About that $5,000 fee . . .

After an impressive presentation at the recent Town Hall meeting that included photographs of rusted metal pipe and irrigation deficiencies, it is probably obvious to most all that our Creek nine golf course has a problem with those components. (1)  Lydell is to be commended for doing an outstanding job of articulating and explaining the issues.

This is not an argument about golf or the condition of the Creek nine.

Rather, this is a discussion about the funding options offered by leadership along with the presentation by this writer of some alternative options and solutions.

The funding sources that are being proposed include a $25 assessment increase to present property owners coupled with a $5,000 Capital Contribution Fee to new property owners which will arguably be funded by a reduction in sales price to the present property owners.  These assessments and fees are designated to be placed into separate non-restricted accounts to fund the golf renovation and other master plan projects. The $5,000 fee will require an amendment to the covenants and will be put to property owner vote in only a few days on November 26^th.

Comparing Big Canoe to other communities . . .

In 2018, a survey was done by the finance committee of twelve communities in the Southeast to compare various fees and assessments.   Reynolds Plantation and one other community were located in Georgia.  This survey is being used as support and justification for the proposed $5,000 Capital Contribution Fee.  According to the survey, this type fee has been in place at all twelve communities since their inception. (2) During the Town Hall, it was noted that Connestee Falls in Brevard, NC was the most similar community to Big Canoe.  Connestee imposes an $8,000 initiation fee vs. the $5,000 fee proposed for Big Canoe.  However, there are several glaring dissimilarities which may have been overlooked when conducting the surveys.

• Connestee requires property owner approval of operating, capital and reserve account budgets. (3) (4)  Big Canoe does not.

• Connestee requires approval for unbudgeted capital projects (cumulatively or separately) each year in excess of $350,000. (3) No Big Canoe property owner approval required for projects less than $1.2 million (cpi adjusted).

• Connestee offers non-property owner golf memberships. (5) Big Canoe does not.
  

• Connestee board meetings and minutes are prepared according to Robert’s Rules of Order. (3) Big Canoe does not. Minutes of the monthly meetings of the board of directors have not been formally approved since January 2017.

In conclusion, Connestee property owners appear to enjoy significant more control over the budget process and spending of the association resulting in more influence over the destiny and direction of the community.

Approval of this $5,000 fee as structured, would be tantamount to giving the current and ALL FUTURE boards a blank check to be drawn against a perpetual source of funds.

Note:  The $5,000 proposed “Capital Contribution Fee” should not be confused with the capital reserve fund we now have in place.

The Creek nine, as presently designed, is not a master plan project.

It is, and has been, a component of every reserve study prepared for the community in the past which estimates the amount of funds required in any given year to maintain each component included on the study.  This reserve study and the requirement that an adequate “restricted” capital reserve fund balance be maintained was mandated by property owner vote and Big Canoe covenant dated August 2010. (6)  Any additional costs for redesign and enhancement to the course could be considered part of a master plan project and should be addressed and itemized separately.

The capital reserve account has not been adequately funded.

According to the last reserve study analysis, the capital reserve fund should have a balance of $3.918 million at year end 2019. (7) The present balance is only $2.772 million. (8) No contributions other than interest income have been made to this fund since year end 2016.

An adequately funded balance would at least account for replacement of the Creek irrigation and pump system in 2020 at an estimated cost on the study of $779,937. (9) For whatever reason, other renovations that presumably include drainage are scheduled for later years and have not been adjusted.

And why do these funding deficiencies exist?

Plausible answers might include:

• Addressing wants instead of needs by failing to prioritize capital projects. In other words, funding NEW capital components rather than first allocating those funds to the capital reserve fund for maintenance and renovation of current capital components. (Examples in 2019 include the food truck, excavator, wine cooler/room, bocce courts, parking expansion studies and the Village Station activity center.) Additional new capital projects continue to be budgeted in 2020 as well.

• A reluctance to release the “control” of excess cash that might be found in the general operating accounts to the “restricted” capital reserve fund.

As a community, let’s come up with a solution that works . .

Deterioration of the infrastructure of the Creek nine and other courses absolutely does command a serious discussion, but first, we must begin by requiring the appropriate funding of the Capital Reserve Fund.

• Properly fund the current capital reserve fund to the $3.9 million level by depositing $1.2 million using current excess cash.  It was indicated at the community coffee that excess cash in the general operating accounts could be approximately $2 million.
  
  
• Stipulate, if passed by the Board, that the proposed $25 monthly assessment fee increase also go into the current capital reserve fund.

• Establish priorities and delay all new and/or unnecessary capital expenditures until the golf situation is under control.
  
  
• Obtain an updated reserve study (due and mandated by covenant), adjust depreciation periods and useful life, where necessary, add components acquired since last study and follow going forward.  These are our obligations.  New master plan ideas are our dreams.

• While we’re rewriting the covenants, reduce the spending authority of the board to a more reasonable level such as $250-350,000.  
  
  
• Consider non-property owner golf memberships now and plow those funds into a golf renovation fund.  Just 200 new memberships at the current single rate could generate $534,000 in one year.

Lastly, table the $5,000 “Capital Contribution Fee” property owner vote scheduled for November 26^th vote until . . .

• Above suggestions are vetted and given consideration
• An analysis of all new and proposed Master Plan components is provided that correlates to the actual amount of the fee proposed.
• Copies of the actual amendment to covenants is distributed to property owners for review, discussion and amendment where necessary.  Consider that simple revisions to POA rules and regulations require three readings over several months prior to approval.  A covenant change is significantly more important and enduring and should command similar due diligence.

Short of these things, please vote no.

Lest we not forget a similar scenario just three short years ago when property owners were presented with an urgent vote for the 2016 land deal that turned out to be something very different from that which was expected. 

If you would like to see additional articles posted in the future, please check back frequently or subscribe for an email notification. 

Likewise, if you have questions or would like further discussion, I can be contacted at thepcrosses@gmail.com.

Patricia Cross

10438 Big Canoe

References:

1 Town Hall Meeting, November 2, 2019 – (POAWebsite>login>POA>Meetings>Videos>Facilities and Amenities Master Plan)

2 Community Coffee, November 16, 2019 – (POAwebsite>login>POA>Meetings>2020 Budget Review)

3 connesteefallspoa.org – (Resources>Governing Documents>Bylaws September2016, Article V, Sections 3,4,5 and Article XVIII, Section 1)

4 connesteefallspoa.org -(Resources>Connestee Falls News>November 2019 Connestee Falls News)

5 connesteefallspoa.org – (Resources>Fee Schedule>2019 Fee Schedule>Page 2)

6 Second Amendment to the Covenants, dated August 21, 2010 – (POAWebsite>login>POA>Governing Documents>Covenants>Capital Reserve2010)

7 Big Canoe POA – Reserve Management Plan, August 7, 2016 – (POAWebsite>login>POA>Reports and Studies>Reserve Study 2016, Page 7)

8 Big Canoe POA Balance Sheet, October 2019 – (POAWebsite>login>POA>Financials>October 2019, Page 12)

9 Big Canoe POA – Reserve Management Plan, August 7, 2016 – (POAWebsite>login>POA>Reports and Studies>Reserve Study, Page 19)