96^th ANNUAL CONFERENCE

MONTANA ASSOCIATION OF COUNTIES

Billings, Montana

MONDAY, SEPTEMBER 26

GENERAL SESSION

Bill Kennedy, MACo President, Yellowstone County

The 96^th Annual Conference of the Montana Association of Counties opened at 8:30 am.

President Bill Kennedy introduced his fellow Yellowstone County Commissioners John Ostlund and Jim Reno,

the Commission Assistant Paulette Turner, and the head table:

Jean Curtiss, Urban Counties Representative, Missoula County

Carol Brooker, Past President, Sanders County

Doug Kaercher, President-Elect, Hill County

Colleen Landkammer, President-Elect, National Association of Counties

Paddy Trusler, Co-Parliamentarian, Lake County

John Prinkki, Second Vice President and Co-Parliamentarian, Carbon County.

Boy Scout Troup #10 presented the Colors and led the Pledge of Allegiance.

Kristie Ostlund sang the National Anthem.

Deacon Bill Daem, St. Pius Parish in Billings, conducted the Invocation.

“…We ask your blessing upon the county commissioners and other elected officials gathered here.

Be present always. Bring your peace. Bring your justice so that all that we do and all that we are

concerned with is for the love and care of those that you put under the charge of commissioners

here and all across our land.”

John Ostlund, Yellowstone County, and Chuck Tooley, Mayor of Billings and President of Montana

League of Cities and Towns, welcomed the delegates.

“As mayor of the city of Billings, I encourage you to take advantage of the opportunities

in Montana’s largest city. I am also pleased to greet you as President of Montana League of

Cities and Towns. We labor in the same vineyards, you and I. We work for our people using

our best judgment to make decisions that will benefit our communities for years to come.

There are people in our society who criticize government in every level. They haven’t

taken the time to understand the value that government brings to our lives. They never

think about the essential services you provide and the fact that we could not have livable

communities without those services. I commend all of you for having chosen the path of

service, meeting the needs of your citizens, day in and day out, whether at home or working

with the Legislature. We all learn and re-learn that “politics is the art of the possible.”

It is a fact that you don’t get thanked nearly enough for the work that you do to sustain

and improve your communities. So on behalf of people who should say it, but don’t,

“Thank you.” Thank you for your dedication and for the work you do to make life more livable.

I encourage you to be positive and cheerful, be glad for the opportunity to serve your fellow

citizens and accept with grace that you will never be thanked the way that you should be

thanked. We are deeply grateful that we are in America, in this magnificent corner of the

finest nation on earth and we are glad you are here in Billings.”

President Kennedy recognized dignitaries from Montana Congressional offices and from

Montana State Departments.

President Kennedy announced that he and Commissioners Todd Devlin and Bill Leach

from Prairie County would appear on the Dave Birch show to discuss P.I.L.T.

He reminded the delegates that all agendas for the State Highway Commission reserve

10:00 to 10:30 am in every meeting for local elected officials to speak.

President Kennedy showed a slide presentation on the hurricane disaster and cleanup

in Louisiana / Mississippi and described NACo’s process for county and individual donations.

COLLEEN LANDKAMMER, NACo PRESIDENT-ELECT

Blue Earth County, Minnesota

The text of her comments is on page 45 of the Presentations Section of these minutes.

ROLL CALL

Bill Nyby, MACo Fiscal Officer, Sheridan County

After an everlasting roll-call consisting of individual county descriptions,

Nyby announced quorum present to conduct business.

MEMORIAL RESOLUTION

James Reno, Host, Yellowstone County

RESOLUTION IN MEMORIAM

WHEREAS, the members of the Montana Association of Counties,

with great sorrow and a deep sense of loss, wish to remember and honor

those members who have been taken by death since the last annual

convention of our Association; and

WHEREAS, each of these county commissioners has rendered

innumerable public services to his or her respective county, to the

State of Montana, and to the people thereof; and

WHEREAS, the absence of these persons is keenly felt as a great

personal loss to their families, friends and colleagues,

NOW, THEREFORE, BE IT RESOLVED by the Montana Association

of Counties in convention duly assembled in Billings, Montana, this

26th day of September 2005, that the Association does hereby pay tribute

to the memory of Commissioners

Marvin Cheek, Liberty County 1977-1983

Malcolm John McCrae, Rosebud County 1977-1987

Tom Hensley, Broadwater County 1977-1989; 1995-2001

Earl Knight, Powell County 1982-1994

Paul Beausoleil, Anaconda-Deer Lodge 1995-1996; 2001-2005

Dan Connors, Custer County 1995-2002

Joann Huffsmith, Granite County 2001-2005

and on behalf of its members and the citizens of the State of Montana,

does hereby express gratitude for their achievements and contributions to

the public good of their counties and to Montana.

CONFERENCES FOR 2006 and 2007

Bill Kennedy, President

Presentations on behalf of Cascade County (Best Western Heritage Inn) and

Lewis and Clark County were given to announce bids for the 2007 Conference.

Flathead County made its presentation on Tuesday morning.

ELECTION ADMINISTRATION

Vickie Zeier, Missoula County Clerk/Recorder and Treasurer

Duane Winslow, Yellowstone County Election Administrator

The text of their comments is on page 49 in the Presentations section of these minutes.

MONTANA BOARD OF INVESTMENTS

Louise Welsh, Bond Progam Officer, INTERCAP Loan Program

Coralie Sciuchetti, STIP Manager , Short Term Investment Pool (STIP)

Delrene Rasmussen, Assistant Investment Officer , Infrastructure Loans

The text of their session is on page 53 in the Presentations section of these minutes.

MONTANA STATE AUDITOR

John Morrison

The text of his message is on page 57 in the Presentations section of these minutes.

“OWNING EDEN”

Steve Pilcher, Executive Vice President, Montana Stockgrowers Association

Ron Aasheim, Conservation Education Administrator, Fish, Wildlife and Parks

The text of their subjects is on page 59 in the Presentations section of these minutes.

PRESENTATION OF RESOLUTIONS AND BY LAW AMENDMENTS

Mike Murray, Chair, Lewis and Clark County

The first proposed amendment is for an “associate” instead of an “assistant” director.

Hiring shall be by the executive committee and the executive director, with confirmation by the

Board of Directors. The second amendment is to allow a member county’s registered voting

delegate to vote by proxy at any meeting of the membership. The proxy must be in writing,

signed by the voting delegate, shall name the person to whom the proxy is delegated and

the subject for the vote(s). The proxy must be delivered to the President prior to voting

action being taken.

The Resolution is to support of the Mariah Hypersonic Wind Tunnel in Butte Silver-Bow

County at the Mike Mansfield Advanced Technology Center.

We have received one additional resolution. We will have to suspend rules with

2/3 of the voting members to allow it. The resolution is in opposition to returning

federal highway dollars to support hurricane relief efforts.

Bill Kennedy

There is a push nationally to open the highway bill to remove the earmarked projects

to help fund the crisis in the Gulf States. The concern is that if you open up the highway bill,

you are not going to take one or two projects out. You are going to see projects across the

state of Montana go away. We worked very hard over the last two years to pass a highway bill.

Most of the earmarked projects are safety projects. I ask that we pass this resolution today and

send it along to our congressional delegation to resist any push to reopen the highway bill.

A motion by Ted Coffman, Madison County, to suspend the rules and proceed with a discussion

on the resolution was seconded and passed. There was no discussion and the motion to adopt

the resolution was seconded and passed.

NOMINATING COMMITTEE REPORT

Bill Kennedy, President

The nominations are:

Past President – Bill Kennedy

President – Doug Kaercher

1^st Vice President – John Prinkki

2^nd Vice President – Cynthia Johnson

Mark Rehbein

Jean Curtiss

Fiscal Officer – Allan Underdal.

The nominations process remained open until the Wednesday General Session.

The MACo By-Laws state that there must be two candidates for the offices of Second Vice President

and Fiscal Officer. If there is only one nomination, then the rules must be suspended in order to accept

only one nomination OR another nomination can be made.

SECOND VICE PRESIDENT CANDIDATES

Cynthia Johnson, Pondera County

I’ve been a Pondera County commissioner since 01-01-01. (That’s easy for blonds to remember.)

I have great fellow commissioners in Pondera County. I’m excited and honored to be nominated from

my district. I believe that MACo is an organization that we all lean on heavily. It is the thing that links

us all together. It can help us do our jobs better and I appreciate everything that they have done for us.

You have great choices this year. I would really appreciate your support.

Mark Rehbein, Richland County

I’m commissioner in Richland County. I came into office in 1999. I’d like to thank the three districts

out east for showing confidence in me to nominate me for this position. I promise I will do

everything that I can do to empower counties to take care of their constituents at home, both financially

and legally, without someone stepping on our toes all the time and trying to cut us down. The best thing

you are going to like about me is that my speeches are real short.

Jean Curtiss, Missoula County

It’s an honor to be considered for MACo’s Second VP. MACo is a strong, well-respected

voice across Montana. This is important because county government is one section of government

that touches every citizen in some way. It’s important to continue serving counties with expert staff,

informative workshops, group insurance programs, legislative lobbying and networking opportunities.

Our commissioner certification program is a really great step. We must assume a stronger leadership

role in Montana and we need to look for partners who will work for change. For example, the

Economic Development Committee has worked with economic development organizations and the

State on policies and changes. We saw some of those in the last session. The Urban Counties are

beginning to work with the Smart Growth Coalition and others on growth issues. MACo needs to build

upon these successes. I’ve served as part of MACo’s leadership team for two years and ask your

support to continue as second VP. We need to look for new ways to do business, like conference

calls and Vision Net so that more people can be involved with less money going to travel.

We can work smarter.

FISCAL OFFICER CANDIDATE

Allan Underdal, Toole County

I’m from Toole County and I’ve been a commissioner since 1993. Here is a bit of useless

information: I’m 52 and was born in ‘52. I figure this was the only year I could ever say that.

I can count and that is one of the prerequisites of being Fiscal Officer. I was the Fiscal Officer

in 1999-2001 and I would like to be able to use my experience to do that again. I would like

thank Bill Nyby, who did excellent work on the hard job actually of getting our dues in line.

I am on the Finance and Governmental Affairs for NACo. I think it is a very important to be

involved in NACo. I also have been involved with the MACo Tax, Finance and Budget Committee

for several years. As Fiscal Officer, I would continue to do that. I ask for your support.

FISCAL REPORT

Bill Nyby, MACo Fiscal Officer, Sheridan County

On January 8, 2005, the MACo Board of Directors approved the FY06 budget.

The FY 06 MACo operational budget shows an overall decrease of 6.03% on the

expenditure side. Bear in mind that this is a non-legislative year, which usually has a

decrease in the budget. The operational budget figure stands at $989,153 compared to

$1,052,661 in fiscal year 2005, with total possible expenses of $1,389,813 compared to

$1,373,080. On the revenue side, the budget shows a 5.17% decrease in revenues due

in large part to the reduction of the MACo dues. In FY 2005, the membership agreed to a

25% increase in dues and .1% assessment of PILT funds to bolster funds mostly in

termination reserves. We accomplished these goals.

Fiscal Year 2006 is the first year for the new dues schedule based on using the

taxable valuable of each county coupled with a reduced assessment of .075 % of the

PILT funding statewide. The new dues structure will bring in $250,750 in dues revenue

and $12,433 in PILT assessment for a total of $263,183 compared to a previous total of

$228,592. Our estimated revenues are 42% collected and the expenses are at 21% spent.

Our dues are fully collected for this fiscal year.

The Fiscal Year 05 audit has been completed and we have received a favorable

opinion that the MACo financial position and statements have been presented fairly.

We have succeeded in fully funding our termination liabilities for accrued vacation and sick leave.

I would like to thank every county for their cooperation in fulfilling this goal. Without you, we

would not have made this happen.

EXECUTIVE DIRECTOR REPORT

Harold Blattie, MACo Executive Director

During the past legislative year we had a great deal of success. We couldn’t have had that success without a tremendous involvement on the part of the members, particularly the Executive Committee. Their leadership, along with a your participation, is what made our legislative session a great success.

MACo is one of the most respected organizations in Helena. Legislators look to us for not only advice, but also information. We serve as an extra research branch so that they have good information to make decisions.

You have a great staff in Helena. The work that your Association does for you happens because of your staff. When you see them, thank them because they are doing a great job for you.

I would like to present our budgeting process and how our money comes and goes. I hope to take this up to a point where we can look ahead.

First we have to take a look at our past or, as they say, we are condemned to repeat it. For you to make good decisions, you need to have good information. So, I present these slides:

First is our current budget and the revenues. We receive revenue from primarily three different sources: Association activities, activities of the Joint Powers Authority (Workers Compensation pool) and our Joint Powers Insurance Authority (property, casualty and liability pool).

Next are the major areas of revenue to the Association. Dues actually account for 25% of the total revenue that flows through the Association. The Joint Powers Insurance Authority is a very significant part at 41%. These services include Greg, who is the Marketing Manager, Jack doing the Personnel Services, and Ray and Emelia doing Risk Management (which is shared between the two pools).

The majority of the dues comes from the member dues that you pay; a small amount of dues is paid by affiliate members. We have the PILT assessment set out separately. The vast majority of MACo’s side of operations would continue to go on with or without the insurance pools.

Another significant source of revenue for the Association is conferences and meetings. We anticipated $47,000 in revenue for this conference that we are attending right now. The Midwinter Loss Control Conference in January and the other miscellaneous meetings that come and go are part of this.

The next major area is marketing and sales. The Directories, which all of you receive free as part of your membership, are sold at a rate of about 1,000 a year. This is a significant source of revenue for us. Some state agencies purchase 30-40 of them, so your names and contact information are pretty widely distributed. They are a wonderful source of information on how to contact you.

Nationwide Retirement Solutions chooses not to do national media advertising. They use the Associations like NACo and MACo for their marketing. The National Association of Counties receives a significant amount of revenue for the efforts to market the Nationwide Retirement Program, and in turn, the Montana Association of Counties receives revenue for their ads in our newsletter. That’s part of our agreement that we help them market the 457 Deferred Compensation Program for your employees.

In addition, we generated a little ($18) from US Communities. NACo has provided, through competitive bidding processes through different counties across the United States, the opportunity for you to piggyback on to large contracts to receive some very favorable pricing on a number of supplies, materials and services. In our agreement with NACo and US Communities, we receive a portion of the proceeds of your purchases. Right now there are four major bids available. This is an area that I hope your county would consider, with an understanding that your purchases are helping MACo to provide services and to keep dues down.

Now let’s look at some of the revenue that flows from the insurance pools into MACo. The insurance pools themselves do not have employees and don’t directly pay for administrative services, which are provided through MACo. We are all MACo employees, although the risk management positions are funded by an even split between the Workers’ Compensation Pool and the Property Casualty and Liability Pool. MACo pays half of the Executive Director and Finance Officer salaries and each of the two pools respectively pays a quarter.

MACo also provides investment administration for the insurance pools through the Finance Officer who handles all of the investments on a daily basis and keeps the cash flowing, just like a County Treasurer invests county money to provide interest income.

The rate of return on MACo money invested through QCI is better than an average return. I think our Association has been doing well and that is a service that MACo provides to the insurance pools. That is the $18,000 of income you see.

In the JPIA, the property and liability pool, the marketing budget of $137,000 includes Greg’s salary and other things like operating expenses.

Some past revenue sources have been one-time grants, such as the GIS/GPS road-mapping project. We also used to receive a fairly significant amount of revenue for the endorsement of Montana Joint Powers Trust health insurance pool that was administered by EBMS. We no longer receive that. We used to sell MACo newsletter subscriptions. Since we’ve gone to a completely electronic format, that’s not a source of revenue anymore, but that has been a huge cost savings in printing and postage. We used to have an agreement with Touch America to receive revenue for counties that were signed up for long distance service through the Touch America plan.

So, let’s look to the future. As we strive to find new sources of revenue, new enterprises, new activities and efforts, we hope to generate revenue to provide services to you and to maintain dues at the current levels. 1) I think we could have a source of funding through an increase of sponsorships that we have not tapped. 2) There are new products that our Association could consider endorsing and, in exchange, receive portions of the sales of those products or services, just like we do with the US Communities Program and the Nationwide Retirement Program. I plan to propose to the Board of Directors Thursday that MACo share back to our counties a portion of the revenues that we receive through such marketing agreements. That might be a way for you to directly correlate the value of US Communities and the Nationwide programs. 3) You are some of the best and brightest people and you might have some new ideas that we could explore. I encourage you to let us know about your ideas for new enterprises. 4) We’ve never actively pursued grants for different projects and programs and that’s another area we could consider.

Now let’s take a look at where our money is going in the operational budget that does not include reserves. You need to understand that $425,000 includes portions of my salary, the associate or assistant director salary and the finance officer salary. This budget supports services that you receive from MACo. In this current budget year, we have an anticipated excess of revenue over expenditures of $22,000. In the case of the two insurance pools, the expenditures and revenues balance. All three pieces are so importantly tied together. The vast majority of the budget is associated with salaries and benefits at around 60%. 60% is typical for any association like ours. The next significant component of that is travel at 16% and that includes member travel.

There were transfers into reserves of $23,000 for terminations, with fully funded termination reserves of $93,417. A building reserve of $10,000 a year is set aside for when major repairs become necessary to our building. The total now is $68,105. We also have auto reserves of $12,000 so when the time comes to trade a vehicle, we have the cash in hand. The total now is $46,145. The Association doesn’t borrow money to buy vehicles, but we save money in advance. In the reserve accounts, $12,000 is associated with the WIR. It is held over from hosting the WIR Conference in Billings a few years ago and has been reserved by the Board of Directors to be used to bring another WIR Conference or NACo Conference to Montana at a later date. We are holding, in a custodial manner for Districts 1, 2 & 3 counties, a small fund that they will chip into for housing during the legislative session.

Here is a ten-year total revenue graph. These numbers are all directly out of the audits. You can see the ebbs and flows of total revenue. There is one spike that was associated with that GIS/GPS project.

In 2003 and 2004 the expenses exceeded the revenue and the prior two years before that were fairly balanced. With the changes in the dues structure, the income enables us to build those reserves. If you look back to 1998, you see a significant increase attributable to risk management and adding the risk management assistant.

Now, let’s look to the future. If we hadn’t had changes and staffing would have remained just the same as it was last year, and if this had also been a Legislative year, what would our budget have looked like? You can see that our expenses would have exceeded revenue had those particular things happened. So, in spite of having the dues increase, we still need to be very cautious and very conservative with our budgeting.

I hope to have passed along to you the importance of the insurance pools to MACo and that our insurance revenue and our insurance costs are even. We are not making money and we are not losing any money. However, if the insurance pools separated from MACo, it would cost all three entities more to operate. Right now the insurance pools have an Executive Director for each of them, each for a quarter of my salary. They each have an Assistant/Associate Director for a quarter of that salary. They each have a Fiscal Officer for a quarter of that salary. So, if they had to go out into the market and hire full time people to fill those positions, the costs would dramatically increase. If the pools were not part of MACo, we would have to have very significant increase in revenues to maintain the staff salaries. All three entities rely upon, are completely dependent upon and benefit from relationships with each other. None of the three can stand alone effectively. The pools are important to the Association and the Association is important to the respective pools.

This is your budget, your money. I would encourage you to be active, ask questions.

TUESDAY, SEPTEMBER 27

MACo COMMITTEE MEETINGS

Agriculture Committee

Kathy Bessette, Chair, Hill County

The Ag Committee had a great meeting. We didn’t have enough time however. We put several items on our priority list. Number one is the farm bill. We feel that it is very important that we who are involved in agriculture and county commissioners comment, because other people are speaking for us and that is not right. There may be a hearing in Montana. So, let’s all head to wherever it is because it is very important.

The fight against weeds is a very big fight. We feel that every county should form a weed district and should have a full time weed supervisor even if that means working with adjoining counties. Our weed supervisor always said that people are more concerned with forest fires. Fires are tragedies, but trees grow back. If weeds take over, nothing grows except weeds. We discussed contracting on private lands, not doing only roads, and forming a weed fund before approving subdivisions.

For transportation, the railroad shipping issue and the lines that are being taken out are very important.

We think mandatory country-of-origin labels are very important.

We are a headwaters state; we are shipping all our water away. HB 22 needs some work; we want it done right this time.

The drought conditions in Montana lead to our weather stations. We think they are valuable instruments in determining the state of drought conditions in Montana.

We want everyone to work toward value-added programs for our products.

A controversial issue is animal ID. I think it can work to protect Montana producers when we are shipping. Also it can help Montana with our efforts for a country-of-origin label. If they know that beef or wheat is from Montana, that’s a plus.

Finally, a major concern is the meth issue. I advise you to download that report from the NACo website, because it can be used as a tool in any of the work that you do in your county.

We want to meet with the Public Lands Committee in an all-day session because we have so many issues that are similar.

Economic Development Committee

Anita Varone, Chair, Lewis and Clark County

We meet earlier this year in Butte and brought a resolution in support of the Mariah Hypersonic Wind Tunnel. In Butte, we began our legislative discussions and came up with eight ideas that we want to discuss. By the end of the next meeting, we are going to have an idea what we are going to support and what we need to do.

Our next meeting will be in southeastern Montana in Hardin. We are going to cover several counties and to see what is available and to discuss opportunities we may have for legislation. We are going to be looking at Colstrip and the PPL power plant, Westmoreland Coal Mine, Decker coal and natural gas development, coal fire generator and the ethanol plant in Hardin.

This morning, we were fortunate to have Tony Preite, Director of The Department of Commerce, Evan Barrett, the Economic Development staff from the Governor’s office and Al Jones, the Regional Development Officer for the Department of Commerce. They stressed the importance of the Governor’s Office and the Department of Commerce working with MACo and the Economic Development Committee. They appreciated our involvement and how well we worked together during the last legislative session. There were two bills that they would like us to discuss when we meet next month in Hardin.

Al Jones wants to hold several one-day training sessions for commissioners and other associated staff on economic development. More and more commissioners understand that they play a key role in economic development and having the Department of Commerce want to work with us is something that we just don’t want to turn down.

Health and Human Services Committee

Bill Kennedy, Chair, Yellowstone County

Susie McIntyre spoke on the 2-1-1 phone line. We also talked about mental health legislation, crisis centers, prescription drug cards and the smoking ban. We will be working with the Montana Meth Project and NACo on the methamphetamine programs, mental health legislation for commitments and drop-in facilities and working with crisis centers. We would like to see prescription drug cards in all 56 counties. We are going to reinstate the quarterly meetings with the Governor’s Office, Department of Public Health and Human Services Director and the Indian Health Service. Our next meeting will be at the Governor’s Health Summit in December in Great Falls.

Information Technology Committee

Mark Rehbein, Chair, Richland County

The IT Montana Government Conference will be in December in Helena. Please get your IT people there if you could. It is important that counties share ideas so we are not always reinventing the wheel. The Department of Revenue is changing their property evaluations system and the counties will have to stay on top of that.

For counties that are having growth, there may be a comprehensive land management meeting. In FY 07 the grant money from the $.75 that they are collecting from all the transactions in the Clerk and Recorders Office may become available. Counties could use this for rural addressing for 911 help lines. Please forward a list of your county IT people and their contact information to rccomm@midrivers.com.

Finally, we discussed data backup and what to do with it. When you have a disaster like hurricane Katrina, which wipes out all your buildings, then you’ve lost everything. So we are looking at off-site locations and a continuance plan.

Justice and Public Safety Committee

Gary Fjelstad, Chair, Rosebud County

Ed Tinsley, Lewis & Clark County, reported on the Court Security Committee that is working on recommendations for the next session.

We also had some discussion on interoperability and the conversion to the digital radio world from the analog system. I think the federal legislation for conversion to digital is slated for 2013. As all that rolls along, there will be a lot more discussion about funding. There has been Homeland Security money available for some of that. As Ravalli County mentioned, this would work for conversion service, but it isn’t going to do much for public works or road departments, if you are trying to keep everybody so they can communicate with each other. So there is going to be some expense there.

If there are any other issues regarding justice and public safety, let one of the committee members know or if there are any Resolutions that you would like to see brought forward, we would like your input.

Land Use Planning and Development Committee

Paddy Trusler, Chair, Lake County

In the last legislative session, there were about 2000 bills. Over 200 of those had to do with land use issues. That points to where Montana is going, so we have to become more proactive instead of reactive in our legislating. In the past we had a clearinghouse for information called Community Technical Assistant Program. That particular office was disbanded to save money. We think that that has proved to be a bad judgment, so we will ask the administration to put that program back.

Since 1973 the Subdivision and Platting Act has actually been on the books. We’re now engaged in an interim committee on land use through SJR11. I represent MACo on that.

We also discussed that there seems to be a lack of shared information for land use decisions. We continue to reinvent the wheel. Our Committee priority is to establish a better network, whether that would be electronically or through additional meetings.

Public Lands Committee

Carl Seilstad, Vice Chair, Fergus County

We had a presentation from Mark Walsh from the Western Counties Alliance. He intends to send letters to all the counties requesting support for full funding of PILT. We suggest that WIR and Western Counties Alliance work together on this.

We would like to work with the Public Lands Committee, the Hard Rock Mining counties and possibly the Forest Service to meet with the Governor to talk about natural resources issues facing counties.

The BLM has varied programs between one county and another county on how they are spraying their weeds. We, in Fergus County, are meeting with the BLM to have input on what all the counties are doing. Some counties are contracting. In other counties, the BLM gives a certain amount of chemical to the lessee, who is responsible for spraying.

Lincoln County has a letter to congressmen for the Endangered Species Act reform. Copies of the letter are available.

Resolutions

Mike Murray, Chair, Lewis and Clark County

We discussed the Mariah Hypersonic Wind Tunnel Resolution. We had “hypersonic” explained as “a lot of wind in a small space.” The project would result in 5-25 jobs initially in Butte, with additional jobs from Helena to Great Falls and would involve the University system in Missoula, Bozeman and Montana Tech. The purpose of the Resolution is to demonstrate there is broad-based support in Montana for undertaking this pilot project. The recommendation from the Resolutions Committee is to pass.

The Resolutions Committee also discussed developing a work description for our particular committee. We see our role essentially as handling resolutions and working to get sponsors for legislation. Our committee is not committed to being the primary lobbyists. We see that as the role for MACo leadership.

We would welcome additional members on the Resolutions Committee. Next year is our busy year being the legislative year. This morning if you saw us dropping in at your Committee, it was to identify what resolutions might be coming forward. There is a wolf resolution being proposed that will go directly to our Congressional delegation.

Tax, Finance and Budget Committee

Bill Nyby, Chair, Sheridan County

We reviewed the Fiscal Year 2006 budget as it stands right now and discussed the Associate Director position as it pertains to the budget. There were no resolutions in the Committee at this time and our major priority still remains to be fiscally responsible with the Association’s budget.

Randy Wilke, Assistant Director of the Department of Revenue, reviewed the 2005 legislation that affects the Department of Revenue and the people of Montana. I have copies of this summary. Another valuable resource is the Biennial Report (2002-2004) that is at the Department of Revenue exhibit booth.

I would like to thank the MACo membership for allowing me the opportunity to serve as your Fiscal Officer the past two years.

Transportation Committee

John Ostlund, Chair, Yellowstone County

The Transportation Committee talked about open-cut mining permits. We will have a workshop with Steve Welch at 1:30. I certainly hope that many of you will join us so that we can decide how to resolve the issues from HB 361. We will talk about allocation fees, annual fees and reclamation.

A few months back, we met with several contractors, the Montana Contractor’s Association and their Executive Director, Cary Hegreberg. They seem to believe that once their trucks have legally permitted loads, they would prefer to pass on repairing the county roads that are used in the federally funded projects. Gary Larson, from DOT, reminded us all that we need to review these haul roads with the State, possibly using a county permit system, so that they are reconstructed back to the same standard that they were before.

The tribes are going to do an inventory system of the roads on the reservations. There is a separate source of funding not associated with highway federal transportation dollars for reservation road construction. They are asking for county support to allow the reservation roads on county inventory systems. Some are maybe state secondary roads, county roads and just public roads. Then they can include it in their gas tax assessment, which is much like that gas tax assessment that we get. This will not affect any funding. There is some language in the mutual agreement that needs to be worked out. We set up a subcommittee to amend the agreements. The reservation counties largely support this project.

Liberty County asked if road stabilization projects qualify for maintenance under the secondary roads program. Gary Larson will ask the federal highways, and if they do qualify, the issue for the counties will be ways to divide the maintenance funds (the project vs district issue, for example).

Luncheon Speaker

BRIAN SCHWEITZER, GOVERNOR OF MONTANA

A text of his remarks is on page 61 in the Presentations Section of these minutes.

Wednesday, September 28

GENERAL SESSION

President Bill Kennedy, Yellowstone County, presiding

COWBOY HALL OF FAME

Boone Whitmer, Wolf Point, MT

The Montana Cowboy Hall of Fame was designated by the legislature.

You commissioners are the backbone of the state. I’m not here today to ask for any money from you, but I want you to be aware that we are setting up the Board of Directors and the Board of Trustees. We want to put together a statewide organization of Trustees. What we would like you to do is be the filter for those trustees, based on your MACo districts. We would like you to identify the people in your counties who support western heritage and values that we have, who would support the Cowboy Hall of Fame and who would help do fund raising for us. We would like to have about 20 trustees per district. When you get home, let us know the names of the people that you think would make good trustees.

I’ll be coming around to each individual county within the next year or so, because in the Cowboy Hall of Fame, each and every county has a story to tell. The Cowboy Hall of Fame is not exclusive to men; it is also women and Native Americans.

QUESTIONS:
John Prinkki, Carbon County: Why 20? That sounds like an awfully large board.

Whitmer: The trustees will meet in their own respective districts. The trustees would help put a biography together and verify that person when the name is passed on to the Board of Directors. All the trustees across the state of Montana will vote on that individual. We want bona-fide people.

COMMENTS FROM U.S. SENATOR MAX BAUCUS (video tape)

U.S. SENATOR CONRAD BURNS (video tape)

ON BEHALF OF U.S. REPRESENTATIVE DENNIS REHBERG, Randy Vogel

The texts of remarks are on pages 65-67 in the Presentations Section of these minutes.

MONTANA DEPARTMENT OF REVENUE

Dan Bucks, Director

The text of his remarks is on page 69 in the Presentations Section of these minutes.

ROLL CALL

Bill Nyby, MACo Fiscal Officer, Sheridan County

At the call of the roll, quorum was present to conduct business.

RESOLUTION OF APPRECIATION

Douglas Kaercher, MACo First Vice President

RESOLUTION OF APPRECIATION

WHEREAS, the 2005 Annual Conference of the Montana Association of Counties is the 96th such meeting; and

WHEREAS, attendance of member counties marks its success; and

WHEREAS, the fine facilities in Billings and Yellowstone County made us feel welcome;

NOW, THEREFORE, BE IT RESOLVED that the 96th Annual Conference of the Montana Association of Counties express its sincere appreciation for the sponsorship of this convention to the Yellowstone County Commissioners, spouses and staffs:

John and Kristie Ostlund

Bill and Mary Kennedy

Jim and Peggy Reno

The seconded motion to accept the resolution was passed on voice vote.

RESOLUTIONS

Mike Murray, Chair, Resolutions Committee

Resolution in Opposition to Returning Federal Highway Dollars

In previous action during Convention general session on Monday, a motion to suspend the rules to allow this late resolution was passed. The motion to accept the resolution was seconded and passed.

Resolution 2005-01 Resolution in Support of the Mariah Hypersonic Wind Tunnel

The seconded motion to pass the resolution was passed by voice vote.

BY-LAWS AMENDMENT

Article V EXECUTIVE DIRECTOR

Section 1. DUTIES AND RESPONSIBILITIES

The Executive Director shall perform such duties as are assigned by the Board of Directors for implementing Association policy, and shall be responsible to the Board.  The Executive Director shall supervise the Association office and staff. The Board of Directors shall be responsible for an annual evaluation of the Executive Director

The Executive Director shall compile, publish and maintain a Staff Policy and Procedures Manual, which shall be reviewed annually by the Board of Directors.  The Staff Policies and Procedures Manual shall include a detailed job description for the Executive Director and such other staff positions as may be created.

The Executive Director shall be responsible for the hiring and termination of staff personnel consistent with the Staff Policies and Procedures Manual.

The hiring of an Assistant Associate Director shall be by the Executive Committee and by the Executive Director requires the concurrence of the Executive Committee and with confirmation by the Board of Directors.

Elaine Mann, Broadwater County

Does the Associate Director’s job description included experience in growth issues, subdivisions and roads, etc.? We request that the Associate Director have either a background or training to help us with our growth issues. We really do need the help.

Harold Blattie: That wouldn’t be a part of the By-Laws. That is part of the Personnel Policy. The By-Laws require that the Executive Director submit the “Personnel Polices & Procedures Manual” for approval at our Annual Conference. It will be presented at the Board meeting tomorrow morning. The job description for each employee is a part of that document. You are asking to have a change in that particular document. It isn’t germane to the By-Law amendment, but is something that would be carried to the Board of Directors.

Carl Seilstad, Fergus County

There has been some question as to why “assistant” was scratched out and “associate” put in. Is this going to be an equal position or is this position still under our Executive Director and what are the roles and responsibilities of the Associate Director?

Bill Kennedy: We expect our Associate Director to be at the Legislature, to take the responsibility on different functions of the Association, to answer questions from you and make decisions. We were asking for more than what the Assistant Director did. We looked at how we might put together a position that would work under the Executive Director, but with the responsibilities that have evolved from the Assistant Director. So we have one Executive Director making the overall decisions and the Associate Director working for the Executive Director, but being able to take the responsibilities that the Executive Director deems important for the Association.

Carl Seilstad

You have answered that the Executive Director will still manage the Association, but will the Executive Director define the duties for the Associate?

Kennedy: The Executive Director will define the duties. Some of the duties we have taken from the Assistant position and had other staff members perform, and added other duties. The position of Assistant Director was actually outdated and we wanted to address the responsibilities.

The seconded motion to approve the By-Law amendment passed.

BY-LAWS AMENDMENT

ARTICLE II MEMBERSHIP

Section 2. VOTING

Each member county, pursuant to Section 1, has one vote. The Board of County Commissioners shall appoint one county delegate and one alternate to have the authority to vote for that member county at membership meetings of the Association. The voting delegate and alternate must be elected county officials. A member county’s registered voting delegate may vote by proxy at any meeting of the membership. The proxy must be in writing and signed by the voting delegate or alternate and shall name the person to whom the proxy is delegated and the subject for the vote(s). The proxy must be delivered to the President prior to voting action being taken.

The seconded motion to approve the amendment passed with no discussion.

WORKFORCE INVESTMENT

Letter to Request Liaison Position

Doug Kaercher, Hill County, MACo First Vice President

There have been several meetings to try to define the commissioners’ stand on the process with the Governor’s statewide Workforce Investment Board. This letter to the Governor outlines what we feel is important to this Association.

MJTP has paid for travel for one commissioner to go to NACo Conferences.

Since 1990 county commissioners have been in control through our governance of that Board. The governance part of this could possibly go away, but we feel that we need to be educated on workforce issues.

We ask if you agree with this proposal to go to the Governor, so that commissioners can stay in touch with workforce issues.

Bill Kennedy

In other states, technical assistance dollars were offered as those states moved to one statewide Workforce Investment Board. If the technical assistance funding came to the Association, we could hire staff to go to District meetings to work with the commissioners, to pay for commissioner travel and to have a say at the state Workforce Investment Board. Currently we have two county commissioners on the Workforce Board (John Prinkki, Carbon County and Mike DesRosier, Glacier County) and a third Commissioner who represents the private sector (Julie Jordan, Garfield County).

The real concern is using the MACo Districts to bring commissioners together to talk about the workforce development. An outside entity has paid to reimburse the counties for the travel so the commissioners were involved. Without that, you would have to go on your own dime. We just don’t have the funding in the Association, so this proposal is asking the Governor to provide the technical assistant dollars for another person at the Association.

We are going to fill an Associate Director position. We already have Harold running five different directions and answering each of your phone calls when you call. We have a staff that is maxed out on getting everything done from legal questions to a little bit of everything. We do not have a position that is going to be able to take over one more thing. We were always dependent on another agency to do this for us. We would like to send this letter, so we bring it to you today.

Betty Aye, Powder River County

Why are there NACo costs in there twice?

Kaercher: The first cost for $10,000 is for travel to NACo for the staff person. It is very important that they travel to those Workforce meetings that NACo holds. There are actually three of them--the Legislative Conference in March, the Annual Convention in July and Workforce Development in November. The second cost is for a commissioner to go, because it is important that commissioners have a voice at those NACo meetings.

Joan Stahl, Rosebud County

Is this person basically just going to go to meetings and then go to D.C. (along with Carol Brooker, who is on the national Workforce Investment Board)? Are they going to hang around the Department of Labor?

Kennedy: We have an Economic Development Committee that has been very, very active, the Montana Economic Development Association and meetings with the Department of Labor and to provide technical assistant and education out to each of the counties. It is a full-time position.

Carl Seilstad, Fergus County

Are we asking for a three-year contract on this or are we going to try to renew this year to year? It seems to me like we would want to put some wording in here that this should be good for three years or so. I move to amend the motion to put language in here for a longer-term contract.

The motion to amend was seconded and passed.

Elaine Allestad, Sweet Grass County

If you are asking the Governor for this funding, wouldn’t that have to correlate with the biennium? If you request a contract for three years, the funding would be different.

Kennedy: The funding is the annual funding that comes through the US Department of Labor that has been allocated year after year.

John Prinkki, Carbon County

When you send the letter to Governor Brian Schweitzer, copy the Commissioner of the Department of Labor, Keith Kelly, and the SWIB Chairman Dan Miles.

The seconded motion to submit the amended / corrected letter passed.

ELECTION OF OFFICERS

PARLIAMENTARY REVIEW

Paddy Trusler, Co-Parliamentarian, Lake County

There is one vote per county that is present. You can caucus, but there is only one vote per county.

The proxy resolution did not go into effect until we just adopted it. So if there is a proxy from anyone who was in attendance before the vote, it cannot be used

There are three candidates running for 2^nd Vice President. Our By-Laws state, “The election of officers shall occur at the annual conference and be governed by the rule of the majority--50% plus one of the entire votes cast.” If one candidate in the first balloting does not receive 50% of the vote, the low vote getter would be eliminated and the other two would then go on a run-off so as to attain the 50% plus one vote.

Elected by unanimous vote are:

Past President: Bill Kennedy, Yellowstone County

President: Douglas Kaercher, Hill County

First Vice President: John Prinkki, Madison County

The Urban Counties elected Greg Chilcott, Ravalli County, as Urban Representative.

SECOND VICE PRESIDENT CANDIDATES:

Jean Curtiss, Missoula County

I bring the experience of serving on this Board for a couple of years and the experience of being in leadership positions in other organizations. I would appreciate your vote.

Cynthia Johnson, Pondera County

I sent everybody a letter for my candidacy and later I thought about it. Do you realize how many commissioners there are named John? I wrote eight ‘Dear John’ letters in one day.

I’ve been a Commissioner in Pondera County since 2001. I’ve been a licensed nursing home administrator for the last 20 years and many years ago I also served as the Executive Director of the Montana Association of Activity Professionals that work with long-term Care. I have spent a couple of years in the insurance industry. I served on the MACo Ag Committee and I presently serve on the Economic Development Committee. I’m the Secretary of the Reservation Counties Association and I serve on the Board of Oil and Gas Counties. Locally I served on the Hospital Board, the nine-county Chemical Dependency Counseling Board, and the three-county Refuse District Board. Currently, I farm for a living. I serve as a Port Authority Commissioner for our recently developed Port Authority and I am on a community regional development board and the eleven-county Golden Triangle Mental Health Board of Directors and the North Central Montana RC&D. At the ripe old age of 3 or 4, I didn’t expect to be the primary spokesman for a body politic, whatever that means. Sitting out in the audience is the result of a plan that is bigger than any one of us. Any one of you can do this job. I am honored to be nominated by you. My fellow nominees would make great leaders. I would appreciate your support.

Mark Rehbein, Richland County

Once again I thank my member districts from the east for nominating me for this position. It is an honor. This was the second year that they nominated me. I did decline the nomination last year, because I didn’t feel it was prudent to run for a position I had no guarantee of filling. But since then, I have been re-elected, so, I am here for the long haul. I will do my best to make this organization work as a unit for the strength of all of us. I ask for your vote and I would hope, if I get this position, that I can make it to each of your courthouses.

For Second Vice President, Cynthia Johnson was unanimously elected on the first ballot.

PARLIAMENTARY REVIEW

Paddy Trusler, Co-parliamentarian, Lake County

The By-Laws clearly state there will be at least two people who vie for Second Vice President and Fiscal Officer. The President will accept nominations from the floor. If no nominations are received, we will have to suspend the rules to allow the election of the single candidate.

We do have the three cities vying for the 2007 location. It is an election. Unless one city wins by 50%, there will be a second vote.

FISCAL OFFICER CANDIDATES

Allan Underdal, Toole County, was the one nomination.

Mike Murray, Lewis and Clark County, was nominated from the floor.

Mike Murray, Lewis and Clark County

Fellow County Commissioners, I would ask you to vote for Allan. There is a reason my wife is the bookkeeper for our business and I am not.

Allan Underdal was elected as MACo Fiscal Officer.

2007 CONFERENCE LOCATION

Joe Skinner spoke on behalf of Cascade County; Gary Hall spoke on behalf of Flathead County; Ed Tinsley spoke on behalf of Lewis and Clark County.

Cascade County, City of Great Falls, was selected by vote.

The General Session was adjourned.

JOINT SESSION

MACo JOINT POWERS INSURANCE AUTHORITY

PROPERTY AND CASUALTY TRUST

MACo JOINT POWERS AUTHORITY

WORKERS’ COMPENSATON TRUST

Monday, September 26, 2005

Billings, Montana

Harold Blattie conducted roll call. Quorum was present for both JPA and JPIA.

NOMINATIONS TO BOARDS OF TRUSTEES

JPA Board of Trustees consists of the MACo Executive Committee, providing all are members of JPA. The current Executive Committee consists of JPA members, so no nominations are necessary.

JPIA Board of Trustees

Mike Murray, JPIA Chair

Gary Fjelstad, Rosebud County, had been appointed to finish the final year of a 2002-2005 term previously held by Vern Petersen, who was not re-elected to the Fergus County Commission in 2004. This position is now open for nominations.

Nominations from the floor included:

Joe Christiaens, Pondera County

Paddy Trusler, Lake County

Carl Seilstad, Fergus County

Garth Haugland, Beaverhead County

Nominations remained open until the final JPIA session on Wednesday.

TRANSITION TRUST ADMINISTRATOR

Gordon Morris

Since July 1, I’ve been devoting my time to achieving a seamless transition for bringing claims administration in-house. I want to thank Larry Zanto, Keith Stapley and Emelia McEwen, who have been working to make sure that we touch every aspect from our current third party administrator to in-house administration. The current staff will become Trust employees as opposed to MACo employees effective January 1. We will be switching services from GenSource, which is our current claims software program, to Riskmaster. We are cooperating with the Montana Municipal Insurance Authority (MMIA) for housing our claims activity reports on their computer system. That means that rather than having to put our claims administration program on Riskmaster’s system in Scottsdale, Arizona, we’ll have it on MMIA’s program right here in Helena. They will administer the entire computer operation for us. For that, we’ll be paying a relatively nominal fee. Other services that have to be absorbed are utilities, lights, electricity, telephone, postage, etc. These will become the Trusts' joint responsibility effective January 1.

INSURANCE TRUST BUILDING PROPOSAL

Mike Murray, John Prinkki and Harold Blattie

Murray: John and I are going to go through some points on why we believe the two insurance trusts should build another building alongside of the existing MACo building. The first point is that bringing claims in-house means having five claims personnel on staff, continuing them in the building where they are now located (and paying rent) or bringing them into our building and collect the rent ourselves. We could use the rent we’re now paying to make payments for the new structure.

Prinkki: In the September newsletter was an open letter to the member counties of the Workers Compensation Trust. It explains why this is a good thing to do. This needs to be based on a good business decision. Bringing the five claims personnel into the staff, we won’t have to pay rent for them and can put the money to help pay off the building. Also we would be able to bring in our legal services staff. There is a scale of efficiency in having the claims administration and the legal staff that helps to review the claims in the same building. Most of the conversations that they have need to be face to face not over the phone. So, you would have that efficiency by having them in the same building.

Murray: The building is proposed to provide rental space with an estimated revenue of $35,000 per year.

Prinkki: The claims personnel need to be readily accessible to Risk Management. So having them in an adjoining building, instead of having them three or four miles away, is another way of being more efficient.

Murray: Accountability for the administration and claims will be enhanced with direct management oversight.

Prinkki: The letter that was in the MACo newsletter contained a cost analysis of the building. The building projected cost is about $860,000. Cost increases, since the quoted price, is probably at about 15%. With the architectural services and the building fixtures, the total estimated cost of the building is just under $1.2 million.

Right now we are currently renting office space at $30,000 a year, with additional annual parking fees. We would gain rental income from the legal services that would move there and from other additional office rental. For a short period of time, available space to rent to another entity would generate approximately $60,000 a year. So the total realized gains on an annual basis could be $90,000.

The investment portfolios for the JPA and the JPIA could cover these expenses without having to borrow any money. For the most part what we are doing is changing our assets from portfolio investments to property. And that property will accrue value, which could be close to $60,000 a year. Even if you don’t think of the building as becoming more valuable as time goes on, there is still a gain in value to the Trusts of about $100,000 a year. So from that standpoint, it just seems to make good business sense.

We are asking the members of the Trust if they see it as a good business decision and whether we should move forward.

Murray: Harold has asked Tom Swindle, our CPA and Auditor, to prepare a document for your perusal, with the proposed building and without the proposed building.

Blattie: In the Joint Powers Insurance Authority statement of financial position as of June 30^th, the left column is without the proposed building. Those are the for-real, actual audited numbers for the Joint Powers Insurance Authority as of June 30, 2004.

The $5.8 million is currently in long-term investments. Had the building been in play in this particular audit and statement of financial position, it would have looked like the right-hand column. That’s the side with the proposed building. What you see is an increase of $600,000 in the property and equipment section of the assets and a reduction of $600,000 in the investments. At the bottom, the net assets of the Joint Powers Insurance Authority remain unchanged. It’s just a different way of using the assets of the pool. The other side is the Workers Compensation pool. It’s the same thing. It demonstrates a conversion from cash to a hard asset--a building, a piece of property.

QUESTIONS AND ANSWERS

Where does the $600,000 come from? I heard the number of $800,000 for the building.

Blattie: The building costs is $800,000; then the added equipment to make it complete and functional raises the cost to about $1.2 million total, with $600,000 to each of the two pools.

What is the rent?

Murray: I believe it is $35,000 a year.

Joan Stahl, Rosebud County

1) When do we move in-house?

Murray: We move in-house Jan 1, wherever the house is.

2) What are we voting on?

Murray: Whether to allow the two Boards to go ahead with the construction of the building which would be ready sometime in late spring.

Prinkki: What we are asking is that you give permission to the Board. We think a decision of this size behooves us to ask our membership before we just unilaterally make a decision to change the nature of our assets. You can look at this as our investment portfolio and you are turning hard cash or CDs into property investment.

Nancy Espy, Powder River County

1) If we have room for people to come in-house now, why do we need a building?

Murray: We don’t have room at the moment.

Blattie: Not without sacrificing the conference room.

Murray: If we give up the conference room, we lose the rent that we generate from it. It is a revenue-producing item within our existing building.

Prinkki: That’s where the full Board of Directors meets.

2) Have we looked at the projections on material costs rising everyday?

Are these projections still accurate?

Murray: That’s why we want you to vote on Wednesday. I believe there is an inflation factor figured in since this was originally discussed last May.

Prinkki: You all know that building supplies have gone up. Sheet rock, plywood, 2 x 4’s, almost all of your building materials have almost doubled. Yes, it’s going to be more expensive.

Ken Evans, Chouteau County

Are we going to be in a situation where it is going to affect our bond market?

Greg Jackson: As far a property rates are concerned this last year, we saw a 30% reduction in the property rates for our reinsurance. Please understand that on the liability side we don’t have any reinsurance in place. We just have the bond in place. I would suspect that the result of the increase of the amount of insurance that is being paid out now in the excess markets, we could probably take a look at an increase in our property rates of the FY06-07 year. But I don’t anticipate that it will be large, because we are not a big exposure out there and our brokers have done a pretty good job of getting us reasonable rates. This last year we had 30% (After 9/11 we were averaging about 15-20% for 3 years.) But we could probably expect an increase in the property rate. On the liability side of things, that all depends on the audit for the last five years.

Jim O’Hara, Chouteau County

Would we have an increase in reinsurance?

Jackson: Yes, anywhere from a 10-15% increase on the reinsurance on the liability side of things. But since we have the bond there, there is no change on the liability side.

Carl Seilstad, Fergus County

1) Who will move into the MACo building?

Murray: It’s my understanding that Keith and that staff will move in and it’s also my understanding that our legal counsel, Norm Grosfield, is willing to take office space with us for his law firm.

Kennedy: Ray and Greg will stay in the current building. We have to remember that the Trusts also own a portion of the building that we have now.

2) Those offices aren’t paying rent that goes into the MACo funds?

Blattie: They own part of that building.

Kennedy: They pay part of the utilities.

3) If we move them in, will they sell their share of the old building?

Blattie: Nothing will change under the existing roof of the MACo building. The new staff would go into the building, as would Norm’s Law Firm, and there would be additional space to rent to generate revenue. But our existing operation would remain unchanged. The staff would stay exactly where they are.

Chuck Egan, Stillwater County

1) Will the new building be the same size as the one we have?

Gordon Morris: Yes, approximately 6,000 square feet.

Allan Underdal, Toole County

Is this building going to be a stand-alone building or is it going to adjoin the other one?

Murray: It will be a stand alone in close proximity to the other.

Bill Kennedy, Yellowstone County

Is the basement of the new building going to be conference or will it be rented to offices?

Murray: Rented to offices.

Morris: With all the governmental services out at the airport, I think that we have an excellent opportunity to rent that to people like the Forest Service and the Immigration Service and anybody else who is already out there.

Murray: Part of the space of the basement is needed to store claims records.

Joan Stahl, Rosebud County

1) Has the Board discussed keeping the office space we have for a year? Have there been any projections or discussions about slowing this down a bit?

Murray: Absolutely

2) And the decision of the Board was to go forward with the building?

Murray: Our preference is to go forward, but to bring it before the full insurance membership and let you guide us.

Kennedy: We are looking for some guidance as to whether you want to go forward with the building or not. It’s been proposed that we have buildings that are similar; it’s been proposed that we have two buildings attached by a catwalk. If there is a need for something that you foresee, we could include that. If it goes forward, you have an asset into the future. If there is expansion of MACo services, we would either rent a space somewhere in town or use the new building.

Ted Coffman, Madison County

The in-house thing does not mean moving Keith and his staff into a building. It is making them employees of the Trusts and renting space for them downtown until there is a new building built. The other point is that it would be the two Trusts that would pay for the building. It wouldn’t be MACo in general. It would be the two Trusts and it would be like a real estate investment, which is appreciating perhaps faster than the securities.

Ken Evans, Chouteau County

I believe that if we go ahead with this new building we should build it big enough that we can rent out space in it, so if there is future growth of MACo down the road we can utilize that instead of having to move some place else.

Prinkki: This proposal does do that Ken. That $36,000 income built into this proposal includes renting out that space until the time when we need it ourselves.

Mark Rehbein, Richland County

1) Do we own the property that the building is on now?

Murray: No, we have a 99-year lease.

2) Can you secure that lease on the additional property?

Murray: A 40 year lease

Kennedy: Harold, is there an option after the 40-year lease?

Blattie: For a renewal, yes

John Konzen, Lincoln County

Is the mission of the insurance groups to generate revenue by competing with private office space in the communities? To build it and to build it for what you need it for, I can concur with. But to build it larger for rental income, I have a problem with.

Prinkki: The reason we are looking at a similar building is that the architecture and engineering is already done. So there is a savings to doing that. We don’t want to have to compete with private enterprise for leasing building space.

Bill Nyby, Sheridan County

I wish we had this information 6 months ago. I was one of the nay-sayers, opposing the building. But all we are really doing is shifting money from investments to a building that will appreciate in value. By looking at these numbers, I am going to change my mind and agree to this proposal. I was one of those who voted no and this opens my eyes. We are really not spending anything. It’s just a shift of investments from both the Trusts to build this building, which will appreciate in value.

Ken Evans, Chouteau County

How much has the building we are in appreciated already?

Morris: When we looked at the feasibility of the building to start with, we learned the appreciation rate in Helena was 9%. So if you use that figure with the original cost of $640,000 for last five years we’ve occupied that building, the current building is worth a little more that $900,000.

Blattie: Gordon reviewed the building cost. A different way of looking at that is to consider the building and improvements. Fully equipped, the building was around $750,000 in value, with each of the entities having 1/3 of it. Now contractors are telling us it will be about $1.2 million to build a similar building. We can make a simplistic jump that that $750,000 investment a few years ago is now worth over a million dollars.

Nancy Espy, Powder River County

I still have a problem if we believe that appreciation is going to continue forever. It doesn’t happen. We need to consider that when we are talking about a building on land we don’t own. I agree with the arguments we’ve had here today. They are very good. But I don’t think we should go in with such a rosy idea that that appreciation will continue forever. I guarantee you it won’t.

Bill Leach, Prairie County

Switching investments from capitol to real estate takes away the liquidity. Will we have to borrow money?

Prinkki: What is it going to do to our liquid assets? I think we are still relatively safe. We are looking at this building cost of $1.2 million. We are looking at 5% of the net assets of the Trusts to build the building. If I were gifted enough to be an investment counselor, I would say that was a relatively risk-free investment.

Larry Lekse, Musselshell County

1) Are you leasing the land now?

Murray: The land is on a 40-year lease.

2) Is the new building on the same land or would we be leasing additional land?

Murray: There would be additional property. It would be on one side or the other side of the building that we currently have. The land is leased from the Airport Authority for Lewis & Clark County and the City of Helena. Ultimately, the city and the county are the owners of the land. What is the lease we are paying now?

Morris: We pay $4,800 for the lease. Ron Mercer, the Airport Authority Manager, would recommend a slight increase per square foot from what we are currently paying and would attempt to coordinate the two agreements to be good for 40 years.

Murray: In order to lease the property, you have to be a governmental entity and MACo qualifies as a quasi-governmental entity to build structures on the land.

3) Is the lease renewable once or it is renewable forever?

Morris: It is renewable forever. In the agreement, we have the option to reopen the negotiations and extend the lease for a full 40-year term any time we chose.

Jim O’Hara, Chouteau County

A balance sheet is a wonderful thing, but it is only good for two things--borrowing money and liquidating. I’m not sure we plan on doing either. I would like to see this discussion on a cash flow basis rather than on a balance sheet.

No action was taken until the Wednesday annual meetings of the insurance pools.

WORKERS COMPENSATION ANNUAL REPORT

Ray Barnicoat

The annual report for the Workers Compensation Trust is a statement of activities and a change of assets during the years that the pool has been in operation. We are in the 20^th year of this program. That’s both good news and bad news. Looking at the changes of net assets shows that we had our bumps along the way, especially since 9/11 occurred. Excess insurance costs went up significantly. In 2001, we paid $47,640 for coverage and the current year, not completed yet, is showing $149,000. In may end up at $199,000. At 11:45 a.m. today, I renewed our excess insurance. I changed carriers to get the good rate and came in at $195,000. One thing I want to point out is that the numbers do not reflect the new rate increases that went into effect on July 1. That will accelerate our ability to build up our reserves.

However, when I look at some of the decisions that have come out of the courts in the nation, it leaves me with a lot of concern.

When I see what’s happening with some of the market trends, that leaves me with concern.

These also concern our regulators, the Department of Labor and Industry. For them, we have to meet certain benchmarks in terms of our ability to pay claims as they come due. This year the Department has implemented an administrative rule requiring all self-insurance pools to build a 25% positive equity over the next 5 years. So the rate increase that you had in March is partly attributable to our schedule to reach that objective. We will reach that requirement if we don’t have large increases in old case reserves.

Some of you don’t know the history of the pool, why we became a pool, where we’ve gone, where that path has taken us over the past 20 years. I would encourage you to read the brochures. If you have questions, feel free to ask me.

PROPERTY AND CASUALTY LIABILITY POOL

Greg Jackson

Currently we have 48 counties in our pool. The latest entry is Yellowstone County, which has a unique program with a $250,000 deductible. Our highest deductible prior to that time was $25,000. So that basically opens the door to underwrite higher deductibles up to that amount. We will be working with counties which have cash flow available for higher deductibles, allowing counties to become more self-insured. In addition to the 48 counties, we have about 180 special districts for a total of 230 entities in the program.

Currently, our un-audited net asset is $1.3 million. We have a total amount of cash, including the investments, of $12.6 million.

We have to make some adjustments in renewals because of some large claims we had. When we visited with you in January, February and March of this year, we did discuss some of those claims. We had a 20% increase in the liability loss claims, but correspondingly, we had a 30% reduction in our property rate.

We don’t know yet what the events happening in the world will do to reinsurance, but in the past, we haven’t been hit all that hard comparably. This next year, we will be updating you on the financial status of the pool and discussing some guidelines for the users of your facilities, such as proof of insurance. I intend to establish some guidelines for you to follow to best protect the county.

Overall we have a 64% loss ratio. As long as we can keep it at 80% or less we are OK. Some of these claims we are paying off are big ones, but our reserve has been adequate.

MACo JOINT POWERS AUTHORITY

WORKERS’ COMPENSATION TRUST

20^th ANNUAL MEETING

Wednesday, September 28, 2005

After roll call, Secretary Harold Blattie announced a quorum to be present.

The current Board of Trustees is: Bill Kennedy, Yellowstone County, Past President

Douglas Kaercher, Hill County, President

John Prinkki, Carbon County, First Vice President

Cynthia Johnson, Pondera County, Second V.P.

Allan Underal, Toole County, Fiscal Officer

Greg Chilcott, Ravalli County, Urban Counties

Bill Kennedy announced that there would be no election, because the Trustees will be the Executive Board.

No other business was proposed. The meeting was adjourned.

TRUSTS MEMBERSHIP DISCUSSION

PROPOSED INSURANCE TRUST BUILDING

MIKE MURRAY, JPIA CHAIR

The Boards of Directors for your insurance pools recommend that, if the market conditions are favorable, we award a contract to construct a building. That means that supplies haven’t gone up to the point where it is cost prohibitive and that supplies are available.

John Prinkki:

We would like to have some direction from the membership, because it is a big decision.

This is not an expenditure; it is a change in value of assets. We are simply taking money that is in CD investments and putting that into real property. It amounts to about 5% of the net value of both Trusts. It is not a great risk. It actually will generate revenue to the Trusts. In 8 to 10 years, that money would be back in cash assets because of cost savings of rent we pay now and the ability to rent space that isn’t used.

Gary Macdonald, Roosevelt County

I move that we support the Trustees in this decision and allow them to go ahead.

The motion was seconded.

Mike Murray: We have a motion and a second to support the Trustees to go ahead assuming conditions are favorable.

Alan Thompson, Ravalli County

Should it be a part of the existing building or should there be a walk way, etc.? I think a separate building, non-connected, is what I would rather see. I think there is a greater value there than in being connected and being one large office, if something in the future should be such that you need to divest yourself of that particular property.

John Prinkki: I think that the Board feels the same way. There are some legal issues because we would be leasing two separate pieces of airport property.

Suzanne Browning, Granite County

You were talking about assets. In the financial report, it is showing that net assets have dropped.

Greg Jackson: Yes, the most recent audit resulted in an increase the reserves for all years for JPIA from $5 million to $7 million simply because of claims activity in some large claims. As a result of that, we had a surplus the year before of about $2.3 million. Then we had the big claims. Then there was a 20% increase in your liability loss claims in order to hopefully bring that net asset situation from $673,000 back up to a reasonable amount. And now again we have a corresponding deduction of about 30% in property rates remember, so the overall average increase to the member counties was about 9% this year.

The motion to allow the Boards of Trustees to proceed was seconded and passed on a show of hands.

MACo JOINT POWERS INSURANCE AUTHORITY

PROPERTY AND CASUALTY LIABILITY TRUST

19^th ANNUAL MEETING

Wednesday, September 28, 2005

ELECTION OF BOARD OF TRUSTEES

The current Trustees are:

Carol Brooker (2004-2006) (fills balance of John Prinkki’s at large position, when he was elected to Executive Board.)

Ted Coffman (2003-2006)

Mike Murray (2004-2007)

President Doug Kaercher

First Vice President John Prinkki

Gary Fjelstad was appointed in 2004 to complete one year of the term vacated by Vern Petersen, Fergus County, when he was not re-elected to the county commission. This position is open. There are four nominees for a three-year term from 2005-2008:

Joe Christiaens, Pondera County

Paddy Trusler, Lake County

Carl Seilstad, Fergus County

Garth Haugland, Beaverhead County

After two ballot votes, Carl Seilstad, Fergus County, was elected to the Board of Trustees.

The Meeting was adjourned.

BY LAWS

MONTANA ASSOCIATION OF COUNTIES

BY‑LAWS

ARTICLE I

NAME, MISSION AND OBJECTIVES

Section 1. NAME:

This organization shall be known as the Montana Association of Counties (MACo), hereinafter referred to as the “Association”.  The principal office shall be in Helena, Montana.

Section 2. MISSION:

The general purpose of this organization is to promote the voluntary cooperation and coordination of the sovereign counties of the State of Montana.

Section 3. OBJECTIVES:

The objectives of the Association will be to:

a) Do all things necessary and proper for the benefit of the counties of this state;

b) Provide a forum for discussions of subjects vital to the operation of county government;

c) Establish and maintain lines of communication with the executive and legislative branches of both the state and federal government;

d) Present and promote legislation which county officials believe to be beneficial to citizens, counties, and the state and oppose legislation which county officials believe to be detrimental thereto;

e) Maintain a permanent organization dedicated to securing cooperation among counties;

f) Maintain a central office, with staff to coordinate the programs of the Association;

g) Collect, compile, and distribute information about county government to county, state, federal officials and Montana League of Cities and Towns;

h) Initiate litigation in the name of the Association to determine rights or liabilities of county officials under any constitutional provision or statute, and appear as a friend of the court (amicus curiae) in any court proceedings wherein such rights or liabilities are to be determined; and

i) Appoint or employ counsel for the purpose of furthering any of the objectives of this Association mentioned herein.

ARTICLE II

MEMBERSHIP

Section 1. MEMBERS:

Members shall be elected officials of counties which have paid annual dues in accordance with a schedule of dues or assessments adopted by the Board of Directors and ratified by the membership. Members shall be entitled to all services offered by the Association.

Section 2. VOTING

Each member county, pursuant to Section 1, has one vote. The Board of County Commissioners shall appoint one county delegate and one alternate to have the authority to vote for that member county at membership meetings of the Association. The voting delegate and alternate must be elected county officials. A member county’s registered voting delegate may vote by proxy at any meeting of the membership. The proxy must be in writing and signed by the voting delegate or alternate and shall name the person to whom the proxy is delegated and the subject for the vote(s). The proxy must be delivered to the President prior to voting action being taken.

Section 3. AFFILIATE MEMBERS:

Affiliate members are individuals, businesses and organizations that make proper application to the Executive Director and pay dues adopted by the Board of Directors and ratified by the membership. Affiliate members shall be entitled to receive services as determined by the Board of Directors. They shall have no floor or voting privileges.

Section 4. TERMINATION:

Any member county that fails to pay its annual dues or assessment within 45 days of the billing date, July 1, shall have its membership terminated, unless prior written request for payment at a later date has been approved by the Board of Directors.

ARTICLE III

OFFICERS AND EXECUTIVE COMMITTEE

Section 1. OFFICERS

The officers are the President, First Vice President, Second Vice President, Class 1A County Representative, Fiscal Officer and the Past President, all of whom must be qualified and acting commissioners of member counties. The officers shall serve as the Executive Committee. These officers will be elected at the annual conference by the membership. They shall hold office until their successors are elected and qualified, so long as they shall remain in county office as county commissioners.

Section 2. DUTIES AND RESPONSIBILITIES OF THE OFFICERS

a) PRESIDENT

The President shall:

1) preside at all general and special meetings of the Association, the Board and Executive Committee;

2) provide the general supervision of all business of the Association in conjunction with the Executive Committee;

3) appoint all committee members that shall serve during his/her administration;

4) serve as an ex-officio, non-voting member of all committees.

b) VICE PRESIDENTS

The Vice Presidents shall consult with, counsel, and advise the President; and, in the absence of the President, his or her duties shall be performed successively by the First and Second Vice Presidents.

c) FISCAL OFFICER

The Fiscal Officer shall:

1) oversee the financial affairs of the Association;

2) make a complete report to the membership at each conference;

3) make monthly reports available to members on request;

4) recommend appropriate investments for the Association's idle funds;

5) counsel with the Executive Director and the budget and finance committee on the framing of the Association’s budget;

6) review proposals for public or private grants to assure that the fiscal needs of the Association are met.

The fiscal officer shall be elected to a two-year term following nominations and elections in odd numbered years.

d) CLASS 1A COUNTY REPRESENTATIVE

The Class 1A County representative shall consult with, counsel and advise the president. The current class 1A county representative shall call a caucus of the Class 1A counties (counties with over 35,000 population) during the annual conference, for the purpose of selecting a Class 1A Representative.

Section 3. OFFICERS’ VACANCIES

a) PRESIDENT - A vacancy in the Presidency shall be filled by the First Vice President. The First Vice President shall serve out the unexpired portion of the previous president's term plus the year representing that in which he or she would have succeeded to the Presidency; or

If the First Vice President declines the appointment, then the past president shall make an appointment to fill the vacancy subject to the approval of the Board of Directors. Said appointee shall serve out the unexpired portion of the President's term and then move into the past presidency.

The First Vice Presidency shall be filled by the appointment of the Second Vice President. The Second Vice President shall serve out the unexpired portion of the previous First Vice President's term plus the year representing that in which he or she would have succeeded to the First Vice Presidency; or

If the Second Vice President declines the appointment to First Vice President, then the Past President shall make an appointment to fill the vacancy subject to the approval of the Board of Directors. Said appointee shall serve out the unexpired portion of the First Vice President's term. Said appointee may be nominated and run for the office of the President at the next annual conference.

The Second Vice Presidency shall be filled by an appointment by the Past President subject to the approval of the Board of Directors. Said appointee shall serve out the unexpired portion of the Second Vice President's term. Said appointee may be nominated and run for the office of the First Vice President at the next annual conference.

b) FIRST VICE PRESIDENT - A vacancy in the First Vice Presidency shall be filled by the Second Vice President. The Second Vice President shall serve out the unexpired portion of the First Vice President's term and then move into the Presidency; or

If the Second Vice President declines the appointment to First Vice President, then the President shall make an appointment to fill the vacancy subject to the approval of the Board of Directors. Said appointee shall serve out the unexpired portion of the First Vice President's term. Said appointee may be nominated and run for the office of the President at the next annual conference.

The Second Vice Presidency vacancy shall be filled by appointment by the President subject to the approval of the Board of Directors. Said appointee shall serve out the unexpired portion of the Second Vice President's term. Said appointee may be nominated and run for the office of the First Vice President.

c) SECOND VICE PRESIDENT - A vacancy in the Second Vice Presidency shall be filled by appointment by the President, subject to the approval of the Board of Directors. Said appointment may be nominated and run for the office at the next annual conference.

d) FISCAL OFFICER - A vacancy in the office of Fiscal Officer shall be filled by appointment by the President, subject to the approval of the Board of Directors.

e) PAST PRESIDENT - A vacancy in the Past Presidency shall be filled by the appointment by the President of the next most immediate Past President.

f) MEMBER RATIFICATION OF APPOINTMENTS - All of the above referenced appointments are subject to approval at the next annual conference by the membership of the Association.

g) CLASS 1A COUNTY REPRESENTATIVE - A Class 1A County Representative vacancy shall be filled by appointment by the President subject to a recommendation made by a majority of the Class 1A Counties.

Section 4. DUTIES AND RESPONSIBILITIES OF THE EXECUTIVE COMMITTEE

a) The Executive Committee shall have general supervision, management and control of the business and property of the Association subject to the by‑laws and to the policy established by the Board of Directors and the voting membership.

b) The Executive Committee shall have the power to determine Association policy on all legislative matters of concern within the guidelines established by the voting membership or the Board of Directors.

c) The Executive Committee shall serve as an Evaluation Committee for purposes of annually evaluating the performance of the Executive Director by surveying the member Boards of County Commissioners. Such evaluation shall be reported to the Board of Directors.

Section 5. EXPENSES

The members of the Executive Committee shall receive their necessary expenses incurred in their attendance of meetings approved by the President, with the exception of the meetings held at the annual conference or special meetings of the full Association.

ARTICLE IV

BOARD OF DIRECTORS

Section 1. MEMBERS

a) The Board shall consist of the four elected officers, the Past President, the Class 1A Representative and the elected chairperson from each of the twelve regional districts specified in Article VIII.

b) In addition to the members identified in Subsection (a), other county elected official associations with no fewer than 29 county members may each designate a member to serve as their representative on the Board.

Section 2. MEETINGS

The Board shall meet at least semi‑annually on a date and at a time and place set by the Board, or on the call of the president. The Board may meet upon the written request of any five members of the Board. The request must state the purpose of the meeting and be mailed to all other Board members two weeks prior to the date for the meeting.  A majority of the voting Board shall constitute a quorum. 

Section 3. DUTIES AND RESPONSIBILITIES

The Board shall have the power to:

a) develop the policies of the Association within the guidelines set by the voting membership;

b) establish a central office;

c) employ an Executive Director, and to set his/her salary;

d) remove the Executive Director at any time after allowing adequate due process;

e) view and approve annually the Executive Director’s Staff Policy and Procedures Manual;

f) review and approve annually a budget sufficient to meet the needs of the Association;

g) prepare a schedule of services for members and affiliate members with recommended dues and assessments for each;

h) present recommended dues increases and assessments, if any, to the membership at the annual conference for approval and adoption;

i) increase the dues schedule in an amount up to the annual COLA in any one year. Any increase above the annual COLA must be approved by the membership at the annual conference

j) authorize an annual independent audit of the Association by a firm of certified public accountants;

k) function as the nominating committee and select at least two candidates each for the office of Second Vice President and Fiscal Officer. No candidate can be nominated and run for two offices simultaneously. Nominations may be made at district meetings and submitted to the Board;

l) amend the approved budget by a majority vote of the Board of Directors

Section 4. EXPENSES

The Board members and designees shall receive their necessary expenses incurred in their attendance of meetings, with the exception of those meetings held at the annual conference or special meetings of the full membership. 

ARTICLE V

EXECUTIVE DIRECTOR

Section 1. DUTIES AND RESPONSIBILITIES

The Executive Director shall perform such duties as are assigned by the Board of Directors for implementing Association policy, and shall be responsible to the Board.  The Executive Director shall supervise the Association office and staff. The Board of Directors shall be responsible for an annual evaluation of the Executive Director

The Executive Director shall compile, publish and maintain a “Staff Policies and Procedures Manual”, which shall be reviewed annually by the Board of Directors.  The “Staff Policies and Procedures Manual” shall include a detailed job description for the Executive Director and such other staff positions as may be created.

The Executive Director shall be responsible for the hiring and termination of staff personnel consistent with the “Staff Policies and Procedures Manual”.

The hiring of an Associate Director shall be by the Executive Committee and the Executive Director with confirmation by the Board of Directors.

ARTICLE VI

STANDING COMMITTEES

Section 1. RESOLUTIONS AND LEGISLATIVE COMMITTEE

The Resolutions and Legislative Committee shall consist of at least five members.  Members (one of whom shall be a member of the Board of Directors) are appointed by the President, subject to approval of the Board of Directors.  The Committee members shall select the chairperson from their own number.  It shall be the duty of the Committee to develop resolutions and to receive resolutions from the Regional Districts.  The Committee may consult other elected county officials to determine resolutions beneficial to county governments, and work with those officials to promote beneficial resolutions. The Committee shall examine resolutions to be placed before the membership for proper form and content, organize them by category, combine similar resolutions, and recommend priorities. 

The Committee shall have legislation drafted as directed by resolutions approved by the membership at the annual conference or special meetings; and assist the Executive Director in securing sponsorship for the legislation. The Committee, together with the Executive Director, shall recommend to the Officers and the Board the response of the Association to all legislation affecting county government.

Section 2. BUDGET AND FINANCE COMMITTEE

The Budget and Finance Committee shall consist of at least five members.  Members shall be appointed by the President subject to the approval of the Board of Directors.  The Fiscal Officer shall serve as chairperson of the Committee.  The Committee shall prepare and submit to the Board of Directors a proposed budget for the Association.  The proposed budget shall provide adequately for all planned activities of the Association.

Section 3. EXPENSES

Members of Standing Committees shall receive their necessary expenses incurred in their attendance of meetings, as approved by the President, with the exception of meetings held at the annual conference or special meetings of the full membership.

ARTICLE VII

OTHER COMMITTEES

Section 1. ESTABLISHMENT

Special interest, ad-hoc or problem‑solving committees may be formed by the President, the Board of Directors or the general membership as needed.

Section 2. EXPENSES

Members of committees may receive their necessary expenses incurred in their attendance of meetings, as approved by the President, with the exception of meetings held at the annual conference or special meetings of the full membership.

ARTICLE VIII

REGIONAL DISTRICTS

Section 1. DISTRICTS IDENTIFIED

The counties of the state shall be grouped into twelve districts in conformance with the Governor's Administrative Districts, as follows:

District No.  1 District No.  2 District No. 3 District No. 4 District No. 5 District No. 6

Daniels Dawson Carter Blaine Cascade Fergus

Phillips Garfield Custer Chouteau Glacier Golden Valley

Roosevelt McCone Fallon Hill Pondera Judith Basin

Sheridan Prairie Powder River Liberty Teton Musselshell

Valley Richland Rosebud Toole Petroleum

Wibaux Treasure Wheatland

District No. 7 District No. 8 District No. 9 District No. 10 District No. 11 District No. 12

Big Horn Broadwater Gallatin Flathead Mineral Anaconda-Deer Lodge

Carbon Jefferson Meagher Lake Missoula Beaverhead

Stillwater Lewis and Clark Park Lincoln Ravalli Granite

Sweet Grass Sanders Madison

Yellowstone Powell

Butte-Silver Bow

Section 2. DUTIES AND RESPONSIBILITIES

A Regional District shall have the authority and responsibility to call district meetings and adopt resolutions directed to the attention of the Association.  No District shall take action of record in the name of the Association on any question involving the welfare of counties outside the Regional District except in the form of a resolution to the Association.

Section 3. DISTRICT OFFICERS

The district officers shall be a chairperson and vice-chairperson elected by a majority vote of member counties in each district.  They shall be elected to an annual term at a district meeting prior to the annual conference and take office immediately following the annual conference.

Districts shall be represented at Board of Directors meetings by the district chairperson, or the vice-chairperson in the chairperson’s absence, or the chairperson’s designee when both the chairperson and vice-chairperson are unable to attend a Board meeting, and that person shall have the power to vote on issues at that meeting.

ARTICLE IX

ANNUAL CONFERENCE AND PROCEDURES

Section 1. DATE AND LOCATION

The date of the annual conference of this Association shall be determined by the Executive Committee, and the place determined by a vote of the general membership at an annual conference, a quorum being present. A majority of the members shall constitute a quorum.

Section 2. REPORTS

The following individuals shall make their reports at the annual conference:

a) The President;

b) The Fiscal Officer;

c) The Executive Director;

d) All committee chairpersons of standing committees and special committees;

e) NACo steering committees members.

Section 3. CONDUCT OF OFFICIAL BUSINESS

The official business of the Association shall be conducted in accordance with the most recent edition of “Robert’s Rules of Order”.

Section 4. NOMINATIONS

a) The Nominating Committee (see Article IV, Section 3 (K)) shall make its nominations report to the membership in the opening general session of the annual conference.

b) The report shall not require a seconding motion, but shall be adopted along with additional nominations made from the floor.

c) All nominations will remain open until the time of the election during the closing general session.

Section 5. ELECTIONS

The election of officers shall occur at the annual conference and be governed by the rule of majority ‑‑ 50% plus one of the entire votes cast. The ballot will be repeated in the event of the failure of a candidate to receive a majority with the nominee receiving the lowest number of votes removed from the ballot for purposes of the subsequent vote of the members.

Section 6. AMENDMENTS TO THE BY‑LAWS

These by‑laws may be amended by a majority vote of the membership at a regular or a special meeting, a quorum being present. Proposed amendments must be submitted in writing to the President of the Association to be read and acted upon at a meeting for the full membership. Copies of said proposed amendment or amendments shall be made available to the general membership at least ten days prior to the convening of the meeting.

Section 7. EFFECTIVE DATE

These by‑laws having been duly amended by a majority vote of the members cast at the 96^th Annual Conference will be effective upon the adjourning of the annual conference with all provisions for compliance in regard to the elected officers of the Association having been provided for by action on the floor of the Association.

PRESENTATIONS

COLLEEN LANDKAMMER, NACo PRESIDENT-ELECT

Blue Earth County, Minnesota

Thank you to all of you who are involved in NACo. NACo is only as strong as the people who are engaged in the process. You have a large contingency on the Board of Directors--Bill Kennedy, Carol Brooker, Doug Kaercher and Connie Eissinger, representing WIR. Most states only have one, maybe two people representing them. You have a large group and a strong voice.

NACo President Bill Hansel has also appointed six of you to chair subcommittees:

Kathy Bessette, Vice Chair of an Agriculture Subcommittee

John Prinkki, Vice Chair of Energy Subcommittee

Peggy Beltrone, Vice Chair of Air Quality Subcommittee

Mike Murray, Vice Chair of Federal Land Management Subcommittee

Connie Eissinger, Vice Chair of Public Lands Subcommittee and

Western Interstate Region (WIR) President

Bill Kennedy, Chair of Rural Action Caucus and on the Meth Task Force.

There was a double whammy after Hurricane Katrina when Rita came along. The extent of the devastation is still unknown. It will take months and, in some places, years to rebuild, if they even can rebuild. I have heard that there is one parish in Louisiana that probably will cease to exist, and there are many others that it will take many years to function. Everything was destroyed in some places and the people who live there may never ever be able to go back. Our prayers are with those people who lost their lives and with those who are trying to re-build.

NACo is working in a multitude of ways to help the victims of this tragedy in the counties and the parishes through a program called “Rebuilding the Gulf Course”. It has three parts.

The first part is at the request of the Department of Housing and Urban Development. NACo asked counties to provide temporary housing for many people displaced by the hurricanes. Nearly 60 counties responded with a range of offers to shelter victims. Some county officials actually offered to take families into their own homes. This is an outstanding heart-warming response to help the people who are most in need.

The second part involves raising funds to help counties and parishes and their employees. It is a county to parish effort. NACo is raising money that would go into a parish/county family fund. It will be used strictly among the Louisiana, Mississippi and Alabama State Associations. With Rita, Texas might be included also. It will allow these State Associations to have money to distribute to the parishes/counties and their employees. The state associations and the parishes/counties know who needs that assistance the most among their employees. Many of you received mail asking you to contribute and I ask you also. This is a way that we can help our own colleagues--the county/parish employees--to cope with this tragedy and begin to get things back to normal.

The third part is an effort to match supplies, equipment and expertise with the counties/parishes in need. We encourage all of you to participate and help if you can.

You can find more about our county family fund on our NACo website--www.naco.org. It gives you great information on the Katrina effort, on the legislative issues that we have, and on other subjects could be helpful to you as you govern your counties. We are hoping you go to the website. It is always available.

County governments across America have been responding to the meth crises. Production, distribution and the use of meth is a widespread problem. It is in rural, urban and suburban areas across this nation. For counties, meth abuse causes legal, medical, environmental, and social problems. Investigating and closing meth labs, followed by corrections, court costs, treatment and cleanup, are direct costs to county government.

In early July, NACo presented results from two surveys on the impact of meth at a National Press Club meeting. “The Criminal Effect of Meth on Communities” is the first one; the second survey was “The Impact of Meth on Children.” The surveys are available at www.naco.org.

The first survey shows that 58% of county law enforcement officials reported that meth was the number one drug threat in their counties, more than marijuana, cocaine or heroin. The federal government had been identifying marijuana as the top drug problem in the country. In releasing this survey, we were not saying that marijuana is not a problem, because it is. But the meth problem needs to be addressed. Since the release of this survey the federal government seems to be changing its position and doing more to address the meth problems.

Other statistics in the survey show that for 87% of the counties, meth arrests have increased over the past three years. In turn, crimes such as burglaries, robberies and assaults are also on the rise because of meth. In some meth arrests, there is a child living in the home. Often these children suffer from neglect and abuse. We are seeing a high number of out-of-home child placements, which is not good for the child and is extremely expensive for the counties.

Meth labs also pose a significant danger, as they contain highly flammable and explosive materials. Additionally, for every pound of meth produced, five to seven pounds of toxic waste remain, which is often introduced into the environment via streams, septic systems and surface water run-off. I believe that counties working with the state, federal, local and private sectors can take leadership roles in responding to and reversing the upward trend in meth production, distribution, use and negative impact on our communities.

We need comprehensive legislation that will deal with the aspects of meth problems. The primary objective of this initiative is to promote action by Congress and the administration to control and reduce the production, distribution and abuse of meth, including assistance to counties to address the problem locally. We also intend to increase awareness among our members about meth, to disseminate information and best practices and to increase the capacity of counties to respond to the problem effectively.

To accomplish these goals, the meth action group was created. The meth action group is a group of county officials that will guide and oversee the initiative. We will establish an information clearinghouse so that we can share solutions and best practices with our members. Montana has a voice on this committee with Bill Kennedy. Meth abuse is ruining families and our environment. I look forward to learning from you and working together to do something to stem this horrible pandemic.

There is an old saying, “May you live in interesting times”. I’m having the opportunity to meet interesting people across the nation and here in Montana. You understand that counties are where the action is and where it will be. Whether we like it or not, counties are on the move and changing every day. As county officials, we understand where and how the wheels of government are greased. We no longer have the luxury of looking to Washington for the solution; we no longer dare to look at our state capitals. Too often their response is a new mandate or to take away our revenue. Having traveled around the country, the federal government and the legislatures sometimes see us as their cash cow. Carl Newman said it best when he noted in our NACo newspaper about the five mega-trends in American today:

1. The state and local government partnership is waning. Too often we find ourselves competing with, instead of being partners with, the state and federal governments

2. There is a substantial erosion of local government’s fiscal health, which, if continued, will threaten our long-term fiscal responsibilities, sustainability and viability. Too many state legislators have the paternalistic view that they have the responsibility for overseeing our work and limit the tools that we need.

3. People, citizens, now perceive local government entities to be redundant, fragmented, competitive and inefficient. I heard way too many statements like, “How many government employees does it take to …whatever.” I’m concerned about our standing in the community.

4. Citizens are not engaged with or by their local governments. In fact, they are becoming anti-government. How many grade schools and high schools teach about local government and about how decisions are made at the most democratic of all levels, the county level? How many of you use the local press as a valuable tool for telling the county story? Each of the four mega-trends leads to the fifth.

5. With the erosion of grass roots government, our ability to govern and provide the needed local services is at risk. We cannot surrender without a whimper.

I ran for county government 17 years ago. I ran because I cared about my community and the people who lived there. I became active in the Minnesota Association of Counties because I knew I had something to offer and I knew I could make a difference and help move forward. I ran for and became president of that association because I knew a strong state association could influence the state legislature. For those same reasons, I became active in NACo. My participation has made me a better county commissioner and allowed me to make better decisions on behalf of my county.

Today, NACo is at the forefront in the fight against meth, the most serious health crisis facing our country. Without the leadership of county officials, the White House and Congress would still be oblivious to the pandemic that is sweeping across this country. You are the only ones who can make a different and take these issues to a national arena. Legislatively, NACo is a leading spokesperson on such issues. We have a table here to give you information on meth, PILT, prescription drugs and a multitude of other programs that NACo puts together.

I’m so pleased to see that the MACo Board of Directors has endorsed the prescription drug program. It’s a wonderful program that can help people in your counties.

NACo also has a relationship with NRS and the NACo financial services corporation. They are key partners to help your county purchasing, to help get better prices and to help you save money. As an organization NACo is on the cutting edge in providing training for county officials and research for local governments. But more than anything else, NACo is about the quality of our member counties and the participation and leadership of each and every county official, every supervisor, every sheriff officer, every county judge or county staff, NACo is about and for you. It’s your voice in Washington and your voice in America. My job as a leader in NACo is to serve you, to listen to your ideas and to help you bring information to NACo from the steps of your courthouse. Through your leadership and through the state association and NACo, we can reverse those mega-trends, we can capture a new vision for county government and we can provide the leadership needed during these challenging times.

The issues for counties are the same, whether in Minnesota or Montana. We are all trying to figure out how to do the best for the people we represent.

ELECTION ADMINISTRATION

Vickie Zeier, Missoula County Clerk/Recorder and Treasurer

Duane Winslow, Yellowstone County Election Administrator

Duane Winslow

Vicki and I worked together on the Legislative Committee for the Clerk and Recorders for six legislative sessions and we are currently on our third Secretary of State.

We found 2005 to be a very unique legislative session. There really was not one party in power the whole time, so it fostered an atmosphere of compromise and working together. Some excellent legislation was crafted for elections. When we started the session, there were a little over 100 election-related bill requests. The election requests varied from ID provision, same-day registration or polling place registration, absentee voting and the new voting systems that will be coming. We decided as an Association to be pro-active this legislative session, rather than trying to react to bills.

The Association met with many constituency groups such as political parties, League of Women Voters, and the Secretary of State’s Office. We suggested setting up an interim committee, but the constituency groups wanted to do something now. So, a group was formed to craft legislation. We met on a weekly basis. This was unique in that it allowed our participation as elections officials.

There were three major election laws that came out of the consensus group. HB 177 was the Secretary of State’s cleanup bill which also had some things added to it. For SB 302, Senator Ellingson graciously allowed us to take the “guts” out of his bill and put in our ideas. SB 88 was Senator Squires’ bill on permanent absentee voting.

The three major bills came out of the House and the Senate with no problems; consensus had been built; compromises made. They passed between the Senate and the House and one morning a woman who represents a constituency group phoned me. She was very upset because SB 88 had just been killed in the House; I started receiving emails from others. The Clerk and Recorders started contacting our legislators. HB 177 was also being heard at this time. In retaliation, HB 177 died and in further retaliation SB 302 was killed. That evening the Secretary of State’s office and our lobbyist confirmed all three bills were dead. Then that night, they brought back all three bills, they passed and went to the Governor’s office.

I will briefly cover some on the items in HB 177. One is that obituaries can be used now to cancel voter registrations. It clarified that candidates can only file for one office, with the exception of committeemen and women. It changed the law so that if there is no filing in municipal, state or county offices, all write-in votes will be counted. It will allow absentee applications on a form other than the official Secretary of State’s form. It also changed military absentee voting to allow any military absentee ballot, that was mailed election day and received in our office by 3:00 pm the following Monday, to be counted. So, it gave the military people a little longer with their absentee ballots. All recounts will be conducted manually. In the past we had been able to use our machines to verify election counts and, only if there was a difference, did we do it manually. This impacts the county commissioners since they are the recount board.

SB 302 was the big bill. One unique aspect is the centralized voter registration system in every county, which allows us to double-check to prevent voter fraud. Same day registration or polling place registration has always been a big issue: whether or not the person who moves into Montana two weeks before the election should be allowed to vote. We were able to compromise in this and allow late registration. So, after the close in registrations, if someone who is not registered to vote in the county and has not been issued an absentee ballot in any other county in Montana (which we can now determine because of our centralized voter system), we will allow them they to register and be issued a ballot right there in the election administrator’s office. They won’t be allowed to go to the polling place, but they will be able to do that up until Election Day. This will have some fiscal impact. It will require more ballots to be printed and also may require more staffing. It reinstated that third parties can now collect and forward absentee applications. It allows signatures on absentee ballots to be used as ID. So if a person sends their absentee ballot back, we can compare the signature to the one we have on file.

Senate Bill 88 has the most fiscal impact on the counties. It allows for permanent absentee lists. 75 days before each election, the election administrator will mail a postcard to a person asking if he wants a ballot and to what address it should be sent. If that is returned to us, then we mail the absentee ballot. In the short time that we have been doing this we have mailed hundreds of ballots. Those postage costs will be a county cost.

There were smaller, but important bills. SB 182, sponsored by Senator Gillan, allows an absentee ballot returned prior to Election day to be counted if they passed away prior to election day. Administratively, that had been a problem for counties such as ours. We had about 1900 absentee ballots cast in the Presidential election. We had a Gazette reporter find 24 of those people had passed away before Election Day. Having no way of knowing that, we hadn’t pulled their ballots.

HB 590, by Rosalie Buzzas from Missoula, allows inactive voters to activate their registration at any election. HB 295 by Brady Wiseman of Gallatin County required that all elections be conducted on paper ballots. Basically it removed the options to use touch stream voting systems that did not have some ballot receipt or mechanism for recount.

Vickie Zeier

There are six major parts of the Help America Vote Act (HAVA): 1) the military and overseas voting, 2) provisional voting, 3) ID requirements, 4) voting systems, 5) state-wide voter registration data bases and 6) ADA’s accessibility to voting.

In 2003, Montana implemented provisional balloting, the ID provisions and overseas military ballots. At times overseas and military ballots weren’t returned and ballots weren’t accepted because of deadlines, so we extended the deadline during the 2005 legislature to give the military a little extra time.

Voting systems, according to HAVA, have to comply with new standards that are not all in place yet. Montana applied for the HAVA funds and bought out the five or six punch card counties. They also provided match money to counties that purchased precinct counters. HAVA specifically states that voters need to be told if they have over-voted, under-voted or have a blank ballot. Currently, the federal government is saying that if an election judge instructs every elector of that right, then you are covered. Missoula County purchased precinct counters and used them in three elections in 2004. Precinct counters notify the voter if they have made a mistake. The state is going after another $7 million, part being set aside for precinct counters. In our last recount, which we did do manually, we found zero errors with the machines and we were done within 7 hours. They count very well.

The last two items are coming up in 2006. The first item is the statewide voter registration database. A committee of 10 counties has been instrumental in the statewide voter database: Yellowstone, Missoula, Jefferson, Blaine, Big Horn, Lewis & Clark, Gallatin, Pondera and Chouteau Counties. The State accepted a bid from Saber Consulting of Salem, Oregon, for the program. We have been changing the system that they purchased to meet Montana laws and what we want. This is going to be a good system. We used three different types of voting registration systems we have in this state and put the best of those three into one system. Currently a pilot system is in Missoula County, Blaine County and Jefferson County. The Secretary of State agreed to put them on the system to help us find any errors before we take it out to the rest of the counties.

One of the areas the ETT is very concerned about is the support and maintenance of the system. There is going to be a cost associated yearly for maintenance and support. And I believe the Secretary of State will pay the cost of the first year, but there is going to be a cost to the counties to continue the support of this system. It will be used for every election in our county, so you should prepare to financially support the statewide database system.

The last item is the Direct Recording Equipment (DRE) for the disabled. This equipment will provide the blind with the ability, for the first time, to vote a secret ballot. It will also allow people who have hand/arm mobility issues to cast ballots by themselves. The Secretary of State will be purchasing all that equipment and will have one per polling place. How does that affect the counties again? Depending upon the equipment, counties may have to hire another election judge per polling place; the other cost is possible maintenance and replacement costs. The state has received one-time money and when it is gone, the costs will fall to the counties.

QUESTION / ANSWER SESSION

1) Was there any direction on the costs for recount boards?

Not really, other than what the law already states, which is vague.

2) Relative to the touch screen system, when that is not in use and you have a line of voters, can anybody use it?

Yes, Anybody can use the direct recording equipment. Brady Wiseman’s bill says there has to be a paper receipt and it specifically says that it is for the disabled, but I believe that if anybody wants to use it, they will be able to use it as long as it has a paper receipt.

3) On the absentee ballots and the mill issue that Duane talked about, can we recover our costs for school elections and municipals?

Absolutely. Municipal and school elections pay all costs involved and other entities piggyback on it. They pay a portion of that.

4) Lewis & Clark County is facing, as are other counties, a lack of election staff and paid volunteers. Our pool is shrinking every year and it is becoming a big challenge to try to staff these elections. What about allowing counties the option of doing a mail ballot instead of having a formal Election Day process? In Oregon, I believe I have seen some figures where it has increased turnout to upwards of 90% in some elections. It’s a heck of a lot cheaper and less staff intensive. What are your thoughts on this?

I like the idea of mail ballot elections as well. I believe the Help America Vote Act does not allow that for federal elections. I don’t think that for federal elections that will ever be allowed unless federal legislation is changed. From a practical standpoint, almost 30% of our Yellowstone County voters vote by absentee ballot in the presidential election. I think that is just going to keep increasing, which will take a little of the pressure off the polling places. Anywhere across the nation, it is a problem finding election workers that are willing to be there for that many hours and work the elections for the low pay.

5) Vickie, why don’t you share how you contacted the service clubs to get judges?

In 2003 I approached our civic organizations. I currently have over 100 judges that are working as volunteers for their civic organizations. We then pay the civic organizations. All my polling place managers are county employees. I send county employees to the polling places to oversee the machines. I only have to pay for overtime issued. The department heads agree that they will support the first 8 hours of pay for that employee to be working. It has helped immensely.

6) Our county is not only rural, we’re frontier. We have precincts that have 14 people, 27 people, and the thought of voting machines and counters and all this seems like an extreme expense for our area.

We all have situations like that. But, I agree with you. We are going to have to look at that efficiency of numbers. The Secretary of State office works closely with all the elections administrators and clerks and recorders to make sure that we are not forcing the system on any of you. We are trying to respond to legislation and the regulations. We are trying to see how far we can stretch the federal dollars to make sure that we are not passing mandates on to the counties.

In terms of having a DRE in every polling place, Congress is pushing in that direction. But in terms of precinct counters, it is the choice of the counties as to how far to go with that equipment. We are going to stretch the federal money to assist. We know that the counties are going to have some costs not only for the statewide database, but also for staff. It is a new system and we want to be sure that there is someone available to answer questions and assist you as you set up elections. And if you continue to maintain the budget that you have always had, it is really to support your people to set up the elections.

MONTANA BOARD OF INVESTMENTS

INTERCAP Loan Program--Louise Welsh, Bond Program Officer

Short Term Investment Pool (STIP)--Coralie Sciuchetti, STIP Manager

Infrastructure Loan Program--Delrene Rasmussen, Investment Officer

Louise Welsh, Bond Program Officer

The Bond Program Office manages six different programs. INTERCAP Revolving Loan Program focuses on low interest loans to local government entities like counties, school districts, fire districts, fire service areas, water and sewer districts, etc. We do this through the INTERCAP Loan Program. This is a self-sufficient program that does not need to use tax appropriations for loans or corroborating expenses.

The money is always available. There is no funding cycle. We review loans on a first come, first serve basis.

There is 100% financing available; equity or matching money is not required. On many occasions local governments use these loans for other funding sources’ matching requirements.

There are no upfront costs. What you see is what you get. You repay principle drawn on the loan with the interest.

There are no origination fees and there are no prepayment penalties either.

This is a variable rate loan program. Our goal is to provide the lowest possible rates for our borrowers. So, our rate to our borrowers until February 15, 2006 is 3.8%.

We first came into existence in 1987. Our overall average is 5.045%. Our ten-year average is 4.16%.

Maximum loan term is 10 years or useful life of the project. For example, sheriff’s vehicles do receive a lot of use so their useful life is about 5-7 years. If you have a construction project, you are looking at a maximum of 10 years to repay it.

We finance new construction, remodeling, land and building purchases, rural improvement districts, heating and lighting retrofits, road and bridge improvements, and cash flow loans. We also finance water, wastewater and solid waste projects, new and used equipment of all kinds, such as asphalt grinders, computers, water meters, and law enforcement vehicles

Is there a limit to how much a county can borrow? Montana statute limits what you can borrow before you need to put it before the people as a vote. 7-7-2101 has two components. First, the county cannot have more than 1.4% of its assessed market value as outstanding debt. Secondly, statue 7-7-2402 broadens the requirements by allowing a county with taxable value less than $50 million not to accrue more than $500,000 in debt without the approval by a majority vote of the electors. If you have a taxable value of $50-$100 million, it bumps up to $750,000. If you have over $100 million in taxable value, you can borrow $1 million without the approval of your voters.

Our board authorizes staff to approve loans up to $1 million. Loans between $1-5 million need to go to our loan committee. Loans over $5 million go before our full board for approval. If everything goes smoothly, loans up to $1 million will have about four weeks from the time we receive the application to the approval of funds. Our board is leaning towards quarterly meetings.

On our website (www.investmentmt.com.) you can see Board meeting records, future meeting dates, etc. For the further information on the INTERCAP program, you may click on the word “Programs” and click on “INTERCAP” within the drop down box. This will give you access to the electronic application, checklist, loan rate history, and contact information.

Coarlie Sciuchetti, STIP Manager

I manage the Montana Short Term Investment Pool (STIP). I am responsible for the day to day accounting of the STIP shareholder accounts.

The Board of Investments was created by an act of the legislature to invest and manage the state of Montana’s investment funds on a centralized basis. The Short Term Investment Pool was created by the Board in 1973 to allow qualified funds to participate in a diversified pool. Although state agencies are usually required to invest in the fund, county governments may voluntarily participate.

The purpose of STIP is to obtain the highest possible return and maintain a liquid position whereby funds can be invested for relatively short periods of one day or more depending upon the anticipated use of the funds. The investment and income of the fund are owned by the participants as a purchase unit and they are managed on their behalf by the Board. Although STIP is not registered with the Securities and Exchange Commission as an investment company, the Board has the policy that STIP will and does operate in a manner consistent with the SEC’s rules. In these certain conditions, we are allowed to use amortized costs to report net assets to compute unit value.

Local governments including cities, counties, school districts, other local government subdivisions that have funds available for investment may participate, as long as they are not required by any covenant or agreements with bondholders or others. If any fund has strings attached to it, then they can’t be invested in STIP.

The board does not provide or obtain any legally binding guarantees to report the value of the unit and we are not aware of any legal risk regarding any STIP investment.

The shareholders have ownership as represented by shares of the fund. The unit of value is one dollar upon purchase. A purchased unit earns income on the purchase day, but it ceases to earn income on the day that it is sold. You can request transactions using either email or fax. We discourage telephone instructions since they can be easily misplaced. Many shareholders request confirmation that we have received their requests, because they want to make sure that they are going to receive their funds the day they purchase.

Funds are transferred electronically using the State of Montana’s Treasuries account and is transferred to a county’s local government bank.

For the sale transaction, there is a 2:30 p.m. deadline.

The income is distributed on the first calendar day of each month. Participants can automatically reinvest that income right back into the new STIP share. We will send it electronically to their bank account.

The cost of the STIP program for the fiscal year 2006 is $28,562 a month. That pays my salary, the STIP portfolio manager’s salary and expenses such as our computer and software. So if a participant held 1 million shares, the fee for yesterday would have been 58¢. It is included in your monthly income distribution.

Our daily yield last Wednesday was 3.72%. That’s an increase of 2⅔ % since May of 2004, which was our low at 1.05%. Our STIP portfolio manager, Ed Kelly has twenty-five years of service in investing for the Board of Investments. Our guideline is to have maturity dates within 397days for short term.

There are 167 active local government shareholders in STIP. 57 are cities and 110 are county entities including county treasurers, school districts, fire departments, irrigations districts, airports, etc. There are 46 of the 56 counties in Montana with active STIP purchases and balances. Through these counties our investment is $460 million, which accounts for 27% of the total STIP holdings.

I hope you will check out our web site. You can download forms, our financial statements, today and yesterday’s STIP balance, the yield from last month etc.

STIP is a great opportunity for your county investment because of liquidity. You can invest one day and sell it the next if you like. You still earn that great competitive rate overnight. It was 3.72% last Friday. You can earn income on your daily balance and that income is distributed back up to you and there is no minimum balance.

Delrene Rasmussen, Assistant Investment Officer

I am an Assistant Investment Officer with the Montana Board of Investments. My primary responsibility is to manage the commercial loans, which are funded by the coal tax program. There are five different kinds of loans. The first two, the commercial and the value added, provide long term fixed-rate financing for approved lenders for their borrowers. The other two, the intermediary and the seasonal, are available for qualified economic development organizations.

The fifth is the infrastructure loan, which is one of our direct lending programs. The Board of Investments is the direct lender and only qualified city, county and quasi-government organizations are eligible for this program. It is a loan program to provide a qualified business with long-term fixed rate financing maybe expanding or moving to the area. It has to be a successful, established company, not a start-up company. If they create at least 50 jobs, they are given a 2.5% interest rate reduction. Now, our 20-year rate is a 7%; this would provide that company 4.5% long-term fixed-rate financing. In addition, the company is eligible for a Montana State tax credit equal to the amount of annual loan payment.

The company has to derive revenues of over 50% from outside of the state of Montana. The minimum loan amount is $250,000 and the minimum jobs to be created are 15 over a four-year period.

The county that asked for the loan is not obligated to pay it back, should the company fail. We fund only very qualified, successful companies. Primarily the program is for infrastructure. We have done sidewalks to railroad spurs to public buildings.

The process consists of an application, which we review and approve or not. We issue a letter of commitment and then fund it. The time frame is about 6 months depending on how complete the application is.

In Butte, Montana Resources reopened the mine. The city of Kalispell got a call center. Wells Fargo in Billings indicated that they were going to create 134 jobs; they actually ended up with 140, and only needed $454,000 worth of infrastructure even though they qualified for more. Great Falls will have our largest infrastructure loan at $5 million. They will create 300 new jobs. Also, in Great Falls, we are going to do a $500,000 infrastructure loan for an international malting company for the creation of 30 jobs.

If you think of something that you want to investigate further, please contact the Board of Investments either by website or phone number.

MONTANA STATE AUDITOR

John Morrison

It is a privilege to speak with county commissioners because you are the ones that meet the voters where the rubber hits the road. There’s that old story about when Lyndon Johnson came into the White House and had inherited all the Kennedy Ivy League people. He said to Sam Rayburn, “You wouldn’t believe all these people. They are from Harvard and Princeton and Yale.” Rayburn said, “You know I’d feel a whole lot better if just one of them had been a county commissioner.”

First I want to talk about how our health care legislation is going to make a big difference in our communities across the state of Montana. Thanks to the voters who enacted I-149, we have four important measures. One is small business health insurance; one is prescription drug relief; one is the children’s health insurance program; and a fourth is that doctors and hospitals that provide treatment to Medicaid patients are paid at least the cost of their service.

The small business health insurance is a huge issue not only for families and individuals across the state, but for small business. One in 5 Montanans doesn’t have any health insurance at all--that’s 170,000 people. If one in five people didn’t have a job, it would be an employment crisis. If one in five people didn’t have food, it would be a hunger crisis. We need to address this health insurance problem with the same level of urgency. We see it in our communities everywhere we go--some family has a child injured in a bike accident or a father who had a heart attack or a mother who has breast cancer. By cash registers in stores are the cans for collecting nickels, dimes, quarters and dollars bills to help pay medical bills that are building up.

Most people depend on their workplaces for insurance, but most small businesses cannot provide health insurance to their employees. So, HB 667 focused on a way to make health insurance available to small businesses so that they provide for their employees.

When we first started talking about this health insurance issue in 2001, I sat down in a coffee shop in Livingston, MT with a number of folks. One guy owned an auto garage. He said, “I’m here because I want to provide health insurance to my guys. I’ve got four boys.” I asked how much he could pay. He said “$100 bucks a month.” I asked how much each employee could pay. He said, “$50 bucks a month.” But for $150 a month, they can’t find any health insurance. When one of these guy gets in a motorcycle wreck or his wife gets breast cancer, they wind up in the hospital and the hospital provides the treatment that they are legally and ethically required to provide and the costs get shifted to people who do have health insurance. We are all paying about 30% more on our health insurance to pay for people who don’t have health insurance. The people who don’t have health insurance want to pay something, but can’t figure out a way to do it.

So that’s the purpose of HB 667. We used a system of tax credits and premium incentives so that small businesses can pay as much as they can afford to pay and then we will use some of that money out of the special revenue accounts from I-149. There are two parts to it. First are tax credits for small businesses of 2-5 employees that currently have health insurance. At the end of the year, they will get a tax credit to the tune of $100 a month per employee, $100 per spouse, $40 for a dependent child up to two kids.

Second, 60% of the revenue set by the legislature is for small business of 2-5 employees that don’t have health insurance. Also, they will have a new state emergency pool. We have appointed the board for this emergency pool. The board has met, the applications have been developed and sent out. These businesses will not only get financial assistance, but they will get into this pool. Now, they can go to market with the pool of employees and get more bargaining power and a better deal on their health insurance. Everybody will pay their fair share if they can. It is going to be good for the health of the people who get health insurance and it is going to be good for the pocketbooks of everybody. We hope it is up and running in January.

SB 324 is going to use the bargaining power of the state to establish a 15% discount for prescription drugs for thousands of Montanans. The funding will also pay the Medicare Part B premium for about 20,000 low income Montanans so that they can use the Medicare prescription drug benefit. Another 8,000 kids will be admitted to CHIP. CHIP and State Medicare matching benefits also leverage about $10 million federal funds, which go to our hospitals and doctors all across the state.

We are fortunate to get grants from investment protection trusts. I head the Securities Commission and we work to protect investors and to provide financial education. Using one of our grants, we are working with AARP, the Department of Justice and the Federal Trade Commission to provide materials that will educate people about investing and watching out for scams and frauds that target investors in the state of Montana. We are not only going to be providing information to consumers, but we will also work with local law enforcement to crack down on the scams and the frauds and protect consumers. We encourage you to visit our website at investsmart.org . You will be able to offer this site to the folks in your county as a place to get quick information about investing wisely.

“OWNING EDEN”

Steve Pilcher, Executive Vice President, Montana Stockgrowers Association

Ron Aasheim, Conservation Education Administrator, Fish, Wildlife and Parks

Steve Pilcher

It may come as a little bit of a shock to have somebody from the Montana Stockgrowers Association sitting next to somebody from the Montana Fish, Wildlife & Parks, but there are occasions when we do find common ground and it’s that common ground that we are trying to build upon today.

It is obvious to all of you that Montana has been discovered. We are in the middle of a tremendous influx of people. Our big sky, our clean air, our clean water and, more importantly, our way of life has been discovered. There are certain parts of the state where this is an issue, namely, the Flathead and the Gallatin valleys. In the agricultural community we are finding a large number of ranches that are being sold to non-resident, non-traditional ranchers. We have seen them come here and expect to change Montana into what they had before. If they are not careful, they could destroy the very things that drew them to our fine state to begin with.

About three years ago, our Board of Trustees for our research, education and endowment foundation realized that we needed to take the first step to reach out to these people and help them understand that they were buying more than just real estate when they bought one of these ranches. They developed a booklet and coined the phrase “Keep Montana Montana.”

This non-resident, non-traditional ownership also creates some challenges for the Department of Fish, Wildlife and Parks and their wildlife management, so we have recently partnered to develop the video that we are going to share with you today. We are trying to get this message to people who we think would benefit from it. This is how you might be involved as well.

Ron Aasheim

We do feel a little bit like the odd couple. We don’t see the Stockgrowers Association and the Fish, Wildlife and Parks on the same agenda, talking about the same thing very often.

What we saw was the need to do something in a friendly, non-threatening way to visit with new landowners. We wanted to show them that their land purchase didn’t happen just last year, but that it was the result of compromise, conscious decisions and some sacrifice by Montanans. We think this is an important message. We’ve distributed about 1500 copies of the DVD to realtors, conservation organizations, land trust organizations, etc. A group in Bozeman works full time to spread this message. We want you to know about this, too.

GOVERNOR OF MONTANA

Brian Schweitzer

Some of you have noticed that during the last 10 months my hair is starting to take on a little bit of gray here and there. So, there would be those of you who think that the 90-day legislative session with your 150 great legislators from across Montana with their 10,000 separate diverse ideas would be the reason for my gray hair. Some of you would think that the reason for my gray hair is about making it through the fire season. Some would think taxation issues, but let me tell you what is happening here. I have three teenagers. Ben is 19 and is a freshman in college in Helena; Khai is a senior at Helena High School. They have grown up on the farm, so this is the first time they’ve ever lived in town. There is a lot of adjustment. I also have a daughter who is fifteen.

Had those people in the gulf coast and those hurricane forecasters contacted me when that hurricane was just a small tropical storm a thousand miles off the coast of Florida, I could have given them some great advice. I know I am just the Governor of Montana and a farmer, so what would I know about hurricanes? Not much, but my daughter’s name is Katrina and I could have told them the way this is going to go down: 1) She will arrive at an unexpected place and time and she will be late; 2) There will be a great deal of damage; and 3) Somebody else will be blamed. If they had just asked me, I could have explained it.

Counties should be happy. 1) The legislature came to town and for the first time in a dozen years, they didn’t leave town by dumping taxes back on counties and forcing you to raise mill levies. We didn’t raise anybody’s taxes and we didn’t force you to raise anybody’s taxes. 2) We eliminated the business equipment tax for 13,000 small businesses, but the business equipment tax will stay at 3% for all of you rural counties that have been counting on some of those business equipment taxes to run your counties. 3) We put more money in education than any legislative session in history--$80 million new money in K–12, which is one of the largest increases in the history of the state, a historic amount of money in higher education, colleges of technology, community colleges and university system. This is over $30 million more investment in higher education than in any other time in history. If we are going to attract new business to our communities, if we are going to help the business that we already have to grow, we need training and retraining. This is one way of reforming and rebuilding Montana’s economic strength.

Some 35 members of your organization have been appointed to commissions and boards. I’ve been spending a lot of time in your county court houses, meeting with you because I recognize that you county commissioners are ultimately responsible for these budgets.

They sent me some great legislators, 150 of them. They came to town for 90 days they talked and they talked and they talked and every single one of them had an idea of how to spend more money. And almost every one of them had an idea on how to cut taxes. But somebody has to pay the bill. We held the line on spending. We held the line on taxes.

You all understand you only get a certain amount of dollars and at the end of the year you can’t make new money. You are running your counties the way we need to run the state.

How much of the gas tax makes it to your counties and the cities in your counties? Jim Lynch came up with $16.7 million. There have been some politicians who have suggested that we suspend the gas tax. If we are going to lower the gas tax, I know a great place we ought to look. On the 30^th of August, the price of crude oil was $70.65. And it dropped to $64 and was back up to $65.40 today. On the 30^th of August the price of gasoline just began its rise. During the next 12 days it went up 54¢ when the price of crude oil went down 6 bucks. Now 75% of our crude oil comes from Alberta, 21% comes from Wyoming and 4% comes from Montana. There are four refineries in Montana--three in Billings and one in Great Falls. That famous Katrina disrupted the Gulf, but gasoline, diesel and aviation fuel that is refined in the Gulf has no physical mechanism of getting to Montana. We have the mechanism of exporting gasoline, diesel and aviation fuel from Montana. We refine about 180,000 barrels of oil in Montana and about 90,000 of it is consumed locally and 90,000 goes to North Dakota, Wyoming and eastern Washington. So you see, when the refiners here raised their price by some 50¢, they put the 50¢ in their pockets. Actually, they put more than that because the price of crude went down and they raised the price of gas.

Now, over the course of the last 50 years, we have been very good neighbors to these oil refiners. Over the course of the last 50 years, we have markedly reduced their property taxes. Over the course of the last 50 years, there have been many instances when their air emissions exceeded state allowable limits, but we worked with them because we were neighbors. But given a momentary opportunity to gouge us by 50¢ a gallon for gasoline and diesel, they took the advantage. Those people who would suggest today that we ought to suspend our gas tax with the expectation of these refiners lowering the price of gasoline by 27¢ a gallon would be disappointed, because they would keep that 27¢ too.

So, you can bet that anytime that there are public policy gurus that suggest that we ought to take $16 million out of county road maintenance pockets, you have a governor who will stand with you and say not only “No!” but “Hell, No!”

As you know, I am committed to finding millions of dollars in Montana’s operating budget that we can save. We want to make sure that we are delivering state government as efficiently as possible. We want to run state government the way you run your county governments. It’s been a long time since state government has squeezed pennies and I can promise you that we will do that now.

One of the places that we would like to find more money is in workforce training. We are committed to putting another million dollars into workforce training even though the federal government is sending us less money. We think that we will have a more efficient system.

During the last ten months, not only have I been coming to county courthouses, but I have been traveling outside the state as well. I’ve been meeting with potential business investors all over this country. Years ago there was a program called the Montana Ambassadors. Some of you have been Montana Ambassadors. The idea of the Montana Ambassadors was to have a group of Montana business leaders and community leaders that the Governor can call on when there are potential investors for Montana. If somebody is coming to Montana and they are looking at a financial business or banking business, we have bankers or people in the financial world who are Montana Ambassadors. If they are interested in agriculture or agricultural value added, or energy or manufacturing, we have Montana Ambassadors that are already in that business in Montana who can sit down with them, to talk about regulation and taxation, our great communities and promote Montana.

We have already formed the Montana Ambassadors branch in Seattle and San Francisco. We’ll do the same in Denver, in Minneapolis and around the country. You all have young people who are business and community leaders all over this country. When somebody leaves Chester or Havre or Forsyth or Billings or White Sulphur Springs and, even though they’ve been gone for 30 years, when somebody asks them in Seattle or Denver or Austin where they are from, they don’t say Seattle or Austin, they say, “I’m from Montana.” So, I’m asking them, when we get inquiries from any of these cities, “Will you go talk to them?”

We are going to continue to tell about Montana, where we have the greatest regulatory and tax environment anywhere in this region or across the country. More importantly we have safe communities, good schools, good recreational opportunities and great communities for families to grow in.

Montana has been blessed. Montana has 120 billion tons of recoverable coal. Of 120 billion tons, we probably have mined less that 650 million tons since the inception of this state. Now, we have proposals for more coal-fired electrical generation. The leadership in California says they need 25,000 new megawatts from Montana and Wyoming. I explained to them, “First, you need to step forward and be ready to contract those 25,000 megawatts, a thousand megawatts at a time. You need to say what you are willing to pay for the generation, for transmission and that you will do it for the next thirty years.”

“No,” they say, “We want somebody in Montana to build new generation and then somebody randomly build transmission and bring it to us. And if you can get it to us, then we would be more than happy to buy it.”

Unfortunately, five years ago in California, their energy market went upside down and their utilities are scared of long-term contracts. But until they do, it will be difficult for us to deliver.

California is a great market. In addition to needing a lot of electricity, they want 30% green energy. (Today the law is 20%.) So 30% of the electricity that we send them must come from green energy, which means wind power. So it means for every thousand megawatts of electrical generation that we produce, we need 300 new megawatts of wind power. 34 Montana counties have wind and coal.

Here are some of our challenges:

1) The Clean Air Act--If we generate the electricity the same way we do at the plant in Billings or as we do in Colstrip, we would have a maximum of about 3000 new megawatts that we could build in Montana before we bump up against the clean air standards. Each of those 1000 megawatts would burn 4 or 5 million tons of coal a year. So if we built three and used 12 million tons of coal a year, how long would it take to use 120 billion tons of coal? A long time…

2) Electricity is difficult because there are complications. You need someone to contract 20-30 years in advance. You need somebody to build the transmission lines. You need somebody to build the generation plants. The generation plants are going to take 5-7 years to build and the transmission lines take even longer. The utilities in California need to forecast how many megawatts they will need 8, 10,12 or 15 years from now. Almost every big electrical generation scheme over that last 20 years has included some bankruptcies like Colstrip 3 and 4. By the time we got Colstrip 3 & 4 built, there was not a significant market for the electricity, because some other electrical providers had come on. If you produce 95% of the electricity that the market demands, you have rolling blackouts and it’s a crisis. If you have 105%, somebody is going broke. It’s very complicated.

3) The technology has existed since 1923 to convert coal directly to diesel gasoline and aviation fuel. 58% of our oil is imported today. We import our oil from our friend Chavez in Venezuela who is now building his regime modeled after Castro’s. Mexico is large. Then we have Saudi Arabia, Iraq, Iran, Nigeria, Angola, Libya and all those countries that end with “stan”. Where is the energy security for the future of our county, our businesses or our communities? Our policy makers in Washington, D. C. apparently are happy tying our future to a bunch of crooks and dictators and sheiks from all over the world. In Montana, with 120 billion tons of coal at a conversion rate of 1.5 to 2 barrels per ton, we have enough coal in Montana alone to supply all of the diesel, gasoline and aviation requirements this entire country for 40 years and more and we can do it for around $1 a gallon.

Why aren’t we doing it already? One dollar a gallon is $42 per barrel. It looks as if oil and gas are going to stay above $35 a barrel. So if we can produce it in Montana, the Dakotas, Kentucky and Illinois, we have enough coal and oil shale to supply all of our energy needs for the next 150 years.

It takes a lot of capital. For example, a single plant built in Montana would probably take $10 billion. Now, they did pass an energy bill to take care of those who have been already importing oil. This energy bill will build only 30-40% of our refining capacity in the wake of a hurricane. We asked Senator Max Baucus to put a few sentences in that bill for a loan guarantee to build the kind of plant that we are talking about to convert Montana coal into diesel, gasoline and aviation fuel. It is an 80% loan guarantee. Venture capitalists here are excited about the proposal.

The Germans used this technology during World War II to make their diesel and South Africa has been making 200,000 barrels for the last thirty years. The Shell Oil Company is building 12 of these plants in China right now to convert Chinese coal and lignite. They have already built a plant in Malaysia and Exxon Mobile is just finishing their 100,000 barrel plant. Our time has come. Montana possesses 30% of the coal in this nation, 9% of the coal on this planet. We are the Saudi Arabia of the coal world.

This is a new technology. This is not the technology where you crush the coal, ignite it and get 25% of the energy to run a turbine with the sulphur, carbon dioxide, carbon monoxide, mercury and the arsenic all going up in a big stack. This technology puts the coal in a huge pressure tanks and use high-pressure steam to get methane. That methane is taken into another high-pressure vessel with an iron ore catalyst, which will break the carbon, hydrogen, oxygen into individual atoms. Then you can put it together in the sequence that you choose. You want to make fertilizer, you want to make diesel, you want to make gasoline, you want to make aviation fuel, you can do any of them and there is not a smokestack in the process. This process eliminates all of the sulphur, all of the mercury, and all of the arsenic in the resulting fuel.

A South African company was here this last week. They are in negotiations in China to build a 440 million barrel plant. 440 million barrels times $40 is what $18 or $19 billion. Our GDP in Montana is $23 billion. When they came here from South Africa, we wanted to show them the refinery in Laurel, the two refineries in Billings, the plant at Colstrip to show them a world class energy project; then the Decker Mine and over Miles City and along the Yellowstone River and over the Big Open west of Circle to show them that lignite that is deposited under the Big Open. When we got out to the Big Open at Circle, at about 10,000 feet, we did a long series of 360’s over this whole large area. So I showed them the map where we could have 10,000 workers in a single place, producing as much energy as any place on the planet, with towns like Glasgow and Wolf Point and Glendive and Sidney and Jordan and Miles City and Billings all close enough that they could commute to this project. There is already a rail into Circle and Fort Peck dam is only 15-20 miles away. So we have water and there is a highway through it. I was excited about this. But at 10,000 feet, these people from South Africa were looking out that window and you know what they saw? Not a damn thing. At 10,000 feet, they couldn’t see a road; they couldn’t see a fence post; they couldn’t even make out any cattle. We headed towards Colstrip and as we came closer, we could see those big stacks and then we flew over the most sophisticated coal strip mining anywhere. Then we landed and when we saw the plants and the mines, these folks from South Africa, who had been making coal into diesel and gasoline for thirty years, started to see that maybe 40 years from now the Big Open of Montana could be the next Colstrip.

The Shell Oil Company has dozens of patents in this coal liquefaction. The Southern Company, which is one of the largest utilities in America based in Atlanta, has patents on coal gasification. General Electric is interested in coming to Montana to talk about this.

In Montana we have been looking at each other for 50 years and saying, “How’d we get to 47^th place? Why does another state manage to get there before us? How is somebody else able to pay for scholarships for their kids to go to college? Why are our wages nearly the lowest in the country?” So, we have called an energy summit in Montana. Seven state governors are coming and at least a couple of US Senators. The energy world will be in Bozeman, Montana the 18^th of October, with Montana as a leader in the new world of energy.

U.S. SENATOR MAX BAUCUS (videotape)

Thank you for your hard work and dedication. I appreciate all that you are doing and through the work here in Washington, we are working together to make Montana a better place to live, a better place to work and raise families and to bring more higher paying jobs in Montana.

Your number one issue is the federal program that compensates the counties for non-taxable land--PILT. I co-sponsor legislation continuously to support and to fund PILT. Every year administrations cut back on PILT funds and we in the Congress have to restore it. Even though the President has cut PILT again by 13%, we will continue to fight until we get full funds for this very, very important program.

We finally did pass a new transportation bill. I used my position to bring more highway dollars to every part of our state and boost our state’s economy and good paying jobs. This will pump more than $2.3 billion into our state’s economy. That’s about a 44% increase over the last highway bill. That will sustain about 15,000 high-paying jobs. I thank Jamie Doggett, who helped us work out the details on the bill. You probably heard some rumblings in the wake of Katrina that some projects will be cut from the highway bill. That’s not going to happen. The highway bill is going to remain intact.

For the new energy bill I teamed up with the chair of the committee, Chuck Grassley. We included items that will mean a lot to Montana. One example is to help develop free coal tracts in the southeastern part of our state into a clean-burning source of energy. I also included incentives to spur domestic energy production, to boost conservation efforts and help develop alternative sources of energy such as wind, solar, biomass and ethanol. I am committed to lessening our dependence on foreign oil and increasing ways that we can have reliable, affordable energy here at home.

In other energy news, I know that gasoline and heating costs are a big concern for many people. All lawmakers are involved with the low-income energy assistance program. As winter months continue to grow closer, we will keep a close watch on that. Gasoline prices have been going up and we don’t want price gouging to occur.

The gulf coast has suffered a devastating blow and thanks go to all of you and other Montanans who lend a helping hand. It meant a lot to me to present a check for $15,000 from Montana to the American Red Cross. I have done all I can to make sure that legislation moves very quickly through both the House and the Senate to provide needed relief.

Service is a most noble human endeavor, to serve your church, your family, your community, etc. Thanks to all of you for your service.

U.S. SENATOR CONRAD BURNS (videotape)

Thank you for the everyday work that you do for our counties.

The work that we have to complete here in our part of the world includes the appropriations process for the devastation of the storms that hit the Gulf of Mexico. We’ve had a number of Montanans go to the gulf coast to help and many others who donated to the relief effort. I commend those from our great state who have shown their support and compassion for those in need. The area will survive and flourish once again, due mostly to strong local government leaders.

That demonstrated that we must prepare for these things. In Montana we have temperatures below zero, blowing snow, fires, floods and earthquakes. Your role in making sure our state is prepared for any type of emergency, natural or manmade, is a vital one. We, in the federal government, will and should be there in a support role. Ultimately, however, state and local government should be prepared for potential disasters. Officials at every level should have the tools and resources to keep our citizens safe.

Montana’s environment is one of extremes. We are the 4^th largest of the 50 states and the population is sitting in the lowest 10%. This diversity makes the role of our governments crucial in the day-to-day lives of our constituents. That makes the issues you address and the work that you accomplish here all the more important.

For the Railroad Transportation Act of 2005, with the support of your resolution, I introduced a bill to limit the impact of railroad monopolies on captive shippers. Rail Link and Burlington Northern/Santa Fee are the only games in town. All Montana rail customers pay premium rates and subsidize lower rates in areas where there is competition. This legislation would create a level playing field in order to compete on the global commodities market. I plan to continue working towards its passage and put an end to the captive shipper situation that we find in Montana. Your support in this endeavor has been vital to its success, so I thank you.

We are working on an appropriations bill which includes great Montana projects, forest fire repayment every year and PILT. I have been working to insure that these funds increase every year and that they continue to make it to our counties. I will continue to work to get Montana the money to improve our infrastructure and community services like schools, law enforcement, fire fighting, roads, water and wastewater, E-911 and modernizing emergency communications centers. Interoperable systems are vital for safety to our citizens.

The work you all do locally is what makes the economy flourish. Without your hard work, Montana wouldn’t be the state it already is today.

ON BEHALF OF U.S. REPRESENTATIVE DENNIS REHBERG

Randy Vogel

Because commissioners are so important, Representative Rehberg travels to all of your counties every legislative term. We have our staff here working throughout the MACo convention so that you can talk with them at anytime.

Our chief of staff, Erik Iverson, grew up in Montana in the Sweet Grass hills in north central Montana. He earned a law degree out of the University of Oregon and worked for former Congressman Rick Hill. He lives in Missoula and is articulate with his message.

Erik Iverson, Chief of Staff

Years ago, I called my Grandmother in Shelby and said, “I just got a job with Rick Hill. As soon as I take the bar exam, I’m going out to D.C. and take this job.” And she said, “That sounds about right. A lawyer is the larval stage of a politician.” This is the same woman who liked to say, “The biggest problem with political jokes is when they get elected.”

As Chief of Staff I manage our offices in Montana (Billings, Helena, Great Falls and Missoula) and one in Washington, D.C. I lived in Washington, D.C. for the last five years. Denny asked me to move back to Montana, so I live in Missoula and spend time going back and forth between Washington, D. C. and our Montana offices.

One of the issues that are important to Denny is gas prices and the gas tax and a suspension of the tax. There is a plan to call for a temporary 30-day suspension of the federal gas tax (about 18.4¢) and a temporary 30-day suspension of the Montana gas tax (about 27¢). Montana, which ranks about 48^th in wages, has the 5^th highest gas tax in the country.

I wish that I could tell you that Denny invented this idea. He didn’t. They are doing it now in Georgia and Washington. Kentucky, Maine, North Carolina, Massachusetts, New York and Connecticut are all considering it. Kentucky has gone to a four-day school week in order to conserve energy. Indiana is looking at doing the same thing.

This is the time for all ideas to be on the table. If we can do this in such a way that it doesn’t impact your county road budget, then we should not dismiss it. A temporary 30-day suspension of the Montana gas tax (at the high end) is $16.7 million. That’s 5.5% of the projected surplus in the Montana State budget, which could go back to families, farmers and small businesses that created the surplus. Denny doesn’t think it is too much to ask, particularly when you do it through backfilling out of the state general fund. It wouldn’t impact the county budgets because we have the surplus to backfill the Highway Trust Fund, which is used to match the federal dollars. Denny wanted me to clear up any misconceptions about what he was trying to do. When he is talking about gas tax relief, we are doing it under the auspices of not having any damage to county road budgets.

Another subject is PILT funding. The federal government continually under-funds its promise to states like Montana. In the last five years, we have increased PILT funding every year over previous years.

The Highway Bill was a team effort with Baucus and Burns. It really paid off. We have a solvent highway bill that we don’t want to jeopardize through suspension of the gas tax.

When some of you were in Washington we talked about CDBG because the President’s budget tried to eliminate it. It is funded, not at the level that some of us wanted, but close to that 2005 level.

Methamphetamine funding is a top priority of Denny’s. He met in the White House office of drug control policy and asked them to pay more attention to the drug problems in rural America. We have a problem in rural Montana with methamphetamine and we are disappointed with the President’s budget for funding.

Finally is the Endangered Species Act. If you have never heard the phrase, “Washington, D.C.--too small to be a state, too big to be an asylum”, the Endangered Species Act typifies that. Here is a program that has 1300 listed species and less than 1% has ever been recovered.

There is a case in Utah where a guy bought some farmland with several different ponds on it. He had been living there for a couple of months when the federal government notified him that there was a protected little snail in one pond. They hit him with all sorts of fines and said he couldn’t use the water. During the next autumn, geese start coming in. The farmer does what he is supposed to do and reported to the federal government that geese were on the pond. What did the federal government do? They threatened to fine him $75,000 for every snail they found in the belly of a goose. (Question from audience) So, how do they find snails in the belly of a goose? …Geese don’t generally voluntarily give up what they have eaten. So, somewhere along the line, the geese are going to be in trouble to save this protected species.

The Endangered Species Reform Act will provide incentives to landowners who want to voluntarily come forward and say they have a protected species on their land. It gives incentives to landowners to be part of the solution. It also reinstates the scientific Peer Review Board so we have solid science when listing these species. It is a good bill. I urge you to make contact with Conrad and Max, because it is important.

QUESTIONS

Connie Eissinger, McCone County

Have there been any amendments to the legislation?

Eric Iverson

This bill is not a re-authorization; it is an entirely new reform bill. There will be amendments added in the House floor. We will have a pretty good idea of what they are and I can get them to you.

The bill is HR 3824. There is a spot on our website where you can check on it. Or you can call our office at 202-225-3211 and we will get you any information on amendments. This may be one of those proposals where we have to go back several times. That is where you all come in. We get phone calls, letters, emails, but when county commissioners contact us, Denny takes note of that. If you tell NACo that this is a big deal to Montana and to rural America, they will fire up their lobbying team and put some pressure out there. NACo is one of the most powerful lobbying organizations in Washington.

Elaine Allestad, Sweet Grass County

Can you explain the de-listing process?

Eric Iverson

There will be a different scientific review board set up for de-listing. It is going to be run through federal agencies because independent boards become cumbersome and are often influenced more by political philosophy than by scientific data. This bill will create a more subjective standard. There will be the rule making process and you can bet that whatever administration is in power is going to try to tweak it. We hope we will have Congress shaping this versus an untouchable group of academics making decisions that are often not based upon science, but upon ideology.

I look at the bill and say it is “watered down.” Other people look at it and say it is off the charts in favor of landowners and in favor of rural America.

Nancy Espy, Powder River County

How much money is 18.4¢ per gallon federal excise tax as a reduction for 30 days and what federal programs does it finance?

Eric Iverson

The program finances the Federal Highway Trust Fund. You are talking about 18.4¢ in the federal tax and 27¢ in the Montana tax. So, those two combined are 45¢ - 46¢ a gallon in savings. For 30 days, we have been told the amount in Montana on the high end is about $16.7 million. We have a $300 million surplus in Montana, so we are looking at 5.5% of our surplus going back to the taxpayers who created that surplus.

Are you back filling that with federal money?

Yes, the federal gas tax portion would be used, as would the Montana gas tax portion.

MONTANA DEPARTMENT OF REVENUE

Dan Bucks, Director

Jean Curtiss, Missoula County

It is my privilege to introduce to you Dan Bucks, who is the Director of the Department of Revenue. He worked for the state government in South Dakota and served as the Deputy Director of the Montana Department of Revenue from 1981-1988. He was the Executive Director of a multi-state tax commission while living in Missoula. He was on the County Planning Board in Missoula, so he got a first hand look at county government.

Dan Bucks

Some of the best training I have had for the work that I currently do came from serving on the consolidated City/County Planning Board in Missoula. One lesson I learned is don’t make decisions after midnight and the second thing I learned is if you do make the mistake of making decisions after midnight, don’t try to explain your decision, because the minutes of the meeting can get really ugly. I also learned from that experience to listen very carefully and listen well. What other people have to say is generally more important than what you have to say. The facts and the issues are rarely as simple as you originally think they are and you learn from listening carefully and you make better decisions. Another thing I have learned is to be ready to cooperate with other people especially those with whom you disagree. When you begin working on practical projects and real decisions, you find that you can learn from each other and find creative solutions and common ground where you never thought you could find it before.

I want to add my deep appreciation for the work that you do on the front lines every day delivering services, making difficult decisions affecting the future of your counties and collectively the future of Montana. Whether you are dealing with fast growth or declining population with little growth or you’re dealing with aging infrastructure and also an aging population on fixed incomes, you face difficult choices. Time and again, through patience and creativity, you come up with innovative solutions to serve your citizens well.

In FY 2002, (the latest year for which the Census Bureau compiled all the data on state and local finances in Montana, where the money came from and where it went) the largest single source of revenue for state and local governments in Montana was not from our own tax system. It was from the federal government. Federal revenues comprised 29% of the total receipts of state and local government in FY 2002. The second largest source is property taxes at 15%. With surprisingly large tuitions plus other charges for services along with interest earnings at 12% (more than the income from the income taxes), you get another 26%. There are other taxes and other receipts, but that is basically the rank: federal revenues followed equally by property and income taxes, tuition and other charges, and interest. This state is more dependent on federal revenues than it recognizes, so trends in federal revenues and what happens with the federal budget have a great impact on this state.

Where does the money go? The largest category of expenditure in our state is education and investment in our children and the future of our state. On a state and local basis, 36% goes to education. The second category is health and human services at 21%. Together they are a little better than half of the expenditures of state and local government. At the state level in 2005, education and health and human services comprise 73% of the total budget--the largest expenditure categories in this state. The state faces a court mandate to finance quality education. There is, as well, a looming problem of under-funded pension plans. There are rising energy prices and, while there is revenue from energy taxes, there are countering effects in terms of expenditures.

Montana is terribly dependent on federal revenue sources, more than other states typically. That is going to create problems for state and local governments in the future, because those federal resources may not be available in the future. Deficits continue at the federal level; commitments to military expenditures and the reconstruction of the gulf will come through cuts in other programs.

Montana is a state of people of modest means and the Governor is committed to not raising taxes. So, if we have dwindling federal resources, pressures from education, from unfunded pension plans and from rising energy prices, how are we going to keep the budget balanced, which is a constitutional mandate? One is to make the state operation is as efficient and effective as possible. Second is to make smart decisions on priorities to fund things that are most important. And third is to make sure that all of the taxes that are owed are actually collected.

One of the best ways to keep from raising taxes is to collect all the taxes fairly and equitably so that everyone pays their fair share. That lands directly with the Department of Revenue and we are committed to doing that job. We make three promises: One is to serve citizens as best we can to help them to file and to pay their taxes. Number two is to insure that citizens and business all pay their fair share of taxes. Third is our special commitment to counties to cooperate and to improve our communications with you.

Since I worked in the Department of Revenue in the 1980’s, there have been some changes such as the computer system. But as it was 1980’s, the relationship between the Department of Revenue and the county governments is still less than desirable and I am intent on changing that.

The Department of Revenue is annually responsible to collect over $2 billion of taxes each year, a little over a billion on the property tax side and about a billion on the state tax side. State government collections need to be healthy, because if the state government finances aren’t in order, that tends to impact local governments. We have an absolutely wonderful group of taxpayers in Montana; they are the Department’s best assets. The vast majority of Montanans, the half a million taxpayers, year in and year out file and pay taxes on time.

Now, there are exceptions that take more of our time. Most of these are out-of-state corporations and non-residents. They are not paying their fair share of Montana taxes. That’s where the bulk of our revenue challenges exist.

One thing that we are doing to provide better service and to insure that the taxes are fairly and equitably collected is to replace the computer system that did not work. This new system is called the Integrated Revenue Information System, IRIS. We have converted six taxes to it, and the seventh tax (the largest, the individual income tax) will be converted in October. We expect it to work as well as it has with the previous taxes that we have converted. It will provide better service to taxpayers and better ability to find the taxes that aren’t being paid.

The rest of the world operates on a monthly billing system. The Montana Department of Revenue has been sending two bills for delinquent state and income taxes. So, we are going to start a monthly billing process. That is going to be a bit of a transition. There are 19,000 people who are delinquent on their taxes. Some of them have not heard from the Department in a long time and because the numbers are updated with penalty and interest, people will be surprised. So, I’m asking you as county officials for your help. People may complain to you that they got this bill from the Department of Revenue and they don’t know what it is all about. The bill will indicate to call 444-6900 if they have a problem and we will work hard to resolve those problems. If you hear that they have tried that or it appears as though the problem is especially difficult, have them call my office at 444-1900. Monthly billing is the right way to conduct business, but the transition could cause some concern. So, please help get people directed to the Department.

In terms of collecting state income taxes fairly and equitably, we have two major problems. One is to correct the problem of illegal tax shelters used by out-of-state corporations and non-residents. The second one is to encourage non-residents to pay their Montana taxes. The illegal tax shelters are not a problem that arises from Montanans and their tax practitioners. They did not buy these phony schemes that were marketed by three giant accounting firms to large corporations and very wealthy individuals, working in alliance with nationwide law firms and investment banks. Even though this problem is largely out of state, it is one that affects our finances, because many of these companies and individuals are filing and paying taxes in Montana, but not paying the right amount. I’m proud to say that we are the smallest state in the country that is trying to work on this problem. We have identified 150+ corporations that use illegal tax shelters to improperly understate their income not just at the federal level, but also in Montana. Now, that may not sound like that much, but it involves millions of dollars that should have been paid to the state treasury and that other taxpayers should not be asked to make up.

In the Department, we are only able to audit about 25 corporations a year, because these plans, these illegal tax shelters, were mass marketed and, at the federal level, have resulted in a number of cases. We could produce more results if the legislature would enact the same rules at the state level that have been enacted on the federal level. Honest taxpayers have income disclosed to tax agencies on W2’s and 1099s. These illegal tax shelter incomes are not required to be disclosed in Montana. There are established tools for doing this at the federal level and we need the same tools at the state level.

Another problem with non-residents is the lack of reporting on the income gain or profit on the sale of Montana property of non-residents. For Montana residents, true to their values as honest taxpayers, the non-compliance rate is only 3%--very low in the income tax world. However, the non-compliance rate for out-of-state people is not 3%; it’s 73%! Only 27% pay taxes on their gains on Montana property. We have identified through skillful cross-matching over 1400 cases in one recent year alone of non-residents not filing and paying taxes on the income from the sale of their Montana property.

Now, we contact these folks and ask them to file returns. Some of them will, but many of them will ignore us, because they know that it is very hard for the Department of Revenue in Montana to accomplish an out of state collection. It costs a few hundred dollars per case to collect a delinquent tax from a Montana resident. It costs us 25 times as much, over $5,000, to collect a delinquent tax from an out of state resident. We have to hire an attorney out of state to go to court and collect that debt. A rising number of states are requiring non-residents to have the withholding on taxable gains done at the time of sale of the property. We are hopeful of convincing the legislature to provide that.

The Governor championed what we believe is a sensible and balanced approach to the business equipment tax. Before this last session, the state of Montana had a very hard calculation on an unpredictable trigger that would have potentially eliminated all the business equipment taxes entirely. The revenue need would have shifted the taxes from the business equipment taxpayers to homes, main street businesses and other property. The Governor proposed to keep the low and highly competitive class rate of 3%, but to raise the threshold for exempting business taxpayers from $5,000 to $20,000 per year. That eliminated 13,000 taxpayers from the tax rolls. The Governor also proposed reimbursing local government for exemptions. Unfortunately the legislature did not provide that funding. Nonetheless, it provides predictability for you, because you do not face the situation of a large shift of tax from one group of taxpayers to another by having that unpredictable trigger go off and causing that tax to go to zero. This coming year we will contact all taxpayers who had more than $5,000 in business equipment or who had been exempt, to ask for report forms.

The next reappraisal cycle needs to be completed by the end of 2008, with new assessment notices sent out in 2009. We face the largest challenge since the first statewide reappraisal in the 1970’s. That’s because of three factors. 1) The state will, as it has in the last two cycles, face district changes in values in different parts of the state--the mountainous regions and urban areas versus the plains and rural areas. These district changes in values will produce difficult policy issues for the state legislature and taxpayer reactions in different parts of the state. 2) We will be completing agricultural land reappraisal on a comprehensive basis and reclassifying all agricultural land for the first time in 40 years. This needs to be done or the whole reappraisal process could be called into question. 3) We will have to replace a computer system as we do the reappraisal. We know that our system needs to work with your systems. So, we are going to create a stakeholders group with local government comprised of representatives of county commissioners, treasurers, clerks and recorders, your technology staff, systems vendors and other experts to meet formally so that this system will work.

Finally centrally assessed property has been a matter of increasing litigation and legislative attention because it is really a legacy of deregulation both in the electrical area and the natural gas area. The real danger in all this litigation and all this legislative process is that the very concept of centrally assessed valuation, of unit valuation, could be eroded and lost to the great detriment of the other taxpayers. Unit valuation is a tried and proven method of properly valuing property that comprises an interrelated system where one part is dependent on another, where functions of the transportation system to get products from point A to point B, or where energy is generated at one location and distributed elsewhere. Basically the central concept of unit valuation is that the value of systems is typically different from and often greater than the sum of its parts. One of our goals in this process of litigation and legislation is to safeguard this concept of unit evaluation and central assessment. It has a great and dramatic affect on local governments if this concept is lost in this process.

We will do our best to get the values right. We will defend those values vigorously in any appeals. We will eliminate any unnecessary delays and if there are opportunities for settlements, we will make those settlements, recognizing our responsibilities to all the taxpayers of Montana to making sure that every one is as close to market value as humanly possible.

Counties in the state had a difference in the legislative session on one piece of legislation that would have established deadlines for property tax protests. We vigorously pressed the case that those deadlines would have prevented the Department of Revenue from defending its values properly and would have given an advantage to all centrally assessed taxpayers and would have resulted in a large shift of tax base from centrally assessed taxpayers to other taxpayers. The deadlines would not work. It would allow companies to stonewall us in the process of litigation and hide information until the clock ran out, thus giving them an advantage and leaving us to have to settle many more cases. We will work at eliminating unnecessary delays. We will work to strengthen our ability to get the values right and defend them effectively and on a timely basis in the protest process. I am interested in exploring your ideas where the department can do its job and taxpayers can make their appeals about market value without disrupting local finances so that you can set your budgets with greater certainty and predictability.

Our commitment to you is to work as cooperatively with you as we can and to communicate as much as we can. I have begun a process of teleconferences with counties affected by centrally assessed property appeals and other matters that affect the counties. We will do that consistently and regularly. When we do things that affect you, we will let you know promptly. If there are other ways that we need to improve our communication and our services, we will do so. Please let us know. We know that you have ideas. We want to work with you to help move this state forward.

MACo BYLAW AMENDMENT #1

ARTICLE V

EXECUTIVE DIRECTOR

Section 1. DUTIES AND RESPONSIBILITIES

The Executive Director shall perform such duties as are assigned by the Board of Directors for implementing Association policy, and shall be responsible to the Board.  The Executive Director shall supervise the Association office and staff. The Board of Directors shall be responsible for an annual evaluation of the Executive Director

The Executive Director shall compile, publish and maintain a Staff Policy and Procedures Manual, which shall be reviewed annually by the Board of Directors.  The Staff Policies and Procedures Manual shall include a detailed job description for the Executive Director and such other staff positions as may be created.

The Executive Director shall be responsible for the hiring and termination of staff personnel consistent with the Staff Policies and Procedures Manual.

The hiring of an Assistant Associate Director shall be by the Executive Committee and by the Executive Director requires the concurrence of the Executive Committee and with confirmation by the Board of Directors.

MACo BYLAW AMENDMENT #2

ARTICLE II

MEMBERSHIP

Section 1. MEMBERS:

Members shall be the elected officials of those counties which have paid their annual dues in accordance with a schedule of dues or assessments adopted by the Board of Directors and ratified by the membership. Members shall be entitled to all services offered by the Association.

Section 2. VOTING

Each member county, pursuant to Section 1, has one vote. The Board of County Commissioners shall appoint one county delegate and one alternate to have the authority to vote for that member county at membership meetings of the Association. The voting delegate and alternate must be elected county officials. A member county’s registered voting delegate may vote by proxy at any meeting of the membership. The proxy must be in writing and signed by the voting delegate or alternate and shall name the person to whom the proxy is delegated and the subject for the vote(s). The proxy must be delivered to the President prior to voting action being taken.

Section 3 and 4 remain unchanged.

RESOLUTION 2005- 01

Resolution in Support of the MARIAH Hypersonic Wind Tunnel

It is the intent of the Montana Association of Counties to support the development of a pilot-scale hypersonic wind tunnel in Butte-Silver Bow County at the Mike Mansfield Advanced Technology Center

WHEREAS, the Montana Association of Counties would like to advance the MARIAH Hypersonic Wind Tunnel Program as an initiative having a statewide economic impact; and

WHEREAS, the current efforts related to the Magnetohydrodynamic Accelerated Research Into Advanced Hypersonics (MARIAH) hypersonic wind tunnel are led by Butte-based MSE Technology Applications, Inc., which coordinates a superb cast of team members, including Sandia National Laboratories, Lawrence Livermore National Laboratory, Oak Ridge National Laboratory, Princeton University and AeroSystems Engineering, Inc.; and

WHEREAS, the current program is intended to develop a pilot-scale hypersonic wind tunnel in Butte at the Mike Mansfield Advanced Technology Center; and

WHEREAS, this pilot-scale hypersonic wind tunnel will be used to demonstrate the utility of a large-scale hypersonic wind tunnel, which must be built if the nation is to be competitive in hypersonic technology; and

WHEREAS, in all probability, the large-scale hypersonic wind tunnel will be built at a secure military installation; and

WHEREAS, Malmstrom Air Force Base is a secure military installation located in Montana and possesses the necessary infrastructure required for a large-scale wind tunnel; and

WHEREAS, the Montana Association of Counties, the State of Montana, the Governor, the Department of Commerce, the Office of Economic Development, the Montana Aerospace Development Association and MSE Technology Applications, Inc. wish to make every effort to ensure that the program, and the resultant jobs, are established and remain in Montana; and

WHEREAS, the large-scale wind tunnel will provide an initial economic investment of up to $500 million; and

WHEREAS, the economic spin-off from this project will have tremendous benefit to the entire State of Montana; and

WHEREAS, the State of Montana, endeavors to become a leader among states in the field of high technology generally, and specifically in hypersonic flight technology; and

WHEREAS, the Montana Association of Counties recognizes the economic impact of Malmstrom Air Force Base and wishes to see Malmstrom continue to have a viable mission well into the future; and

WHEREAS, the MARIAH hypersonic wind tunnel will have a positive economic impact on the Montana University System and the communities associated with the University System; and

WHEREAS, aerospace and defense companies will most likely develop a physical and economic presence in Montana during construction and after completion of the large-scale wind tunnel; and

WHEREAS, the Congressional Delegation from Montana has been very supportive of the MARIAH Hypersonic Wind Tunnel Program; and

WHEREAS, the Montana Association of Counties recognizes the Montana Aerospace Development Association as a valuable resource in forming public/private partnerships to support the site for the large-scale wind tunnel,

NOW, THEREFORE, BE IT RESOLVED that the Montana Association of Counties supports the efforts of MSE Technology Applications, Inc., to successfully complete the pilot-scale hypersonic wind tunnel in Butte, and;

BE IT FURTHER RESOLVED, that the Montana Association of Counties supports efforts to locate the large-scale wind tunnel in Montana, and;

 BE IT FURTHER RESOLVED, that the Montana Association of Counties urges the Montana Congressional Delegation to continue to support the development of the MARIAH Hypersonic Wind Tunnel Program in Montana.

SPONSOR: MACo Economic Development Committee

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