Rancho Santa Teresa
Swim and Racquet Club
286 Sorrento Way, San Jose 95119
I hope you all had a wonderful holiday season and a good start into the New Year. By now everyone should have received the letter from the club informing you that the Board of Directors has adopted new election rules. These rules are a necessary element for our upcoming vote to adopt new bylaws. The vote is planned for March at our spring membership meeting. The exact date will still be determined and depends on a couple of milestones, like when the new proposed bylaws will be approved by the Board of Directors and when we will be able to mail out the voting packages. Once the packages are mailed out to all members, the voting and spring membership meeting will be 30 days thereafter. The 30-day time frame is a legal requirement to give everyone a fair chance to turn in their absentee ballots.
As stated before, it is necessary to update our 50-year old corporate bylaws to ensure that they reflect current laws the board can rely on. As board members we use the bylaws as our “golden” rule book and it is therefore important that our bylaws are not in conflict with any other laws, in particular the Davis-Stirling Act, which is the relevant section in the California Civil Code which we must follow. Some members asked why we have to follow the Davis-Stirling Act since we are not a traditional home owner association, condo, or apartment complex. However, the Davis-Stirling Act applies to“common interest developments” (like ours) which essentially means any community where members share ownership in the common area, or share ownership of an association (our Rancho Santa Teresa Swim and Racquet Club) which owns the common area, or where the association can levy assessments and lien your property to pay for maintaining the common area. That meaning can apply to condominiums, but it also applies to developments with single-family homes, like ours.
As our club is incorporated as a 501(c) (7) non-profit organization, we enjoy special benefits like tax exemption, serving alcohol and even gambling activity would be legal. However, with these benefits come also restrictions. For example, our club needs to be exclusive, which means it cannot be open to the public. Furthermore, our non-member income cannot exceed 15% of our member income. In-depth research and consultancy with tax experts have revealed that our existing Seasonal Guest Pass program does not comply with 501(c) (7) regulations. When the Seasonal Guest Pass program was introduced in 2012 only 34 families, who lived outside of the Rancho Santa Teresa boundaries, joined the club for a two months period. At that time, the club benefitted from an extra income of $10,200. However, over the years our Seasonal Guest Pass program has gained in popularity and in 2018 we had 90 families joining from April to September. This ensured the club an extraordinary income of $45,000, which was used to keep the membership dues low and did offset the cost of operation. Absorption of the steep increase in minimum wage would not have been possible without this income. Further, non-member income is generated from renting the tennis courts, non-member swim lessons, and the all-year swim team, which is highly used by our members. The total non-member income received reached our maximum allowable threshold. Further, IRS rules require that guests are accompanied by members at all times, which would mean that all sponsors of the seasonal guest pass holders would need to be at the club with their seasonal guest pass holders. By implementing an Associate Membership, this requirement would be eliminated. Another requirement is that the Board of Directors needs to determine who will be granted a membership. Currently this is not the case and a change of our current bylaws is therefore required.
The planned Associate membership will allow families which do not live in the club boundaries to join the club after board approval. However, these families need to reside between Lean Avenue,
Bernal Rd., Hwy 85 and the mountains. Because our current Seasonal Guest Pass holders are a fundamental part of our Rancho community it would unfair to exclude those families who have been“quasi members” for years. For this reason, the board wants to “grandfather” those families in as long as they continue their membership. It is important to know that all our neighboring cabana clubs have already updated their bylaws to address civil law changes and adopted the concept of Associate Membership. So we are not proposing anything new or different.
Besides the definition of the term Associate member, which will have a maximum cap of 100, in our proposed new bylaws the board anticipates the following changes:
Mandatory statute of the California Civil Code, addressing Assessments, will be incorporated. This will empower the board to raise annual dues without a member vote if the increase is less than 20% of the dues in the previous year. This is something the board discussed in detail. While none of the board members wants to increase their own dues, it gives the board the capability to adjust to annual increased operational costs, i.e. utility and minimum wage expenses, more easily and at the same time ensures that we fund our reserve account appropriately.
Please note that this list is preliminary. At this point the board has not yet approved the proposed bylaw changes and I am writing this message before the January board meeting. We may even be waiting with the approval after the town hall meeting on Friday, January 25 as we want to hear your feedback and ensure that all your questions are answered for this important bylaw change vote. We will be posting the preliminary proposed bylaw change by January 19, so everyone has the chance to read them before the town meeting on Friday, January 25 at 7pm in the club house.
The board still has to clarify a couple of items on the received draft, developed by the law firm of Adams Stirling. We are planning to have the final version as soon as all our questions are answered. If everything goes according to plan, you should receive a copy of the proposed new bylaws in your mail with instructions and a voting ballot in early February. I will provide an update in the February newsletter. Please also visit our Facebook page or www.ranchosantateresa.org website for updated information. I hope I see you all at our town hall meeting on Friday, January 25th at 7pm in our club house where the board is planning to answer all your questions and count on your support for this important step in our long club history. The board does not want the bylaw change vote to fail because the consequences will be devastating for many members, their friends, the Sea Otter swim team, and the operation of our club. Therefore, we are planning a second town hall meeting after you receive the voting ballots to answer any further member questions. We hope that these town hall meetings provide our members with an open forum as your opinion is very important to us.
Dirk Seidel, President