Photos: UFOs

Wednesday, December 25, 2019
Photos by Jerry Solomon

This morning saw interesting clouds . . . revisiting Roswell??

Photos: Dec 2019 Montecito Holiday Decorations

Wednesday, December 25, 2019
Photos by Jerry Solomon

Our Holiday trimmed clubhouse and our sky clouds this AM . . . enjoy . . . 2020 should be a visionary year, causing opthimologists to take a sabbatical.

 

President’s Message: Bulk Cable Update 12/23/2019 with Answers to some Questions

Kim Fuller
President

 

Good afternoon residents,

After my message this morning, I received some questions which I thought would be best answered for everyone.

It is true Spectrum will not be offering the Door Fee of 1.035 million, just as Frontier will not be offering their Door Fee of 1.380 million. This came at the request of the Board to both companies for a couple of reasons.

  1. Because we are well funded in our Reserves it was felt we did not need the money up front but would prefer a reduction of the monthly fees for the Cable services. This meant that Spectrum reduced their monthly fee by $5 per month rather than giving us the Door Fee. If Spectrum were to give us a Door Fee the monthly fee would be $53 instead of $48. In the case of Frontier, we got a reduction of $6 per month so the price dropped from $18 per month to $12 per month for not having a Door Fee.
  2. If we did get a Door Fee it was estimated that we would have to pay taxes on the money. This would mean about $300,000 to pay out in taxes. By not having a Door Fee all the money could be used as a credit on our monthly fee thus giving 100% of the benefit back to each resident. This seemed a better way to go to benefit the residents directly.

Please understand that because there is no Door Fee, we all receive a lower monthly fee without paying taxes.

We found an error in the proposal that did not line up with the proposed new channel guide for Spectrum. NFL Red Zone is included in the proposal. Once we got the new channel lineup today from Spectrum, we saw the error. The new Channel list is now posted on the Website and can be obtained at www.scshca.com/bulkcable. HBO is not included, but NFL Red Zone and all the other channels on the posted channel list are included. HBO will cost $15 per month additional if you want that service.

I have been asked if the Dodgers are included and that answer is yes. They are listed as ‘SportsNet LA.’

Please let me know if you have further questions and I will get back to you as soon as possible.

Have a great Christmas and Happy New Year. I will look forward to seeing everyone at one of the Town Hall meetings.

Kim Fuller
President

Policy Change for Traffic Violations

The Board of Directors at their November 18, 2019 monthly meeting voted in Executive Session to discontinue the practice of having the SCSH Patrol Officers pursue and stop traffic violators. This change was the recommendation of the Security Contractor and the Safety Advisory Committee in order to eliminate any potential danger to the officers and reduce potential liability. However, the Patrol Officers will still video violations and if they witness a traffic violation, they will obtain the license plate number of the vehicle and the owner of the vehicle will receive a citation in the mail within ten (10) days of the violation. The violator will be able to view the video and/or photos of the violation. They will also be able to contest the violation citation to the Covenants Committee and appeal their findings to the Board of Directors. No change in the current policy, except the Patrol Officer will not pursue and stop the violators.

Board of Directors

President’s Message: Bulk Cable Update 12/23/2019

Kim Fuller
President

Good morning residents,

After the Board meeting on Monday 12/16/2019, Spectrum submitted a new proposal. The Board has been reviewing that proposal in detail. I have attached a new presentation to describe the current proposals from both Spectrum and Frontier which you can view at the following link:

www.scshca.com/bulkcable

Some basic points in the new proposal from Spectrum are:

  • Price will increase from $40 to $48 per month excluding all taxes, fees and any HOA fee
  • Spectrum will not pay a Door Fee to the HOA ($1.035 Million)
  • Reduction in content – No HBO or NFL Red Zone
  • Small dollar amount changes in equipment pricing

These changes will bring the estimated total monthly cost per residential lot to approximately $51 to $57 per month depending on taxes and fees for the Spectrum plan.

The Board immediately began working with our representatives and Spectrum to try and resolve legal issues with their contract. At this point the Board believes all issues with the legal terms in both contracts from Spectrum and Frontier can be resolved within a few weeks.

The Board has scheduled the Montecito Ballroom on 1/13/2020 and 1/14/2020 to hold Town Hall meetings to explain what we believe will be the final proposals from both companies. The times of the Town Hall meetings will be 9:30 am and 2 pm on both days. We will then release a new survey for residents to fill out. This survey will be released on 1/15/2020 through the E-blast system and will need to be done by 1/22/2020 at noon so results can be tabulated before the Board Meeting on 1/27/2020. It is the Board’s intention to vote on which proposal to put forth to residents for a ballot vote in April. We need to decide at the January meeting which company and proposal to submit for a formal ballot vote if we are going to have all the material printed and ready to release in time for such a ballot vote.

The survey will be going out through the E-blast system and will be available on our website in the Residents-Only section. Only one survey per home address, any duplicates will mean both surveys will be deleted, so be sure to only fill out one survey per household. Your name and address will be required on the survey to be valid and incorrect addresses will be voided, so please take your time when you fill out the survey. This last survey will reflect the latest and up-to-date information on how the residents feel about moving forward, information that will be valuable for the Board vote on 1/27/2020.

Hopefully this clarifies how we are proceeding.

Let me know if you have further questions.

Thank you,
Kim Fuller
President

Finance Advisory Committee – January 2020

By Bill Wethe
Finance Advisory Committee Chair

The members of FAC want to thank John Deshaw for his 2-1/4 years of service to the Community and to the Committee! Well done!

FAC now has three openings. We would love to hear from you if you have an interest in serving on the FAC.

Work Completed

During the months of November and December, the FAC continued its work with the Board as well as with DRM and Troon management on behalf of the Association including:

  • Review and recommend Board approval of the Associaton’s unaudited November 2019 financial statements including the:
    • financial statements prepared by DRM/Associa, Troon, and the Controller.
    • combining and combined financial statements included in the HOA Treasurer’s Report prepared by the Controller.
    • summary financial information on the HOA’s financial position and results of operations included in the Controller’s report to the Board.
    • condensed Association financial information to be published in The View.
  • Review of the variance analysis prepared by the Controller on the 2019 Operating Fund revenues and expenses to assess impact, if any, of the 2019 Forecast.
  • Review of variance analysis prepared by the Controller on the 2019 Replacement Fund expenses and inter-fund transfers to the Operating Fund.
  • Review of the 2019 Forecast (11+1) of the Operating Fund and Replacement Fund as compared to the 2019 Budget and the 2019 Forecast (10+2) prepared by the Controller.
  • Regular meeting of FAC held on December 13, 2019.
  • Preparation of the FAC monthly written report to the Board for its meeting on December 16, 2019.
  • Review of November 2019 bank statements, bank reconciliations, and Replacement Fund investment account statements.
  • The Board approved the revisions proposed by FAC on the Association’s Investment Policy for 2020.
  • The Board approved the revisions proposed by FAC on the Association’s Procurement Policy.
  • The Board approved the increase of $1 million to $16 million in the Fidelity Bond proposed by FAC as of January 1, 2020, to comply with California Civil Code Section 5806.

Work in Process

The FAC proposed revisions to the Charter and Mission for the FAC and the Charter and Mission for the FAC Subcommittee on the Replacement Fund and Reserve Study (Subcommittee). The proposed revisions were approved by the Board for posting to allow for comments.

The FAC and Subcommittee prepared written recommendations for the Board’s review in the preparation of Board Action Forms requesting expenditures from the Replacement Fund for replacement or major repairs of common area real and personal property components.

Further Information

Please review minutes of our monthly meetings and written reports to the Board included in Board meeting packages on the HOA website.

Additional FAC Members: Larry Anderson, Steve Proia, Carey Thompson, Bob Giovannettone, and Bill Ferstenfeld.
FAC Subcommittee Members on the Replacement Fund and Reserve Study: Chris Stevens, Don Salvatore, Steve Proia, Carey Thompson, and Bill Wethe, Chair.
Contact the author at finance@scshca.com.

President’s Report – January 2020

Kim Fuller
President

A Discussion About Assessments

Every year when our new assessment amount comes out, I get questions about why the assessment is going up. So, I hope to explain here some of the factors that determine our monthly assessments. Our assessments are set up to allow us to meet all our costs and maintain sufficient reserves for future replacement, improvements and major repairs.

I want to start by saying that I believe that as long as there is inflation, monthly assessments must always go up. If we are to maintain facilities and services at an equal level year over year, assessments will need to go up at least by the inflation rate in order to compensate. The only way we could keep assessments at the same level would be to have a reduction in services or maintenance, and I do not support such a philosophy. As a result, I have often stated that assessments must go up every year if we want to maintain the same level of services.

There are also many reasons to increase assessments by more than the national inflation rate such as cost increases imposed by the state government (for example our state-mandated minimum wage increases). It is also possible that residents might want to boost costs for additional services. For example, the Board increased our landscaping cost by $3.50 per month per home because many residents wanted more landscaping services so our community would have a better appearance.

Our 2019 balanced budget was based on $270 per month, not the $265 per month that we are all paying. We were able to reduce assessments to $265 because of a budget surplus in 2018 that allowed us to lower assessments by $5 per month. So, from a budget point of view, costs for 2019 were based on $270 per month. Inflation toward the end of 2019 was 1.75% and was estimated to reach 1.8% by December, but for this discussion I will use the rate of 1.75%. This means, to maintain facilities and services at their current level, that costs must go up by 1.75% or $4.73 per month. (1.75% of $270).

Next, we need to add in the costs of increased labor as a result of state-mandated increases in the minimum wage. The minimum wage will increase from $10.50 to $15 by the year 2022. We must pay this increase each year, and it will mean a labor cost growth of about 8% per year. Because a company like Troon employs more than half of its staff at minimum wage, you can see this increase can be considerable.

As a result, the Board implemented labor cost increases for 2020 at 1.5% for non-minimum-wage staff and then state-mandated increases of about 8% for minimum-wage staff. There were two buckets for calculating labor, one for non-minimum-wage staff and one for minimum-wage staff. With inflation at 1.75%, we did well to hold labor cost at 1.5% for those that were not minimum wage. Combined labor costs will then come in at about 4% - 5%.

We need to keep in mind that our HOA does not permit contracts longer than one year. This can work against us when trying to contain costs for a period of time longer than one year. Although we can bid each contract every year, all increases in costs will be passed on to us each year.

As a result of low unemployment and the increased minimum wage, contract costs have increased. For example, our security contract went up by $1.50 per unit per month. The landscape contract went up by $3.50 per unit per month. The latter is for two reasons: residents wanted increased service, which requires more labor, and the minimum wage requirement. These two contracts alone increased costs to the HOA by $5 per unit per month.

Now, let’s talk about Reserves, which we refer to as the Replacement Fund. We accumulate a portion of each month’s assessments for future replacement and major repairs of common area real property improvements as well as common area personal property and equipment. The Finance Advisory Committee (FAC) initially considered setting this portion of the assessment at $45 per unit per month starting in 2020. However, this would mean our 30 year cash flow forecast would include eight years in which our funding would be less than 70%, an amount considered to be the minimum financially responsible level for reducing the risk of special assessments.

As a result, FAC recommended we put an additional $2 per unit per month (for a total of $47 per unit per month) into the Replacement Fund in 2020. The increase in the funding rate starting in 2020 will mean that the 30‑year cash flow forecast to be below 70% in only two years. Over the long term, the Board agreed this is wise because it provides residents with added confidence that we should not need a special assessment, which is one factor in maintaining home values.

After accounting for all these different concerns, our increase in costs was projected at $15 per month per home for 2020. Because the balanced budget for 2019 was $270 per month, this meant we were trying to keep assessments for 2020 below $285 per month. Through the budget process of looking at expenses we might not need, or costs that could be reduced, the balanced budget came in at $281 per month per home. Because the HOA had a projected surplus for 2019 of $331,000, the Board decided to use this surplus to reduce the balanced budget assessment by $8 per month, making the net assessment $273 per month for 2020. This amounts to a net increase to residents of $8 per month beginning in January.

But keep in mind that our balanced budget in 2020 is $281 per month, and we will have two more years of minimum wage increases. So, we have two more years of increased costs that are beyond our control.

Once you calculate the past two years of budgets, you can then project that, for the next two years, assessments will increase at least 4% per year. Hopefully, if we can maintain some efficiency, we can keep from exceeding that 4% level. However, given state-mandated cost increases, holding assessments to inflation increases will not be possible, in my opinion. The only way to hold assessments to less than a 4% increase would require a reduction of maintenance and/or services, not my first choice.

Even after considering all these factors, I take a moment to stare at the sunset and recognize that we still live in a beautiful place that is worth every penny. Paradise is the perfect description; so, without a doubt, I will always contend, “It doesn’t get any better than this!”

Kim Fuller
President

President’s Message: Bulk Cable Update 12/20/2019

Kim Fuller
President

Good morning residents,

At our last Board meeting on Monday 12/16/2019, the Board made a presentation of current information regarding Bulk Cable Contract negotiations. You can view that presentation by going to the following link

www.scshca.com/bulkcable

The Board has been waiting on a response from Spectrum since our last meeting with them on 8/21/2019. Since then, Spectrum communicated in writing on multiple occasions they needed additional time to review their initial proposal and establish a new pricing model due to changes with many of their content providers. It is not the Board nor our attorneys who have been delaying negotiations.

On 12/6/2019 the Spectrum representative stated to us the following:

Spectrum has incurred significant increases in our programming costs across the board. This has required us to revisit our offer with our finance group to make sure we are in compliance with our new cost model.

After the Board meeting on Monday 12/16/2019, Spectrum submitted a new proposal. The Board is reviewing that proposal in detail now and we can hopefully have more complete information to you soon.

Some basic points in the new proposal include:

  • Price will increase from $40 to $48 per month excluding all taxes, fees and any HOA fee
  • Spectrum will not pay a Door Fee to the HOA ($1.035 Million)
  • Reduction in content – No HBO or NFL Red Zone
  • Small dollar amount changes in equipment pricing

These changes will bring the estimated total monthly cost per residential lot to approximately $51 to $57 per month depending on taxes and fees.

Unfortunately, this increased cost proposal by Spectrum does not address the contractual legal concerns which the Board communicated to Spectrum four months ago, so we again have asked Spectrum to respond to these concerns.

We have continued negotiations with Frontier and will hopefully resolve any legal issues with their agreement by next week. Currently, we have one insurance point to reach agreement on with respect to the significant terms of a proposed contract.

Hopefully this clarifies how we are proceeding. We are trying to work with both companies as quickly as possible to reach a positive conclusion. But we must wait for their responses and that is something we cannot control. Once we have all the information from both companies, we can decide how to proceed in the best interest of the HOA.

Let me know if you have further questions.

Thank you,
Kim Fuller
President

December 2019 Board Meeting Video Now Available

To see more videos, visit our Videos page by clicking here.

Photos: Tamale Festival 2019

December 7-8, 2019
Indio, CA
Photos by Jerry Solomon

Two-day event, which we attend annually. Yummy . . .

Flag Notification

Fly the United States Flags at Half-Staff Saturday, December 7, 2019 in Honor of National Pearl Harbor Remembrance Day

Pearl Harbor Remembrance Day occurs on December 7 of each year, designated in memory of the lives lost in the 1941 attack and to remember that we enjoy freedom thanks to their sacrifice. The attack claimed the lives of 2,334 servicemen and servicewomen and wounded another 1,143.

On Pearl Harbor Day, the American flag should be flown at half-staff from sunrise until sunset to honor those who died as a result of the attack on U.S. military forces in Hawaii. . Some organizations may hold special events in memory of those killed or injured at Pearl Harbor.

Memories of Holidays Past

Compiled by Beth Bolduc

Who doesn’t have wonderful, interesting memories of holidays past? We asked our SCSH Writer’s Club to retell ones that stood out for them. Below are a few of these stories. You can find more on page 20 of December's issue of The View.

Enjoy these special memories!

President’s Message: A Discussion about Assessments

Kim Fuller
President

Good morning residents,

After my message on Monday I have been asked some questions, and I thought it would be good to share the answers with everyone. I was asked since the 2019 inflation rate for the United States is only 1.7%, why are the monthly assessments going up by approximately 3%-4% in the past 2-3 years?

I want to start by saying I am a proponent that monthly assessments will always go up every year if there is inflation. If we are to maintain facilities and services at an equal level year over year, assessments will have to go up at least inflation to compensate. The only way to keep assessments at the same level would mean a reduction in services or maintenance and I am not a proponent of such a philosophy. As a result, I have often stated that assessments must go up every year if we want to maintain the same level of services.

There are many reasons to increase assessments over inflation such as cost increases imposed by the government, i.e. minimum wage increases, or perhaps residents want to increase costs for additional services for a particular reason. An example is the landscaping cost was increased by $3.50 per month per home because many wanted an increase in the landscape service so the facility would have a better appearance. Such increases in labor to achieve a different result from the past will mean an increase in costs. I have been told by many the landscaping has dramatically improved. Was it worth it is a judgement each person must decide for themselves.

There was a time when assessments were reduced by $20 per unit per month for three years and our Operating Fund net working capital of about $1.7M was reduced to a deficit amount of $453,000. At that pace another 6 months to a year and we would have been staring at a special assessment to pay Operating Fund expenses. I know hindsight is always 20/20 but planning to reduce assessments in an environment of inflation rarely ends up on a positive note.

As a basis for discussion, keep in mind this year’s balanced budget was $270 per month, not $265 per month. The reduction of assessments to $265 was because of a budget surplus in 2018 which allowed us to reduce assessments by $5 per month. So, from a budget point of view, costs for this year are based on $270 per month. It is correct current inflation is 1.75%. Estimated year end will be 1.8%, but for our discussion I will use the current rate of 1.75%. This means that for facilities and services to be maintained at their current level costs must go up by 1.75%, or $4.73 per month. This is based on 1.75% of $270 per month.

We now need to add in the costs of increased labor as a result of state mandated increases in minimum wage. Minimum wage will increase from $10.50 to $15 by the year 2022. This increase in labor cost each year we must pay, and it will mean a labor cost increase of about 8% per year. Considering a company like Troon employees more than half of the staff at minimum wage you can see this increase can be considerable. As a result, the Board requested and implemented labor cost increases for next year to be 1.5% for non-minimum wage staff and then state mandated increases of about 8% for minimum wage staff. There were two buckets for calculating labor, one for non-minimum wage staff and one for minimum wage staff. Considering inflation is at 1.75% we did well to hold labor cost at 1.5% for those that were not minimum wage. Combined labor cost will then come in about 4-5%.

We need to keep in mind that our HOA does not allow for contracts over one year. This can work against us when trying to hold costs for a period of time longer than one year. Although we can bid each contract every year, all increases in costs will be passed on to us each year. As a result of low unemployment and increased minimum wage, contract costs have increased because companies are having more difficulty holding down labor costs in order to hire people while being required to increase minimum wage. Security contract for example went up by $1.50 per unit per month. The landscape contract went up by $3.50 per unit per month for two reasons, residents wanted increased service, which requires more labor, and increased costs of inflation and minimum wage. These two contracts alone increased costs to the HOA by $5 per unit per month.

Let’s talk about Reserves which is referred to as the Replacement Fund. We accumulate a portion of each month’s assessments for future replacement and major repairs of common area real property improvements and common area personal property and equipment. The Finance Advisory Committee (FAC) initially was recommending the 2020 Replacement Fund assessment per unit would be $45 per month. FAC had concern that using $45 per unit per month starting rate in 2020 would result in a forecasted percent funded of less than 70% for eight years in the thirty-year cash flow forecast included in the 2020 Reserve Study. The 70% threshold is considered financially healthy and unlikely to have any special assessments. On recommendation of FAC an additional $2 per unit per month for a total of $47 per unit per month will be put into the Replacement Fund in 2020. The increase in the starting rate in 2020 would result in a forecasted percent funded of less than 70% for only two years in the thirty-year cash flow forecast included in the 2020 Reserve Study. Long term I agree this is wise and provides residents added confidence that we should not have to have a special assessment which is one factor in maintaining home values.

After you total all these different points, an increase in costs was projected at $15 per month per home. Given the balanced budget this year was $270 per month this meant we were trying to negotiate costs to stay below $285 per month. Through the budget process of looking at costs we might not need, or costs that could be reduced, the balanced budget came in at $281 per month per home. Since there is a projected surplus for 2019 of $331,000, the Board decided to use this surplus to reduce the balanced budget assessments by $8 per month, giving the net assessments for next year at $273 per month. This will be a net increase to residents of $8 per month beginning in January. Keep in mind the balanced budget will be $281 per month and we have two more years of minimum wage increases so we have two more years of increased costs beyond our control.

Once you calculate the past two years of budgets, you can then project that for the next two years assessments will increase at a rate of at least 4% per year. Hopefully if we can maintain some efficiency, we can maintain that 4% level without going higher, but given state mandated costs increases, holding assessments to inflation increases will not be possible in my opinion. The only way to hold assessments to less than a 4% increase would mean a reduction of maintenance and/or services, not my first choice.

At $273 per month, Sun City Shadow Hills is still one of the best values in the valley for facilities and services, and the reason I have always stated we are living in Paradise. Please enjoy your Thanksgiving Holiday, and I for one am very thankful for living here with so many volunteers and staff willing to help make this the best place on earth.

If you have any questions, please don’t hesitate to ask.

Thank you,
Kim Fuller
President

Troon Golf Email Outage

Troon Golf is currently experiencing an email outage.

If you wish to contact Shadows Hills Golf Club or the Shadows Restaurant staff, please contact them via telephone.

  • Shadow Hills Golf Club: 760-200-3375
  • Shadows Restaurant: 760-772-4342

President’s Message: Monthly Breakout of 2020 Assessment

Kim Fuller
President

Good afternoon residents,

With the new year it seems only appropriate to explain once again our forecasted monthly expenses. These amounts are based on the Board approved 2020 budget. Your total monthly assessment per homeowner unit is $273, which reflects a $8 per unit per month reduction because of the forecasted Operating Fund surplus in 2019. By this I mean, total monthly assessment for 2020 would be $281 per unit had there not been a forecasted surplus for 2019.

Let us now look at the composition of the $273 monthly assessment. $47 per homeowner unit is credited to the Replacement Fund. This fund accumulates financial resources for future replacements or major repairs of common area real and personal property components owned by the Association. The balance of the monthly assessment, or $226 per homeowner unit, is forecasted to pay estimated monthly Operating Fund expenses as follows:

  • $56 for Facilities Maintenance
  • $37 for General/Administration
  • $30 for Golf
  • $30 for Property Protection
  • $30 for Landscaping
  • $16 for Recreation/Lifestyle
  • $11 for Utilities
  • $12 for Fitness
  • $8 for Food/Beverage
  • $0 for Capital Improvements
  • $0 for Common Area Improvements
  • $5 for Contingency Fund
  • $11 for Depreciation

You may notice that the budgeted Operating Fund expenses I listed total $246 per homeowner unit per month. The difference in Operating Fund expenses and Operating Fund assessments ($246 vs. $226) is funded from Operating Fund other income that is anticipated to be earned during the year ($12 per unit per month) together with utilization of a portion of the forecasted Operating Fund surplus from 2019 ($8 per unit per month).

The net increase in assessments from $265 in 2019 to $273 in 2020 represents a 3.02% increase which is very reasonable considering cost increases like minimum wage which has gone up 8.3% beginning in 2020.

Below is a summary of the computation of the monthly assessments for 2020 and 2019.

Detail of monthly assessment per unit: 2020 2019
Operating Fund, balanced budget $ 234.00 $ 228.25
Operating Fund, credit for prior year surplus (8.00) (5.00)
Operating Fund, net assessment 226.00 223.25
Replacement Fund 47.00 41.75
Total monthly assessment billed to unit owners $ 273.00 $ 265.00

Thank you,
Kim Fuller
President

President’s Message: Bulk Cable Update

Kim Fuller
President

Good afternoon residents,

I have had more questions about the Bulk Cable contract process and what is the current status. I wish I had new information to report, but at this point there is little new information to give you regarding the Bulk Cable contract with either Spectrum or Frontier. We have listed our concerns which has been given to both companies.

The Board gave priority to negotiating with Spectrum first because Spectrum was selected by 77% to 23% over Frontier. It was also clear in the survey that 85% of residents want to do something. Once we contacted Spectrum and discussed the contract, it appeared to the Board this process could take some time given Spectrum’s comments in the meetings. It was Spectrum that felt this could take some time. We have asked Spectrum to respond to requests about changes in the agreement, but as of this date Spectrum has said they need more time. We have not heard anything about our requests in over two months. The current contract proposed by Spectrum was unanimously rejected by the Board.

We have been having discussion with Frontier on changes to their agreement and at this point Frontier has been more responsive. I can’t tell you how this will end up, but the Board is quite aware of the preference of Spectrum over Frontier but is leaving all options open in the best interest of the HOA.

It could be possible that if we don’t reach an agreement with Spectrum, but we do reach an agreement with Frontier, a ballot vote will go out for Frontier. At that point if residents don’t want to proceed with Frontier, they will be able to vote ‘no’ on the ballot for Frontier. This way if residents want Spectrum, and only Spectrum, and nothing else it will become clear.

Currently the Spectrum plan that has been proposed will cost about $45 per month for both TV and internet service. The equivalent plan from Frontier for both TV and internet service would cost about $90 to $110 per month. Both plans will save residents money, and the Board understands for TV and internet service the Spectrum plan would save more money than the Frontier plan. The Board also understands that the Frontier plan will affect fewer residents in a negative way because each resident could then pick the TV plan they prefer. This gives the Frontier plan more versatility over the Spectrum plan. The Board understands that most residents voted for Spectrum, but unless we can obtain an agreement that is acceptable to the HOA we will not be able to go forward with Spectrum. We are waiting on a response from Spectrum as to our concerns so we will have to wait and see.

Hopefully this clarifies how we are proceeding and that both companies have contract issues, so we are trying to work with both companies as quickly as possible to reach a positive conclusion. But we must wait for their response and that is something we cannot control.

Let me know if you have further questions.

Thank you,
Kim Fuller
President

Finance Advisory Committee – December 2019

By Bill Wethe
Finance Advisory Committee Chair

Work Completed

Yes! The 2020 Budget and the 2020 Reserve Study are complete, and the Board approved them on October 28, 2019. A BIG “thank you” to all those responsible including:

  • the DRM management team.
  • the Troon management team.
  • the members of FAC and the FAC Subcommittee.
  • our Board of Directors.

The FAC continues to work with the Board as well as with DRM and Troon management to:

  • review and recommend Board approval of the unaudited October 2019 Association financial statements including the:
    • financial statements prepared by DRM/Associa, Troon, and the Controller
    • combining and combined financial statements included in the Treasurer’s report prepared by the Controller
    • summary financial information on the financial position and results of operations included in the Controller’s report to the Board
    • condensed financial information to be published in The View magazine
  • review the variance analysis prepared by the Controller on the 2019 Operating Fund revenues and expenses to assess the impact, if any, on the 2019 Forecast
  • review variance analysis prepared by the Controller on the 2019 Replacement Fund expenses and interfund transfers to the Operating Fund to assess the impact, if any, on:
    • the 2019 Replacement Fund annual cash flow forecast
    • The 2019 Replacement Fund liquidity and investments
  • review the 2019 Forecast (10+2) of the Operating Fund and Replacement Fund as compared to the 2019 Budget and the 2019 Forecast (9+3) prepared by the Controller
  • hold a regular FAC meeting on November 15
  • prepare the FAC monthly written report to the Board for its meeting on November 18
  • review October 2019 bank statements, bank reconciliations, and Replacement Fund investment account statements
  • prepare articles posted on the Association website with information about:
    • depreciation expense recorded in the financial statements of the Operating Fund
    • services provided by Troon in the management of the Association’s golf and F&B operations
    • services provided by DRM in the management of all other Association operations.

Work in Process

The FAC has several initiatives in process including reviewing and proposing revisions for the Board to consider on the:

  • Association’s Investment Policy
  • Association’s Procurement Policy
  • Charter and Mission for the FAC
  • Charter and Mission for the FAC Subcommittee on the Replacement Fund and Reserve Study

Further information

Please review minutes of our monthly meetings and written reports to the Board included in Board meeting packages on the Association’s website.

Additional FAC Members: Larry Anderson, John Deshaw, Steve Proia, Carey Thompson, Bob Giovannettone, and Bill Ferstenfeld.
FAC Subcommittee Members on the Replacement Fund and Reserve Study: Chris Stevens, Don Salvatore, Steve Proia, Carey Thompson, and Bill Wethe (Chair).

Contact the author at finance@scshca.com.

President’s Report – December 2019

Kim Fuller
President

Monthly Breakout of 2020 Assessment

As the new year begins, it seems only appropriate to explain once again our forecasted monthly expenses. These amounts are based on the Board-approved 2020 budget. Your total monthly assessment per homeowner unit is $273, which reflects an $8 per unit per month reduction because of a forecasted Operating Fund surplus in 2019. By this I mean, the total monthly assessment for 2020 would be $281 per unit had there not been a forecasted surplus for 2019.

Let us now look at the composition of the $273 monthly assessment. The Replacement Fund is credited with $47 per homeowner unit. This fund accumulates financial resources for future replacements or major repairs of common area real and personal property components that the Association owns. The balance of the monthly assessment, or $226 per homeowner unit, is forecast to pay estimated monthly operating expenses as follows:

  • $56 for Facilities Maintenance
  • $37 for General/Administration
  • $30 for Golf
  • $30 for Property Protection
  • $30 for Landscaping
  • $16 for Recreation/Lifestyle
  • $11 for Utilities
  • $12 for Fitness
  • $8 for Food/Beverage
  • $0 for Capital Improvements
  • $0 for Common Area Improvements
  • $5 for Contingency Fund
  • $11 for Depreciation

You may notice that the budgeted Operating Fund expenses I listed total $246 per homeowner unit per month. The difference in Operating Fund expenses and Operating Fund assessments ($246 vs. $226) is funded from Operating Fund other income that we anticipate earning during the year ($12 per unit per month) together with utilization of a portion of the forecasted Operating Fund surplus from 2019 ($8 per unit per month).

The net increase in assessments from $265 in 2019 to $273 in 2020 represents a 3.02% rise. This is very reasonable considering cost increases like the minimum wage, which has gone up 8.3% beginning in 2020.

Below is a summary of the computation of the monthly assessments for 2020 and 2019.

Detail of monthly assessment per unit 2020 2019
Operating Fund, balanced budget $ 234.00 $ 228.25
Operating Fund, credit for prior year surplus (8.00) (5.00)
Operating Fund, net assessment 226.00 223.25
Replacement Fund 47.00 41.75
Total monthly assessment billed to unit owners $ 273.00 $ 265.00

Kim Fuller
President

November 2019 Board Meeting Video Now Available

To see more videos, visit our Videos page by clicking here.

Photos: Planks-giving 2019

Friday, November 15, 2019
Montecito Fitness Center
Photos by Gus Ramirez and Joe Rubio

Management by Desert Resort Management, Inc. (DRM)

By Bill Wethe
Finance Advisory Committee Chair

Purpose

The objective in preparing this memo is to provide further details of what DRM currently provides to the Association for the management fees (Fees) that are paid by the Association to DRM.

Please note this is a summary of many items in the executed Management Agreement (Agreement) that the Association has with DRM as well as other information provided by DRM. Please refer to the Agreement which is posted in the Residents Only section of the Association website.

Further Discussion

Let us review what management “goods” and services are provided by DRM to the Association to understand how those services relate to the management fees that are being paid by the Association.

DRM provides the following “goods” and services for the Fees paid to them:

  • Application software and related infrastructure for:
    • General ledger accounting
    • Financial statement reporting
    • Vouching of vendor invoices
    • Electronic approval of vendor invoice (Strongroom)
    • Accounts payable subledger
    • Payment of vendor invoices
    • Billing of assessments and other amounts due the Association
    • Accounts receivable subledger
    • HRIS
    • Payroll (ADP)
    • Benefits
    • COBRA
    • Affordable Care Act (ACA) compliance and reporting
    • Timekeeping (ADP)
    • Workplace monitoring (Safeline)
    • Online employee training
    • Employee performance
  • Accounting and financial reporting including:
    • Escrow disclosure fulfillment and changes of ownership
    • Delinquency tracking
    • Monitoring of bankruptcies foreclosures
    • Lien processing and tracking
    • Production of and distribution of the homeowner associations’ assessment billings
    • Receipt of and tracking of all owner assessment payments
    • Administration of bank accounts for the Operating Fund and Replacement Fund including approved account transfers and bank reconciliations
    • Processing of vendor invoices and payment of Association vendors
    • Preparation of the monthly general ledgers and related financial statements including general ledger account reconciliations
  • Executive oversight and supervision in offsite office space:
    • Mark Dodge of the General Manager
    • Keith Lavery of the Controller
  • Administration including:
    • Support for operations of on-site Association management office
    • Support for preparation and distribution of all Association written communication including annual mailers
    • Customer Service interface with owners on billing and Association maintenance issues
    • Attendance at and support for Board of Director (Board) meetings and relevant Advisory Committee meetings
    • Oversight of and attendance at annual meetings and elections including support for preparation of election
    • Updates to the Board as to new laws/regulations affecting the Association
    • Rule enforcement support through use of mobile application
    • Homeowner dispute mitigation and escalation
  • Emergency services program; 24 hours a day, 7 days a week for communication with unit owners in the Association
  • Human resources and personnel in offsite office space:
    • Recruit, hire, pay, train, supervise, investigate and discharge the on-site employees of DRM
    • DRM pays for all recruitment costs of on-site employees of DRM and the Association does not reimburse DRM (please note, the Association has used certain job posting websites to advertise open positions and has paid the costs of such directly to the vendors)
    • Employee onboarding, including background and drug testing
    • Employee Training and Development (please note, the Association did budget for additional education, training and development in 2018; the 2018 expense was $1,876 as compared to the annual budget of $8,000; the 2019 annual budget is $0)
    • Benefits administration
    • Workplace compliance and monitoring
    • Support of monthly safety training program
    • Processing and monitoring of workplace injury and harassment complaints
  • Defend, indemnify and hold the Association harmless from and against claims as specified in the Agreement with DRM
  • At DRM’s sole cost and expense, provide the insurance coverage as specified in the Agreement with DRM:
    • Fidelity insurance with coverage for all DRM’s employees
    • Commercial general liability, including automobile liability, insurance and the Association is additional insured under both policies
    • Umbrella liability insurance
    • Employment practices liability insurance

In addition, two additional benefits are provided to the Association without charge including:

  • Associations, Inc. (Associa), the parent company of DRM, has arranged for a Private Depositor Bond issued by a Surety naming the Association as a beneficiary covering Association Operating Fund and Replacement Fund checking and money market accounts maintained at MUFG Union Bank, N.A. (Union Bank) which have account balances that are in excess of the FDIC insured limit of $250,000.
  • Associa has arranged for implementation of positive pay on Association Operating Fund and Replacement Fund checking accounts maintained at Union Bank.

The Private Depositor Bond is significant to the Association in terms of operational and administrative efficiency. If the Private Depositor Bond was not in place, then the Association would have to maintain multiple Operating Fund checking accounts so that the average balance in each of the accounts was less than $250,000. The Association would need approximately eight to ten checking accounts which would take substantial more resources and time to manage and administer.

Positive pay is an automated fraud detection tool offered by the Cash Management Department of most banks, including Union Bank. In its simplest form, it is a service that matches the account number, check number and dollar amount of each check presented for payment against a list of checks previously authorized and issued by the Association.

Additional FAC Members: Larry Anderson, John Deshaw, Steve Proia, Carey Thompson, Bob Giovannettone and Bill Ferstenfeld.

Contact the author at finance@scshca.com.