LAKE FOREST PROPERTY OWNERS ASSOCIATION
SPECIAL BOARD MEETING
August 23, 2004

 The President, Mitch Davis, called the Special Board Meeting of the Lake Forest Board of Directors to order at 6:30 p.m.

 Guest Speaker – Mike Andreoli

 M. Andreoli began a discussion involving the details of the auditor’s report for the restructuring proposal of Lake Forest.  He stated that the figures used were based on the budget.  The figures that based the initial assumption were provided by Kristal Neese from the current budget. 

 Revenue

 Andreoli detailed the revenue from the proposal.  The $710,400 revenue amount in the proposal represents dues of $18.50 per month.  The golf membership revenue of $8,100 is based on 250 golfers at an additional fee of $36.00 per month.  This additional golf fee was needed for a break even. 

 Andreoli stated that the interest income of $60,000 in revenues is based on cash from the sale of assets earning a low interest rate typical at most banks.

 Expenses

 Andreoli stated that the operating fees represent a reinstatement of the transfer fee.  The expenses were based on historical numbers.  Andreoli stated that the $191,476 of excess revenues collected over expenses includes depreciation.  Underwood mentioned that depreciation is normally not a cash expense.  He said the $191K comes out to $4.79 per member that is to be charged for depreciation.  Underwood stated that he would not be against taking the $4.79 out of the $18.50 charged per member.  Discussion followed among board members and Andreoli.  Discussion concluded with the auditor’s statement that taking the depreciation out of the two million dollars in cash would deplete the funds.

 Andreoli reported that the proceeds from the sale of assets detailed are conservative figures.  He stated that a twelve-month period is a short-term analysis for this proposal.  This concludes Andreoli’s report.

 Board Discussion and Questions for Andreoli

 S. Coxwell questions the increase in Food and Beverage revenue.  Andreoli says this is because labor is being accounted for separately.

 Board discusses the tax escrow account.  Andreoli suggests that the Board could just charge $21 per month and not mention an escrow account.

 S. Coxwell questions the expenses for other amenities.  Andreoli responds that the expenses for tennis and pools is in three different categories and is not listed separately.  He says that the members pay $1.43 per month for the pools and .53 cents per month for the tennis courts.  S. Coxwell questions the difference in golf course revenue and expenses from budgeted amounts.  Andreoli answers that labor and benefits includes golf course expenses.  He further states that the only changes from previously budgeted golf course expenses is a $20K cut in golf expenses for fertilizer.  Also golf course labor is also decreased from a reduction in personnel benefits including insurance, 401K, etc.  He further stated that having 18 verses 27 holes decreases employee and maintenance expenses.

 Underwood stated that currently the Lake Forest benefits make up for the somewhat low hourly wages.  However not many companies pay 100 percent medical.

 Andreoli leaves the meeting at 7:15pm.

 Davis discusses his opinion on the subject of restructure.  He said the current structure works very well.  Lake Forest is in the black and has lots of amenities.  Davis does not recommend disposing of any amenities.  He also said that he thinks the employees are taking the biggest hit with this proposal.

 Underwood responded that with the restructure Lake Forest would have no debt, lower dues, cash in the bank, and the key amenities.  He further stated that property values would likely increase. 

  Underwood stated that he wants a vote on support of the restructuring proposal. Davis stated that we should wait to vote until all members are present.  Deloney motioned to take a vote on support of the restructuring proposal and that the vote should be by secret ballet.  Underwood seconds.  Vote by secret ballot on support of the restructuring proposal passed 4 to 3.  Threlkeld was absent.

 Deloney details a paper he submitted to the Board regarding Roberts Rules of Order and the ability of President Mitch Davis to serve impartially at the Special Board Meeting in October.  (See Attached Paper – Deloney)

 Deloney motions for a vote by secret ballot to remove President Mitch Davis from presiding at the Special Board Meeting on October 11.  A vote of yes indicates that Deloney will preside at the meeting.  A vote of no indicates that Davis will preside.  Motion dies with 4 votes (no) for Davis to preside and 2 votes (yes) for Deloney to preside.  Sheldon abstained.

 Further discussion on the subject concludes that there will be no presentation of views on the restructure.  Questions will be taken in writing from the audience and answered by the Board.  No late questions will be taken. 

 Meeting adjourned at 8:10pm.

 _______________________________                _________________________________

Mitch Davis, President                                          Sarah D. Coxwell, Secretary