Dr. Kern called the meeting to order at 9:12 am. Board members in attendance were Dr. Robert Kern, President; Mr. Preston Beck, Vice President; Mr. K. Robert Kreiger, Secretary/Treasurer; Mr. R. L. Reeder, Sr., Mrs. Thelma S. Jackson, Mr. Larry Kirk, and Dr.. Anna B. Coles, Directors. In attendance from Hilton Grand Vacations Company were: Dave Pontius, Senior Vice Operations; Gary Byrd, Vice President-Operations; Jeffrey Calvert, General Manager; Kevin Lang, Assistant General Manager, and Gail Grill, Executive Assistant and Recording Secretary for the meeting.
Also in attendance were Chris Van Ruiten, Comerica Investment Company; Pernille Lake, Director-Homeowner Association Accounting; Tom Damico, Executive Assistant; and Marc Neu, Senior Manager, Corporate Compliance.
Establishment of Quorum – With all board members in attendance, a quorum was established per the Association By-Laws.
Approval Meeting Minutes
The minutes from the prior meeting had been distributed prior to the meeting. Mr. Byrd suggested a change for the first paragraph, second page: instead of reflecting when resort “becomes 95% sold”, it should be “becomes 98% sold.” Mr. Kirk made a motion
to accept minutes with the change noted by Mr. Byrd; Mr. Beck seconded. Motion
carried.
Ms. Jackson asked about minutes from the election of officers. For the record, Dr. Kern recapped the meeting of July 2, 2002:
On July 2, 2002, a telephone conference was held to elect officers. Mr. Kirk nominated Dr. Kern for President; Dr. Kern nominated Mr. Beck for Vice President; Dr. Kern nominated Mr. Kreiger for Secretary/Treasurer; all
nominations were duly seconded; and Motions carried for the election for the
new slate of officers. The budget meeting date was set for Thursday, October 17, at 9:00 am, at Corporate Headquarters in Orlando. Mr. Kirk suggested a dinner meeting on the evening prior to the budget meeting, in order to orient the new board. Ms. Jackson made a motion to approve the recapped minutes as
Old Business –
Management Company Report – Mr. Pontius gave the report
• Hilton Corporation’s business is recovering slowly after the tragedy of September
11, 2001; they’ve done cost cutting, and are poised for when people start traveling again.
• Regarding sales, Hilton Grand Vacations Club has had an extremely good year.
However, as Hilton Corporation is now economizing, Hilton Grand Vacations has to hold back on development somewhat due to funding limitations.
• Mr. Pontius said the Hilton Club is a new timeshare club in New York, located in two
floors of the New York Hilton that were converted to upscale units with plasma screen TVs and high-end finishes; designed to appeal to people who live in suburban New York who want to visit the City, or people who do business in the City and want to have a place to lodge clients; and set it up for nightly usage.
• Mr. Pontius reviewed details on Club members and usage statistics. He reviewed
the Sea World owner activity, and the usage at the Sea World resort, for 2002. General Manager’s Operations Report –
Mr. Lang gave the first part of the report. He said the renovation in OVS I for soft goods, including drapery, carpet, bedspreads, wallpaper in vanity area, sofas, was finished on schedule, and is under budget so far. He said the rooms turned out very well. The four penthouse units are pending refurbishment due to inventory constraints. Mr. Calvert resumed the report. He welcomed the Board members back to their home, and gave an overview of the Gallup scores. Mr. Byrd said the chart reviewed illustrated only the top score (extremely satisfied) for each question, shown quarter over quarter, due to the different demographics that travel during different quarters. Mr. Byrd said the scores had improved in 2002 over 2001. He said Gallup would tell you the ratings at Sea World are phenomenal in the industry. Mr. Calvert said that Sea World staff is working hard to provide even better service to guests. Mr. Calvert reviewed individual rating charts with the Board.
When resort security’s scores were reviewed; additional discussion related to security’s uniform. Mr. Kirk felt security should be clearly identifiable. Mr. Calvert said he would work with Mr. Byrd on this issue. Mr. Calvert said he changed the Director of Security’s hours to be second shift, when most security issues come up.
RCI scores were reviewed; he noted that the resort is rated number one for the Orlando area.
Mr. Calvert reviewed the new managers in 2002. He thanked Mr. Lang, the Assistant General Manager, for his invaluable assistance in budgeting, and making staff changes during Mr. Calvert’s first month,.
Mr. Byrd gave an update on the Security Gatehouse. He said the Department of Review for Construction is reviewing the new gate construction, construction is due to begin in December and be finalized by early February. The project is being done at the Developer’s cost, and will be located by Registration. Security personnel will be stationed in the gatehouse 24 hours a day, 7 days a week. A security camera will monitor vendors arriving with deliveries. Mr. Byrd said this would enhance security immensely. Mr. Pontius said there have not been any significant security infractions, however it makes people feel more secure, and other properties in the area have security gatehouses in operation.
Dr. Kern asked that the agenda jump ahead so that Mr. Van Ruiten of Comerica could give his presentation.
Mr. Van Ruiten talked about the reserve investment program for the resort. He said the program was started a year ago, and the money is on average earning about 3%, compared to the prior program which had been invested in money market accounts, whose interest rates are in the 1% range now.
He reviewed schedules for OVS and OVS II, for a three-year period, including investments in CDs; showing a budget for monthly reserve investments and distributions. Mr. Van Ruiten said the goal was to have a laddered investment strategy to try to forecast into the future what is going to be happening , and maximize returns. Mr. Byrd asked about the projected rate of return. Mr. Van Ruiten said he used today’s rates, and on average it is in the range of 2.2%.
Pernille Lake said HOA is issuing quarterly statements for the reserves. She said there are updates available on the Web.
Mr. Van Ruiten was thanked for his report to the Board. Ms. Lake asked if the Board would name a primary contact for Comerica to assist if a CD needed to be broken, etc., Dr. Kern said he would be the contact, until the Board becomes a five member board and has it’s own Treasurer. Ms. Lake said the schedules presented were based on the proposed budget, and will be updated to reflect any changes made as a result of today’s meeting. Mr. Pontius said that working with Mr. Van Ruiten has been great, and the quality of the information has been exceptional.
The Operations Report was resumed. Mr. Lang gave a financial overview, including accounts receivable, which showed a 95% rate of payment through September, for both OVS I and II.
New Business –
Review and Approval of 2003 Budget Mr. Lang gave the budget presentation.
• A new chart of accounts was introduced in 2002 to assist in monitoring of various
line items on a monthly basis. The budget for 2003 reflects the new chart.
• OVS I is 14.3% of the shared expenses; and OVS II is 85.7%.
• Mr. Lang said the property insurance for 2003 has increased over 80%. Mr. Byrd
said insurance has gone up at all HGVC properties tremendously, due to insurance companies investments going down, and passing those costs on to the customer. Mr. Pontius said the insurance carriers have made terrorism insurance a separate rider, and the costs are prohibitive. Hilton properties are electing not to have the insurance because of this.
• Housekeeping was moved in-house during 2002, and in 2003 would be fully
implemented, which lowers the labor cost. This allows the costs to be more fixed due to better forecasting, and increases efficiency at peak-need times, because it puts the clock in the staff’s pockets, and provides an incentive for cleaning to be done more quickly.
The maintenance fee for OVS I for a 2 or 3-bedroom is $580.81 ($418.65-Operating Fee and $77.16-Reserves, $85-Club Fee) excluding property taxes. This includes, which is a 3.17% increase, 2.6% of which is due to property insurance. The remainder of the increase is a minimal increase. Dr. Kern asked why the percentage of property insurance for OVS I and II differed from percentages for shared expenses. It was explained that property insurance is property specific.
• An independent company that specializes in reserves, Armstrong & Associates,
prepared a reserve study. The reserve budget was prepared using information from the study, which was based on the resort’s current funding, projected revenues and expenses,. In addition, Mr. Byrd included a 3.9% increase, as a conservative hedge against inflation.
Dr. Kern asked each board member if they were satisfied with the budget presentation for 2003; and each signified that they were. Mr. Krieger made a motion to accept 2003 proposed budget as presented for OVS I, with a maintenance fee for 2 and 3-bedroom
units of $580.81; seconded by Dr. Coles. Motion carried.
OVS II has a 4.9% increase per unit type in the maintenance fees for 2002. The proposed maintenance fee for 1-bedroom of $408.10 ($275.83-Operating Fee, $47.28-Reserves, $85-Club Fee), 2-bedroom of $543.21 ($392.17-Operating Fee, $66.04-Reserves, $85-Club Fee), and 3-bedroom is $675.79 ($503.42-Operating Fee, $87.38-Reserves, $85-Club Fee). Mr. Kirk made a motion to approve the proposed budget for
Deli Refurbishment
Mr. Byrd said the refurbishment would include closing the entry door coming from the lobby, and moving it to the middle of the hallway, and adding a sign, to raise awareness of the deli. Also propose adding an awning to extend 12-feet, ceiling fans, and tables. Mr. Calvert said that inside the deli, there could be a “fresh market” layout, with segmented areas for various items, to create more enticement to guests to buy ready-assembled meal packages, etc. Discussion ensued about expanding the deli into the adjacent space, and relocating the video games.
Mr. Kirk made a motion to enhance the deli by adding the awning outside the deli, installing ceiling fans, moving the entry door, adding a sign in the lobby at the expense
of the developer; seconded by Mr. Beck. Motion carried.
The board agreed that consideration will be given for the utilization of video arcade area for deli expansion, at the cost of the Developer, provided the current services of the arcade can be relocated.
Mr. Kirk said he would recommend having the board walk the resort prior to a meeting. Telephone Switch
Mr. Kreiger said the current switch capacity for voice mail has been exceeded, so there is an immediate need to expand it. In considering services necessary for the future, he said current income for telephone calls by guests would pay for the replacement equipment, and its management by Intercom, over a 7-year period. Intercom currently provides all the telephone services for the HGVC corporate office, including a dedicated on-site telephone consultant. This has reduced costs for telephone service by about $250,000 in the first year. Mr. Kreiger asked the board for permission to pursue an agreement to outsource the equipment and management of the telephone switch, which would remove the expense from the Reserves for the resort. Dr. Coles made a motion to authorize Kreiger to pursue an agreement with INNRCOM to provide a telephone
switch, and the management thereof; seconded by Mr. Beck seconded. Motion
passed.
Mr. Kreiger said the board needed a motion to include the investment of all Association funds by Comerica. Mr. Kreiger made a motion to expand and extend the investment policy to operating, tax, and all funds controlled by the Association from the current
policy for investment of the reserve funds; seconded by Mr. Kirk. Motion carried.
Mr. Kreiger said property taxes for the resort were reviewed in light of Florida Statutes, and reviewed the determination by the property assessor, and found that the resort is being assessed in a way that is favorable to the resort.
Spending Limits
Dr. Kern had sent a letter to board members regarding the board member spending limits. Ms. Lake reviewed the corporate policy for reserve expenditures, which adequately protects the association for reserve expenditures. She said that for expenses in the $5,000 to $25,000 category, the current policy is as follows:
The resort manager will request a reserve disbursement. The VP or regional manager will approve it. Two board members will have to sign off on the request. ARDA
Mr. Lang reviewed the $3.00 ARDA voluntary contribution, to consider for inclusion on the maintenance fee statements. He had provided an overview of legislative issues that ARDA had been involved with, in materials sent to the Board before the meeting. Mr. Pontius said about 70% of HGVC owners give the voluntary contribution to ARDA. He said that a vast majority of the associations HGVC manages has also opted to become a member of ARDA’s ROC PAC. This is the resort owners’ coalition that supports lobbying efforts around the country to help protect timeshare owners from new taxes, etc., which have been very effective in the past. Mr. Kirk recommended that the association include the voluntary contribution in the maintenance fee bills. Dr. Kern made a motion to include the ARDA ROC PAC voluntary contribution on the
maintenance fee statements, and purchase the $100 membership for the ROC PAC;
seconded by Mr. Beck. Motion carried.
Next Meeting
The date for the next board meeting was set for Thursday, at 2:00, for May 8th, 2003,
and the annual meeting was set for Friday, at 9:00 am, for May 9th, 2003. Mr. Reeder
made a motion to accept dates; seconded by Mr. Jackson. The times will be decided
later. Motion passed.
Adjournment – Mr. Kirk made a motion to adjourn at 2:00 pm, seconded by Mr. Beck.
