Some Highlights of the October 2006

BOD Meeting

This was the annual budget meeting of the BOD, in which the 2007 budget was presented by Jack Troia, Chair of the Finance Committee. On this occasion, Freedom Hall was almost standing room only. Besides the budget presentation, this meeting was noteworthy for two other reasons.

The first was the included Hearing on the Board's agenda for the Business Development Club to show cause why their charter should not be revoked. The Hearing took place towards the end of the meeting at a time when both attorney's (John Leach for the Association and Kathleen Janssen for the BDC) were present. The BDC's formal response to the violation charges against the Club appears separately, Click Here. You may read a separate SCA View-Journal editorial on the Board Hearing by Clicking Here.

On Seeking the Truth. The second noteworthy event of the day was the "after the Hearing" dialogue between Larry Cole and Favil West on Larry's unsuccessful efforts in search of the Trumpets financial records. Following the Hearing portion of the agenda, roughly 90% of the audience rose from their seats and exited the building, leaving only a few stragglers to witness the end of the meeting and the interesting but unproductive exchange between Mr. Cole and Mr. West.

What Larry did not realize at the time and what he eventually found out was that the financial records he was seeking from RMI on Trumpets simply did not exist. The dialogue between Mr. Cole and Mr. West went on for some time, with Larry pressing for answers to why the financial data was not available, as required by Nevada statute. The smoke and mirrors explanation did not deter Mr. Cole from pursuing the matter further. Finally, a frustrated Dea McDonald took the floor to announce that the Board was not present to enter into a dialogue with dissatisfied residents, at which time Mr. West moved on and closed the meeting.

Mr. Cole may have forgotten to make note of a prior Board meeting and a very telling statement made by RMI's accountant, Sherry Fields. When a similar inquiry was made at that Board meeting, Sherry Fields responded along the following lines: "I'm keeping the Trumpets financial records I was told to keep. Isn't that correct?"

I would have to say, "Yes, Sheery," you are correct. In fact, Sheery is doing exactly what she was told to do. As a result, there are no financial records of the type Larry was seeking to look at simply because Sherry was not tasked by the client to generate records showing accruals of the amounts owed by S & D Cafe V, LLC. It's that simple. Sorry Larry.

Poor Larry Cole. Now if Larry Cole had only known what had happened to the last person who engaged Mr. West in such a persistent and challenging manner during a Board meeting, he might have had second thoughts before stepping up to the podium. But that disturbing story demonstrating the real perils that a Sun City resident can face in speaking out at a Board meeting is best suited for another day.

Mini-Bombshell. Favil West, not to let the Trumpets matter rest without some presumed finality on the issue of what's owed, dropped a mini-bombshell during his exchange with Mr. Cole (the "bombshell" image at left was the courtesy of Yahoo images).

To those residents who had been asking for an accounting of just how much the lessee of Trumpets owes the Association, Mr. West announced that the forensic accountant hired last year had also been tasked (recently ?) to provide the Association with an overall amount that is owed by the lessee, in addition to making an assessment of the correctness of the amounts owed (if any) due to the revenue sharing provisions of the lease. Kudos to Favil West.

  The 2007 Budget & the Neighborhoods Problem. With no basic dues increase planned and the SCA treasury flush with excess cash in 2007, the Board will be under serious pressure if not attack to explain why certain of the Neighborhoods in Sun City are scheduled for an increase in their annual assessment, allegedly by as much as $2,000 as noted by Financial Committee Chair Jack Troia. While Mr. Troia took some care to explain the need to increase assessments for these Neighborhoods to meet future reserve requirements, that explanation went way over my head. The assumption had always been from day one, at least by the affected homeowners and presumably by the Developer-controlled Boards, that adequate reserves were being accumulated, assessed or paid into the reserve kitty to meet future needs. Now we are told that may not have been the case, at least, if my understanding is correct, in the case of Clubhouse and Pinnacle Neighborhoods.

Does the absence of a reserve study for Clubhouse and Pinnacle fully address the question of why reserves were not being accumulated for these Neighborhoods all along?

As announced, there will be a special meeting of the Neighborhood residents, the date to be determined. These are the five Neighborhoods, together with the number and type of units in each Neighborhood.

For those who do not know, all Neighborhood residents pay the same assessment everyone else pays, currently $940 a year. In addition, residents are assessed for current operating and for future needs. For example in the High Mesa Neighborhood, residents pay an additional amount of $1,500 a year to meet these needs, which include common area, landscaping and future needs, such as outside painting, roof repair and maintenance and liability insurance.

Anticipate some serious finger pointing as questions are raised about what happened, why and who was responsible for the budgetary problems that some of the Neighborhoods will be encountering in 2007 as their assessments are increased.

Since SCA's overall budget (that includes the Neighborhoods) will be voted on as one item at the November Board meeting, the pleading voices of those affected Neighborhood residents seeking some relief will be difficult to hear.

There may be a need to explore alternative financial management options on Neighborhood financing. Today, for example, each Neighborhood is treated as a separate budget item. This means that a budgetary shortfall in Neighborhood "A" will have to be met by the residents of Neighborhood "A," rather than the shortfall being shared by all Neighborhoods, even though all Neighborhoods have essentially the same maintenance needs over time, regardless of when the Developer brought the homes online. Pinnacle Village, a Neighborhood, is different in that the owners pay for painting, maintainence & insurance, while they are assessed additionally for street maintenance, lighting, and operation of the entry gate.

As to how the Neighborhoods are managed financially, we were told that is a Board decision.

2008 and Beyond. While the 2007 year poses no real financial concerns, 2008 will pose some real financial challenges. Developer build out in late 2007 to a total of 7,144 lots will bring to an end increasing revenues from Developer lots and resident assessments. In other words, income to the Association from these sources will be fixed by the number of lots the Association will be able to assess. Planning for 2008 will have to take into consideration the impact of maintaining the third recreation center building, which will have three relatively expensive swimming pools to operate and maintain, making the cost of operations and upkeep on that 21,000 sq. ft. recreation center building more akin to the costs incurred on the 78,000 sq. ft. Anthem Center.

Bait and Switch. A disturbing budgetary "bait and switch" offering appears to be in the making. As previously mentioned, this is a sort of "now you see it, now you don't" slide of hand trick, but in this instance, the amount of $1.375 million disappears. Mr. Troia announced that the Pulte-promised $1.375 million for our (admittedly depressed) reserve account was not in the 2007 budget. How come? This amount should be in the 2007 budget since there will be no Cogeneration operations in place at the third recreation center. How do we know that? We know that because Favil West told us so.

What is Cogeneration? It's important to understand what Cogeneration is and what it is not. Cogeneration has a specific meaning and is a well understood term in the power industry. It is the use of a heat engine, like a gas or jet turbine engine as Mr. West has explained to us over the years, or a power station to simultaneously generate both electricity and useful heat. What Cogeneration is not are solar panels. This is a very important distinction since we have a written agreement, a contract if you will, with Pulte on this very matter. Here is what that 2002 agreement specifies, as signed by then Del Webb Nevada Communities General Manager Chris Haines, May 1, 2002:

Co-Generation Plant

Del Webb will fund up to $1,375,000 for the development and construction of a co-generation plant to supply hot water and electrical power to the Anthem Center and associated amenities and, if practical, for the satellite amenities as well. Any monies remaining after the construction of said facilities will be donated to the Sun City Anthem Community Association reserve fund at the transition from Developer control to resident control. If the co-generation plant proves to be unfeasible, the entire amount will be donated to the reserve fund at transition. This money is in addition to any money normally required to be deposited by statute.

The agreement and language could not be more clear. Either there is or there is not constructed "a co-generation plant." There are no ifs, ands, buts or howevers to interpret or consider. Since the plant will not be constructed, the question is why did the 2007 budget not plan for the receipt of the $1.375 million? The short answer is that the Finance Committee was told not to show that amount as future income to the Association. How could that be? Don't we have a binding agreement with Del Webb/Pulte on the disposition of those funds? Apparently not!

When is a deal not a deal? Answer: When the deal involves $1.375 million!

And, emphatically "No," Mr. West the agreed upon deal was not for solar panels as an alternate to Cogeneration. If Pulte subsequently decides to place solar panels on the third recreation center, fine. But that act should in no way mean that the $1.375 million belongs in Pulte's construction pocket rather than in the Association's reserve account. Or does it?

Has Favil West made a new and undisclosed deal with the Developer on this matter?

Ron Johnson, 29 October 2006, revised