With a month elapsed since the Lake Petit Dam Town Hall meeting, it is past time for this writer to express appreciation to the Geosyntec engineer/representative for his presentation regarding the status of our dam. (1) It was not only refreshing but also reassuring to at last hear from an outside source and expert on the subject.
Likewise, despite the abundance of information provided throughout his forty five minute presentation, it can not go without mention that much of the referenced material such as the emergency action plan and various correspondence from the Safe Dams Program, etc., has also been freely available via another property owner for a number of months.
But without getting into discussions of dam safety and regulations aptly being covered by others, questions do remain regarding the financial viability of the yet to be finalized details of the project along with several other issues of concern.
An analysis based on assumptions . . .
Appreciation is also expressed to the Finance Committee Chair for his easily understandable presentation forecasting the POA’s cash flow over the next five years. Utilizing those forecasts (2), it is indicated that the POA may need to draw from the restricted Capital Reserve Fund around year 2024.
And while on paper, it appears that adequate funding could be available for the Lake Petit dam repairs, it is most important to remember that these projections are based on assumptions and will work only if each of the assumptions are correct. For example:
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At least 190 (non-exempt) “family dwelling units” must sell every year in order to collect the required revenue from the recently approved Capital Contribution Fee (CCF). (Remember that there is minimal “new” construction in Big Canoe; therefore, owners of approximately 190 non-exempt properties must likewise choose to “leave” Big Canoe. )
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Each future board (beginning January 2022) must choose to approve a $500 increase to the CCF each year until it maxes out at $5,000 in 2026. (Note: This can not be voted on in advance as was suggested.)
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All assumptions are based on cost estimates totaling $4.125 million that are somewhat inconsistent. (3) For example, the cash flow projection allots only $1.5 million for the spillway. Yet, in response to a property owner question, Geosyntec replied that the cost of the spillway could be as much as two million. (1b)
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More musical chairs as the shell game continues . . .
Also, as presented, the cash flow forecast included consolidated cash balances of all accounts excluding the restricted capital reserve fund. While consolidation may have helped simplify the discussion, it failed to reveal the insufficiencies and intent of the two segregated capital funds established by leadership in 2020 (4) as well as the continued pattern of obvious capital overspending and commingling of funds.
For example, utilizing the forecast capital expenditures (5), the Master Plan Fund will be depleted and require cash infusions as early as this very year. In fact, continued cash infusions will be required for each of the five years included in the forecast resulting in the ultimate depletion of the required operating cash minimums noted by the chairman.
Given the analyses provided, it is also interesting to note that future property owners will be the ones to shoulder a significant portion of the repair expense to the almost fifty year old Petit Dam via the recently approved Capital Contribution Fee.
Forgotten promises – made to all 2016 Big Canoe property owners . . .
Likewise, the analysis fails to account for the $25 reduction in assessments in 2026 as promised to property owners per the 2016 land deal. (6) (Those property owners that purchased in Big Canoe since 2016 to include the GM, any directors and committee members may not feel bound by this promise.) Recognizing that it might be naive to really expect that promise would have been fulfilled, regardless, it is disappointing to see our current leadership already counting on and “spending” those property owner assessments promised to expire in 2026.
The pay back . . .
And although it was noted that the POA may need to draw from the restricted Capital Reserve Fund, it was also explained that those funds must be paid back in three years. However, a clarification is in order.
The covenant actually states that if any reserves are used, the POA “must build reserves back up to Reserve Study recommended levels” within three years. (7) In fact, this very understanding is supported by the excerpt of a legal opinion copied to this writer by a current director which states, “. . . if the Association has used any of the Capital Reserve Funds for capital or emergency funds in recent years, the Association IS required to replenish the amounts used in accordance with the recommended levels needed per the Capital Reserve Study (which must have been updated at least within the last five (5) years.)”
Unfortunately we, as property owners, do not even know what those reserve study recommended levels will be in 2024 – 2026 as the results of the updated Reserve Study (prepared by outside consultants in August 2020) have not been provided by management. Four “Ask the POA” requests for that information have now been submitted with a newly estimated publication date of this month end. (8)(9)(10)(11)
And with the current balance in the underfunded restricted Capital Reserve Fund at only $2.8 million, consider that even the outdated 2016 Reserve Study specifies a 2026 reserve balance of $6.2 million and would require significant replenishment. (12) It is obviously unknown what recommendations might be made in the updated version of the study.
Many unknowns remain . . .
Understandably, as honest and informative as both presentations appeared to be, there are still unknowns. For example, it is not yet known if the spillway and the lower level outlet will require repair or replacement or to what depth the lake will be required to be lowered. These unknowns can absolutely affect the costs – up or down. Yet, there is no margin for error in any of the calculations or contingencies applied. And although unidentified projects in later years might be deferred, that postponement is unlikely based on leadership’s recent history of capital overspending.
Mystery Parcel . . .
Further, another unknown (with potential legal and financial implications) is the status of property located at the corner of Wilderness Parkway and Wolfscratch Drive that abuts the Lake Petit dam spillway. It has recently been discovered that Pickens County, Georgia records show this parcel is still owned by the developer (Big Canoe Company, LLC) even though all developer owned parcels (excluding residential building lots) were reported to be included in the 2016 land purchase. (13)CornerParcelMap (14)
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- Given this information, will the spillway repairs and/or replacement encroach on this property or require access?
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Regardless, an explanation concerning the status of this parcel should be provided to the property owners as soon as possible and certainly prior to the commencement of any work by Geosyntec in that area.
Meanwhile, it’s a preeminent thing . . .
And now, even after considering these unknowns, leadership continues to spend exorbitant amounts of money while justifying every expensive financial decision with the POA’s need to be preeminent terminology.
Make no mistake, there is no current priority greater than the Lake Petit dam repairs. It is what it is, and it must be taken care of. Therefore, when capital expenditures are forecast at $10.4 million in 2021 – 2022 alone (5), BEFORE the major dam expense in 2023, one might easily question the wisdom of these decisions.
Needless to say, prudence is strongly encouraged.
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If you would like to see additional articles posted in the future, please check back frequently or subscribe for an email notification. Likewise, please feel free to contact me at thepcrosses@gmail.com for questions or further discussion. Meanwhile . . . take care and stay safe.
Patricia Cross (10438 Big Canoe)
References:
1 Lake Petit Dam Town Hall Meeting, February 27th, 2021; (b) at 1:12:45
3 PetitDamForecastedExpenditures
4 The metamorphosis continues, September 3rd 2020, bcmatters.org
https://bcmatters.org/the-metamorphosis-continues/#more-558
6 /https://www.insidethegates.org/2016/02/08/poa-property-purchase-qa/
7Second Amendment to the Covenants, dated August 21, 2010 (POAWebsite>login>POA>Governing Documents>Covenants>Capital Reserve2010)
12 Big Canoe POA – Reserve Management Plan, August 7, 2016 –
(POAWebsite>login>POA>Reports and Studies>Reserve Study 2016)