Rancho Santa Fe Association board to pursue bylaw change to allow establishment of Compensation Committee

By Karen Billing

The Rancho Santa Fe Association board will pursue a bylaw change to establish a Compensation Committee after the RSF Association board voted to have an attorney draft language for approval of the bylaw change at the March 6 meeting. The committee would assist the board in annually reviewing all policies and practices related to human resources and personnel, specifically overseeing and authorizing employee compensation packages, and approving the annual performance review of the Association manager.

“Past boards have certainly addressed compensation but I feel I don’t want to leave it to the discretion of future boards, I feel that we should establish a committee by a bylaw,” RSF Association director Jerry Yahr said.

RSF Association Board President Ann Boon said she believes one area that the Compensation Committee could be helpful is in access to employee files. She said there are four Association employee contracts that she has not reviewed or seen.

Boon said she recently asked to see 10 years worth of compensation data and RSF Association Manager Pete Smith said that staff was bogged down and couldn’t get the information to her in a timely manner. She turned to the Internet and Boon said she found the tax returns for the Association, its form 990, which included the compensation for the most highly compensated employees.

She read the form for the latest return available, 2011, and found it troubling that the form said that a complete copy was provided to all members of the governing body before filing and was also digitally scanned and transmitted to members. Boon said she never received a copy and has never seen or been asked to approve the manager’s contract at any time.

“I think this document and the importance it places on board oversight further cements the argument for the establishment of a Compensation Committee in our bylaws, to ensure that this board and all future boards are fully able to honor their fiduciary responsibility to the community,” Boon said.

RSF Association Director Larry Spitcaufsky said that, as part of the finance committee, he has seen summaries of the employee contracts, and former board member Deb Plummer also said that she has seen the employee contracts.

“I have never ever been denied the right to look at those contracts,” Spitcaufsky said.

Yahr said that he has seen the summaries as part of the ad-hoc Compensation Committee, formed three weeks ago.

“That is the intent of the Compensation Committee, to dive into all the details and make sure Covenant members are protected to the best extent possible,” Yahr said.

RSF resident John Moores asked Boon if she intends to take steps to report that the tax return is wrong. Boon said the board would need to discuss it on a future agenda. Spitcaufsky said that none of the board members was aware of any inaccuracies until that day.

The discussion on the Compensation Committee came on the heels of a presentation by Boon regarding the Association’s budget, as she said the board continues to look for ways to balance the needs of the community with revenues without increasing the assessment.

Boon said Association revenues boomed in the early 2000s as real estate values increased and new homes were built. But after 2008, she said, revenues fell but Association expenses have continued to grow.

A little over a year ago the finance committee started to dig into how the budget was put together and take a hard look at expenditures given the forecast of flat revenues. The committee asked Smith to review the budget and look at opportunities to trim expenses.

“He reported that the staff was a pretty lean machine and that they are overtaxed and there wasn’t any obvious place to cut expenses,” Boon said.

As a result, the finance committee determined they should focus on compensation, which takes up 70 percent of general services revenues. An outside human resources consultant was hired last fall to review all the policies and compensation packages.

“It can’t be said strongly enough that the focus on compensation is not about one employee’s salary or a specific group of key employees’ salaries,” Boon said.

She said the goal remains to continue to offer fair compensation for employees that is sustainable under the current assessment.

“We wanted to foster loyalty and have a talented staff and wanted to be generous and that’s easy to do when revenues are pouring in and growing, but it’s more challenging to do that when revenues are not growing,” Boon said.

She said the hope is that the ad-hoc Compensation Committee will make a recommendation to the board by April.

Boon acknowledged that numbers she cited in one of her recent Buzz columns that appears in the RSF Review on this topic were perhaps incorrect and a little misleading.

Spitcaufsky said of the $5 million in revenues, compensation and benefits represent a little north of $3.5 million. Non-discretionary spending, which includes things such as ongoing legal fees, software and utilities, takes up about $1.4 million, about 28 percent of the entire revenue.

“That leaves about 2 percent or $100,000 for the board to spend,” Spitcaufsky said. “There’s very little discretionary spending right now, that’s money that is re-invested back into the community.”

He said he would like to focus on the non-discretionary spending and compensation to drive more money to the boards for discretionary spending. Spitcaufsky also noted that raising the assessment is not even on the finance committee’s radar screen.

Former board member Deb Plummer said she appreciated Boon acknowledging that her numbers were misleading, and said in her view the Association’s annual expenses have increased by less than 1.2 percent a year.

She said rationing down expenses began when she was on the board and it has certainly been addressed in the past. She asked that they not spend $6,000 on a bylaw change.

Boon said the board would look at ways to do it as efficiently as they could, possibly piggybacking the bylaw change vote onto others, such as the issue of condo rights.

RSF Association member Lisa Bartlett complimented the board for having the “courage to address transgressions and abuses of power that have gone on in the past and are still going on today,” such as denying information to members and using executive sessions when inappropriate.

Moores said that the Association was “nuts” not to publish salary information.

“To not be transparent is just plain wrong,” Moores said.

Boon said she advocates in the future that all compensation information be mailed to members along with the annual budget.