Sierra Canyon, Somersett, Villages, The Vue – Your Community Forum

Fact or Fiction

courtesy of Freedigitalphotos.net

courtesy of Freedigitalphotos.net

Posted by Herb James

Finding a way to save the golf course will be accomplished if the discussion is constrained by facts, not the ad hominem attacks and vitriol we have heard and read about.  Fabricated accusations about ill- intentions, name calling, claims of make-believe groups, false or irrational comparisons, fabricated crises, etc. divert attention from the core issues that need to be resolved if Somersett/Del Webb is going to preserve the golf course.  In any disagreement only the relevant and material facts should be discussed – providing the real goal is to achieve a mutually satisfactory solution.  To discuss the core issues, facts need to replace fiction.  With this goal in mind I present a number of issues that are either FACT OR FICTION.  I believe these issues are relevant and material to any discussion about the Lease Agreement and recommend they be addressed.

FACT OR FICTION:

The former Board made no effort to determine what if any new amenities, the property owners wanted prior to creating and implementing the Lease Agreement.

FACTOR FICTION:

The former Board made no effort to obtain an independent, objective cost analysis to determine the value of the amenities and to determine an appropriate cost for the property owners.

FACT OR FICTION:

Secret meetings between the former Board and the Somersett Country Club, Inc. were held to determine the cost to be charged to the property owners and then amenities to be provided.

FACT OR FICTION:

The former Board did not allow the property owners the opportunity to vote for this Lease Agreement, as required by law and the CC&R’s, prior to its implementation.

FACT OR FICTION:

The CC&R’s do not grant the Board the authority to add new amenities nor do the CC&R’s give the Board the power to force property owners to pay for new amenities property owners did not approve.

FACT OR FICTION:

The total cost to the property owners, for this 10 year Lease Agreement, is no less than $5,000,000.00 but more probably closer to $7,000,000.00.

FACT OR FICTION:

The book value of the Somersett Country Club, Inc. was artificially increased from approximately, $2,000,000.00 to between $7,000,000.00 and $9,000,000.00 solely as a result of this Lease Agreement.

FACT OR FICTION:

This Lease Agreement can be considered a very secure debt instrument that has a low risk of default.

FACT OR FICTION:

The Somersett Country Club, Inc. has the option of selling their club to a third party, the sale of which would include the golf operation ($2,000,000.00) and this Lease Agreement ($5,000,000.00 to $7,000,000.00).

FACT OR FICTION:

If the Somersett Country Club, Inc. sold the club, the Lease Agreement states the SOA is obligated to continue paying the new owners for this Agreement.

FACT OR FICTION:

If the Somersett Country Club, Inc. sold the club to a third party, the money from its sale would be shared only with its approximately 135 owners.

FACT OR FICTION:

The Attorney General’s Office is considering filing a formal complaint against the former Board because it created and implemented this Lease Agreement without the knowledge of the property owners.

FACT OR FICTION:

The current Board has the authority, under Nevada law, to void this Lease Agreement immediately and unilaterally.

FACT OR FICTION:

If the current Board exercised it power to void this Lease Agreement, the SOA would save over $36,000.00 per month, the threat by the Attorney General’s Office to file a formal complaint against the former Board would be removed and the SOA would save tens of thousands of dollar in unnecessary legal fees by not having to defend the former Board.

FACT OR FICTION:

Refusal of the current Board to void this Lease Agreement is a violation of the current Board’s fiduciary responsibility to manage the SOA in the best interest of the property owners.

FACT OR FICTION:

Handouts, welfare payments or subsidizes harm both the recipients and the providers.

FACT OR FICTION:

The purpose of this $5,000,000.00 to $7,000,000.00 Lease Agreement is fourfold:  1.) continue subsidizing the Somersett Country Club, Inc.; 2.) expand the club’s existing facilities; 3.) create a very secure debt instrument that would be sold along with the golf operation; 4.) help pay the cost for constructing of the club’s private clubhouse.

FACT OR FICTION:

The purpose of this $5,000,000.00 to $7,000,000.00 Lease Agreement is to provide new amenities.

These issues seem to be at the heart of the disagreement.  The proponents and opponents of this Lease Agreement have the same goal in mind – the preservation of the golf course in Somersett.  The disagreement seems to emanate from how this goal should be achieved.  Opponents of this Lease Agreement agree with Messrs. Blake Smith and Ray Lee who have publically stated this Lease Agreement will not save the club.  Proponents disagree with their assessment.

I hope the issues are discussed so a solution can be amicably achieved.  I make a quantum leap in assuming both opponents and proponents will respond to these issues.  I am especially interested in the response from the Somersett Country Club, Inc.’s erudite official spokesperson “Bagdad Barry”.  No doubt “Bagdad Barry’s” analysis will be sagacious, cogent and powerful; after all he is representing the official position and values of his fellow owners of the Somersett Country Club, Inc.

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Comments on: "Fact or Fiction" (18)

  1. I was hoping to get the facts – not the issues reprinted. Reprinting all the issues is certainly relevant, however, how can a meaningful discussion arise from just reiterating all the issues without stating which are facts and which are fiction? Obviously I missed the point of this ‘blog’.

    • Jim Haar said:

      Leslie,

      Good point. As I read Mr. James issues, most can be factually addressed, whereas others have a subjective element. With this in mind, following you will find my perspective as those with a factual element (FACTS) and those with subjective elements (YOU BE THE JUDGE). For the later category, I have taken the liberty to express my opinions. I have chosen to not repeat Mr. James’ issues, but my responses are numbered in the order of his listings.

      1. YOU BE THE JUDGE – However, are you aware of any attempt made by the former BOD to diligently inform or obtain homeowner feedback on the details of the Lease Agreement? I see no evidence that this occurred.
      2. FACT – There is no evidence or documentation in Association archives that the former BOD did a cost/benefit analysis.
      3. YOU BE THE JUDGE – Similar comment as for Item 1 above regarding transparency.
      4. FACT – No homeowner vote was undertaken. The Nevada Attorney General’s office is challenging the legality of the Lease Agreement under the CC&R’s and Nevada Law
      5. FACT – Article III Section 3 of the CC&R’s define the purpose and amount of assessments that can be determined by the BOD. The purpose is specified under Article II Section 1 of the CC&R’s, which states “The Association shall have no other purpose than those specified herein”. No where does the specified purpose permit or address maintaining or adding amenities outside of the Common Area. However, I acknowledge that others may take a more liberal interpretation of the CC&R’s.
      6. FACT – Minimun cost to homeowners over the ten year term (including the 7 year renewal period) would be $4.2M assuming moderate growth. Exercising of the “Event Trigger”clause (wherein the SOA participates in the design and utilization of a permanent SGCC clubhouse) would add additional assessments TBD. Total amount over the ten year term would depend on a number of factors, but in a maximum case could approach $7M. (Reference: Articles IV.1, IV.4, IV.5, and IV.10 of the Lease Agreement).
      7. FACT – Prior to the Lease Agreement, the book value of the SGCC (land, buildings, equipment) as contained in their 2011 IRS Form 990 filing was $4.2M. Not sure how the 2011 book value and the assessment income from 2012 and beyond affects market value or to substantiate the numbers listed under this issue.
      8. FACT – The Lease Agreement provides guaranteed income to the SGCC that can be used to secure debt as is the case for all entities and individuals with guaranteed income.
      9. FACT – Per Article IV.11 of the Lease Agreement the SGCC may sell to a third party and the Lease Agreement becomes a non-terminable part of that sale.
      10. FACT – Same response as per item 9 above.
      11. FACT – This would be based on the terms of the sale, but is a logical conclusion as I doubt any equity owner would defer compensation.
      12. FACT – The Nevada Attorney General’s office has determined that the Lease Agreement is in violation of Nevada Law and, in the absence of a negotiated settlement involving the past and current BODs, will prosecute the case before the appropriate Nevada Commission.
      13. FACT – Per Nevada Law, the current BOD can void a contract, without penalty, entered into by a previous BOD “that is not in good faith or was unconscionable to the units owners at the time entered into” (Reference: NRS 116-3105).
      14. FACT – Voiding the Lease Agreement would save the Association the $15/mo/unit of assessments going to the SGCC or approximately $36K per month. However, it is unclear as to what extent the Association is required to indemnify previous Board members against legal actions or what legal action the SGCC may choose to pursue. However, but the $36K/month savings would pay for a lot of legal fees!
      15. YOU BE THE JUDGE – There are many factors to be considered as to whether the current BOD is violating its fiduciary responsibility in not voiding the Lease Agreement. I do not believe they are at this time. Depends on how the “violation of law” and “negotiated settlement” issue referenced in item 12 is resolved.
      16. YOU BE THE JUDGE – No comment.
      17. YOU BE THE JUDGE – However, based on the evidence, I believe all are applicable.
      18. YOU BE THE JUDGE – However, the evidence supports that the primary purpose was not for the amenities, but shoring up the SGCC’s financial stability.

      Hope the above is helpful, but bear in mind that sometime in the next six months or so, there is a high probability that a new agreement will be presented to homeowners for ratification via majority vote.

    • Herb James said:

      Ms. Craighead,
      Thank you for taking the time to read my article . Because of the amount of acrimony expressed recently, I believe stating the issues clearly can help to re-direct the discussions back to these issues.
      I intend to address some of these issues and offer my analysis of them. I am hoping other people will address these issues so a better understanding of them will result.
      Herb James

  2. Barry Lazow said:

    It’s interesting how you start your diatribe but stating “Fabricated accusations about ill- intentions, NAME CALLING, claims of make-believe groups, false or irrational comparisons, fabricated crises, etc. divert attention from the core issues that need to be resolved if Somersett/Del Webb is going to preserve the golf course.” and then you end it by closing with “NAME CALLING (erudite official Bagdad Barry – you’re soooo clever Herb – NOT)”. Not very nice HERB. And certainly not very productive.

    You then go on to assert that the posts by yourself and the others in your merry band of minority homeowners here at Somersett are the only accurate ones when on the other hand the majority of the posts are usually gross exaggerations of the facts (for instance referring to the costs of the agreement as $6M, when in fact it is nowhere near that as far as a commitment goes). SO, Fiction – the cost is NOT IN FACT ==> “The total cost to the property owners, for this 10 year Lease Agreement, is no less than $5,000,000.00 but more probably closer to $7,000,000.00.” The agreement calls for a three year agreement at $430k/year that is “RENEWABLE” after the three year term for another 3 or 4 years and then again for the balance of 10 years. Look up renewable, that does not mean it is committed for 10 years. Even if it were 10 years, 10 X $430k is $4.3M (yeah I know your math includes new homes, but the reality is it’s only about a $1.3M commitment.

    Where the HELL did you get this one? “The book value of the Somersett Country Club, Inc. was artificially increased from approximately, $2,000,000.00 to between $7,000,000.00 and $9,000,000.00 solely as a result of this Lease Agreement.” FICTION

    “If the Somersett Country Club, Inc. sold the club, the Lease Agreement states the SOA is obligated to continue paying the new owners for this Agreement.” ==> only to the extent of the balance of the time left on the three year agreement, not for 10 years as you would lead people to believe.

    “The Attorney General’s Office is considering filing a formal complaint against the former Board because it created and implemented this Lease Agreement without the knowledge of the property owners.” – FICTION – the AG is looking at a completely different issue not associated with the lease agreement.

    “The current Board has the authority, under Nevada law, to void this Lease Agreement immediately and unilaterally.” ==> So what? Why would they want to do that? To make you and your merry band of minority homeowners happy?

    “If the current Board exercised it power to void this Lease Agreement, the SOA would save over $36,000.00 per month, the threat by the Attorney General’s Office to file a formal complaint against the former Board would be removed and the SOA would save tens of thousands of dollar in unnecessary legal fees by not having to defend the former Board.” ALSO, if the current board defines a new replacement lease agreement and it is voted on and approved by the homeowners the AG also stated that she would not file a complaint against the former board. We Need ALL the facts here Herb, not just the one’s you like to include.

    “Refusal of the current Board to void this Lease Agreement is a violation of the current Board’s fiduciary responsibility to manage the SOA in the best interest of the property owners.” In who’s opinion? You’re really reaching here Herb. FICTION!!!

    “Handouts, welfare payments or subsidizes harm both the recipients and the providers.” Whatever!!!

    “The purpose of this $5,000,000.00 to $7,000,000.00 Lease Agreement is fourfold: 1.) continue subsidizing the Somersett Country Club, Inc.; 2.) expand the club’s existing facilities; 3.) create a very secure debt instrument that would be sold along with the golf operation; 4.) help pay the cost for constructing of the club’s private clubhouse.”
    WHAT????? How about add valuable amenities to the community to maintain and increase homeowner value? Debt Instrument? Where do you get this stuff? Build a private clubhouse? REALLY? The current SOA agreement could NOT have less to do with the SGCC building a clubhouse than President Obama could have to do with any sort of repair to our limping along economy.

    “Opponents of this Lease Agreement agree with Messrs. Blake Smith and Ray Lee who have publicly stated this Lease Agreement will not save the club. Proponents disagree with their assessment.” WHAT? What the HELL do you know about what will or won’t save the club? NOTHING!!

    In closing, I had a benign conversation with a Doctor of mine this morning about Somersett and the SGCC. I told him about the agreement that took $15/month out of already existing H/O Association dues (no increase) and added amenities such as a private driving range for homeowners to use, Bocce Ball courts for homeowners to use, Two rounds of golf at the SGCC for all homeowners (which BTW, I think should be bumped up) and access to our formerly private restaurant, plus some future amenities to be added. His first off the cuff response was “Wow, that sounds like it would be great for the community”. It was refreshing. He has no skin in this whole thing and that was the first thought out of his mind.

    • Bruce Watkins said:

      Barry, I appreciate your responses. It seems you have some facts, but…….. why can’t we leave out the personal responses?

      • Herb James said:

        Mr. Watkins,
        Thank you for taking the time to read my article and responding to it.
        I agree with your criticism and I will try to limit future articles to my analysis of the facts.
        Herb James

  3. FACT:

    I pay $180 a year to keep up and/or improve someone else’s toy.

    • Joe Bower said:

      I am with you on the $180. Until now owners didn’t seem to care as overall dues year-to-year essentially remained the same. What they don’t seem to realize is that without the Agreement fiasco, their dues could have gone down $15/month. Had dues gone up $15 on January 1, we would still be hearing the screams.

  4. Bruce Watkins said:

    Herb;
    I appreciate your attempt to ask fact-finding questions. They appear to be succinct and logically asked. But….. why is it necessary to go into name-calling?

    • Bruce,

      Your comment on civility is right on and should be observed by all. However, in defense of Mr. James, he did call for this in his opening statement. Suspect his closing reference to “Bagdad Barry”, is in deference to Mr. Lazlow’s continued use of the same insults and talking points to offset reality. Hopefully, Mr. Lazlow’s rhetorical style does not speak for the majority of Country Club members

  5. You guys are nuts. $15 a month to protect your greenbelt golf course. Isn’t it worth that to look over the beauty of your development? I don’t get it…

    • Herb James said:

      edbear55,
      Thank you for reading my article. The disagreement is not about the $15.00/month. The disagreement is with the way it was developed, executed and marketed. This agreement placed no less than a $5,000,000.00, but more likely closer to a $7,000,000.00 debt on all properties, without the knowledge of he property owners. This was intentionally concealed from the property owners. This concealment is one of the important elements in the Attorney General’s pending complaint against the former Board. Both the benefits and the costs have been intentionally misrepresented. The amenities, those that are not phantom amenities, were never asked for, are seldom used and are shamefully over priced ($107.00 for a bucket of balls at the driving range).
      This agreement renders the CC&R’S useless as a body of regulations that protect property owners from assessment increases by the Board without their approval.
      No one in their right mind would have signed this agreement. This agreement has been filled with deception from its inception. That is why the Attorney General’s Office is considering filing a complaint .
      Most people want to preserve a golf course in Somersett. The issue is how best to accomplish this goal. Those that disagree with this agreement want to achieve the goal in an open and honest way, not in the unlawful and deceptive way this agreement was reached.
      I think it is important to keep in mind the current Board can submit this Lease Agreement, as is, to the property owners for their approval. This has not occurred because anyone familar with the agreement knows it is a sham, whose purposes are to keep this private golf club solvent and private without the owners increasing their personal investments in their personal luxury.
      I am confident that the property owners would have willingly subsidized the golf club if the club had been honest and simply requested short term financial assistance in the summer of 2011. My friends and I would have contributed. The club, instead, chose collusion with the former Board, which has resulted in this problem and the pending Attorney General’s complaint.
      Herb James

  6. Geoffrey Brooks said:

    edbear55

    I think that everyone (almost) wants to keep the green in Somersett. I for one wish to echo Mr James sentiment in that would cheerfully pay more per month to keep the green in Somersett under the control of the homeowners.

    I also believe that a vote could be had on this additional expenditure and nearly everyone would vote for this. A yes vote would preserve the beauty of Somersett, which makes us more than just another housing development.

    The lease agreement is a flawed incomprehensible piece of mumbo jumbo, which has raised questions in the eyes of the AG’s office, rightfully so. It was foisted on the homeowners without a vote, without a change in our CCR&R’s.

    I note that some of the contributors to the SU blog often mention “D’Andrea” and the negative vote against the golf course. When you look carefully into this, it was an attempt by a private golf course and country club to take money from the homeowners to put it into the pockets of the owners of an exclusive club..why would anyone support someone elses hobby? Many people look at the current SGCC lease agreement in a similar way…What we need is an agreement where we will own the golf course (why not run 2, we run a public one already). We need to be able to make a community wide decision on how to maintain the open spaces. This is not something to leave in the hands of the few.

    If one checks with Lenar – the builder in D’Andrea, you will hear that the housing business without a golf course, (which may be developed into nice modern homes for people who want to live here in metro Washoe County), is doing quite well, prices are escalating and building is proceeding briskly.

    It is perhaps worth noting that Lenar have built a non-golfing community almost within Somersett which reaches into to the pristine custom Peavine gated hillside lots. Here prices are also rising and expectations are currently exceeding production (a similar story can be told about Sierra Canyon 2).

  7. loves golf said:

    Why is it that Mr’s James,Haar,Bower and Brooks keep rehashing the same old stuff with little or no suggestions for a remedy. If they are that unhappy with Somersett then perhaps another community would better suit them. Its very clear that the homeowners spoke when none of the somersett united folks were elected to the board. Guess that was probalby fixed also. Get real.

  8. Geoffrey Brooks said:

    To Loves Golf

    If the election was a defacto vote on the virtues of the SGCC lease, why can’t we have a proper one where the CC&R’s are changed and the expenditure for the new amenties are approved according to NV real estate law?

    As I had stated earlier, I for one would be happy to pay more to maintain the championship golf course. It is not about the $15 a month, it is the actions of the 2012 board. Purchasing amenties (?) and subsidizing the remodelling of a private restaurant without a vote. When we moved here, access to a private golf course was just an option, which one could pay to enjoy. In fact in 2011, we did pay to join and enjoy as social members.

    If I recall correctly, the aminosity in the election was over whether some residents, who dont want to move, were prepared to let the golf course go brown. I cannot believe that golfers would try to drum out homeowners from our community because they don’t believe the communities interests are just golf!

    I cannot speak for everyone, but I have always believed that if the golf course was in financial trouble, the only practical solution was to have all the homeowners own the CGC, to make sure that its stays as open space, operating it as a public golf course. I met with members of the previous board, pointing out that the only viable long term solution was to have the HOA own the CGC. We already own and operate the Canyon 9, why not both to protect the future beauty of the community. Why is it that a few SGCC members feel that they have the right to dictate the amenties our community needs, what is best for our community? Surely every resident has a right to have a say in where their monthly dues are spent.

  9. Joe Bower - Sierra Canyon Owner & SOA Member said:

    Re the Board vote: it was won by the non-SU folks because they ran as a group ticket among whom was the only candidate from Sierra Canyon. Those folks want to be represented and they would have voted for whichever ticket that person was on. Enough said without going into his previous role on the developer board where The Agreement was cooked up.

    BTW the new board has been in place for over seven months. Except for the controversy over The Agreement, what else is new or has changed considering all the flowery talk at election time? Same old same old, even the same vendors/contractors.

  10. Lovesreno said:

    This is a very interesting list of comments. I have a few questions: 1) What do you mean by “secret” meetings? Does this imply that the SOA board must notice and allow homeowners in on every meeting it has? I can’t see how that is productive. 2) I read the AG letter posted by the SOA and it never says that the AG was going to file a complaint based on the fact that this agreement was entered into without a homeowner vote. In fact, it doesn’t mention anything about the validity of the agreement. That is what a hearing would decide. 3) The letter also does not mention anything about a claim being dropped if the current lease is voided. 4) Where is the “book value” coming from? Is it from the accounting records or tax returns of SGCC? Since the tax returns are public information I’m sure it would be simple to quantify the asset value of SGCC.

    I think we all need to be careful spouting accounting and legal opinions on this blog without proper credentials. As homeowners we can disagree with the SOA board’s actions and that is our right. But to quote a few NRS codes and come up with lease values and asset values gets into messy territory. That is what the experts are for. It sounds like the current board will take any new agreement to the vote of the homeowners. Good for them! They are acting in the appropriate manner and I, for one, appreciate their dedication to the community. And no, I’m not on the board. I’ve gone to a few meetings and see how much there is to do as part of that voluntary board and I’m amazed at how much they accomplish. I think they will do what is right for the community and will be transparent in their actions as circumstances allow.

    • Response to Lovesreno Comment said:

      Lovesreno – The following in response to your questions:

      1) Yes, unless it is an “executive session”, which per NRS 116.31085 has constraints on purpose.
      2) Not sure what letter you are referring to, but the “Complaint” prepared by the AG for filing before the Commission in fact did not mention a requirement for homeowner vote. However, it listed several violations of NRS statutes associated with implementation of the Lease and that the Respondents (i.e., previous BOD) acted outside the scope of their authority in approving it. The Complaint also alleged that the Lease Agreement substantially benefits the Club and provides only nominal benefit, if any, to the association. It also addressed disciplinary actions.
      3) Following a meeting between the AG and representatives of the SOA, SGCC and the Respondents, the AG agreed to stay filing of the Complaint provided that Lease Agreement negotiations were finalized with expanded amenities, the CC&R’s were amended and both brought to homeowners for vote. This is clearly documented in the “Agreement to Stay Investigation” document available on the SOA website. Whether the current agreement is or is not voided is not an issue with the AG at this time. However, per NRS 116.3105 the BOD has the authority to do so if they so desire.
      4) Per SGCC’s 2011 IRS filings they listed a book Value of $4.2M for Land, Buildings and Equipment.

      All the above responses are factually documented. I agree with you about being careful in our discourse and applauding the actions and transparency of the current BOD (certainly an improvement over the previous BOD). However, should we also not applaud the actions of those who recognized the improprieties of the current agreement and brought it to the attention of the AG’s office? I am not convinced that without AG intervention a homeowner vote on a revised long-term agreement (i.e., as proposed by the current BOD and SGCC) would have been accomplished.

      Jim Haar

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