Emory Williams Letter to Big Canoe
Big Canoe Property Owner,
According to pronouncements from the POA board you will soon be asked to approve an initiative allowing the Board to increase existing fees and/or to impose new fees on property owners. You will probably be asked to vote YES to an Initiation Fee (often referred to as an Exit fee).. The Board of Directors and its representatives have been providing you with “white papers” and other documents purporting to prove the need for such a fee. I believe much of the information presented is erroneous, incomplete, and misleading, and that the need for such a fee is neither necessary or desirable. The purpose of this paper is to provide you with arguments that will convince you to vote “NO” to the imposition of such a fee. I will also direct you to a web site that those of us who believe Big Canoe is headed in a wrong and dangerous direction can use to communicate additional information and to exchange ideas. Please go to responsiblepoa.com for more information.
My arguments against the imposition of the initiation fee must necessarily include criticism of the POA Board’s actions over the past three years. Board members proclaim proudly that they do not represent the property owners but that they represent the Corporation. This argument fails to recognize that the Board has always been seen as a representative body and that the POA only operates as a corporation to provide limits on legal liability. Such an attitude by the board has led to an arrogance that has contributed to the state in which we find ourselves. After all, even corporate boards have finally learned that shareowners cannot be ignored, and property owners are the POA’s shareowners.
The current Board’s arrogance extends beyond mere micromanaging. For 9 months now the GM position has been filled by a member of the Board. Reading a recent Smoke Signals we learn that only a member of the current board is qualified to be the POA General Manager. We are supposed to believe that in all the country there is no professional manager who could fill this important position. Can it be that the current board is so intent in advancing its own agenda that it is afraid that a true manager might be so competent that the agenda might be challenged?
I believe the current board has so badly managed the POA finances that we are truly in danger of becoming like some other communities whose financial positions are in serious danger. While the POA revenue has steadily increased, the operating budget for 2008 projects a decrease in profit of almost $500,000 when compared to the past several years.. A serious question arises whether even this poor performance can be achieved. One big unknown is the amount the new restaurant will have to be subsidized. The new clubhouse and restaurant, while valuable additions to our amenities, will obviously cost more to operate than the old one. If revenues do not increase substantially, the required subsidy will be greatly increased. This potential additional POA cost is one of many reasons the Board should take a deep breath and stop its reckless spending.
The board has promised that the money collected from the new revenue source will not be used for the operating budget. This is not the case. The board plans to shift major expenditures from the operating account to the “Capital Reserve” account. For example, the interest paid on POA debt has always been an operating expense that is part of the operating budget. Likewise the annual road re-paving has always been paid from the assessments collected.. According to the Board’s whitepapers, these expenditures, along with others will now be paid from the new Capital Reserve account. The two expenditures mentioned above amount to $900,000 to $1,200,000. With the movement of these amounts from the operating budget to the new Capital Reserve account the Board creates a significant “windfall” for the operating budget which is primarily supported by our monthly assessments. The Board then has the opportunity to reduce our assessments, build up cash reserves for a “:rainy day”, or simply continue its uncontrolled spending habits and “burn up” the windfall. Which do you think will happen?
The “initiation fee” as proposed will not affect all property owners the same. The time share properties will be totally exempt since the properties are never sold, yet they will get to cast 100 votes for the proposal. Worse than that, the developer’s sales of new lots will gain a dramatic benefit over property owner resales of homes. While it is true that the 1% fee will be paid on some of the lot sales, there will be no fee when the buyer of a lot decides to build on the lot. As an example, suppose the developer sells a lot for $150,000. A fee of $1500 may or may not be due on this sale. But if that lot owner builds a $500,000 house on that lot, no further fee is due. So on what is essentially a $650,000 transaction, the maximum fee is $1500 or 2/10 of 1%. At times, this type transaction accounts for as much as 80% of houses constructed in Big Canoe. Conversely, if a resale is sold for $650,000 the fee is $6500. This puts the sellers of existing homes in Big Canoe at an additional disadvantage over what already exists.
The reason given by the board for needing a new source of revenue is to fund a Capital Reserve fund. I agree that establishing a reasonable reserve fund is prudent and desirable. I also believe that the reserve could be funded from current sources. While prior boards did not have a designated fund, cash reserves were large enough that a defacto fund existed. In 2002 when we had a devastating tornado, the POA spent in excess of $700,000 for cleanup and still had cash reserves. Prior boards also had to fund the buyout of the developer and add to and improve our amenities from normal assessments. This board does not realize that the best preparation for future needs is through the proper management of current spending. They also have demonstrated that they cannot differentiate between “needs” and “wants” which compounds their spending proclivity.
Little doubt exists that the economy is in a slump. Energy and food prices are at all time highs, while real estate continues to be depressed. Well run companies are cutting costs and scaling back expansion plans to get through this difficult time. Big Canoe’s developer has announced the indefinite postponement of the Potts Mountain development because of slow real estate sales and the general state of the economy. One would think that our POA would follow this example, reduce expenses, and slow down on the pursuit of new projects. This has not been the case. The board continues its bureaucratic tendencies by spending large amounts of money on non-essential projects and by greatly expanding overhead costs.
Unlike most developments where the developer pays for all the amenities and recovers the cost through lot sales, all the amenities in Big Canoe have been paid for by the Big Canoe property owners. Most of the payment for amenities have come from the Amenity Reserve Fund which has been funded by a significant portion of the monthly property owner assessments. Because of the 1999 Amendment to the Amenity Reserve Agreement, the POA has no further obligation to pay for any future amenities desired by the Developer. However, there is reason to believe that the current board plans to use some of the Capital Reserve funds to pay for additional amenities in the Potts Mountain development. This cannot be allowed to happen. Any amenities added to that development should be paid by the Developer, not property owners.
Take a long look at the projects the Board wants to undertake by spending your money and think about whether all these undertakings are in the best interest of Big Canoe or are they just a way for this Board to advance its own agenda and to change the nature of our community. One of the things they want to do is to tear down a perfectly functional maintenance administration building and replace it with a new one. To do this will be wasteful and irresponsible. Another proposed project is a “Village Hall” or administration building. While there are legitimate arguments for some type of community center in the future, the proposed facility would not satisfy that need. This facility would house our bloated administration, including a greatly overstaffed accounting department, and provide additional meeting rooms. The board’s argument for more meeting space is trivial at best. Before you vote for this proposal you should ask yourself how many times you have been inconvenienced by the lack of meeting space. Although the Board is not forthcoming about projected costs for individual projects, the “leaked out” estimate for the Administration Building is around $3,000,000, which is an outrageous amount.
Many property owners seem to think that the proposed Fund is to upgrade or maintain amenities. That is not the case. A prior Board along with the management team in place at the time made a decision that Big Canoe’s amenities needed upgrading. They left a plan in place to upgrade the amenities without putting an undue hardship on the POA finances. They realized that high quality amenities directly affect property values. Although this Board let costs get out of hand, the amenity upgrades are near completion. Big Canoe’s upgraded amenities should serve the community for many years to come. The projects proposed for payment from the new Fund are, for the most part, administrative in nature. While the completion of some of these projects might eliminate some minor inconveniences to homeowners, they will in no way positively impact property values. These are merely pet projects desired by the few to serve the few.
This board seems obsessed with re-making Big Canoe no matter the cost or the negative effects on the “character of Big Canoe”. They meet in secret “work sessions” and make decisions in concert with committees which are sometimes incestuous in nature. The husband of the chief financial officer for the POA serves on three committees, including the Long Term Planning Committee that created the list of POA needs. This is a direct conflict of interest since the CFO is a chief beneficiary of an expanded bureaucracy. Look at an updated list of committees and the people who are on theses committees and you will see other examples of people serving on more than one committee.
Looking at the arguments made by the board for this Fund you have probably seen their contention that most other communities are imposing an initiation fee similar to the one proposed by our POA board. They presented examples to make their point. Unfortunately most of the information they presented was wrong, Many of the large amounts they showed as initiation fees are actually fully refundable membership deposits for private golf courses. Certainly, there was little to make those properties comparable to Big Canoe. What they did not present are the communities that are actually similar to ours, and in geographic proximity, that have no or very small initiation fees. We have found that most similar communities charge from $400-$1000 as an entry fee.
I hope you will not only cast a “NO” vote for the POA proposal, but that you will also let the Board know that you want a return to financial sanity, and that you oppose a re-make of Big Canoe. I think a resounding defeat of the board’s proposal is necessary to get the board’s attention. Ultimately what we want is a Board that truly represents the property owners who elected them, and does not justify its “tax and spend” policies by hiding behind the illusion of “corporate” responsibilities.
Emory D. Williams CPA
Former Big Canoe POA Interim Chief Financial Officer
Former Big Canoe Board Member and Board President
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This site is presented as a resource for use by Big Canoe property owners. Information found on this site will often differ from that which is presented by the POA Board, the current administration, and some of the committees. Much of what you will see here is opinion, but the opinions will be formed from the best available information.
As property owners and users of this site, you are urged to bring attention to the good things you see as well as the bad. You are particularity urged to bring attention to acts by our employees when those actions exceed your expectations.
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Recent Posts
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Recent Comments
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- F Shead: Congratulations, very well done.
- F Shead: Must address no-bid contracts. There must be wording added to stop multi-million dollar “no-bid”...
- Larry Grizzle: I would like to think that everyone involved in this process feels they’re doing the right thing...
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- Don Wyeth: My numbers as to homes and lots may be slightly inaccurate but are close enough to establish a point....
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- Don Wyeth: By now most of you are aware that the POA Board has , after great consideration , come up with a new plan...
- mark sementilli: Doug, The one area or your letter that strikes me as truly amazing is the purported spiking of the...
- Doug Piggott: “Corporate” Board – Fact or Fiction? You decide. Some would have us believe that this term...
