Board of Directors
Regular Meeting
JANUARY 15, 2007

President Bill Risen called the regular meeting of the Lake Moovalya Keys Board of Directors to order at 6:00 p.m.

President: Bill Risen
Vice President: Chuck Baker
Secretary/Treasurer: Chris Chambers
Board Members: Joe Price, Jack Sweeney, Gary Svider, William (Squeak) Kossnar, Larry St. George

Board Members: Bob Stroud, Joe Maxwell, Richard Jaschke

Guests: Barbara Risen (lot 184)
General Manager: Cheryl Shockley
Bookkeeper/Recording Secretary: Sue Thomson
Legal Counsel: John C. Churchill (6:10 p.m.)

The 1/7/07 Bookkeeper’s Report was approved. Ms. Thomson corrected an error on Bills for Approval, and added Mr. Churchill’s 12/31/06 statement for legal services for approval. Mr. Risen approved digital cable service (Cheetah Lite) for the General Manager’s residence for the Association’s secondary computer. Mr. Sweeney presented bills for reimbursement for a replacement LCD for the card reader, and a new lock. Steve Stanton was paid an additional $250 for a concrete curb at the mailbox repair site, which improvement was not part of his initial proposal. A motion was made to approve the prepaid bills and Bills for Approval. The motion was seconded, and the motion carried.

Mr. Sweeney moved to approve the December Balance Sheet. The motion was seconded, and the motion carried.

Mr. Price moved to approve the December Profit & Loss Statement. The motion was seconded, and the motion carried.

Mr. Kossnar made a correction to the last paragraph of the General Manager’s Report In the December 2006 Minutes to read as follows: Squeak reported that the owners of lot 125 are not cleaning up after their dog who frequently dumps on lot 198. Mr. Kossnar also said that people have been noted hosing dog waste off their decks into the canals. A motion was made to approve the Minutes of the regular meeting of December 4, 2006. The motion was seconded, and the motion carried.

Ms. Shockley reported that Dan at NPG Cable will complete their bridge repairs by Wednesday. She also reported that Steve Stanton is not interested in bidding on the engineered bridge repair project, as the proposed repairs are too extensive for his limited manpower.

The T&C Seal Coat proposals presented last month, as a result of their walkthrough, were discussed. Mr. Sweeney reported that he and Ms. Shockley met with Terry and Kathy of T&C at lot 202, Mr. Stroud’s property on Hopi where the flooding problem is. Mike Dyer would have to bid on any street demolition in conjunction with any major street repair on Hopi. Mr. Sweeney shot the elevations, and he reported that an elevation rise of 2.5” is inadequate to alleviate flooding onto lot 202. Mr. Sweeney also stated that Mike Dyer advised that it would be impractical to attempt to fix the problem without an engineer determining where the water would go, and Mike Dyer said he wouldn’t touch it without it being engineered. Mr. Stroud’s drain is tied into his neighbor’s drain, and Mr. Stroud’s driveway is the low spot, but his drain is in a spot where it’s not catching the water. Mr. Price stated, as he has in the past, that this is a pre-existing condition, before the streets were paved. Mr. Sweeney stated that with a rise of 2.5”, the drain would catch only 2.5” before running off.

Ms. Shockley reported that T&C believes we need only a seal coat on our streets at this time, and that any cracks would continue even with a slurry coat. A seal coat would fill the cracks. Mr. Price inquired about whether or not cracks would be filled before a slurry. Ms. Shockley stated that T&C is probably under the assumption that we would use our usual vendor for rubber crack filling prior to a slurry. She stated that Terry says our streets are in good condition. Mr. Sweeney stated that cracks should be filled with rubberized material. Mr. Svider asked about the need to prepare the street prior to the project, and Mr. Price reported that T&C can do that. Mr. Price made a motion that we do a rubberized fill of street cracks. Mr. Chambers seconded the motion. There was a discussion about whether or not to fill cracks on Hopi Drive, in light of the sinkhole.

Mr. Chambers made a motion to fix the curb in front of Mr. Stroud’s house and raise the surface 1” across the entire width of the driveway at lot 202, using hot mix. Mr. Sweeney seconded the motion. Mr. Sweeney stated that the cut out area can be replaced with concrete. Mr. Baker stated that Mr. Stroud needs to agree. Mr. Sweeney stated that Mr. Stroud has an engineered drawing showing a 2.5” rise for 300’, but even a string line wouldn’t be exact, and this wouldn’t solve his problem. Mr. Svider stated that Mr. Stroud didn’t approve that plan three years ago. Mr. Price stated that if the berm is on Association property, we can do it without homeowner approval. Mr. Baker suggested that we let the matter go until later. Mr. Chambers agreed that if the berm is in the street, we can do the berm, so let’s proceed. Mr. Price asked about the sinkhole. Mr. Sweeney replied that nothing is being done about the sinkhole, and it’s getting worse. He suggested that we wait until such time as the sinkhole needs repair. Ms. Shockley added that Mike Dyer could then do the whole project at one time. Mr. Chambers suggested a concrete gutter down the middle of the street all the way to the ramp. Mr. Sweeney stated there’s not enough downhill gravity. Mr. Price suggested piping it to the bridge. Mr. Sweeney stated that Moovalya Drive has a crown 3-4” higher. He said we could possibly swale it to the first bridge on the south side of Navajo. Mr. Baker said there’s no fix except for a drain. Mr. Sweeney stated the drain in Mr. Stroud’s driveway needs to be fixed. Mr. Sweeney stated that runoff from the bridge goes right to his own house (lot 197) and to his neighbor (lot 196). Both have had to install drains to deal with it. Mr. Sweeney withdrew his second to the motion. Mr. Svider seconded Mr. Chambers’ motion. There being no further discussion, and upon a show of hands, the motion failed to carry by a vote of 5 to 2.

Mr. Baker stated that the Board will need to approve at the February meeting the 2006 financials and the 2007 Budget.

On the issue general membership voting, Mr. Churchill reported that the applicable statute applies to “units”, as in condominium units. Keys’ properties are “lots”. It would appear that the statute doesn’t apply to us, as we have “lots” not “units”. We are not a condominium development. Our Bylaws permit voting by proxy, but if we choose to interpret the statute as applicable to our “lots”, then proxy voting is now prohibited, and the plaintiffs’ attorney in the current lawsuit may challenge voting by proxy this year. Mr. Churchill stated that the Arizona legislature is not often clear in their laws, and the statute could be interpreted either way. If the law assumes that it does apply to us, then we can not use proxies. Mr. Churchill also advised that once the agenda is published, the issues are set for the annual meeting, and no other issues can be voted on. Absentee ballots can be used in lieu of proxies, and they can be submitted to the Association by fax, mail or e-mail.

Mr. Price made a motion that the Association utilize absentee ballots at this year’s annual meeting in lieu of proxies. Mr. Sweeney seconded the motion. Mr. Baker asked what issues can be added after the notice is sent, and Mr. Churchill replied that all issues up for vote at the annual meeting must be on the ballot. Mr. Price asked whether it needs to be first voted on by the Board, and Mr. Churchill stated that Board approval is necessary only if it involves a CC&R's change. Mr. Svider pointed out section 1.29 of the CC&R’s regarding proxies. It was noted that this section is merely a definition, and Mr. Price stated that in any event state laws supersede CC&R’s. Mr. Churchill also advised that we’ve always had the power to vote by absentee ballot. Mr. Svider referred to section 15.1 of the CC&R’s concerning amendment requirements. There being no further discussion, the motion carried.

Mr. Svider asked about plaintiffs’ time frame for responding to the required 26.1 disclosure. Mr. Churchill stated that their reply was due in 40 days (8/23/06), but he said it is also the plaintiffs’ responsibility for pushing the case forward.

The 2007 Annual Meeting was set for April 7, 2007 at the Board of Supervisors’ meeting room.

As a follow up to Mr. Svider’s earlier comment about proxy language in the CC&R’s, Mr. Sweeney referred to 3.1, about midway in the section.

Mr. Risen opened discussion about possible amendments to the CC&R’s being proposed to the membership for vote at this year’s annual meeting. Mr. Svider referred to 12.17 of the CC&R’s, page 45 concerning Rental of Lots. Mr. Risen read the section. Mr. Svider voiced his concern about owners renting to more than a “single family”. He stated that under the law, a short-term rental is one under 30 consecutive days, which is in violation of R-1 use of land. We should allow or not allow short-term rentals, or change the language to allow only long-term rentals (longer than 30 days). Mr. Baker stated we may only need to enforce the definition of “single family”. Mr. Chambers inquired how we would know whether or not a group comprises a single family, and this would be a can of worms. One person could write a check then bring others as guests. Mr. Sweeney agreed that this is completely unenforceable for weekend rentals. Mr. Baker disagreed by stating that we’re only talking about a few houses, maybe 10, where we could start enforcing the “single-family” definition. Mr. Price said that we would have to pass a rule with some teeth to enforce the “single-family” definition. Mr. Kossnar said that anyone can say ‘my cousins are visiting’ and get away with it. Mr. Sweeney stated he is opposed to prohibiting short-term rentals, because people knew what they were buying into when they purchased their properties in the Keys.

Mr. Risen read section 12.18 - Enforcement. Mr. Sweeney stated we could set a fine for violating a rule by not registering, but he is otherwise at a loss concerning enforcement. Mr. Churchill advised that the establishment of a rule under this section refers to a meeting of the members.

Mr. Risen read section 12.19 – Modification. Mr. Sweeney said he thinks a proposition to delete short-term rentals would pass at an annual meeting. Mr. Baker suggested that short-term rental landlords be forced to register all guests. Mr. Churchill stated that they are already required to do that pursuant to the special meeting held in June 2004. Mr. Churchill suggested that we offer choices to the members: (1) do nothing; (2) change by rule, modify or waive provisions of section 12.19 creating restrictions; or (3) change it permanently via a CC&R's change. He stated we can’t change section 12.2 – Residential Uses, and its subsections, without amending the CC&R’s. He recommends that we leave it up to the homeowners, because they are the ones to vote on it anyway. There are three ways to accomplish this: (1) at a Special Meeting; (2) a 2/3’s vote in writing; or (3) at an Annual Meeting. Mr. Sweeney said he would like the homeowners to vote on two options: To prohibit or to register. Mr. Churchill stated it is easier to change section 12.17 – Rental of Lots by utilizing section 12.19 – Modification. It was noted that this issues does not apply to commercial-zoned lots, so the rule would apply only to residential properties. Mr. Kossnar stated that extra security would be needed to check everyone in at the gate. Mr. Sweeney stated that our card reader at the gate can be a fingerprint reader, which would also eliminate the need for cards.

Mr. Baker made a motion to propose to the homeowners for a vote at the 2007 Annual Meeting the incorporation of a new rule prohibiting short-term rentals. Mr. St. George seconded the motion. Mr. Sweeney stated that we should find out what the homeowners want. He personally doesn’t think it’s a good idea, but he agrees that the homeowners’ voices need to be heard. There being no further discussion the motion carried by a vote of 6 to 1. Mr. Chambers asked what we would do, if the proposition passes, about landlords who falsify information. Mr. Risen deferred the matter, stating that it’s only a motion to put it on the ballot. Mr. Sweeney stated that if it passed, the Board would have to determine how to regulate it.

Mr. Sweeney made a motion that we enforce by fine the present CC&R's provisions relating to short-term rentals. Mr. Svider seconded the motion. Mr. Risen stated that the Board would need to enable the General Manager to enforce regulations. Mr. Baker stated we should wait to see how the members vote. There was more discussion about enforcement issues, lack of control and alternate options for the ballot, as well as legal ramifications. Mr. Sweeney withdrew his motion.

Ms. Thomson opened discussion about whether or not the Board still wishes to proceed with changing section 4.12 – Accounting. State law (33-1810) no longer requires certified CPA audits. Mr. Sweeney made a motion to propose for vote by the membership a change in the CC&R’s to replace bi-annual ‘certified’ CPA audits with an annual CPA ‘compilation’ and bi-annual ‘reviewed’ CPA audits, consistent with new law that no longer requires ‘certified’ CPA audits. Mr. Chambers seconded the motion. Mr. Baker stated he didn’t know for sure what the definitions are of ‘reviewed’, ‘certified’ and ‘compilation’. Mr. Sweeney explained the differences between the three, with a certified audit being very involved, including the CPA obtaining written verification from every vendor of all monies paid to them during the year. Certified audits cost the Association about $5,000 in CPA fees. Mr. Baker stated that, after hearing Mr. Sweeney’s explanation, he would be comfortable with what Mr. Sweeney calls a ‘reviewed’ audit, especially in light of the fact that we know approximately how much annual revenue the Association receives and approximately how much it spends. Mr. Churchill pointed out that the CC&R’s call for a bi-annual certified CPA audit. Mr. Price said he was meeting with his accountant later in the month, and that he would speak with him about the matter, and he suggested we put the matter on hold another month. Mr. Churchill inquired about the position CPA’s are taking on the subject, and Ms. Thomson replied that she spoke with a CPA in Lake Havasu City who does certified audits, and he recommended to her that HOA boards try to amend their CC&R’s to comply with the lesser requirements in order to avoid having to go through full-blown audits. Mr. Sweeney withdrew his motion until next month.

Mr. Svider reiterated that motorized vehicles (Rhinos) must be licensed. Ms. Shockley stated that she is having more problems with drunk drivers, and she’s having more problems with repeat-offender speeders. It was noted that in 2004 fines were established for speeding infractions. Ms. Shockley asked how she is to enforce unlicensed Rhinos, as well as speeding and reckless driving. She asked for clarification on criteria for issuing a speeding citation, and she read the 2004 rule that dictates a speeding or reckless driving fine of $25 for the 1st offense; $50 for the 2nd offense; and $100 for 3rd and subsequent offenses, with no warnings. There was discussion about obtaining a radar gun, and Ms. Shockley stated she will start issuing speeding citations.

The meeting adjourned at 8:00 p.m.

Submitted by Recording Secretary, Sue Thomson