2024 Annual meeting

I’d like to call the 2024 Saddlebrook 1 annual meeting to order um and before I do that I anyone that is wearing a hearing aid uh that if you want to connect to the te coil please go just outside the Vermilion and uh sit at one of the tables you will have better luck connecting to a teac coil there you will not be able to connect to a te coil in the Vermilion room so let’s go over our agenda today um we’re going to call the meeting to order and we’ll have introductions then we’ll have the president’s report the treasurer report the investment report the general manager report and then we’ll open the room up for questions from our homeowners and then we’ll have a brief adjournment and we will go forward with our regular April meeting so here we go I’m Joanne Ellison and I’m the president of hoa1 I want to make introductions for the 2024 board members would you please raise your hand as I call your name we have Tom Sakowski our vice president Steve balaka our secretary Don Taylor our Treasurer Joe o Conor director Kathleen sartoris director Len Cana director and we have our ex officio directors Marty OA and Mike Odell now I’d like to introduce our 2024 committee chairs so if you’re a committee chair and you’re present in the room I would like you to raise your hand let’s start with Mike Odell architectural and Landscaping Charlotte James events Tom simister Finance Andy Timothy Golf Bill Clarken investment committee Vivian timian 401K investment committee John labar property and Roads Howard con Howard I know you’re there there he is heal Recreation health and wellness John Alton rules compliance and Covenants lever kyus unit Representatives David Taylor search and Donna gruninger elections there she is also I want to introduce David lendorf he is our 2024 Saddlebrook public affairs commission chairperson the Saddlebrook public affairs commission is a joint hoa1 hoa2 entity whose mission is to gather information and monitor Trends in the external environment including residential and commercial property development environmental issues demographic changes and governmental actions so we give a hand to our committee chairs and our commission is everybody okay I heard a thump okay um let’s start with the president’s report moving on first of all I would like to review the Saddlebrook One mission and vision the Saddlebrook One Vision is to be the active adult community of choice in Arizona and the Saddlebrook One mission is to provide active adults with a community that enriches their lives with updated amenities clear and transparent rules and governance timely responses to Residents fiscal responsibility protection and enhancement of property values and a strong sense of community and I want to go over what we do as a board our primary function is to preserve and protect our Collective assets this is mandated by law we are your fiduciaries and we take this Duty seriously your board and your committees are laser focused on that objective and thanks to our talented management team I am proud to say that we have and we will continue to meet our essential objectives and I can’t wait to show you what we have done and what our future plans will be for 2024 let’s start with the 2023 goals and objectives in 2023 our board identified three goals and Cory objectives our first goal was to continue to maintain and improve the financial position of Saddlebrook one and the objective in order to achieve that goal was to achieve favorable results to the 2023 budget well how did we do we met our goal and you will hear more about that in the upcoming presentations our next goal goal number two was to ensure that our replacement Reserve fund and our Capital Improvement fund continue to be and are adequately funded and the objective that we identified for last year was to uh approve an independent uh Reserve study to be to be conducted by an outside vendor in 20123 how did we do on that goal we met that goal and we will be incorporating the information from that report in our future planning the independent vendor performed a deep dive into our organization and confirmed that we are well funded our third goal for 2023 was to maintain and update our existing amenities in accordance with our 10-year planning projections and we have two we had two objectives to achieve that goal to provide all necessary support to management for the Roadrunner Grill project to be completed in the fall of 2023 and to continue the planning for the renovation of the recreation Fitness and arts and crafts facility Well how do we do on the Roadrunner Grill we met that goal John Reed director of operations and his team made this difficult task look easy and he got a lot of assistance from Don aola who deserves special mention and how did we do on our second goal we met that goal our Saddlebrook 1 property and Roads committee identified and surveyed all the major users of the facility residents of both Saddlebrook 1 and Saddlebrook 2 made significant contributions to the project a scope of work was prepared and in March of this year an architect was engaged to prepare concept drawings so we can begin holding Town meetings the uh Recreation Fitness and arts and crafts facility was renamed for our project by the uh property and Roads as a working name the creative arts and Wellness Center so we met that objective as well now let’s turn to 2024 in 2024 we’re taking on five goals our first goal is going to be to continue to maintain and improve the financial position of Saddlebrook one and we’re going to do that by again achieving favorable results to the 2024 budget our second goal is to ensure that our replacement Reserve fund and our Capital Improvement fund will continue to be adequate funded and to achieve that we will continue to apply and develop our planning and management processes including incorporating the 2024 Reserve study the 2024 goal three is going to be to maintain and update our existing amenities in accordance with our 10-year projections and our 2022 to goal four will be to continue to build a framework that will strengthen the bonds between Saddlebrook 1 and Saddlebrook 2 and what objectives are we going to identify to achieve those goals we are going to continue planning for the renovation of the creative arts and Wellness Center so we are ready to send the project out for bid in early 2025 specifically the board will develop architectural and plans and space plans site plans and space plans to review with the residents in at least two Town Halls we will submit approved site plans to panel County for its review and approval and then we will complete construction drawings for the new project so that it can go out to bid and then finally our 2024 goal five will be to keep Saddlebrook 1 moving forward toward achieving its vision and Mission and with respect to that we are going to complete a fiveyear plan with input from community and management and we are well underway to achieve our 2024 goals in conclusion our primary function as a board is to preserve and protect our Collective assets we are your fiduciaries and we take our duty very seriously we will continue to be laser focused in 2024 on achieving our goals and objectives and finally our board does not micromanage we provide oversight it is through our talented management team that we have and will will continue to meet our essential objectives I said last year that our employees are our Crown Jewel We are continuing to build and maintain a management team that will ensure a successful future for our organization thank you and I will turn it over to our next speaker is that the me okay thank you Joanne no isn’t it Don no Don’s uh don asked to come after us okay he wants to have us have a strong finish got it there we go okay um my name is Vivian Timmy and I’m the general manager here at Saddlebrook one um a lot of great things happened in 2023 but uh before I get to them I just kind of want to tell you how Saddlebrook uh Works basically um the general manager myself reports directly to the board and the standing committees and commissions also report directly to the board and then I have a staff of people that that report to me so that’s basically our function so that we’re all working uh to uh at the board’s request basically um I’ve been very honored to have a great uh group of people that I work with I’m going to start with Leslie Vanhoff who is over here to the right she’s an executive assistant and is a great employee thank you for everything you do all year long Leslie and I don’t know if Linda’s in the in the house or not but Linda Irwin is also an executive assistant also helps us with a lot of Communicator issues as well as sending out a lot of emails to you folks my patrol manager is uh Christopher alers he joined us a couple of years ago um has brought a different uh uh Vision to our Patrol group Our IT director of Rich Sandoval is over in Las Vegas right now he is going to an AI convention because that is the big thing in uh it these days and identifying how can that be used for us going forward in the future um our Web Master uh is Jason and he is back there at the controls and then our our newest uh Edition is uh Kelly Evans and uh she is our food and beverage director welcome Kelly our controller Mike triber is in the back as well does a great job of keeping everything on track making certain that we have money where we need it when we need to spend it our director of operations is John Reed’s done a great job over the past year our director of golf Mike Rody um uh we have probably an outstand one of the best uh golf uh groups here in uh Southern Arizona as a result of Mike and his team and all the work that they put into it and then our HR generalist I think he’s in the back that is John and he uh he helps us with all our our staffing and making sure that we’re following all the uh correct employment rules so um that’s that’s how it works here at Saddlebrook so without further Ado um I talked to Mike and I said Mike what are we going to do this year here because we want to do something different and he says well I want to talk about what sets us apart and so we kind of grabbed a hold of that of that theme what does set us apart well we transitioned in 1999 and that means that we have been complete away from the uh developer for 25 years now that’s a long time um we are private HOA golf FNB and amenities are closed to the public uh we have 261 Home sites we are in a strong financial commit uh position which we’ll be covering later on in this uh in this pres presentation we just completed the rrf study our cash flow is very positive um no issues with um being able to make payroll and being able to get the things done that the residents are asking us to do every year um we do have strong resident support for improve improvements and maintenance and that’s really important here we want to and and that’s a big deal because one of the things when I first took this job a lot of my I’m I’m an engineer I come from an engineer engineering background and a lot of my friends said what are you going out there for they don’t have any money and I said but they want to fix everything and they want to keep it in top condition and they said really and I said yeah they’re very um the M the the residents are very involved in making sure that things are running properly um and of course the experienced staff we have a very very experienced staff here at Saddlebrook so that’s what sets us apart from an operational standpoint this is one of the slides that I like to present done every year looks like um it’s a it shows the labor costs and it includes the L the payroll burden which is also the PTO as well as the medical and dental insurances as well as workr comp and all those taxes that we have to pay to the government as well and in 2016 we were spending 4,440 th000 or 53% of total expenses in 2023 if we look at the numbers we’re up to 6 million but we are at 56% which is not a bad increase considering the fact that in 2017 was when Arizona decided to adjust the minimum wage and we went from $8 and 5 cents an hour up to $12 over a period of time so in 2017 that that growth started coming at us um our we actually went down as opposed to 2022 last year you can see we’re 56% versus 58% last year that’s because the expenses have gone up the cost of fertilizer the cost of uh soil the cost of seed um but most definitely the cost of food so that’s all gone up in the last year and so that’s why our percentage as a result of uh our our labor percentage has actually gone down um in administration if we take a hard look at the administration area we did hire an assistant controller we brought in a consultant in August um to talk about our club software and give us some training where he is coming back again in July this year Kelly has already presented them with a grouping of questions and things that we would like to see out of the soft Ware that we have and so he’ll be back on site uh at the end of uh July um the focus on uh cyber security this has been a big one Rich has been working uh very diligently to get us 24×7 coverage and uh we have a a software called masterg software and it’ll actually tell you I get alerts all the time that someone is trying to get into our system and it monitors 24 by7 and it all show so it it socks it and then it it drops it basically is what he calls it so it it you’ve notified you that they’re trying to get in and they don’t let it in um it’s been a big Improvement on our cyber security as well as uh he introduced a software plan to our uh employees called No before and it really goes after fishing software and I think that if any of you have ever been roped in it’s really easy to get roped into a fishing email where somebody says oh by the way can you move this money over here because we really need money from this area or if some somebody is calling and asking for cards or gift cards or anything like that um that’s really helped us when uh he started the program we had a 60% of our employees were going after the fishing stuff and they were they were falling for it all and I believe that number is now less than 10% so it’s been a big uh training process for our employees because that’s how that’s how most hackers get in it’s through the employees it’s through our systems um we also completed the C Comcast inst ation throughout Saddlebrook 1 but I will tell you that we are still dealing with Comcast we have major problems in unit 21 with concrete we’re not happy with any of the concrete that work they’ve done we’ve asked them to bring in another vendor we’ve actually offered to uh use our vendor and they can reimburse us or they can pay the vendor directly and we also have a problem with the driveways a lot of the driveways that they did as long as they weren’t Co they did fine job the problem was when they went in and coated it the Coatings aren’t holding so so we’re going back and we’re asking some of the residents to go ahead and get bids from outside companies and then we’ll approach Comcast to uh pay for those bids and get the uh other Professionals in here to finish up the driveways so a lot of issues just still hanging out there with Comcast I hope to have this resolved by uh Summertime by June but we’ll see what happens in 2023 we spent 1.7 million in 2022 we spent 1.6 the big increase here was we did a $40,000 um replacement Reserve study uh that uh was requested and uh we that came out very very well um the independent study said that basically we had plenty of money in uh in our reserves right now but they did adjust the fundings from 5 years out to 30 years out because it’s 30-year plan so basically for the next 5 years we’ll still be on the same plan that we uh we had uh indicated earlier um in terms of amenities this is uh basically and these are numbers directly from the audit and they’re showing how much money we spend yearly and this actually includes uh the uh depreciation on it so the activity center we spent 28592 depreciation on this is probably around $25,000 just to give you an idea so depreciation runs heavy we changed out the carpet earlier we do some adjustments to the to the activity center that all goes into the depreciation arts and crafts was 39570 um a little bit of an increase not really that much again big depreciation number um the clubhouse uh went up and basically that we were having a problem with natural gas and I think everybody in the room can probably um understand that because I think everybody’s natural gas bill went up and the pool definitely that’s where the natural gas really hit us we were up from 147 up to 182 and Tennis at 92,000 versus 85 again that tennis number is basically almost uh it’s about $85,000 that is depreciation on that that um so when we take a look at it we were 928 for 2023 849 for 2022 then we take a look at Services the common area and roads this is uh you’re seeing 1.2 million here versus 95 and that’s basically because Comcast delayed a lot of work in 2022 we were unable to do it we came back like gang buers in 2023 and got a lot of the work done so um lot of improvements in thead roads the fitness center 206 versus 183 we added a um weekend person to the fitness center that was seen as a safety issue that we needed to do uh have a little bit more oversight there so we we did bring in an outside a another uh uh coordinator to work with the uh people on the weekends on maintenance uh 828,000 versus 777 and a lot of this has to do with the buildings are getting older we’re doing a lot of the work inhouse so we are seeing that increase in maintenance Patrol actually went down and the reason for that is because we used to have a uh safety officer that was in Patrol that position’s actually moved up into maintenance so that’s part of that increase in maintenance as well so as you can see 2.6 versus 2.2 but at least 300,000 of it little bit more almost 400,000 of it was associated with the uh with the road work that was done in 2023 that’s the uh that’s a big increase so then let’s take a look at the next one a look at ahe at the rest of 2024 and Beyond we have a challenge to maintain a high level of service and contain overall costs um we completed the the reserve study in March of 2024 um we are using staff input to identify efficiencies higher when we need to give uh support and flexibility to our areas um we’ve adjusted the front office hours accordingly and we’re taking a little bit of a savings there but we’ve also increased the um costs in accounting but I think a needed increase because basically there’s a lot of Investments to watch and there’s a lot of work that needs to be done on an extremely timely basis our finance committee likes to see everything completed early and everybody wants to take a look at those um monthly numbers as soon as they possibly can and we’re going to continue to cross train uh across different departments to provide a flexible Workforce this uh really hit home in during covid in 2020 we had FNB going outside and doing some work with the land aping Crews we had some landscapers come in and they help with the decorations at at Christmas time um we really need uh the flexibility in our Workforce and we’ve really asked our workers to just you know you’re here for a given period of time you’re paid by the hour you know this is what we need you to do and that’s been U met with a great deal of agreement and they have no problem in fact they kind of like it because they get a chance to do something different during the day um the next slide is the major projects we’re we’re going to incorporate the replacement Reserve study into the 10-year plan as I said for the first 5 years we’re going to use the numbers that were there um in our plan from last year but then we’ll adjust the numbers up slightly to uh cover the replacement Reserve uh funding that the the third party thought that we needed um we did a disaster recovery project for it systems that was actually completed in February and what that is is basically it backs up everything to the cloud and so that if for some reason we lose our server we he can bring us back online probably within an hour so we’ve got a much better much more robust Disaster Recovery uh system um we are this afternoon we’re going to be asking for a road resurfacing project on Ridge viw section one and that is from Saddlebrook buard to Via del Via Del Oro which is just uh right before you get to the Catalina Recreation Center so we’re going to be asking for funds to resurface that roadway um we do have a drainage project um in common area next to Catalina number one uh last year the pipes were actually blown out of the ground and uh they’re 3ft pipes or 30in pipes 30 in right 36 36 in I was right the first time 3ft pipes and the the force of the water hit it so hard that they literally blew out of the ground so what we are doing is we’re going to a different uh we’ve been working with an engineering firm we’re going to be bringing uh them in to take a a then they came in and designed the project for us and I believe that project starts around May 1st right correct great this week that’s May 1st Wednesday yeah and uh we did finish the uh drainage portion of the project that is just North of uh Catalina Hills which is uh in unit six and there’s this drainage area there the gunite was completely damaged and we had the same company come in and repair all the damage to the Gunite and get that straightened out before the monsoon Seasons what we’re trying to do obviously with these two projects is get them done before the monsoons hit in July or June um the entry work to uh Saddlebrook Boulevard in ridg viw um you can see that work going on right now we’re putting a uh some rock work on the slope along with the logo along with three Planters and then the plants will be um installed that is a joint project between properties and Roads and our staff as well as the outside company that uh designed it which was horiculture unlimited and they came up with the design and our people are in-house staff did all the irrigation work all the lighting work all the electrical work and then the uh the Planters were done by an outside company and then a second outside company coming in to do the rock work so we’re hoping to have that done by hopefully this Friday and develop uh construction drawings for the creative arts and Wellness Center last month the board approved $103,000 for us to go out and hire an a uh architectural firm to come out with and she said it before but I’ll say it again the site plan and then also the renderings so we want to take those renderings we will take them out to the residents this is what the building will look at like and we’ll give you an overview of exactly what the spaces will be used for it’s a huge increase in space it’s about 7,000 square fet and so we want to get more aerobic uh area and dancing area and we also want to have more area for the Arts and Crafts and also for some other areas that haven’t been recognized in the past some Digital Arts and Crafts some uh radio club um we’ve got a lot of things that are going on we’re really excited about this project so we’ll take that to the residents and we’ll be showing you that as and at the same time we’ll be going back up to the county and showing them a preliminary site plan so that we can get approval on a parking variance they uh we have a parking variance now and what this will do is just reinforce the parking variance that we’ve got so a lot of exciting things going on in uh Administration and operations and I’m going to turn it over to to Mike Rody right now who’s going to talk all about the wonderful things that are going on in golf there you go all right thank you uh thanks Vivian uh I’m Mike R your director of golf and grounds here at Saddlebrook one um and I would like to start by talking about what sets us apart when it talk when we talk about our golf operation here um one thing that uh doesn’t get mentioned very often um is is that we are the only true private HOA golf facility in the area when you look at our golf courses that we are often compared to hoa2 the Views uh the highlands at Dove Mountain Saddlebrook Ranch they are all open to the public with public golf and the views and the highlands actually sell memberships to anyone um you can live in Tucson or Ora Valley and buy memberships at those those facilities so I think one major way that uh we set ourselves apart um from those other HOAs continuous Improvement um the community is committed to improving the golf experience annually we’re not standing still continue to go grow the game uh rounds have continued to show growth lessons and Clinics are well- intended and bringing new golfers to the game on a daily basis the golf courses are managed for year round playability proactive cultural practices continue to improve course conditioning even with the high round volumes that we see every year and the last one working with Kelly to my left here and her team um unique and fun events throughout the year our seasonal events are well attended and we work together with the food and beverage Department to have a cohesive and creative event from the courses all the way inside to the dining venue those are the ways that our golf operation is set apart is it not working there we go there we go all right so we look at our rounds played um there are abnormal years in there uh weather obviously always plays a role in when you’re talking about Golf Course access and rounds you also had Co so there’s a little Spike there during the covid years um but overall if you look back uh showing from 2011 to today um we have a nice rise in our participation levels on the golf courses here at Saddlebrook 1 annual membership this is another area where we’ve continued to show some growth every year um we currently sit at 458 annual members for the 2024 golf season Revenue impacts uh our prices have gone up because they’ve had to you’ve heard already conversation about expenses uh Rising um so that Revenue has had to go up with that um the continued participation and increased participation helps us in that and that second graph shows the the net cash positive impact of golf last year alone golf brought in over $400,000 cash to the HOA oops there we go we look ahead um at the rest of 2024 and Beyond challenge maintain increased use and interest in the experience number one keep golfers engaged new fun and exciting events Master superintendent Revenge couples food and beverage those are examples of of how we’re going to do that continue adding to the golf population existing a new residence clinics Golf and fitness teaching Technologies are all part of that equation the course experience continue to address playability issues maintain a positive playing experience with course design and conditioning improvements we’ll be making some minor modifications to the Tucson Golf Course this summer uh provide balance new ideas versus traditions and expectations so we need to balance those things as we move forward and and plan for the future our major projects in golf in 2024 I mentioned the Tucson night 9 course improvements we’ve been working with Mike gole on minor course improvements uh to benefit both playability and maintenance so that those will be happening over the next three or four months uh continue the bunker sand Replacements we started that uh last year um that will continue on the Saddlebrook course and we’ll start incorporating uh the replacement of Bunker sand on Catalina this summer as well and number three uh finalizing Golf Shop interior update we have that beautiful new grill next door to the golf shop so that’s made the golf shop uh look uh a little behind the times um so we’d like to take an opportunity to uh modernize uh and we’re going to develop price and present a plan to refresh uh the golf shop interior to the board of directors hopefully in October of this year with the project being conducted in 2025 okay Kelly I’ll I’ll take it when when we start talking about 2023 but you could start about what take what sets us apart awesome yes so what sets us apart for food and beverage uh we are a private club so our customer base does not change we get to see all of you lovely people all throughout the week um our menu and service style creativity so between uh Chef’s Table around the world uh grillin and Chillin Monday and Tuesday specials downstairs we have a lot of flexibility in the weekly monthly and seasonal menus the connections with local vendors in this area has allowed for lower cost for our inventory which directly relates back to um lower cost to the residents so for example what we charge for a shot of Tios here is $2 cheaper than The Preserve in hoa2 due to our relationship with the vendors and then we have a positive kitchen environment if you’ve worked in the restaurant industry um having a closed kitchen where the chefs are able to just interact with each other without view from our guests uh for them to be very positive to the front of house supportive of each other uh is very rare in the restaurant industry and we have a very welcoming environment for new chefs who are coming in so I told Kelly I would go ahead and take care of everything that happened in 2023 because she wasn’t here and uh so I have 2019 all the way through 2023 listed there and I think the one thing that uh um really showed is the fact that we were into uh we were doing really well until we hit uh until we shut down in May for the uh work and then you can see our our Revenue dropped significantly and it continued to drop significantly throughout the the operational times but on November 7th when we opened you folks made us highly highly positive in November and December as a matter of fact last month we brought in $882,000 in the roadr runner Grill which is phenomenal it’s a it’s a great dollar figure we lost on during these months we lost around $30,000 a month it because people and and they didn’t understand it they said well I don’t understand why don’t the golfers just come up here well first of all you got to park down there and then you got to walk around or you can park out front and then you got to walk make that long walk walk in here and you’re not really in a golfing kind of environment and golfers want a golfing environment they want someplace where they can lay down all their bets and settle everything and make sure that everything’s okay I think that’s right isn’t that right Steve yeah anyway um they uh so so you know we’re we are finished with this right now and I think it was a a strong finish to the end of the year but that six months that we were down it really did uh we took a a lot of losses on that and we did not uh we kept everybody employed during that time we did want to let anybody go as a result of the shutdown um challenges were the shutdown of the road on a grill for 7 months um we brought breakfast and lunch as I said up to the upper levels we moved Banquets and events to the agave and that was really interesting because you’d have people eating here and then you’d have a meeting over there and it was kind of people were very good about it they were very good about working with each other and again we kept the employees working um we had higher labor rate rates during that entire seven months as a result of keeping all the employees on staff I believe we made the right decision we wanted to show the employees that we were behind them 100% we just wanted to open successfully when we did open and the bottom line performance uh you can see that we dropped down quite a bit 2022 we were had a subsidy of $211 2023 it was 385 and again that was due to the uh to the due to that shutdown um our if if we hadn’t shut down I would say that that number would probably be well over $3 million and uh that would uh that would have been a great year for us but this year is going to be a good year um right now if we continue on I did some rough math the other day um we’re looking at around a quarter of a million dollar subsidy and I think we were budgeted for like 350 so things are going well there I set the bar for you Kelly yeah thanks so let’s uh let’s hear what Kelly’s got to say about the rest of 2024 yeah so for the rest of 20 24 and Beyond um our challenge is creating consistent food and beverage service hours uh that’s really our main goal is to have that consistency for all of you when you want to come in and dine with us um the way that we’re going to do that so we’re working on hiring training and retaining new employees so looking at our training program and our turnover rate and how do we entice people in and get them to stay for a long time we are working on marketing our Chef team to not only the community but also to the public so upand cominging chefs who want to come and learn from Chef Dylan or Chef Izzy or Billy uh getting their information out there so that this is really a dining experience that they can learn from and create a career out of we’re also looking at how we can overcome Transportation issues into Saddlebrook so with uh the county lines and the way that public transportation Works um a lot of people in the food and beverage industry uh take public transportation so we’re just looking at how we can combat that in the past we’ve used gas cards we’ve done car pooling so just looking for more creative ways to get people out here our 2024 major food and beverage projects um we’re looking at an expanded dining space in the vistas so adding some more tables to um the dining space out there so that we can get more guests in our building um expanding the front of house management team we just promoted Josh Cornwell he’s a new team member here bartender server and expediter for us but previous to that he has 10 years of restaurant management experience and he was a general manager that helped run for restaurants um in the California area so we’re very excited to have somebody who was most recently in an hourly role who can help us tailor our training program and also take his expertise and really round out our team the goal there is to make sure that we always have management presence whether it’s a banquet the Roadrunner grill or nighttime here in the Vista there will always be a manager on duty we’re also looking into um deep diving our technology improvements so Vivian spoke about bringing um the specialist for our Point of Sales system in in July we’re also looking at uh more technology for training more technology for our banquet coordination so just to streamline everything and have access to all of that information in the kitchen we’re looking at upstairs adding a steam table for our Banquets so a steam table helps hold um food hot and will allow the kitchen to not have to rearrange their kitchen line when we’re doing bigger banquet events and plated events so it will greatly improve the quality of food that we’re able to put out on those nights and then we’re also looking at a dishwashing station renovation for up here um the dishwashing station right now is very tight you can fit one person in there and and uh efficiency wise getting you know clean silverware clean plates out and um sauté pans to the line it there’s just some issues there that do slow down service so that will greatly benefit um food and beverage [Applause] thank you um I asked Vivian and her staff to go ahead of me because they very elately explain the business for the year the financials follow along to represent what happened okay okay the the planning and budget process takes a long period of time a whole lot of time goes into the 10-year plan and the budgeting and these are some of our assumptions we used for last year and this year uh we try and do inflation numbers that are conservative because if inflation is greater than we plan our will be in financial difficulties if we our assumptions are better than inflation we have a conservative uh plan for spending as in the past uh Comcast had a major impact on what we could do for roads uh last year we did a pretty good amount out of catchup we don’t adjust budgets during the year for projects not completed so this just explains the effects of leaving out projects okay this is basically the same slide as last here on not much has changed we still have the same issues uh the one thing I do want to emphasize is on the last item the clean opinion in addition to the clean opinion there is no management letter a management letter is a constructive criticism of a client’s accounting procedures and practices it is the other deliverable work from an audit firms strive to find constructive criticisms and comments so the lack of a management letter demonstrates We are following our procedures and policies so in this is case no news is definitely good news these are similar challenges as last year the supply chain delays is particularly in Gulf where uh we’ve ordered things over a year and a half ago we haven’t received them yet two years two years okay and the minimum wage legislation the fivian talk about and this is ongoing issue okay homeowners dues many people refer to this as homeowners dues the official name is community service fee also known as CSF uh this chart shows the last 10 years which in the next uh upcoming two years which is from our 10-year financial plan in the past the CSF increases have been held below the rate of inflation throughout most of this period sat was founded in 1986 so many of our facilities amenities are aging we need to upgrade not just maintain our facilities we try and keep the CSO if it’s low as possible but it will not be possible to continue to increase our CSF below the inflation rate in the future expect modest increases in coming years our CSF for this year is $2,800 for just as a basis of comparison our neighbors in hoa2 their CSF this year is $3600 which is $800 higher and this will not be going down in the future okay this are the sources of cash um big bulk of it is a CSF home resales were below expectations in 2023 we really have no control over that um golf provides positive cash and other is primarily interest income and Bill Clarken will have more to say on this shortly this is cash basis for expenses why do we focus on cash without depreciation in managerial accounting we look at cash flow because that’s what our managers can control and this a breakdown by amenity and by Services of how much we spend per household the food and beverage net cash outflow is 316,000 ,000 which is $154 per household oops back up again a large portion of the reserve funding was for the road run gril renovation which is about a million 7 and renovation of roads which is another 400,000 CIF stand spending total Capital spending for 2023 was a, 82,000 which is 525,000 $525 per household CIF spending varies a lot from year to year 2023 was a very active year with the um Road runer Project 2024 will be quite quiet replacement Reserve fund total spending for this year was A Milli 99,000 which is $931 per household uh much of the services category is Road renovation with the completion of the roadr a grill project the next major Reserve fund fund fund spending should be the new community building which is in future year so at this point uh 20 24 will be a pretty uh quiet year when it comes to spending in both Tif and RF okay I add to these next two slides because I hear a lot of misinformation about subsidies for food for food and beverage and golf so I’ve added some facts for public record I presented actual numbers for the past 3 years and the 2024 budget forecast while GF has an operating profit CLI back CLI oops I sorry while GF has an operating profit which is golf fees less labor and materials to operate and maintain the courses and as a source of operating cash it has substantial annual replacement Reserve expenditures for equipment and Co components this results in significant depreciation expense subsidies have remained consistent over the past 3 years 2024 subsidy will probably be low than projected because annual and preferred memberships sold to date are better than planned gol gets most of their revenue up front and so we know already we’re going to be better than expected on on revenue for those who wish to Discount depreciation as a non-cash expense which I hear a lot I’m showing an alternative cash only perspective in the case of golf subsidy numbers are about the same uh 2023 is kind of an aberration that since we didn’t receive the equipment we ordered uh we did not spend much money on um but that will be uh taken care of hopefully in the future okay food and beverage our Auditors have many Arizona HOAs as clients when they met with the finance committee I asked them how many ho ways food and beverage operations make a profit their response was none so we we’re not unique in this our subsidies are pretty small as they offer golf uh but the Road Runner was closed for 7 months last year so that adversity affected 2023 food and beverage has few Capital expenditures most years so the alternative cash perspective is not representative of subsidies with a new Road Runner kitchen expanded seating outside and a new director this should be an exciting year for food and beverage roads will not capitalized because we do not build them or pay for robes and for them therefore they’re not part of the $30 million in assets however we must maintain them so replacement costs for that are around 10 million realistically we have an additional 10 million of assets to maintain which brings the total to 40 million HOA well one is well managed and in strong Financial Health This Was a Very Good Year thank you [Applause] thank you Joanne uh my name is Bill Clarkin and I’m chair of the investment committee um I first like to thank my wife who puts up with all of my petitioning in the morning about how the markets are doing Etc and I’d also like to thank uh significant asset of our group Lesley who puts up with my questions Etc and keeps me well organized um Joanne I appreciate your support she shows up for virtually every meeting and I appreciate that very much uh the committee the committee is pretty much the same as it’s been for the we’ve been doing this for 10 years now it’s pretty much the same as it’s been for 10 years uh the committee is somewhat broken into what I’ll call the investment side and the accounting or the operation side in terms of what we do uh viven has been just a terrific asset in the organization um Mike triber who has to put up with me and ask him how the mark how how we’re doing and whether or not we’ve placed money just does a fabulous job in terms of maintaining the um books and helping me out to get the information that I need in addition he was sign ific contributor when it came to uh when we had when we had covid and we used an investment called Cedars and I’ll get to that in a in a few minutes finally Don Taylor has joined the group and he has made a nice contribution as well and he took Marty oa’s Place who did a fantastic job and made a significant contribution which I’ll get into in a few minutes um this year uh well first of all the guidelines and the rules are all defined by the cc&rs so I’m required to or our committee is required to follow that we have zero problem with uh the direction of the ccnr and what we do we work within those guidelines um and our goal is like any investment firm to try and maximize our return within those guidelines now in doing that um we have have to strictly stay to government guaranteed Securities which means staying under $250,000 in uh CDs because that’s the guaranteed amount or investing in treasuries which have the full faith of the US government so we do say stay that way and when we started this project we’ve now been doing it 10 years um I’d like to say I have the gray hair to prove it but I’ve had gray hair since I was 40 so um we started we were getting 7,000 we earned about $7,000 as you’ll see a little later we’ve made a significant improvement over that um in terms of our our objectives or what we’re trying to do again they’re all defined by the CCN ours our account is not that unusual I actually ran what we we called a pre-retirement fund uh at Motorola which had very similar objectives to this that fund was supposed to be strictly Investments Less Than 3 years uh uh in in the particular fund now this is a little different than what I’ve done in the past uh I want to talk about the transition in various periods over the past 10 years in the early days uh we were laying the groundwork we had to get comfortable with how we were going to look at the cash flow we were fine-tuning the formats Etc initially we said let’s use a laded port portfolio and by a laded portfolio that means we match the cash flow need in each of the three accounts to uh the investment uh maturities uh as we rolled through that and into the second period uh that was characterized by extremely low rates uh we were getting more and more clarity on monthly cash flow Vivian will tell you that we argue every month about how much we should and how much we should drain it down to each month I’m trying our committee might be a little bit Chuck toos to them sometimes because we’re trying to use and invest as much cash as we possibly can during a particular month period three was characterized with higher rates and then we were allowed then to extend some of the maturities because we were getting better rates 2020 hit covid need I say more uh that was a very challenging period of time and as you will see dropped precipitously during 202 period 5 the most recent period we’ve been in has been characterized by Rising inflation we have a healthy balance sheet but we’ve had to manipulate things and there have been a lot of what I’ll call arguments within the committee as to exactly how much we should extend and exactly how we should do it so to look at this on the right hand side is kind of the approach Ro we took uh early on we were working with trying to understand the Investments and the accounting and how that should be put together I talked about the laded portfolio um the investment strategy in the second period of time uh we saw ex increasing economic activity uh within the economy um and the board enacted a policy to allow for management prior to that period of time we had been hardwired as to when we were going to move the money from the operating accounts into the reserve accounts the our so-called rrf and CIF working with Marty OA he took that we we we got convinced ourselves that as long as we maintained the amount of money that the board had approved to transfer it didn’t make any difference in what month it took place Marty took that to the board and he he deserves plot it’ss for that that change that we made CU it has made a very big difference in our ability to leverage return so that’s very important um prior to 2020 uh we were starting to extend the Investments interest rates were starting to go up we were able to kind of the generic term we use is we were able to lay off some of the money into a little longer periods of time now the term that is used is a normal yield curve is interest rates in the early periods are lower and interest rates in the higher periods are in in the longer periods or the uh greater maturities are higher in rate that would be called a normal curve normal yield curve when covid hit we had what we call now an inverted yield curve that is short rates are higher than long rates now when I showed that each of the three of us earned our cfas in the early not early in during the 80s or late 70s each of us cut our teeth in that period of time on the fixed income and the investment markets all of us learned about uh higher rates uh and persistent inflation so we were we’re all been influenced by that and probably everybody in this room remembers 10 and 12% um mortgage rates that was the period of time we all learned the investment business now just to summarize a little bit about where we were when we started this in 2013 the rates of return were only in the. 2% that’s 20 basis points in the one-year maturities as I told you as 2017 came along we were able to extend some of these Investments now this blue line that I’ve put here is approx is approximately 3 to four years that is actually about the furthest that we can go out because that’s the greatest Insight that we have to make sure that we are properly matching maturities with Vivian’s needs and the needs of the community just to give you an idea of what happened in 2017 we had uh Rat around 1% the the treasury rates got all the way up to about 2.6 2.7% and then covid hit and they almost instantly dropped that’s not 2% that’s 20 basis points that’s. 2% that they dropped to now the challenge was to try and come up with better rates of return again hats off to uh Mike TR because what Mike did was he had a relationship with CIT and they were offering a product called Cedars and we used Cedars during that particular period of time now Craig and I had to spend about a week or two vetting the product to make sure that it complied with our guidelines we convinced ourselves that it did it was a little bit tricky in that we had to do it in what’s called tranches we had to do uh 30 days 90 days 180 days and a oneyear piece we were locked into those maturities but we were getting 90 basis points at the outset I think it was at 90 wasn’t it Mike 95 yeah so we were getting well above what Market rates were now we were convinced that our guidelines were being properly followed um they were giving us that rate um I have a feeling that CIT was running what we call a little bit of a mismatched book but as long as we were guaranteed that ours would match the Securities we didn’t care if they were going to give us those rates so we we shifted to that for a period of time now that meant that we had quite a bit of investments in these particular maturities um that I’m talking about and what we decided to do is when we got into the 2021 period of time into the 2022 inflation was rising and we were back to the future 1980s all over again nobody on our committee believed that interest rates and inflation was going to quickly collapse so we started to unwind The Cedars as we rolled into 2022 and 23 and remember the curve was still inverted uh this fun won’t last forever when our sweet spot is in those shorter term maturities to give you an idea in the period of time from uh 21 early we allowed the cash balances to rise significantly at 70 75% that means that we were almost fully cash we have this represents the investable assets as things started to roll through we got to 3Q of 22 and 4q we started working down the cash we had to unwind The Cedars and right here in this late 22 period we were getting 4.7% in one-year treasuries and that we we started unwinding that and we are now what I would call fully invested we’re down to about 20% 15 to 20% and Vivian needs that much cash on a daily basis to maintain the payment of of of those um maintain the uh payment of various bills Etc how did we do for the year we did pretty okay um what we did was we started this and we were earning about $7,000 per year in 2012 last year we earned almost $371,000 and probably about 70% of our assets are in in are earning in excess of 45% right now maybe even a little bit more I don’t know that we will do 371 again this year but I think we’re going to do pretty well again this year so and that is how we did last year thank you okay yeah [Applause] there you go J we’re getting close to the end of our meeting I want to leave you with some thoughts your HOA is in great shape financially and is being cared for well cared for by the board and management I hope we demonstrated that to you today the board and committees do not micromanage we let management do its job we have continuity and Leadership on both the board and in management and on committees from year to year that allows us to take on long-term planning and projects we are achieving our mission and vision and will continue to work to build on past accomplishments and improve in all areas and I want to leave you with this final thought and I think we demonstrated that today Community begins with each of us thank you thanks for coming any questions going to open up the meeting to homeowner questions and comments please come to the microphone State your first and last name unit and lot number and um please keep it to 2 minutes per homeowner okay I guess um thank you again I guess we on to the next