Annual Meeting Minutes May 28, 2022

Posted on: Aug 12, 2022

North Shores Annual Meeting of Members – Saturday, May 28, 2022

The annual meeting of the members of North Shores Board of Governors, Inc., a Delaware nonstock corporation, was called to order at 10:17 a.m. by Board President Steven Hollman.

President Hollman thanked all for their attendance in person and by ZOOM audio-visual connection.

President Hollman then introduced the other board members and noted his particular thanks to Ms. Debbie Director for 10 years of service to the community.  President Hollman also recognized Helen Hoart, Evan Thalenberg, and Bruce Wilson for their board service, and he asked the members of the community to recognize Phyllis Donovan, the community’s bookkeeper, and Jeff Sellman, the Community Executive, for their many contributions to the operations of the Community.

President Hollman asked for confirmation that there was a quorum, and Secretary Director confirmed that the requisite percentage of owners, represented in person or by proxy, was in attendance in the meeting and that a quorum was thus established, allowing the business of the community to be conducted.

President Hollman then reminded all in attendance at the meeting that receipt of a paper ballot (for those attending in person) or casting a vote electronically on any matter (for those attending by ZOOM audio-visual conference) would nullify any previously granted proxies.

Approval of 2021 Minutes

The first order of business was approval of the Minutes of the 2021 annual meeting of the members.  The floor was opened for comment on the minutes, and no comments or questions were raised.  On a motion duly made and seconded, the Minutes were approved by acclamation.

President’s Report

President Hollman summarized some of the governance resources that he had reviewed in assuming his new role as board president, in particular from materials made available from the Community Associations Institute, as a useful source of best practices.  President Hollman then thanked resident Joann Burnstein, a specialist and professional consultant on non-profit board governance, for volunteering her time and input on good board governance practices.  President Hollman also noted that he had reviewed other local communities and neighborhood associations for insights into their best practices, including sound financial management.

President Hollman observed that the Board had, on the recommendation of Director Helen Hoart in her capacity as Treasurer, decided to conduct a formal audit of the community’s financial statements for 2021.  In years prior to 2012, the Board had relied on an annual “compilation” of its financial statements by our outside accountants, and then from 2012 through 2020, it had relied on formal “reviews” conducted by the community’s auditors — a level of accounting review that involves less field and account testing than a formal audit.  President Hollman noted that both the 2021 audit and an update to the 2014 capital survey of the community’s assets and long-term funding needs were currently underway and that these reports would be provided to the community when completed.

President Hollman indicated that funding for many of the community’s capital projects traditionally have been addressed with current operating funds and that there is no separate long-term capital reserve.  Rather, the community has excess funds just over $1.0 million accumulated over the past decade, and boards traditionally have relied on a combination of annual and special assessments, and, when required, funds from the community’s cash on hand or certificates of deposit, to cover ongoing capital needs.

However, President Hollman also shared that an early draft of the capital reserve study update indicates that while the community is well-funded for the next several years, over the longer term, some of the community’s capital assets are deteriorating at a more rapid rate than expected, and the study draft preliminarily recommended an increase in longer-term capital funding of approximately $400 to $575 per annum per lot in the community, with a 3% cost escalator each year.  The view of the capital survey consultants is that this level of additional funding from the community would be appropriate for full funding of the community’s anticipated future capital needs.

President Hollman noted that these funding levels did not include extraordinary beach repairs or flood damage, one of the key reasons that the Board seeks to keep excess cash on hand as a means of paying for a part of any such emergency beach repairs.  President Hollman expressed the view that adequate funding for common infrastructure is a critical requirement for the long-term health of the community, and he repeated that the capital study would be made available to all residents when it is completed.

President Hollman then mentioned that the community had received from Henlopen Acres a copy of a letter sent by that community to DNREC concerning proposed dredging in the Rehoboth-Lewes canal, and he noted that the marinas in both Henlopen Acres and North Shores need dredging in the next 12-18 months.  President Hollman indicated that the Board continues to evaluate dredging options for the winter of 2022/2023, the initiation of which may depend on finding a suitable location for the dredging spoils.

Beach and Pool Report – Captain Kent Buckson

Captain Buckson provided the Beach and Pool Report, noting that the beach and pool guards are 100% staffed with a healthy mix of returning and new guards.  Captain Buckson’s instructions to the staff are to be positive, be professional, be polite and be proactive.

Captain Buckson noted that the Junior Lifeguard program, which was highly popular in 2021, will be offered again this year from mid-June.  The program teaches ocean safety and is intended to be a feeder for future lifeguards.  Captain Buckson also noted the popularity of the Lifeguard Ball at the end of the summer, commenting that this was highly useful for morale and retention.

 

Treasurer’s Report – Helen Hoart

Treasurer Helen Hoart reported on the financial health of the community, describing how the Board manages the finances of this community and thanking Phyllis Donovan for her 48 years of service as the community’s bookkeeper.  Luff and Associates, our CPAs, are a great resource and the source of our annual review.

Treasurer Hoart reported that every month Phyllis Donovan puts together a financial packet for the Treasurer’s review and then circulates this package to the board.  The monthly financial package allows the Board to track our actual expenses every month to our budget.  We also review the balance sheet and disbursements as part of the monthly package.

At the end of the year, Luff then prepares a review of our financials.  There are three levels a CPA firm offers.  There is a compilation – and it’s exactly as it sounds.  The second is a review, which is what Luff has been doing for us since 2017.  The review looks at our revenues and expenses year over year to determine if there are significant changes.  The third level is an audit, and as noted above, we are currently in the middle of the annual audit for 2021.

We post all annual financial information on the website for community review.  We will also share the audit document when the audit is completed

Our financial position is strong because of prudent management.  Our revenue comes primarily from our assessments, which are $2,600 for 2022, a $200 increase from last year.  Even with that increase we are still operating with a deficit (which is then covered by a reduction in our excess operating funds) of $141,000 but the board agreed that the excess cash from 2021 will be used in our 2022 operations, thereby reducing our deficit to $49,939.  In 2021 expenses were $126,282 below budget.  A number of factors contributed to lower expenses.

• Dredging was postponed until 2022/23 because of permitting delays associated with a location for the dredging spoils.
• Storm drainage repair work did not occur in 2021 because of contractor delays.
• Road and marina parking lot paving was postponed until the marina dredging is completed, since heavy equipment will be brought into the Marina area, possibly causing some road damage.

Minor beach and marina repairs were undertaken by Jeff Selman, North Shore’s Community Executive, and consequently, we didn’t have to pay a contractor.  These repairs included the beach crossovers, sand fence along the crossovers, replacing the marina dock decking and repairing the Kawasaki ATVs.

The community’s 2022 budget is posted on the North Shores website.  Highlights of some major areas of interest include the following.

As our community ages, we will always have the need to invest in our infrastructure.  This year our major capital expense is dredging of the marina.  We are hopeful that will commence in the fall and is budgeted at $150,000.  Other major expenses include:

• Purchase of a Polaris ATV to be used for the beach crew transport of equipment and passengers needing help to get to the beach,
• New sand fence, and
• Further repair of our dune crossings.

Amounts for each of these items are in the budget which is online and was sent to the community in our annual mailing in April.  We have also experienced increases in our annual contracts and services, such as security patrol, trash removal, etc. Highlights of these operating revenue and expense items include:

• $269,640 in 2022 Beach and Pool/Tennis Club (“BTC”) revenue.
  1. The bulk of that — $197,200 – comes from umbrella and chair rental. The umbrella and chair rates were increased this year to keep pace with increased labor and equipment costs.  The last rate increase was in 2013.
  2. Boat docks are projected to contribute another $62,100 in revenue.
  3. We will also continue to sell merchandise and hold a Junior Lifeguard program again this year.

 

• BTC overall expenses in the budget are $416,100.
• Salaries are projected at $300,000 in 2022, a $15,000 increase from 2022. As we face competition from other beaches, restaurants, and area enterprises for seasonal employees, we will offer a starting salary of $16/hour to lifeguards and $14.75 per hour to beach crew and an increase of $1.50 per hour to returning employees beach and pool staff.

We noted in year end 2021 balance sheet that we had a little more than $1 million in CDARS (formerly, “Certificate of Deposit Account Registry Service,” but now renamed “IntraFi Network Deposits”).  CDARS (or, as they are now known, “IntraFi Network Deposits”) is a service that breaks large deposits of individuals and entities like North Shores into smaller pieces and places them in a network of federally insured banks and savings associations across the U.S., to permit individual depositors and entities like our community to have FDIC insurance on deposit amounts in excess of the FDIC limits.  This is a prudent means of holding near-cash reserves through a vehicle that is federally insured but is above the FDIC insurance limits for individual accounts.

President Hollman thanked Treasurer Hoart for the report and noted again that long-term capital needs in the community would likely require additional revenue sources in the coming years.  After a request for any questions or comments, the 2022 Budget as proposed by the Board was ratified by the homeowners.

ARC Report – Bruce Wilson

Director Bruce Wilson and President Hollman reported that architectural reviews continued with the pace of building in the neighborhood.  They reported that during 2021, there were 17 minor construction permits issued; 4 major construction/new house permits, and one extension. Fees generated from these 22 projects amounted to $6,750 under the community’s current rules.  In 2022 to date, four major and four minor projects were approved, resulting in $4,500 in fees.

Director Wilson and President Hollman reviewed the architectural review process with the community, noting again that key considerations with new construction include stormwater management.  Properties are required to take remedial steps to perc as much stormwater as possible on their land, but the increased roof cover of larger homes in the community increases the percentage of impervious lot coverage, and heavy storms invariably lead to excess drainage into the community’s drainage swell and piping system.  This adds to community costs over the longer term, and requires careful assessment of covenant compliance during the design and construction phases of new homes.

Given these considerations, in addition to initial plan review, the ARC intends in the future to increase inspections during construction, to ensure that original approved plans are being implemented during the construction process.

Board of Director Elections

Board Secretary Debbie director made remarks as she heads off into retirement.  She thanked the community for the opportunity to serve, and noted the increasing professionalism of the Board and governance in the community.  Secretary Director also reminded the community of the importance of having board members who can work constructively together.

President Hollman thanked Debbie for her years of service to the community, and then made remarks on the voting process for “ZOOM” A/V meeting participants, again reminding the participants that casting a ZOOM meeting vote or, for those attending in person, that taking a ballot for the meeting would void any previously issued proxies.  President Hollman thanked Anthony Cipriani and Carolyn Moser for their efforts to implement the ZOOM meeting option.  He also introduced Christopher J. Kephart, an attorney with the Morton, Valihura & Zerbato firm, as the Inspector of Elections.

President Hollman then introduced the Board candidates and indicated that each would be offered an opportunity to speak later during the meeting.

Old Business – Fee Elections

President Hollman reviewed the history of proposals and debate concerning the proposed construction and rental fees, dating back to the Board’s consideration of the issue during the winter of 2020-21 and the April newsletter to the community.  Following a positive shareholder vote at the May 2021 meeting, a December “ZOOM” call was held to permit opponents to express their views a second time, and to permit the Board to hear from residents who had not participated in the May meeting.

Messrs. Brinn and Antonelli spoke in opposition to the proposed fees, asserting that fees to cover the actual out-of-pocket costs of the community incurred during the building process would be appropriate, but that no fees for indirect costs should be imposed.  Mr. Brinn noted in particular that the Board should seek to encourage further development in the neighborhood, and that constructing (or reconstructing) owners should not be asked to incur the indirect burdens of administering the construction permit system or associated infrastructure costs, because those costs could not be tied to specific projects.

Mr. Brinn then made clear that the annual assessments should be increased to cover these costs and noted his view that construction fees for new construction should not be tied to the square footage of the proposed home.  Mr. Brinn noted that he and Mr. Antonelli opposed fees that raise costs for some in the neighborhood and not for others.

Mr. Antonelli reminded all that for the last 60 years, simple annual (and occasional special assessments) had spread costs equally throughout the neighborhood, and he noted that many homeowners opposed the new fee proposals.  Mr. Antonelli noted that the Board’s proposed reduction of construction fees from $2.00 per square foot to $1.00 per square foot was good progress, but that the Board should listen to the concerns of a large minority of homeowners if they were opposed to the fees.  Mr. Antonelli suggested that a committee of homeowners be engaged to debate further the fee proposals and determine what is fair.

President Hollman thanked Messrs. Brinn and Antonelli for their remarks, and observed that the draft Capital Asset study makes clear the community faces significant increased costs in the coming years that need to be addressed.  President Hollman reminded the community that increased fees would be used to sustain the community’s infrastructure, and that solid funding would enhance, not degrade, property values.  President Hollman reviewed the drainage and paving impact on the community resulting from new home construction, and he reminded homeowners that other similar communities along the Delaware coast – both private and public – almost universally imposed markedly higher construction fees.  President Hollman observed that Henlopen Acres charges approximately $20,000 for a construction permit, and that other communities, including Rehoboth and Dewey, charge $30,000 for such permits.

President Hollman observed that the community already had voted in favor of the construction and rental fee concepts, and that those concepts had now been sufficiently fleshed out that the Board could adopt a rule.  President Hollman noted that the Board was open to compromise on some issues such as grandfathering and the administration of minor projects, and clarifications that “interior only” projects would not be charged a construction fee if no other covenant issues, such as GFA limitations, were implicated by the construction.

President Hollman then opened the floor for questions and observations concerning the proposed construction and rental fees. Several homeowners spoke in favor of the construction and rental fee proposals, and several expressed their opposition.

After extensive discussion of homeowner viewpoints in favor and opposed to the proposed fees, the question was called, and voting took place on the following resolutions:

1. Construction Fees Does the community support a new construction fee rather than general community assessments to recover some of the infrastructure burden and administrative costs of construction through a graduated fee schedule tied to the size of the construction project, measured in gross floor area, up to a cap, with questions of grandfathering and fee minimums to be determined by the Board?
2. Rental Fees Does the community support the adoption of a rental amenity fee to be assessed to be assessed on tenants, with effect from and after January 1, 2023, in an amount equal to $20 per tenant per week.

Following the meeting, on June 4, 2022, the Board announced by email that the proposed construction fee and proposed rental fee resolutions were both adopted by the community.  The voting certification from the community’s Inspector of Elections is attached as an Exhibit to these minutes.

Board Elections

President Hollman then introduced each of the Board candidates, and he reminded the community how important Board elections are. The candidates, David Antonelli, Cyrus Brinn, Mickey Miller, and Joel Sher each made remarks.  Following the remarks, President Hollman announced that the voting results would not be available for a few days following the compilation of ZOOM, proxy and paper ballots and the official certification of the election.

 

Following the meeting, on June 4, 2022, the Board announced by email that David Antonelli and Cyrus Brinn had been elected as directors.  The voting certification from the community’s Inspector of Elections is attached as an Exhibit to these minutes. (click to view)

Memorial Day

President Hollman reminded all in attendance of the importance of observing Memorial Day and giving thanks for those who have made the ultimate sacrifice for their country.  After a reading of the names of the 13 U.S. service members killed in the terror attack at the Kabul airport, the community observed a moment of silence in memory of their sacrifice and of the following community neighbors whom the Board knows to have passed away since our last meeting:

 

• Robert Henry Richards, III
• Patrick John Brill
• Michael Melville Wood, III
• Goldie Nussbaum
• Joan Olivere (mother of Hallie Biden)
• Michael Norman Sohn
• Eugene “Gene” M. Korzenewski (father of resident Peter Korzenewiski)
• Charles “Sherfy” Jones
• Morton “Morty” Bender
• Diane Martin

 

 

There being no further questions or comments, and the meeting adjourned at 12:38 pm

 

Respectfully submitted

 

 

_______________________________

Bruce S. Wilson, Secretary