I appreciate the opportunity to provide input.   First, let me say I agree the community should have a capital reserve.  Unfortunately, the fact that one has not already been created from operating revenues is alarming.  I am an advocate of paying yourself first from revenues.  We should then manage to live within the our means after we allocate for reserves from operation revenue.

My main concern is that the only alternatives the board is considering seem to all be associated with raising additional revenues.  There is no mention of cutting operating costs and allocating the savings to a reserve.  I believe that we need to take a fine pencil to both operational expenses as well as capital costs including the procedures for spending capital.  I believe those costs should be measured against industry benchmarks to see if we have any fluff that can be removed.  In addition all major capital expense should require a bid and any work that we self perform be properly costed for our labor before we decide to engage our employees on capital projects.

I cannot determine operational efficiency by examining the existing form of financials that are reported to each owner.  In addition, I believe the financial results should be mailed to the owners instead of them having to be proactive in getting them from the web.  (At least emailed)  The concept of a static budget seems to be alien to the current board.  We have seen an increase in the Lodge that seems very excessive for what we are getting in my opinion.  I  have no way of determining the cost of the back gate from our financial statements and I only heard a number that if true was extremely weighted on the high end for the work that was performed.

I basically cannot figure out what was spent on capital projects and if those projects are self sufficient and profitable (including the amortizing cost of the direct capital expense).  It appears the use of loans has no ceiling from the board’s perspective.  I consider a loan the same as additional capital reserves without a vote.  The community will have to pay it back and did not get complete input on loan ceilings.

I cannot support a fee of this nature or any other form until a detailed review of the last 3 years is performed and reported back to the owners.  I am very concerned this board may be a tax and spend board without adequate controls.  The fee will virtually halt additional sales and will most certainly be paid by a reduction in sales price or offset from the seller.  I actually believe this method of creating a reserve will cause a higher devaluation of property than the amounts collected.

My suggestion is reducing operating costs and better management of our capital expenditures.  Applying this pressure first will tell the market we have great fiscal leadership rather than sending out an alarm that the POA has financial issues.  After successful cost reduction and capital spending evaluation, we could then determine if our fees need to be raised.

I for one would go so far as considering privatization of the operations.  I do not even know what the payroll or headcount of our multiple operations are.  I do know only from pieces of information, we provide some very expensive benefits  to a workforce that may not be within market.  However, I cannot really confirm the facts because I am using the posting for amenity manager as my basis for the assumption.  The posting did leave one critical item out - The pay range and any incentive pay components.   Adding another level of management that is compensated by overhead cost rather than revenue creation seems like the wrong answer.

I understand the possible POA response is that I am just complaining.  However, based upon the amount of money I pay into the POA yearly and the number of residents in this community, I believe the leadership should be able to live within the Gross Operating Revenue Constraints for both operations as well as capital reserves.

Regards,

Deas Nealy