December 2, 2010 Combined Minutes Phase 2

Association of Apartment Owners of
Phase 2 Keauhou Gardens
The Phase 2 Kona Coast Resort Owners
Association
Telephonic Board of Directors Meeting
December 2, 2010
10 A.M. (HST)
Combined Minutes
A. ROLL CALL:
Present:
By Invitation:
President Lane Letsch, Vice President George Keeney, Secretary Bob
Jenkins, Treasurer Henry Auwinger, Director Mack Hendrick, Director
Ralph Kerr, Director Jeff Pank
Linda Anthony, Regional Vice President, Shell Management Hawaii, Inc.
(SMHI); Cintia Dutra, General Manager, Kona Coast Resort; Doug
Costales, Director of Project Management, SMHI; Tricia De Fusco,
Regional Association Manager, SMHI; Michelle Costales, Regional
Accounting Manager, SMHI
B. CALL TO ORDER: Noting the presence of a quorum, President Letsch called the meeting
to order at 10:03 A.M. (HST).
C. PROOF OF NOTICE OF MEETING: President Letsch noted for the record that Notice
for this meeting was posted and sent to all Directors pursuant to the Bylaws.
D. APPROVAL OF AGENDA: The agenda was approved as submitted.
E. APPROVAL OF MINUTES: The minutes of the September 30, 2010 meeting were
approved with the following corrections:
1. Section F; correct the numbering, which should be 1-4 not 5-8
2. Section F number six “b”; change appositive to read a positive
F. REPORTS:
3. President: President Letsch submitted a written report included in the Board packet,
(Attached as Exhibit “A”).
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 2 of 8
4. Treasurer: Treasurer Auwinger provided a written report for period ending
September 30, 2010 included in the Board packet (Attached as Exhibit “B”). In
addition, Treasurer Auwinger received the financial statements for period ending
October 31, 2010 and reported the following:
a. The Association of Apartment Owners: Operating results for the first ten
months are positive in the amount of $113.806, which is a positive variance
of $105,373. Significant savings came from Electricity costs coming in
$19,000 under budget and Refuse Removal $17,000 under budget.
b. The Interval Owners Association: Operating results for the first ten
months are positive with a net operating income of $180,077, which is a
positive variance of $143,357. Again, the significant savings were realized
in Electricity costs of $605,266 through October, which is about $175,000
under budget.
Maintenance fees continue to be a problem. Our provision for doubtful
receivables of $239,000 is about $121,020 under budget. GM Dutra and
staff are doing a marvelous job in managing expenses and all areas of resort
operations.
5. Committees:
a. Restaurant Oversight: The Restaurant Oversight committee provided a
written report included in the Board packet (Attached as Exhibit “C”). In
addition, GM Dutra noted that the training conducted by Shell Corporate
was well received.
b. Communications Enhancement: Secretary Jenkins, Chair of this
committee, provided a verbal report. The Financial Statements Summary
page and Balance Sheets from January through August 2010 have been
added to the Timeshare Owner section on the website.
c. Penthouse Liaison: Secretary Jenkins, Chair of this committee, reported.
To date he has had no contact or dialogue with the newly formed
Penthouse Committee.
d. Photo Voltaic: VP Keeney reported. The general consensus is that it
would be pushing it to get anything started this late in the year therefore,
the project will be put on-hold until next year.
6. Plan Manager:
a. General Manager’s Report: General Manager Dutra submitted a written
report included in the Board packet (Attached as Exhibit “D”). In addition,
GM Dutra noted that the latest Employee Opinion Survey results came
back in the high nineties.
b. Occupancy Statistics: The Occupancy Statistics Comparison, September
2009 versus September 2010, was included in the Board packet.
c. RCI Scores: RCI scores for period ending October 2010 were included in
the Board packet. All scores are at least one point above the RCI
thresholds.
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 3 of 8
G. FINANCIAL STATEMENT REVIEW:
1. Financial Reports: Financial reports for period ending September 2010 for the
following associations were included in the Board packet and accepted as presented:
a. AOAO Phase 2 Keauhou Gardens
b. The Phase 2 Kona Coast Resort Owners Association
2. Wells Fargo Summary of Investments: The Wells Fargo Summary of investments
for the period ending September 2010 was included in the Board packet.
3. Maintenance Fee Billing Re-cap: Regional Accounting Manager Michelle Costales
reported. The period ending September 2010, included in the Board packet, shows
delinquencies at 4.2%. The period ending October 2010 shows delinquencies at
4.1%, which is not much of a change.
H. OLD BUSINESS:
1. Ratify Board’s Action:
a. Transferring Reserve Funds: Treasurer Auwinger moved to ratify the
Board’s actions from the October 1, 2009 meeting (Paragraph F number
three d) where in it was decided to transfer $250,000 of IOA operating
funds to KCR 2 AOAO reserves to supplement funding for dry rot repairs.
Additionally, the contribution to IOA reserves was decreased by $250,000.
This adjustment was reflected in the 2010 Reserve Study and has been
shown on each month’s financials throughout 2010. The treatment of the
transfer was verified with Richard Emery, Reserve Specialist. The motion
was seconded by Secretary Jenkins and carried unanimously.
2. Ratify President’s Action:
a. Approval of 2010 Auditor: Director Hendrick moved to approve the
President’s action in approving Cross, Fernandez & Riley, LLP,
Accountants and Consultants, to perform the Association’s 2010 audit and
prepare the Federal and State income tax returns for year-end December
31, 2010. The motion was seconded by VP Keeney and carried
unanimously.
I. NEW BUSINESS:
1. Appoint 2011 Nominating Committee: The following Directors’ terms are up in
2011: Lane Letsch, George Keeney, Bob Jenkins and Jeff Pank. President Letsch
appointed Treasurer Auwinger (Chair), and Directors Hendrick and Kerr as the 2011
nominating committee.
2. Association Owned Inventory: Regional VP Anthony reported. There were about
eight intervals sold at the November 3, 2010 auction with roughly two hundred
intervals going back to the Association. The titles of the foreclosed intervals are in
the processing of being transferred into the Association’s name and recorded with the
Bureau of Conveyance. It is possible that Shell Vacations Club may consider making
an offer to purchase the intervals, which will be discussed at the January meeting.
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 5 of 8
Exhibit “A”
PRESIDENT’S REPORT
December 2, 2010
Since it has only been two months since our last board meeting, I have little to report.
I do wish to thank the management teams at both Kona Coast and the Shell Corporate Office at
Hanama Place. Those Management teams are:
At Kona Coast Resort
Cintia Dutra
Liz Delos-Reyes
Sandra Karn
Gerret Belog
Cherie Sadumiano
Mary Waninski
Doug Branch
Doug Costales
Alena Callejo
La Vanda Kainoa-Salvador
“June” Corrales
Kona Coast Resort General Manager
Assistant General Manager
Executive Assistant
Security Manager
Housekeeping Manager
Reservations Manager
Maintenance Manager
Project Manager
Activities Manager
Front Desk Manager
Grounds Manager
At Hanama Place
Linda Anthony
Tricia De Fusco
Michelle Costales
Monica Pasco
Regional VP Shell Vacations Hospitality, Hawaii
Regional Association Manager
Regional Accounting Manager
Executive Administrative Assistant
The review of next year’s budget and resulting maintenance fees was made very easy due to the
hard work by Michele Costales, Cintia Dutra and many others. I also thank all employees who,
through their hard work, make their managers look good.
Respectfully submitted,
Lane Letsch
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 6 of 8
Exhibit “B”
Treasurer’s Report
December 2, 2010
Association of Apartment Owners
Operating results for nine months through September of 2010 are positive in the amount of
$104,512, which is $9,906 better than budgeted. The goal is to end the year with positive
operations.
The most significant savings within the budget came from Electricity costs coming in $17,818
under budget and Refuse Removal coming in $11,648 under budget.
Interval Owners Association
Operating results for the nine months ending September 2010 are positive with an operating
income of $178,867, which is $125,783 better than budgeted. Significant savings are being
realized in 3 major areas. Electricity costs $542,837 through September, which is $159,111 better
than budgeted. Wages in all areas of Resort Operations are running better than budgeted and
Other expenses such as supplies, furniture and fixtures are significantly under budget.
Collection of maintenance fees continues to be a problem. Our provision for doubtful amounts is
at $239,892, which is $121,020 worse than budgeted.
Resort management continues to do an excellent job of operating the property, balancing our need
to maintain the property to the high standards our owners expect while keeping our costs under
control in this difficult economy.
Respectfully submitted,
Henry Auwinger, Treasurer
Phase 2 Kona Coast Resort
Board of Directors
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 7 of 8
Exhibit “C”
RESTAURANT COMMITTEE REPORT
December 2, 2010
The Market Metrix scores for Aloha Friday’s Restaurant for the five categories in which they are
scored are hovering around the 85% Level, which is our contractual requirement. As an editorial
comment, the restaurant is far better than the restaurant was when operated by the previous
proprietor.
We are hoping that the training session of the Restaurant employees; to be conducted by Shell
Corporate; by the time this board meeting is conducted on December 2, 2010 will have a positive
impact on guest experience at the restaurant. We will not know how well the training has
affected performance of the employees/proprietors until we see the guest scores for December
and January. The committee will again meet with the proprietor when we are there in January to
understand his position on this issue.
Respectfully Submitted,
Phase II Kona Coast Restaurant Committee
Phase 2 AOAO/IOA
Board of Directors Meeting
December 2, 2010
Page 8 of 8
Exhibit “D”
November 8, 2010
Board of Directors
Kona Coast Resort, Phase 2, IOA
General Manager’s Report
Aloha Gentlemen,
Our guest comment card scores for the month of October were the highest we have ever achieved, at 94%. So, I
would like to make this report about our employees. Their loyalty and commitment to the resort is what drives our
great customer service scores and secure the value of our product with a dedicated maintenance program. They just
took their second employee survey for the year and we hope to see them in the high 90s, as has been the norm for
the past few years. We are very proud that employees see KCR as a stable and secure workplace. We are still
celebrating our First Place “Best Places To Work” received earlier this year. We do so with recognition programs
and incentives to keep the level of service high, fun and genuine.
Out of 112 employees at Kona Coast Resort, 42 have been with us for 5 years or longer, 20 have been with us for 10
years or longer and 7 have been with the resort for over 15 years. Not bad, considering that Kona Coast Resort is
only 21 years old and the total number of employees started at a much lower number and increased as the resort
expanded with a second phase.
We have many employee programs that focus on training, incentives, recognition and a healthy lifestyle. As an
example, the Wellness Ohana program has representatives from all resorts in the region that meet and discuss health
and lifestyle related subjects. We
then pass this information on to the
employees through fun activities and
challenges.
Examples are mini
aerobic breaks and group pedometer
challenges. As they say, “Take care
of your employees and they will take
care of your customers”.
Respectfully Submitted,
Cintia Dutra