[2022] MVC Trust Owners Association - Reserve Funding Waiver etc?

[Davey54321]

i assume others have received this Limited Proxy document. Thoughts?

Any understanding as to why board is recommending Yes to Waive at this point in time?

TIA for responses…

Vicki & Dave

 

[SueDonJ]

Can you explain exactly what the BOD is recommending that you vote to waive?

I'm assuming that it has something to do with Fully-Funded Reserves because several states mandate that owners either fully-fund reserves OR vote a majority to waive them. South Carolina is one of those states so this is a voting issue for my Weeks every few years, and it wouldn't come as a surprise if Trust Members also must vote intermittently on it, too.

Anyway, before getting into any further explanation it's probably a good idea to know if Fully-Funded Reserves is the correct assumption.

 

[Davey54321]

Yes, sorry Susan, that I wasnt more explicit. I believe you are correct. it says basically that the B of D recommends a vote of YES to waive full funding of reserves for the 2023 fiscal year. If YES majority, level of reserves will be bellow fully funded. If NO majority, will result in fully funding 2023 reserves, which will cost between 8.57 and 8.98 per beneficial interest.

I dont remember seeing this before and we have owned trust points for years, but letter does say that The State of FLA permits the annual waiver or reduction of reserves…etc.

Again TIA !

 

[DRH90277]

"Crazy, crazy, crazy" and an indication that they are scared of telling us the true maintenance costs.

I'm for fully funding the reserves each year and like the idea of full reserves. The alternative to not funding reserves exposes the then current owners of weeks or points to either special assessments or increased maintenance fees to meet deferred needs. Deferring expenses to the future are much like the federal government approach, except the Vacation Club and owners can't print money.

Not to be too cynical, but could this be so that Vacation Club can brag about the low maintenance fees? If not fully funded, how does one know the amount of the accumulated deferred and unfunded expense? Do you think this deferred cost would be disclosed to those buying into Trust properties or to those buying weeks?

Please vote "NO"

 

[jmhpsu93]

Crazy, crazy, crazy and an indication that they are scared of telling us the true maintenance costs.

I'm for fully funding the reserves each year and like the idea of full reserves. The alternative to not funding reserves exposes the then current owners of weeks or points to either special assessments or increased maintenance fees to meet deferred needs. Deferring expenses to the future are much like the federal government approach, except Vacation Club can't print money.

Not to be too cynical, but could this be so that Vacation Club can brag about the low maintenance fees? If not fully funded, how does one know the accumulated deferred and unfunded expense? Do you think this deferred cost would be disclosed to those buying into Trust properties or to those buying weeks?

Please vote "NO"

I would think that based on historical behavior they would want the reserves fully funded, pushing up maintenance fees of which they get a 10% cut for management fees.

 

[VacationForever]

We own 2 timeshare weeks (SVR and MGV) in Orlando. HOAs of both properties send out annual communication and votes to owners as to whether to fully fund reserves or not. The way I read it is that local law's reserves requirement is over the top high, and that the reserves kept by the timeshare properties are the realistic amounts. Obviously the trust also holds Florida properties, and similarly want to under fund reserves.

BTW, I voted "Yes" to not fully fund the reserves for the Trust, which I fully believe is the right answer. If I didn't have the background of Florida's mandate of reserve funding, I would likely have voted "No" on the vote for the Trust. But since I do know what's going on with Florida, I go with Yes.

 

[SueDonJ]

The states that mandate fully-funded reserves (SC and FL are two that I know of) define what that means and it's not always compatible with the the timeshare companies' Reserve accounting practices. For example, a state's mandate might say that "fully-funded reserves" means that the owners have to fund an account that will be available to cover the total replacement cost or a very high percentage of the total replacement cost in the event that an unanticipated catastrophe requires a total/near-total rebuild, and such a strict mandate may not take into account things like existing warranties on major items (roofs, boardwalks, facades, etc) or things like the existing stockpile of furniture/unit appointments that the larger timeshare companies keep on hand or things like the 5/10-years soft/hard goods refurbishment schedule that keeps Marriott resorts in decent physical condition and on which Marriott bases its budgets' Reserves requirements. The mandates might also mean that a fully-funded Reserves account is a giant pile of money that may not ever need to be utilized.

Over the years when fully-funded reserves have come up as a voting issue for my SC resorts, on the schedule that's required by the state's mandate, the majority owners (me included) have voted to waive them. Don's a finance/tax guy and he's not ever been concerned that Marriott is underfunding our resorts based on the annual Budget Reports, and neither of us thinks that our MF's are low! Over the years we've been hit with two Special Assessments because of hurricanes that blew through two years in a row. Prior to those the last hurricane which caused significant damage on Hilton Head had been forty years earlier and there's no telling when/if the next one will hit. The SA's were to cover the percentage-based deductible for the catastrophic property damage insurance* that kicked in, and again no telling when another event might happen, how much damage it will cause and thus, how much that deductible will be. I much prefer that if a catastrophic event happens that has so many variables related to damage/repair costs, I want to be assessed my share of the cost when it's needed rather than letting it sit parked in an account that might never be needed.

*Note catastrophic property insurance and its percentage-based deductible is different from standard property insurance with a dollar-figure deductible. My resorts include in the Annual Budget the premiums and deductibles for standard property insurance. Note also that when we were hit with the two Special Assessments, Marriott explained them satisfactorily AND Marriott elected to not collect its 10% Management Fee on those monies.

I'm surprised this is the first time it's ever come up with the DC Trust annual budget/meeting, but offhand I don't know how often it comes up as a voting issue for my Weeks. And I am definitely not saying that everybody should share my opinion on fully-funded Reserves - but I am saying that waiving them doesn't automatically equate to an underfunded resort.

 

[DRH90277]

The states that mandate fully-funded reserves (SC and FL are two that I know of) define what that means and it's not always compatible with the the timeshare companies' Reserve accounting practices. For example, a state's mandate might say that "fully-funded reserves" means that the owners have to fund an account that will be available to cover the total replacement cost or a very high percentage of the total replacement cost in the event that an unanticipated catastrophe requires a total/near-total rebuild, and such a strict mandate may not take into account things like existing warranties on major items (roofs, boardwalks, facades, etc) or things like the existing stockpile of furniture/unit appointments that the larger timeshare companies keep on hand or things like the 5/10 soft/hard goods refurbishment schedule that keeps Marriott resorts in decent physical condition. The mandates might also mean that a fully-funded Reserves account is a giant pile of money that may not ever need to be utilized.

Over the years when fully-funded reserves have come up as a voting issue for my SC resorts, on the schedule that's required by the state's mandate, the majority owners (me included) have voted to waive them. Don's a finance/tax guy and he's not ever been concerned that Marriott is underfunding our resorts based on the annual Budget Reports, and neither of us thinks that our MF's are low! Over the years we've been hit with two Special Assessments because of hurricanes that blew through two years in a row. Prior to those the last hurricane which caused significant damage on Hilton Head had been forty years earlier and there's no telling when/if the next one will hit. The SA's were to cover the percentage-based deductible for the catastrophic property damage insurance* that kicked in, and again no telling when another event might happen, how much damage it will cause and thus, how much that deductible will be. I much prefer that if a catastrophic event happens that has so many variables related to damage/repair costs, I want to be assessed my share of the cost when it's needed rather than letting it sit parked in an account that might never be needed.

*Note catastrophic property insurance and its percentage-based deductible is different from standard property insurance with a dollar-figure deductible. My resorts include in the Annual Budget the premiums and deductibles for standard property insurance. Note also that when we were hit with the two Special Assessments, Marriott explained them satisfactorily AND Marriott elected to not collect its 10% Management Fee on those monies.

I'm surprised this is the first time it's ever come up with the DC Trust annual budget/meeting, but offhand I don't know how often it comes up as a voting issue for my Weeks. And I am definitely not saying that everybody should share my opinion on fully-funded Reserves - but I am saying that waiving them doesn't equate to an underfunded resort.

Still Crazy, crazy, crazy - Perhaps, the answer is in asking the BOD's and Marriott advisors to be more explicit about what they are suggesting and the ramifications. When the choice is "fully fund or to not fully fund" with no clarification, those of us with financial expertise will balk at the notion. I've seen some of the worst of financial risks and impacts and cannot concede to this "gloss over" approach.

 

[SueDonJ]

Still Crazy, crazy, crazy - Perhaps, the answer is in asking the BOD's and Marriott advisors to be more explicit about what they are suggesting and the ramifications. When the choice is "fully fund or to not fully fund" with no clarification, those of us with financial expertise will balk at the notion. I've seen some of the worst of financial risks and impacts and cannot concede to this "gloss over" approach.

I agree that it can be better explained, and have in the past asked for my resorts' BOD's to give a better explanation. I don't own Trust Points, though, so I don't know how much of an impediment it is that the Trust's BOD is much less concerned with single-resort issues and much more concerned with the inclusion of all resorts in the Trust and many of those not being subject to a fully-funded Reserves mandate.

The best explanation is in the mandates themselves, if you know which states are in play and how to look them up.

 

[dioxide45]

Grande Vista is going on 25 years old and have been waiving fully funded reserves every year and yet to see a special assessment. Florida Law requires the Association to maintain reserves for deferred maintenance and capital expenditures, based on the estimated useful life and replacement cost of each reserve item. The association will do its own reserve study every several years to determine the expected life of such items to determine the ongoing cost to replace the items.

 

[mjm1]

We have owned trust points for several years now and have voted "no" each time is has been requested. Our understanding of the issue is consistent with other TUG members who have indicated a "no" vote.

Best regards.

Mike

 

[hcarman]

We also own a property in Florida and always vote to waive fully funded reserves The different in maintenance fees is substantial if you vote to fully fund at some of these properties. We have never had an issue. And raising the maintenance substantially could have the affect of raising the number of delinquencies the following year.

 

[DRH90277]

We also own a property in Florida and always vote to waive fully funded reserves The different in maintenance fees is substantial if you vote to fully fund at some of these properties. We have never had an issue. And raising the maintenance substantially could have the affect of raising the number of delinquencies the following year.

I understand, however, deferring obligations does not eliminate them. This means that at some time, timeshare owners will need to make up for the deferrals and the amount deferred only keeps growing. The Boards should be disclosing the annual amount of this ever-growing deferral and the plan for addressing it. The chickens always come home to roost.

Would owners rather have to address delinquencies or a collapse at some point due to the weight of this growing obligation? Also, think about who is absorbing the potential deferrals for the recent acquired properties added to the program.

 

[SueDonJ]

I understand, however, deferring obligations does not eliminate them. This means that at some time, timeshare owners will need to make up for the deferrals and the amount deferred only keeps growing. The Boards should be disclosing the annual amount of this ever-growing deferral and the plan for addressing it. The chickens always come home to roost.

Would owners rather have to address delinquencies or a collapse at some point due to the weight of this growing obligation? Also, think about who is absorbing the potential deferrals for the recent acquired properties added to the program.

But as has already been explained, voting to waive Fully-Funded Reserves in the states that have a mandate does NOT automatically equate to either Reserves being underfunded or routine/necessary maintenance/refurbishment being deferred.

Think of it like this - have you personally always kept aside a bank account with a balance equal to or nearly equal to your expected costs of rebuilding your home should an unexpected and impossible-to-plan-for catastrophic event renders it uninhabitable? Or have you instead structured your finances so that you're planning and saving for routine maintenance/refurbishment as it becomes due, while at the same time developing credit/insurance options should your home suffer catastrophic damage from a one-off event?

I can understand why a person might prefer that their timeshare company sit on a Reserves fund to cover any and every unexpected catastrophic event, if the purpose is to ensure that at no time ever will an owner be subject to a Special Assessment following any and every catastrophic event. I don't agree with that line of thinking, I prefer that such one-off events be handled if/when they occur, but I can sort of understand it. But if you do agree with it, how many one-off major rebuilds do you think your timeshares should pre-fund with your money that might not ever need to be spent?

 

[DRH90277]

I suspect that while some want to blow this off, can anyone provide a list of any specific reserve items deemed unnecessary for inclusion in the current maintenance fees. I hope these are immaterial, but do you really know or are you just speculating? These reserves must be material, or we would not be asked to waive the reserve requirements.

 

[VacationForever]

I suspect that while some want to blow this off, can anyone provide a list of any specific reserve items deemed unnecessary for inclusion in the current maintenance fees. I hope these are immaterial, but do you really know or are you just speculating? These reserves must be material, or we would not be asked to waive the reserve requirements.

Because of legalities of Florida and South Carolina (learned from SueDonJ's post), owners have to explicitly vote to waive fully funding reserves, and hence the election request. This legal requirement and why we should vote to waive it, is explained in the election material which I receive from Sheraton Vistana Resort and Marriott's Grande Vista. MVC could have done a much better job by including this explanation in the request for election to Trust owners.

 

[dioxide45]

I suspect that while some want to blow this off, can anyone provide a list of any specific reserve items deemed unnecessary for inclusion in the current maintenance fees. I hope these are immaterial, but do you really know or are you just speculating? These reserves must be material, or we would not be asked to waive the reserve requirements.

I would expect that the resort is (and they are) performing reserve studies by an outside company to determine the proper level of fudning.

 

[SueDonJ]

I suspect that while some want to blow this off, can anyone provide a list of any specific reserve items deemed unnecessary for inclusion in the current maintenance fees. I hope these are immaterial, but do you really know or are you just speculating? These reserves must be material, or we would not be asked to waive the reserve requirements.

Marriott and the other timeshare companies are required by legislation to either include in the resort budgets the necessary amount to cover “Fully-Funded Reserves” as it’s defined in the same legislation, or, to put the waiver to a vote by the owners. I don’t see this issue at all as something nefarious that Marriott is voluntarily inflicting on the Owners.

 

[DRH90277]

There is much going on to ensure owners are informed, thus the waiver vote and disclosures. The waiver relates to reserves for deferred property maintenance and replacement projects. If less than fully funded reserves are to be provided (to be billed in the maintenance fees), owners are informed and accept this by signing the waiver. And yes, deferring the accumulation of fully funded reserves will reduce current maintenance fees. But it may also expose owners to delays in project completions and the need for special assessments.

You may want to read about legislative efforts to address "milestone inspection" and "substantial structural deterioration" inspections and requirements. I suspect Marriott properties are already doing something like this. I appreciate the attention paid to maintaining Marriott timeshare properties.

 

[SueDonJ]

There is much going on to ensure owners are informed, thus the waiver vote and disclosures. The waiver relates to reserves for deferred property maintenance and replacement projects. If less than fully funded reserves are to be provided (to be billed in the maintenance fees), owners are informed and accept this by signing the waiver. And yes, deferring the accumulation of fully funded reserves will reduce current maintenance fees. But it may also expose owners to delays in project completions and/or special assessments.

You may want to read about legislative efforts to address "milestone inspection" and "substantial structural deterioration" inspections and requirements. I suspect Marriott properties are already doing something like this. I appreciate the attention paid to maintaining Marriott timeshare properties.

I agree with you that waiving "fully-funded reserves" as they're defined in legislation can result in Special Assessments, but not because a waiver results in routine/scheduled/necessary upkeep being deferred or budgets being deliberately under-funded. If that were the case then there would be an obvious history of SA's at the SC and FL resorts which have had owners voting for decades to waive the mandate! There is no such history. The history of relatively-rare SA's at Marriott resorts in most cases is due to damage caused by catastrophic events which cannot be predicted or quantified in advance, and in a few select outliers due to unknown structural damage not observable on sight and/or BOD's taking it upon themselves to reduce the budget/MF's submitted to them by Marriott. IMO, as I've said, I prefer that Marriott collect SA's at the time of a one-off event rather than Marriott be sitting on funds to cover damage from an event that may never happen.

It's already been explained in this thread and in past threads that Marriott hires professional firms to do Reserve Studies that consider the expected usable life of structures and hard/soft goods, and that the annual budgets for every Marriott timeshare take these studies into consideration when scheduling routine upkeep and determining the Reserves amount related to those items. Voting to waive "fully-funded reserves" has absolutely nothing to do with under-funding Reserves/scheduled maintenance and everything to do with Marriott complying with legislation, yet you keep saying that it will result in budgets being under-funded. So, can you please explain how an owner-majority vote to waive "fully-funded reserves," as they're defined in the applicable legislation, might result in delays to complete regularly-scheduled routine projects/updates/refurbs?

 

[kozykritter]

Does anyone know the outcome of the vote on this matter at their Sept 8th meeting? Or what budget they adopted and how much MF per BI?

 

[timsi]

Still Crazy, crazy, crazy - Perhaps, the answer is in asking the BOD's and Marriott advisors to be more explicit about what they are suggesting and the ramifications. When the choice is "fully fund or to not fully fund" with no clarification, those of us with financial expertise will balk at the notion. I've seen some of the worst of financial risks and impacts and cannot concede to this "gloss over" approach.

They should explain why they believe the reserves are fully funded and present some possible scenarios. "Fully funded" can be very relative if the inflation continues to be high and if the reserves do not yield a decent investment return in the future.

 

[wuv pooh]

I have been waiving "fully funded" for Harbor Lake for 20 years and the resort looks better and has more amenities than it had when we started. No way that I would have wanted to pay an extra $200-$300 a year to sit unused in a CD paying 1% interest.

 

[Venter]

$200 -$300 sounds good. Lakeshore Reserve is about $2500. So there if we pay the required(by the state) reserves the MF's will be about $5000.

 

[DRH90277]

I have been waiving "fully funded" for Harbor Lake for 20 years and the resort looks better and has more amenities than it had when we started. No way that I would have wanted to pay an extra $200-$300 a year to sit unused in a CD paying 1% interest.

First, your limited vision regarding amenities and the resort looking better is questionable. You need to focus on the items for which reserves are necessary.

Perhaps, the Board of each resort should share the accumulated shortfall by category each year. With that, owners could make an informed decision. The facts are that we really don't know the cumulative unfunded reserves and that's scary. Reserve requirements are determined by professionals who know what they are doing. A vote by those only motivated to defer the inevitable need is pretty stupid. This is not prudent, and the exposure should be quantified and disclosed to the owners before they vote.