Texas Wine and Grape Growers Association Board of Directors Meeting Wednesday, February 21, rd Floor Meeting Room 6 Irving Convention Center

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1 Texas Wine and Grape Growers Association Board of Directors Meeting Wednesday, February 21, rd Floor Meeting Room 6 Irving Convention Center Call to Order Dusty Timmons The meeting was called to order at 12:00 noon by President Dusty Timmons. Roll Call Dana Pool Officers Present Dusty Timmons, President; Bob Landon, Past President; Mike McHenry, President-Elect; and Dana Pool, Secretary. Board Members Present Brenda Canada, Chace Hill, Gabe Parker, Jon Bowden, Stephen Morgan, Penny Adams, Paul M. Bonarrigo and Patrick Whitehead. Incoming Board Members Present Stan Johnson, Jesse Barter and Jason Englert. Officers and Board Members Not Present Dusty Evans (No Proxy), Mark Tyler (No Proxy) Susan Steger (Proxy to Gabe Parker); Pat Brennan (Proxy to Mike McHenry); Carleton Turner (No Proxy) and Fredrik Osterberg (No Proxy). Staff present Debbie Reynolds, Executive Director; Kyle Frazier, Legislative. Guests Attending - Dr. Justin Scheiner, Dan Lineberger, Fran Pontasch, Larry Stein and Michael Cook. Approval of Minutes Dana Pool The November 4, 2017 Board meeting minutes were distributed by . There were no corrections. A motion was made by Stephen Morgan to dispense with the reading of the minutes and accept as distributed. The motion was seconded by Mike McHenry. Motion Passed. Treasurer s Report Debbie Reynolds As of December 31, 2017, the TWGGA Bank Account balances were: Wells Fargo Operating = $101, Wells Fargo Savings = $141, Frost Bank Association Reserve = $5, Profit and Loss: 1

2 Income Focus - Membership and Exhibitor revenues exceeded budget by 5.5% and 14.2% respectively. We knew the Exhibitor revenue would increase because the 2018 conference has 40 more booths than in the previous year. - Registration numbers were up but revenue was down. More students and educators are taking advantage of deeply discounted registrations for events. TWGGA has not raised event registration fees in over eight years. There are no plans to raise any fees in the near future unless sponsorships decrease. - Sponsorship was down approximately $10,000 due to the lack of a Conference Presenting Sponsor. Currently, sponsors remain committed to the Association s events. Expense Focus - Expenses exceeded budget in several areas The Association prepaid $40,000 in future conference costs (2018, 2022, 2024). The 2018 Conference is 95% paid in advance. The Association has taken over funding TX Wine Passport Mobile App reward redemption. There was $14,000 in TCEQ consulting fees paid to RSAH20 that were not budgeted in TWGGA has an $18,000 Specialty Crop Grant for 2018 to fund grape acreage and varietal survey collection. TWGGA is working with USDA/NASS to coordinate with their survey. There will be no Economic Impact expense in 2018 because of the funding of the national economic impact by WineAmerica in Cash Flow: Continues to be strong and steady over the entire year. As of January 31, 2018, the TWGGA Bank Account balances were: Wells Fargo Operating = $126, Wells Fargo Savings = $141, Frost Bank Association Reserve = $5, Profit and Loss: Income Focus - Membership: This was the strongest month for membership renewals and new members joining the Association. We set a bold goal of $15, 195 and exceeded the goal by $2,065. Expense Focus - Prepaid 80% of Superior Expo Services bill and 80% of the conference wine ordered. The budget process is every December so the Association looks at an 11-month actual. The TWGGA Staff sends the budget to the Board for approval by December 15 th. The budget for the Annual Conference is set based on the future event one year in advance. For example, 2

3 the 2018 budget based Annual Conference revenue on the 2019 Conference. There is always the ability, when it makes sense, to adjust the budget in mid-year. For the 2023 TWGGA Conference, Bryan/College Station was an option but using the university facilities was a very high cost. The Association is not opposed to Bryan/College Station using the newly built Executive Center/Hotel. After the 2018 Conference, the Association should look toward 2023 and beyond. Debbie attended the opening of the Embassy Suites Denton where the 2022/2024 Annual Conference will be held. The property is first class. The growth of the Annual Conference and locking in lower rates in advance are two key considerations when planning the future conferences not currently locked in. A motion was made by Paul M. Bonarrigo to approve the Treasurer s Report. Stephen Morgan seconded the motion. Motion Passed. President s Report There was no President s Report. Dusty Timmons Legislative Report/State Kyle Frazier This is the 3 rd Sunset Process for TABC. It is an extensive management audit of the agency, not the code. The end result of Sunset is that the agency date extension legislation must be passed in the 2019 Legislative Session or the agency ceases to exist. Kyle distributed a handout outlining the TABC Sunset Process and schedule. This handout will be shared during the Thursday, February 22 General Session at 5:15 pm. Board members can follow the Sunset Process at The Speaker of the House and Lieutenant Governor appoint members of the Sunset Committee. The Sunset staff is composed of evaluation and administrative professionals that support the Commission by performing agency reviews and assisting in the legislative process. Any interested person can sit down with Sunset staff to discuss whatever is on their minds relating to the agency currently under Sunset review. Kyle has met with most of the Sunset Committee members from the House and Senate. There will be a Sunset Committee/Commission Staff wine tour in the Hill Country set up this Spring to take these members/staff to several Texas wineries. Kyle encouraged Board members to attend the TABC Round Tables meetings being held all over the State. As well, TABC staff (Matt Chaplin, Thomas Graham and Jared Staples) will be hosting a session at the Conference Thursday, February 22 at 9:45 am. 3

4 TWGGA has hosted two Town Hall meetings Region 5 on November 7, 2017; Region 3 on February 2, The future Town Hall meetings are scheduled for March 19, 2018 (Region 2 at Landon Winery in Greenville) and April 26, 2018 (Region 1 at Reddy Vineyards Event Center in Brownfield). The Texas Commission on Environmental Quality (TCEQ) will participate in the Region 2 Town Hall. Kyle was contacted by Senator Dawn Buckingham who indicated the 100% discussion will continue for the 2019 Legislative Session. She has requested TWGGA to work with her on the legislation verbiage. TWGGA will release the annual legislative survey and meet with other alcohol groups before the end of April. TWGGA s biggest concern is what Southern Glazer s and Republic will do. Based on the two Town Hall meetings, no definitive issues have surfaced. The Board discussed the March 7 election and possible outcome. There is expected to be few changes in the Senate. The House will change due to a new Speaker of the House in 2019 and Democrats may pick up more seats. Legislative Report/Federal Debbie Reynolds Texas was very instrumental in getting the Craft Beverage Modernization Act passed. The TWGGA staff was active in contacting many key Congress members. The excise tax reform will expire at the end of 2019 so it is vital we continue working to extend those tax breaks. WineAmerica will send out a survey asking wineries to say what they are doing with the money they save on taxes. After a brief government shutdown, Congress passed a two-year budget agreement that sets the spending levels for the Federal Government through fiscal year First and foremost, the bi-partisan bill continues to fund the Federal Government at current levels through March 22, That will give the House and Senate Appropriations Committees time to finalize a long-term spending package that will fund the government the remainder of fiscal year The two-year budget agreement outlines the money Congress can appropriate to fund the Federal Government. It raises spending on defense and nondefense programs by $300B and features $80B in disaster relief. The bill also suspends the debt limit until March 2019 which means the U.S. will not default on its loans. The U.S. Department of Agriculture s Market Access Program (MAP) for export funding remains at $200M, divided among many commodities. The level of funding for the TTB to expedite licenses and label approvals will increase in 2019 (current level $105M). There is a focus on agriculture and the Farm Bill. Industry leaders are pushing for funds for the National Agricultural Statistics Service (NASS) and Economic Research Service (ERS). It has been a while since meaningful and available current data was cranked out by these groups. Budget cuts over the years have resulted in a lack of meaningful agricultural statistics. Bill Hundl from the Southern Plains Region will present at the TWGGA Member 4

5 Meeting Thursday, February 22 at 8:30 am. TWGGA, the High Plains Winegrowers and Texas Hill Country Wineries are working with NASS to provide address information for growers to complete the grape survey. Based on their timeline, will be distributed in late March. The final report should be published in June. There will not be significant movement on immigration even though the issue has many areas in dire need of resolution. Upcoming events in/related to Washington DC: National Wine and Grape Policy Conference June 18-21, 2018 Alcohol Coalition Meeting July 17/18 or July 24/25 WineAmerica Fall Retreat in November 2018 to be held in Fredericksburg, TX On March 1, Debbie Reynolds will begin her term as Chair of the WineAmerica State and Regional Association Advisory Council (43 State Associations). This position places her on the WineAmerica Board of Directors. Labeling Committee Paul M. Bonarrigo The Labeling Committee will meet on Friday, February 23 at 3:00 pm to discuss sending out a survey and how to proceed with the issue. The intent of the committee is not to write the law but to gather the views of Texas wineries on the issue. It is important the industry is truly informed on the issue. The committee wants to do their due diligence to decide what level of information needs to be provided in the survey and what is the best way to communicate. The survey will be released after review and approval by the TWGGA Board. The TWGGA Labeling Committee members are Paul M. Bonarrigo, Mike McHenry, Andy Timmons, Chace Hill, Bob Landon, Bret Perrenoud, Tim Drake, Fredrik Osterberg, Anthony Furgeson and Brian Heath. There was a discussion on has TWGGA defined the impetus for change. The Labeling Committee does not assume there needs to be a change. The survey will help the Board to understand what the membership wants as it relates to this issue. The TWGGA Board approves the legislative agenda at the November Board meeting. The Texas Hill Country Wineries had a Label Committee with the thinking that their focus was FSITO. This committee has been consolidated into their Legislative Committee. Texas Wine Foundation Report Patrick Whitehead The Texas Wine Foundation Frost Bank account balances were: - Frost Bank Scholarship Account = $12, Frost Bank Foundation Operating Account = $ Income - $17, from conference auctions and scholarship fundraising efforts at the TWGGA Conference, Grape Camp and Newsom Grape Day. 5

6 - $1,000 from a wine dinner held by Landon Winery - The Walk Around Wine Tasting at the 2017 Annual Conference was a success. This event will come back in Expenses - $2,970 for Trademark legal work. The Foundation name was changed from the Texas Wine and Grape Growers Foundation to Texas Wine Foundation and a new logo was trademarked. All work is completed. - $ Directors Liability Insurance - $1, Other Expenses (Printing, Board Meetings, Conference Call Phone Line, Staff Travel, Credit Card Processing Fees, Event Supplies) - $15,000 Texas Tech University and Grayson College students $1,500 scholarships 2018 Fundraising Plan - TWGGA Annual Conference - Wine Pull at the Foundation dinner Friday night; Heads and Tails at the Gala Dinner Saturday night; President s Dance at the Gala Dinner Saturday night; portion of the Friday dinner ticket sales; donations - Newsom Grape Day Supplier tables and donations - Grape Camp soda donations - The Wine Society of Texas is hosting a dinner on April 28, 2018 and will donate a portion of the proceeds - Other events as determined by the Texas Wine Foundation Board of Directors which can include hosted dinners/events that will donate a portion of the proceeds to the Foundation. The Texas Wine Foundation Board of Directors are appointed annually by the TWGGA Board. The Board members to be appointed are: - President Dusty Timmons - Vice President Paul M. Bonarrigo - Secretary/Treasurer Dana Pool - Region 1 Director Monty Dixon - Region 2 Director Patrick Whitehead - Region 3 Director Karen Bonarrigo - Region 4 Director Jim Evans - Region 5 Director Jennifer Beckmann Brenda Canada made a motion to appoint the Texas Wine Foundation Board of Directors for Dusty Timmons seconded the motion. Motion Passed. 6

7 Executive Director Report Debbie Reynolds Classification Friend $10,800 $10,650 Professional $23,550 $22,650 Small Commercial Vineyard $26,700 $24,250 Small Commercial Winery $20,000 $18,250 Medium Commercial Vineyard $4,200 $4,900 Medium Commercial Winery $10,500 $9,800 Large Commercial Vineyard $2,250 $2,700 Large Commercial Winery $4,050 $7,650 Actual $102,050 $100,850 Budgeted Plan $96,720 $84,105 *Comparison of 12/31/2016 to 12/31/2017 Highlights of Solid financials for the Association - Strong Membership base with the greatest opportunity in the Small Commercial Winery and Vineyard category - Respect from Texas legislators and US Congress members - Support of TWGGA events Annual Conference, Grape Camp, Lone Star International Wine Competition - Broad education partnership with Texas A&M AgriLife Extension - Support of local business for services website, social media, printing, media and following a bid process for many services - Coordination between TWGGA, THCW and HPWG Focus in Association Staff Changes - TWGGA representation on WineAmerica Board - Prepare 2019 Legislative Agenda - Frequent communication from regional directors to members in their region - Monthly coordination call between TWGGA, THCW and HPWG - Website refresh; how to recognize out of state vineyard and winery members; make the site more user friendly - Explore partnership with The Grape Link or other options for selling Texas fruit - USDA-NASS Survey and TDA Specialty Crop Block Grant to gather acreage and varietal information - Applied for a Specialty Crop Block Grant for $15,000 to study and create a formal high school viticulture program and expand it beyond Mason High School and Grayson County. The grant would run from December 2018 to September It includes hosting a field day for students. Paul M. Bonarrigo made a motion to accept the Committee, Texas Wine Foundation and Executive Director Reports. Stephen Morgan seconded the motion. Motion Passed. 7

8 Open Forum Dan Lineberger, Texas A&M Agrilife Extension, provided the funding update as of February Team members with Viticulture/Enology responsibilities - Extension Specialists: Dr. Andreea Botezato, Dr. Pierre Helwi, Jim Kamas, Dr. Justin Scheiner, Larry Stein and Dr. David Appel - Program Specialists: Michael Cook, Brianna Hoge, Shelia McBride and Fran Pontasch - Support Staff: Janet Bizzell, Jennifer Jakubik, Jacy Lewis, Sheri Robinson and Dorothy See Extension and program specialists conducted educational events for new and experienced growers including grower site visits, organized meetings and workshops and responded to phone, and social media contacts. Specialists made presentations at Grape Camp, the Advanced Grape Growers Workshop and the TWGGA Annual Conference. Our boots on the ground made over 550 grower visits with over 100 of those made to individuals identified as new growers. Specialists revised the Aggie Horticulture Viticulture and Enology website, established the Enology Webinar Series with 165 wineries attending at least one of the five webinars and archived the series for on-demand delivery on a newly created YouTube channel. The Texas Grape Pest Management Guide was revised for Additional publications released include Management Strategies for Texas Winegrapes and A Guide to Recognizing and Diagnosing Pierce s Disease of Grapes in Texas. Specialists leveraged their support by securing funds from several sources, including the TDA Specialty Crop Block Grant Program with awards totaling over $300,000. Twenty students are enrolled in the Viticulture Certificate within the BS in Horticulture at TAMU. Renovations are underway for the Extension enology research/demonstration lab and funds are being sought to remodel the enology teaching lab on campus. Lab renovations are quite expensive so additional funds will have to be obtained before these projects can be completed. Buildout of the Texas A&M AgriLife Extension research/demonstration vineyard at the Horticulture Teaching Research and Extension Center in the Brazos Bottoms continues with the planting of Pierce s Disease resistant selections from California, Florida and Arkansas. The vineyard also houses a large planting of the UC David PD resistant selections, the fruit from which can be used for enology research. A statewide survey of grape growers was conducted in December 2017 to gather information on grower challenges and the current status of the industry. While 2017 was reported as an excellent harvest by most growers, regional differences in pest and disease pressure were reported and the predicted increase in reports of herbicide drift damage materialized. There is a focus on virus studies and clean plant network. 8

9 The Advisory Committee will meet today after the TWGGA Board Meeting. Doug Steele, Director of Extension, is here to attend the meeting. Old Business Creating a PAC Kyle Frazier Kyle had submitted a proposal to create and manage a PAC for the Association/Industry. A PAC is a general-purpose committee. The money raised by the PAC is hard dollars from individuals not corporations. To be effective, the target goal to raise should be $200K a year. PAC donations are not tax deductible. There are various ways of raising funds for the PAC. The money donated is for the PAC to use as they choose. The PAC requires administration and a Board, appointed by the TWGGA President. If the PAC is not successful and is closed, any funds raised will be distributed. There are Texas political races that could use our financial support. Effective grassroots efforts are the most effective but the hardest to organize. The Board decided to have the TWGGA Legislative Committee discuss political fundraising and call to action. At this time, no PAC will be created. Texas Regions Re-Draw Plan Bob Landon The committee, who was appointed at the November 4, 2017 TWGGA Board meeting, created a map of the 254 Texas counties and drew new boundaries still keeping five regions. Of the 254 counties, 118 have G permits located in their county. So far, the committee has only looked at G permit holders regardless of TWGGA membership. The map provided by the committee shows the regions with the following G permit holders: Region 1 with 31; Region 2 with 133; Region 3 with 100; Region 4 with 11; Region 5 with 176. The vineyards need to be added into the mix for consideration. It was discussed that the committee does not need to stay with five regions. The committee must address how the changes will affect industry members who are very tied to their region as well as where is the political clout in the regions. The TWGGA staff will provide what information is needed by the committee to make a recommendation. The committee members are Fredrik Osterberg, Bob Landon, Pat Brennan, Paul M. Bonarrigo, Gabe Parker, Brenda Canada and Jon Bowden. The committee will attempt to meet during the Annual Conference. New Business Annual Conference Program Debbie Reynolds The bulk of the education sessions are on Thursday, February 22 with five sessions occurring at each time slot. There will be a total of 20 educational sessions and 2 General Sessions on Thursday. Friday and Saturday will have six mini-sessions in the Trade Show. Saturday, after the Trade Show closes, there will be two outstanding educational sessions. 9

10 The TWGGA Staff was able to coordinate with TABC, the Irving Convention Center and the Omni Mandalay Hotel to secure the necessary alcohol permits needed for the entire conference. There were some concessions that had to be made but TWGGA is able to bring in all the wine we want to feature. There will be three booths on the Trade Show floor that will be Regional Wine Tasting stations served by Irving Convention Center bartenders. The Friday night Texas Wine Foundation dinner will feature Foundation Board wines. Winemakers from those wineries are encouraged to network with attendees to promote their wines. Board members will not be asked to introduce speakers. Many of the panels will be introduced by the moderator. Other sessions are covered for introductions. Developing Financial Performance Benchmarks Debbie Reynolds The Texas State University Department of Accounting McCoy College of Business has requested TWGGA s support on a financial and productivity benchmark study. The outline of their request is as follows: I. Project Background Businesses use financial and productivity benchmark measures as helpful reference points when identifying areas for improvement. (Six Sigma, 2017). Benchmarks are industry averages; winery executives can compare a winery s individual performance to these averages and identify strengths and weaknesses. For example, by comparing administrative costs as a percentage of revenues to industry norms, a winery s owners may find that the winery s costs are much higher than those typically found in a winery of similar size. The owners can then develop and implement a plan to reduce these costs and make the winery more competitive. Little is known about typical winery financial performance within Texas. Texas climate, geography, and wine production environment are very different from those of better known wine producing states. Therefore, Texas vintners cannot reasonably rely on these measures when attempting to identify opportunities for improved efficiency and reduction of costs. II. Project Description The goal of this project is to develop a series of industry-level financial benchmark measures that will aid Texas winery executives in assessing efficiency and lowering costs. TWGGA winery owners and operators will be surveyed about their winery financial performance; survey responses will be averaged to develop initial performance benchmarks for the Texas wine growing industry. To help promote development of these important benchmarks, I propose that the survey recruitment materials specify that this is a project supported by both TWGGA and Texas State University. The University is asking TWGGA to provide a list of TWGGA member wineries with contact information. This is not a practice TWGGA has supported in the past. The University can pull a TABC G Permit list and obtain mailing addresses for every G Permit in Texas. The 10

11 study should include all G Permits, not just TWGGA members. The University is also requesting the use of the TWGGA logo on survey materials and any recruitment documents. This study would not be a cost for TWGGA unless printing costs are incurred. The TWGGA Board recommended the following: 1. TWGGA Executive Committee approve the University s survey. 2. Once approved, the TWGGA logo would be provided for use by the University on the survey. 3. The University can pull a G Permit list from the TABC website. 4. The survey must include the ability for contacts to opt in/opt out. 5. Provide the University the ability to link to the survey on the TWGGA website. 6. TWGGA asks the University how many winery responses would make the study a success. 7. The TWGGA Executive Committee will review the survey results before they are published. Kyle Frazier Consulting Contract Dusty Timmons Kyle Frazier Consulting has presented a new contract to TWGGA for consideration. The current contract expires February 28, The new contract is asking for a $9,000 annual increase raising the monthly commitment from $5,000 to $5,750 for a two-year period. The Board discussed the contract terms and commitment by Kyle Frazier Consulting to the Texas wine and grape industry. Paul M. Bonarrigo made a motion to offer Kyle Frazier Consulting $69,000 annually for a four-year contract term or $66,000 annually for a two-year contract. Bob Landon seconded the motion. Motion Passed. The new contract was presented to Kyle Frazier who agreed to the contract terms of $69,000 annually for a four-year contract. TWGGA Staff Mike McHenry The Board Members discussed the TWGGA Staff search in Executive Session. Announcements/Miscellaneous Dusty Timmons recognized the outgoing Board members Jon Bowden, Pat Brennan, Carleton Turner and Fredrik Osterberg. Paul M. Bonarrigo suggested the Board meet more than three times a year three in person meetings and at least three conference call meetings. Debbie advised Bob Landon, Mike McHenry, Dana Pool, Dusty Timmons and Kyle Frazier that there are conference event scripts in the back of their binders. 11

12 The next Board meeting is June 26, 2018 at the Canyon of the Eagles Live Oak Room (16942 Ranch Road 2341, Burnet, TX). Lunch will be served at 11:00 a.m. with the meeting beginning around 11:30 a.m. Hotel accommodations are available for Monday, June 25, 2018 for $99. The Board and their guest are invited to a reception and dinner tonight at 6:30 pm in Meeting Room 8. Bob Landon made a motion to adjourn the meeting. Stephen Morgan seconded the motion. Motion Passed. The meeting adjourned at 4:13 pm. Respectfully Submitted by Debbie Reynolds, Executive Director Approved by Roxanne Myers, Secretary 12