NORTH COAST RAILROAD AUTHORITY (NCRA)

BOARD OF DIRECTORS REGULAR MEETING MINUTES

WEDNESDAY, MARCH 15, 2000 AT 10:00 A.M.

HEALDSBURG CITY HALL, 401 GROVE STREET, HEALDSBURG, CALIFORNIA

A. CALL TO ORDER

Chair Jehn called the meeting to order at 10:00 a.m.

B. ROLL CALL

Directors present: Chair Jehn, First Vice Chair David Ripple, Allan Hemphill, Jack McKellar, Daniel

Opalach, Robert E. Simonson, and Max Schlienger.

Directors absent: None.

Also present: Executive Director Max H. Bridges, General Counsel Christopher J. Neary, Property

Manager Cyndee Logan, Consulting Accountant Russ Mustola, and Administrative Assistant Pamela

Fishtrom.

C. MINUTES

Approval of Minutes of the February 16, 2000 Regular Board Meeting

Motion by Dir. Ripple to approve the Minutes; seconded by Dir. Opalach. Vote taken; motion

approved.

D. AGENDA APPROVAL

The Agenda stands approved by Chair Jehn.

E. PUBLIC COMMENTS

James w. Calkins, Attorney representing Pacific Rail Services, expressed appreciation for the Board's

action on his claim.

Pam Van Meter, Van Meter Logging, contested a passage written by NCRA General Counsel Neary to

her lawyer regarding the relationship between Van Meter Logging, Jon Green, and former NCRA

Executive Director Mr. McLaughlin.

Loretta Ellard, Planning staff of Mendocino Council of Governments, reported their next fiscal year’s

draft work program includes $20,000 to be used as a match towards a state grant that will be used to

prepare the 20-year transportation development plan for the Railroad. However, the state seeks support

of the grant by a contribution from all four counties; Humboldt, Mendocino, Sonoma, and Marin.

James Quinn, retired attorney from the Public Utilities Commission, characterized NWP as undergoing

“death by a thousand cuts" because of endless delays and requirements. He indicated not one public

official, besides those appointed to NCRA, catches the vision of a viable railroad. Worse yet, some

officials do not want the NWP. He said, because this is an election year, emphasis should be on getting

the politicians to get to the regulatory agencies and involve the media. Dir. Hemphill and Mr. Neary

lauded Mr. Quinn for his support while he was part of the PUC staff that worked on Railroad issues

during bankruptcy and abandonment proceedings and thereafter.

Chair Jehn announced he must leave at 11:45 a.m. to meet with six members of the Assembly

including the Chair of the Senate Sub-Committee on Transportation.

Mike Pechner, who donates his services as a weather man, gave a report regarding the status of weather

this year as compared to last year in terms of impact on the Railroad.

F. CONDUCT OF BUSINESS

1. Consideration of Federal Emergency Management Agency (FEMA) Alternate Project

Proposal

Executive Dir. Bridges reported FEMA hosted a meeting to discuss NCRA’s options because of

concern over the nature of the responses received as a result of the Environmental Assessment

(EA). Option one: Alternate Project where 90 % of the money identified in North End DSRs could

be spent improving the South End, satisfying eligible debt, and purchasing equipment, in lieu of

taking on an environmental battle providing NCRA can find another way to address the canyon.

Option 2: Modified Improved/Alternate Project where the North End DSR money is shifted to

open the South End and a portion of the North End. The unopened portion would be connected as

money becomes available. Option 3: Continue North End environmental work; address EA

comments and secure a determination by FEMA to issue an additional EA or require a full

environmental impact statement. The project will proceed upon completion of the environmental

work. The environmental work may lead to litigation further delaying the process.

Ms. Logan indicated PacBell contacted her to complete a fiber optic lease resulting in $4-$5 million

to use as match money or for completion of work in the canyon.

Mr. Neary reported the environmental assessment is surmountable and once NCRA has completed

review, FEMA will be able to proceed with a mitigated negative declaration. An Environmental

Impact Study may not be necessary. Litigation may occur if the facts support a preliminary

injunction which would prohibit the job from moving forward, however, delaying environmental

concerns should not be the sole reason for approval of an Alternate Project. In addition, selection

of the Alternate Project option precludes ineligibility for further disaster relief although FEMA has

indicated an exception might apply.

Mr. Darling, President of Rail-Ways, Inc., reported he strongly supports the Alternate Project and

has crafted a proposal which meets the needs of NCRA and Rail-Ways, Inc. His proposal allows

for NCRA to finish restoring the South End and relieve some creditor debt, thus restoring Rail-

Ways’ financial health. In addition, environmental concerns are deferred. Mr. Darling explained

other funding sources would be needed to restore the North End and if private money is used the

work may be performed outside the EA.

Harry Sherwood, FEMA, explained converting to an Alternate Project means the public is not

served by restoring the project, therefore, the facility is normally abandoned. However, precedence

has been established in a few instances of unusual circumstance where a great deal of damage

occurred and where private monies, not federal funds, restore a facility – for the Railroad that is to

Class I standards – FEMA will consider it a new facility, therefore, eligible for future disaster

funds. The process for future eligibility could be an amendment to the improved project agreement

or as a new agreement. Alternate Project funds can be used on capital improvements, hazard

mitigation projects, equipment purchases, and debt relief on a case-by-case basis for in-eligible

items from past disasters. The money cannot be used for operating expenses or the non-federal

share of federal projects, and all costs must be supported by adequate documentation.

Dir. Hemphill indicated there is not enough FEMA money available to open the canyon, additional

funding is needed regardless of the option chosen. Chair Jehn remarked the Railroad needs

approximately $90 million to re-open the line two-thirds of which would be spent in the canyon.

Mr. Darling indicated repair of the line for work trains only from Eureka to Willits is $10 million;

from Glynn to Eureka $650,000 with an additional $300,000 to bring it to Class I.

In response to Mr. Bridges, Charles Rabamad, OES, said the 10% reduction in funds from

approval of an Alternate Project can be offset by the addition of contingencies increasing the

estimate of the DSRs.

Motion by Dir. Hemphill to table the item, schedule a meeting within 10 days, direct staff to

prepare a feasibility study for the Alternate Project hybridized with the Improved Project to open

from Scotia North and Nashmead South including dealing with environmental issues, and perform

a study in collaboration with FEMA of possible creditor relief issues and potential uses of funds by

selection of the Alternate Project. Seconded by Dir. Ripple. Vote taken; motion carried.

Chair Jehn announced the meeting will be held March 24, 2000 at 9:00 a.m. in Willits. Chair Jehn

recessed the meeting at 12:05 p.m. and left, leaving Dir. Ripple to chair the meeting. The meeting

reconvened at 12:20 p.m.

2. Disbursement of Funds

a. South End Improved Project

Executive Dir. Bridges reported current project funds are due to Rail-Ways, Herzog, and

Boyle Engineering, however, there is no agreement as to how the remaining funds should be

disbursed. Mr. Davis, Rail-Ways Road Master, made an impassioned plea for funds. Mr.

Denny, Herzog, addressed the distribution of funds be based on logic rather than emotion.

The Board suggested Rail-Ways and Herzog meet to gain consensus.

b. Federal Emergency Management Agency / Office of Emergency Services

Executive Dir. Bridges reported NCRA received approximately $202,000 from a Net Small

Project Cost Overrun from Disaster 1044. He reported the Finance Committee discussed

three options for distribution; paying Disaster 1044 vendors, paying some vendors after

retaining the portion that was reimbursement for force account, or paying Rail-Ways because

of the audit exception offsets taken out of Disaster 1203. The Committee recommended

option three. Staff recommended that, in addition, Ross Mayfield receive the administration

funds, approximately $15,000 be paid on invoices that were directly related to the work

performed on Disaster 1044, yet unpaid, and the rest be given to Rail-Ways. Dir. Hemphill

moved to accept the staff recommendation; Dir. Opalach seconded. Vote taken; motion.

approved unanimously.

3. Action regarding Single-Year Audit; Fiscal Year End 1996

This item was continued until the next Board of Directors meeting.

4. Consideration of Acceptance of Single-Year Audits; Fiscal Year End 1997 and 1998

Phil Aycock, Aycock and Edgmon, CPAs, presented the draft audits. He indicated that the audits

of 1995 and 1996 should be approved first. He discussed his firm’s findings; the opinions are

unqualified. They will begin the 1999 audit right away. He reported progress has been made in

terms of the financial reporting and he anticipates a better report will be associated with 1999. As

with Mr. Staley’s report, a response from management is required and incorporated into each

audit.

5. Establishment of the Passenger Committee

By direction of Dir. Ripple, First Chair, appointments to the Passenger Committee are as follows:

Chair Jehn, Dir. Schlienger, and himself.

6. Transfer of Easement to Eurdora Crider

General Counsel Neary recommended accommodating the request of Eurdora Crider for transfer

of easement to facilitate the sale of her property. Moved by Dir. Hemphill; seconded by Dir.

Schlienger. Vote taken; motion carried.

7. Consideration of the Claim of David and Destra Beatie

General Counsel Neary recommended rejecting the $280.47 claim of David and Destra Beatie for

damage to their car occurring at a crossing in Petaluma because liability is not clear. Moved by

Dir. Simonson; seconded by Dir. Schlienger. Vote taken; motion carried.

8. Action on Standstill Agreement – Secured Creditor

General Counsel Neary recommended continuing this Item until M.1 is considered in Closed

Session.

9. Request Purchase of Copier for Eureka Business Office

Executive Dir. Bridges requested authorization to purchase of a copier. Dir. McKellar motioned

approval of purchase not to exceed $1,000 plus tax; seconded by Dir. Schlienger. Vote taken;

motion carried.

G. LIAISON REPORTS

1. NWPRA – Max H. Bridges

Executive Dir. Bridges presented a written report.

2. Legislation – Max H. Bridges

No report.

3. Passenger – Robert Jehn

No report.

4. Cities – Jack McKellar

Dir. McKellar reported he spoke with various political agencies regarding the area from Scotia to

Eureka.

5. Sonoma-Marin Rail Transit Commission – Robert Jehn

Executive Dir. Bridges mentioned the failure of Measure C in Sonoma County as a set-back

because there were moneys available for the Railroad in that measure.

6. Contractor – Rail-Ways, Inc.

No report.

H. COMMITTEE REPORTS

1. Finance – Robert Jehn, Daniel Opalach, Robert E. Simonson

Previously discussed.

2. Organizational – Robert Jehn, David Ripple

Executive Dir. Bridges indicated the Organization Committee has not met.

I. STAFF REPORTS

1. Executive Director – Max H. Bridges

Mr. Bridges asked the Board Members to turn in their Conflict of Interest Forms.

2. Property Manager – Cyndee Logan

No report.

J. LEGAL REPORT – General Counsel Christopher J. Neary

1. Finalization of Appeal on Excise Tax

Mr. Neary reported NCRA will receive a refund for appealed excise taxes of just over $50,000.

2. Action to Expunge Improperly Recorded Abstract

Covered under Item J.4.

3. Further Information on Improper Public Disclosure of Withdrawn 1998 Grand Jury

Subpoena

Mr. Neary reported in 1998 and early this year information was disclosed by FEMA to the press

and he will make a written recommendation that the Board act on this matter possibly in April.

4. Status of Mendocino Transit Authority (MTA) Contract

Mr. Neary indicated the contract with MTA cannot be consummated until the Abstract of

Judgment recorded by Jon Green is dissolved. That lawsuit has been filed and sent to Mr.

Green’s attorney.

5. Meeting with Department of Toxic Substances, Regional Water Quality Board, and

Department of Fish and Game

Mr. Neary reported this meeting is scheduled after this meeting to discuss the status of Consent

Decree compliance.

K. MATTERS FROM BOARD MEMBERS

None.

L. ANNOUNCEMENT OF NEXT MEETING

Special Board Meeting – March 24, 2000 9:00 a.m. in Willits, Mendocino County

Regular Board Meeting – April 19, 2000 10:00 a.m.

Willits City Council Chambers, 111 East Commercial Street, Willits, Mendocino County

M. CLOSED SESSION

Motion by Dir. Hemphill to continue Item M and Item N to the Special Meeting of March 24, 2000;

seconded by Dir. Schlienger. Vote taken; motion carried.

1. Conference with Legal Counsel – Potential Litigation – Two Cases

Government Code Section 54956.9(a)

2. Conference with Legal Counsel – Consider Initiating Litigation

Government Code Section 54956.9

Jon Green – Two Quarry Agreements

3. Conference with Real Property Negotiator

Government Code Section 54956.8

Negotiating Parties: Pacific Bell, etc.; NCRA

Under Negotiation: Longitudinal Easement

N. ANNOUNCEMENT OF ACTION TAKEN IN CLOSED SESSION

O. ADJOURNMENT

Dir. Ripple, First Chair, adjourned the meeting at 1:50 p.m.