Power Ranch Community Association Town Hall Meeting hosted by CCMC – February 13, 2024 at 6 PM – The Barn at Power Ranch.
Note- this Town Hall was noticed through an email in lieu of the originally scheduled Budget and Finance Committee meeting. Neither meetings were posted on the CCMC-managed website, MyPowerRanch.com.
PANEL
Power Ranch Board Members present: 1.) Gary Whitchel, 2.) Stephen Whitworth, 3.) Becky Cholewka, 4.) Crystal Glaim, 5.) Josh Pleasant
Power Ranch Board Members not present: 6.) Matt Dominy, 7.) Heather Parker
CCMC Staff: 1.) Jennifer Partridge, 2.) Irene Sousa, 3.) Nick Ferre, 4.) Jenna
Butler Hansen, CPA: Paul Hansen
Carpenter, Hazelwood, Delgado, and Bolen: Curtis Ekmark
Meeting Intro
Meeting began with soon-to-be former Board President, Gary Whitchel stating that the Association’s auditor, Paul Hansen and Association’s attorney, Curtis Ekmark are here tonight to address some of the “questions that some people have had over the past few weeks.” He laid out the land by saying questions would be written on cards then passed to the front for answers, “we’re not going to be doing questions from the audience tonight” and that “we don’t want any interruption of our speakers tonight.”
Paul Hansen from Butler Hansen (auditor)
Paul, who was well-dressed and well-spoken, began the meeting by joking that it was a hot ticket tonight and Taylor Swift was not in attendance, but our auditor was. No one laughed, except for one person who I suspect was probably hired by CCMC, but that’s beside the point.
He then mentioned that the Board of Directors had engaged his firm to examine the financial statements prepared by CCMC. He emphasized that his company had been working with Power Ranch for many years.
To gauge the audience’s familiarity with the audit reports, he asked if anyone had taken the time to review them. “Anyone?” he questioned.
The audience exchanged confused looks.
“No?” he responded. He went on to explain that the audit report was available for everyone in the community to review, though he wasn’t sure if it was accessible on the website. Jennifer Partridge confirmed that it was indeed not available online and that it has not been sent to homeowners.
To back pedal, Paul said “typically the audit reports are not the most exciting thing to put on the website but it is important for you to know that your Association financials are audited.”
He stressed multiple times that he does not work for CCMC but rather for us, Power Ranch Homeowners. He had the responsibility of ensuring that the reports and financial statements provided to us as members were accurate. In the middle of his sentence, Paul paused and added, “By the way, there is a lot happening here, a lot is going on in your community.”
He emphasized that our association was established in 2000, and Power Ranch encompasses 1,400 acres of property. Additionally, our balance sheet shows corporate assets totaling $11 million. Our association brings in over $6.5 million in revenue annually and incurred $5.5 million in expenses last year, with $2 million allocated to landscaping.
His firm dedicates approximately two weeks to conducting the financial statement audit. Subsequently, they issue an audit opinion and provide a formal report. He proudly shared that his company has consistently granted us the highest rating possible for every year they have completed the audit report.
He went on to explain that he was invited to speak because there are some hot button topics or issues that are coming up or have already arisen, and they will be significant issues – “very, very big issues.”
He began his presentation by discussing inflation in a way that assumed we had never heard of it before. He repeatedly mentioned that it is even worse when it pertains to Associations, but he did not provide any further explanation. He proceeded to educate us about the Consumer Price Index (CPI), current stock market conditions, and made a convincing argument that all of these factors could be attributed to inflation, which lasted for another 15 minutes. He presented examples of other communities that did not have enough reserves and had to lay off their entire recreational staff. He tried to reassure us that Power Ranch Community Association is in a much better position because at the end of 2022, we have two to three months’ worth of operational funds. However, this only heightened the concerns of the homeowners present. He continued by saying from the reserves account standpoint, he is a little scared for our community and referenced the last reserve study completed in 2019 and how inflation has impacted the funded percentage. In other words, he wanted to prep us that our reserves study in 2024 will show a lower reserves funds than what is required and that we will most likely see another increase.
He kept emphasizing how lucky we were to have CCMC manage our community and that they are excellent.
Homeowner Ken requested Paul to clarify his role as an auditor, emphasizing that he is responsible for reviewing and examining financial statements, and does not have decision-making authority. Paul affirmed that he indeed does not possess decision-making power and solely focuses on auditing financial reports. Therefore, he is unable to provide advice on the rationality of purchases or contracts. It is important to note that he is not a financial advisor; his role is solely to validate the accuracy of financial statements only.
Paul continued to harp on increasing dues for upcoming years to keep up with inflation. A homeowner interjected and said unless we take proactive steps to look at expenses which Paul said “oh yeah, that too” and it would be beneficial during the budgeting process for the Board to bid things out.
After 30 minutes of hearing about other HOA’s gone wrong, homeowner Kraig asked if Paul’s company had been involved in the previous fraud case at Power Ranch. Paul confirmed that they had been the CPA firm at the time, but he claimed that they hadn’t caught it because CCMC had caught it internally.
If you are unaware of the 2019 embezzlement that occurred, you can read about it here.
Another homeowner inquired about the availability of the next financial report. Paul assured them that they were already working on it and that it would be available in May. The homeowner sought clarification, asking if it wouldn’t take just two weeks. Paul explained that it was indeed a two-week process, but it was spread out over time due to the need to receive bank statements from the bank, as well as from attorneys and various vendors. This response was confusing because Paul had repeatedly stated during the presentation that they spent two weeks on the audit process.
Board of Directors, Annual Audit
Unless any provision in the planned community documents requires an annual audit by a certified public accountant, the board of directors shall provide for an annual financial audit, review or compilation of the association. The audit, review or compilation shall be completed no later than one hundred eighty days after the end of the association’s fiscal year and shall be made available upon request to the members within thirty days after its completion.
CCMC Budgeting Process
Jennifer Partridge from CCMC:
- Several hands touch the budget before it gets to the Board
The Board’s main priorities are:
- To maintain the award-winning status of Power Ranch.
- To uphold and sustain service levels.
- To ensure the relevance of Power Ranch for the next 20 years.
- To maintain reserves funding at a minimum of 70%.
During the meeting, Jennifer presented a list of vendors that the organization is currently in contract with, and mentioned that “these individuals” they are in contact with when drafting the budget.
Jennifer then proceeded to explain the “meat and potatoes” of the budget, including income and expenses.
Jennifer pointed out that there are a total of 40 volunteers serving on the committees, who are all homeowners and actively involved in the budgeting process.
Per Jennifer, in response to the extreme heat, the landscape committee is working on reducing the areas that require watering during the summer months.
Jennifer emphasized that selecting a vendor solely based on lower costs does not guarantee better quality.
However, Jennifer failed to mention any efforts related to bidding out contracts, vendor oversight, or the lack of systems and processes in place to ensure vendor accountability. Additionally, there was no discussion about what types of reports are expected from vendors, or how they report to the Board or homeowners.
Jennifer proceeded to explain the different sources of income. Working capital encompasses property transfer fees of $2,500 per transaction for every home sold in Power Ranch. Initially, the Board implemented this strategy to compensate for expenditures from reserves. However, in the previous year (2023), Power Ranch diverted the entirety of the working capital to operational matters, allocating none towards reserves. Additionally, they are utilizing the generated funds from renting out facilities to counterbalance inflationary operation expenses.
Jennifer presented a slide that showed the increases over the past 14 years and said homeowners assessments (dues) have increased only 8 times. (Note: 1-3% increase every 2-3 years is considered standard, 2020-2021 experienced increases up to 10%; however, 20% increases at the Knolls is alarming which indicates prior issues that affected the reserves.).
Here are the Master Association’s quarterly increases from 2020-2024:
’20 = $249.xx
’21 = $260.xx
’22 = $280.xx
’23 = $312.xx
’24 = $348.xx
Jennifer mentioned that the increased expense in 2020 was caused by the cost of repairing a well, which amounted to over $1 million. She proceeded to present a slide that showed the dues paid by “comparable” communities to Power Ranch, stating that Power Ranch’s dues were in line with those communities. No agenda or copies of the slides were provided. One of the communities mentioned as an example was Cortina and Morrison Ranch, whose quarterly dues were lower than Power Ranch’s. (Please note that I do not recall seeing a calculation of Association-managed $/square footage, which would have provided a more accurate assessment rather dues only.)
Regarding funding, Jennifer stated that by the end of 2023, the reserves was funded over 70%. However, she also mentioned that there were over $6 million worth of expenses anticipated over the next four years, not including the updated reserve study to be completed in 2024. (Note: Reserve Studies are typically completed every 3-5 years, standard is 5 years, but varies based on economic conditions and at the discretion of the Board/Association.).
Jennifer displayed a slide with a graph showing various expenses increasing over a period of time, with legal expenses glaring and shooting to the maximum point on the graph but she made no mention of that expense.
Jennifer emphasized the importance of having checks and balances in terms of invoices. She explained that Irene reviews the invoices first, and then Jennifer approves them after verifying that the work has been completed. They “ensure” the vendor’s insurance is up-to-date, corporate office is responsible for keeping up with the vendor’s insurance policy then let’s onsite office know if there are issues. Jennifer is responsible for reviewing contracts and then it goes to Nick Ferre.
Nick Ferre and Curtis Ekmark provided an explanation on the types of insurance the vendor is required to carry. Curtis said that he has specific insurance language for vendors.
Curtis Ekmark - Attorney from Carpenter, Hazelwood, Englewood, Delgado
Curtis began by emphasizing in several ways that he represents the Power Ranch Community Association and stressed “I do not represent CCMC or any other community management firm” and that he works at the “direction of the Board.” He continued by saying that while he works “with CCMC” and that “I am blessed to be in a position of my life where I don’t represent very many community associations anymore; I am fortunate enough to be able to pick and choose but even though I represent a limited number of communities, I have been to multiple meetings like this in the past.”
Note: To read between the lines, Curtis Ekmark represents the largest communities; therefore, does not have a need to represent communities in quantity, he targets the largest communities which requires fewer numbers of communities. Makes sense. His company is also listed as an affiliate along with CCMC on AACM.
Curtis disclosed that he has been on multiple Zoom calls in the past several months and at least 3 calls with the Budget and Finance Committee where the members have said “Hey Curtis, this is so weird, every item on our reserve fund is over inflation.” Curtis’s response with a chuckle, “Well, maybe you’re not being told what inflation is.”
He further emphasized that there is an election coming up and whoever gets elected has a very difficult job ahead and since he has been in the industry for 31 years, and reiterated once again that he doesn’t represent CCMC, he knows Power Ranch can get a “cheaper” management company, but Power Ranch cannot get a better management company than CCMC.
He said that he is not a numbers guy but from a legal perspective, “you had a few weird blips in there that I can explain (referring to expenses).” Curtis explained “you had a really significant expenditure in legal, like well over 6 figures because of pool issues.” He said ultimately they had to litigate and it resulted in “X.X.X.X” settlement but did not provide an amount. He said that they will not have lawsuits like that in the future because “we are very strong” when it comes to contracts.
He continued by saying, “The other thing is there is currently litigation going on right now. I am not handling it. Someone body else is, partly an insurance offense, partly not. There’s a group that wants to build a, ya know, basically use, call it a condo, call it an apartment and so that has been a bit of a drag and hopefully it will resolve itself sometime in this particular year.”
Nick Ferre asked Curtis to clarify what an “insurance offense” means. Curtis said, “an insurance offense means the Association turns it over to the insurance carrier pays for a significant portion of the attorneys fees. Again, not me.”
Homeowner Ken asked for further clarification as to what the litigation is about.
Curtis said, “It is a group that one point in time came to the Board and asked for an assessment reduction in order to develop a condominium. They have now said it is unreasonable for the Board to insist that they actually use it as a condominium as opposed to an apartment. They want to rent out all the units, which um the Board’s position is which I think is legally pretty valid. You can call it a condominium but if one person owns it and rents out all the units, it’s an apartment complex so that can have adverse affects. Again I am not a realtor but that could affect property values as well. I don’t know.”
Homeowner Ken further questioned, “Was there any zoning changes to that particular piece of land?”
Curtis: “That I don’t know.” (Hmmm…unfortunately, I do not believe that he doesn’t know. The parcel has always been zoned condominiums and if 1 owner or 10 owners own the properties, there are no restrictions regarding rentals. Personally, as a licensed real estate broker, it would be better for property values to have an institutional operator versus multiple “mom-pop” operators.).
Homeowner Kraig asked, “Who decided to litigate the matter?”
Curtis: “That decision was made by the Board. The Board decides that.” He added that the “lion share” of that expense is being paid by the insurance company because “they” meaning the other group “sued the association.”
Note: Unless we missed something, Power Ranch Community Association is listed as the Plantiff which means, Power Ranch launched the first attack. Contrary to Curtis’ statement, Power Ranch decided to sue Woodcrest East and used homeowners’ dues to cover portions of the costs of litigation.
Curtis continued by saying that Woodcrest East recorded Declarations without providing the Master Association with any assurances and began renting them out.
Based on our research and first-hand information as well as referencing the Declarations and the Reduced Assessment Agreement between Power Ranch and Woodcrest Homes, Woodcrest Homes is required to seek approval before recording its Declarations; however, the Reduced Assessment Agreement also stipulates that “any consent or approval of the Association or Woodcrest required pursuant to this Agreement shall be in writing and SHALL NOT BE UNREASONABLY WITHHELD.” While, I am not an attorney; I am a homeowner paying dues and I prefer not continuing with a losing $150k/year battle. You can read the full agreement here. Additionally, a Countersuit was filed by Woodcrest Homes for $13M which means Power Ranch Association would be on the hook if we do not prevail. While insurance may cover this amount, our policy will be affected for years ahead which it already has.
CCMC, the attorney, or Board have not disclosed any information to homeowners up until this point, it was only when a homeowner actually reviewed the financials to discover the excessive attorneys fees that this information is now being presented.
Also, Woodcrest Homes does not have Certificate of Occupancy; therefore, zero units are currently occupied which contradicts what Curtis said in the meeting that Woodcrest Homes just began “renting them out.”
Homeowner Sally asked, “So what is the end game? Do we continue?”
Curtis: “No, the end game is to get them to use it as condominiums.”
Many homeowners expressed their concerns that if this continues, the neighboring lots on the West side will remain empty, or if they are forced to halt construction on the East, Power Ranch Community will be left with, yet again, an unfinished project that is an eyesore.
Nick Ferre from CCMC
Nick started by saying, “we wanted to answer some questions because there were some questions that was forwarded to our office so we would like to be able to answer some of those questions right now.” What seemed to be an attempt to respond to the article titled “Where is Our Money?“
Nick attempted to clarify by saying the following:
- “Hopefully after tonight, you can understand that the Board is made up of YOUR neighbors making difficult decisions and have a lot to work on since the pandemic.”
- “Power Ranch is award winning, and we win a lot of awards. People move here for a lot of reasons. Often times, we hear from people saying that they have been renting from across the street but ‘I want to live in Power Ranch because of the amenities.'”
- “Lifestyle is important to the Board of Directors and it is a value-add that draws people into the community.”
- “As we approach our 25th year, we want to ensure people are still buying houses (in Power Ranch).”
Nick pointed out that there is an events calendar compiled by the Lifestyle Director and attempted to justify the expenses. However, he did not mention how homeowners’ feedback on the prioritization of scheduled events would be considered.
In addressing the issue of what CCMC is paid:
- “There is a base management fee. That management fee basically covers expenses for the back office. There’s a lot of people in Scottsdale. There are 14-17 people in the back office that touch Power Ranch which includes the Executive Team”
- “Further it takes a lot to operate this, we interview people to serve in our communities.”
- “There are not just 9 employees, there are 15-16 employees that work for CCMC (for Power Ranch).”
- “The Association covers those costs which relates to salaries.”
- “It covers insurance, and 401k’s of the employees”
- “The benefit to the Association is that the employees work on your behalf.”
- Employees consists of Lifestyle Directors, Onsite Maintenance, Patrol, Community Managers.
Nick said it was the decision of the Board of Directors to keep the newsletter circulation although it is costly “it is the only way to get information out to people out there.” He continued to say that the newsletter’s purpose is to “educate” homeowners.
Nick addressed the concern surrounding the 2019 website expenditure of $25,000 to improve the website. His comments included “the cost related to those improvements made in 2019 to benefit our residents was really had mainly to do with point of sale.” Apparently it allowed homeowners and non-homeowners to be able to book rental facilities online. That is great but in my opinion, did not require $25,000. Note: There is this thing these days called a plugin for websites that allow bookings and a payment portal that costs maybe $25./month but apparently CCMC knows more about how to spend our $25,000 on a website.
Open Discussion/ Q&A:
Homeowner Ken: “Where did those questions come from?”
Nick: “Those questions were provided to the office.”
Homeowner Ken: “From? You know where?”
Nick: “No, I don’t.”
Homeowner Mike: “So what part of the roughly $97,000/month paid to CCMC is allocated towards the backend office staff? So if the IT guy comes down to fix Jenn’s computer, how is that allocated?”
Nick: “The IT person would be supporting the data for the association so that is an association fee.”
Regarding upcoming budgeting for 2024, Nick: “There 2 benefitted parcels in the community, the Knolls and the Village; they pay additional assessments for additional services so there are additional pools in the Knolls, there’s landscape, private streets, they pay more for that. And then in the Village, they pay for landscape and private streets so the Board does look at that.”
Homeowner in the back had questions regarding the Village parking issues pointing out the lack of parking there.
Nick responded by saying that we would be veering off topic but there are no plans to increase parking in the Village and that his answer is a nice way of saying “no, there will not be additional parking” in the Village. The Board is working on getting educational information out to homeowners about clearing out garages.
Homeowner: “What is CCMC and the Board doing to gauge the types of events that most interests homeowners?”
Nick: “Survey going out in 2024 to assist with that. Part of the lifestyle team participates in the events, the Board participates in lifestyle events, part of that they ask ‘How does this event work for you?,’ ‘How does the wrist band pricing work for you?,’ ‘What other things would you like to see?’ So part of it comes from just engaging with residents. We always encourage people to make a call into the office if there is something they want to see.”
Homeowner: “There was an excessive line item for office supplies. Can you explain what that was used for?”
Jennifer: “It covers some of printing for annual meeting. Your statements, it covers overages of the printer if we go over the amount.”
Homeowner Ken: “I would think that printing statements would be included as part of management fee expenses.”
Nick and Jenna: “We don’t print statements.”
Jenna from CCMC: “The office expenses were $55,000 for 2023.”
Jennifer, then back pedaled by saying she believes that expense line item also included software expenses as well because now looking at it, it does look right to her as well so they will be rebooking those expenses to correct it. Again, we still have no idea what was included in this line item even after asking for clarification.
Closing
Gary W. got up to provide the closing statement:
“It’s a privilege to serve the community, I think sometimes with all the questions we heard tonight and all the stuff that’s going on we forget about the human element involved here and who are and what we do here, we are all residents here…after the years we have spent on this Board, we are friends, we have been to each other’s homes, we have been at dinner with each other, we have had some knock-down, drag-out disagreements to make things work…so to come firing at us sometimes like we don’t know what we’re doing or if we haven’t been involved in this, we know exactly what we’re doing. I’ve worked with a lot of Board Members over 10 years, they have all been dedicated, they have all been concerned, some have strange ideas….but never forget the human element.”
Homeowner asked what compromises were made amongst Board Members to make things work.
Gary responded by continually giving kudos to Becky Cholewka for getting AAA Landscaping to come together, although it was a 30% increase from the previous year.
Final Thoughts From Homeowners
The VOICE of Homeowners
Homeowner Amber
There were a lot of times where they were defensive, cryptic and evasive. They were also condescending at times and I felt like the auditor was like a car salesman “this the best company…” I’m not buying anything they said. The increase in my opinion could have been avoided if budget cuts were made. I really don’t believe they put in enough efforts to find ways to make savings. I also don’t think the increase needed to be as high. We have had increases each year for the past 4 years for this. It isn’t adding up and making sense. I didn’t like hearing they “gave up” things too. Negotiating a price with the landscaper isn’t giving anything up. You’re also right we need to ask the right questions and I think I would like to see receipts! These continual increases are going to backfire and residents won’t be able to pay or stop paying. This will impact everything they have reasons why they needed to increase so much.
Homeowner Chad
Felt like tonight was the same old, “let’s high five each for the incredible work we think we did!” While the rest of us sit in confusion and frustration because financials are not provided to the community, decisions are made without homeowners being aware even if it involves 6-figures attorneys fees, overall lack of transparency, the association auditor and attorney are clearly not working just for power ranch homeowners, they have a portfolio of associations also managed by ccmc, and the blatant careless accounting practices admitting that they coded expenses improperly. It’s a train wreck.
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Last modified: February 18, 2024
Where did you find the association’s policy regarding taping meetings?
Hello Richard, Great question. You will find it in 2 places, in our governing documents (CC&R’s) and the Arizona Revised Statutes (ARS 33.1804).