The Country Club's Murieta Room was full – more than full – for Thursday night's meeting. (Click photos for larger images.)
At a raucous, standing-room-only meeting Thursday night, the Country Club board argued why filing for Chapter 11 bankruptcy is the best course available to the club. Members asked questions and offered challenges to the board, and the landlord called for investors to join her in saving the club.
The session, which lasted more than two hours, was rowdy at times. Sixty seconds after it began, as Vince Lepera, the board president, was doing an introduction, a man yelled out that it was supposed to be a town hall, prompting boos that drowned out his complaint. Maybe his anger was motivated by the story going around beforehand that only written questions would be answered, and no questions would be taken from the floor.
That wasn’t the case. The audience, which numbered 200 to 300, had the floor for 90 minutes. People filled the seats and lined the back wall of the Murieta Room and spilled over into the Terrace Lounge.
Among the speakers was Carol Anderson Ward, the club’s landlord, who said she is “trying to build a strong, healthy community” with her investments – the Equestrian Center, the new hotel, the shopping center and the Retreats development.
She said a Chapter 11 filing would be “the worst thing for our community and its property values,” which drew strong applause.
Carol Anderson Ward asked for people with great ideas and $500,000 to invest. (Click photos for larger images.)
Lepera had just said the club’s landlord is still interested in selling the land and that prospective buyer James A. (Bob) Husband, who backed out of the deal in July, is still interested in buying.
“Some of the things that are being said and represented right now are hurting me very badly,” Ward said. “To say that Bob Husband is going to step back in here and buy the club is a complete lie. I don’t think he ever had the money, first of all. I think the Pension Trust Fund (problem) was the last straw (on) the camel’s back.”
When Lepera challenged her for the answer to the club's problems, she said the club needs people running it who have great ideas. “I’m sorry, Vince,” she said. “I don’t believe that you have our best interests in mind. I’m sorry. You’ve failed.”
Ward said as landlord, she had offered to do remodeling of the club, but the club told her no, fearing the rent would go up. She said it was never the property owners’ goal to sell the club.
She said she thought there were five people in the audience who would be willing to invest $500,000 and become owners of the club and help fix it up.
For club members who “love what we have here,” she said, “Call me. ... We will find some way to make this work without filing bankruptcy and causing damage to all of our properties.”
Vince Lepera, club president, handled much of the club's presentation. (Click photos for larger images.)
In a 45-minute presentation at the start of the meeting, the club offered details, numbers and pie charts. On the way in, members got a packet with seven pages of frequently asked questions and answers. On the way out, the board promised to provide answers on the club’s website to all written questions submitted at the meeting.
Director Jeff Frost, who, like Lepera, is up for re-election, spoke about how the board has come to see Chapter 11 as the best available option – the only way the club can get out from under a multimillion-dollar pension shortfall, which is the only way the club can be sold, which is the only way there will be an infusion of capital.
“The board is nearly unanimous in approaching Chapter 11 as our primary option,” Frost said. He added, “The reality is that going into Chapter 11 bears some risk. The question is: Is it more or less risky than doing what we’re doing now? That’s the question for you guys when you vote.”
This fall’s club election is a referendum on the possibility of Chapter 11. Three candidates, Bill Armstrong, Lepera and Frost, argue that Chapter 11 is the best possible choice at this hour, while eight other candidates oppose Chapter 11. There are six seats open on the nine-person board – three in an election that closes Oct. 12 and three in an election that closes Oct. 31.
Longtime member Ted Hart, who’s working with the slate of eight candidates, challenged the board with the first audience question, asking if the board hasn’t already voted to file Chapter 11.
Yes, it has, Frost replied, but he said there was no timing set for a possible filing. He added, “Let’s be honest: There’s an election; things could change.”
Hart continued, saying the board voted in executive session in July to take the step, while Lepera told members at the August board meeting that the club was only considering the action.
Hart drew applause when he challenged Lepera, “Were you telling the truth at this point? I mean, you can’t have it both ways. If you’d already voted to file for a Chapter 11, then it comes back to the question – you’re telling the membership, ‘We’re just contemplating this.’ It doesn’t work both ways.”
Lepera at first denied the closed-session vote was in July, but the date was confirmed by Director Chris Pasek, the board secretary.
Hart made available a copy of the minutes from the board’s July executive session, which say: “MOTION – Jeff Frost moved that RMCC file for Chapter 11 Bankruptcy after we meet with the developers and the bankruptcy attorney which would happen within the next week. It was seconded by Clint Souza. The vote was 6 yes to 1 no (Ray Bray). Buzz [Breedlove] asked if the petition to file bankruptcy could be withdrawn before the plan is submitted. The answer was probably and was added to the motion. All agreed. ... Vince was authorized to make the filing determination.”
Virgil Flores Sr. argued that a bankruptcy would drop Murieta property values by 10 or 20 percent. He suggested that the club simply give the club’s keys back to the landlord and let the landlord handle the problem of the unfunded pension liability. “We can say to those who own the land, it’s not our problem, sir, ma’am; it’s your problem,” he said.
Speakers suggested legal strategies, a new dues structure, negotiating strategies with the union and financial approaches for the club. They challenged the way the club has handled things like the previous assessment, which was allowed to expire. They said the club needs a new board to try new approaches.
Two club attorneys were on hand, and they answered questions about Chapter 11 and the club’s negotiations with the union.
Echoing one of the lawyers' comments, Al Dolata backed the board's approach, saying, “The plan here is to seek the court’s protection from the union. It’s that simple. And the court can give it. ... There is precedent that permits the court to help this club escape the crippling liability of that mismanaged union pension plan. That’s the course we must take.”
Some gloomy facts shared by the board:
- Club membership is declining 8 percent a year.
- Fifty-seven percent of the community has no role in the club.
- The average age of club members is 63. (Lepera: “We’re not attracting very many younger members because we don’t have the amenities.”)
- The club can’t weather a major financial problem. (Frost: “The coup de grâce for us as a club is when we have to replace this roof. Because we don’t have a reserve to do it.”)
Every year is a budget struggle for the club, the financials shared at the meeting showed; there is no money for major improvements. Lepera said based on Husband’s calculations, the club will require $7 million in investments in the next five years to fund maintenance and product improvements, like a swimming pool and fitness center.
“If you want to do the things we’ve talked about, if you want to get $7 million into this club in the next five years, you sell the club,” Lepera said. “If you don’t want to do that, then this board, we need to reach out to the RMA and somehow get them involved....”
At another point in the meeting, he said, “I remember when RMA did the community center vote. How bad was that defeated?”
As for the members' monthly bill, the directors made two points: A three-year assessment of $40 a month is on the club ballot, even though it won’t be quite enough to address the projected financial shortfall. And members are asked to pre-pay dues this fall. They’ll get a discount and the club will get cash that will carry it through the slow winter months.
In the closing moments of the meeting, in response to a member suggestion, Lepera endorsed the idea of a member vote on whether to file for bankruptcy. He confirmed his support in a brief interview after the meeting.
In an email Friday morning, Lepera clarified that his support would happen if he was elected to another term in this fall’s club election. Such a vote would require board approval, he wrote, and his term will be up before the board could vote. He pointed out that Frost, who’s also seeking re-election, told the audience there would be no action taken on bankruptcy before January, after members have had a say in the club election.