Important Clarifications from iED

Skip to the bottom to read the big issues and my big worry about Pacifica's survival, if you don't have time to read all of this.

I have not had time to respond to the flood of e-mails about these issues - if I answered a quarter of them, I would not have time to get any real work done.

But I want to clear up some misinformation. Many of you are not going to like what I have to say, but it's the truth and you deserve to hear that. There's way too much rhetoric and assumptions stated as fact, that are going around. I believe in real news, not fake news.

The bankruptcy vs loan issue is basically moot, at least for now, because the PNB has decided to pursue loans. But I remain very worried about our financial situation, with our growing debt and no approved plans to pay it off. Pacifica did better financially overall last year (with a net loss of $184K for FY2017, vs losses of $597K in FY2015 and $980K in FY2016), but it's still not good enough to pay off our debts, and the amount we owe to Empire State Realty Trust keeps growing every month. We have been kicking the can down the road for years, accumulating debt and hoping we'll be able to reverse the downward trend the next year, but it has not been happening. But we can't keep doing tht forever. Other creditors, besides ESRT, will come forward, and we have to find funds for our employee retirement funds and other obligations.

This is not finalized yet, but some friends of KPFK, possibly with some others, have pledged $2 million for a short-term loan to Pacifica so that all of the ESRT judgment can be paid off. This loan would only be for a few months. So assuming we can finalize that soon, then the immediate crisis of seizure of assets by ESRT will be averted. The PNB also approved, last Thursday, that we pursue another larger and longer-term loan that would pay off the first loan and also some other immediate financial obligations, such as the employee retirement fund and part of the accumulating unpaid tower lease fees for the Empire State Building.

About filing for bankruptcy:

I, and all of our officers, recommended last month that Pacifica file chapter 11 bankruptcy, because we had no written forbearance agreement from ESRT and no indication that they'd give us one, and because ESRT had hired attorneys to file their judgment in every state where we operate and even went to the extra expense and trouble to personally serve the notice on the National Office in order to cut a few days off of the mandatory waiting period in California (before they could seize assets). That also allows them to place liens on all of our properties. We had consulted with two bankruptcy attorneys over the last few months, both of whom had advised us to avoid bankruptcy if possible, but who had told us we should file chapter 11 when and if we got to this point, in order to protect our assets and continue operations. Two other attorneys also advised us to file ch. 11 if we had no written forbearance or stand-still agreement with ESRT. The attorneys told us that getting a loan before bankruptcy would put Pacifica at a very significant disadvantage (and cost us a great deal of additional money) if we had to file bankruptcy later (which I still think may be likely, as we have no repayment plan for the loans and the amount we owe to ESRT increases every month). Although bankruptcy does indeed add additional costs, there is the potential (not guaranteed, though) that we could substantially reduce the amount of future tower lease obligations, possibly saving us $1 million or more. Chapter 11 would also ensure that other creditors could not take legal actions to seize assets, and it would give us time (up to several years) to pay off our creditors.

But the PNB majority decided to pursue the loan route, and so that's what we are doing now. I was pleased that so many friends of Pacifica stepped forward with this loan, although I'm disappointed that my pleas to the LSBs for months to help with major fundraising largely were ignored, as donations (rather than this loan) would have avoided the necessity to pay interest and other fees for this loan. Thanks to the individual board members and others who did help, though, even if the PNB as a whole did not do so. It appears that the possibility of imminent seizure of our bank accounts demonstrated the urgency of why we need to pay the ESRT judgment, and I thank the people who have agreed to lend us money to do that.

However, I still have significant concerns about the second, larger, loan. Pacifica has a lot of debt, a bad history of paying our financial obligations, and inadequate cash flow to pay our current obligations (including the WBAI tower lease), and so lenders are going to insist that provisions be put in any loan agreement to ensure that they get paid back.  For the short-term $2M loan, the KPFK/PRA building will be used as collateral. I have not seen the loan documents yet for it, but because the loan is from friends of Pacifica, I'll hope they are reasonable. But for the longer-term larger loan, I worry about the conditions that a lender may insist on. We looked at a loan in November to pay the ESRT judgment, but when we got the loan document details, we found we would have been in default on the first day of the loan and thus would be at the lender's mercy immediately. Some of the problems could have been fixed by correcting information in those docs, but there were multiple other default triggers that we would not be able to avoid, because they required us to do things we would not be able to do. That loan would have put the collateral (the KPFK/PRA building) immediately at risk of foreclosure. I'm worried that the second loan we're looking for may have similar problems. We don't have a lender identified yet, and no loan documents to review. But we have a loan broker looking, and I put him in touch with a bank who I'm told may be friendly to Pacifica. I'm hoping for the best but being cautious. It is critical that the PNB thoroughly review loan documents before approving them to make sure they are acceptable, especially because the second loan may require using all of our buildings as collateral, thus putting all of them at risk of foreclosure in the event of default.

In the long term (which should be this year), the PNB MUST approve a financial recovery plan, that includes paying off our debt. One significant part of our debt is disputed, but all of the rest must be paid. That's going to require that we not only break even, but generate surpluses, and/or that we use some of our assets to pay the debt, such as approving a signal swap for one of our stations. All of our stations must fulfill their Central Services obligations each month so we can hire adequate personnel for the National Office. Lack of enough senior accounting staff is why we're so far behind with bookkeeping and audits, and why our tax exemption is again threatened. But that takes money. 

Specifically, WBAI must make changes in how they operate, including some changes in programming and how fund drives are conducted, as they have not been able to make CS payments even though they have paid zero on their tower lease since June. Programs with few listeners to and which no one supports are not fulfilling our mission, no matter how good the programmers may think they are. Fund drives that drive off many of the remaining people don't help our mission either. 

WPFW also needs to make CS payments each month. They are doing better than a couple of years ago, but are still struggling and are again getting behind on those CS payments.

Even KPFA, which has been doing better than our other stations in recent years, needs to make some changes, as they had a $187K deficit last year. They dropped below KPFK in revenue but continue to have the highest expenses (mostly for personnel) of all of our stations. 

KPFK has been doing better in the last year but I worry about the projected increase in spending for this year, and how they'll raise the extra revenue to support that.

KPFT has been doing significantly better financially in the last six months, with fewer fund drive days while making C.S. payments and payments on its transmitter loan, every month since August. This is with the smallest paid staff of any of our stations. But they are trying to figure out how to afford the paid staff they need, including a Program Director.

We also need to get our employee retirement fund payments up to date for all stations, as no money has been put into that for the last three years. KPFK has set aside money for that in 2017, but our pension fund administrator told us last year that we had to fund all stations' retirement, and could not fund just one of them at a time.

Board interference and micromanaging programming and station operations must stop. Our boards should be setting policy and helping with fundraising and getting more listeners, not in raising hell if an unpopular program that listeners don't support is replaced or moved around in the schedule to make way for something new or for a quality program from one of our other stations, or if a needed personnel change is made.

I continue to be very concerned about our extreme levels of board dysfunction. We should not need to have 3-5 hour long (sometimes longer, including the executive sessions) PNB meetings every week, sometimes twice a week, and still we are not able to get through the agendas. It should not take an hour or more to get through the public session agenda approval in each meeting, and then have to argue over the executive session agenda at length as well. We have committee and LSB meetings, too, and I ask you to think about what (meaning how little) our boards and committees are accomplishing in all of that time. We've had Bylaws amendments, mostly ones to help make our boards function better, on the agenda since early December, but we have not gotten to them, and it's probably too late now.

Some on our boards especially don't want to hear this, but we have to make changes to our Bylaws regarding our governance. It is not working. It is hindering, rather than helping, to fulfill our mission. It is driving away major donors and interfering with station operations.

The big questions: 

* Are we willing to make some changes to help Pacifica not just survive, but grow in order to better fulfill it's mission? 

* Or will we continue to spend so much time and energy fighting with each other and ignoring the impending financial disaster that's coming? 

If we can't make some changes to make sure we can pay all of our bills, and adequately fund the National Office so we can get audits and other necessary work done so we don't lose our tax exemption, there may not be a Pacifica around next year to fight about.

I plan to work on changes to our Bylaws this year, specifically to improve board function while helping rather than hurting our mission. This is one of the main reasons I supported the hire of a new interim Executive Director and recommended to the PNB that they hire the new person that the Personnel Committee found - so I'll have some time for that. The new person looks very well qualified, too. (I'll give more details in the next few days, but we need to get the written agreement in place first for the new person.) 

Bill