Dear Roger & Bobbie,

To hear you tell it, Monarch and essentially all current and prior Board's, are essentially perfect. Owners are fed up with this attitude and, more importantly, by the lack of accountability and oft misdirection by your offices, as well as present and prior MCCHOA Boards. Owners have the capacity and ability, contrary to your demeaning statements, to "understand" quite well what has happened at MCCHOA, but they need a clear presentation of all of the facts to be able to do so.

Clearly, for you & Monarch to have not provided at least "CYA" - URGENT WARNING NOTICES - to MCCHOA Board's about the severe and consistent under funding of the Reserves, reflects not only negligence, but worse, sheer incompetence. 

Your statements contradict...for, in one place you state the cause of the under funding was due to "prior Boards knowingly under funding the Reserves", and in another you state the explanation lies in your "belief that the additional 1.5 million dollars not anticipated, but now believed to be necessary for the streets, is what has brought this to a head (you conveniently leave out the issue and present controversy of painting that you have also previously cited as the, or another, "cause") and caused the current severe under funding." 

Let me ask you Bobbie...if you are not providing at least this basic level of management input and guidance, what are you doing? 

You answer that HOA's are not required under the law to fund Reserves, yet we all know that inadequate funding of Reserves is the #1 problem found in most all mismanaged HOA's. The Reserve Studies "financial rudder" has indeed not be used or shown regard by you, Monarch or MCCHOA Boards. The annual Audits you refer to do not include a full accounting of Reserve expenditures, and they need to in detail. Your offices have, by your own comments, affirmed that you did not do your job of cautioning MCCHOA Boards, which the written record also supports. 

The undeniable fact is that we should NEVER have found ourselves in the present over 90% under funding position. Yet, you state in the past 12 years of Reserve Studies "no irregularities were found". Of course not, its not the Reserve Study that uncovers "irregularities"...instead it determines under funding to which you never reacted by advising our Boards to correct or at least to meaningfully address. You state "over $200,000 in reserve funds was spent for beam repairs/replacement and capping...This amount had not been budgeted and, perhaps should not have been spent." Well, if the HOA award netted $1.8 million, and the Special Assessment added $1.26 million for a total of $3.06 million, and the Del Mar decking contract cost $2.089 million, that would have left a net excess of nearly $1,000,000...so why then did we have to spend anything from Reserves...or, put another way, what happened to this $1,000,000, and where and when did it specifically dissolve away? 

Who, if not you, along with present and prior Board's, is responsible for these management matters? As soon as under funding reached 20-25%, a thorough audit of income and expenses should have been conducted, and after all reasonable cost reductions had been implemented, only then, BUT CERTAINLY THEN, HOA monthly fees should have been adjusted...not 3,4,5 or 12 years after the fact, and then certainly NOT at nearly the statutory max of 20% (thereby allowing the Board to avoid a vote by Owners). 

I believe you and your firm MUST be held financially and legally accountable for this mismanagement. Again, you have not produced proof that you applied even one management tool to avert or otherwise prevent the problem of consistent under funding of the Reserves. The Board, short of a thorough Reserve Account audit (a detailed accounting of all inflows and outflows, year by year, and directly correlated to the Reserve Study reports that you now have confirmed were done as frequently as annually), also lacks credibility. YOU MUST ALL HAVE BEEN WEARING HORSE BLINDERS! 

What Owners are asking for is a full accounting and vetting of the Reserve Funds and expenditures for each of the last 12 years, up to and including the present fiscal year through the proposed 2005 Budget. You continue to talk in general terms like "current large expenses" but don't define them, or past one's for that matter, with any kind of useful specificity; therefore, an objective Audit is indeed needed if for no other reason then to affirm, once and for all, that you, Monarch and MCCHOA Boards mismanagement and incompetence. Such an Audit may also well serve to guide future Boards in how they, and their selected Management Company, run Mesquite.

Operating Accounts and their expenses (normal operational costs of running an HOA) are separate from Reserve Accounts and their expenses (the replacement of deteriorated major property equipment). Property subject to replacement with Reserve Funds is clearly identified in Reserve Studies under replacement / remaining life expectancy schedules. The fact that you cannot provide evidence that you advised prior Boards to stop taking funds that are for operating expenses from the Reserve and visa versa, and that you did not strongly caution them against severe and consistent under funding of the Reserves, is proof positive of your incompetence.

If, as you say, the decking surfaces were always the responsibility of the Owners having decks (against who the Special Assessment was levied), then wasn't it also your responsibility to advise the Board that, like the original construction defect, that the most equitable course to take in amending the CC & R's was to change it so that all Owners shared such maintenance mutually? Owners above and below these decks have a mutual interest that they be constructed and maintained properly, and a strong case can be made that those underneath have an even greater interest that the decking be maintained for if its not there is a higher likelihood that greater damage will occur within their units due to water intrusion from above. I think it totally wrong that all Owners do not mutually share in such upkeep costs...you and prior Board's apparently do not. When the construction problems were faced so should this CC & R provision have been. Again, another example of poor and wanting management skills and insight.

You state something interesting; namely, that "the Association is going out to bid on landscape, management and pest control." This is the first that any of us have heard of this, but let me caution you that this must be carefully overseen by someone other than yourself or any other party, or related party, of Monarch, for the obvious reasons of conflict of interest (Monarch and the Landscaping are "sister companies").

Contrary to your statements, the Boards tendency IS to levy Special Assessments and/or to raise HOA dues, and NOT to cut expenses. Examples of the Boards meaningfully cutting any expenses, as opposed to just shifting dollars from one vendor to another by different names (Monarch to the Landscaper who are effectively one and the same, and BOTH with annual cost increases), are not clear. For example, and as you state "while the Association has cut back on flowers...resulting in a reduction in water consumption" the Landscape contract costs have increased every year despite the reduction in work load, plus we paid additional for the changeover! 

It has been suggested to the Board to use sunlight generated heat to heat the pools (solar panels or generators), yet the Board wants to instead heat only half the pools, which would apparently result in a $40,000 savings, whereas the solar heating has the potential of savings many thousands more and for a much longer period -- compounded, that amounts to potentially a lot of dollars conserved. 

You state "the only way additional money could be saved would be to cut services" (eliminate property attendants, reduce the maintenance staff, eliminate pest control services, eliminate earthquake insurance, etc.). Owners do not agree, but to verify all of this we really need to see the actual contracts because preliminary research shows that Boards have not managed this issue well right down to your own termination clause built in and self-protective "golden parachute benefits."

What will help our property values most is a competently run HOA, with strong Reserves, and tightly controlled expenses, offset by reasonably moderated HOA dues.

Sincerely,
Paul

Paul M. League
P.O. Box 7007 
Beverly Hills, CA 90212
Personal E-mail: PML@linkline.com 
Phone: 1.310.277.3244
Business Websites: www.LeagueFinancial.com  & www.BankCreator.com