Residents have serious concerns about the financial ramifications of owning the Copper Center. Read the pertinent information below.
Can We Afford to Keep the Copper Center?
Let's Find Out the Right Way, So We Can Make More Educated Planned Improvements
According to BOD Policies FIN-002 & FIN- 005, a professional Asset Reserve Study is supposed to be performed every 3 years or at the least every 5 years. The Asset Reserve's funding level goals are to be computed at the beginning of each fiscal year in July and is set at 60% to 70%. As per Bylaw Section 6.2e,iii, an 'Asset Reserve Schedule' outlining all proposed expenditures for repair or replacement of our Association's facilities and equipment is to be included in a Board annual summary statement.
The last 'FULL' Asset Reserve Study was performed in Feb of 2018. According to the designated time frame, a new one ought to have been done in Feb of 2023, but it was not done. We were warned at that time in Feb of 2018 that our Reserve was low and was instructed to increase our contributions to $94,000 per month, with a nominal annual increase to help offset inflation. At that time the Asset Reserve Fund of $5,148,390 gave us a rating of 65.6% which put us at a 'MEDIUM RISK' for Special Assessments. Since 2018 with inflation, our personal use everyday items have increased tremendously. Over the last (3) years items covered under the Asset Reserve Fund consisting of construction and mechanicals have inflated (2) to (4) times the figures we now have on our books, or in our 'prudent reserve'.
~ The following lists some items in question:
* The Bocci Ball Court greens carpet was replaced in 2022. The Asset Reserve Funds at that time only had reserved (planned for) $18,700 for that improvement on the books. But the actual cost was approximately $44,000.
* In 2018 the Asset Reserve Fund had a Views Restaurant hot water system reserved at $5,800. But it was replaced this year at a cost of $19,050.
* The Artisans Center air conditioning replacement costs listed on the Asset Reserve Fund was reserved at $6000 & $8000 totaling $14,000. But the (2) HVAC units replaced this year cost $26,000.
~ Note that even if the Board did figure in the right-sized contribution every year to the Asset Reserve Fund, we would still be in financial jeopardy.
The professional Asset Reserve company who performed the 2018 study, had suggested that we increase our household annual (HOA's) contribution from $399.92 to $453.37 per year to the Asset Reserve Fund. Last year in 2022 the HOA only contributed $86 to the Asset Reserve Fund and this year in 2023 it was $402 per household. What were they in previous years? Now due to the purchase of the Copper Center, the Asset Reserve Fund is extremely low, which is putting us at a 'HIGH RISK' for 'Special Assessments’.
In addition, in 2020-23 SCOV expanded the Activity Center and added new equipment. Factoring in the recent Copper Health Property Purchase, our HOA now needs to inject lots of cash into the Asset Reserve Fund. It needs to cover our items in need of repair and replacement, such as 14-18 air conditioning & exchange units, plus new roofs, new driveways and parking lots, a new generator, plus all the other equipment and structures in need of up-keep.
A Resident financier has suggested that we invest in a new 'Phase One' and 'Phase Two' study, to be performed by either the previous accounting firm contracted, 'Association Reserves', or another firm. He also recommended getting bids from two to three companies. The cost of such a study is guesstimated in the $15,000 to $18,000 range. The Resident also suggests, "This study acts as our 'spreadsheet lifeline", which helps us to keep solvent. It seems expensive but it's the only way to get back on track, in order to assure we stay in good financial standing. These studies are typically executed in HOAs. Other HOA's do them, so should we."
Our General Manager appears to discourage Residents from looking into or checking on many things pertaining to OUR MONEY and SAFETY. To that we ask, "What are you hiding and afraid of us finding out?" In fact, residents ought to take a look at the financial position of the last HOA community our General Manager managed. (Leisure World in Mesa, AZ)
Did you move to here to have a nice, relaxed, peaceful retirement in which to enjoy your last years? Now knowing what's actually going on financially in the community, can you sit back and watch your fiscally sound retirement plans become abused and jeopardized by the persons you are paying? "We need to thank all the watchdogs and 'naysayers' in our community for discovering this important financial information for you all to seriously consider.
The Copper Center Situation
KEEP the Copper Center Purchase vs. SELLING
~ The Welcome Center is structurally sound after all. The Administration has stated they are OKAY with staying in place.
~ Due to the purchase, our Cash Assets have been reduced by approximately $5,000,000.
~ Due to the purchase, our Capital Fund balance is now in the NEGATIVE by more than $2,000,000. Money was “borrowed” from the Asset Reserve Fund. As a result, our Asset Reserves will need to be continuously funded at an acceptable level in order to get it back up to par. But, where will those funds come from? By Special Assessments or significant Dues Increases?
~ Ownership of the Copper Center will ADD YEARS before any money becomes available for the Projects that have been pre-identified in the Long Rang Plan, such as new Pickle-ball Courts or a new Recreation Pool. How will we be able to fund any new Projects or even maintain our facilities in case of emergencies? By Special Assessments or significant Dues Increases?
NOTE:
~ As per the Master Declaration Article 3, Section 3.1, the Board can approve HOA dues increases of up to 15% of the previous year's dues - WITHOUT A RESIDENT VOTE. That could amount to a payment of approx. $226 p/mo. next year as opposed to this year's $196. p/mo. and the following year it will increase to approx. $259 p/mo. This year's annual dues payment was $2355. Next year it could be $2708 and grow each subsequent year thereafter to $3114, then to $3581.
~ The Board can also levy a Special Assessment as per Master Declaration Article 3, Section 3.2 to cover Association expenses, which can be charged up to 5% of the prior year's gross revenues - WITHOUT A RESIDENT VOTE. That could amount to an approx. additional fee of up to $201 per home next year and could be assessed each subsequent year.
~ NOTE that the current Board may claim no increases will happen this year or even next. But future Boards may not be able to promise that. Our current Board is not in a position to predict what future Boards may be forced to do - to play catch up with our finances.
~ The Board can also control 'incremental' renovation expansions of individual Clubs into the Copper Center. As long as the cost for each renovation project does not exceed approx. $1,000,000, they can via the Bylaws Section 6.3b proceed - WITHOUT A RESIDENT VOTE. They have the authority to spend without a Resident Vote, up to 10% of our annual gross revenues, which typically averages $900K to $1 ,000,000.
In 2022, the Artisan Center Task Force had estimated $4,500,000 to expand the (8) clubs at the Artisan Center, even though the construction plans could have been designed to cost much less. This amount since it was over $1,000,000 limit would have required a Resident Vote for approval.
~ Residents need to know the COMPLETE BUDGET COSTS for all Copper Center renovations and if the TOTAL amount goes over the Board's $1,000,000 spending limit, the Residents MUST BE ASKED VOTE on this TOTAL for all renovations. They need to see a TIME FRAME and SCHEDULE on how this money will accrue and from what sources it will come from.
~ The Association is involved in litigation on the Copper Center, which could result in a very expensive settlement with monetary damages and fines possibly totaling in the millions, payable by an assessment to Residents. That fact cannot be 'trivialized'.
All of the above actions by our Board, take away Residents' influence, control and voice on the matters at hand.
___________________________
OR - SELL THE COPPER CENTER to the plaintiff, Daniel Holdings (as a settlement)
for use in the LEGAL SETTLEMENT, or if not possible, SELL IT to an outside party.
~ This RETURNS CONTROL OF OUR FINANCIAL FUTURE to the Residents.
~ If negotiated, selling to 'Daniel Holdings' would ELIMINATE THE LAWSUIT.
~ The Capital Fund will remain POSITIVE by more than $2,000,000 which creates money available for new Projects.
~ Selling the building, eliminates the extra cost of maintaining the building.
~ Selling the building eliminates the need to add the building and its contents to the Asset Reserve Schedule.
~ All Clubs remain where they are until their specific needs are properly and professionally analyzed, identified, reviewed and then approved by the Board. Then several cost-effective solutions for expansion in plan and elevation, would follow. Residents would be asked to decide by vote on which one they'd prefer and at which cost. If that final plan goes over the Board spending authority of $1,000,000 it would be put to a final Resident vote for approval.
~ Committees and Task Forces can continue to identify future Capital Projects that are reviewed by Long Range Planning, recommended to the Board and put to Resident Votes.
~Residents will be able to control their own future.
Let’s provide Residents with all the relevant information and let us VOTE on our FUTURE.
Let's keep Resident's sound personal financial retirement plans from being compromised.
From Concerned Residents
In light of the recent financial controversy and concerns with the Copper Center (CC), Residents have serious concerns of the ramifications of its ownership, which ultimately affects their pocketbooks. Items being discussed are as follows:
-- Copper Center's Usage
* How will we now utilize the CC building? The engineer's report from June 2023 states that the Welcome Center (WC) was NOT built with modular units after all and is structurally sound with only some minor drainage corrections needed. Why were we told by the SCOV Leaders, including the Board Pres. prior to the Vote in a community email dated 12/12/22 that the WC needed $4.6 million worth of renovations to repair the building or it would need to be 'razed' going forward?
* The Admin. offices stated they can remain in place which means there is no need to spend money to move them to another building. Only a few Artisan Center Clubs have expressed an interest in relocating and other Clubs wish to remain where they are - some have logistical issues with moving due to specialized equipment requirements and associated costs. Yes, some wish more space.
* A Copper Center Task Force is meeting to study possible usages for the 22,000 sq. ft. building. But their Charter does not ask them to offer up the additional costs to sustain the square footage in the building. Where will the money come from?
-- Expenditures on the Copper Center
* The Contingency Fund accounting shows we spent $4,501,333 for the PURCHASE of the CC Building PLUS additional costs and fees of $29,535. This does not include any additional expenditures calculated since April 2023.
* What will it cost to 'hold and maintain' the building, considering its' general up-keep and utilities? The TEP bill alone for Jul/Aug '23 was $2850, for an empty building. Prior to the vote, our Leadership estimated these costs for the CC at $6000 annually.These bill totals could likely amount to up to approx. 5 times over that estimate, just for electricity!
* How much more money will the building need to get it up and running? Renovations had originally been estimated at $2.7 million, based on the admin. offices moving in; but will that figure increase since the building's usage has not yet been determined and more amenities and clubs will need to fill its spaces?
* How will the Copper Center's lack of proper parking spaces (only 49) be addressed for its new uses and what will it cost to provide more, if that is even possible?
* Residents need to know the COMPLETE COSTS for all CC renovations in addition to all other changes and moves to other buildings, and if the TOTAL amount goes over the Board's spending limit of $1,000,000, the Residents must be asked to Vote on the total cost for renovation and see a Time Frame and Schedule on how this money will accrue and from what sources.
-- Financial Concerns
* How will we pay for the maintenance of our current facilities? At least (3) buildings have leaking roofs and windows, and the pools need regular professional maintenance and water quality monitoring, which has been an ongoing problem. Our other facilities and grounds also need regular up-keep.
* Why has The Views lost $366,725 in 2022-23, which was 69% over our budget? Why was such an annual loss built into the budget with no expectations or plans to break-even at a minimum?
* According to the 2023-24 Annual Report, HOA dues bring in $5,859,240. But, total wages and salaries are at a cost of $5,433,772. This represents a 92.7 percentage of our dues (and a difference of $425,468). Where will the extra money come from for all the renovations and maintenance? Obviously, our expenses are top heavy in salaries!
* As an example, it was found that in 2011 our total wages and salaries cost approx. $2,502,028. Since our current total wages and salaries cost $5,433,772, this reflects a 47.8 percent increase since that time. But according to the US Bureau of Labor Statistics Consumer Price Index (CPI) the increase for this time period was only at 27 percent. With no additional housing or amenities to our HOA, why has there been such a grossly inflated wage increase necessary in our community? In the words of Dennis Legere of the AZ Homeowners Coalition,"That 's enough to run a small city".
* For what reason was $717,167 of our CD investment money cashed out before their maturity?
-- The Copper Center Lawsuit - The Elephant that MUST be Addressed Prior to Altering the Building
* We are currently under litigation for 'tortious interference and discrimination' by a previous buyer, Daniel Holdings. They claim the Assoc. encroached on the plaintiff's binding 'Letter of Intent' to purchase and publicly denigrated their clientele. Mediation is scheduled for Dec. '23 and the trial has been set by the court for April 24, 2024.
* Our Board of Directors has $10 million dollars of "Directors and Officers" (D&O) insurance coverage if they are personally sued, but WE, the HOA Association have NO COVERAGE. NO insurance coverage has been promised for damages if it takes that turn. This lawsuit is not 'frivolous' as the Board has told us! We could potentially be fined for millions of dollars. Where will that money come from?
* Can we be assured that NO money will be spent or accessed for renovations at the CC until this lawsuit is settled? Doesn't it make sense to keep the building intact for its highest (medical) use until we know whether we will be expected to pay legal damages? Once we change it to office and/or art studio settings, its value will plummet and if forced to sell it later to pay for monetary damages from the lawsuit, we will likely loose a lot of money - if we are even able to sell it at all.
* Residents need a new VOTE on the Copper Center building, based on comprehensive, inclusive and accurate information and figures, to either keep or sell the building for use in the legal settlement or to another buyer.