The filing won’t impact the Flagstaff, Ariz. club’s day-to-day operations, including its public golf course and restaurant, and won’t lead to any layoffs, the HOA Board President said. At issue is a long-standing dispute over addressing leakage from a man-made lake on the property, which led to a class-action suit from some homeowners and court-ordered fees if the lake is not kept properly filled.
The Board President of the Homeowners Association of Continental Country Club in Flagstaff, Ariz. acknowledged to the Arizona Daily Sun that the organization has filed for Chapter 11 bankruptcy protection, but said the filing will not impact day-to-day operations of the club, including the public golf course and the Oakmont Restaurant, and won’t mean any layoffs.
“This filing allows Continental and its homeowners the chance for a fresh start so we can best address several issues,” said Jon Held, President of the Association’s Board of Directors, in an e-mail to the Daily Sun. “In some cases, these problems predate the current board by years, if not decades. For the good of our residents and those who enjoy our facilities, it was time to take action.”
Held said the organization is facing several financial challenges, including an issue involving recent legal action over Lake Elaine, a man-made lake within the country club that has been the center of controversy for years, the Daily Sun reported.
First used to store water for Continental’s golf course, Lake Elaine is now only aesthetic, but has been leaking water for decades, the Daily Sun reported. For every four gallons of water that is pumped into the lake each day, three gallons are lost to seepage into the ground.
In 1988, a group of lakeside homeowners filed a class-action lawsuit against the HOA that mandated that the HOA should keep the lake full, the Daily Sun reported. But so far, no significant repairs to stop the seepage have moved forward.
In 2017, residents came back and asked the court to hold the HOA in contempt for not following through on its mandate to keep the lake full, the Daily Sun reported. The court agreed, and a daily fee of $700 was placed on the HOA for not filling the lake. That fee would drop to $500 if the HOA begins refilling the lake, and continue until it is full.
The fee had been set to begin at the start of February, but due to the bankruptcy, it has been put on hold, the Daily Sun reported.
The repairs the lake needs would cost more than a million dollars in addition to the water needed to fill the lake, Held told the Daily Sun, and the HOA simply has not had the funds to complete those repairs.
But the residents involved in the class-action suit believe repairing the lake isn’t nearly that expensive, the Daily Sun reported.
“The association has said that any lake repair would cost millions of dollars. That’s not true. We think a partial repair could have been done for as little as $600,000,” attorney Jason Bliss with the office of Aspey Watkins and Diesel, which is representing the homeowners, told the Daily Sun.
“We don’t yet know what the ultimate effect of that bankruptcy will be on the finding of contempt or on the long-term future at the lake,” Bliss added. “We certainly are going to be involved in the bankruptcy proceeding and continue to assert our class-action rights to have the lake maintained and repaired.”
Most of the leaks are in the upper portion of Lake Elaine, Bliss said, and targeting repairs toward that section of the lake would go a long way in solving the problem.
After the court held the HOA in contempt last year, Bliss told the Daily Sun, the homeowners approached the HOA about ways to move forward, but their offers were rebuffed and the HOA decided to move forward with bankruptcy instead.
But Bliss also took issue with the HOA’s suggestion that the issue over Lake Elaine was the primary cause of the bankruptcy, the Daily Sun reported. The HOA has several other significant expenses and issues that have prevented it from properly facing those issues, Bliss said.
In a letter to HOA members, Held said the organization also has a $600,000 balloon payment on a loan taken out in 2011 for the installation of a new irrigation system, the Daily Sun reported.
The HOA also has lots of deferred maintenance fees, while also having some of the lowest member fees in the state, Bliss noted.
Based on the HOA’s rules, those fees can only be raised by a two-thirds vote by all members, the Daily Sun reported.
“So we know that the association is trying to make this look like it’s the bankruptcy is all about Lake Elaine, but the association has a number of financial problems, several of which are not related to Lake Elaine,” Bliss said. “The failure to plan by the association, the failure to reserve funds, has really put the association in a tough spot.”
It is not clear how the bankruptcy might impact the Lake Elaine issue, but Bliss said it could lead to a situation where the HOA is able to eliminate the lake but pay the surrounding homeowners for the reduced value of their homes, the Daily Sun reported.
“That’s not what any of our folks want. They don’t want to claim for damages. They want the lake fixed,” Bliss said.
Continental CC, situated below Mount Elden, has an 18-hole championship golf course designed by Bob E. Baldock, and also offers racquet sports, swimming, a fitness center and the Bear Paw family Recreation Center.
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