May 16, 2016
Dear Rock Creek Property Owner,
Our Association’s governing documents require the Board of the RCPOA to call a special meeting of members if requested to do so by at least 25% of our members. Recently, a group headed by Hal Brown and Mike Robbins presented me with a petition signed by the requisite number of members requesting that a special meeting be called for the purpose of considering proposed amendments to the RCPOA Articles of Incorporation, Bylaws, and Conditions, Covenants and Restrictions (CC&R’s). Therefore, enclosed please find a notice of the special meeting to be held on Tuesday, June 14, 2016 at 7 PM at the Clubhouse. The specific agenda items are on the attached “Notice of Special Meeting” and relate to increasing/changing the voting requirements as they pertain to dues increases, special assessments, loans, and amending the governing documents. I met with the group on February 23rd, where they first shared their proposals with me. The rationale they provided to me was that their proposals would make voting more “fair and reasonable”, provide for a more “democratic” process, and that a “simple majority” was all they were asking for. The very next day I let our board know of the group’s existence and their proposals, and we promptly started the due diligence process to answer some basic questions about their proposals. Questions that immediately came to mind were: “Do their proposals reflect standard association voting requirements for POA’s like Rock Creek?” (they don’t); “If implemented, how would their proposals effect a board’s ability to respond to emergencies?” (negatively); “Would their proposals impede the future conduct of neighborhood business when the voting participation rate settles back to the historical average?” (Yes); and, if as the group has maintained, “Are their proposals fair and reasonable?” (they aren’t); “Do their proposed voting requirements provide a more democratic process?” (they don’t); and, “Do their proposed voting requirements constitute a simple majority?” (No). Our due diligence process included a review of the governing documents of our neighboring and peer POA’s – Eastern Rock Creek, Sandy Ford, and Timbercreek - and discussions with their officers and management company staff; discussions with local attorneys who specialize in POA governance and affairs; analysis of the RCPOA voting history; and discussions with the Community Association Institute’s consultants (The Community Association Institute is a nonprofit educational and advocacy group that serves over 33,500 POA’s. Their website is located at www.caionline.com).1 The results of our due diligence formed the basis of the board’s positions, and the process we went through along with the resources we relied on ensured that those positions have been well thought out and are based on the facts as presented to us.
1
The Board’s due diligence efforts have not cost the RCPOA any money; however, the cost to hold this special meeting is anticipated to be between $4,000-5,000.00. Legal fees alone to review and correct the group’s interpretation of the governing documents related to special meeting procedures, and to review and correct their proposed amendments to the governing documents are $1,980.00 to date.
1
So that we can make the best use of our time at the meeting in June and so that you can make the best decision on these issues, we have included a separate document which describes each of the group’s proposals and the board’s position with our supporting explanations. Also included is a list of questions for the group that relate directly to their proposals, and we are asking them to respond to each question so that all of our members can effectively and thoroughly evaluate the merits of the arguments for and against the proposals well before the vote is held. It’s reasonable to expect that the group had considered and thoroughly researched the topics addressed in the questions prior to the development of their proposals, and well before they presented them to the members and sought their support for them. Accordingly, they should have this information close at hand and should be able to provide a very prompt response to our members. The POA professionals we spoke with were unanimous in their opinions that the group’s proposed amendments to increase the voting requirements to raise dues/levy assessments/obtain unsecured loans are ill-advised and inconsistent with responsible association governance. If the group has fact-based information from POA professionals that contradicts the board’s data, they should immediately make it available to the members. In the coming weeks you should expect phone calls or visits from group members as well as representatives from the board related to this vote. On behalf of the board I apologize in advance for the forthcoming interruptions; however, as directors of the RCPOA we have a responsibility to protect the neighborhood’s long term interests, and except where noted, the board believes that the group’s proposals run counter to those interests. Therefore, we are asking you to vote with the board based on the positions and explanations we have provided to you. A proxy is attached. If you do not wish to sign the proxy, please make every effort to attend the meeting and cast your vote in person. In regards to the meeting, it is important to note that the only issues to be considered are those that are explicitly stated in the attached “Notice of Special Meeting” and matters of procedure related to those items. The attached proxy is general in nature only because the proposed amendments may not be exactly as the notice lists them. Under no circumstances can a vote on an amenity, dues increase, assessment or any other matter other than those on the notice be voted on. Please keep both the attached “RCPOA Board Positions on the Group’s Proposals” and the “Questions for the Group” documents nearby so that when you are contacted you can use them to get accurate answers to your questions, ensuring that you are in a position to make a well-informed decision as to whether or not their proposals are in the long term, best interests of the entire neighborhood. If you have any questions, or would like to discuss any of the enclosed information in more detail, please don’t hesitate to contact us.
Respectfully,
RCPOA Board of Directors Steve Novak, Board President
[email protected] 251.583.0870
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PROPERTY OWNERS ASSOCIATION P. O. BOX 1178 FAIRHOPE, AL 36533
May 17, 2015 Dear RCPOA Member, Pursuant to Sections 3.4 and 3.5 of the Bylaws of Rock Creek Property Owners Association, Inc. (the “Association”), a special meeting of the members will be held on June 14, 2016 at 7:00 PM (and as may be adjourned from time to time) in the Rock Creek Golf Clubhouse located at 140 Clubhouse Drive; Fairhope, Alabama, for the purposes stated in that certain Petition to Call Special Meeting delivered to the President and Secretary of the Association, that is: To amend governing documents as follows: 1. Require a majority (222) of all property owners (442) to approve: a. Special assessments; b. Borrowing any money by the RCPOA; c. Increasing annual dues by more than fifty ($50.00) dollars a year; d. Changes to the Bylaws, Declarations and Articles of Incorporation; 2. Clarify that items on a proxy which are left blank cannot be counted as either “for” or “against” any vote. Business shall be limited to that stated above. Members should arrive at least 45 minutes before the start of the meeting in order to complete the registration process before the start of the meeting.
Kacey Keeney Secretary
RCPOA Board’s Positions on the Group’s Proposals Levying of Special Assessments - Amend the CC&R’s to increase the current vote requirement from 50%+1 of the votes cast at a meeting of the members where a quorum is present to 222 votes to approve an assessment, regardless of how many votes are actually cast at that meeting. The Board is against this proposal because: Boards need some ability to levy assessments to respond to emergency situations and our current provision already provides for a significant and difficult threshold to do so. The provision constitutes a super majority with the net effect being that “non” votes are counted as “no” votes permitting members who took no position to impede action merely by their inaction. In a hypothetical scenario where the most votes in the history of the RCPOA were cast (373) a vote of 221 to 152 for an assessment would fail even though 59.2% of the votes cast were in favor of the assessment. While the RCPOA voting participation has increased substantially in the last two annual meetings, it should be anticipated that once the Club issue is resolved, one way or the other, that participation will settle back to the RCPOA historical average of approximately 160 votes cast at annual meetings. 222 votes are 139% of our historical average making it impossible to even consider an assessment. RCPOA’s current requirements are higher than, or equal to our peer POA’s. Ex. Sandy Ford recently levied an assessment without a vote in the amount of $1,300 per lot to fix two pond issues unrelated to a natural disaster. Timber Creek can levy an assessment without a vote of up to 2x the previous year’s dues, or $1,800 per lot. Authority to Increase Dues – Amend the CC&R’s to increase the vote requirement from 50%+1 of the votes cast at a meeting of the members where a quorum is present to 222 votes to approve an increase of dues above $50/year, regardless of how many votes are actually cast at that meeting. Currently RCPOA boards have the ability to increase dues $112.50/year ($450*.25) without a vote of members.1 The Board is against this proposal because: The provision constitutes a super majority with the net effect being that “non” votes are counted as “no” votes permitting members who took no action to impede action merely by their inaction. In a hypothetical scenario where the most votes in the history of the RCPOA were cast (373) a vote of 221 to 152 for a dues increase above $50/year would fail even though 59.2% of the votes cast were in favor of the assessment. Board’s need some ability to raise dues in the event operating expenses exceed revenues. RCPOA’s current voting requirements, as they relate to increasing dues are higher than both Timber Creek and Sandy Ford, and are equal to Eastern Rock Creek. While the RCPOA voting participation has increased substantially in the last 18 months, it should be anticipated that once the Club issue is resolved, one way or the other, that participation will settle back to the RCPOA historical average of 160 votes cast at annual meetings. 222 votes are 139% of our historical average making it impossible to even consider a dues increase above $50/year.
1
The group included the table below in its letter seeking the member’s support for their amendments. It is a hypothetical projection of annual dues if a board were to implement the maximum allowable dues increase for four consecutive years without a vote of our members. The clear implication is that, without the group’s amendments and protection, members should be scared that a board would impose these increases on them without their consent. This argument fails to recognize that among its POA peers, the RCPOA has, by far, the lowest threshold to remove directors (a result of the RCWAVE effort). Consequently, it is inconceivable that any board could or would raise dues as contemplated below for even one year, much less four, without being removed and replaced, and the dues increase rolled back. It should be noted that this board has had three opportunities to raise dues as suggested below without a vote (’14, ’15, ’16), and hasn’t done so. Year 1 (2016) Year 2 (2017) Year 3 (2018) Year 4 (2019) Year 5 (2020)
$450 $563 $703 $879 $1099
RCPOA’s Positions on the Group’s Proposals, continued. Borrowing money on a secured basis - Amend the Articles of Incorporation to decrease the vote requirement from 2/3’s of the total votes of the Association (295/442) to 222 votes. The Board is in favor of this proposal because: Given the RCPOA’s voting history the current requirement makes it virtually impossible for the RCPOA to pledge assets to get secured financing. The ability to pledge assets would allow the neighborhood to finance an amenity without the need for an assessment. The ability to pledge assets means the association can borrow money at a lower cost, and on better terms than unsecured loans. *Under Alabama State Law the vote requirement to amend the Articles of Incorporation is 2/3’s of the votes cast at a meeting of members where a quorum is present; a considerably higher vote hurdle than the requirement to amend the Bylaws and CC&R’s. Borrowing money on an unsecured basis - Amend the Association’s Articles of Incorporation to establish a vote requirement of 222 votes to approve borrowing money on an unsecured basis. As our Articles stand today, the board can borrow money on an unsecured basis without holding a vote of the members. The Board is against this proposal because: It is necessary for boards to take emergency action and this proposal makes that response more difficult. Lending institutions already have very stringent requirements in order for POA's to obtain unsecured funding. Any voting requirement of 222 amounts to a super majority based on the RCPOA voting history. *Under Alabama State Law the vote requirement to amend the Articles of Incorporation is 2/3’s of the votes cast at a meeting of members where a quorum is present; a considerably higher vote hurdle than the requirement to amend the Bylaws or CC&R’s. Changes to the Bylaws and Covenants, Conditions and Restrictions (CC&R’s) - Amend the Bylaws and CC&R’s to increase the vote requirement from a majority of votes represented at a meeting of the members where a quorum is present to a majority of the total votes of the Association (222/442) in order to make changes to the Bylaws and CC&Rs.2 The Board is against this proposal because: Any voting requirement of 222 amounts to a super majority based on the RCPOA voting history. The current provision is in the original Bylaws and CC&R’s, has worked fine over the history of the RCPOA, and it is not necessary to make this change. The current requirement is a standard requirement for associations like Rock Creek. Proxy items left blank shall not be counted as votes – Adopt a provision that prohibits blanks in proxies from being counted as votes.3 The Board is against this proposal because: There is no section in the governing documents that deals with the content of a proxy, and as such there is no need to establish one. The board can restrict what is in a proxy, subject to the requirements of applicable state law. Considerable effort— including extensive review by board members and long-time outside counsel—was expended to ensure that the proxy used at the most recent annual meeting was understandable.
2
Hal Brown and Mike Robbins, who head up the group, have indicated they are no longer supporting this change due to advice received from RCPOA counsel. 3 Hal Brown and Mike Robbins, who head up the group, have indicated they are no longer supporting this change because they trust the board to ensure that future proxies do not count blanks as votes.
Questions for the Group 1) Did the group obtain the advice of POA consultants, legal professionals specializing in POA governance, or any other specialists in POA governing documents or POA affairs, to help them determine whether or not their proposed changes are prudent, appropriate, or consistent with standard, responsible Association governance? If so, please provide the documentation supporting the group’s proposals. 2) Did the group review the governing documents of Timber Creek, Eastern Rock Creek and Sandy Ford, or any other competing POA’s? If so, how do our current voting requirements compare to them? How would they compare if the group’s proposals are enacted? 3) Did the group consider any emergency scenario that would present a need to obtain an unsecured loan, raise dues above $50, or levy an assessment under their proposed requirement of attaining the vote of 222 members before doing so? If so, please describe the emergency scenario and provide the contingency plans for responding to the emergency under their proposed requirements. 4) Did the group consider the long-term impact of their proposals on future boards and the conduct of affairs of the neighborhood, after the Club issue is resolved, and when it is inevitable that the RCPOA voting participation rate settles back to its historical average of 160 total votes cast at member meetings? If so, please explain. 5) In 2003, members of this group were board members who participated in amending the governing documents to lower the voting requirements that they’re now seeking to raise. Would these previous board members responsible for writing and passing the current voting requirements thirteen years ago please explain why they now feel they are unfair and unreasonable? Would the members of the group who have served on the board during the past thirteen years explain why they never proposed making these changes when they were board members and in a position to do so? 6) Since 2003 quorums have been established at only 4 out of 14 RCPOA annual meetings, and only at those 4 meetings would there have been enough votes present to even consider a proposition to levy an assessment, raise dues above $50, or obtain a loan under the group’s proposed requirement of 222 votes to approve any of those measures. (A quorum is defined as the minimum number of votes, in person or represented by proxy, required to conduct business at a meeting of members, and in our case that number is 222) The following table lists the 4 years when a quorum was established, the actual total number of votes cast in person or by proxy at that meeting, and a hypothetical scenario where a proposal to levy an assessment, raise dues above $50/year, or obtain an unsecured loan is defeated by a small minority of members under the group’s proposed requirement of 222 votes to approve such measures, even though the vote was overwhelmingly in favor of the proposal: Year 2003 2005 2015 2016
Total Votes 237 236 307 358
For 221 221 221 221
Against 16 15 86 137
% in Favor 93% 94% 72% 62%
Outcome FAIL FAIL FAIL FAIL
Please explain how these scenarios are “fair and reasonable”; are a more “democratic process” than our current requirements; and, how they constitute a “simple majority”. 7) Is there any scenario other than one in which all 442 votes are cast at a meeting of the members where the group’s proposal to require 222 votes to raise dues/levy assessments/obtain loans would constitute a simple majority (222/442=50%+1)? If so, please explain. 8) Given the fact that in the entire history of the RCPOA never have all 442 votes been cast, and that the RCPOA record for total votes cast is 373, does the group anticipate all 442 votes ever being cast in future votes? If so, please explain.
Proxy for Special Meeting June 14, 2016
Whereas, the undersigned owner(s) of the following lots in Rock Creek: _______________________________ wish to appoint each of the Treasurer and the Secretary of the Rock Creek Property Association, Inc ("RCPOA"), with full power to each, acting alone, to serve as my/our proxy with respect to my/our voting rights as Member of the Rock Creek Property Association, Inc. ("RCPOA") and to act for me/us as provided herein; Now, therefore, the undersigned does hereby appoint each of Robert Smith, RCPOA Treasurer, and Kacey Keeney, RCPOA Secretary, (or the successor duly elected to such office, respectively) (the "Proxy Holder"), with full power to each, to serve as proxy and to exercise all or any of my/our voting rights as member of the RCPOA at that certain Special Meeting of Members set for June 14, 2016 and any adjournments and resettings thereof. The authority granted shall include, but not be limited to, casting my/our vote(s) on any and all measures of every nature and kind that may come before the membership during the said proceedings. It is understood that the business conducted at the Special Meeting is limited to that stated in the Notice of Special Meeting and matters of procedure in the conduct of said proceedings. The authority granted by this proxy SHALL TERMINATE on the earliest to occur of (i) revocation by me/us by written notice to the RCPOA; (ii) conveyance by me/us of the aforementioned lot(s); (iii) receipt of notice by the Secretary of the Board of the death or judicially declared incompetency of me/us; and (iv) the expiration of one (1) month from the date of the June 14th Special Meeting. Any revocation by email is valid only if from the following email address: ____________________________________. No revocation by email is valid if an email address is not shown in the foregoing blank and sent to
[email protected] before the said Special Meeting is called to order. I/we hereby revoke any and all previous proxies given in connection with any RCPOA member action whatsoever, whether as to action at the said Special Meeting or otherwise.
PRINTED NAME
DATE
SIGNATURE
Note: For jointly owned property, only one of the owners is required to sign the proxy.
Witness:
PRINTED NAME
DATE
SIGNATURE
NOTE: Someone other than an owner of the above lot must witness. A nonowner spouse may witness.
