The Seven Lakes Landowners Association [SLLA] needs an emergency fund, Treasurer Conrad Meyer told his fellow Directors during the their Monday, July 9 Work Session, as well as a written policy that describes the Associations reserves funds, how the are funded, and how the can be used.
He presented a Reserves Policy drafted by Finance Committee member George Temple, and the Board agreed to take it to the July 25 open meeting for a vote. [Neither the members in attendance or the press were provided with a copy of the proposed policy.]
Meyer explained that the Association currently maintains two reserve funds: a restricted reserve that may be used only for road maintenance and state-mandated repairs to the dams, and an unrestricted reserve which is used for other capital maintenance projects and for emergencies.
"We don't have a credit card of any significance, " Meyer said, Nor do we have a line of credit set up. There's no reason to do that, at the moment, because we have $1 million in reserves."
Though the Association has significant reserves now, Meyer continued, the Board has voted to spend more than $500,000 on road repaving. And the capital maintenance items identified in the Reserve study far exceed the remainder of the reserves.
"In the Finance Committee, the discussion was: Is it appropriate for us to spend all of our reserves down to zero. We ought to keep some amount in reserves for unforeseen things that might happen -- to at least buy us time to go out and secure a loan."
In order to address that concern, the proposed Reserves Policy includes the creation of an emergency reserve fund equal to three months of operating expenses, or roughly one-quarter of the annual expense budget. Meyer said that would amount to $275,000 to $300,000.
"In essence, we are setting up a rainy day fund," Meyer said. "I am concerned that, if we continue on capital projects we could readily spend our reserves down to zero, which we don't think is a good idea." He added that having enough cash on hand to cover three months worth of expenses also helps with cash flow management.
A final element of the recommended policy specifies that any interest earned on reserves will be recorded as ordinary operating income. Meyer said that would simplify accounting and will not diminish the reserve funds, because any excess income at the end of the year is rolled over into reserves.
Temple added that, previously, the Association has had no written reserves policy that could be provided to new Board members, the management company, or the auditor. "We need to have this stuff written down," he said.
Meyer noted that, if the policy causes a problem in the future, the Board has the power to change it. He also said that reserves in the emergency fund could be invested to earn additional interest, "if we know we are setting it aside.
The Board voted unanimously to move the policy to the July 25 open meeting for a vote.
Road Repaving Ready to Start
President Darr announced that the Board had selected Riley Paving of Carthage to handle this year's phase of the road repaving project. Work is expected to commence on Monday, July 16, he said, with the first two-and-one-half weeks devoted to tree root removal and patching. After that task is finished the repaving of targeted areas is expected to take another two weeks.
Darr said it will be necessary to reroute traffic -- including implementing a temporary exit from Cardinal Drive to Seven Lakes Drive -- during a portion of the work. Details will be supplied on the SLLA Website, posted in the mailhouses, and emailed to landowners.
The Board has hired George Temple to serve as on-site supervisor for the work, to ensure that contractor meets the specifications laid out by S&ME, the engineering firm that planned the repairs.
Enforcing boating rules
Both Darr and Fentzlaff brought to the meeting alternative versions of a rules amendment that would make clear not only that landowners boats must bear SLLA stickers, but that unstickered boats belonging to guests must not be put on SLLA lakes. [Neither draft was shared with the press or members in attendance.]
Darr advocated requiring guest boats to be parked near the gatehouse, with some exceptions.
But the discussion quickly turned to a general expression of frustration that rules -- and lake rules in particular -- are not being enforced. Darr said the current Budd Group lake patrol officer has no instructions on how to deal with violators.
Darr advocated a system in which violators would be stopped, and handed a citation with the fine clearly marked on it. But Racine cautioned that North Carolina law will permit fines only after a case has been reviewed by the Judicial Committee.
Every member of the Board expressed frustration at the lack of enforcement, and Darr ultimately referred the matter to the Security and Judicial Committees -- although Security Director Steve Ritter was absent from Monday's work session.
Returning to the proposed rules revision that started the conversation, the Board agreed that Fentzlaff would make some modification to his draft and submit it for approval during the open meeting.
Davenport Contract
Director Racine said he had reviewed the contract with Davenport Landscaping and felt the Board would be able to terminate that contract after December 31, though some penalties may be involved. He noted that CAS, Inc., the company that will be taking over management of the Association on September 1, has in-house counsel who should be able to help the Board interpret the contract language.
"So we could quote other landscaping companies at the end of the year," Director Meyer said. "That doesn't mean we will make a change, but we could look at it."
Other business
In other business during the Board's Monday, July 9 work session:
• Darr said he hoped a pool pump motor that had burned out could be repaired and back in operation by Friday, July 13.
• Director Dave Buckingham said the new website had been up three weeks and had attracted 2,351 visits and 8,749 page views. However, only 63 members have logged in aand created a profile. He encouraged members to set up a login name, because "there is going to be a lot of information that you will be able to get by logging in."
