Somersett Golf Country Club Fact Sheet

The Somersett Golf & Country Club (SGCC) has recently sent a Memo to all its members entitled “Somersett Golf & Country Club Fact Sheet”, a copy of which may be accessed by clicking on the quoted title. What is the purpose of this memo? To educate its members? Doubtfull. To provide some “Talking Points” for their members when addressing others in the community? Most likely! Why? Perhaps to gain some support for the SGCC whose image has been tarnished somewhat by the ongoing controversies over Rockery Wall liabilities, Water Facility maintenance and Board Member conflict of Interests.

With regard to the document as written, SU has no quarrel with the “Facts” as stated therein. However, whereas they may be factually correct, for every Fact there can be a supplementary discussion. Therefore, let’s discuss some of these Facts presented in the Memo.

Introduction

  1. Yes, Somersett was designed to be a “Master-Planned Golf Community”, but it consists of separate entities (e.g., the SOA, the SOA Sub-associations, the Public Parks, the Town Center Retail Buildings, the SGCC) all with different relationships. With respect to the SGCC, there is no question that it was originally established as a private entity completely separate from the Somersett Owners Association (SOA), who had no rights of ownership, operation, usage or responsibilities related thereto (see Article VII Sections 5 & 6 of the CC&R’s). This changed somewhat when the SOA purchased the SGCC’s Land, Water Rights and Water Facilities and leased it back to the SGCC. However, the basic tenant of its operational relationship with the SGCC has not (see item 2 below).
  2. Yes, SGCC is a separate business entity owned by its Equity members. The Purchase Agreement only covered Purchase of Land, Water Rights and Water Facilities, not the SGCC Business or its assets, nor the Clubhouse or the parcel of land on which it sits. Therefore, the SOA has no responsibility or obligation for supporting the aspects of its operation. However, as owner of the Land and Water Facilities, the SOA does have the responsibility to ensure that the SGCC is maintaining them in accordance with the lease provisions of the Purchase Agreement.

Purchase Agreement

  1. Yes, in 2014 the SOA owners voted (by a large margin) in favor of the ill-conceived (SU opinion) Purchase Agreement, after being told there would be no impact on assessments and would help to ensure the financial stability of the SGCC.
  2. The statement that “The only allowed use for this purchase is for operating a private, member owned country club” is a SGCC lease requirement and does not apply to the SOA should the land revert back to the SOA.
  3. The statement “The SOA has not provided any one-time payment nor provides any ongoing fiscal support to the SGCC” is true, but only since 2015 when the $2.75M was paid to the SGCC in fulfillment of the Purchase Agreement. In the three years prior to 2015 the SOA provided approximately $1.24M in funding to the SGCC via owner assessments. Primarily to offset its operating deficits. From 2016 to 2018, the SOA’s operating deficit has increased from approximately $53K to $108K. The concern by many being if this trend continues can the SGCC continue to meet its obligations. Will the SOA Board again permit the SGCC to dip into the SOA Well?
  4. The Memo quotes a 50 year lease, but there are two 20 year renewal options at the sole discretion of the SGCC.
  5. The Memo states that “The SGCC pays an annual lease to the SOA…”, but does not mention that this annual fee is only $2200.
  6. Yes, Non-resident members of the SGCC are permitted use of TCTC under Article VII Section 8 of the CC&R’s. This subject to the payment of dues as is required by all other Somersett owners (except for Sierra Canyon). The SOA does not bill these members individually. The SGCC collects the required payments and remits them to the SOA. This does not a represent a significant revenue to the SOA, as it only involves approximately 30 members.

Water Facilities

1. The Memo accurately describes the SGCC’s responsibilities for operating and maintaining the Water Facilities. However, it emphasizes doing so at “NO fee to the SOA”. A little disingenuous seeing as how they are paying practically nothing (i.e., only $2200/year) in leaseback fees.
2. The Memo accurately describes the SGCC’s operational and maintenance responsibilities. These are not in question as they are clearly established under the Purchase Agreement. The concern here is will SGCC have the necessary funds to properly maintain them. This as a result of their improper maintenance of the well providing most of the SGCC’s irrigation water, which has apparently resulted in over pumping of the Truckee River water rights and a concern over how long this can continue.

Rock Wall on Hole 5

  1. The SGCC acknowledges the lower Rockery Wall failure on SGCC leased land adjacent to hole 5 resulted in roughly $680K in damages
  2. The SGCC contends that they are not responsible for these damages because of hillside instabilities resulting from drainage problems along the upper wall on SOA property, which subsequently caused both walls to fail.
  3. The SGCC rejects the SOA commissioned CME engineering report that concluded the lower wall failed first causing the upper wall to fail. However, the SGCC has offered no counter report to substantiate their position.
  4. The Memo states that the SGCC, via the Tolling Agreement, is making a good faith $500/month payment to cover the interest on the loan taken out by the SOA to pay for the upper and lower wall repairs. These repair costs were included within a consolidated 15 year $6M loan at 5% interest. The repair cost portion for the lower wall being $680K. How does this calculate? $680K at 5% for 15 years would result in a payment of $5,777/month. Averaged over the 15 years results in $3,777/month principal and $1,600/month interest. However, we know that the interest portion is usually much higher in the beginning (i.e., starting at around $2800/month). Therefore, the $500/month payment certainly falls way short of covering the interest payment on the $680,000. One could question as to whether or not this constitutes a good faith payment.

Food for thought –  Rather than engage in litigation over the $680K, why not reach a negotiated settlement wherein the SOA and the SGCC agree to divide up the costs?  For example a 50 – 50 split would result in the SGCC paying the SOA $2,888/month toward the loan payment. The SGCC could recover this simply by raising Equity member dues by $10/month.  Perhaps an additional $10/month to accrue some reserves for Water Facility repairs.

It is most likely clear to our readers that SU, among others as demonstrated at Board meetings and social media comments, are opposed to any future SOA financial support to the SGCC. Many, especially some SGCC members, equate this to being anti-SGCC and anti-Community, which is an unjust conclusion and just fuels the “us vs them” narrative.

6 thoughts on “Somersett Golf Country Club Fact Sheet

  1. You ignore the fact that the developer had “reverter rights”. If the SOA has not purchased the golf course land, the developer had the right to come back and build on the golf course. You folks always neglect to mention this important fact.
    The homeowners made the right decision.

    1. Terry,
      If the SGCC cannot meet its obligations under the Purchase Agreement and the land and water rights revert back to SOA control, selling off some of the land and water rights to a Developer might be a good idea. The SOA could then use the income to: 1) maintain a few parcels as green space for a park, sports field, winter sledding area, or whatever; and 2) build an indoor pool/fitness center on the SOA owned property in the Town Center adjacent to the retail buildings (it’s currently just sitting there with no plans for its usage) . This rather than subsidizing the Golf Course so it can continue operations for the benefit of its equity members, or the SOA attempting to run the Golf Course with the same results.

      Just a thought! Anybody else have an idea?

      Jim Haar

      1. Jim

        If the SOA cannot find a business partner (such as Duncan Golf Management, Arnold Palmer) who can operate it as a PUBLIC GOLF course … then just maintaining the 200 acres as green and open space would cost no more than $200K per year – around $5 a month per resident.

        This envisions the SGCC not paying the $680K and the SOA cancelling the lease agreement … no thought that we should (all) maintain it as a private loss making golf club!

        Baseball Diamonds, Soccer pitches, Football pitches which could be used by our local schools and the residents.

        A permanent residence for the brush eating fire retarding goats? Which recently have been credited with saving the Reagan Library from a fiery oblivion!

        I would envision stables and pony riding as well.

        The surplus water rights can be sold for $6000 per AF back to the water master. 200 AF (Our Association would still have 212AF remaining) would yield $1.2 Million to pay down the $6 million debt – something Terry has told me at the HOA 2020 budget presentation we should be doing.

        Geoffrey

  2. Reverter Rights – this was to ensure that if the SGCC failed that the builder could incorporate the Golf Course into the PUC – and develop…

    A better deal for the SOA would have been to purchase the Reverter rights from the Developer at the time of of the turnover in exchange for cash (estimated at $500K) and making the reserves whole – we inherited a $1,000,000 shortfall… unfortunately the negotiation team did not think of this.

    The whole deal was constructed to funnel SOA monies directly to the SGCC and bless the prior $1,000,000 subsidy for “non-existent amenities” made by the Developer controlled Association
    (the original lease agreement was under investigation by the NV attorney general’s office).

  3. I agree the fact sheet includes several ‘marketing elements’.

    Where I think they have a point is when they remind that :

    – Somersett is a master planned golf community;
    – everyone can use the Canyon 9 course;
    – the golf club and its ameneties can also be used by everyone ( the grille makes really nice food.) and
    – non members get 4 preferential green fees a year.

    So with this in mind I think it s in everyone’s interest to make the golf course/club a success.

    If all the residents would go eat at the grille
    at least once a month, it would help.

    There is also a very nice shop there and Christmas is coming – if each residents were to buy at least one present there to support the business, it would also help.

    Plus some restaurant/store patrons might then consider buying a membership.

    If the SOA drops the golf course, there are going to be multiple and costly lawsuits against it from the golf club, its members and some homeowners + we ll still be stuck with the repairs.

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