Contents
1. Nominations and Elections
2. By-Law Change – Voting Procedures
3. 2013 Budget
4. Road Financing
5. Road Project
6. Walkways Committee
7. By-Law Change – Further Information

1.  Nominations and Elections

The Board candidates have been announced by the Nominating Committee.  Ballots will be mailed sometime after October 4th, and the annual meeting is currently scheduled for November 18th.

Similar to last year, I plan to ask each candidate to voluntarily respond to a list of questions; to hopefully give the community an idea of where they stand on current issues. For those candidates that choose to participate, I will try to have their answers posted here by the end of September.

(Editorial Comment: As I mentioned last month, this election may be unusual in terms of having candidates with differing views on current issues; and some of those issues may not be readily apparent to all residents.   This may mean that, in this election in particular, having information on the candidates will be very helpful in terms of deciding how to vote.)

2.  By-Law Change – Voting Procedures

The Board approved a change to the By-Laws having to do with voting procedures. The main purpose was to allow for electronic voting. The next step is to create a suitable electronic voting system.

(Updated – 10/14/13)  However, other changes appear to create new, separate voting procedures for the election of directors that differ from those used for voting on other matters. It appears that this has been done to make it clear that ballots for Directors must be submitted in advance of the Annual Meeting.  That has been the practice in the past, but that was never specified in the By Laws.  I originally had the mistaken impression that ballots could be submitted at the meeting itself; but that was not the case.

This is covered in more detail at the end of this summary.

3.  2013 Budget

It appears this year’s budget category overruns will be somewhere between $70,000 and $80,000. Higher costs were incurred primarily in storm maintenance, personnel costs and legal expenses.

However, savings in other categories have been identified. The budget included roughly $10,000 to do an engineering study on the Morehead/Franklin Ridge pond. This was deemed necessary because of potential drainage problems in that area. The Infrastructure Committee felt that this study and any necessary work could be deferred until 2014. In addition, $10,000 of costs related to utility disconnection work was deferred to 2014. Lastly, the committee feels that there will be overall savings of $30,000 in the road and storm drainage maintenance budgets. This is primarily due to less than anticipated road repair costs, and the committee feels that, barring unforeseen events, this amount will not have to be added to the 2014 budget.

After accounting for those savings, it leaves $20,000 to $30,000 of overruns that will be covered within the $50,000 of contingency funds in the current budget. This does not account for any unexpected storm maintenance expenses that might occur before the end of the calendar year; from either windstorms or snowstorms.

4.  Road Financing

The Board recently finalized what is essentially a $1.0 construction loan from Pacific Premier Bank with a rate of 4%. There were minor fees associated with the facility, and the security is our assessment income stream. Proceeds from the loan may only be used for road reconstruction. Drawdowns may take place as needed over the first seven months; at which time the facility will convert to a five year amortizing term loan (similar to a mortgage with fixed monthly payments over the term). There is no pre-payment penalty.

During the meeting, there was some discussion about the amount to be drawn down under this facility. To understand this better, please consider this hypothetical situation. Until the project is finished, we will not know the cost. All we have now is an estimate of roughly $2.8 million. Assuming that is correct and assuming that we use all of our reserves before borrowing any funds, it appears that, to finish the project, we would have to draw down approximately $400,000 of the $1.0 million facility by year end. At that point, our Reserve Fund would be empty.

However, our annual assessments are due in January 2014, and payment of these will result in something between $450,000 and $500,000 going into our Reserve Fund. Those funds could then be used to pay off the debt, but that would once again leave the Reserve Fund almost empty.

Having money in our Reserve Fund is prudent for two reasons. First, it helps cover unexpected, emergency capital expenditures; thus possibly avoiding the need to levy a special or emergency assessment. Second, it starts to build reserves for future major projects related to storm drainage and/or road reconstruction; which projects may be several years away from being undertaken.

Given those considerations, the two inter-related questions become: How does the loan get paid off and how much should we keep in reserves? In the above scenario (where we have borrowed $400,000), here are three options as examples:

1.  We could pay off the loan in full in early 2014 thus avoiding the interest costs. But we would then have very little in our Reserve Fund.

2.  Another $300 special assessment could be levied, and those proceeds would come very close to paying off the loan in full. This would not only allow us to avoid financing costs, but it would leave a reasonable amount of cash in our Reserve Fund.

3.  We could pay off the loan over time and incur the interest expense. This would avoid a special assessment and allow us to maintain a reasonable amount of cash in our Reserve Fund. But our annual budget would then have to fund the debt service.  For example, assuming we borrowed $400,000, the annual debt servicing cost would be $88,400 per year; which includes principal repayments and interest. Adding such a cost to our budget might require a slight increase in our annual assessment.

Whatever we borrow will, one way or another, have to be paid off by all of us. In the end, it is merely a question of how much we want to pay in interest versus using that money for other purposes within the community.

The matter was discussed at this meeting, but nothing was decided.

5.  Road Project

I can’t add anything to the excellent communications coming from Roy Thornton. If you are not reading his e-mails all the way through, I recommend you do so. He is providing a comprehensive, understandable “play by play” of the project.

(Editorial Comment:  From what I have seen, Roy has done everything possible to minimize the inconvenience and to keep us informed. Frankly, I expected it to be much worse than it has turned out to be. He has done far, far more than any “hired” manager would have done, and I trust everybody knows how lucky we are to have him supervising this work.)

6.  Walkways Committee

This recently formed committee submitted two meeting summaries to the Board. Significant points noted in these reports were as follows:

• This is a sub-committee of the Long Range Plan Committee. To my knowledge, this has never been mentioned before. The Board has always represented it to be a stand-alone committee. (The potential significance of this is covered below.)

• In its first meeting, the committee “proposed that the installation of sidewalks occur in two phases”. The first phase would be a sidewalk from Governors Square to Graham (which is just short of the front gate). The second phase would be the extension of the existing sidewalk from Morehead Lake to Wilkinson Park. (Note: This essentially proposes that a new sidewalk from Governors Square to Graham supersede the current sidewalk plan which calls for the next phase to be the extension to Wilkinson Park.)

• Various other proposed walkways were discussed, the details of which can be found on pages 41 and 42 of this document:  8/20/13 Board Packet

• Initially, the committee wanted to implement its first phase (Governors Square to Graham) during the road reconstruction. However, in the second meeting report, it was noted that no sidewalk projects would be considered until the road was finished.

• The committee is exploring the possibility of asking houses fronting proposed sidewalks to help pay for a portion of the cost.

• The committee is going to seek assistance from a UNC graduate department that deals with planning issues. They will be asked to look at and prioritize sidewalk projects within the community. The idea is to get a totally unbiased opinion from knowledgeable people.

During this Board meeting, the Directors agreed that the Walkways Committee should be informed of the deadlines currently in place for finalizing our Long Range Plan; the idea being that the committee would have to submit anything for inclusion in the plan by those required dates.

I addressed this point in the last few meeting summaries. It is an important issue because an approved Long Range Plan is a blueprint for future Boards to follow and implement. Therefore, any sidewalk plan within the Long Range Plan will be implemented by future Boards. With this in mind, I previously asked the Board if the purpose of this new Walkways Committee was to include a sidewalk plan in the Long Range Plan. The Board’s response said that this was not the case, but it then included the following sentence:

The committee’s “responsibility and authority is now limited to studying and advising the Board. As in the case of all POA Committees, its work may be reflected in future Board actions or the ‘look aheads’ summarized in the POA’s five year plans”.

As I wrote last month, this seemed a little contradictory in that it left the door open to including this committee’s work in the Long Range Plan.  It now appears that assessment was correct.  Because the Director’s action to notify the committee of the Long Range Plan deadlines seems to indicate that including a sidewalk plan is, in fact, one of the purposes of this committee.

If that turns out to be the case, anybody interested in sidewalks should look carefully at the draft Long Range Plan and offer input to the Board. Because, if a sidewalk plan is included in the approved Long Range Plan, future Boards will move to implement that plan irrespective of whether or not there has been any community-wide input.

7.  Resolution on Electronic Voting – Further Information

The final resolution has not yet been posted to the POA web site.  But a draft version is in the last four pages of the following document.  It will suffice for purposes of this explanation:  8/20/13 Board Packet

And, if it helps, the current version of our By-Laws can be found here:  By-Laws

New language was inserted in several locations which require all votes for directors to be cast in advance of the annual meeting. Our By-Laws now have two voting protocols; one for electing directors and another for anything else subject to a vote.

The voting protocol for “anything else” remains unchanged except for the addition of electronic voting. Written ballots and electronic votes are acceptable. Voting in person (at a meeting) and proxy votes are allowed when authorized by the Board. All meeting notice periods, as outlined in Section 6, remain unchanged.

New language in Section 10 creates a separate protocol for electing Directors, the key points of which are as follows:

• It creates a “Notice of Election” which must be mailed out separately; presumably with the notice of the Annual Meeting. This Notice of Election has to be mailed no sooner than 45 days and no later than 30 days before the Annual Meeting.

• Voting can be done by written ballot or electronic voting. Proxy and in-person voting will not be allowed (see next point).

• All votes must be submitted to the POA by a specific date in advance of the Annual Meeting. That specific date is determined at the discretion of the Board.  In the past, ballots were required to be submitted in advance, but that was never specified in the By-Laws.  This change codifies that practice.

• Article 3, Section 3 has been changed to say that the purpose of the Annual Meeting is to “announce the election results”; as opposed to the old purpose of “electing Directors”.  This makes clear that the voting takes place in advance of the meeting.