As published in The View, March 2022:
President
At the October 2021 Board meeting, your five-member Board, by a unanimous vote, authorized establishing the new Capital Improvement Fund account of $1.5 million. All homeowners need to know why we took this step and the information that led us to this decision.
Your Board’s first concern is to protect Sun City Shadow Hills and every homeowner from future assessments because of major projects that are coming up. The money in the new fund belongs to all of us, and NOT ONE PENNY OF IT HAS BEEN SPENT. It is in the bank in a separate account so that we can keep track of it. All of it will be used for necessary major projects. And let me assure you that the actions your Board took comply with our CC&Rs, Section 4.3.2.
Your Board of Directors did not take this action lightly. SCSH is faced with a very costly Coachella Valley Water District (CVWD) Flood Channel Project. We first brought this project to your attention via two town hall meetings held in the Montecito Ballroom on July 8 and July 12, 2021. You can view the videos at https://www.scshca.com/cvwd.
The proposal to create the Capital Improvement Fund out of funds already assessed and currently in our operating fund surplus was reviewed and investigated by our Financial Advisory Committee, outside legal counsel, and our independent auditors. After receiving their comments, the Board reviewed all the information and voted on how to proceed.
CVWD Flood Channel Project
After due diligence, the Financial Advisory Committee prepared a Board Action Form recommending that the Association transfer $1.5 - $2 million from the Operating Fund into a new Capital Improvement Fund. The Board then consulted our outside CPA (Wayne Carlsen), and he advised that the Association could move the funds from the Operating Fund to the Capital Improvement Fund with no tax consequences.
Your Board asked outside legal counsel to advise us about the legality of creating a Capital Improvement Fund from surplus funds already assessed and contained within the operating surplus. Legal counsel advised that such an action complies with our governing documents.
So why did the Board even consider this action? What would the money be used for? Soon we will be forced by CVWD to participate in an extremely costly multi-year rebuilding project here in Sun City Shadow Hills. This is a MANDATORY PROJECT, and we are responsible for the cost of much of what will be done on our property to bring us into compliance with current flood plain standards.
And why do we have to pay? Because Pulte, the SCSH builder/developer, had to agree that a flood control channel would run through the property in order to get approval to build the Sun City Shadow Hills development. So we inherited this, and have no choice. I urge you to watch the Town Hall video if you have not already done so.
Both Sun City Palm Desert and Sun City Shadow Hills are affected by this flood control channel. CVWD has already started construction along Avenue 40 to Adams Street, which you can see. CVWD is paying for that. On our property, CVWD will pay for rebuilding Pond #1 at is at the corner of Jefferson and 40th Street. But we must pay for all other flood control improvements along that proposed channel.
These improvements are very costly and necessary to protect the Jefferson Street entry and roadway overpass over the North Channel to Phases I and II. We need the $1.5 million Capital Improvement Fund. Although this is called a CAPITAL IMPROVEMENT, it is actually a CAPITAL NECESSITY.
The project starts now with Pond #2, which is on the right as you drive out the Jefferson gate on the north side of the bridge. Pond #2 must be completely removed, and the pipes supplying water to the entire golf course must be rerouted from Pond #1 to Pond #3. Pond #2 will be filled with dirt and covered with sod, and new irrigation lines will be installed. Just the reconstruction at Pond #2 will cost approximately $250,000. This is a capital expense that will be funded from the Capital Improvement Fund.
Additionally, we will need to build a road from Avenue 40 down into the North Channel so that debris removal vehicles can access this area during any flood event. This additional estimated cost is approximately $150,000. We are likely to face these expenses this year.
At a future date, the bridge at the Jefferson Gate will have to be retrofitted at a substantial cost to protect it from being washed out and collapsing during a potential flood event. These costs could well exceed $1 million according to current preliminary estimates, and these costs will also have to be funded from the Capital Improvement Fund if we have enough money in the fund at that time.
Hopefully, all of these necessary expenditures will not require an additional assessment upon homeowners. Facing these significant expenses, your Board decided (in a unanimous vote) that giving the surplus operating funds back to homeowners now was imprudent because this would likely lead to a special assessment upon homeowners in the future.
Please understand that no money in this fund has yet been spent. Nothing from the fund is earmarked to pay for any improvements to Shadows; nothing has been allocated for the completion of any future projects that might involve the five-acre parcel acquired from Pulte, despite what some homeowners have suggested.
As your President, I have always shared straightforward information with you. I know this is a lot of data about a very important topic. We will keep bringing you more information as the longer term planning continues. Please attend Board meetings and listen to the podcasts to stay informed.
Contact the author at john.macdonnell@scshca.com.
