Park River Oak Estates Homeowner's Association

Meeting Minutes

Park River Oak Estates Annual Membership Meeting
Sunday, November 4, 2007

Members Present:

Ann Campbell                                                
Marguerite Elia                                              
Kimberly Harbison                                         
Patrick Harbison                                            
Elizabeth Johnson                                          
Dick Kempster                                               
Karen Kempster                                             
Michael Mullins
Nereo Rebellato
Lee Ann Trumbull
Greg Watanabe
James Williams
Chor-Yi Wong
Carol Wright
Todd Yee

HOA President Marguerite Elia called the meeting to order at 5:30pm.

Chor-Yi Wong gave a summary of the California state voting rules and reviewed the new election laws that went into effect on July 1, 2006.

Votes were publicly tabulated by Election Inspectors Dick Kempster, Chor-Yi Wong, and Greg Watanabe.

We achieved quorum in this election (33% of membership-minus-delinquents = 24 ballots) as 43 ballots were received.  Two ballots could not be counted due to one homeowner not using the required envelope that ensured confidentiality and a second homeowner not signing the outer envelope.   The inspectors opened the outer envelopes of the 41 valid ballots and separated them from the inner envelopes to ensure the confidentiality of the actual ballots.

While the votes were being counted, HOA President Marguerite Elia gave a report on PROE’s 2008 budget, and apologized for there not being a current monthly financial report prepared by our manager. 

FEMA is not offering low-cost preferred-risk flood insurance to HOAs for multicomplex buildings such as ours in the Pocket Road area.   After FEMA redesignated our flood zone, homeowners must now purchase their own individual preferred-risk plans.  Insurance experts warn us that in the event of a catastrophic flood in the Pocket, FEMA would probably not allow our homes to be rebuilt for many years.  FEMA has not rebuilt failed levees in most other parts of the country for many years.  FEMA may never rebuild failed levees that are considered high-risk.  In other states, federal funds were not allocated for massive emergency levee repairs and state budgets do not contain the billions of surplus funds needed for catastrophic levee replacements.  Also, the preferred-risk insurance plans ONLY available to individual homeowners have significantly larger payouts and would give homeowners enough funds to pay off their mortgage and to relocate to safer regions, in the event of a levee break.  The pay-outs for Park River HOA’s previous multiplex policies (strictly established by FEMA) were much lower and insufficient for the needs of homeowners after a flood, and they cost twice as much. 

Homeowner’s Association dues increased 20% on January 1, 2007 (from $200.00 per month to $240.00 per month) from 2006.  Because of the flood insurance changes, there will be no dues increase in 2008, although a cost-of-living increase to keep pace with inflation for mandatory maintenance costs is likely necessary in 2009. 

The Bob Browning Group completed our Reserve Study (a budget projection of our largest long-term expenses for pool, gutters, painting, roofs, gate, stucco, roads, etc.) and calculated an ultimate goal of two million dollars for repairs that will be due in twenty years, based on professional inflation estimates for all parts of the construction industry.  At the end of 2008, the Browning Group calculated that $600,000.00 would place us on track for the first phase of large repairs due in less than ten years (such as exterior painting, substantial road repairs and resurfacing, and several other big items), although we have nowhere near that amount in our Reserve account, due to our low dues.  The roads are already 13 years old in 2007 and show much deterioration.

Marguerite reminded the homeowners that the Board has a fiduciary duty to fund the Reserve account.  The California legislature recently voted to increase state scrutiny of this specific duty.  This year (2007) was the first year that new homeowners contributed any money to the Reserve account, because the initial budget for 80 homes at $200/month was significantly unrealistic in several budget categories, and left zero funds to go into the Reserves.  Until the $240/month dues in 2007, the entire $40,000 in the Reserves came from the owners of the original 18 homes, prior to the new homes being built.

Numerous California townhouse communities that failed to adequately fund their Reserves have had to impose Special Assessments of $5000.00 to $10,000.00 per home.  Communities who kept their dues artificially low have engaged in bad management practices and the California legislature has proposed corrective measures.  In 2009, the California legislature will more aggressively enforce proper Reserve funding levels.

Homeowner Questions

1)  How many units are currently empty?  Answer:   We have 82 homes in the community and two are not annexed into the HOA.  The only vacant homes on the property this month are the two that are not annexed in.  Also, one new home foreclosed in 2007 and has not paid dues in two years (a bankruptcy case and bank-owned).  There are also several homes chronically in arrears, so about 76 or less homeowners cover the true expenses of 82 homes.  This is unfair to the 76 homes and it will cause dues increases.

2)  Flood insurance question:  There are no preferred-risk HOA policies for multi-units being written by FEMA for the Pocket (FEMA currently only offers us over-priced high-risk and external-structure-only policies without any content or internal coverage).

In 2006, Flood insurance was approximately $562.00 per unit for exterior coverage only.  In 2007, the multi-plex policy prices for HOAs increased even higher.   In 2007, policies for individual homeowners which cover the internal, external, and contents of the home cost approximately $360.00 per unit per year.  The Board/HOA has no enforcement ability to require homeowners to purchase Flood Insurance.   We can, however, provide educational correspondence on this matter.  Two homeowners would like an opinion vote on Flood Insurance.

Directors Election Results:  Alvina Tzang 31 votes; Kimberly Harbison 26 votes.

One homeowner proposed a buy-in contribution to the Reserves for future home sales as the developer’s budget under-funded this account, when selling new homes in 2005.

Park River Oak Estates Overview

Marguerite Elia explained that we are a formally incorporated mutual-benefit non-profit corporation, subject to hundreds of state, federal, and local laws, including the Davis Stirling Act, Americans with Disabilities Act, the Fair Housing & Employment Act, and corporate business laws.  We are also held to rigorous annual Health and Safety County inspections for commercial pools.  Our pool is not legally defined as “residential” because we are a multi-unit complex, so our pool contract, maintenance, and repairs is mandated by the County to be at higher-cost, higher-safety commercial levels only.

Even though we are a residential community, we must pay commercial rates for all utilities and repairs to common areas on the property.  We must also possess a comprehensive fire and hazard insurance package.  A recent court case held that HOAs can be forced to cover worker’s compensation payouts for all workers injured on our property, if a vendor’s insurance levels are too low.  HOAs have been held liable for millions of dollars of payouts to injured or killed workers in California.  Many, many vendors have inadequate insurance levels, especially the low-bid companies.

We are a PUD, a Planned Unit Development, as opposed to a condominium.  In a PUD, homeowners own their lot’s land, the foundation, and the interior and exterior of their homes; whereas condominium owners do not own the land their homes are built upon, nor the exterior of their homes, exclusively.  That is why our CC&Rs require homeowners to pay for all external repairs to their homes except the very large Reserve items.

A major responsibility for new Directors is to learn the laws, corporate accounting obligations, and the practical details of maintenance issues.  Many California Property Managers are not formally educated in all matters of this industry.  In 2003, the California legislature passed a new law requiring managers to attend five classes to be certified to work in this field.  Prior to 2003, no formal education was required to be called a Property Manager.  The new 2003 law is not enforced, and many managers are not compliant with it.  Five classes are not enough education for anyone to master this complex field.

HOAs are highly regulated in collection procedures and this is one area where we were in most legal danger with former managers.  Previous managers broke the law with outdated and inadequate collection procedures and put us at great risk.  We can place a lien on a home after two months of missed dues payments.  Collection notices must include a verbatim Davis-Stirling Act statement in bold capital letters, or typed in 14-point font, and it must also cite the Federal Rosenthal Act.

The Re-Roofing Project:  Two subcontractors quit, resulting in a delay in the roofs’ completion.  The new roofs will be paid from lawsuit settlement money.  Danny de la Rosa is Old Country Roofing’s representative, and he hires subcontractors for different aspects of the job.  The main delay was due to major new insurance policy changes, as roofing is one of the most injury-prone occupations.  Insurance companies are now imposing TOTAL exclusions of townhouses.  Mr. de la Rosa agreed to pay half of the increased insurance premium for his stucco subcontractor to over-ride the exclusion so the project will continue and is estimated to be completed in late November.

General Discussion Questions:

Can we hire repair/service people who do not purchase full (expensive) insurance in order to save money or to choose low-bids?  California courts emphatically ruled:  NO!  Any accident or death not fully covered by construction insurance would put PROE homeowners in direct and huge financial liability for millions of dollars. 

We can, however, do maintenance prevention ourselves, e.g., keeping the gate tracks free of obstruction, walking the property to inspect for damage/needed repairs, etc.

Landscaping Update:  The three dozen trees in the new area that were diseased last year are now disease-free thanks to Carson Landscapers.   Their managers appear to have uniquely high knowledge and skills and all areas of the landscaping have improved.

Sewer Update:  Our townhouses were built with the smallest legally-allowed sewer pipes.  They are inadequate for our community, but they meet code.  They also have the least allowed grade/slope, which is part of the reason for many sewer spills.  We have the entire system hydro-jetted about every five months in order to avoid more backups.  The cleanings are working.  Reminder:  Do not put grease, fat, or objects down your drains!

Meeting adjourned at 6:35pm.  Respectfully submitted, Kimberly Harbison