The Greenbank Farm Management Group (GFMG), a non-profit corporation organized in 1997 to manage the Farm on behalf of the public, operates the Farm under two agreements with the Port of Coupeville, a Lease Agreement and a Management Agreement. Under these agreements the GFMG is required to provide financial statements and reports of activities during the year, as well as final-year end financial statements.

The purpose of this report is to fulfill those reporting responsibilities.

Summary of Activities

The Greenbank Farm continued as a favorite venue for Island events and as a gathering place for residents and visitors. In 2008, the Farm was the site of the annual Highland Games and the Antique Car Show, as well as the venue for many other smaller events and for weddings and other private parties. The Whidbey Pies Café continued to draw patrons at an increasing rate and the Wine Shop and Tasting Room and the Greenbank Cheese shop were also favorite stops.

The purpose of this report is to fulfill those reporting responsibilities.

In 2008, leases for two of the Farm's retail spaces were set to expire. From this uncertain situation, the Farm emerged in the fall with three complimentary art galleries, Artworks Gallery, The Rob Schouten Gallery and Raven Rocks Gallery. This is setting the scene for the Farm to become art center for the Island.

In 2008, the Farm was selected as the site for a Community Supported Agriculture (CSA) Learning Center, developed by the Northwest Business Center (based in Mount Vernon) with the WSU Extension program. Since May, the CSA has been producing vegetables weekly for subscribers. The group of market farmers growing produce for commercial sale has also expanded. All agricultural fields on the Farm are certified organic.

The GFMG organizes and presents two major festivals during the year. Despite one day of rain, the annual two-day Loganberry Festival in July was among the most successful and the Oktoberfest in the fall was expanded from 2007. In addition, the GFMG presents four seasonal wine markets.

During 2008, the GFMG and many of its directors and staff worked with others under the leadership of the Port of Coupville to create a Master Site Plan for the Farm. Most of the meetings were completed by the end of the year and the final draft of the plan is currently being discussed in public meetings. The GFMG was please to contribute to this important long range planning project for the Farm.

Summary of Financial Results

In 2007, the GFMG initiated a strategic plan for 2008 that included increasing staff and compensation with the objective of increasing Farm revenue. As fall approached, it became clear that the plan was not working as contemplated, as revenue appeared to be less than in 2007. In addition, wine shop margin was unexpectedly down from 2007, adding to lower financial results. By the end of 2008, payroll expenses were $27,500 higher than in 2007, program service and event revenue were down about $9,500 and wine shop gross margin was off approximately $22,000.

Although the management fee paid by the Port of Coupeville increased $3,300 and non-payroll expenses rose only a modest $1,000, these operating trends resulted in a 2008 operating loss of approximately $72,000, an increase of more than $57,000 over 2007.

Beginning in the early fall of 2008, the GFMG addressed these operating issues by focusing additional management effort on wine shop operations, including inventory control and gross margin management, planning for adjustments in staffing and payroll, stabilizing long-term lease relationships and analyzing facility rentals and market activities. These efforts helped close out 2008 with gradual improvement in these trends.Their continuation is now under the management of Virginia Bloom, the Farm Operations manager since January 2009.

Preliminary results for the first half of 2009 are promising. The operating loss is more than $30,000 lower than for the first six months of 2008. The GFMG also undertook a more aggressive fundraising campaign and, with the help of an anonymous matching grant, was able to increase donations to the Farm by $22,400, from $26,800 to $49,200. This extraordinary effort helped to offset the decline in operating results from 2007 to 2008.

GREENBANK FARM MANAGEMENT GROUP
Financial Statements for 2007 and 2008

GENERAL

As a nonprofit organization, the Greenbank Farm Management Group (GRMG) generally incurs an annual operating loss, which is offset through fundraising efforts directed to individual and business donations and grants. The operating loss, however, increased substantially from 2007 to 2008, from approximately $14,500 to approximately $72,000. In late 2007, the Board adopted a 2008 strategic plan that increased staff and compensation with the goal of increasing revenue generated by the Farm. The plan did not work. Although payroll expenses were $27,500 higher, program services revenue was less $9,500 than in 2007 and the wine shop gross margin declined by $22,000. Non-payroll expenses increased about $1,000, while the management fee paid by the Port increased $3,300.

The GFMG also undertakes annual fundraising to cover its operating shortfall. In 2008, fundraising efforts generated approximately $49,200 compared to $26,800 in 2007, an increase of $22,400 or close to double the 2007 total. This increase in fundraising allowed the GFMG to close a portion of the decrease in operating results from 2007 to 2008.

REVENUE

Program Services

Program services revenue includes three categories: (i) rental of the Farm facilities to outside parties for weddings, events (such as the Highland Games), shows and markets, such as antiques and art shows, and meetings in the Jim Davis House, (ii) leasing of office space, such as the Whidbey Camano Land Trust, and space to retail businesses, such as the Whidbey Pies Café, the Greenbank Farm Cheese Shop and retail art galleries, and (iii) markets operated by the GFMG, such as the wine and chocolate market in February, the Sunday farmers markets during the summer and the holiday markets in December.

Facility rentals declined $3,000 from 2007 to 2008, primarily due to fewer weddings in 2008.

Long-term leases were fairly stable from 2007 to 2008 and the stability is expected to continue in 2009. Tenant facilities at the Farm are fully occupied.

Revenue from markets declined $7,500 or about 30% from 2007 to 2008. Sunday farmers market booth fees declined, in part due to a restructuring of rates, but the markets continue to struggle. The GFMG is experimenting with different approaches to the markets in an effort to improve attendance by vendors and the public. The GFMG, however, does not anticipate an increase in revenue during 2009.

Events

During the year, the GFMG sponsors and organizes two primary events, the longstanding Loganberry Festival in the summer and a recently originated Oktoberfest in the fall. Revenue from the Loganberry Festival has been stable over the last two years, although revenue for the second year of Oktoberfest in 2008 increased by $2,000.

Port Fee

Under a management agreement, the Port of Coupeville pays the GFMG a fee to manage the non-commercial areas of the Farm (generally the agricultural fields and recreational areas). Through March 2008, the monthly fee was $3,750 ($45,000 annually). Beginning in April, the monthly fee was adjusted to $4,162.50 ($49,950 annually) and will continue through 2009.

Wine Shop

The GFMG owns and operates the "Greenbank Farm Wine Shop and Tasting Room," which sells a selection of table wines produced by small western Washington wineries, including the Farm's own private label loganberry wine and loganberry dessert wine, as well as wine accessories and a small selection of deli items.

Wine shop sales in 2008 were $254,000 compared to $265,000 in 2007, a decline of $11,000 or 4%. Most of the decline occurred in December 2008 as snowstorms cut into seasonal customer traffic and sales. Although the sales decline was small, the drop in gross margin in 2008 was substantially larger, declining from $108,750 to $84,600 or about $24,000. The gross margin percentage in 2007 was 41.0% and 34.1% in 2008, a decline of 5.9 percentage points.

Due to changes in record keeping and accounting programs, it is difficult to identify the reasons for the reasons for this decline in wine shop operations. Starting in the fall of 2008, however, the GFMG instituted more thorough inventory controls and reporting and additional analysis of operating results on an ongoing basis.As a result of these efforts, wine shop operations have improved over 2008 and the GFMG expects a financial contribution from the wine shop comparable to 2007.

EXPENSES

Payroll Expenses

In planning for 2008, the GFMG increased the salaries of its principal management personnel and added a senior staff position with the objective of increasing the revenue base of Farm operations. Accordingly, payroll expenses increased from $163,000 to $190,500. although the plan was not successful in achieving the goal.

For 2009, the GFMG has a new Farm manager and is adjusting compensation and staffing levels to what it believes to be a more reasonable level. Based on these changes, the GFMG expects that payroll will be significantly reduced.

Bookkeeping, Accounting

The GFMG uses an independent contractor on an hourly basis to maintain it financial records and perform accounting and financial tasks. These costs declined by $4,500 from 2007 to 2008 and are expected to further decline in 2009.

Administration

Basic costs of administration, such as copier rental, office supplies, software and postage, declined from $8,500 to $6,600, as office supplies purchased in 2007 were used throughout 2008 also. Expenditures in 2009 are expected to be an average of the two years.

Advertising and Promotion

Advertising and promotion includes institutional advertising to make the public aware of the Farm in general and specific advertising and promotion of Farm sponsored events, such as the Loganberry Festival. These expenses declined in 2008, in part, because 2007 advertising included costs for the celebration of 10th Anniversary of the preservation of the Farm.

Credit Card Fees

Most sales in the wine shop are through credit cards, the issuers of which charge the wine shop customary fees.

Insurance

The Farm carries public liability insurance, casualty insurance and directors and officers liability insurance. Expenditures are fairly stable.

Maintenance and Repairs

Maintenance and repairs expenses includes the commercial buildings, such as the barns, the Jim Davis House, and the caretaker's house, the grounds around the commercial buildings (but not the fields), the equipment, such as the tractors and related farm equipment, and janitorial services and related facilities supplies. The GFMG uses independent contractors to maintain the grounds and provide janitorial services.

These categories of maintenance and repairs were fairly stable from 2007 to 2008, with equipment maintenance expenses rising and grounds maintenance declining by a comparable amount. Maintenance and repairs expense in 2009 are expected to stay at these past levels.

Utilities

Utilities expenses include alarm and security, electricity, garbage collection, propane and telephone and Internet services. The year 2008 reflected a period of rising energy prices and, from 2007 to 2008, aggregate electricity and propane expenses rose by $2,150 or almost 18%. Other utility costs rose about 4%. The 2009 budget contemplates a decline of 8% in utility costs, due to cost cutting efforts and stabilized energy rates.

Entertainment

Entertainment expenses relate to the Loganberry Festival and Oktoberfest. These costs are expected to decline somewhat in 2009.

Taxes, Licenses, Permits

The GFMG pays leasehold excise taxes, business and occupation taxes and various annual fees and permits. Expenses are fairly consistent from year to years.