True Colors . . .

For those who may not have heard, a small group of concerned property owners including this writer (“the group”) was formed for the initial purpose of soliciting signatures on a petition asking the board to give the property owners an opportunity to vote on a proposed amendment to the covenants regarding capital expenditures exceeding $1 million and the associated member approval requirements. (1)  petition

In order to minimize any costs to the Association, the petition requested that the proposed amendment be placed on the ballot no later than November 7^th, 2022, thereby allowing it to be included in the annual election of directors package.

The proposed amendment stated the following:

• • Not withstanding anything contained in the Declaration to the contrary, no capital expenditure exceeding one million dollars ($1,000,000), regardless of the source of funding, may move forward unless the expenditure is approved by more than fifty percent (50%) of the votes cast by Members. This restriction shall not apply to roads, bridges or dams. The $1,000,000 will include all costs whether categorized as maintenance, replacement or enhancement as well as the cost of planning, design and all construction costs including a reasonable contingency.

With the help and support of many, the group physically collected signatures from a diverse cross section of similarly concerned property owners. Purposefully, this process was conducted within a very short time frame and absent any post on this blog site or use of social media. Had it been, one might be certain that the number of signatures would have increased exponentially.

On June 30^th, during the Q&A section of the regularly scheduled open board meeting, the petition containing 194 signatures with a voting weight of 262 was presented to the board. The transcript of that presentation can be found here. (2) The board’s response dated July 8^th, 2022 was received on July 12^th, 2022 via certified mail which included an additional letter from the Association’s legal counsel. But first . . . let’s digress a bit.

Some background and why the proposed amendment to the covenants outlined in the petition is so important . . .

Since the 2010 property owner approval of Article VI, Section 13  of the covenants, the Association has been operated under the premise that any capital expenditure (excluding roads, bridges and dams) exceeding one million dollars (cpi adjusted) would require the approval of the property owners. The statute specifically states that the Capital “Reserve Fund” will be used “to pay for the purchase, repair, maintenance, and replacement of Association property . . . “

Adherence to this statute and it’s intent has been demonstrated for over a decade in past board policies and procedures  (3) as well as property owner approval requirements of capital expenditures often described by the board as maintenance or replacement. (Example: The Creek 9 renovation which was funded through the Master Plan Fund.)

And it really only makes sense . . . with the board granted the authority in our governing documents to establish and collect assessments as well as the authority to borrow money, it is not only logical but wise that property owners should have some type of approval authority and oversight regarding where all these dollars both collected and borrowed are spent. Without that oversight, the board is basically in possession of a blank check.

So what happened? . . .

Something changed with the 2021 Board of Directors that has apparently carried through to the recently elected directors as well. The perception shifted. The interpretation was bent with the board’s September 30^th revision of Board Policies 152 & 153 eliminating any property owner approval requirement for capital expenditures defined by the board as maintenance or replacement regardless of amount if funded outside the Capital Reserve Fund. As an example, if the Creek 9 renovation took place today, there would be no property owner vote required. Looking ahead to future projects and examples, the Choctaw and Cherokee nines as well as a revisit of renovations to the Chimneys will proceed without a property owner vote should the board continue to classify those projects as maintenance.

Now, whether this revision was done in order to purposefully circumvent the intent of Article VI, Section 13 is unknown, but that is definitely the result.

Or perhaps instead, leadership was fearful of some obscure and arguably questionable legal interpretation that could label them liable for failing to maintain Association property. Yet, if that is really the case, this proposed amendment would serve to fix that while also codifying the requirement that all capital expenditures exceeding $1 million (excluding roads, bridges and dams) regardless of definition and regardless of the source of funding be first approved by the property owners.

Next, only four months later, the board approved and proceeded to secure a credit facility with Wells Fargo Bank. That said, we now have a board with access to $20 million in loan commitments (4) in addition to millions in other funds without any property owner approval requirements whatsoever provided they classify the capital expenditure as  maintenance or replacement. That is quite frankly an invitation to disaster.

True colors emerge . . .

Because of all these issues, the group presented the board with the aforementioned petition. As it is an amendment to the covenants which takes precedence over Board Policies and Procedures, it will mandate the reversal of the board’s decision to eliminate the property owner approval requirement for capital expenditures defined as maintenance.

One might ask, why was the petition conducted in this matter absent any public notification or involvement of social media? Well, perhaps, the group just wanted to quietly and respectfully give the board the opportunity to stand up and do the right thing by honoring their past promises  (5) as well as preserving the intent of Article VI, Section 13 of the covenants. Instead, the board chose to forfeit that opportunity.

” . . . will not be brought to the community for a vote” . . .

Unfortunately, the board will not be allowing the property owners an opportunity to vote for the petition’s proposed amendment as explained in the POA Secretary’s July 8th letter  (6). The letter states that the proposal “would substantially change the intent of Policy 152” formulated through “hundreds of hours of committee, staff and board meetings” that culminated in the board’s September 30^th, 2021 approval of the revised Policy No. 152.

It also should not go without mention that this “research, discussion and collaboration” was conducted over almost a year of closed door meetings .

But YES, the board did get one part right because changing, rescinding and canceling that dictatorial September 30^th, 2021 board decision, by amending the covenants via a property owner vote WAS and REMAINS precisely the purpose of the petition.

Further denial . . .

Interestingly, the board’s reply also included a denial from the Association’s legal counsel (7) in a letter speaking “on behalf of the Board of Directors” and addressed directly to the petitioners.

Curiously, while the counsel’s letter first acknowledges that “there is no mechanism under the Association’s governing legal documents” for members to present or propose an amendment, she conversely attempts to create an alternate avenue (Article II, Section 2.2) in order to conclude “As such, your request is hereby DENIED.”

To be clear, the group has recognized from the beginning that the governing documents are silent on this particular issue. Because of that silence, property owners are not prohibited from presenting a request such as this in petition format to the board of directors for consideration, and that is exactly what this group has done. Likewise, the group understands that the board is not obligated to honor the petition’s request. The board has now spoken and clearly denied the petition by stating the “petition will not be brought to the community for a vote.”

One might ask . . . What now? . . .

While continuing to discuss ways to achieve a path forward, the group remains open to suggestions and assistance. Some ideas that have already been proposed follow:

• • Invite others to join the effort and provide support to the 194 signers of the petition in hopes the board will acquiesce. (For those interested in providing this support, print out the petition , sign and place in this writer’s alpha box or simply scan and email to responsivegovernancegroup@gmail.com) , or

• • Rather than requesting a solution, stand up and protest the board’s decision during the “three minutes” allotted to members at the regular board meetings, or

• • Continue down the list of options outlined in a previous post on this site. (8)

Regardless, always remember that the board of directors has complete free will to do the right thing without ever being presented a petition and without ever calling a meeting, and this board has clearly chosen not to do so.

. . . . .

As always, please feel free to post comments or contact me at thepcrosses@gmail.com for questions or further discussion. Likewise, should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. Meanwhile, take care and stay safe.

Patricia Cross (10438 Big Canoe)

References:

(1)  petition

(2)  transcript of that presentation , June 30th, 2022 presentation to the board

(3) past board policies and procedures – Big Canoe Policies and Related Procedures, 153 Capital Expenditure Policy dated August 20, 2020.

(4) “Let’s revisit that $20 million credit facility”, bcmatters.org, July 6^th, 2022, https://bcmatters.org/lets-revisit-that-20-million-credit-facility/

(5) An excerpt from “A Betrayal of Trust”, October 29^th, 2021, bcmatters.org, An excerpt from “A Betrayal of Trust”, October 29^th, 2021, bcmatters.org https://bcmatters.org/a-betrayal-of-trust/

The ballot package containing an information sheet titled ” 10 Things to Know About The Capital Contribution Fee ” (3) along with the ballot requesting approval of the “CCF” amendment was delivered to property owners. As one can clearly see, item number 4 states, “While the fee gives the POA the ability to plan and pay for major projects, no capital expenditure of more than $1 million can move forward without a vote by Big Canoe Property Owners”.

(6)  POA Secretary’s July 8th letter  addressed to the Responsive Governance Group

(7) Letter from the Association’s legal counsel , Kimberly C. Gaddis, Esq., dated July 8^th, 2022

(8) “What If”, bcmatters.org, February 21^st, 2022,  https://bcmatters.org/what-if/