THE 2023 $600,000 BUDGET SURPLUS & THE BOTTOM LINE!
| I had a cordial email exchange with Jim Mayfield who exits the Treasurer post in less than a week. We agree on so much usually and his assessment of the tax consequences if directly applied to the Reserves is a taxable event. He is right. There is still a way to get the money rightfully to 2025 because the law requires that SCA either issue checks to homeowners in 2024 for the 2023 surplus funds or credit the homeowners a future credit in 2025. Here’s the law again :NRS 116.3114 Surplus funds. Unless otherwise provided in the declaration, any surplus funds of the association remaining after payment of or provision for common expenses and any prepayment of reserves must be paid to the units’ owners in proportion to their liabilities for common expenses or credited to them to reduce their future assessments for common expenses. NRS 116.019 “Common expenses” defined. “Common expenses” means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves. So in 2025 they could easily apply the $600,000 credit to the operating expenses assessment calculation and raise the Reserve Contribution to fund the depleted reserves $600,000 more or less above the regular detemined assessment independently and go about their normal 2025 budgeting process. No adverse tax consequence. But as pointed out previously budget preparation with more dilligence than was done for the 2024 budget. The 2025 assessment will be up to the new board but applying the 2023 credit in 2025 is mandated by law unless checks are written in 2024. Surplus funds was a disputed issue at Anthem Highlands when I served on the board. The board majority did not want to follow the law very similar to here at SCA for this $600,000. On behalf of homeowners in Anthem Highlands I filed an action with Nevada Division of Real Estate and the Attorney General’s office got involved. I prevailed resulting in the Anthem Highlands board changing its position and as a result $1.2 of surplus funds was returned to homeowners. That was equivalent to one years full assessment relief. And the Anthem Highlands attorney had the law wrong but defended the board anyway. Sound familiar?The only difference in this case is that SCA has a more restrictive tax consequence preventing the funds to go directly into the Reserves. I have had lots of complaints against current management and the board for not following the governing documents and NRS116 and more. I have let so much go. I am sick and tired of their lawlessness. The 2024 Budget was an admitted fraud as to the restaurant deficit and the violations of Article VIII in hiring non budgeted jobs. This surplus funds case ought to be a slam dunk against SCA if initiated and a waste of attorneys fees if defended. I will be sending the new board a complaint to be put on the agenda to follow the law and if they don’t, I have different options to seek enforcement. I am so tired of the weaponized counsel and the board exercising bad faith. The new board ought to immediately get new counsel and terminate Sandy Seddon and get its house in order where the rule of law and competence are paramount. The new board takes over May 1 with 7-8 months remaining to cut spending to mitigate the YORKTOWN losses expected in 2024. They should act swiftly. And let the 2024 year reflect what actually happens without artificially mucking up the accounting to cover up the bad budgeting and bad management job. Until next time… Robert |
Sandy Seddon is history until June 19th. SCA should also let go of all the employees she brought in, especially the two Fitness Directors, who doesn’t do anything for the residence. What about the new Deputy COO-James McNamara. What is his contract and compensation.