Concerned Renter: AC Golf Acquisition Reserve Study

Sunday, January 18, 2015 Email to Arrowcreek411 Webmaster from A Concerned Renter living in the ArrowCreek (AC) community:

I am a “Concerned Renter” and would certainly need to do a lot more due diligence before we purchased a property in ArrowCreek. In fact, we did decide not to purchase in ArrowCreek until the Golf Course issue was settled …

I did notice that your website hits are going up! I wish more people would sign up for your emails … it is a great way to be reminded that there are new posts on the website.

Since I do not have access to Associa or the Board to ask questions, I thought I would drop you a note and see if you knew the answers or had access to additional information. Here are my questions after a cursory inspection of the Reserve Study:

Component Definition:

  1. “Client input will further define this component.”
  2. “Client input regarding on-going maintenance, if not paid thru operating, will further define this component.”
  3. “Client provided information regarding cost and frequency of replacement will further define this component.”

Comment: It is a concern that the Reserve Study has so many ill-defined components. Since yearly “Transfer to Reserves” numbers are incorporated in current and future Operating Budgets, ill-defined components could have a significant effect on the Reserve Study, future Operating Budgets and future Assessments.

Client initiated cost reductions:

  1. “2014 – Cost reduced 50%, $nn,nnn to $n,nnn, per client 11/28/14 email.
  2. “2014- $nn,nnn anticipated parking lot repair in 2015 per client 11/17/2014 email.”
  3. “2014- Remove and replace in 2020 per client. Cost per unit decreased from $3.5 to 2.15.”

Comment:  Although client-suggested changes to the Reserve Study are not that unusual, the following information should be disclosed:

  1. The entity who initiated the changes and their relevant background
  2. The Reserve Company’s opinion of the changes

Component Lifetime:

  1. “It is possible that sub-components of this system can be replaced or rebuilt to extend its life.”

Comment: Possible? What effect does “possible?” have on the component lifetime?

 Operation Budget:

  1. “This is for miscellaneous xxxxx. As xxxxx is typically replaced as needed, most replacements will be from operating.”
  2. “Painting is completed through operating.”

Comment: There are a number of components that will be maintained through current and future Operating Budget. This will increase the future Operating Budgets by unknown amounts. What are these additional Operating Budget items? The impact of the acquisition on the future Operating Budgets should be disclosed (at least estimated).

Inflation and Interest:

  1. Inflation cost = 2.5%
    Interest income =

Comment: Inflation and Interest values can have a significant impact of the reserve numbers. Inflation at 2.5% seems modest, at best. I could find no mention of the Interest %. Since Interest % has an impact on the FFB, it should be disclosed.

 

Additional Comments: This Reserve Study strikes me as the best case scenario … not the worst … or even the most likely. With all the unknowns in the Reserve Study and on future Operating Budgets and Assessments, I would be hesitant at this time to agree with the purchase of the Golf Course (not that I actually have a vote). I agree with the CNA that the “Vote”, as I currently understand it, violates the governing documents regarding the majorities required for passage. Although I can understand why the Board wants to make the issue into a “One Vote” issue, for transparency and legality, I think it needs to be separated into a vote on each issue.

Additionally I can understand the FOA’s desire to make the sale and get out of the golf course business BUT I don’t understand the rush and believe that the deadline for the vote is artificial.

 

Good luck,
A Concerned Renter
(My name doesn’t matter since I am “only” a renter.)

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