Board Member Gives
Report on Restaurant Matter
The following is a report that will be
presented to the Sun City Anthem Board meeting by Nona
Tobin.
It is LENGTHY;
however, in order to avoid any form of misunderstanding, rather than using a
summary, we are printing the entire presentation for your
review.
Keep in mind these are merely her thoughts, not
necessarily those of others, and in our opinion, seem quite biased in favor of
yet another restaurant, despite the continual failures of the
past.
Ms. Tobin is NOT AN
ATTORNEY and as a result, we would hope any such thoughts be examined by
AN INDEPENDENT LEGAL SOURCE, in addition to our
association attorney, in order to avoid bias toward adopting any
option.
At the conclusion of Ms. Tobin's presentation, we
have two suggestions.
First, send your thoughts to the Sun City Anthem
Board members, and then send us your opinion of Nona Tobin's
report.
Special thanks goes to Rana
Goodman of Anthem Today for calling this to
our attention.
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Restaurant Space Study
Nona Tobin’s
Recommendations for
Board Direction to the GM at the May
25, 2017 BOD Meeting
Summary:
Time is of the essence as the restaurant has been closed 16 months,
and the cost while it is closed is $4,000+/month, excluding the cost of
reserving for idle equipment.
It is contrary to our CC&Rs to discontinue operation of the
restaurant without 75% of the Owners written approval.
The board’s role is to set policy direction and identify priorities to
ensure that the Association is in legal compliance and acting solely in the best
interests of the Association and its members.
The GM manages operations within Board-defined parameters.
The Board needs to revise and be more specific in its direction to the
GM to return SCA to compliance with our CC&Rs and to get the job
done, i.e., a restaurant that meets owners’ needs is expeditiously put back
in operation using on an open,fully disclosed analysis of the
options.
Although the specificity of instruction to a GM is not normally
needed or appropriate, it is necessary in this case because 1) the job is not
done, 2) SCA is not in legal compliance, and 3) the current method being
employed by the Board and GM offers no promise of relief.
It is my recommendation that the Board vote each of my recommendations
up, down or to modify individually, rather than reject or table this entire
report for whatever reason.
The GM cannot do her job if this Board does not do its job.
Recommendations
1. Resolve that time is of the essence
to return the restaurant to operation to bring SCA back into compliance our
CC&Rs provision 7.2(b).1.
2. Resolve that the SCA Board
is prohibited by statute (NRS 116.3103(2)(a) from changing the CC&Rs or
exempting the Association, the Board or the members from any of the provisions
of the CC&Rs.2.
3. For discussion and possible
action at the June 25 meeting, direct the GM to locate an independent commercial
agent/ real estate broker/agent/with expertise in bars, restaurants, gaming and
the local market to potentially negotiate a lease, utilizing the recommendations
and expertise of residents to assist her in her search.
4. If the GM needs outside expertise to
complete the analysis and report by June 9 for the June 22 Board meeting,
authorize the expenditure of up to $2,000 for this purpose.
This does not have to be the same specialized agent who will be
needed to eventually negotiate a lease.
5. Board approval is requested to specify
that at least the following options must be reported for the Board’s
consideration at the June 25 Board meeting.
The GM can include other options in the analysis.
The final pages of this document contain
information I gleaned from a review of SCA records and Owner
input.
a. Option
1
Lease space to a tenant for $1 rent
b. Option
2
Restaurant Subsidized by Gaming using a licensed route operator or a
licensed tenant.
c. Option 3
Restaurant using a required food and beverage minimum.
d. Option 4
Non-profit Culinary School operated by a newly chartered SCA Culinary
Club.
e. Option
5
Re-purpose the space into multi-purpose and activity
rooms
6. Direct the GM to complete by June 9, 2017
for Board review, and publish on June 16 in the Board Book, the analysis of the
selected options, including pros, cons, costs and recommendations, including
benchmark comparisons with the local comparables, The Willows at Sun City
MacDonald Ranch and three restaurants owned by Sun City Summerlin: 5 Star
Tavern, Tavern at the Falls, and The Summit.
7. Board should specify the high-level
parameters to be mandatory in any lease.
8. Direct GM to recommend RFP parameters
for potential tenants using the suggestions below which came from input from
residents and the historical record of SCA, and ways to ensure an open, fair
selection process.
Regardless of whether the suggestions below are used or changed, the GM
is directed to report costs and justify how her recommendations benefit members.
Restaurant features suggested by members
include:
a. Reasonably priced food and drinks
especially with discounted prices during daily Happy Hour.
b. Menu items like common café/tavern
fare with variety to accommodate taste for ethnic diversity, eg., burritos,
chicken teriyaki, lasagna, etc.
c. Food or bar service during hours when
the most people are there for other activities.
d. 8 hours per day, six days/
week.
e. Offer take out
menu.
f. Compete for the catering to SCA
Clubs; staging area for other caterers.
g. No outside catering jobs.
h. Tenant is
responsible for maintaining and replacing the equipment.
i. Tenant is responsible for
utilities.
Background
The last of five failed restaurants closed in January, 2016, two
months after the GM was hired, but a year before the cut over to self-management
from First Service Residential (FSR) was scheduled to occur.
The Board did not give the GM policy direction to make reopening
the
restaurant a top priority and priority was given to myriad tasks required to
transition accounting and operational systems from FSR’s proprietary system.
Further, FSR’s lack of cooperation, opaque records and failure to
perform required maintenance demanded that the GM’s attention be focused on
deferred maintenance of facilities and systems changes.
7/28/16
GM reported to the Board that:
A workshop has been scheduled for Tuesday, September 27,
2016 at 9 am in the Delaware room.
This workshop is an opportunity for residents to share feedback to
Management and the Board regarding the restaurant space.
The Board has instructed me that securing a restaurant is a management
task.
I think we can all agree that a restaurant is
needed; it’s just a matter of what kind and how we go about it.
To
that end, we hope that this scheduled workshop is productive and meaningful.
There is no specific timeline or process that has been outlined yet
related to the restaurant. This is just the beginning.
9/27/16
Workshop for resident input was held, but there is
no audio recording, no minutes, or even the fact that the meeting occurred
listed on the SCA website.
The GM has not articulated how Owners benefit or
why it is a better business decision to structure the study to evade giving
Owners their rights as mandated by NRS 116.31083.
11/16/16
The GM was directed during her appraisal that a performance expectation
was that she was to “Present the Board with alternatives/resolutions for the
restaurant space by the end of the fiscal year (12/31/17).
2/23/17
The GM offered three alternatives, recommending two and against a
self-managed alternative and requested Board direction:
• Self-managed restaurant with monopoly on catering, unacceptable
levels of liability and increases in accounting, auditing and insurance costs
(Employees were not mentioned.)
• Tenant-operated Restaurant- leased for $1/year, requiring
$14+/year direct subsidy from dues for utilities estimated at $100-120K/yr.;
monopoly on catering, vendor/public would compete for the ballroom and lessen
access for club and association events; close coffee bar.
• Repurpose space – Inaccurately stated that CC&Rs 7.2b
requires written consent of the majority of the members to re-purpose; planned
use “multi-purpose & activity”rooms.
Conclusion
“Does the board have any direction to the General Manager related
to
Tenant leases space and repurpose space?”
3/23/17
Board ratified recommendation to eliminate self-managed option;
notified Owners there would be more workshops for their input.
5/9/17
Restaurant Space Workshop collected Owner input,
but was no agenda, no audio recording and no minutes.
5/9/17
Tom Nissen presented this status report of actions taken between
2/23/17 update report and 5/9/17 update report:
• A draft P&L was developed (P&L was not
shared nor was how he has the expertise.)
• Advice was received from potential tenants who self-initiated contact
with SCA (This creates a conflict as it biases the
process.)
• $1 rent (as example) to prove that subsidy is the only way a
restaurant could succeed.
• SCA should prop up the operator at an estimated
annual cost of $100K-$125K to ensure the tenants’ success.
(Is this expenditure even permissible by our
CC&Rs?).
• More financial work needed (The reason for it
is not explained)
• 1120H tax issues
• Get new attorney’s opinion needed about re-purpose
• Let new Board weigh in Impact of restaurant not being in
operation.
Owners are deprived of an expected service.
This amenity was created by the Declarant Del Webb
and was intended to be in continuous operation unless 75% agree in writing to
discontinue the operation.
Waste of money.
It costs $4,000/month, excluding the cost for reserving for the idle
equipment, for every month.
The impact on the Reserves is anecdotally a similar amount, but
this
cost needs to be articulated in the report.
Restaurant staying closed put SCA in violation of CC&Rs.
Significant conflicting priorities and inadequate direction from the
Board delayed the GM’s work on the project.
Residents have not had a restaurant for 16 months already and there
is no end in sight.
That the SCA Board has tolerated and even exacerbated SCA being in
violation of CC&R 7.2(b) is unacceptable and must be
corrected.
No plan.
There is no articulated plan with milestones and deadlines to get the
job done.
Failing to plan is planning to fail.
Role confusion is exacerbated and is destructive to self-management
being successful in SCA.
The GM reported that “The Board has instructed me that securing a restaurant is a
management task.” Over-delegation of the Board’s policy function to the
GM will cause failure of self-management.
Option 1
Food and bar service with direct subsidy from the dues.
In both the GM’s and Tom Nissen status reports the necessity of a
subsidy was emphasized.
Renting to a tenant for $1 was an example which would result in a
subsidy from the Owners assessments of about $14-18/year per Lot.
(How this estimate was built needs to be publicly
disclosed.)
Many Owners have repeatedly stated they want to see some form of
reasonably priced food and bar service that is open during the hours that most
people are visiting the Anthem Center for other activities, but are opposed to direct subsidy from the dues.
The GM should articulate in writing
why she is recommending that the Board adopt the policy that SCA owners should
take responsibility for propping up a vendor who would otherwise fail because
the food is not at the right price point nor of good quality.
Option 2
Gaming to subsidize restaurant by leasing to a licensed tenant or a
licensed route operator.
The Board needs to get a specialized agent/broker's
advice, but previous Boards have concluded based on their analysis that gaming
under the license of a route operator or the tenant’s existing license can be
profitable.
Since the Association cannot receive a cut of the gaming profits (per
Gaming Control Board), SCA could benefit by more favorable lease terms with a
tenant whose profit came partially from gaming.
Presumably, the tenant would not need to cut corners on the quality of
the food or raise menu prices if the majority of their income came from gaming.
The goal would be to negotiate a lease favorable enough to avoid
a
subsidy from dues.
Information from several former Board members shows that renovating
the space for gaming was explored earlier.
About $100K was a contractor's estimate (around 2009) for
a
newly-constructed bar and the necessary removal of a non-load-bearing wall.
One current estimate for a reconfigured space would have an L-shaped
bar that could accommodate up to 15 machines at a cost of $170,000 whereas a
U-shaped bar is estimated to cost around $250,000.
Using a route operator or a licensed tenant would render moot
identified potential problems and costs of insurance and licensing which could
exist if the Association were the operator.
If a commercial broker with expertise in the local market, gaming, restaurants and bars couldn't get a route operator to come in because it wasn't worth it financially, or if we could get a more favorable lease with a better but a different tenant who was not licensed for gaming, then gaming could be dropped if unneeded, unwanted, or not worth the trouble.
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Now...it's your
turn.
Have a comment ?
We suggest you send your thoughts
directly to members of the Sun City Anthem Board.
Here is a link to their respective
email addresses:
...and send any personal thoughts to us
at:
Hi Dick,
Thank you for all your hard work that you provide us here at SCA, and especially today, Memorial Day.
Your email was both timely and pertinent for the holiday.
I noticed no one else in the SCA community bloggers has offered to recognize the day.
Sad, isn’t it?