By Ron Duncan
The ArrowCreek Club Committee convened at 2:04 PM PDT, 26 October 2015. It was called to order by Rich Kenny and members present were Sam Fox, Paul Burkett, Robin Rakusin and Charley Dickinson, along with ~30 residents.
There were three items on their agenda, not furnished to the public, that were (1) The proposed ACHOA Budget with golf additions; (2) The proposed revised schedule of activities and (3) Status of the banking discussions.
Item 1 was begun with recognition of the contributions of Gary Smith, who resigned with a disagreement over the direction of the committee and is currently in Arizona, per Rich Kenny. This kicked off (AC 2016 DRAFT SUMMARY BUDGET For Owner Review) the budget discussion as Gary had recommended a $2.00 increase to the reserve assessment. That assessment only covers Bridge Maintenance inspections and Engineering golf course tunnel inspections. It did not/does not cover the reserves for replacement of irrigation water pipes 2 inches or larger on the proposed owned land. The committee discussed the reserve contributions and decided that $2.00 was the correct amount and IF the reserves were to fall short, excess funds from Fy’15 to be transferred to reserves to make up any shortfall, per Ms. Rakusin. So, the committee tentatively settled on a property owner fee increase of $27.00, additional components of which will be discussed in item 3.
Item 2. Rich Kenny presented a revised schedule, that he said had ACHOA Board approval (since no Board meeting was held to discuss this it came as a surprise). The Committee’s plan (All dates are ‘targets’ as dependencies were not acknowledged) :
23 November 2015 –
Send Information Packet to Property Owners: Packet to consist of DRAFT CC&R’s, DRAFT Bylaws, Updated LOI, Cost estimates, DRAFT contract with the FOA LLC, DRAFT Lease agreement with the FOA LLC, Reserve Study, DRAFT ACHOA budget with golf property additions, and possibly a summary of all this material. There was lots of discussion on this topic and it was declared that a ‘Special’ ACHOA Board meeting would be called to approve all of this draft material for release to the property owners.
1 thru 10 December –
Informational meetings to be held at the residents center. The Communications Committee had provided a motion to the Board that these not be held until after 1 January as holidays and absent owners might not be able to participate. Mr. Burkett stated that “The Board had denied that schedule and moved it to December.” Further, the Board had decided that the meetings would be presentation style, versus the Communications Committee proposal to have at least one be a debate format. Presentations will be allowed from the ACHOA, FOA LLC, APG, CNA and any other group that qualifies (to qualify, the criteria will be sent by e-mail blst from Associa today, 27 October). The presentations will be followed by a Q&A session.
15 December –
Ballots to be shipped to Property Owners: Discussion of the ‘ballot’ entailed w o get it to owners who are away for the holidays/winter season and the number of propositions. From the committee discussion there will be at least three propositions, all of which either have to pass or they fail. This led to a discussion of the need for some guidance on filling out the ballot along with the ‘Pro’s & Con’s’ material with appropriate rebuttals.
Additionally, there was a discussion of ‘how many ballots would be needed to begin a count.’ Mr. Burkett was under the mistaken idea that only 545 votes would be need for passage. Ms. Rakusin and Mr. Duncan chimed in that the number is 547 based upon the current version of the CC&Rs, 547 it is. Sam Fox then spoke up and mentioned that once 800 ballots are received, the ACHOA would call for a count of the ballots, and if there were no clear winner, re-solicit for additional ballots from those who had yet to vote. It was agreed that opponents would be notified of who was receiving this ‘second chance’ and would be party to the solicitation.
Again this is a tentative schedule that it’s not clear who’s pushing this so hard.
Item 3. Status of Banking/ Loan discussions: Sam Fox said that they have contacted three different banking firms and received one package back. Interest rates are running from 4.75% to 5.75%d he feels they’ll be able to negotiate a loan package of 4.5% (which is the figure the Committee has been using in its presentations to the community. There was a lot of discussion between Sam and Bob Kirtley as to the actual costs of the loan and the need for those to be part of the documentation package sent to Property Owners.
At the end of their exchange, it was not clear if the loan amount contains all of the bank charges or not.
It was also brought out that the loan is a ‘Commercial Loan’ not a ‘Real Estate Loan.’ That then led to a discussion of placing liens on our individual properties, per the draft CC&R Article IX. Fox and Burkett then chimed in that NO there would not be liens placed on individual property but it would be placed on ‘Common Property.’
The meeting wrapped up around 3:25 PM PDT.
The next meeting of significance is the Governing Documents Committee meeting tomorrow, 28 October at the Associa offices, from 2:00 to 5:00.
Help me understand this significant change, Rich. So the Board, in it’s sole decision, can require owners to continue to maintain the course until it decides to do otherwise? That’s certainly reassuring, Rich. The Board can decide to maintain the course for even longer than a year? Well, that surely is a significant change in our financial commitment. Thanks for pointing that out.
It’s also reassuring to learn the FOA cannot close the course before 2017, Rich, but I suspect filing for bankruptcy would take precedent over their agreement with us?
There is one other item you haven’t included. I clearly outlined the agenda at the beginning of the meeting and listed a suggested revision to the terms in the Letter of Intent between the HOA and the FOA. This item, which was approved unanimously by the committee, addressed the issue of closing a portion of the course and keeping it in a dormant state. Previously the HOA would have been required to keep the course in dormant state, at the HOA’s expense, for a minimum of one year. The new terms only require the HOA to keep it in a dormant state at the HOA’s expense until the HOA Board decides to do otherwise. In addition, the FOA cannot elect to take this action any sooner than 2017. All other terms of the original wording continue to apply, including a 90 day notification period if the HOA decides to convert the land to a use other than golf.
This was a significant change in the overall financial commitment for the HOA and I’m surprised you overlooked it.
Changes to the Letter Of Intent (LOI) merely express what two parties desire and are willing to negotiate through a contracts process. Although, yes, the change was not included in the Synopsis, the ‘official’ change and reposting of the LOI would certainly have caught that over sight.
More importantly, is the ‘implied’ impact of this change. The impact of this change would certainly put pressure on any future ACHOA Board. In fact, does it not create a situation where the ACHOA community will be forced to maintain this ‘open space’ as green forever? We can’t sell it for a profit. We can’t sell it for development. All we can do is donate it to another non-profit organization for open space. Of course, I guess we could lease it to another golf operator or a sheep/cattle rancher.
What cost limitation on this ‘maintaining dormancy’ is the ACCC prepared to recommend to the community? The understanding was that the agreement reached bounded the ACHOA’s financial liability. How does this change to the LOI do that? Have we not violated one of the basic premises of the negotiation?
Thank you for bringing this change to the fore front.
The obligation of a future board to determine the use of the golf property, should a portion of it no longer be used by the golf operator for golf course, is unchanged from the original terms of the Letter of Intent. What has changed is that there is no longer a requirement to keep it in a “dormant” state for one year. The effective minimum to keep it dormant is 90 days, which is the notice period stated in the provision. I do not see how you conclude that there is a requirement (either legal or practical) to keep the open space green forever. If the HOA, via its Board, determines that it does not value the space as green, then it would be perfectly free to discontinue watering and maintenance and, of course, accountable to homeowners for that decision.
The effective time frame of dormancy really is an artificiality. For an HOA Board to act within 90 days and determine if the property should be maintained green or not is not a reality, as can be seen by the absence of a mere vote of consent to pursue this purchase in the first place.
The effect of a ‘dormancy clause, for land the ACHOA owns,’ is abhorrent in its concept and mandating that the dormant property, if the ACHOA cost is prohibitive, be offered back to the leasee who abandoned it in the first place is also chicanery of the first order. The ACHOA allows the former leasee to resume operations on a piece of our property that we’ve maintained for whatever period of time, for them to ‘get well,’ and then offer them a new lease? The entire dormancy clause should be stricken. If the property goes dormant, the ACHOA will need to figure out what to do with it, including keeping it green forever or leasing it out to another interested party.
As noted in the closing remarks of the comment above, “HOA, via its Board, determines that it does not value the space as green, then it would be perfectly free to discontinue watering and maintenance and, of course, accountable to homeowners for that decision.” Accountable exactly How? It would be green forever, and this statement verifies that.
You and I don’t have the same purpose. You want to advocate a position and I want to clarify the facts. You are not supportive of the representative Board structure and process (your last paragraph). I get that, but it is what we have.
The primary purpose of the dormancy clause is to control the conditions under which the FOA could request to close some portion of the course and demonstrate the financial necessity to do so, since this can potentially have a negative affect on home values. As well, it then describes what further actions might take place. You are apparently dissatisfied, which is your right. But as long as the purpose and details are understood, then I’m happy to let homeowners make their own choices.,
As there appear to no more factual misunderstandings to clarify, I will gracefully exit, stage left.
Personal attacks are definitely unwarranted. The facts, when viewed from two different perspectives, are always different. Ask any attorney. The advocacy of a position, like acquiring a golf course, may also cloud facts and present only half the story. As a strong advocate of getting a whole story, exchanges like these certainly help fill in a better picture for the community.
Supporting a representative Board, since I attempted to be part of it last election cycle, is inherent in all of us. The issue is the degree of listening and attention that a given Board pays to ALL of its constituents. The Board in question has apparently held meetings outside the purview of its constituents, per the numerous references to a “Board decision” during the ACCC meeting yesterday, and those meetings resulted in numerous decisions affecting the path forward for the ArrowCreek community, specifically schedule, budget and presenters at informational meetings.
Yes, we definitely have a different perception of the ‘facts.’ The dormancy clause, as it affects a private corporation, FOA LLC, does nothing to “protect home values” and has the appearance of protecting the PRIVATE Corporation over property owner payments to the HOA. Additionally, this statement would be met with the usual ‘belief’ that the courses add value to ALL our homes. That would be met with facts showing month after month that the data does not support that belief.
Ron Duncan — Also exiting stage right………..
It is always interesting to read your summaries. Since I chaired this meeting, let me differ with you.
First of all, I recognized Gary Smith for his contributions to the committee and his avid support of his positions. He was a valued member of the committee. I did not discuss his reasons for leaving the committee or current move to Arizona as you imply, since I believe that’s up to him to reveal. While not discussed at the committee meeting, I think we should recognize Gary for being the one who introduced the concept which underlies the basic structure of the proposal which is before the HOA. He is a very creative person and very mindful of the individual homeowner’s interest.
In your summary of the Reserve Assessment conversation you are confusing the 2016 Budget discussion with the 2016 Reserve Analysis inclusive of the golf purchase proposal. The committee was only focused on the Reserve Analysis, in which you will find that Browning has included all of the items you mention and also the Irrigation system items which you believe to be omitted. Please see “00860 – Golf Course Associated” and under that “28000 – Water System”. I would suggest that in the future you address your questions to me or the Reserve Committee for clarification before making claims in your blog.
Under your Item 2 (the proposed schedule), dependencies were explicitly acknowledged and discussed. In fact, we very clearly stated that this was a target based on current information and that the schedule may have to change if key items are not ready for presentation to the community.
You are correct in your summary of the affect of a bank loan on individual property owners. The bank loan would be made with the HOA. It is the obligation of the HOA to pay the loan based on its ability to assess its members (HOA homeowners) for the funds to pay. If the HOA should default (not a position I would advocate) then the bank has recourse against the assets of the HOA (operating cash, common area property, etc.) and not against the individual homeowner’s property.
Thank you for the opportunity to clarify.
I’m certain a review of the transcripts and/or the minutes of this meeting would resolve any confusion as to what was said in the opening remarks. What was included in the synopsis was what was heard by the author.
As for the questionable reserve values, the reserve study that is referred to was not available to the community at the time of the meeting. However, a review of the draft budget has only two items listed; Bridge Maintenance – Inspections and Engineering – Golf Course Tunnel Inspections. The DRAFT budget proposed by the budget committee and the ACCC appear to have not included an Engineering inspection/analysis of the effluent carrying pipe system that the ACHOA would inherit. The Reserve funding also appears to be deficient in that it does not contain funding for repair/replacement of these items that are currently approaching 17 years of life. The cost figures presented and discussed by the committee appear to be artificially low.
The clarifications and additions that have been added, through this discussion, certainly clarify the events of the meeting.
That’s interesting that Mr. Fox thinks he can get 4.5% even though rates are currently running 4.75% – 5.75%. A quick perusal of the internet shows commercial golf lending at 10 year treasury + 5% (10 year rates are at 2.05 today so that more like 7% interest). http://www.realtyrates.com/commercial-mortgage-rates.html Maybe this is somehow being portrayed as not being a golf loan?
It is true that most other commercial lending (apartments, industrial, office, retail, etc.) is cheaper at 10 year + 2.5% – 3%, something close to what Mr. Fox is implying. However, that is because most lenders consider these other forms of commercial lending considerably less risky to make a loan to than golf. That of course would be because loans to golf courses are seeing much higher default rates than apartments, industrial, office or retail. Even restaurants, the category notorious for having the highest amount of defaults, are now being quoted at lower rates than golf. Just think about this people, you are going to buy into a business that bankers considered even riskier to loan to than opening an restaurant…..