By Jon Held,
Continental Country Club Board of Directors
Note: This post is based on comments from Past President Jon Held that he gave during the August 28, 2021 Annual Meeting of the Board.
This past year has been challenging on several fronts. The impact of COVID changed how we staffed and managed all of our amenities. We are fortunate to have all of our amenities currently open and will continue to monitor State and Federal guidelines to offer a safe environment for all of us.
As we are all aware, we filed for Chapter 11 Bankruptcy protection in February 2021. The three factors contributing to the filing are the litigation surrounding Lake Elaine, the balloon payment due in October to Sunwest Bank, and the lack of reserves for our aging facilities and amenities. The Board has remained resolute in solving these challenges and feels it is critical that we address these difficult decisions that have challenged the Association for decades.
In the midst of these challenges, we have been able to accomplish a lot over the past 12 months thanks in large part to the efforts of our dedicated staff led by General Manager Tahlia Murray.
- We have been able to keep our amenities open throughout this period. When the bankruptcy filing occurred, we indicated we wanted to keep operating as normal. We have been successful in accomplishing that and have seen higher levels of activity than we have had in prior years. Our front desk representatives have done a tremendous job interacting with members and serve as a great face for the Association.
- With the move of the staff to the second floor at the clubhouse, we were able to create new spaces for use by members. The downstairs meeting and game room has seen great utilization and it is wonderful seeing members socializing and playing games. A business center and library were created on the second floor with computers and printers for use by members.
- Tahlia Murray and Kim Rushing have done a phenomenal job of being flexible in the midst of all that the Association has gone through. They have retained their focus on members and our community while balancing their workload with the requirements of bankruptcy, litigation and the emergencies that crop up at any time.
- Social memberships through July 31 increased by 197% over the prior year. We now have 183 social members compared to 62 last year. This has generated $123,000 in revenue for the Association this year.
- Golf has seen record results. In the midst of COVID, we saw rounds played increase to 31,000 last year. The golf course contributed positive cash flow as a result of the growth in revenue. The number of rounds in 2021 have remained comparable to the prior year so far although the monsoon is obviously having an impact. The golf staff lead by Sean David and Mitchell Yocom have provided great customer service and the feedback from the golfers has been very positive. We have new carts from Yamaha and Pat McGeogh and his staff continue to clean, repair and have everything ready for the golfers.
- We hired Reserve Advisors who completed the Association’s first official reserve study. This has been available to all members on the owner’s portal since February. While it underscores the magnitude of the insufficient reserves, it is an excellent tool to assist with long-term planning. That study indicates that $16 million are needed over the next 30 years and that we should have a reserve approximating $5 million at the end of that period. Of the $16 million total, $8 million are needed between now and 2030. During the past year our maintenance staff has done a great job of handling the most critical needs with little resources available to them.
- We have established a new banking relationship with Foothills Bank and have transferred all of our funds to them. A huge win for the Association is having all of our funds now covered by FDIC which has not been the case in the past. The bank is providing excellent customer service.
- We have completed the much-needed resurfacing of the pickleball and tennis courts. They look phenomenal and we have received positive feedback from the players.
- Oakmont, a great partner, had a record year last year in the midst of COVID. That contributed an additional $48,000 of revenue compared to $32,000 in the prior year. This is the result of a clause in the lease that provides incremental rent equal to 6% of Oakmont revenue in excess of the specified amount. They have expanded their outdoor patio, which is a great addition to their outdoor seating.
- Great progress has been made on the proposed amendment to the Unified CC&R’s for single family homes that would require rentals to be 30 days or longer. The Unified CC&R’s apply to 1210 single family homes within Continental Country Club, which is about half the total members in Continental Country Club. We are very appreciative of the response by homeowners and have only 46 homeowners yet to respond. As this is an important matter, it is critical that we hear from all homeowners. Out of those that have responded, 805 or 69% have approved the amendment, while 359 do not approve. It takes 807 approvals for the amendment to pass.
- The Continental Country Club area remains a desirable community in Flagstaff. We are seeing record numbers of home sales this year. To date there have been 120 property transfers compared to 118 last year at this same time. Property values continue to climb and it is not unusual to have multiple offers on a listing.
- We successfully renewed our Firewise certification. With the recent fire activity around Flagstaff and Arizona, it is critical that we remain committed to keeping our area safe from devastating fires.
- This was a year with several active committees, more than we have seen for a while. A huge thanks to all the committee chairs and to those members that have participated. Minutes from committee meetings are posted on the owner’s portal. These meetings are posted on the calendar on the CCC website and members are invited to attend. Input from all members makes our community a better place for everyone.
- We are fortunate to have had great volunteer support. A huge thank you to all of the volunteers who spent time stuffing envelopes for Association mailings, for planting new plants around the clubhouse, for cleaning up and painting around the clubhouse, for hanging screening on the pickleball courts and for providing helpful new ideas and suggestions.
- This past year was strong from a financial perspective. We finished 2020 with a profit of $64,000 which was approximately $54,000 better than budget. Thanks to Kim Rushing’s efforts, the review report indicates that no material adjustments are needed to comply with generally accepted accounting principles and there were no significant adjustments that arose during the work completed by Stephens & Co.
- Financial results through July of 2021 are strong as well compared to budget and last year.
- As most members are aware, a contempt lawsuit was filed against the Association in 2017 by a class of lakefront owners. After an evidentiary hearing in State Superior Court in October of last year, the judge indicated he would be entering a judgement adverse to CCC. However, a judgment was not entered before Continental Country Club filed for Chapter 11.
- The case has been transferred to the Bankruptcy Court. Ongoing discussions have continued with the lakefront owners to arrive at a solution. Mediation has been a part of the process and we are hopeful that an agreement can be reached that takes into consideration the long-term impacts for all parties. We have also had discussions with the Arizona Department of Water Resources with regards to the condition of the dam and are hoping to have more feedback by the end of September relative to the repairs needed. We would like to be able to share the details of all of these discussions but are precluded from doing so due to confidentiality and privilege surrounding the mediation and offers/counteroffers.
- A balloon payment of $600,000 is due to Sunwest Bank in October to repay a loan that financed the replacement of the golf course irrigation system in 2011. A tentative agreement has been reached that extends the terms of the note, provided a plan of reorganization is approved by the Bankruptcy Court and the members.
- We have indicated in the past that as part of our fiduciary responsibility, we have been exploring the sale of the golf course. As of this date, we have not received any formal offers. We have not listed the golf course for sale with a broker and likely will not do so due to the timing of the reorganization plan. In the event an offer is received that the Board feels is appropriate we would notify Aspen Valley Golf Club. They have a right of first refusal which allows them to match any appropriate offer we receive. They would have 30 days to decide if they would exercise that option. We continue to focus on the overall profitability of the golf course operation and evaluate ways to improve revenues and manage expenses and keep the operations cash flow positive. You have probably heard that Aspen Valley conducted a brief survey of their members and has held town hall meetings to assess the members interest in a potential purchase of the golf course. It is our understanding that they are not taking any action at this time.
- A reorganization plan is due to the Bankruptcy Court on October 8th. That plan will include a special assessment and/or an annual dues increase which will allow the Association to meet all of its obligations, including the establishment of an appropriate reserve to cover our aging facilities (but those amounts are not currently known.) The amount of any proposed special assessment or dues increase will be dependent upon the outcome of our current discussions with the lakefront owners and any requirements imposed upon us by the state Department of Water Resources to address the dam. As soon as we have those terms determined and a proposed plan to share, we expect to hold a series of town hall meetings and public forums to share the information with the entire membership. Based on our current status, we reasonably expect that this process will proceed before the end of the year.
Focus for the Next Year
- The number one priority is the filing of the reorganization plan. Ultimately it is the members that have to approve any special assessment and dues increase that will be necessary to confirm our plan and allow us to come out of Chapter 11. The Things To Know email that was sent on August 18th outlined those eligible to vote, including the townhomes and condos.
- With approval of the plan by the Bankruptcy Court, we will be in a position for the first time in a very long time to address reserve projects and deferred maintenance to keep our facilities and amenities open and accessible to members.
- We are looking to hire a new enforcement officer and will continue with recruitment efforts. This position is critical to the ongoing enforcement of the CC&R’s for the single-family homes. In the interim, enforcement efforts have continued with various resources contributing.
- Ongoing efforts regarding the proposed CC&R amendment will continue with the hopes of having input from all single-family homeowners subject to the Unified CC&R’s.
With approval of a reorganization plan by the homeowners, the Board and the various committees will be able to focus on strengthening the sense of community as the significant issues that have been on our plates for the past few years will be behind us. As a reminder to all, the mission statement for the Association says it best:
- To preserve and enhance residents’ lifestyle and owners’ property values by providing to its members quality surroundings, amenities and services financed through fees and assessments paid by the owners.
- To manage a golf course and restaurant, both open to the general public, and to carry out the provisions of the association’s CC&R’s.
We have a great family-oriented Association with amenities for all to enjoy. We have a dedicated staff who have that same goal in mind. We appreciate your patience and understanding throughout this difficult year of COVID and bankruptcy.