A loan in the amount of $1.6 million for the ERC remodel was approved unanimously by the Board of Directors at Tuesday’s business meeting. Just two years ago the estimate for this remodel was in the range of $700,000 and was carried as such in the contemporaneous Reserve Study. Now that costs have ballooned to more than $2.3 million a loan was proposed to cover these additional costs and to lessen the impact on member dues. “We have $2.3 million in construction costs,” said Treasurer Elke Strunka, “and perhaps it could end up being more if something comes up that hasn’t been discovered yet, as they often do when you do construction.” At a Finance Committee meeting last week 2019 dues of $78 per member were proposed, an increase of $11.
The loan approved on Tuesday has a term of five years and an interest rate of 5.25%. Total interest over the course of the loan will be to $222,620. A loan origination fee of $8000 and closing costs of $3500 bring the total loan service payment to $234,120. OVA’s monthly payments are projected at $30,377 and, based on 4,785 OVA members, comes to $6.35 per member per month. However, the final dues increase for 2019 will be based on next year’s budget, which is currently under consideration and will be shared with the membership before the end of the year.
Strunka used the 5.25% interest rate in her calculations, though she mentioned that the rate could be slightly lower. Another feature of the loan is a grace period of one year to draw funds. As such, her proposal recommends that funds not be drawn from the loan until the end of the construction period (scheduled to begin Monday, August 27) and to use existing funds in the Asset Replacement Fund to pay construction costs as they come in. The loan will then be funded in January 2019 and used to reimburse the Asset Replacement Fund at that time. This lowers the impact on the existing 2018 budget and dues structure and moves the impacts into the 2019 budget year, when higher member dues are proposed.
In addressing the effect of the loan on member monthly dues Strunka said, “The dues have been adjusted based on what we need to collect in order to have some reasonable balance in the fund.” She added that dues would rise less over the five year period with a loan than without a loan, even though the costs of construction will be higher with the added interest.
An additional loan to finance the Berger remodel was also briefly mentioned. “We had contemplated that we would get possibly also a loan for the Berger,” said Strunka, “and we had assumed around a $4 million project cost. We know that in 2020 or 2021 we would have to do another analysis that has to do with the Berger.”
Other matters of interest from today’s board meeting:
- A resolution proposed by Board President Spanier, which was included in the New Business section of the agenda, entitled “Committee Member Appointment/Board Criteria,” (see page 9 here) was stricken from the agenda by Spanier at the beginning of the meeting. No further explanation was given. This resolution had received a lot of criticism when it was proposed and sent to the membership last week. When asked by Task Master Cathy Dougherty at the end of the meeting whether he wished to put the resolution on the next meeting’s agenda, Spanier said it should be stricken permanently.
- Building and Construction Committee Chair Iris Harrell gave an update on the ERC remodel, set to begin next Monday. She explained that a permit for a commercial construction project such as the ERC remodel involves many variables and hurdles in acquiring a construction permit.
- Plans for a temporary dog park on the CAC greensward have been put on hold with permit delays that could last several months.
- Manager Hubred introduced discussion of a list of flammable plants and trees that the Fire Safety Committee recommended OVA should consider not approving for any future landscaping in common areas, HOAs or individual properties. The list was compiled by fire safety officials in Sonoma County. A 30-day notice will be sent to the membership for review prior to approval.
- BCC Chair Harrell raised the issue of the flammability of bark mulch in landscapes and suggested that the board needed to address the 15% rock issue as it relates to fire safety.