are some things we would want in a building and not want in the building. Getting small tenants will be no problem at all. It is the big tenant that makes the budget financially viable.

Walker: Read from one of the reports, "although we need only the Post Office and one other major tenant to make the Match Factory self-sustaining…." Is that really not true?

Lawrence: We have estimates of the rent per square foot. We have a range of estimates. If the high end of the range works, one tenant is enough.

McCann: Anything moving forward would be contingent on having a tenant or tenants that would bring in enough revenue that would make the economics work.

Walker: The Post Office will solicit bids sometime in October. For us to get the Post Office contract, the Post Office has to be assured the APS will own the Match Factory. So once October comes around, we are committed to spend at least $300,000 to buy the Match Factory. Probably by that time we will have a lot more money committed. We have to do it in October. We don't have the luxury of waiting until next year to make a final decision.

Lamb: We can probably do this with an option to buy. Even if we put the $300,000 down, the sale would be contingent upon a suitable tenant in the block warehouse.

Walker: And the Post Office would be willing to go along with that?

Lamb: The Post Office would have no say in that. The Post Office has to commit itself to that building, and the commitment would not take place in October. The Post Office would issue its request for proposals in October. Lamb has been advised informally that their searches have revealed no other suitable location in Bellefonte that could accommodate the kind of facility they want. There is a procedure to validate that.

Lawrence: This contingency would be with the Borough. If we don't find a suitable tenant, we get our money back.

Flood: It is no problem to draw up a sales contract contingent upon an executed agreement with the Post Office. If that deal doesn't go through, the sale does not go through. The Borough of Bellefonte bought this building. They have one customer for it - us. They are willing to be very cooperative. They won't give the store away, but they will be very cooperative.

Walker: Is the Post Office going to be willing to do this? Don't they have the alternative to build something themselves?

Lamb: Yes, but they don't have a site. What they want is something close to downtown Bellefonte. They could get some farm land, but that doesn't suit their needs. The main post office needs to be downtown. This is the only suitable location, according to some sources in the Post Office.

Flood: It is the only open site in the Borough of Bellefonte.

McCann: We don't get trapped into anything unless the Post Office goes forward. We don't lose any money.

Walker: We are not debt committed in October?

Lamb: No.

Walker: So we do have time for architectural studies?

Lamb: Yes. We probably wouldn't be looking at an actual purchase until sometime in February.

Youngblood: From everything seen, heard, and read about the unprecedented growth of that area not only being at the convergence of two major Interstates, as well as a burgeoning historical district, the availability of newly renovated nice quarters would make us more desirable as a landlord. Even if the Post Office deal didn't go through there would be a possibility we could find another tenant.

McCann: But we are not locked in until we find that tenant.

Grant: If both Boards were to recommend we go forward, might it be possible to have a flow chart of the contingencies so that everyone can see the order in which events are taking place and a timeline that estimated activities so we have a sense of what is happening.

Lamb: For internal planning purposes we have done this. It is not detailed yet, but once we get into it the three pages we have now will probably turn in to ten or fifteen pages. The next thing we have to do after it is approved is to sit down with the Postmaster to make sure we understand his decision making process, who gets involved, and when certain actions take place. There are some things such as the selection of architects that would have to be keyed to the Post Office decision making. We have to go out quickly to get architecture proposals coming in, but we don't want to select our architect until we are certain we have the Post Office on board as a tenant. That's when we start spending big money.

Grant: The Boards will want to have something to look at that will help them understand what is happening at any given time and reduce their anxiety.

McCann: We are not making a decision that is irrevocable today. We will continue to monitor the process as we go along.

Lois de Violini: Why isn't the Post Office itself interested in buying this property? What stops it from being the property owner here?

Lamb: The government does not buy property as much as it rents it. It is the government's philosophy that it was not supposed to be in the real estate business. It was also a way to pass money into the local community.

Morison: Currently the Postal Service is selling properties and renting them back.

De Violini: There really isn't any danger of the Postal Service stepping in and trying to buy it instead of APS?

Morison: Doubts it very much. The Postal Service does have to advertise they are seeking rental property, so that everyone gets an opportunity to bid, but they can define the territory. If they want space downtown, that will be defined when they seek a bid.

Peterson: Grant made a good point that we need some sort of milestones chart and a timeline. We have had a lot of discussion about the stages, but there has been no indication that the Board will be provided with these timelines. We need to have that assurance that will be provided.

McCann: Absolutely.

Lawrence: It was literally the very last thing we did before we came here.

McCann: That would be appropriate to add to the motion as a contingency.

Walker: The purpose of the APS and the APRL is to provide philatelic services to its members. Here we are getting into preservation of an historic building and being a landlord. Are we getting away from things we are supposed to be doing for the members? Particularly with the Postal Service in terms of their support of STAMPSHOW and other shows.

McCann: Would prefer not to be a landlord. The Board and Staff have looked very long and hard at the economics the APS is faced with right now. We are not expecting an increase in membership. If anything, we are having a decrease. We have that problem. The Match Factory came out of the blue and if it hadn't we would have a lot of problems deciding about what to do. When you look at the numbers and analyze them, which both Boards have done, this is really the only option we have to do something that is economically feasible. If that entails becoming a landlord and having income that is separate from our membership dues, then we can do that and take advantage of it. It will give us a chance to continue our current services but have some provision to expand for the membership.

Lawrence: Non profit organizations have been told repeatedly for the last decade that they have to become entrepreneurial and find outside sources of money to survive. The traditional philanthropic sources are telling them that unless you can find ways to generate money, don't come hat in hand to us. Realistically we have two choices. We can either raise dues, which Lawrence favors but the Board doesn't; or we can become entrepreneurial. We have to find other sources of revenue. Keeping member services costs reasonable so that everyone can afford them, and finding additional sources of revenue to allow us to do that is the best possible service to members.

McCann: We considered raising the dues last night and the Board voted against it.

Youngblood: In looking at the options available to us, assuming we could raise enough money to expand on the existing building we would be buying ourselves a very limited amount of time at best. One of our primary mandates to our membership at this time is providing adequate and safe space for our collections. We need to provide for the foreseeable future, not just for the next five years.

Klug: Wanted to address Walker's comments about rental income. Klug has been a pain to Lamb and Lawrence asking questions and demanding reports almost on a daily basis, but the one very attractive aspect of the Match Factory proposal was the opportunity it presents to provide APS with a new source of income. We do need to look for other sources of income to supplement our diminishing dues income. If we don't, sooner or later we will begin having serious problems.

Peterson: APS being a landlord did not bother Peterson as long as we are dealing with suitable tenants appropriate to us, and that the management would be handled by an outside firm. Peterson did not see a problem with having the Post Office as a tenant. We already have the Post Office as a tenant in State College and we use it for our own operations. We need the availability of the Postal Service.

Lawrence: Look at this as the real estate portion of our portfolio.

De Vries: One advantage of being a landlord is that if, at some point, we need more space we can take it back. If we were to buy a space that had only what we currently needed, we are locked into that space.

Morison: We could probably sell a piece of this building, too.

Triggle: We are getting close to calling the question. Can we have an input now on contingencies we see as important?

Lamb: If it is the decision of the Board to proceed, we should have Flood draft it and send it to both Boards and if others feel there are things that should be added we should do it that way.

Flood: Because of our tax situation, this burden is going to have to be borne largely by the APRL. In times past Boards of the APS have requested the APRL Board to proceed with construction. It is a good idea that the APRL Board not only do the project, but be responsible for the supervision of it and make a turnkey operation to APS when it is concluded. It has been our practice in the past.

Triggle: That was not the answer to the question asked. With the motion we are making, would it not be prudent to include the contingencies we have with Bellefonte? Triggle would like to see the contingencies in place before we vote.

McCann: Klug has placed the motion on the floor. McCann suggested Klug draft the contingencies as a part of that motion during the lunch break. Anyone who has contingencies to add should discuss them with Klug. The contingencies should be put in writing so it is clear what we are voting on. We can do it simply for now.

Bauer: Which Board has the final say? Do both Boards have to agree, or does one Board have precedence over the other?

Lawrence: The APRL Board owns the existing property. Theoretically the APS Board does not have to have the APRL Board's permission to purchase another property, but as a practical matter there are reasons why the APRL owns the existing property and ought to own the new property. It would be foolish for both Boards not to agree, but as a technical matter the APS Board controls the budget, business, and staff and the APRL Trustees is in charge of the property.

Lamb: Both Boards ought to approve the project.

Flood: Historically it has been a request from the APS Board to the APRL Board.

McCann: We will put that contingency in the motion.

[The Board broke for a working lunch and executive session at ll:55 a.m. The open session resumed at 2:05 p.m.]

McCann: Asked Klug to read the motion with the contingencies that were added during the lunch break.

Motion: To approve the report of the Expansion Committee and proceed on their recommendations to move forward with the Match Factory proposal which includes the following contingencies:

1. The Borough of Bellefonte assumes liability of any hazardous materials should they be found.

2. Bellefonte shall expand Tallyrand Park to include the former Clasters retail property.

3. Bellefonte shall provide an entranceway through the park for visitors.

4. Bellefonte shall provide adequate parking for visitors.

5. Bellefonte shall support the installation of a traffic light where the Match Factory drive meets Water Street.

6. APS staff shall provide both the APS and APRL Boards best case and worst case financial projections.

7. APS staff shall provide both APS and APRL Boards quarterly reports that include progress on construction, finances and debt service.

8. A suitable tenant renting 22,000 square feet shall be found.

The APS Board requests the APRL Board of Trustees accept this proposal.

Moved by Klug. Seconded by Triggle.

Lamb: The most difficult thing on the list to do is the best case/ worst case financial projection. The best case is that somebody gives us the money and we walk away with it. The worst case is that we go bankrupt. Those are not options that are acceptable.

Walker: By best case/ worst case Walker meant we could only rent to the Post Office and not get a restaurant, storage facility, or office tenant. Instead of having construction costs of $5.5 million, it ended up being $7.5 or $10 million. Those are the kinds of best case/ worst case financial data Walker wanted, particularly if the debt the Society has exceeds $1.3 million. Do we have the financial ability?

Lamb: If it goes to $7.5 we can't afford it.

McCann: A lot of the work has been done and some of the documents already exist. Walker's concerns about cost overruns are shared by many on the Board and McCann did not see a problem with that contingency.

Peterson: The wording best case and worst case do not have meaning in themselves. We should put a parameter on that.

Walker: Sure. Costs 50% above what is expected and revenue is 50% below expectations.

Morison: The traffic light requirement in this sounds like a nit. Bellefonte does not control that, the state highway department does.

Lamb: Bellefonte does not control it and it is not something we could put in a contract, but Bellefonte could say they will help us get it. This is something the Postal Service will require for their site. It is a fairly important element.

Walker: Across from the railroad tracks there was a building structure and on the door there was some graffiti. Is that one of the buildings to be demolished?

McCann: Yes. That is the old retail center. It will be torn down.

Lawrence: There is a point about the traffic light. In these economic development projects it gets to be an issue of who will pay for the traffic light and that is why we want it as a contingency.

Grant: One of the previous contingencies was the repainting of the railroad bridge. Should that be included?

Lamb: The railroad bridge belongs to the Susquehanna Valley Council of Governments. It is not something Bellefonte can control. Lamb does not doubt we can get the bridge painted, but there is no point in putting it in an agreement with Bellefonte because they can't control it. They have said they would weigh in with Susquehanna to see if it would be done.

Bauer: Was not sure we would get that.

Lawrence: This railroad is an historic railroad. It is a tourist attraction. We'll get it. They want this place to look perfect for the tourists.

McCann: Called the question to accept the report of the Committee and go forward with the Match Factory proposal with the stated contingencies. In favor: Morison, Peterson, Boehret, Hotchner, Klug, Clark, Triggle, De Vries, Youngblood. Opposed: Adams. Motion passed.

Adams: Voted against the proposal on a philosophical basis. Given the Board's fiduciary capacity, the proposal has a degree of risk Adams was not willing to assume for the Society, especially the financial risk.

McCann: Did not believe this vote entailed financial risk at this time.

Adams: Realized that, but felt this was a step along the slope and hoped no one would take this negative vote personally.

Flood: There will be some time to time resolutions that may be required from us in order to seek grants or to seek cooperation from the state. Normally these require a formal resolution.

McCann: This is only the very first step. It does not include anything further than starting the process. The Board will be voting on many more issues. We will get to a couple of points of no return where we will have to discuss whether to sell our present building or not. We may find out with some of these contingencies that it is a no go, and we will be back talking about it again.

Clark: Proposed a vote of confidence and thanks to Bob Lamb and the staff in State College and to Ken Lawrence and his committee for all the hard work that has gone into presenting this proposal. (The entire Board seconded and applauded.)

APS Relations with U.S. Postal Service

De Vries: Suggested we have a committee to look into how we'd like the U.S. Postal Service to promote philately and how we think it can best do so. We can come up with some better ideas for them and make some suggestions. As the largest organized group of stamp collectors in this country we can tell them how we think they should proceed in promoting stamp collecting to everybody's benefit.

Triggle: Hotchner is USPS Liaison. He should be able to address this issue.

Hotchner: A lot of this is under constant discussion with the U.S. Postal Service. If you want to approach them formally with a letter outlining those things, it could be done. We don't need a new committee to do it. If de Vries wants to draft it and pass it through the Board for the usual editing process, that is the way to do it.

McCann: Was de Vries suggesting more than that?

De Vries: Believed the Liaison was just the ongoing relationship with the USPS This would be something specific on how they promote philately. They are dismantling their youth programs. We expect them to scale back greatly in their participation in shows. Maybe we have some better ideas. If that is the feeling though, de Vries said he could draft something and send it to Hotchner as USPS Liaison.

McCann: Suggested de Vries and Hotchner work together as an ad hoc committee to talk about that.

Peterson: Hotchner is a single point of contact as Liaison to the USPS There is a lot of difference between that and a committee of several people who can brainstorm to try to develop ideas. Hotchner as Liaison does not include him coming up with all kinds of ideas to submit to the Postal Service.

Hotchner: There are a number of things under discussion with the Postal Service on a regular basis that Hotchner did not want to go into. There are two points of contact with the Postal Service. There is the informal contact which Hotchner is responsible for and he takes guidance from the Board. There is the formal relationship which includes letters from the APS President. Whatever happens has to go through one of those relationships.

Triggle: What we have at the moment is one person acting as a Liaison to the Postal Service, but this Liaison is also a standing committee. It is an umbrella that can be opened. De Vries could fit in under that umbrella if that is what the President decides to do.

McCann: As a Board member, de Vries has a right to make a suggestion. It is a good suggestion and de Vries and Hotchner should talk about it. Together you may come up with some ideas that haven't been tried before.

Hotchner: There is also a possibility of McCann doing one of his President's messages inviting membership to contact the leadership with any ideas they have about our relationship with the Postal Service. If we want to prospect for ideas, why keep it to just the Board?

McCann: It sounds as though de Vries has some ideas. McCann asked de Vries and Hotchner to come back to the Board with some ideas.

Confirmation of Executive Session Votes

Motion: To confirm the votes for various awards we did in Executive Session. Moved by Clark. Seconded by Hotchner. Passed unanimously.

Announcements

Lamb: We started sending people who are delinquent in payment to the Sales Division to a collection agency. The Board was concerned at the time that happened and they did not want us to do that until the member had been expelled. The trouble it that delays the process about two years. The collection agency says if we could get to these things earlier that we would have a better rate of return. Lamb asked if the Board would object if the delinquent Sales Divisions payments would be sent to the collection agency at the same time they were sent to the Board of Vice Presidents.

Peterson: At the time it goes to the Board of Vice Presidents, do they get a notice from APS?

Lamb: Yes.

Morison: It would not be a problem as long as it was done after the notice is sent from APS. The Board of Vice Presidents wants to move this along more quickly, and has asked the Sales Division not to sit on problems until a long period of time has passed. We were assured by the Sales Division they weren't doing that.

Hotchner: Do we tell members in the sign up process or any time after they haven't responded to a few letters that we are sending this to a collection agency?

Lamb: We should at the sign up. This is a small percentage of the total participants. There are 7,000 people who participate in the Sales Division and maybe 5 or 10 who end up with a collection agency. Right now we don't do it because they have already been expelled and action has been taken on them before we turn it over to a collection agency. In this case, we should tell them that their case is being sent to a collection agency when we tell them it is being referred to the Board of Vice Presidents.

McCann: Asked all the Board members to attend the General Meeting at 9:00 a.m. on Saturday, and to be there ahead of time to greet members as they come in.

Lamb: The mayor of Providence will be here for a ribbon cutting to open the show. It will be a brief ceremony but it would be nice of the Board could attend that.

Adams: Inquired about the Dealer's Breakfast.

McCann: Said he and Youngblood would be attending and would introduce Irving Miller as the new Dealer Liaison to the Board and will give background on what he is doing.

Adams: Were other Board members invited to come.

McCann: Yes, it is at 8:00 Sunday morning.

Adjournment

Motion: To adjourn the meeting of the APS Board of Directors. Moved by Clark. Seconded by Klug. Passed unanimously.