ALERT: OVA Board to Choose Future Berger!

Following two informative Town Hall meetings and many Board discussions, both in public meetings and executive sessions, the Oakmont Village Association is set to choose a strategy for renovation of the Berger auditorium. This decision, to be discussed at Tuesday’s Board of Directors meeting, will impact:

• How well Berger will meet the needs of the community in the future.
• How well Berger will meet the needs of the community during construction.
• How much new debt OVA will incur in order to renovate Berger, and its effect on our dues.
• How much expenditures on renovating Berger will limit OVA’s ability to address other expensive needs, such as a long overdue renovation of the central pool and possible purchase of the building currently housing the OVA offices and for which we pay considerable rent each month.

These and related issues were discussed in some depth in two previous Oakmont Observer articles by Deborah Quam: Berger Center Is Only One Piece of a Much Larger Financial Puzzle and Wildfire Risk, Insurance, and Oakmont’s Financial Future.

Berger Renovation Proposals

As presented in the April 21 Town Hall meeting, the Energy Systems Group (ESG) company developed three possible tiers for Berger renovation and hopes to be the “design-build” contractor who would manage the entire project. Tier 1 would only implement work that is required in order to responsibly maintain Berger, and would be paid for with about $3M from existing OVA reserves. Tier 2 would add items represented in the OVA reserve study, but which may not be required for a few years yet. It would be paid for with about $4M from existing OVA reserves, plus about $2.7M in loan funding ($2.32 per member per month for 15 years). Tier 3 would add additional desirable features, including a 1,000 sq ft expansion of the building footprint that might accommodate 177 additional people, and would require an additional $1.3M in OVA borrowing (resulting total dues impact $5.22 per member per month for 15 years, according to the chart presented in April). Items of note:

• The “design-build” method for managing renovation construction is a source of controversy. Its advertised advantage is that it places responsibility for the entire process in a single, highly qualified company (in this case, ESG), who will compete the components of the work and provide some protection against overruns. Its disadvantages are (1) once chosen, there is no further competition for the design-build contractor and (2) once initiated, it will be more difficult and/or expensive for the OVA Board to decide to change things (some might say that this is actually an advantage!).
• The loans proposed for tiers 2 and 3 would require refinancing the existing loan at a substantially higher interest rate. The current loan is scheduled to be retired in about 9 years, but a new loan would encumber OVA for 15 years.
• The higher the total OVA debt, the more difficult it would be to acquire additional debt, whether for essential purposes, such as disaster response, or for discretionary improvements, such as purchase of the OVA office building.

President Spanier addressed some of this in his June 9 President’s Message.

Tuesday’s Meeting Agenda

The agenda for the Tuesday Board meeting includes a pair of competing proposals for how to proceed with planning for the Berger renovation — see pp 56-57. The first proposed resolution (p. 56), submitted by director Terrie Mui and designated “Design Requirements alternative Tier 2.5”, would approve use of ESG with all work proposed for Tier 2, plus removal of some interior Berger walls to make more space available for large events. This proposal would save about $1M compared to the full Tier 3 proposal.

The second proposed resolution (p. 57), submitted by President Steve Spanier and titled “A New Plan for Renovating the Berger Center”, would separate and give immediate approval for the “emergency” replacement of the Berger chiller (which is already on order). All other Berger renovation work would be overseen by an “Owner’s Representative” to be hired by OVA. The OVA Board and staff would first create and agree, with the Owner’s Representative guidance, on a detailed project scope of work, and then bid out the project to at least three general contractors, one of whom would be selected to do the work.

Commentary

The two proposed resolutions are mutually exclusive and the Board has apparently decided to debate their merits in an open OVA Board meeting. This is very good, because it will give us all the opportunity to hear the pros and cons of each and to express our preferences and priorities.

I don’t begin to know what is the best path forward, but I know that decisions made concerning Berger renovation will affect both our pocketbooks and the quality of support provided by OVA for the many member activities that rely on the Berger facility. Among questions about which you might want to express your views to the Board:

• Should OVA refinance the existing loan, in order to make Berger better for the membership? (Note that Tier 1 and part of Tier 2 could be financed from in-hand reserves, requiring no new financing. On the other hand, the monthly member cost of refinancing is reasonable — estimated $2.32 for Tier 2 or $5.22 for Tier 3 in the April Town Hall meeting).
• Depending on who you ask, OVA’s level of reserve funds is either quite reasonable or lower than it should be. Should OVA spend so much of its reserve funds on this project, or limit expenditures to the minimum necessary in order to maintain a higher reserve balance?
• If OVA proceeds with the Tier 2.5 proposal, will it still be able to do other essential projects, or would these need to be delayed?

You may be happy to leave all such decisions to the Board (after all, that is what we elected them for!), but if you have any opinions you would like the Board to hear, now is an excellent time to let them know. Either attend the Board meeting, in person or via Zoom (see directions in the meeting agenda), or send Email to ovaboard@oakmontvillage.com or to individual directors (see list with Email addresses at https://oakmontvillage.com/board/).

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