Keeping the record straight . . .

In yet another welcomed information packed open board meeting complete with a lively Q&A, the community was barraged with details on a multitude of important subjects. And although the clubhouse situation and renovation probably took center stage, this post will be limited to time sensitive discussions regarding the water company negotiations and Wells Fargo loan covenants.

Light at the end of the tunnel . . .

During the February 29^th meeting, while withholding any specifics (sketchy by necessity) regarding the ongoing legal negotiations with Utilities, Inc., the POA President seemed to imply that those discussions which have literally spanned years would soon be moving toward a conclusion. At that time, the community will be provided the actual details of those negotiations.

And given that the Association has already spent over $80k in legal fees (1) to pursue their exact undisclosed objective, the pending resolution of the issues is indeed good news.

Note: Similarly, the Water Committee referenced “recent developments” in the negotiations in their February 23^rd meeting minutes.

That 2018 water agreement . . .

However, as it appears that the original agreement with the water company, Utilities, Inc., took place prior to the President moving to Big Canoe, it unfortunately seems that he may have been provided some inaccurate information regarding that transaction. Specifically, in response to another property owner’s question, the President noted that the 2018 agreement (which is the subject of the current negotiations) was approved by the community in two town halls. (2a)

For the record, the community (beneficiaries of the Trust Deed) did not approve that agreement.

In fact, the community was not even privy to the content and/or existence of the 1984 Trust Deed which was an integral part of the agreement until the deed was posted on this site almost two years later. (3) As outlined in this writer’s most recent post on the subject (4) https://bcmatters.org/lets-not-give-away-the-ranch/ , it is believed that contrary to the verbiage found in that agreement, the release of the Trust Deed would require the approval of those owners whose property is “attached” to the Utilities, Inc. water system.

It is unknown if the release of the Trust Deed is a subject of the negotiations.

And as additional clarification, it is important to recognize that only those owners of property “attached” to the Utilities, Inc. water system are the “beneficiaries” of the 1984 Trust Deed.

Note:   One might question why assessment dollars of those property owners who do not utilize the Utilities, Inc. water system (such as residents of Waterford) and are not beneficiaries of the Trust Deed have been used to fund the $80,959 in legal fees for these negotiations.

As for those Wells Fargo loan covenants  . . .

(the shell game revisited)

In a February 1^st post to this site, https://bcmatters.org/now-for-the-rest-of-the-story/  it was noted that the scheduled transfer of cash equal to December depreciation expense (approximately $295k) from the operating account into the Board Designated Capital Fund did not take place as mandated by board procedure in place at that time.

The post went on to state that “Failure to perform this required transfer effectively neutralized the intent and diluted the effect of the board’s previous month’s [November] decision to transfer the unused insurance proceeds ($474k) from the operating account into the Board Designated Capital Fund while making that transfer now appear as nothing more than a ruse”.

“And further, this December 2023 deviation in procedure would have required a majority vote of the board, and there is no indication anywhere in the minutes that such a vote took place prior to January 25^th, 2024. Instead, for whatever reason, this vote was taken noting an effective date of December 2023 resulting in a backdated change to board procedure.”

Based on information found in a previous financial presentation at a Lake Petit Dam Town Hall that included a slide titled Cash Flow Forecast  (5) specifying a $1 million minimum balance requirement in the operating account to cover one month of expenses, this writer pondered the following:

• • Could it be that the additional funds were needed in order to bolster the balance in the operating account to $1.067 million and set the stage for the year end audit of the books by Mauldin & Jenkins?

• • For example, would a more favorable year end balance in the operating account as reflected on the audited financial statements enable the Association to attain any possible minimum balance requirements that may have been outlined in the Wells Fargo loan agreements?

Note: It should not be forgotten that this writer’s previous requests for copies of the Wells Fargo loan documents have been denied by a previous board.

The update – a veiled rebuttal? . . .

In what appears to be an apparent effort to quash this writer’s suggestion that the December 2023 transfer of dollars from the operating account to the Capital Fund may have been waived in order to maintain the year end balance requirements established by Wells Fargo, the Director of Finance presented a new financial slide at the February 29^th open board meeting titled Wells Fargo Loan Covenants . (6)

And contrary to the previous Cash Flow Forecast , the Director of Finance defined the $1 million requirement as “cash on hand” (2b) and subsequently included the board designated and restricted capital funds in the calculation to arrive at an $8.25 million total at the 2023 year end.

Stepping into the shoes of a previous director, the current POA Treasurer continues to deny access to the Wells Fargo loan documents . . .

Finding the inclusion of restricted capital funds in Wells Fargo’s minimum balance (liquidity) requirements unusual, this writer once again submitted a request for the loan documents. Although hoping for an outcome different from that with prior boards, this writer’s AskthePOA Ticket#12631  (7) request for the loan covenants was again denied. However, the POA Treasurer summarized the minimum balance or liquidity requirements as follows: “Maintain “Unencumbered Liquid Assets” with an aggregate fair market value not at any time less than $1,000,000.00 tested quarterly. ‘Unencumbered Liquid Assets” means cash, cash equivalents, and/or publicly traded/quoted marketable securities acceptable to the bank.”

The deception . . .

Well now. Unless management can provide documentation of some further distinction in that secretive loan agreement, it should be clear that the various capital funds are “encumbered” assets. As outlined in the audited financial statements, both the Capital Reserve Fund and the Master Plan Fund contain restricted uses per covenant. Similarly, the Capital Fund which includes the residual insurance settlement proceeds is restricted by board designation.

Therefore, the Director of Finance either does not understand the meaning of “unencumbered liquid assets” or she intentionally (with the apparent concurrence of the POA Treasurer) provided the community with inaccurate information during her February 29^th slide presentation of the Wells Fargo loan covenants.

Thus after eliminating the capital funds from the calculation, it becomes clear that the Association could not have maintained the required $1 million balance at year end without retroactively deferring the scheduled transfer of funds from the operating account to the Capital Fund. (8)

Not a good look.

. . . . .

If you believe the information contained on this site is important, please continue to share and pass it on. And should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. As for questions or further discussion, I may be contacted at thepcrosses@gmail.com. Meanwhile, take care, stay safe and thank you for your readership.

Patricia Cross

10438 Big Canoe

References:

1)   AskthePOA Ticket#12632

2)   Big Canoe POA Board meeting, February 29^th, 2024, video on Youtube at a) 1:39:50; b) 33:25     https://www.youtube.com/watch?v=DqUJbI1YExg

3)   https://bcmatters.org/lets-talk-about-our-water/

4)  https://bcmatters.org/lets-not-give-away-the-ranch/

5)   Cash Flow Forecast

6)   Wells Fargo Loan Covenants

7)   AskthePOA Ticket#12631      

8) Total of $8.25 million less $7.185 million (capital funds) = $1.067 million less $295k (depreciation transfer) = $772k