Now isn’t it remarkable that only weeks after being subjected to an extensive campaign for golf course renovations boasting the message “we already have the money” and culminating in an overwhelming approval for the project, property owners would now be confronted with a proposal for a $2,500 capital contribution fee containing the veiled threat that assessments or debt could be increased if not approved. (1) Seriously? Where did our money go? Have we just been duped?
In his November Smoke Signals column, the general manager also reminds us of our 88 miles of roads, earthen dam and other 48 year old facilities and the need to maintain and replace them over time while curiously citing the two previous attempts to secure approval of a capital contribution fee.
However, rather than being “narrowly defeated” as management would have us believe, the 2008 attempt was actually defeated with a 60/40 margin. Specifically, 2,237 votes against and 1,517 for the proposal. (2) Time for management, presumably under the direction of Bobby Jones Links (or is it still the board’s purview?), to get the facts straight really.
And as for last year’s contribution fee proposal, described as “scuttled”, it was rescinded due to the serious error in language which would have eliminated Article VI, Section 13 of the covenants and the requirement for property owner approval of capital projects exceeding one million.
It is also noteworthy that there is absolutely no mention of this community’s restricted Capital Reserve Fund approved by the property owners in 2010 that would and should have provided the resources in peak years for these important replacement expenditures. (3) Unfortunately, although the covenant language establishes that the restricted Capital Reserve Fund was created for this precise purpose, zero contributions (other than interest income) have been made to the fund since 2016. Yet, there does not seem to be any contemplation that this $2,500 fee will be contributed to that fund.
$2.2 million transferred to the Master Plan Fund in 2020 . . .
Looking back a bit to previous funding opportunities, it was previously suggested by this writer that $1.2 million in surplus funds be transferred to the underfunded restricted Capital Reserve Fund. (4) Interestingly, $1.25 million was instead transferred to the Board Designated Capital Fund that was later renamed the Board Designated Master Plan Fund. (5) (And yes, the number of funds and constant renaming is enough to make anyone’s head spin. Confusion by design? Perhaps.) Regardless, it is important to note that only one fund is described on the balance sheet as being either restricted and/or designated as a reserve fund. And that is the distinction held only by the Capital Reserve Fund.
Similarly, it was also suggested that this year’s additional assessment be transferred to the underfunded Capital Reserve Fund. Likewise, those funds which will amount to approximately $950k by year end are contributed to the Master Plan Fund. The entirety of these funds ($1.25 million + $950k) are now spoken for in the Creek nine renovation project.
Glancing back even a bit further . . .
In conjunction with the 2016 land deal, another funding opportunity became available when it was agreed to extend the $25 special assessment, that would have expired at that year end, until repayment of the land loan in 2026. At over $900k per year, these dollars which had been contributed to the Capital Reserve Fund previously were instead rolled into the general operating account beginning 2017 only to be consumed by ever increasing operational expenses and food and beverage losses.
All this is really just a prequel to the seriousness of the lack of financial stewardship regarding our capital projects. (An extensively documented post regarding this community’s Capital Reserve Fund will be forthcoming.)
Comparing Big Canoe to other communities . . .
In a subsequent communication, management goes even a step further by comparing Big Canoe and extolling the virtues of the 3,900 acre Connestee Falls in North Carolina charging an “$8,000 amenity fee to new homeowners at closing, which generates on average $800,000 annually for upgrading or adding amenities.” (6)
Apparently no effort was made to update that information or provide additional details that might paint a clearer picture of that community. Specifically, the $8,000 amenity fee was actually increased 25% in 2020 to $10,000 which is exactly the scenario that will take place in Big Canoe if the yet to be seen proposed covenant language does not prevent that increase without a property owner vote. (The 2019 “scuttled” proposal would have allowed that increase by vote of the board only.)
And while comparing, the GM does not mention some dissimilarities such as the fact that Connestee bylaws require property owner approval of operating, capital and reserve account budgets as well as approval of cumulative unbudgeted capital projects each year in excess of $350,000. (4)
But most importantly, no mention was made of the fact that, unlike Big Canoe, Connestee Falls makes yearly contributions to capital and infrastructure reserve funds which are all part of the budget process. It appears that only those amenity fees collected that exceed amounts required in the annual budgets are designated to an amenity expansion reserve for the construction of additions to the amenities of the community. (i. e. master plan projects)
According to the GM, “As things currently stand, the only way to make them (essential projects) a reality without raising capital assessments or taking on new debt” is to establish a capital contribution fee . . . (1)
Given management’s analyses in these communications of the dire need for the $2,500 capital contribution fee, any reasonable property owner must question leadership’s previous insistence that “we already have the money” for that $2.3 million Creek nine project.
To be clear, it’s not that property owners haven’t paid their fair share through the years to maintain our facilities and common properties, as will future property owners, it is instead that priorities have never been established, the Capital Reserve Fund never funded to appropriate levels and money grab after money grab have been aimed at satisfying the “wants” of some rather than the “needs” of all.
And now, precisely one year after the previous attempt at a $5,000 fee and in the middle of yet another holiday season, property owners are once again burdened with the discussions and decisions regarding a capital contribution fee. As weary as property owners must be of the subject, likewise, this author is weary of being compelled to write about it, but . . . leadership just won’t ever give it up apparently until they succeed by obtaining what must be considered the ultimate prize.
Without access and preview of the covenant language . . .
Finally, this proposal requires a change to the covenants, and at this writing, it is impossible to determine what the precise wording of those changes will be as a draft copy of that document has not been provided. However, considering the POA’s history of consuming funds for other purposes, no capital contribution fee should be seriously contemplated that does not include the commitment and statutory requirement to allocate those funds to the currently established restricted Capital Reserve Fund to maintain a balance at least correlating to the balances recommended in consistently updated and independently prepared reserve studies. Once that commitment is made, new and/or enhanced capital projects might be given consideration.
. . . . .
If you would like to see additional articles posted in the future, please subscribe for an email notification. In addition, if you believe the issues examined on this site merit property owner awareness and discussion, please share and/or forward to your friends and neighbors in Big Canoe.
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) “GM’s Corner”, November 2020, Smoke Signals, Pg. 5A
https://smokesignalsnews.com/eedition/news/page-n-005/page_e75c36c6-77ff-5113-8cb8-f7ed8733cba5.html
2) https://smokesignalsnews.com/archive/its-back-to-the-drawing-board-for-the-poa/article_4c768941-7243-5ac6-a264-dff4c35479f9.html
3) Second Amendment to the Covenants, dated August 21, 2010 –
(POAWebsite>login>POA>Governing Documents>Covenants>Capital Reserve2010)
4) “About that $5,000 Fee”, November 18th, 2019, bcmatters.org
5) “The Metamorphosis Continues”, September 3rd, 2020, bcmatters.org
6) “Maintaining the standards expected in Big Canoe: A Capital Contribution Fee is the answer”, November 3rd, 2020, Smoke Signals, weekly edition https://smokesignalsnews.com/news/big_canoe/maintaining-the-standards-expected-in-big-canoe-a-capital-contribution-fee-is-the-answer/article_56f6e3d8-1e18-11eb-9e0d-8f7aa7772f15.html#utm_source=smokesignalsnews.com&utm_campaign=%2Fnewsletters%2Flists%2Fheadlines%2F%3F-dc%3D1604497758&utm_medium=email&utm_content=read%20more