OK what transpired at the SOA Budget Meeting held at TCTC Thursday night? Well, there was some review of 2018 accomplishments:
- The failed Rockery Wall repairs were completed. Although at an approximate cost of $3.0M, which was over the original estimate of $2.5M, thereby requiring additional Common Area reserve fund expenditures.
- The West Park plans were completed. Although at a higher cost than originally budgeted for by the City of Reno. However, the Parks Committee has done a good job at raising additional funds from outside sources.
- Numerous TCTC facility improvements were accomplished.
- The various SOA outstanding loans (i.e. The Canyon9 & TCTC Developer Loans plus the Rockery Wall Repair Loan) were consolidated into a single loan of $6M for 15 years (5% interest first 10 years, adjustable last 5 years) which saved the SOA approximately $107K in early payoff to the Developer.
However, more importantly, what about 2019?
- The good news is that the operating budgets for the three activity centers (General Common/Canyon9, The Club at Town Center, and the Private Gates/Streets) are not significantly different than 2018. Therefore, monthly assessments for these areas will remain the same. That is, General Common Area – $92.00, TCTC – $89.00 and Privates Gates – $54.00.
- The bad news is that the Common Area Reserves have been depleted to the point that the estimated $3.7M for additional “high risk” (e.g., Gypsy Hill and 2nd Roundabout) Rockery Wall repairs in 2019 and beyond is not available. The proposed solution is to levy a “Special Assessment” on Somersett Owners in 2019 to fund this amount.
- Given the approximate 3100 unit owners for 2019, the Special Assessment equates to $1200 per unit owner. One might opine that this amount is way over that permitted by the SOA CC&R’s without a majority vote of unit owners. That is, per Article III, Section 5 of the SOA CC&R’s, Special Assessments which exceed 25% of the annual amount (in this case 25% of $92 x 12 = $276) cannot be approved by the Board, but require majority unit owner vote. However, this requirement is apparently superseded by Nevada Law (NRS 116.3155 2. b) which obligates HOA’s to establish adequate reserves. The SOA has concluded this statute applies, and therefore obviates the need for a homeowner vote. This based on a memo from Nevada Legislative Counsel Brenda J. Erdoes to then Nevada State Senator Michael J. Schneider, dated July 12, 2007. A copy of this memo may be accessed via the following link:
- One might ask, why not just take out an additional loan for the $3.7M? The rub here is that the SOA’s current debt service inhibits the ability to obtain additional loans. However, this aside, the Special Assessment makes more sense than incurring additional loan debt with its attendant interest charges.
- How exactly will the $1200 Special Assessment in 2019 be levied? While this will be up to the new Board installed at the November Annual Homeowner Meeting, it is expected that the first $600 will become due and payable in early 2019, with the balance deferred to later in the year or via periodic installments.
- Regarding the ongoing lawsuit against the Somersett Developer, and underlying contractors, in the SOA Chapter 40 claim for damages, nothing new to report. However, the SOA Finance Committee acting Chairman expressed the viewpoint that recovery of any damages would most likely be far lower than the amount expended and claimed by the SOA. How any monetary recovery in this area would subsequently be processed, would be up to the SOA BOD at that time.
The Budget Meeting PowerPoint presentation which summarizes the various 2019 operating budget items will be accessible on the SOA website (www.somersett.net). Also, the complete budget details will be mailed to all Somersett unit owners no later than November 1, 2018.