ACHOA Board Voted 4-3 To Go With ACCC Suggested Proposal

The room was packed to the gills! Lots of wine glasses. Lots of minds. Rich Kenny presented the ACCC Report and Recommendation to the Board. Lots of questions and speeches were next.

The committe recommendation:
The ACCC recommends that the HOA Board accept the proposed agreement between the HOA and Friends of ArrowCreek to purchase and lease-back the property under the golf courses at The Club at ArrowCreek, as described in the Term Sheet. The ACCC further recommends that this proposal be moved forward for a vote of all ArrowCreek homeowners within the next 60 days, subject to legal review.

The vote of the board was ACLegendGC
Yes: Elliot, Rakusin, Seelen and Fox
No: Dickinson, Krisch, Liebman

Maybe Mr. Liebman will forward his speech to ArrowCreek411 for publication. FYI though – It is the ACCC – ArrowCreek Community Club Committee, not the Communications Committee who did the presentation.

So, here you have the ACCC Report and Recommendation. Please record your thoughts and questions in comments below. Please keep the comments tactful! Reread How to Express Your Truth With Honesty and Respect as a reminder.

This entry was posted in ACHOA, ACHOA BOD, ArrowCreek, ArrowCreek HOA, Belief, Belief Systems, Control Destiny, Control Our Destiny, D’Andrea, Fire Abatement, Fire Danger, FOA, Friends of ArrowCreek, Golf, Golf at ArrowCreek, Golf Course Purchase, Golf Developments, Green vs Brown, HOA, HOA BOD, HOA BOD Ballots, Home Sales, Home Values, Homeowner Questions, Honesty, Joint Venture, Playing the Game, Reno, Reserve Fund, The Club at ArrowCreek, Trust, Truth and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

20 Responses to ACHOA Board Voted 4-3 To Go With ACCC Suggested Proposal

  1. Anthony Medler says:

    Not only is this a terrible transaction for the community as a whole but I have serious reservations about a committee who spent the great amount of time, effort and money on pursuing something that is of limited benefit to only a few of the community members. I have been in sales all my life and recognize a con job when I see it.

    Like

  2. leslie says:

    Unless I have missed something, the “Term Sheet Details” do not explicitly reference which party is responsible for:

    1. Any outstanding water bill?
    2. The ongoing water bill for irrigating the course?
    3. Assuming (big assumption since it is not spelled out in the terms) the FOA is responsible for the water bill, is the HOA at risk if the FOA does not pay the bill?
    4. Assuming the FOA is responsible for the water bill and the FOA does not pay the bill is this considered a default of the lease agreement?

    As it stands in the “Term Sheet Details” the water cost is a huge blank check and the homeowners could get left holding the bucket!

    Like

  3. Bob Kirtley says:

    In addition to the other comments about the presentation, I continue to take issue with the lack of diligence on the Board’s part:
    1) after all this drama, we don’t have an appraisal of the property. No prudent buyer would enter into a real property transaction especially one with commercial activity without an appraisal.
    2) this appraisal is even more important given the split of the assets. The FOA are certainly retaining assets with a large value
    3) comments from Rich about a “greedy developer building a thousand homes” was uncalled for and only used to incite panic. I suspect any developer would have to consider:
    a) the number of lots that are still vacant esp on west and south side of AC. With a large inventory already present, would a developer want to add new lots?
    b) current restrictions in the original subdivision plans (I suspect there several annexes that deal with trying to rezone the golf course)
    c) access and easements that would have to be granted to a developer
    d) infrastructure costs of roads, power, water and sewer that the developer would have to build and the county would have to build
    e) lending appetite from a bank to support a development that would have to stand separately within AC
    f) the current rate of home purchases of what would be relatively high end houses to pay for a-e

    My conclusion is that the chance of a developer wanting to tackle a project in the middle of Arrowcreek is fairly small (and we charge $3.3 M for easements)

    Finally, even if the vote is a “yes”, the $3.3M loan is going to be a tough loan to put together. The HOA balance sheet will reflect the total $3.3M debt. The HOA is going to have to pledge cash flows to the bank from each person’s monthly dues. I haven’t delved into the restrictions but there will be conflicts with redirecting cash flows first to the bank in lieu of areas that require funding. I am sure one of the readers is much more familiar with how the dues are mandated to be spent. On the flip side, by entering into a lease, the HOA becomes a creditor of the FOA, I have seen no diligence from the board on whether we consider the FOA a reasonable risk especially for a term of 25 years. The lease obligation of the FOA would be a large receivable on the HOA balance sheet. If the FOA defaults, the HOA takes the hit and writes off the balance. If the FOA is not deemed credit worthy, our audtitors will force the HOA to reserve the entire balance. (Not a pretty sight on a balance sheet) See audit requirements @ NRS 116.31144

    Liked by 1 person

  4. Pingback: Arrow Creek Golf Course What Next? | Somersett United

  5. One of my favorite quotes of the presentation (page 21):
    “Their [FOA] capital should not be tied up in perpetuity if the business cannot support 36 holes.” Yet, it is perfectly fine for the ACHOA owners to pay the “FOA Tax” in perpetuity if the business goes or fails.

    Is the FOA making a profit from this transaction in violation of our Articles of Incorporation that no owner can enure from a change in any of the governing documents? There are changes being made to the CC&Rs to do this “transaction.”

    Liked by 1 person

  6. jimmyleg says:

    I missed the beginning. Did ACCC bring up any other successful gated community golf course purchase lease-back situation in the United States? This proposal can’t be a first-of-its-kind, can it?

    Like

    • Ronald Duncan says:

      Jimmy,
      No they did not present other lease-back situations in the U.S. In fact, there haven’t been any facts presented to support the claims of the ACCC.
      Don’t forget this is still to be reviewed by the lawyers to determine if the ACHOA is going into a for profit business of leasing property. What will we do with it if the Leasee pulls out?

      Like

  7. AC Homeowner says:

    We are long time homeowners of ArrowCreek and have over the years witnessed the same old bad actors (golf club equity members, aka FOA) infiltrate the HOA Board. Guess what these same old bad actors are members of the ACCC. The same ACCC that trying to sell you this “GREAT DEAL” In the past they brought a law suit against the developers, who at the time still controlled the golf club. The developers were trying to move along and sell the golf club to Club Corp (owned several prestigious golf courses around the country) When Club Corp found out about all these litigants and all the problems with them, they walked away. So homeowners, know who you are dealing with and like Club Corp walk away from this bad deal! VOTE NO!

    Liked by 1 person

    • Ellie says:

      Thank you Kerry, Bryan, Wayne, Leslie, Kefin, and AC homeowner for your comments. I could not have said it better.

      The quick and dirty on this deal is that none of the essential limits or NO’s of the golf course proposal were met:

      There is open ended financial commitment, and the arrangement does not preclude future raises of the HOA fees beyond $300. We will be forced to become golf course owners, but are kept out of the club house. So we all would become members of the golf course group of owners, without any rights.

      Like

  8. Kevin Mullet says:

    People living on the golf course have homes with valuations significantly higher than most of those who don’t, and those valuations will be impacted far more than those that aren’t on the course if the golf goes under. So their vested interest might be 10-20x what a non-course household stands to lose. Yet in any deal conducted by the HOA, all households are legally required (I presume) to take on an equal share of the financial burden and any future liabilities. With two non-course households for every one on the course, why isn’t it obvious to everyone that an equitable deal can never be delivered through an open democratic process by the HOA?

    Like

    • Ronald Duncan says:

      Kevin,
      The ACHOA has no other recourse than a ‘democratic’ process as that is how it is constituted under Nevada Law. With that said, there are two fundamental studies, one preferred by the ACCC and the other, which contains facts pertinent to Northern Nevada, that try and address the concerns expressed above.
      The Professor Pingle, UNR Economics, study of Open Literature, which can be found on this site through a query, revealed that home values benefit by having a golf course nearby, within 100 feet. Beyond that ‘magic mark,’ the impact decreases by a 1/x factor from the entrance to the golf course.
      The second study, by Brian Bonnenfant, also available on this site, UNR Nevada Small Business Development Center, addressed the home values related to Golf Course Closure at D’Andrea and Northgate. This study indicated that over a two year span home values began trending to market values of the local economy.
      In either study, trending of home values are to the local market. Here in ArrowCreek the values that have been tracked for the past three months indicate that properties directly adjacent to the course are selling at $230.13 per square foot. Since they tend to be larger homes, on the 4 to 8 thousand square foot range, their prices are higher than some of the semi-custom homes selling for $236.73 per square foot, where the homes are more in the 2500 square foot range.
      In either case, using the Bonnenfant study results, would indicate a loss of 1% over a 24 month period, should the golf course be unsuccessful. Compare that to the initial $360 per year increase in fees for the next 15 years. Is it worth it to approve this proposition?
      Ron Duncan

      Liked by 1 person

  9. leslie says:

    So in a nutshell, Board Members Elliot, Rakusin, Seelen and Fox feel that paying double ($3.3 million vs. ~$1.5 million as the purchase price out of bankruptcy to the FOA) for only part of the country club (greens only vs. the entire property including buildings) is a good financial decision. Adding insult to injury, Kenny refused to answer the question about where the negotiation started. Quite interesting considering how often the word “transparency” is invoked in board meetings.

    So….I am left with trying to make sense of their approach. Either:

    – Elliot, Rakusin, Seeler and Fox really don’t have the business acumen and leadership skills they said they did when they were running for the board, and are, indeed, unskilled negotiators

    -or-

    – Elliot, Rakusin, Seeler and Fox are letting a personal preference get in the way with making an appropriate business decision at the expense of the homeowners

    Grateful kudos to Board Members Dickinson, Krisch and Liebman for having the foresight, intelligence and courage to identify a bad deal.

    Like

  10. Wayne says:

    I heard nothing from Mr. Kenny that was compelling to support the proposed deal that would pay over market price for land, charge the FOA under market for a lease, and cause us owners to bear the burden of capital reserves and the ultimate failure of The Club.

    Folks, this is a sweetheart deal for the FOA. They get their investment returned; they get to lease the land for $20,000, a pittance of just under $5,000 more a year than the current HOA payments they already make (which go away with this deal). We incur the financial liability of reserving for capital replacements. And for what? The peace of mind that we’re controlling our destiny? This is the Board’s vision? To bail out a business in an industry fighting against demographic odds so that if it fails we’ll at least own the land?

    This proposal will protect our property values? At what cost do ever increasing fees to subsidize a non growth business start working against our home values?

    What I did hear was 2 of the ACCC members who did not support bringing the proposal to the Board, and 3 of the 7 Board members who voted against sending this to us for approval. And, folks, if the Board is not unanimous in a proposal, why should we approve it?

    This proposal does not solve a problem, because there is no problem. The Club is privately owned. The professional management is reaping dividends; membership climbs; activities have increased. If successful, perhaps Arnold Palmer Golf would be interested in purchasing The Club? Let capitalism work.

    Liked by 1 person

    • scott mariani says:

      Wayne, the Club will be paying 20K to lease the land BUT will be dropping the 15K road fee. When it all comes out in the wash the total layout by the Club will be a net 5K. This is a 15K savings for the Club. Sweet Dealing!

      Like

      • Ronald Duncan says:

        Scott,
        Since the club currently pays $15,696 annually to the ACHOA, under the terms of this ‘new agreement they will pay $20,000, instead. My math suggests that they will be paying an additional $4,304 to the ACHOA over their current payments.
        This is still a bad deal as the ACHOA inherits the added expenses of fire mitigation, which the FOA has done nothing about, and the potential of cleaning up dirty dirt, that the former and current owners haven’t tested for.
        $20,000 seems an awfully low lease price.
        Ron Duncan

        Like

  11. Bryan S says:

    (Copied from general September tab)

    What you need to know:
    – VOTE: Vote NO for the HOA buying the golf course from the FOA. As a successful businessman, banker and strategy consultant, this is the worst proposition by a mile for the majority of owners in Arrow Creek. This is only good for those living on the golf course at the expense of others. What is the HOA going to buy next…and where does it stop…maybe the next movement will be for 25% of the community to rally support for the remaining 75% to subsidize a bobsled through the hood…not a bad idea;-) Maybe we can start paying more taxes to fix all the other bad decisions in this country…bad logic to throw good money after bad…

    – GET TRUE COMPARISON. Comparing a Sparks community in the desert (dirt/playa) to arrow creek with the best school zone in Nevada, beautiful boulevards, open sage and wildflower common areas, pools, workout facility, fully funded HOA, much higher average income per household, person gated community, access to nice shopping, etc. is crazy. The data is not comparable, and those locations also don’t have views from being up on a hill of the valley and surrounding mountains. What other communities that they want to compare have TWO courses?? Shut down one, increase the prices (supply and demand) of the other course, and we still live in a “golf community”. Or shut them both down, in 6 months no new person coming to buy a home up here will no the difference…only the people on the course will know the difference…if they want to live on a course, they can buy it or subsidize it, or go buy in sparks, northern Nevada or Montreau. The HOA should not own the course or the land. If we want the land (not running a golf course), let it go back to bankruptcy and by it for pennies, b/c no other smart business person would buy into such a venture.

    – SMELLS FISHY, IT IS…:FOA and owners living on the course want you to subsidize their golf playing, course views and home values (and their values won’t be too impacted and will eventually recover) b/c they have a vested interest, but they are the minority (~350) . Only a quarter or less of community are members of the golf course. If you want to play golf, let the FOA keep the course and keep running in. Or, let the people on the course subsidize or own the course, but the HOA has no place in owning 2 golf courses. I get and appreciate that supporters of FOA are worried about their home values given that most, if not all, of them live on the golf course. I too would want the 700+ other home owners to subsidize my home value, but I don’t think I could feel good in my heart about signing the community up for such a liability and ongoing money loosing venture. This is irresponsible of the board to even consider.

    – SUCKING SOUND: “Raising Capital” is the indicator that the FOA is in trouble…has to keep feeding this course money…”Emergency Meeting” is not an emergency for ArrowCreek…it is an emergency for FOA, and they want the HOA, which means you to take it on with no limit in costs and increases to your HOA. You want this to be our emergency? Ready to pay to replace the 15 year life span irrigation system on two courses….$5+ Million…and that is just irrigation, not the ongoing water bill to keep the grass green. Too big to fail…sound familiar…stick the general population with the bill while others massively profit….

    – THE NUMBERS (THEY WIN, YOU LOSE): If the numbers were good, FOA would not be in an emergency to off load. The board (only half support) is irresponsible in recommending an acquisition and sticking the homeowners with a substantial ($1M+) outstanding water bill from the county that can’t go away in a bankruptcy, as well as ongoing subsidies and assessments. Not only is this the wrong thing to recommend, they are recommending a deal that gives “Friends of AC” a substantial windfall while leaving the HOA and homeowners holding the bag. Sure, if I own a home on the course, I don’t mind paying $100+ more a month to keep my home value from falling by 5%, especially at the expensive of others that get NO UPSIDE. But to irresponsibly stick the rest of the community with this is crazy. If the presenter wants meet to review the numbers, let’s do it. Let’s start with ArrowCreek unique qualities and highest priorities for buying in ArrowCreek (for the MAJORITY, it is not golf, truth), then let’s look at the numbers of those on the course vs not on the course and the recommendation for the rest of the hood to support those on the golf course. If those on the course want to own the course, then let them buy it…oh, they did and now want to sell it to us for a massive profit and ongoing subsidy to their personal property value. Then let’s look at Arrow Creek home value recovery vs other neighborhoods and price per square ft. Then let’s look at home sales in AC this year that are not on the course and on the course. What is the premium for owning on the course vs not on the course? A home facing AC parkway with no view sold for $100k (20% more) more than it did 3 years ago..if the course goes brown, that home value facing AC parkway will never know the difference. I personally don’t buy into their numbers or rationalization for endlessly increasing our HOA fees based on fears of a brown golf course when all the other variables are not being properly weighted. As the aging population in California retires (we are not the only grey hairs…many more on their way), they are coming here, and they don’t play golf, nor does most of the country…don’t screw the rest of us and possibly yourselves with much higher HOA fees and likely massive assessments…the other studies don’t take into consideration 2 courses, massive water bill debt, maintaining a massive infrastructure, aged out irrigation system, etc…

    – “FRIEND” of AC?: If FOA was truly a friend they would not be asking for 12% interest on a loan where interest rates are at an all time low (5-6% on business loans). Banks don’t want to lend on businesses that have shown no profit for 15 years and went through bankruptcy in the last year. If the FOA has an emergency and is loosing money (which is why they need more), why would the greater community want to sign up for the limitless calls for monthly HOA Fee increases and possibly further assessments. Why do you think the FOA wants to sell this pig? If they were getting rich, they would keep it, but they hurting and it will just get worse given the aging course and infrastructure. Additionally, if they are a “friend” to Arrow Creek, why would they not offer to sell the course/land for the purchase price. Good luck trying to sell your home when the HOA fees go to $300 and then $400+ b/c, and with record of special assessments…people buy homes here for the school zone, safety, view of the valley/mountains, pools, gym, diversity in nature (trees, sage, wildflowers, etc). Do friends try to profit on unreasonable interest rates, and jack up the sales price by 50-100+% in a years time?

    – YOU WILL BE JUST FINE: Home across the street with no view (of the road) sold for $100k more than it sold for 2 years ago…you live in a great neighborhood with many more valuable assets than a golf course that only a fraction of the hood even values…if this was so important to the community, there would be 75+% membership, not 25%. Be ethical and stop trying to stick the rest of of the hood with your personal issues…it should be the other way around…I like the idea that those on the course buy the course, oh, guess that already happened…smart of them to offload it…

    – WE NEED WATER: Anyone notice the Truckee is not running and the reservoirs are mostly empty? The logic to keep it green at ANY cost is crazy..we live in the desert. And to have Two courses, one of which is in a gated community within a gated community is even more absurd. And then to ask the much larger community to subsidize those in the private part of the neighborhood is cray cray.

    And after the drama…there is joy, life and humor:-) May we all get our needs met…

    Liked by 1 person

    • scott mariani says:

      Great communication. I think there is a ploy about that people who live on the course are automatic “YE$” votes in favor of the golf purchase. My wife and I live on the course and find that 3 out of 5 (course side neighbors) don’t want the purchase, one neighbor is a YE$ and the other just moved in, thus unknown.

      Like

    • Bob Kirtley says:

      and I’m sure the FOA are willing to escrow half of the $3.3M for the duration of the lease to return the cash to the HOA if the FOA are forced to close 18 holes given “business needs” 🙂

      Like

  12. Janice Ziomek says:

    Thanks, Ron.  Missed the very beginning of the meeting, so receiving this is very helpful.

    Like

  13. Kerry McKinney says:

    What is the emergency that precipitated this emergency HOA meeting? Why do we have to take votes on four separate actions within the next 60 days? From this meeting we learned that if the HOA takes no action, the FOA will seek investment capital to continue running the golf club. Why don’t we let the FOA raise their capital, eliminating the need for any action on the part of the HOA? In the mean time, we could hold the town hall meetings that the ACCC recommended to discuss alternatives that we may choose to consider if the FOA fails and files for bankruptcy. Winter is coming, nothing will turn brown soon. We have time to see whether the FOA can rescue their own investment themselves.

    Liked by 3 people

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s