The following are copies of e-mails obtained by the Tribune from an open records request submitted to the City of Magnolia. The e-mails include messages sent and received by City Administrator Ryan Kelley, Mayor Jimmy Thornton and City Councilwoman Patsy Williams. Each week the Tribune will publish e-mails received in the request. City e-mails and records are available to the public through the Texas Public Information Act. To view more e-mails, visit tribunenews.com.

FROM: Leonard Schneider

TO: Jimmy Thornton

DATE: October 3, 2008

SUBJECT: Magnolia Community Foundation

Mayor,

I have assisted in the forming of the MCF.

As follow-up it is my recommendation that an accountant be secured as soon as possible to do the appropriate IRS and Texas Comptroller filing for the tax-exempt status. This will settle any questions bout tax write-offs before the music festival in March.

Have a great weekend!

Thanks,

Leonard V. Schneider

FROM: Leonard Schneider

TO: Jimmy Thornton, Ryan Kelley, Debra Brent

DATE: May 28, 2009

SUBJECT: Magnolia Community Foundation

Dear Mayor, Ryan, Debra and Beverly,

I am glad the initial Music Festival was a success and that all the hard work paid off by the Mayor, Council, city staff, 4A/4B and volunteers. There was good press coverage and positive reviews of Magnolia.

I also understand all have been busy, however…….

I am writing to state it is my opinion that it is time to separate the Magnolia Community Foundation (MCF) funds from the City. I recommend the following:

1. The MCF board meet as soon as possible.
2. It would be certainly advisable that new board members be added so that the wrong misperceptions do not arise due to the fact that the board is currently the Mayor, Asst City Secretary and City Administrator. While I do not believe this to be a legal issue, it is always wise and prudent to alleviate or mitigate any perceived conflict of interest and any possible misperception of use of City Staff for MCF purposes. It would be a good start to expand the board and elect some new officers and remove at the minimum Ryan and Debra from the board. Expand the board and elect some new officers and remove at the minimum Ryan and Debra from the board.
3. After the election of new officers and board members, have the MCF Board pass an appropriate resolution to open a MCF bank account.
4. The MCF Board should then make a formal written request to the city that the current funds from the Festival be transferred from the City to the MCF bank account. Once received, the City should transfer the funds.
5. No more funds should be dispersed from the MCF funds while in the City’s possession unless to pay the CPA or attorney to assist in the board meeting. Even then I recommend waiting until the funds are transferred to the MCF account.
6. Before any more HOT (Hotel Occupancy Tax) funds, or 4A or 4B funds, are used to help the Music Festival, a written contract should be entered into between the City, and/or the 4A and 4B, and the MCF (similar to the contract with the Chamber of Commerce). This is a firm recommendation on my part and I would be required as legal counsel to the city/4A/4B to state my objections in writing if a written contract is not entered into if any additional funds by these groups are allocated to the MCF for use for the Music Festival.
7. If this has not been done, an accountant should be secured NOW to do the appropriate IRS and Texas Comptroller filing for the tax-exempt status. This should be done quickly before any additional disbursement of MCF funds or receipt of donation to the MCF. If the Board wishes to hire an attorney instead of obtaining an accountant, an attorney in my firm has previously done this for a non-profit and the hourly rate will be $170.00. Any bills for this should be paid from the MCF funds. This needs to be done so people who donate to the MCF will be able to claim tax write-offs if the donations qualify.

Thanks for taking the time to read all this legal jargon and please call with any questions.

Sincerely,

Leonard V. Schneider

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