Residents may have seen the RSF Post’s recent articles about the new cost-sharing agreement between the Golf Club and HOA that our outgoing RSFA Board passed at their last meeting. It was done with no transparency or notice to members, and put through without the discussion that should take place among all members of the community before something this major is decided.
Please see below a letter written by a fellow concerned resident, Lisa Bartlett. The newly elected Board of Directors (with 3 new members) will be seated at their Board meeting today July 2nd at 9:30am at the Golf Club. I encourage anyone concerned about this issue or the proposed fence resolution to come show support or make public comment to the new Board. The new Board can vote to reverse this decision.
July 1, 2019
Board of Directors
Rancho Santa Fe Association
P.O. Box A
Rancho Santa Fe, CA 92067
Re: “Agreement Between the Rancho Santa Fe Association and the Rancho Santa Fe Golf Club for Sharing Responsibilities and Authority for Food and Beverage Operations” is Null & Void
Dear Directors Dunn, Gallagher, Lemarié, Ruhnau, Sapp, Strong & Weber:
I believe that the “Agreement Between the Rancho Santa Fe Association and the Rancho Santa Fe Golf Club for Sharing Responsibilities and Authority for Food & Beverage Operations,” (hereinafter “The Agreement”) adopted by your immediately preceding Board on June 11, 2019, is null and void.
The RSFA “Cost Sharing Agreement Q & A”, which was posted on the RSFA website shortly after the June 11 meeting, indicates, in part: “A joint committee was formed in December 2018 to explore a cost-sharing agreement between the Association and Golf Club and to lead an effort to explore redesign of the restaurant. The agreement approved by the Association Board and Golf Board was the result of many joint committee meetings over the last six months. The committee included co-chairs Golf Club President Bill Weber and Association Board Vice President, Allen Finkelson, Golf Club Governor Dan Comstock, Association Director Steve Dunn, Golf Club Governor Bill Johnson, Association Director Rick Sapp, Golf Club General Manager Brad Shupe and Association Manager Christy Whalen.” [Mr. Shupe and Ms. Whalen are not RSFA members and therefore, would have no voting rights.] Exactly when was the agenda for the June 11 meeting posted?
Six out of the seven immediately past Board of Director members were/are RSFGC members. The Q & A also states: “The agreement states that any capital costs would be shared by the Association and Golf Club with the approval of both Boards.”
“The Agreement” states, in part: “5. It is the intent of the Boards that the net loss or profit, if any, of the Food and Beverage Operations calculated in the same manner as the budget shown as Exhibit A [which is not on the RSFA website nor was it provided to the members that attended the June 11 board meeting, as apparently no copies were available to provide to attendees] be ultimately shared equally by the RSFA and the RSFGC….In the case of fiscal year 2019-2020 it shall be $300,000…. 6. Capital costs for major capital improvements shall be shared equally….” Miraculously, somehow the $300,000 is partially to be paid retroactively.
“The Agreement” revoked Resolution 2017-102, to the extent that Resolution 2017-102 was inconsistent with “The Agreement.” Resolution 2017-102, states, in part: “1. Any cash deficits resulting from the operation of the Golf Facilities will be the sole responsibility of the Club and its voting members….”
A review of the agendas for the RSFA Board of Directors, from December 6, 2018, and the RSFA Audit/Finance Committee (hereinafter Audit Committee), from November 28, 2018 to the most recently posted agendas, show that the Board and Audit Committee met many times concerning “Contractual Matters” and “Legal Matters,” in Executive Session. There are absolutely no clues as to the general nature of the matters to be discussed. There are items on these agendas that show that “Davis-Stirling Act Compliance” was discussed in Open Session. Thus, all Board and Audit Committee members clearly understand they must comply with all the provisions of the California Corporations Code sections referred to as “Davis-Stirling.”
In the agendas for the Audit Committee there are a few entries, during Open Session, where the RSF Golf Club (hereinafter RSFGC) requested funds for such items as:
“Design Fees for Remodel of Clubhouse; “Golf Clubhouse Remodel Contract”, “Golf-Landscape Architect” and “Golf Kubota Utility Vehicle & Banquet Table”. The agendas do not indicate if these requests were for approval of monies to come directly from RSFGC funds or from RSFA funds.
The “Charter Audit/Finance Committee of the Rancho Santa Fe Association” states, in part: “3.3 Open Meetings, Notice of Meetings—All meetings of the Committee shall be noticed and (except for Executive Sessions) open to all Association members. Notice of meetings shall be posted not less than four (4) days prior to the date of the meeting for open sessions or two (2) days prior to the date of the meeting for Executive Sessions. Such notice shall contain an agenda. The only subjects that may be taken up in Executive Session are those permitted by Section 4935 of the Davis-Stirling Act or successor statute.” (Amended and Approved 2.02.19 Board of Directors.) Where in the Davis-Stirling Act does it indicate that committees of the board can meet in executive session?
RSFA board members “are entrusted with the money and property of the association (and thus) they are held to a higher standard and must avoid conflicts of interest. They are deemed ‘fiduciaries’ and have a duty to act in the best interests of the membership.” [Davis-Stirling.com] Black’s Law Dictionary defines “Fiduciary Duty” as: “A duty to act for someone else’s benefit, while subordinating one’s personal interest to that of the other person. It is the highest standard of duty implied by law (e.g., trustee, guardian).” The overwhelming majority of the members of the RSFA do not review RSFA Board agendas or Audit Committee agendas or review the minutes of Board or committee meetings or regularly attend Board or committee meetings. The members rely on the Boards and committees to be open, communicate and consult with them concerning matters of vital interest to all members.
California Civil Code, Section 4935, which is part of “Davis-Stirling”, states that all members have a right to attend Board meetings, unless they adjourn to Executive Session. The only matters that may be discussed in Executive Session are: 1. Legal issues—litigation; 2. Formation of contracts with third parties; 3. Member discipline; 4. Personnel issues; 5. Member’s payment of assessments; and 6. Foreclosure on a lien, relating to a member.
The RSFA “Cost Sharing Agreement Q & A” states that a joint committee of the RSFA Board and the RSFGC was formed in December of 2018, to “explore a cost-sharing agreement between the Association and Golf Club and to lead to an effort to explore redesign of the restaurant….” “The agreement states that any capital costs would be shared by the Association and Golf Club….” The agendas of the RSFA Board and Audit Committee, over the past 6+ months, do not appear to show agenda items relating to these items until the Board agenda of June 11, when there is a cryptic, at best, Item 8: “Cost Sharing Agreement”. There is no mention that this relates to the RSFGC, whereas Item 7 says: “Golf Club Items.” On the agenda for the June 11th meeting, there is no indication of the RSFA paying for half of the capital costs for major capital improvements and/or equal sharing of the Food and Beverage Operations costs (2019-2020 amount is $300,000). By reading Item 8, there is no way most members would have had any clue what Item 8 was about. Who was the “agreement” with and what was the nature of the proposed agreement? There is no clue to the membership in this regard by reading Item 8.
Section 4935 also states: “(e) Any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership.” There are no minutes of the RSFA Board posted on the RSFA website since the minutes of the April 4, 2019 meeting, almost three months ago. Sample minutes for HOA meetings show that executive session matters need to be much more specific than just saying there was a discussion of “legal issues” or “contracts”, etc. Examples of minutes describing what happened in executive session, to be included in the minutes, provided on Davis-Sterling.com: “The Board met in Executive Session on _____ (date) at _____ (time) and took the following actions: 1. Contracts: (a) Reviewed bids for repairing the clubhouse roof. (b) Approved a contract to paint the clubhouse. 2. Delinquencies: (a) Approved a foreclosure action against APN ____ (#). [Note: Failure to include this in the minutes summary could be the basis for a legal challenge to a foreclosure action.]….” The RSFA minutes do not provide any clue as to what was discussed re: litigation, foreclosure, contracts, etc.
Of the six items listed above, there are only two that the immediately preceding Board could try to “hang its hat on” concerning “The Agreement”: 1. Litigation and/or 2. Formation of contracts with third parties. Obviously, there are no litigation matters relating to “The Agreement” so that ground for executive session is not applicable. Equally obviously, there is no formation of contract with a third party so, that ground for executive session is not applicable. The RSFA is a legal entity. The RSFGC is not a legal entity, it is merely a division of the RSFA like the Trails Committee, Forest Health Committee, Osuna Committee, etc. Neither the RSFGC, nor the “joint committee formed in December 2018” are third parties. As a matter of law, one can’t form a contract with oneself. Thus, the RSFA Board can’t go into executive session to discuss a contract matter unless it is a potential or actual contract with a third party. There is no indication, that I have seen, that the “joint committee formed in December 2018” notified/invited the general membership of the RSFA to the meetings that it held from December 2018 until the Board approved “The Agreement” in June 2019. Also, I have seen no sign of the “joint committee” being an officially sanctioned standing committee or ad-hoc committee of the RSFA Board. The immediately preceding Board didn’t follow the standard protocol when forming the “joint committee”. It gave no notice to the general membership; it didn’t send an “invitation” to all members to apply and there was no vetting of the applicants.
In 2006, the RSFGC “borrowed” $12 million through the auspices of the RSFA (since the RSFGC is not a legal entity, the only entity that can borrow money is the RSFA), to undertake a complete renovation of the Main Clubhouse and build the Player’s Clubhouse. The majority of the loan was used to build the Player’s Clubhouse. The loan and debt service were to be fully repaid within six years. Some 13+ years later, the loan has not been repaid in full. As of last June, the RSFGC had over $4.2 million in unpaid debt. Thus, in all these years, only about half of the Player’s Clubhouse loan has been repaid and now the RSFGC expects the RSFA members to pay for half of “major capital improvements” and half of the Food & Beverage Operations.
In the “Restaurant Cost-Sharing Agreement Set”, the immediate past President of the RSFA Board states: “Because the amenity [restaurant] is shared by all members of the Association, the Board determined that it would be forward thinking and fair to share the cost and supervision of the restaurant….” This statement is not necessarily accurate. Approximately 75% of the RSFA membership consists of non-RSFGC members. Of the approximate 25% of the RSFA members that are RSFGC members, presumably not all of them would be in agreement with “The Agreement”, considering the fact “The Agreement” was enacted in violation of the law. The RSFGC has had the use of dozens of acres of land for many decades.
The RSFGC’s finances fall under the RSFA “umbrella.” The Board of Directors of the RSFA have a fiduciary duty, which they can’t delegate, to see that the RSFGC is run properly and in a financially prudent manner. The Board also has a fiduciary responsibility to see that the other members of the Association have access to Association funds for projects they deem important.
The bottom line of “The Agreement” is to give a minority of members huge gifts: $4.2 million still outstanding re: the Player’s Clubhouse + $1 million, or whatever the number turns out to be, in the way of a major capital improvement for the Main Clubhouse redo + apparently paying half of the cost of repaving the entire RSFGC parking lot in the last couple of months, + an open-ended major capital improvements budget for other future projects, etc.
The fact is that all RSFA owned property, which includes parcels such as the golf course, all the buildings on the golf course, the tennis club land and all improvements, Osuna, and the Arroyo are not owned by the RSFGC, Tennis Club, etc. As set-forth in California Civil Code, Section 4500: “…in a planned development in which the common area is owned by the owners of separate interests, the common area is owned as tenants in common, in equal shares, one for each separate interest.”
For the reasons stated above, “The Agreement” is null and void and needs to be officially rescinded. The Board cannot delegate its responsibilities to a committee or employees to run the restaurant or any other portion of the golf club. “The Agreement” is an accounting ploy to make the RSFGC look fiscally sound, which appears is not to be the case, without huge gifts of RSFA monies and accounting gymnastics.
If the current Board believes that a memorandum of understanding, like “The Agreement” is something that should be considered, discussions need to involve the entire RSFA membership. The Board has a duty to represent the entire membership, not just a portion, which in this case is a small minority. A matter of such great importance to the community should not be presented to the membership as a fait accompli, after having spent months, if not a “few years” negotiating a deal in the dark of night. Let the light shine on the process.
I ask the Board to: 1. Rescind “The Agreement” 2. If this Board wishes to consider proceeding towards a memorandum of understanding with the RSFGC, a notice should go to all members that an ad hoc committee is being formed, officially sanctioned and invite any interested members to apply, going through the approved protocol. The need to “do the right” and legally required thing, is required in order for the Board to restore confidence in the membership that this Board is going to fulfill its fiduciary responsibilities. This board made it clear that they believe in transparency and a commitment to openness and honesty. It is time to honor these commitments.
As a matter of common courtesy and as required by RSFA Board policy, please respond in writing, in detail, to the questions and issues raised in this letter.
Lisa M. Bartlett
Cc: Christy Whalen, RSFA Manager, Brad Shupe, Golf Club General Manager
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