Synopsis: 1st Addendum

This Synopsis: 1st Addendum was received via email after the comment was posted in the comment section at the bottom of the Synopsis page.

Here is the pdf file with easier-to-read formatting! It has been updated to correct the information on Rich Kenney per his comment.
Synopsis 1st addendum update

Text below:

Synopsis: 1st addendum

I would like to update the synopsis previously posted on this website based on my
knowledge as a long time AC resident and information obtained from the ArrowCreek
411 website, the Associa website, and from local newspaper and TV reports. The
synopsis and this update are an attempt to sort through and organize information for
myself to the best of my ability. I hope, that sharing this information might be helpful to
others who are trying to get their arms around this. Constructive corrections or
additions are more than welcome.

The Process

Joint Venture Process:

Our community is represented by the HOA board. After the elections in December
2014, it became public knowledge that the five board members that were elected were
supported by the FOA. The FOA are a group of about 36 investors that bought the
ArrowCreek Golf Club at a bankruptcy hearing in the fall of 2014. The ArrowCreek
Community Club Committee (ACCC) is a committee established by the HOA Board to
analyze the options regarding the purchase of the golf club. The HOA board also
established a communications committee to relay vetted information from the HOA
board to the residents and provide board approved answers to HOA member questions
(for example: FAQ’s). We also now know the names of a few of the litigants that
involved the Golf Club and the developer Terrabrook in multiple lawsuits from about
2006 to 2008, contributing to the decision by Club Corps to not buy the Golf Course in
2008. (Key managers of Club Corp now are with the Arnold Palmer Management
Group). Below is a list of members of each of the aforementioned groups. Names of
those that have multiple roles in our community are highlighted. Pertinent information is
added as available regarding those key players in our community.

HOA BOARD:
President: Sam Fox: FOA supported
Vice President: Robin Rakusin: lives on golf course, 6th hole, verbally attacked
James Keller, Board candidate (not FOA supporter) during “Meet the Candidates”
meeting
Secretary: Charles Dickinson, FOA supported
Treasurer: Alan Liebman, FOA supported, lives on golf course 7th hole (in his letter to
Arrowcreek friends and neighbors on 11/14/14 he said: I “do not live right next to the
golf course”
, and on his candidate application he denied any conflict of interest)
Director: Steven Elliott, FOA supported
Director: John Krisch,
Director: Joyce Seelen: FOA supported, Golf Club member, lives on 8th hole: admitted
to potential conflict of interest on her candidate application form

ACCC:
Rich Kenney:Chairman, spokesperson for the committee / presenter at HOA meetings, served HOA: on the Board, Board president, Board Treasurer, Design Review Committee, Budget Committee, presented HOA on the Unsecured Creditors Committee in the bankruptcy proceedings
Charles Dickinson: ACHOA Board Liaison, HOA board member, FOA supported
Sam Fox: HOA President, FOA supported
Robin Rakusin: HOA Vice President
Norm Reeder: ACCC member, Golf Club member, former Golf Club Member Advisory
Board President
Gary Smith: former Golf Club member, former HOA board member/president

Communications Committee: (incomplete list, obtained at the Nov 17th HOA
meeting)
Paul Burkett: former golf club member, former president of HOA, temporary HOA
board member in 2014, Chair of HOA Budget Committee
Norm Reeder: ACCC member, Golf Club member, former Golf Club Member Advisory
Board President
Hal Albright: FOA member, Golf Club member
Added volunteer members on 11/17/14: James Keller: HOA Board candidate, not a Golf
Club Member; John McGhee: former co-chair of The Group of Volunteers (GOV)
pursuing transparency and open communication during the 2008 Club Corp
negotiations, not a Golf Club Member
[Webmaster Note (2/14/15): Added Susan Duncan, not a Golf Club member, in 12/14 after she created ArrowCreek411 website. Elizabeth Heaven, Golf Club member, was asked to join in 1/15 after her published letter on ArrowCreek411.]

FOA: (incomplete list)
Registered Agent: Rew R. Goodenow
Manager – Tom Gurnee: member of ACCC until December 2014, Golf Club Member
Manager – Alan E Humphrey
Manager – Gary Pestello, FOA spokesperson, member of ACCC until December 2014,
Golf Club member
Manager – Joseph Petite, Golf Club Member
Manager – Mark Wimbush, Golf Club Member
Joseph Morabito: Golf Club Social Member
Hal Albright: communications committee member, Golf Club member

Former Litigants: (incomplete list)
Gary Pestello: FOA, Golf Club member, member of ACCC until December 2014
Paul Burkett: former golf club member, former president of HOA, temporary HOA
board member in 2014, Chair of HOA Budget Committee, communications committee
member
Tom Motherway: FOA investor, former HOA board member
Other litigants: Bob SKACH, Richard HARRIS, Alan E. HUMPHREY, Rick MEYER,
Gary GAUMER, Manny MARTINEZ, Christie CORT, Don PARSONS, Mark TOOMEY,
Paul JASZEWSKI

The above lists show that several HOA board members are/were ACCC members at
the same time. Other ACCC members have strong connections to the Golf Course. The
communications committee also has other members who are either members of or are
in support of the Golf Club. Litigants are/were in the ACCC, in the communications
committee, on the HOA board, and are FOA members.

Question:

How can the work product from the HOA board, the ACCC, and the communications
committee be unbiased? The concern would be if these individuals can be trusted to
serve the community or will they serve their own interest. If anyone has more
information regarding FOA members, board or committee members, please share with
all of us.

Permissibility of FOA 12% Interest Earnings per the Articles of Incorporation:
A concern regarding the FOA and their business proposal is the 12% interest the
ACHOA would have to pay on all expenses incurred by the FOA. Paraphrased, our
Articles of Incorporation do not permit any activity that would result in the direct financial
benefit of any ACHOA member.

In the recently posted correction of previous statements, it appears that the HOA Board
defines the FOA, LLC as a separate entity from the ACHOA Corporation, and thus
“there is no direct profit to members of the ACHOA Corporation (ACHOA
homeowners)”.
They are seeking advice from a tax expert to clarify if profits from the
Joint Venture will affect the non-profit status of our HOA. This issue is on the agenda
for the HOA meeting on 2/24/15.

The Vote:

Currently, the HOA board is proposing a simple majority vote on the JV based on an
encompassing question that includes the purchase, operation and amendments to all
governing documents. In January, an AC resident sent a notice of violation of voting
procedures to the HOA board. In addition to the permissibility of the 12% interest
earnings by the FOA, two other key concerns are: a) whether the conversion of our
HOA from a non-profit to a for-profit corporation violates the Articles of Incorporation,
and b) whether the vote based on a 50 % + 1 vote majority as currently proposed by the
board violates the Articles of Incorporation that require a two thirds majority. In the
recently posted correction to previous statements, the HOA board states that it is
unclear whether the Articles of Incorporation have to be amended. The issue is on the
agenda for the next HOA meeting on 2/24/15.

Liability

The HOA posted the following in January 2015 regarding potential law suits and HOA
residents’ liability:

“If judgments exceed the procured limits of coverage, the NRS requires that the ACHOA
Board of Directors assess the membership for the shortfall. At this point in time, all
ACHOA member Homeowner policies with their HOA assessment coverage will be
triggered and the ACHOA member will be reimbursed to the limits of insurance
purchased in their homeowner’s policy. Many ACHOA members are
procuring $25,000 to $50,000 limits to cover this contingency for both catastrophic
property and casualty losses in their home owner’s insurance policy.”

Question:

Have you purchased an umbrella rider on your home owner’s insurance policy?

Financial Risk

Zoning and Home values:

The HOA board posted the following in the FAQ’s regarding rezoning of the Golf Course
land:
“There are a myriad of encumbrances on the golf course property with respect to
legal and administrative open space requirements established by multiple local and
federal agencies as well as archaeological restrictions. Consequently, it can be
assumed that the application process to rezone this property would be long and
arduous. Whether or not such an application would be approved cannot be speculated.”
The HOA board subsequently posted the following on the Arrowcreek 411 website
regarding rezoning of the Golf Course land on 1/29/2015:
“If ‘The Club At ArrowCreek’ failed to thrive, a land speculator might buy the golf course
from the FOA investors in the expectation that the developer would be allowed to build
hundreds of additional homes in and around our existing homes.”

Question:
With the above HOA statements, the question remains if we have to fear rezoning if the
JV is not approved by the residents.
Costs:
About $30K have been spent for the Joint Venture. $60K have been budgeted for the
Joint Venture. The costs incurred for legal counsel to date, and the tax lawyer are not
known. The HOA Board also commissioned two studies: the property valuation study,
and the demographic survey. Cost unknown.

Private and Public Options failed in the History of the AC Golf Course.
At the beginning of the ArrowCreek development, there was a phase when all
ArrowCreek residents were social members of the Golf Club. Then the developer
Terrabrook started the concept of equity membership, rescinding the social membership
of the HOA residents. Over time, promotional membership fees had to be increased,
resulting in a substantial loss of Golf Club members. In 2006, in an attempt to increase
membership, the Legends course was made a public course, while the Challenge
course remained private. The golfing industry peaked around 2006. Around that
timeframe, the AC Golf Course “had 450 members and operated at a $1.5M annual
deficit”
(in RGJ: as per lawyer for the litigants, Mr. Gunderson). In 2008, when the
developer Terrabrook sold the Golf Club to Charlie Leider, there were about 400
members. During Charlie Leider’s ownership, more attempts were made to raise private
as well as public membership. In 2014, Charlie Leider had to declare bankruptcy. The
Golf Club has never been profitable. Therefore, in the history of the AC Golf Club, both
private and public membership concepts have failed.

Recently, the FOA and Arnold Palmer management have decided to make both of the
AC 18-hole Championship Golf Courses private courses once again. According to the
Reno Gazette Journal: “Arnold Palmer says it has a goal of enrolling about 400 new
members by July. They admit it’s a lofty goal, but say they are well on their way to
reaching it.”
The last available membership number is about 130 members, meaning
that in a few months membership would have to be more than tripled (and as mentioned
above: with 450 members, the annual deficit was $1.5M). The timeframe for promotional
“recallable” membership rates of $250 for nonresidents is not specified on the golf club’s
website, and $230 for AC residents is guaranteed for only 1 year. Social membership is
$95/month. The vote on the purchase of the golf club and the Joint Venture proposal is
now delayed. According to the latest HOA Newsletter no date has been set.

Questions:

Will newly recruited members remain members in the future when promotional
membership fees will have to be raised to sustainable levels? Will we have a true
picture of the potential for success or possible failure of the Joint Venture by the time we
will be asked to vote? Can a 36-hole golf course be successful without continued
subsidies from the HOA residents when there is so much surplus of golf courses in the
Reno area and with the golfing industry remaining in a recession? In 2013 about 157
golf courses closed, while there were only 14 openings (National Golf Foundation)

Special Assessments:

To just cover the purchase price and the water bill debt the HOA board published the
following in January 2015 describing a potential special assessment of about $2500:
“The ACHOA Board and ACCC have been reviewing the Nevada Revised Statutes and
the ArrowCreek Declarations of Covenants, Conditions and Restrictions, Section III –
Assessments – Section 5 Special Assessments with Board legal counsel. The question
being pursued is whether a “Special Assessment” approved by the ACHOA members
for the acquisition of “The Club at ArrowCreek” would be allowed. If we estimate that the
purchase price is between $1,600,000 to $2,000,000, that would require a one-time
assessment per lot owner of $1,473.30 to $1,841.62. [1,086 ACHOA lot owners]
However, there is still the need to fund the past due water bill of almost $900,000 and
that would increase the special assessment by $828.73. With these types of numbers,
there may be a need for some type of a payment plan and a need for short term capital
to make such a purchase.”

Question:

We know that the golf course and the club house are in need of substantial capital
investments. The proposed increase in HOA monthly fees by $99 roughly covers the
yearly operational deficit based on information from past years. The question is how will
these capital investments be financed?

ONCE THE VOTE TO APPROVE IS IN THE PAST, THE BOARD HAS NO REQUIREMENT TO ASK THE MEMBERS (US) IF WE AGREE TO INCREASED MONTHLY HOA ASSESSMENTS OR SPECIAL ASSESSMENTS TO PAY FOR CAPITAL CALLS FOR THE GOLF COURSE OR COMMUNITY CLUB.

12 Responses to Synopsis: 1st Addendum

  1. Richard Kenny says:

    My name is Rich Kenny. I am not and never have been a member of the ArrowCreek Country Club. I play golf once or twice a year, primarily to let my son claim “bragging rights”. I have served the HOA in a number of capacities including the Board, Board President, Board Treasurer, Design Review Committee, Budget Committee and now the Community Club Committee. I represent the HOA on the Unsecured Creditors Committee in the bankruptcy proceedings against the prior Club owners. I do these things because I have an interest in maintaining the values of our community, including our property values, and because I have considerable expertise in financial matters which can be useful. If you ask any of the Board members or committee members with whom I have served over the last 7 years I think you will find that I take my fiduciary responsibilities very seriously and that I go out of my way to make well-reasoned and unbiased decisions. I am personally undecided on the issue of purchasing and operating the Club, but I do believe there is sufficient potential benefit to bring the issue to a homeowner vote given the information before us today. This may change as further information is developed over the next few months.

    The webmaster’s summary of my role and background is both insulting and slanderous.

    Like

    • As you can see, Mr. Kenny, the Webmaster has posted your comment in full. I also must let you know that the Webmaster is not writing these missives personally. These are writings from many different members of the community. So your clarification of your position will help rectify a misunderstanding.

      Thanks for joining the conversation. We need more give and take like this.

      Like

    • Ronald Duncan says:

      Rich,
      Welcome to the discussion. If the webmaster had written the synopsis, I’m certain that quality control would have caught the error. The thing about an open website, is that multiple people can post and some are less informed than others. For instance, there aren’t many people who know that there are two Kenney’s living in the ArrowCreek development.
      You’re one of the most ethical people involved in these discussions and so I’m not surprised by your dismay. Only apologetic that someone didn’t recognize the correct individual.
      Ron Duncan

      Like

  2. Ben Collins says:

    Web Master,
    I have an 6″ (W) by 5″(H) (roughly) pdf chart that I would like you to publish with minimal reduction. Can you do that on this site?

    Regards,

    Ben Collilns

    Like

    • Ben – Please send it to arrowcreek411@gmail.com – Thanks!

      Like

      • Ronald Duncan says:

        Dr. Collins,
        The decision tree you’ve provided certainly is a different way to review the golf situation in ArrowCreek. However, the FOA has already made an offer to the ACHOA to buy the assets from them at a modest 12% profit. So, the starting point of the tree seems to be off kilter. In addition, some of the lower tier decision points don’t appear to have ‘consequences’ listed. For instance, if the FOA assets are turned brown, that’s a business decision by an LLC and property owners adjacent to that property have no recourse. If, on the other hand, the ACHOA owns the asset and decides to turn a course brown, the ACHOA now has the potential of being entangled in legal arguments with the property owners who are affected. Not a good situation. Also, from the selling to a ‘builder,’ you’re likely unaware that the original developer of ArrowCreek tried his very best to persuade the County Board of commissioners to allow more units, both adjacent to the existing club house and the area northwest along the national forest lands, and was soundly told NO. Building on the open space, not likely.
        So, this is a good start to try and get people to take an objective look at the situation. It just needs some refinement to reflect the facts of where we’re at and a larger picture.
        Ron Duncan

        Like

  3. Bob Kirtley says:

    The Synopsis and related First Addendum have provided the community with a succinct summary. Kudos to the writer. In a related topic, I have been asking for the disclosure of the background of specific financial information. I have copied in my questions and the Board’s response. I will let the audience of the blog make their own opinion of the Board’s response to my questions. My response follows the Board’s.
    Bob Kirtley
    Questions edited for length; full text should be posted by the Board

    With respect the potential transaction with FOA, I have 2 questions: the first is who has done the due diligence on the viability of continuing golf operations? The projections of the FOA and running the golf course have not been made available. Given the fact that the golf operations have never been close to self supporting, the information on how the FOA/Palmer is going to turn this around should be open to scrutiny. The homeowners should be able to make their own assessment of the project viability.
    My second question is why were the greenbelt and brownbelt options dismissed? The background supporting the costs of these options should be made available. My strong suspicion is the cost is much lower than assessing all the homeowners for a failing golf operation.

    Board’s response:
    February 2, 2015
    Dear Mr. Robert Kirtley:
    The ACHOA Board appreciates the receipt of your email and the numerous questions you have posed. The following response is to each of the questions in your email. If we have not completely answered all of your questions, please let us know and we will comply with your request. Please note that the recent events at “The Club At ArrowCreek” have delayed some of the due diligence and vetting work planned by the ACHOA Board and the ACCC. Therefore, we may not be able to completely answer all of your questions at this time.
    1. Who has done the due diligence on the viability of continuing golf operations?

    The due diligence and vetting of the proposition to continue golf operations if the ACHOA owns the golf course property and improvements has not been completed. The ACHOA Board and the ACCC will be conducting the due diligence and vetting of financials for “The Club at ArrowCreek”. It may be necessary during the vetting and due diligence process that the ACHOA Board and ACCC consult with Board Counsel and Board Accounting firm to gather additional information. At this time this the due diligence and vetting process is pending.
    The ACHOA Board and ACCC do not disagree that the ArrowCreek Golf course under previous owners including the developer was never self- supporting. The ACHOA Board and ACCC agree that all financial information concerning the operation of “The Club At ArrowCreek” currently being operated by the FOA and APG should be open to scrutiny by the ACHOA members. The five year pro forma and current results will be presented to the ACHOA members for their review and assessment of the operational viability of the golf course.
    Unfortunately, those documents have not been shared with the ACHOA Board and ACCC because of the current Membership Strategy being pursued by the FOA and APG. The FOA and APG want to make sure that membership growth is trending in a manner that will financially support a Joint Venture Proposal to the ACHOA members. When the due diligence and vetting of the released financial documents has been completed by the ACHOA Board and ACCC, those documents will be provided to the ACHOA members for review.

    2. My second question is why were the greenbelt and brown belt options dismissed?

    Before the ACHOA Board and ACCC answers this question, we need to address the most significant question or proposition that the ACHOA members must agree upon. Should the ACHOA purchase the 544.6 acres of land in the middle of the ACHOA? Should the ACHOA take out a loan or special assess the ACHOA members to purchase the golf property land and improvements?
    If the members do not approve the purchase of the golf property land and improvements, the greenbelt and brown belt and golf operation questions and debates are moot. How the golf course will be run, sold, allowed to turn brown, green, or rezoned for other uses will be completely out of the control and influence of the ACHOA members. The decision to control the destiny of this land falls to each ACHOA member.
    Assuming that the ACHOA membership votes to purchase the golf property land and improvements and approves a loan to cover the purchase, only then do the numerous options concerning operation of the asset get a complete and through vetting. The green belt and brown belt options are not off the table and they will be revisited along with other options. All of the costs for operating the brown belt and green belt will be revisited and these will include costs for the Reserve Fund assessments, water costs, maintenance costs, fuels management costs, additional personnel costs, additional equipment costs, operational building costs, property tax impacts, etc. In addition, the ACHOA Board and ACCC will review the viability of 18 holes of golf, 27 holes of golf, and 36 holes of golf operational costs and related revenue streams for operation.
    Thank you for your questions. The ACHOA Board and ACCC will be posting additional FAQs with responses in the near future. In addition, the ACHOA Board will be sending out update email blasts to keep the community members informed about the due diligence and vetting process.
    ACHOA Board

    In my follow up to the Board, I reiterated that Pro-formas and projections are usually the first step in any business plan to assess the viability of a project. Not having them at this late a date is worrisome.
    The Board also has implied that the required increase in the monthly assessment for a green belt strategy is roughly 40%+ more per year than for operating a golf course. As one suspects, I would like to understand the basis and support of those calculations. Refer to the ACCC Board Presentation of November 4 2014.

    Bottom line: I was very disappointed in the response I received.

    Like

  4. Great information says:

    Thank You for the detailed information. Very eye opening.

    It appears the “FOA” has been able to use HOA money (thanks to the board) to pay for their research in taking over the club.

    My question is:
    Now that it appears they are keeping the course and will be using our roads, security, lighting and other services paid for by the HOA, are they going to pay a fee for these or will they be a gift, as the financial and legal studies have been.

    I think they should not only be assessed to use our roads, etc. but should reimburse the HOA for takeover expenses.

    All in favor?

    Like

  5. Pingback: Synopsis: The First Addendum Has Its Own Page Under The Synopsis Page | ArrowCreek 411

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