Our Solar Project Revisited

10/6/2021 13 Comments

Our Solar Project Revisited

The HOA has just sent out a copy of the Solar Power Proposal that was produced in 2018. A proposal is the starting point. Where is the executed contract that represents the business arrangement the Board entered into for our Solar Facility at the Country Club?

For example:

Were there additional cost that DPPS incurred during the project installation, such as electrical re-wiring, repaving , etc.?
What were the actual legal fees charged during the three year period from proposal to completion of installation?
Does the actual contract provide the same financial benefits as this proposal?
In what year will the solar project break even?
How many batteries did we purchase and at what cost?
Was the estimated cost saving provided by the vendor? Did the board seek an independent analysis to verify the projected savings?
Now that the system is on-line, are we getting the savings that were predicted?

The Blog would like to hear your comments.

13 Comments

Cyndie Barone

10/7/2021 06:24:18 am

Pondering: I received an email from what I believe is the HOA Board that indicates that the HOA is not in a tax position to use the credits etc generated by the solar installation. Since I do not personally have a copy of the HOA tax return (Form 1120H), are they indicating that the HOA does not generate ANY non dues income? An HOA is allowed to exempt function income from its gross income. This means to qualify as an HOA for tax purposes, at least 60% of the HOA's gross income must consist of expenses to acquire, hold, maintain or care for the property. This money is exempt and therefore not taxable.

However, taxable income is the the excess of gross income for the year that is over the exempt function income amount. And exempt income consists of membership dues, fees or assessments etc.

So my question: Do the restaurant and the golf course not generate net positive non exempt income for the HOA? And if they do, wouldn't the credits help offset that? And if they don't - why not??

Valorie

10/8/2021 01:15:24 pm

As we know, the Country Club and the restaurant are open to the public, therefor, they generate taxable income. (Since there are losses, obviously that would result in little to no tax to pay. But all the same, the generation of income can alter tax and filing status. It does look like there may be some accommodation for that however.)

Here is a link from the IRS that has info regarding – Social and Recreational Clubs – IRC Section 501(c)(7):
https://www.irs.gov/pub/irs-tege/atg_social_rec_clubs.pdf
A recreational organization (ex. a Country Club) is categorized as a IRC Section 501(c)(7) organization and some requirements listed are:
"There is no inurement of income."
and
"The activities are in furtherance of pleasure, recreation or other similar nonprofit."

However, when you read further into this, there appears to be a some accommodation for certain percentages generated from outside revenue;

"Before 1976, IRC Section 501(c)(7) required a tax-exempt club to be organized and operated
“exclusively” for pleasure, recreation, and other nonprofitable purposes. P.L. 94-568 amended
IRC Section 501(c)(7) to require that “substantially all” of a tax-exempt club’s activities are
dedicated for pleasure, recreation, and other nonprofitable purposes. The amendment was
intended to allow IRC Section 501(c)(7) organizations to receive up to 35 percent of their gross
receipts, including investment income, from sources outside their membership without losing
their exempt status. See S. Rep. No. 94-1318 (1976). Within the 35 percent, no more than 15
percent of gross receipts should come from the general public’s use of the social club's facilities
or services. If an organization has outside income over the 35-percent or 15-percent limit,
consider all the facts and circumstances to determine whether the organization qualifies for
exempt status. "

https://www.irs.gov/pub/irs-tege/eotopicc82.pdf

So it appears that the answer lies within how much (what percentage) of the outside revenue is generated from the public vs. internally (from membership dues, member use, etc.)

To stay on topic with this thread, in regard to the Solar federal tax credits and rebates, it would be best answered by a CPA or tax attorney as there are many aspects to consider in regard to filing status of the Country Club. And then furthermore, the use and what/who is benefiting from the energy produced and what exactly that structure is...

Sven Paardekooper

10/7/2021 07:11:58 am

So are contracts entered into by the HOA not visible to homeowners? Aren't they legally obligated? Also, is there a need to consult an HOA attorney at this point? https://www.calassoc-hoa.com can be a source of information.

I choose to reply anonymously

10/7/2021 03:57:33 pm

Hi Sven,
You can contact Management Trust to ask for a copy of the solar contract. I obtained a copy. My solar company was appalled when they looked at Desert Princess's contract. They said in their opinion, that the only one who made out on that contract was the solar company. And that there are possible sizable financial liabilities to Desert Princess due to the structure of the contract. With notable downsides to Desert Princess. Among other things. These statements came from a large solar company that does commercial work in Coachella Valley. This company did not quote Desert Princess for their solar. So I felt that this feedback was unbiased.

D C

10/9/2021 08:42:19 am

Sven, There are many reasons to seek legal remedy, unless this BOD does not soon correct their elitist, divisive discriminatory and opaque culture. SBEMP LLC (www.SBEMP.com) with offices in Palm Springs and Indian Wells, successfully represented a homeowner against Mission Hills (see Brown v Montage at Mission Hills) seeking remedy against restrictions placed by that HOA on rentals. DPCC BOD, knew, or should have known about this case, yet willfully negligent passed the Rental and Fines regulation that encroaches on homeowner's property rights.

Very Concerned Homeowner

10/7/2021 09:32:15 am

Why is Peter Webb wasting HOA time, resources and “our”money…sending out old info about the solar project.

Can he not stand up and speak for himself..it is rather difficult sitting on his high horse in Vancouver BC,Canada.
Remember he has not stepped foot on this property since March of 2020. Canadians have been able to fly down here since the beginning of this year.
I personally have seen and talked to quite a few Canadians that have visited our resort this past year.
The USA border has been open by air during this same duration.

We need a board member that has first hand knowledge and boots on the ground to help steer us to financially sound decisions..
this solar project is a perfect example of a bad financial decision.

Peter Webb was the Treasurer then and now is President from conception to completion.
So when our community questions our solar project choice we can look straight to the source.

We need a change of leadership ..please vote to recall Peter Webb.
I know I will be and so will many of my neighbors. Watch for the ballot in the mail after October 22nd.

Wondering

10/7/2021 07:01:41 pm

Did the HOA even get at least three bids for this job? Do they put out for bid any of the “projects” they do?

Good Question

10/8/2021 01:34:45 pm

I have wondered the same. They will not prove or show the other bids. This question has been asked by several and it is usually answered with something like "we don't have to show you"
They are "supposed" to obtain 3 bids when "possible." Of course in this case it was possible. But this board isn't transparent. And even though they don't legally have to show us the other bids, the COULD show us. Other HOAs do gladly show their homeowners other bids when requested. Those that have nothing to hide, do.

Wondering Also

10/9/2021 04:33:31 am

As a side note to HOA financial processes, does anyone do a depreciation of assets (calculated by dividing the cost of the asset by the estimated number of years in its life) when purchasing . . . because the landscape/walkway lighting units must have died 15 years ago.

Vincent rella

10/7/2021 07:04:41 pm

I read the charter below. Please read it . Let’s keep politics off this blog. We have enough .

D C

10/8/2021 11:44:33 am

Vincent, What politics are you talking about? This blog is the only avenue at DPCC to find information that should be readily available to HOA members, however, it seems that the BOD and the Property Management team is trying to keep it hidden. Shedding light is the best disinfectant, and this blog does just that. The decision if the information is correct or not, should be left to the readers.

I witnessed first hand this BOD willfully awarding to vendors tens of thousands of our money without competitive bidding (e.g. repairs done to a pool fence, or just extending Trust Management contract for another year and accepting without any justification a 3% fee increase payable to Trust Management).

This amateur BOD should not get involved with issues that they know little, or nothing about, entering into long and expensive contracts with professionals. Solar panels/batteries , is a "nice" thing to have and not a "must" have. Lowering our HOA assessments is a much more important issue that needs to be addressed. If a homeowner wants to have solar panels, the CA laws expressly allows to install them at their expense, even inside a Common Interest Developments,

Be on the watch for next BOD's vanity project using Millions of OPM is EV charging stations inside garages.

Equity & Respect for All

10/8/2021 01:48:35 pm

Thank you DC. You are quite correct. Sharing of information, especially when provided by opposing views is not political. It is engaging community dialog. What is political, is when information is not only unavailable, but is covered up or otherwise obfuscated by management and the BOD.

Judith Stephan

10/18/2021 11:07:47 am

The explanation of the solar project appears reasonable IF the cost of the lease yields savings on DP electricity and IF due diligence in obtaining comps was exercised. Since there was no purchase of a capital asset, there is no tax credit.

The project to install EV plug-ins seems ill-advised because we don't know at this point what technology will be utilized in the future. Also, the cost may exceed the threshold to require a vote. The board should focus on straightening out current problems. The issue of lack of transparency could be resolved very simply by publishing COMPLETE minutes (including full financials and budgets) on the website monthly. Why do they refuse to do this?

Your comment will be posted after it is approved.

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Our Solar Project Revisited

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