By Andy Kramek, April 5, 2020
I think that most people would agree that the Hot Springs Village is officially “in crisis mode” now, along with the vast majority of the rest of the country. The question is less about what we are going to do about the shortage of toilet paper, or lysol, and more about how is the Village itself going to avoid bankruptcy?
The reality is that “assessments and penalties” comprise just about half of the total revenue for the POA, and ALL of its “guaranteed” income. Everything else comes from variable sources – service charges, permits, and usage fees. The 2020 Budget projects assessment revenue to be just under $19million. However, when you take into account the $4 Million bad debt provision, the net income is only going to be about $15 Million. The same budget shows compensation at over $17 Million! So, even before we start, all assessment income has to go to fund the POA compensation bill – and even that will not be enough.
Enter the CoronaVirus! What impact is that going to have on POA Finances, and the village?
The most immediate, and most obvious, effect is that it is going to hit the variable income stream hard. The POA restaurants are closed, as are all other fee-generating amenities with the exception of golf (which is not a net contributor anyway, as its costs far outweigh any income it generates). However, not only are the POA amenities closed, but other income sources are being directly affected. The Governor of Arkansas has just imposed a ban on renting accommodation to out of state visitors, other states have implemented stay-at-home orders with varying degrees of severity but all essentially prohibit non-essential travel (i.e. travel for leisure purposes). There are a large number of rental properties in HSV whose owners depend, to a greater or lesser extent, on the income from them that has just dried up. Not to mention that those erstwhile visitors were themselves an additional source of income for the village amenities.
So what conclusions can we draw? It is too early to predict the exact result but even when things return to something approaching normal it is going to take time before leisure pursuits recover. So it is clear that the POA’s 2020 Budget projections for income are going to fall woefully short.
Now the question is what is the POA Management doing to prevent what could easily become a financial disaster for the Village? The one thing we cannot afford to do is to shutter ongoing maintenance and day to day operations. Once you start doing that not only do you allow infrastructure to deteriorate at an increasing rate but you also lose your experienced workforce. We have to keep our staff on the payroll somehow and ensure that the essential functions of the village are not interrupted.
So, what else can we do? I don’t pretend to know all the answers, but one obvious question, given the high percentage of income that is being spent on compensation, is what are the senior management personnel doing to help out. Many CEOs of companies are foregoing their salaries right now, is ours? What about all of these other senior management positions (each drawing in excess of $150k per annum with salary and benefits) are they really needed given that we are essentially shut down now and for the foreseeable future?
* Chief Member Experience Officer
* Director of Real Estate and Land Services
* Director of Placemaking and Development
* Director of Agronomy
* Director of Tourism and Community Affairs
Right there we save over three-quarters of a million dollars in compensation, and if CEO waives hers too we recover well over a million. Some may argue that a teacup of water doesn’t have much impact, one way or the other when you are drowning. The other side of that coin is that we are not drowning YET. It is the tidal wave that is heading down the road that is going consume us and could, I firmly believe, bankrupt the village unless action is taken right NOW to significantly reduce operating costs over the next few months. Once things are back to “normal” we can re-visit the necessities but until then we have to put the brakes on spending and put them on hard.
By Andy Kramek, April 5, 2020
***
Thank you for reading. Let us know what you think about this matter by commenting below. Please be sure to bookmark this website so you do not miss any updates.
Click here to visit our Private Facebook Group.
Gary Puffer
04/05/2020 — 5:59 pm
All of the jobs you have listed above are unnecessary and are pretty much LN cronies who are raking in money without doing very much of anything. I would also include the Director of Golf on the list. I don’t think the above-listed jobs existed before LN became the CEO and started creating these jobs for her friends. They all need to be fired and the positions eliminated.
Monica Impellizzeri
04/05/2020 — 6:29 pm
Excellent points. Thank you. I would like to see all of those jobs eventually eliminated. But for now those people should be laid off along with our director of tourism!
Just my thoughts. Tighten our belt!
Mary Odom
04/05/2020 — 7:01 pm
Agree 💯% on all the above!
Dave S.
04/05/2020 — 7:55 pm
All of it sounds good and cutting hours help also. A 32 hour week for awhile, at least jobs are kept. During the mean time the salaried managers can pick up the slack by doing the work of the hourly force.
Jerry Jay Carroll
06/04/2020 — 8:26 pm
This ideally would include cleaning up at the end of the day at the POA offices, not excluding scrubbing the toilets. If they are too good for that they are lofty for the village. It’s time for hard work and sacrifice and a certain humility..
Jeff
04/05/2020 — 8:10 pm
I’ll contribute as much as I can but not while Lesley is still employed by us and her overpaid staff keep bleeding the Village dry.
Not one dime. Not one dime until Lesley is gone.
Julie
04/05/2020 — 8:13 pm
Why eventually? Eliminate them all first order of business when the new board is seated.
Anything else is way too little way too late.
Sorry, but these people have to go.
There is no question about it whatsoever.
None.
And, sadly enough, not one single resident will even know they are no longer here…they do nothing that positively impacts HSV. Not one single thing.
Just reading the phony titles makes me physically ill.
steve bylow
04/05/2020 — 8:34 pm
I am surprised to see the Director of Agronomy job posted on the POA website.
If the CEO does not realize it is poor judgment to post and fill the vacancy at this time I hope the new Board Members can help her with her decision making.
Steve
Scott M
04/05/2020 — 10:56 pm
Thanks to the 2017/2018 board members who changed the Governing Documents and effected a ridiculous contract with the CEO granting her ultimate power to manage our Village without OVERSIGHT from the board, the board cannot override the decisions our CEO regardless of how it harms our financial bottom line.
Karen Daigle Lundberg
04/05/2020 — 9:59 pm
I completely agree with everything everyone is saying. Nothing would make me happier than to see our new Board hand Lesley her walking papers, and then follow down the line. But that’s not how it works. It is going to take a process, and not an easy one. But I have to say that I have complete faith and trust in LTD and Diana that they will be doing everything in their power to right our sinking ship. Let’s all have faith and trust. They will do the right thing. And let’s all try to remember, that these people have got one outlandish job ahead of them, and they are volunteering to do this job. They have mountains to climb, so, please, let’s all support them in whatever way we can to get to the top of that mountain.
IN LTD AND DIANA WE TRUST!!
Julie
04/06/2020 — 5:37 am
What do you mean that’s not how it works? Who cares how things are supposed to work?
These people have got to go and every minute of every day that they are still employed and destroying HSV is destructive beyond belief.
Just get rid of them.
Now.
Otherwise, what’s the point? We need drastic measures for a drastic situation.
Karen Daigle Lundberg
04/06/2020 — 7:42 am
Julie, I understand and feel your frustration. I really do. You have no idea how much I would like to take a box, pack up Lesley’s office and tell her to get out. I’m sorry, but it really doesn’t work that way. In the past several years, we have had Board of Directors who followed Lesley instead of led her. They gave her a contract that they used every means possible to keep her in that job. However, nothing is impossible. The most important thing we can do is support our new Board members and Diana, and let them get the job done. Someone posted “small puddles,” the other day, and I thought that was a perfect way to describe it. I know how hard it is to be patient, but that is what our new Board is going to need from us…that and support. These are people who are NOT going to turn on us. We must trust them and support them. They already know what needs to be done, and I have every confidence that they will get it done, one step at a time.
Tom Blakeman
04/06/2020 — 6:55 am
That the POA executive suite needs to be decimated is a given.
What I’d like to know is what’s being done by anyone here to take advantage of the financial support measures now being handed out by our Federal government?
As of just last Friday businesses can apply for loans thru any bank which will be forgiven in full when the crisis is over – IF, the company does not lay off workers. I’m not any expert in this but it sounds like “free money” to me. Maybe we could use it?
So far we’ve not heard a peep out of either CEO or BOD on what they are doing with regard to any financial matters relative to the Corona pandemic effects on our Village.
Julie
04/06/2020 — 1:23 pm
And you won’t hear a thing – these people are way, way too incompetent to deal with anything like this.
Trust me on that.
Tom Blakeman
04/06/2020 — 8:04 am
For those who have been living under a rock the last few weeks and not watching the news the following is one link to federal programs noted previously.
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options
Anne Shears
04/06/2020 — 11:29 am
Perhaps a new bylaw should be considered. This bylaw would give a current Board the authority to revise the previously-approved budget during national emergencies. This way, funds could be redirected into Public Works and Public Utilities to keep the village as healthy as possible. What do we actually NEED? Water, Power, Sewerage Disposal, and Trash Pick-up. Right now, everything else is gravy.
Julie
04/06/2020 — 12:52 pm
The only new bylaw we need is one that eliminates the “ceo”.
Robert Busse
04/06/2020 — 2:41 pm
Tom or others who are more informed than I. With HSV being a private, non-profit community are our POA owned businesses (actually amenities, including restaurants) eligible for this federal relief money? The POA exists for the mutual benefit of our members, not the general public and our gates are there to limit outside public access. So, I wonder if we would qualify for anything coming from Washington, D.C.
Tom Blakeman
04/06/2020 — 3:19 pm
Bob: answer is I don’t know. I did go to the Fed website and saw a notation that it included non profits. My take is if you don’t ask you won’t get anything. Who cares if you get turned down?
Bank of America alone had application for something like $35 billion in one day. That’s 10 percent of the Fed allocation of $350 billion total of the program.
Tom Blakeman
04/06/2020 — 3:22 pm
See link:
https://www.cnbc.com/2020/04/06/bank-of-america-sees-booming-rescue-loan-demand-with-applications-for-nearly-10percent-of-allotment.html?__source=newsletter%7Ceveningbrief
Dave S.
04/08/2020 — 9:46 am
I read nothing anywhere that states our managers cannot fill in on the hourly jobs during a crisis. If a 32 hour week in order to keep our hourly employees then all of our managers could pick up the slack during the open hours picking up trash, working on golf courses and manning the gates, etc. Companies everywhere are cutting back and fighting for survival, so as our leading body it should not be beneath anyone to do their fair share. When we are fighting to keep our Village going then they should all jump in as some of the clubs do cleaning roadsides and gate beautification. They all know how to cut grass and throw trash in the back of a truck. Now’s the time to show how much they are dedicated.
Julie
04/08/2020 — 1:49 pm
Agreed.
What a sad bunch of inept people…they should have done this already…and they never will do it…it is “beneath” their station in their minds.
They are pathetic, small, weak, incompetent, and sad.
Chipmunk
04/08/2020 — 5:48 pm
Not in their sick contract.
Tom Blakeman
04/08/2020 — 6:10 pm
I heard on the presidential press conference today that there are small casinos in Nevada that are not being permitted to qualify for the small business loan (and forgiveness) program. I also believe I heard Trump say they would look into it. Interesting.
So, if that’s the case, let’s hope that “mutual benefit” organizations, who might not be full blown “charitable” organizations (such as HSV) would qualify. Or, at least be worthy of an appeal, or perhaps qualify under the second “traunch” of the program – coming soon I think I also heard.
But, first our leaders would have to apply or at least try to apply. So far I’ve heard nothing that says we either need it (hard to believe) or have applied or it. So, let’s also hope we hear more by our next board meeting.
Again, as I understand it, these are loans which, if granted, are conditioned on the business not laying off workers, and would therefore be ultimately be forgiven, the only condition being that no workers are laid off.
We are at least a notch or two above a Nevada casino, aren’t we? Sounds like “free money” to me. What about you. Let’s have some discussion on this.
Andy Kramek
04/09/2020 — 9:27 am
Let me speculate controversially for a moment.
Tom, you are making the assumption that the primary objective of the current management is to minimize the impact to the property owners, its employees and financial position. Have you considered that, just possibly, their objective is the exact opposite?
One of the persistent (and totally unproven!) rumors is that somehow the New Urbanists – and their developer partners – would reap large financial benefits if the village were to go into bankruptcy. Just how that is supposed to happen has never been adequately explained but it has been touted on several occasions. This crisis may be just the vehicle to provide a shortcut to that end, with no additional action necessary on their part.
Tom Blakeman
04/09/2020 — 11:20 am
Could be Andy. Recession follows the Corona pandemic. Lot owners and others default. POA runs us out of money. That forces a vote for assessment increase. Vote fails. Bankruptcy follows. Recession continues. Private equity New Urbanists comes in and buy out CCI for pennies on the dollar. They also scoop up select POA assets out of forced court sale. New majority owners cut a deal with the feds to finance low income housing for them. The long standing Metro Plan idea for unification of Little Rock, Hot Springs and everything in between rolls on nicely. And, the New Urbanist investors laugh all the way to the bank. Scary.
Andy Kramek
04/09/2020 — 11:38 am
Tom, hopefully that is just the ‘nightmare scenario’ and not a prediction of what will actually happen.
I’d certainly feel happier if we heard anything at all from the POA Management as to what their plans for addressing both the short and longer term issues are.
Dick S.
04/09/2020 — 11:47 am
I believe I read that government entities are not able to get loans under the Cares Act. Not sure what the POA is considered. I doubt that we are considered a non-profit 501 (c) (3) organization nor a small business. However, if our restaurants and golf courses are separate and have a NAICS code of 72, they might qualify.
It would be nice if the CEO would actually tell us exactly what the situation is on getting one of these loans. If used properly some of them could be forgiven and even if not the interest rate is very low.
For the CEO not to check with the POA bank would be inexcusable.
HSVP C
04/09/2020 — 2:39 pm
Dick, HSV is a 528. “IRC 528 was enacted under the provisions of the Tax Reform Act of 1976, to provide homeowners’ associations with another alternative to exemption under IRC 501(c)(4). Qualifying homeowners’ associations that are exempt under IRC 528 are taxable only to the extent provided therein.”
Tom Blakeman
04/09/2020 — 2:58 pm
POA is/was incorporated as a Non-Profit Corporation. However, we are NOT a 501 (c) (3) tax exempt status non-profit (charitable organization) under IRS law. We ARE exempt from income taxation as per Section 528 of IRS law so long as 60% of our gross income derives from assessments, fees or dues from the property owners. So far as I know we have always met this test (I think we are about 64% or so) and have never paid any federal income tax.
Whether or not we would now pay (or ever would have paid) any corporate tax if we missed the so-called 60/40 rule test I don’t know. Someone could look at our old financials and try to figure that out. Personally I’m guessing we might be better off to risk paying a few $$ in tax some years than worrying about some arcane 60/40 IRS rule all the time. Given that we lose money on almost everything except our utility billing I would be tempted to think we would never pay any tax. But I’m no CPA, lawyer or tax genius.
The entire POA is incorporated and reports as one entity so the restaurants and golf courses are not a stand alone. We are also not considered a government entity or that bug-a-boo word “municipality”. As I stated in an earlier post non-profits are supposed to be eligible. Tribal entities are also eligible – I guess we could consider ourselves that – maybe? The purpose of the CARES Act is supposed to be about employment and not laying off of workers. Therefore, why should it matter if we are an IRS rule 528 non-profit or something else? It’s the worker angle that should matter. We have almost 500 of them.
I’m looking forward to hearing something from our POA on this by the next board meeting. And, as I said before, if you don’t ask for the “free money” you surely would not have Uncle Sam coming to your door handing it to you. On the other hand maybe we don’t need any “free money”. If that’s the case then why am I always hearing about the perceived need to increase our assessments?
Linda Anderson
04/09/2020 — 2:59 pm
ANDY, THANK YOU .There is no doubt that we are in a bad recession due to the huge numbers of unemployed thru out the nation. CEO’s are now cutting back their salaries, making adjustments to executive salaries and cutting out bonus programs. This is the proactive leadership. Our leadership should take the same steps and let’s hope this happens. Let’s not forget that the majority of the POA’s Budget is in the red. This was never a problem as far as they were concerned because the CMP agenda to build and they will come. This was clearly a cover to spend irresponsibly by saying we have reserves. Well, now it’s time to cut back on all costs and then use the reserves to maintain and protect while we can. To do otherwise may prove the case for gross negligence on the part of our CEO. Our new Board members are committed to change. Now drastic changes will have to be made to keep our village safe and secure.
Julie
04/09/2020 — 4:26 pm
This will NEVER happen unless the new board acts promptly to relieve the little “ceo” of her duties….don’t care anymore if they can’t fire her…but they can always reassign her.
It must be done.
We are sick of this whole mess.
Julie
04/10/2020 — 5:31 am
If we don’t remove the little “ceo” you can change your title to wither.
Linda
04/13/2020 — 9:43 pm
I was told, If you qualify for this loan under the Cares Act. Forms are submitted by e-mail. The loan is done thru a lending agency. Large banks and small such as Relyance, Arvest, and Bank of America etc. 75 percent of loan is to be used for payroll. I believe a nonprofit status is a 501(c)3 for this loan. If rules are followed correctly if you receive the funds then turns into a grant (free money) which is determined by the lending organization. Otherwise this is a 2 percent loan to be paid back within two years. However, this is under a first come first serve approach by the government.