SOMERSET HOMEOWNERS ASSOCIATION January 10,2018 Meeting Minutes

Transcription

1 SOMERSET HOMEOWNERS ASSOCIATION January 10,2018 Meeting Minutes Attendees: Board Members Brett Landin, Elizabeth Owen, Kiran Chopra, Chad Copenhaver, Jim Hemenway, Annmarie North. Property Management: Garrett Quackenbush, Al Orendorff. Homeowners: Nicole Ringelmann, Paula Hemenway, Bob Bankston, Susan Reily, Marc Arnold, Vardu Israel. Meeting called to order: 18:36. Minutes of December 2017 meeting: passed after revision. Draft and revised minutes need to be circulated as soon as possible after each meeting. Revised SHOA website update: Emphasis was on encouraging new website as soon as feasible, rather than modification of existing site. Discussion concerning ways to make a private means specifically for the issues of HOA merger vs separation which would be easy access for whole community. Probably not feasible but further technical advice to be obtained. Manager s report: Fencing repairs completed. Christmas lights taken down. Low snow means snow removal budget excellent but remains to see what happens rest of season. Problem regarding renting out homes via VBRA/Airbnb that violates covenant regulations (Section C, 1993 Covenants). Insurance: Farmers quote at $4600, State Farm at $5200 and waiting for third bid. Will proceed with Farmers if lowest. Landscaping/infrastructure: Slow season now. Lights replaced where necessary. Finance report: Jim made a presentation regarding better investment strategies for Reserve funds (included as Appendix 1). Water Defense ($20K) will be placed in short term 12 month CD with EverBank. Reserve Fund ($137K) more problematic due to rigid restrictions in Declarations. Agreed suggestion is to amend the documents to make conservative investments acceptable. This must await outcome of ongoing HOA merger/separation issues. Water issues: Jim also made a most informative presentation regarding historical, educational and economic issues related to water rights and water usage (included as Appendix 2). Key conclusions to be taken up as soon as possible in the future are (1) to minimize our losses over the B shares we currently own by hopefully selling or swapping them; (2) swapping or selling CBT shares for Ditch shares, (3) transition to more xeriscaping and set up a committee to work on options for this, and (4) to realize and take into account the fact that we will continue to need much more water in the long term. Merger/separation issues: As suggested by the Committees report (December 2017 minutes, Appendix 1) and agreed by the Board, legal counsel was obtained. Chad provided a current status report: Legal counsel regarding Pool Issues were put on hold as this issue clearly takes precedence. Counsel specializing in Assocation and CCIOA law was obtained and have committed to complete in-depth analysis by February 14, Initial cost estimates: Initial assessment and analysis: $ Implementation of separation of communities: $3500 x 2 ($7000). Implementation of merger: $5000. This does not include legal fees pertaining to document/declarations preparation if requested. While there was no disagreement in terms of obtaining legal counsel, there was extreme and rancorous disagreement and arguments regarding exactly how the legal counsel should proceed. The

2 Board will proceed as outlined by Chad and will provide all information at the next HOA meeting. Adjournment: Motion to adjourn: 20:27. Accepted. Next HOA Meeting: Wednesday, February 14, 2018

3 Appendix 1 - January 10, 2018

4 SHOA Bank Accounts at 12/31/17 Account Description Operating Location Est. Balance Earnings (12/31/17) YTD YTD Yield $46k $0 0% Reserve Bank of Estes Park $137k $ % Water Defense 2 $20k -$ % Total $203k $ November actuals adjusted for December expenses ($4k) and $65k transfer from operating account to reserves. 2 Fund was established in Feb 99 with $20,000. We ve earned 0.75% in 19 years.

5 Water Defense Fund - $20k Grant ( 99) documents require this to be invested in insured bank account held by the SHOA in an insured, interest bearing bank account separate and apart Proposal is to move this to a 12 month CD at Everbank, currently paying 1.80% There are a # of banks online with good rates, but many don t offer such deals to business entities Synchrony, Cap One so Everbank is a good choice. I think I can do this w/o input from Board, but want to notify folks. Everbank is FDIC insured and the stadium sponsor of the Jacksonville Jaguars.

6 Reserve Fund - $137k Was $72k for most of year before recent xfer from op. account ($65k). Earned $13 in interest Nov 17 YTD on an avg. balance of around $72k (0.02% yield). Recommended replacement is either Vanguard s ST Investment Grade Bond Fund (current yield 2.42% as of 1/8/18) or ST Corp Bond Index (yield 2.52% at 1/8/18). We need to modify or remove the section of the reserve policy highlighted below to allow investments in bond mutual funds. I think the whole document should be re-written, but that can wait. A vote to remove this provision will allow us to move forward and start earning more (~$3.5k+ annualized at 2.5%). See next page for other options and metrics.

7 Appendix Some Fund Options Vanguard Fund Results as of 9/30/17 ST Corp Bond Index ST Inv. Grade ST Federal Prime MM YTD 2.50% 2.17% 0.98% 0.76% 1 Year 1.56% 1.34% 0.13% 0.94% 5 Year 2.06% 1.93% 0.83% 0.31% 10 Year N/A 3.15% 2.44% 0.68% Current SEC Yield (a/o 12/29/17) 2.49% 2.39% 1.86% 1.42% Avg. Maturity (Years) Risk Potential (Vanguard's 1-5 scale) Fund Size (Billions) $ 27 $ 64 $ 5 $ 97 Fund Expense Ratio 0.07% 0.10% 0.10% 0.10% ) MM funds have 90 day maturity limit and Prime designation implies some investment grade corporate borrowers 2) Federal = gov t = no credit risk, but +0.44% yield to take a small amt. of term risk vs. MM (#1) 3) Maturity like #2, but +1% overall to take theoretical small credit and term risk vs. #1 4) Name implies potentially some non investment grade bonds, but slightly higher yield vs. #3. 5) 10 year results (including crisis period) superior for #3.

8 Appendix 2, January

9 Basics and Terminology SHOA owns ~29 units/shares of water from 3 agencies 1) Boulder White Rock (BWR) 17.5 units, 2) Colorado Big Thompson (CBT) 11 units, and 3) Boulder Left Hand (BLH) 0.67 units We have physical access to BWR and BLH ditches. CBT water comes via BWR s ditch. 1 share or unit entitles the owner to draw ~1 AF of water each year in perpetuity from storage, subject to annual availability (the allotment factors) as well as ditch company delivery fees and other charges. Shares usually also include the ability to get river run water (free, quantities vary) prior to storage draws. River run water usually ends in June or early July. BWR has 3 share classes, with different features, which affects the utility and the value of the rights. Rights are bought from the agency in an auction process and can also be leased from existing owners. 2

10 Water Purchase History Acquisition Date Retitle/ Transfer Date Share Classes Current Purchase Owner Agency A 1 B 1 C 1 Price Nov 84? July 03 SHOA 2 CBT 11 n/a n/a Unknown < 1978 May 96 SHOA 3 BLH 0.67 n/a n/a $6.8k < 1978 April 10 SHOA 4 BWR Unknown Aug 10 SHOA BWR $7.5k June 12 SHOA BWR $30k Feb 13 SHOA BWR $10k Total Shares $5k per share 1 CBT and BLH don t have classes AFAIK. BWR share classes are not additive. B (Panama Reservoir) shares are worthless to us and C (Panama or 6 Mile) shares would probably be useful Minutes refer to knowledge that B shares have restrictions, but those concerns were allayed somehow. 2 Original owner was Cottonwood Hills 3 Original owner was Longview Associates 4 Original owner was Colorado Adera (McGraw entity) 3

11 Here s a comparison of the different sources CBT Boulder White Rock BLH Share Class N/A A B C N/A Market Price per Share 2 $25-30k $8k $3k-8k Shares Owned by SHOA Lease Rate/AF (1 year) ~$50 N/A ~$50 Delivery Methods/Rules Ditches, canals Company ditches only, they deliver in larger quantities than we can use sometimes Recent Allocation Factors 60% in 17, 75% is typical, can range from 30% (in drought years) to 100% Comments Also get river water in spring, doesn t count against shares (April to ~July) Must source from Panama reservoir? River water in spring Effective Water (AF) 1 ~16.5 ~ Estimates of what we can actually use for watering after factors, delivery fees, etc. including a portion of early season river water with realistic (75%) factors. Assumed 1.5 AF/unit including river water ( ). 2 Estimates based on conversations with Ditch employees, recent auctions and other sources 29 AF total stated ~35 AF effective 4

12 SHOA water usage history 1 1) ~60 AF 08-11, heavy waterfall, good allotments and favorable measurement 2) ~35-40 AF since ) SHOA Owned water is based on 1.5 AF/share (0.75 river storage) 4) 22 AF before 8/1, 9 AF after 8/1 (21 per BWR) 2017 figure is based on meters installed 8/1/17 and adjusted for estimated use prior in the year. Prior year estimates are based on head gate observations, engineering docs, discussions with ditch company, etc. We estimate that we need ~60 AF to run waterfall, and keep current expanse of grass green 5

13 Legalities and Risks to Water Use Uphill pumping/ponds/grass we ve heard these could be problems, but all parties/documents/sources indicate it s ok. The uphill notion comes from the under the ditch term in water law. (1997/1988) Steven Leonhardt/Kevin Pratt Fairfield and Woods Law Firm - under the ditch was an anachronistic term used when pumps were rare and gravity was the only practical method of moving water. Realistically it was not intended to prohibit use above the ditch but merely a recognition of what happened most commonly. (1997) Julius Van Thuyne Board President - BWR Ditch Company. The BWR board didn t care about the acres irrigated or location, just that we use only what we re entitled to. They knew we were pumping uphill into Estates ponds in 97 and going above the ditch for grass since 84. Ken Wright Wright Water Engineers. OK to expand irrigated area from 5.6 acres in original agreement with BWR/BLH to including Estates no harm to other BWR shareholders. (1977) Barbara Bryan Boulder County Planning Dept. and Robert Brand Water Users Association of District 6: Approved conceptual use of ponds on future SHOA property. (2015) Letter from Northern CO Water Conservancy District (CBT) to SHOA reclassifying our usage to non-irrigation. There was a change in annual service charges, but clear acknowledgement that they know what we re doing. Ditch companies exist to serve their shareholders (SHOA) and their policies reflect that. Grass watering uphill is fine as long as you buy the rights. We re partners with them and it would be counterproductive of them to rat us out on some technicality. Water Court approval could be required for certain circumstances, but per F&W water courts would be inundated if every user had to obtain Water Court permission to pump uphill. 6

14 Conclusions Water rights are real property and we shouldn t avoid a conversation with BWR about getting our fair share. Everybody knows we water grass, pump uphill and use ponds it s all irrelevant. We are having conversations with BWR (Bill and Jules) about fixing our 6 worthless B shares either via trade or other means. The BWR annual meeting is on 2/6/18. Historical (< 12) data shows we ve gotten a whole lot more water than we get today and more than we ve owned. Likely very favorable measurements at the head gate. Data is not granular enough to know, but at this point with our current run rate, the chart shows we probably do need more. To the extent possible, we should also consider swapping away from CBT and towards ditch companies. We could buy 25 ditch shares for $150k and sell 11 CBT shares for $300k and end up w/14 add l AF + $150k. We should also consider reducing our usage via more xeriscaping, especially after what happened in fall of 16. Landscaping committee? We d save more than just water irrigation heads and pipes break, mowing, etc. This would also be a wise political move if we were ever challenged on anything. Water ownership rights are easy to transfer to other parties - McGraw did it several times with the various agencies by sending them letters. 7

15 Appendix - Seasonal Water Consumption and Water Sources Availability of Water - River Run (free) vs. Storage ) Watering needs are approximately 0 in April/May when river run water is plentiful.. 2) but ideally 15 AF/month in July/Aug when it s gone 3) We probably do need ~20 AF add l equivalent 0 April May June July Aug Sep Storage Water River Run Water New Supply Needed Irrigation Needs 0 Quantities in Acre Feet (AF) and are estimates for illustrative purposes 8