SEC attorney: Trustees can continue business as usual
The new bylaw placing a cap on spending for the Socorro Electric Cooperative Board of Trustees doesn’t apply to the 10 trustees currently serving on the board. That’s the view of SEC attorney Dennis Francish, who told the board at its regular meeting on Wednesday, April 28, that they were “grandfathered” in under the old rules when they were elected to their current term.
The resolution — one of several member-sponsored resolutions aimed at reforming the SEC that passed by overwhelming margins at the annual meeting on April 17 — limits expenditures to $10,000 per trustee and $15,000 for the board president.
Francish issued his opinion after members of the board bemoaned the restrictions member-owners placed on them by passing a series of reform related resolutions, many of which were aimed at cutting the board’s expenses.
Last year, the 11-member board’s expenses surpassed $492,000 — an average of almost $45,000 per trustee — considerably higher than what trustees at other co-ops in the state received. The compensation comes in the form of travel, lodging, per diem, fees, as well as medical and health insurance.
Trustees Leroy Anaya and Milton Ulibarri of Socorro sought guidance about what to do about the limits for trips they have planned.
As the SEC’s representative, Anaya was traveling this week to Washington, D.C., for a National Rural Electric Cooperative Association legislative meeting. Ulibarri is to attend a June meeting of the state organization in Ruidoso, as the co-op’s delegate.
“How they going to get there? Do we gotta chip in and buy gas,” quipped San Antonio, N.M., trustee David Wade.
Francish said legal arguments could be made regarding “course of conduct” and “implied consent” that would exclude the current trustees from the new bylaw limiting expenditures.
“Course of conduct” is a pattern of actions that are similarly or regularly repeated over a period of time — in this case receiving their regular rate of compensation.
Francish said when the trustees were elected it constituted an “implied consent” that they would be compensated at a similar rate for the duration of their terms.
“The question is: are you entitled to continue along the line you were accustomed?” Francish said.
Although the change to the bylaw was approved, Francish reminded the board that a 1967 resolution allowing trustees to receive insurance benefits was still intact.
“I don’t see where there’s a violation,” he said of exceeding the new limit. “If you pay more than $10,000, I don’t think you’re violating anything.”
The attorney said the questions were complex, but he could make a case for overriding the new resolution.
“There’s no easy answer. That’s where the courts come in and answers it,” he said. With trustee Charlie Wagner — a leader of the reform movement often at odds with his colleagues — absent from the meeting, only Prescilla Mauldin, who won election as a reform candidate in Socorro last fall, raised a concern. She questioned whether accepting more than the limit would be carrying out the wishes of the member owners.
“But the bottom line is they approved $10,000,” Mauldin said.
At the special meeting five days earlier, Francish was asked to comment on each of the member-sponsored resolutions that passed. While there was much discussion about how the $10,000 would be distributed, he made no mention that trustees might be entitled to more.
At the same meeting, Francish told board members state law provides that they are entitled to serve out their terms, even though the members voted to reduce the size of the board from 11 to five.
Terms for seven trustees won’t expire for another two years and eight months. The terms of the other four end a year later.
The attorney also indicated there were two other newly passed bylaws that presented problems. He said it was a “ridiculous” idea to ask the board to voluntarily agree to following the Open Meetings Act and Inspection of Public Records Act, because those laws don’t apply to co-ops. He also said he had a “big problem” allowing members and the press to sit in on board meetings and that their presence was “not in the best interest” of the co-op.
Wagner, and a member-organized SEC Reform Committee, are calling for the newly passed resolutions to go into affect immediately, or as soon as new districts can be formulated.
Francish suggested again on Wednesday it might take a lawsuit to resolve the issue.
“There’s no easy answer,” he said “That’s where the courts come in and answer it.”
The attorney said members made a mistake when they voted to limit trustee spending. He said the money spent on travel to conferences and meetings was part of the cost of doing business. The payments were to benefit the private non-profit corporation, not the members of the board, he said.
“What do you want to do? Limit people from doing company business?” he asked. “You can’t go overboard; you can’t stop doing business. You’ll hurt the company.”
SEC President Paul Bustamante said it was important for board members to attend conferences to keep abreast of issues that affect the co-op and to have representation with state and national associations.
Anaya said as the SEC’s representative to Tri-State Generation and Transmission Association, he’s updated on industry issues, such as clean coal and natural gas, that impact the budget.
While members aren’t allowed to speak at board meetings without prior approval, Bustamante read a letter from member-owner Doug May, of Socorro, expressing his disappointment with the board.
May wrote that the members voted for changes, but so far the board hadn’t taken any steps to follow them, like advertising meetings and allowing for public comment. May wrote that the board’s lack of transparency caused there to be distrust between the member-owners and SEC management that was negatively affecting the community.
“We’re a community. We need to renew that spirit,” he wrote.
While reading the letter, Bustamante commented, “There’s a fine line about transparency. It’s coming to a point somebody is going to have to draw a line.”
Bustamante said, as per one of the resolutions that passed two weeks ago, there would be an agenda item that allowed for public comment at its May meeting.
In Other Business
• The board approved a resolution stating that the board was aware and consented to attorney Francish also representing the Continental Divide Electric Cooperative.
Francish said in the rare instance a conflict of interest presented itself, he would step aside and represent neither on the issue.
• The board approved and signed a series of resolutions that allows the SEC to receive a $24 million loan from the USDA Rural Development.
Larry McGraw of the USDA said distributing the loans to rural electric cooperatives was routine, occurring every four years.
During discussion of the loan, SEC General Manager Polo Pineda said it’s likely there will be a rate increase in coming months.
“People think reduction of the board will make rates lower, that’s false,” he said.
Pineda said rates haven’t increased in about four years, but one might be coming in June after Tri-State, which distributes power to co-ops, announces its rates.
• The board approved a $300 donation to a youth football team based in Belen.
In a letter from the team’s coach, James Lucero pointed out that he and most of the kids that play on the team are from the northern part of the SEC’s service area. He was requesting a $650 donation to help pay for equipment and other expenses.
The request prompted some discussion about another resolution approved by the membership that prevented the SEC from making donations to adult or civic organizations.
As a result, Pineda said the SEC would have to end its sponsorship of the Socorro Open golf tournament and could prevent it from contributing to such groups as Friends of the Bosque del Apache.
Although the resolution was member-sponsored, it was introduced by trustee Jack Bruton at the District 5 meeting last October.
Bruton explained why he called for the change in the bylaw.
“The reason I did it was because there were two organizations that got $7,000. To me, it looked like we were buying votes with co-op money and I wanted to put a stop to that,” he said.
• The board appointed Ulibarri the SEC’s delegate for the New Mexico Rural Electric Cooperative annual meeting and Leo Cordova as alternate.
Contact T.S. Last