2015 Board Meeting Minutes

Kaanapali Royal Association of Apartment Owners
Board of Directors’ Meeting Minutes
January 9, 2015

Board Members Present: Richard Beck, President; Tom Perkins, Vice President; Jim Basolo, Treasurer; and Directors Ed Kelly, Rod Conklin, and Rick Little

Owners Present: Bob and Diane Pure, C303; Chuck and Meri Fedak, A202; Don Betterly, J202; Steve Maunsell, M102; Ray Grace, A101; Jim and Marietta Gillogy, F303; Bill Flint, N303; Matt Kinney, C101; Blake and Jill, Wells, B102; Carol Hickel, B101; Doug Duckworth, K303; A Perkins, H301; Dennis Pettinelli, A303; and J. Lambert, N101

Other Attendees: Dave Ferguson, Management Consultants of Hawaii; Charles D. Philips, General Manager/Resident Manager; and Carol Simmons, Recording Secretary

I. DECLARATION OF QUORUM

A quorum was declared with six Directors present.

II. CALL TO ORDER

President Richard Beck called the Kaanapali Royal Association of Apartment Owners’ Board of Directors’ Meeting to order at 9:00 a.m. The meeting was held onsite, Kaanapali, Maui, Hawaii.

III. INTRODUCTIONS

Introductions were made at this time.

IV. PROOF OF NOTICE

It was certified Notice of the Board Meeting was emailed to all Directors and posted on property on December 30, 2014, in accordance with the Association governing documents and in compliance with Hawaii State Law.

V. APPROVAL OF MINUTES

MOTION: To approved the Minutes of the May 16, 2014, and October 17, 2014, Board of Directors’ Meetings.

Rod Conklin/Ed Kelly Unanimous Approval

VI. SOLAR UPDATE
Director Perkins provided an update on the Solar Project. There has been a written consent balloting process to determine whether or not to proceed with the solar project. The decision must be made to “go” or “no go” on the Solar Project due to time constraints imposed by Maui Electric. The voting process is supposed to remain open, per the Bylaws, for an entire year. Currently, there are only a small percentage of owners who approved the plan to go forward, and the amount does not meet the two-thirds requirement standard. Consequently, Director Perkins proposed that the balloting be declared “over”, and that the Association abandons the project. It was noted that 82 of 105 owners voted. There were 23 owners who did not vote. All remaining votes would have to be positive for approval, which would be highly unlikely.

MOTION: To cancel moving forward with the solar project.

Tom Perkins/Jim Basolo Unanimous Approval

There was brief discussion regarding the future of energy in Hawaii. There is a good possibility that future electric rates from MECO could be lower.

VII. OWNERS FORUM
The following issues were addressed during the Owners’ Forum.

An owner expressed concern that the barbecues are a fire hazard, because they are not cleaned regularly. The same owner expressed concern about the quality of the barbecue equipment. Director Little, Director Perkins and Mr. Philips will address this issue to include an increase in the cleaning schedule of the barbecues, as well as possible equipment upgrades.

There was a question about the Reserves, specifically regarding the replacement of the roof. The roof is scheduled to be replaced in 2030 and will cost approximately $800,000. Concern was expressed about not having enough money in the Reserves to replace the roof at that time. There was an explanation on how the Reserves are calculated. Several owners suggested the possibility of hiring an independent auditor to do a study of the existing systems at Kaanapali Royal to determine future system failures, to evaluate the costs and to make recommendations. It was noted that the Association has not had a professional Reserve Study. The cost is approximately $3,000. President Beck stated that a professional Reserve Study would be a good investment at a cost of $28.50 per unit.

MOTION: To hire a professional to conduct a Reserve Study.

Rick Beck/Tom Perkins Unanimous Approval

An owner from Building N wondered when the yellow tape in the parking lot would be removed. Mr. Philips stated that the tape was there to protect new plants.

Another owner reported that the pool is too cold. The same owner requested more flowering bushes, higher lounge chairs and asked if something can be done about noisy lawn mowers. Mr. Philips will check the mowers for muffler problems.

This year fees were raised by $105. There were questions about the allocation of these funds. The President stated that $35 of the $105 increase was allocated to the Reserves, and $70 would be allocated to the Operating Budget. There were three drivers in 2014 having an impact on the increase: 1) The insurance premiums doubled due to flood problems; 2) The electricity was over budget approximately $24,000 during August and September; and 3) There were approximately $50,000 in expenses under the Repair and Maintenance Budget to pay for damages due to flooded units.

Sewer and drain lines are a concern. Mr. Philips stated a pressure reducing valve was installed three years ago and have helped with the situation. He reported that the lines from the kitchen sinks are a constant problem due to blockages. He explained problems with the plumbing and possible solutions. He noted that the pipes are 30-years-old and are deteriorating. He outlined actions he takes during emergency plumbing breaks. He also noted that hot water heaters need to be replaced every five years.

There was a brief discussion on what to do regarding possible problems with cable TV top boxes.

VIII. PRESIDENT’S REPORT

The President reported that the collection of maintenance fees is significantly better than last year. Further, he updated the Board and owners on the status of the Lanai Enclosure Permitting issue.

Two issues up for a vote by the membership “expire” tomorrow, because there were not enough votes returned for approval. The two issue expiring are: 1) Prohibiting an owner to serve as General Manager; and 2) To reimburse Board Members for travel costs for all three Board Meetings annually.

There are two legal issues pending with regard to the previous General Manager. The goal is to resolve in 2015.

The floor was opened for owner comments and questions, as follows: 1) Hours, duties and routines of Security personnel; 2) Increase in pool hours; 3) Need for new pool signs, with succinct and proper language, that incorporate hours and rules; and 4) Problems with feral cats on the grounds.

IX. SITE MANAGER’S REPORT

Mr. Philips distributed a two-page report which included the regular, routine jobs accomplished by Mr. Philips and his staff, as well as information on what projects have been completed, information on unexpected projects and updates on planned projects. He noted that 2014 was a very busy year.

Director Conklin updated the Board and owners on the Parking Lot Project. The paving of the parking lot was scheduled for 2014 but was deferred to 2015. There is approximately $50,000 in the budget for this project. It was noted that quite a few repairs were accomplished in the past by in-house staff. The scope of work for the project was detailed, and logistics were reviewed. The time frame for this project is June or July 2015.

It was reported that the office needs the keys for every stored car on the property in order to move them in the event of an emergency and/or for work that will be done in the parking lots. Mr. Philips is also looking into temporary storage of these cars on the property next door.

Maintenance of front door locks is recommended. This service will be provided by Island Lock. It would be at an individual cost to the owner but is highly recommended for purposes of access. Access is very important in the event of an emergency. The original locks installed cost $700 each. Island Lock will maintain the lock on a bulk basis for approximately $60 each. They will remove the lock, service and reinstall.

Secondary irrigation water, i.e. wastewater, was discussed briefly. The County of Maui has hired a new director to look into the use of secondary water (grey water). If it is possible to transport the grey water to the Association’s irrigation system, it will cut costs significantly. Mr. Philips is working with the County of Maui on this possibility.

X. MANAGING AGENT’S REPORT

The Association is responsible, on an annual basis, to provide the Maui County Real Property Tax Division with information on the actual use of an apartment, i.e., vacation rental, owner occupied, second home, etc. A list was provided to the County on December 1, 2014. In October 2014, MCH sent an inquiry to owners asking the actual use of their apartments. He noted that 52 of 105 owners responded to this inquiry, and that 40 of the 52 respondents stated their apartments are vacation rentals. Mr. Ferguson believes that there are more than 40 owners renting their units on a transient basis.

The County Planning Department reported plans are in place to crack down on people using their units as vacation rental properties and not correctly reporting the usage. They are now on the web tracking owner usage through websites and VRBO, etc. The County and the State are starting to share information. When an owner does not provide the actual usage, the penalties and fines will be high. Mr. Ferguson encouraged anyone who hasn’t provided his office with information on the use of their apartment to go to MCH’s website, MCHawaii.com, complete the information, and then MCH will supply that information to the State Department of Taxation. He further explained that the onus is on the owner to provide the correct information. The Association assembles the information and provides it to the State Department of Taxation. The homeowner is liable to provide the correct information.

There were a number of water claims this year for backed-up or failure of sewer lines. There was also a fire this year. The fire was most unusual; it will cost $200,000 in repairs. The insurance company is responding to the fire claim and will reimburse the total amount with the exception of a $5,000 deductible. However, due to the number of water claims, the insurance premiums have more than doubled over the previous year, and the policy renews February 15, 2015. MCH explored options. The only alternative is Lloyds of London, and this is the carrier of last resort. The decision is to renew with the existing carrier with double the premiums.

There are questions about one water leak claim that caused the Association significant problems with the insurance company, and the matter has not been resolved.

A discussion followed on water claims to include identification of problems and possible solutions. It was noted that items are being flushed down the system, such as handiwipes, and that the Association needs to be more proactive with owners and housekeeping to prevent this. It was further noted that Mr. Philips and his crew are doing what they can to mitigate the loss. Cleaning the waste lines can be done, but the next day the lines could be clogged again. The condition of the lines is of concern. The system is old, and the toilet tank might not be flushing properly. Mr. Philips took the opportunity to explain how the plumbing system operates as well as his recommendations for preventative measures President Beck stated that there is a plan to re-implement the quarterly newsletter, The Coconut Wireless, which among other things will give owners tips on how to maintain the existing plumbing system.

XI. COMMITTEE REPORTS

A. Communications

Due to the fact that Director Vivian Hyman sold her unit and is no long a member of the Association, the Board does not have an appointed communications’ person at this time.

The Association’s webmaster had to quit due to illness. Consequently, no one is currently updating the website. There is a plan going forward to hire a consultant to evaluate the website and provide recommendations on modernization. Moreover, the consultant would provide training to Kehau and Mr. Phillips on how to use and update the website. Eventually a person will be hired to maintain the system on a permanent basis.

B. Rental Advisory

Owners who are interested in communicating with other rental owners can give Director Kelly their contact information, and he will add this information to an email blast list. Director Kelly is also available to help owners register for State Excise and TAT tax licenses. For new owners with units used as vacation rentals, there is a requirement for the owner to post tax license information on their advertisements and on their websites.

C. Energy and Technology

Director Perkins reported that approximately $270,000 was spent on electric last year, which was a big increase over the previous year. Since the Association is no longer pursuing solar, the Board will start exploring options to conserve on energy and save on utility costs.

D. House Rules

This committee will work on the pool signs with Mr. Philips to make sure the House Rules and signs are in sync.

E. Building and Grounds

Director Conklin’s report included the following: 1) A request to submit car keys during the re-sealing process; 2) The committee is evaluating options to replace the golf net; 3) A request to owners to notify Kehau or Director Conklin if lights are flickering or have gone out; and 4) A reminder to owners to change AC batteries once a year. Mr. Philips will keep batteries on hand as a convenience to owners.

F. Finance

Treasurer Basolo reported that it has been a disappointing year financially, as most of the problems were unanticipated. Variances, both over and under target, were noted and explained. Revenues were on track and ended up approximately $15,000 over budget. Expenses were approximately $100,000 over budget, mostly due to anomalies that could not be anticipated. Building and Repairs went over budget by approximately $30,000 primarily due to claims. Insurance was a big issue. Electricity was much higher due to a hotter than normal summer. The Reserve funding level is 40% but still needs to reach the 50% threshold.

The floor was then opened for questions and comments. The possibility of a future special assessment was proposed and discussed in depth.

G. Architectural Review

Owners are asked to complete an architectural review form prior to the commencement of a remodel project. It was noted that there were approximately fourteen remodeling projects last year.

XII. NEW BUSINESS

Director Perkins stated that the pool is too cold; he recommended that the Building and Grounds Committee conduct a study and obtain an estimate to install a pool heater.

MOTION: To do a study to potentially add a gas or propane heater for the pool, and investigate the potential of modernizing the pool equipment.

Tom Perkins/Rick Beck Unanimous Approval

XIII. ADJOURNMENT

The meeting was adjourned at 11:17 a.m.

Respectfully submitted,
Louise Rockett
Louise Rockett
Transcriptionist