Member submits rebuttal to the November 15th BHOA statement to Members

Admin: On November 15, the BHOA Board published a statement regarding our on-going lawsuit with the Town of Carefree.On November 17, a concerned member of the community submitted an annotated version of this statement to Carefree Unity for publication.  The annotations can be understood as a rebuttal.  Carefree Unity can verify that the author, who has requested anonymity, is a member of the BHOA who is not a member of Carefree Unity. We believe the submitted document represents a positive and rational contribution to the community discussion and that publication is in the community interest.

Statement by the BHOA Board of Directors regarding the Town of Carefree’s lawsuit against our Association

As volunteers committed to serving responsibly on our Association’s board, we would like to ensure that fellow Association members understand the reality of the Town of Carefree’s lawsuit against our Association, and are not misled by clever politics.

The Town has recently made some very significant admissions, buried within a 222- page Official Statement it was required to produce in order to borrow $18.535 million for the “water transition” project. For a public bond offering such as this, truthfulness is the only option. This document can be found on our BHOA website, but not on the Town’s website. Starting on page 4, the Town admits that:

The document referred to is a disclosure statement issued by the bond underwriters for disclosure to the investing public, not the town’s inhabitants– admission is a word the authors chose to forward their agenda.

• a new tank is NOT essential for the Town to be able to provide potable water and fire protection on schedule to “Neighborhood A”; and

• at least five other suitable sites exist for the tank.

What is disclosed is five other “less-optimal, but suitable, sites”

In other words, as many of us have long suspected, the Town’s claim that it is necessary to place an industrial water facility on our Association’s preserved desert common land for the salvation of Neighborhood A from supposedly contaminated water has been a complete hoax.

The tank facility would not be underground, notwithstanding misleading assertions by Town officials. It would be a clearly visible industrial facility, despoiling our community’s natural desert frontage along the town’s main street. Certainly it would damage our community’s character and property values. The Town’s offer of $20,100 as “just compensation” is ludicrous in comparison.

As directors, our sole duty is to the Association and its best interests. Town officials and their supporters have urged us to act “for the good of the town” (as they themselves define it) but these new admissions demolish the credibility of any such demand.

The small group of Association members who inexplicably support giving up our common land argue, as a last resort, that the cost of resistance is too high relative to what they consider to be the likelihood of success. Their argument has many fatal flaws:

• financial reserves are replaceable, common land is not;

Then give all 320(+) members the opportunity to endorse your course by voting on just how much they are willing to invest in your plan, when you run out of that money, you can go for the next round, and so on and so on …..

• the value of more than $300 million in properties is at stake;

The actions of the current board have damaged the reputation of ALL of the Boulders community (including the South), fostering a BOULDERS PRIVILEDGE backlash. Lack of adequate reserves and palpable community derision also affects property values.

• our board is being guided by arguably the most experienced, successful and insightful Arizona attorney who specializes in defending again condemnation and obtaining just compensation;

Your attorney is 0 for 8 in his maneuverings. The term arguably is fitting.

• these members lack understanding of the litigation strategy and how it could produce favorable results (and that is obviously not a suitable top for public discussion or debate);

“These members” include attorneys, litigation consultants, and successful individuals that are well aware that any legal course of action “COULD” produce favorable results. They are also aware that they could not. So far, the “could not” is prevailing.

• in our Association’s last election, the overwhelming majority of members voted for candidates who publicly opposed the unnecessary taking of our common land;

That was before the disaster your board has brought to this community.

• the Town has simply failed to provide us with any cogent or credible reasons NOT to oppose the seizure of our common land; and • legal expenses to date are still just a fraction of a single quarter’s assessments.

Legal fees related to the condemnation issue disclosed to members to date approximate $100,000. At the 10/29/21 board meeting, Mr. Pistillo acknowledged those fees are for legal services incurred only through the end of August 2021. As of the end of August, 2 motions had been filed by your attorney, we now stand at 8 motions filed. Repeated requests for an accounting of legal fees incurred subsequent to those billed at the end of August go unfulfilled by our board. Lacking current data, it is reasonable to assume fees to date are probably closer to $200,000.

As to the repeated comparison of legal fees to date being just a fraction of a single quarter’s assessment, a more rational analysis would be to begin with the understanding of the BHOA budget. We operate on a zero-sum budget which anticipates an annual break-even performance: expenses of normal operations plus contributions to reserves equals revenues (revenues being assessments). Assuming operational expense forecasts for 2021 were reasonably accurate, all revenues in excess of the reserve contributions are “spoken for”. Reserve contributions were established by a reserve study that estimates the remaining useful life and replacement costs of our association’s assets such as roads, buildings improvements. In other words, those reserve contributions are also “spoken for”. The 2021 budgeted monthly reserves contributions are $12,470, or $39/month per member. Given this perspective and using the $200,000 legal fees probability, actions to date indicate 16 months of each lot member’s assessment contributed for purposes other than daily operating costs. ($200,000/320) = $625 per household, $626/39 = 16 months of assessments.

We would like to encourage anyone who knows those berating us about legal expenses, to ask these persons whether they have similarly complained to Town officials about using the coercive power of eminent domain to launch this ill-justified and costly lawsuit against us.

Please recall who demanded the prior board officially state that the BHOA would not negotiate with the Town on the water tank issue. Condemnation “was” this group’s “strategy” at the outset – against the advice of the then BHOA counsel. Those same individuals claimed that such a move was prudent because it would preserve the rights of individuals to seek compensation from the town separate from what BHOA might recover. This board owns the situation we find ourselves in.

Because Town officials and their supporters can offer no good reasons why we should cooperate in their efforts to take our land, they have resorted to intimidation and harassment. These tactics have only served to increase our Association’s legal expenses.

• The abrupt resignation of all Association officeholders associated with the mayor, including himself and his wife, was obviously aimed at harming the functioning of the Association and destabilizing the new board elected by the majority of our members. In our opinion it also demonstrates a fear of being held accountable for their undisclosed dealings regarding the tank;

“obvious” to whom? “Associated with the mayor” is this all that resigned? All directors that resigned were also elected by a majority of members. Following this logic, since 5 of nine members resigned and 4 remained, a “majority” of the “majority” of members that voted for board members seated on April 1, 2021, voted for the directors that resigned. A minority voted for those that remained.

• A group calling itself “Carefree Unity”, apparently connected with the mayor’s campaign organization and which claims to be promoting transparency while its members ironically decline to identify themselves, has asserted without evidence or justification that our board has breached Arizona open meeting laws;

“apparent” to whom? What is “ironic” about not disclosing identities, at least this group has identified themselves as ex-BHOA directors. Fearing retaliation and character assignation? What about Noah Watertank? Did they self-identify? NO Without evidence or justification as determined by whom?

• An aggressive attorney from the Town’s law firm has preposterously asserted that our board has defamed Town officials, and threatened suit;

Again, the adjectives – preposterously? Such drama One man’s aggressive attorney is another’s “experienced, successful and insightful”

• The Mayor’s allies among our members have engaged counsel to pointlessly demand disclosure of documents that our board, unlike previous boards, has already posted on our Association’s website;

• Our board president has received countless harassing e-mails (but from only a few individuals), and has been physically threatened;

• Fake e-mails impersonating our board president have been sent to other board members, attempting to deceive them into dialogue; and

• The mayor and Town’s attorneys have threatened to make claims upon the Association and demand bonding if our defense delays their project, a ridiculous notion that is completely unfounded under Arizona law.

In fact, there is an asymmetry of risk in the litigation – under Arizona statute, if the Town’s condemnation is defeated, it is likely that they will be obliged to reimburse our legal expenses, whereas regardless of whether our defense is successful, they cannot claim the reverse.

So why is all this happening ? We wonder ourselves. Indeed, we think it is highly dubious for a town of less than 4,000 people to want to spend more than $20 million just to deliver the same Central Arizona Project water to a small part of town through a different route.

We’ve noticed that at the same time that Town officials are seeking to take our land,they are moving rapidly towards adopting a General Plan Amendment that will facilitate the ‘upzoning’ from very low density residential to commercial of five contiguous parcels, across Tom Darlington Drive and downhill from the proposed tank site on our Association’s land. As reported during our board’s last open meeting, Town officials anticipate that a “destination resort” of up to 175 rooms will ultimately occupy the five parcels.

The purpose of our board is to conduct the business of the community

Is there any connection? Town officials have denied it, but we’ve now seen that their alleged Neighborhood A requirement wasn’t true. So what is the tank really for? Iy stands to reason that a 175-room resort is going to need a lot more water storage capacity than the five homes that could be built on these parcels under current zoning.

It’s important to understand that by law, the Town’s power of eminent domain cannot be used for private development purposes. If the resort’s developers need additional water storage capacity, they would be obliged to build it themselves on their own land – unless the Town just happened to be expanding its water system for other putative purposes.

The purpose of our board is to conduct the business of the community

The entirely obvious possibility of such a connection concerns us, and is a fundamental reason behind our opposition to locating the tank on our land. Our Association and members (and Carefree Water ratepayers) should not be subsidizing private developers.

The purpose of our board is to conduct the business of the community

We also have concerns about possible undisclosed conflicts of interest by Town officials, arising from their relationships with the owner of the five parcels and with potential developers.

The purpose of our board is to conduct the business of the community

Our Association’s natural desert frontage along Tom Darlington Road and Stagecoach Pass unfortunately presents a significant temptation to Town officials who have often lamented the small proportion of the Town’s land available for commercial development,and who have already declared an intention to move town hall out of the commercial center. The use of eminent domain to convert our Association’s private open space for public use (e.g. town hall, fire station, water storage tank) would directly free up additional acreage for the commercial development they desire.

Carefree’s voters have never been asked which alternative they would prefer: a property tax like almost everywhere else, or wall-to-wall commercial development to generate sales tax revenue. The choice not only affects our local landscape – it affects the extent to which town officials are responsive to property owners like us (who don’t matter when revenues come from sales taxes), and the extent to which town officials are tempted by improper conflicts of interest arising from commercial development.

The purpose of our board is to conduct the business of the community. In the meantime, ARCC violations abound, parking compliance enforcement is non-existent. Review of Governing Documents halted. The list goes on….

We have no confidence whatsoever that the taking of our common land is for a legitimate public use, and on behalf of the Association will continue to oppose it by all reasonable means.

Reasonable is an appropriate adjective in this statement.

The Board of Directors

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