The Ahwatukee Board of Management has obtained approval of its request for federal pandemic relief assistance and one of its longtime former members isn’t happy about it.
“We’re a very wealthy association,” said Christopher Gentis, who retired last year after serving on the board 22 years, including multiple terms as president and treasurer. “We shouldn’t be borrowing money from the U.S. government. That money is for people in need.”
Gentis – who is also a retired Phoenix Police lieutenant – said the board applied for Paycheck Protection Program funds to cover ABM’s losses of rental and program fees at its community center at 48th Street and Warner Road.
He also asserted that the board requested $100,000 and that it is circumventing HOA bylaws requiring a homeowners’ vote on any loan greater than $100,000 by calling the money a grant.
Stating that its annual revenue of more than $1.2 million should enable ABM to weather the pandemic’s economic storm, Gentis said, “Certainly there was a loss in income due to the stay-at-home order and there will be lost income for some time into the future, but ABM pays no property taxes, has no mortgages.”
“We can borrow money from reserves if truly necessary or merely adjust the budget for the remainder of the year in order to get through this current year,” Gentis added, stating ABM “has always padded the budget.”
But board President Carolyn Johnson disputed those assertions, said the HOA needs the federal relief money to cover significant losses in revenue from cancellations of at least three months of birthday parties, weddings and other private gatherings at its activities center as well as many of its normal programs for children and adults.
She declined to specify the amount of money the HOA sought – noting homeowners have not yet been told – and said the board was seeking to cover two months of payroll and some other losses.
She said the board has struggled to avoid laying off any of its 16 fulltime staffers, who have been working since nonessential businesses were ordered closed in mid-March, in the wake of those revenue losses.
She also said lot fees paid by ABM’s approximately 5,100 homeowners only cover about 51 percent of the HOA’s operating costs.
Johnson also disputed Gentis’ assertion that the board is circumventing HOA bylaws on seeking homeowner approval.
“It’s not a loan; it’s a grant,” she said, estimating the HOA’s losses in activity center rentals alone at more than $13,000 a month in cancellations through June.
The U.S. Small Business Administration describes PPP money as “a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.”
“SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities,” the agency also says on its website.
The PPP was part of the $2-trillion Coronavirus Aid, Relief and Economic Security (or CARES) Act that Congress approved to help people, charities and businesses adversely impacted by the pandemic.
Congress has put more than $650 billion into the fund to help small businesses stay afloat during closures to counter the spread of COVID-19.
Only weeks after the program was approved in mid-April and ran out of funds with the first infusion of $300 billion, numerous reports emerged of mega-restaurant chains and even the Los Angeles Lakers basketball team getting millions from a program aimed at the little guy.
Many small businesses in Phoenix alone have been unable to get PPP help, city officials have said in recent weeks.
Phoenix Economic Development Director Christine Mackay estimates that 20-25 percent of all small businesses with fewer than 250 employees in the city “will not come back” as closure restrictions are eased and removed.
Gentis said he has been exercising his right as a resident to view the documents related to the fund request, but said the board has been slow to respond.
Last Thursday, board Executive Director Tina Zalesky wrote Gentis, noting it has 10 business days to provide the records – documents he says he could see in five minutes if the office was open.
“We will attempt to meet that timeline,” Zelesky wrote. “We will advise you if there is a delay, otherwise, we look forward to serving you and will contact you when the information is ready for delivery.”
Unlike small businesses that were devastated by pandemic-related closures because they typically have no more than a month’s worth of cash, ABM in the past has typically maintained reserves of at least $500,000, although it dropped to about $250,000 in the wake of the housing crash during the 2008 Great Recession, he said.
Gentis also said that while most businesses rely on customers regularly coming through the door, ABM has a built-in revenue stream since homeowners are obligated to pay their annual fee or risk foreclosure.
The HOA collects $225 a year from 5,100 lots as well as 25 percent of that fee per unit from the five apartment complexes within its boundaries. There also are other fees it collects, such as $400 for every new closure on the sale of a home.
And the bulk of those fees are collected at the beginning of the year, he said. The pandemic was officially recognized as a global health emergency by the World Health Organization on Jan. 30 and declared a public health threat by the Trump Administration the next day.
Gentis said that the activities center is not a separately incorporated entity and therefore its revenue is part of the HOA’s overall budget and shouldn’t be considered separately from that bigger financial picture.
A May 4 report in Forbes magazine zeroed in on businesses that apply for PPP funds that are not necessary to their survival. That report quoted the SBA, which has vowed to audit all recipients.
“All borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application,” the agency said, adding:
“Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, borrowers still must certify in good faith that their PPP loan request is necessary. It quoted SBA’s warning to applicants to “review carefully the required certification that current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Forbes said some of SSBM’s guidance has been unclear, but urged caution.
Gentis said that ABM has steadily raised lot fees by 2.5-5 percent every year for the last 10 years and that too many businesses face life-or-death situations that need the federal help more.
When he retired as a board president last year, ABM administrators praised Gentis in a column published in AFN as a “team player” and a “team leader” who “has given untold hours of service in growing, managing and planning every facet of this beloved community” and “has been an integral part of making this community what it is today.”
He told AFN that the situation ABM faces in the current economic meltdown reminds him of his time on the board during the housing market crash in the Great Recession.
“We had an emergency board meeting when the stock market dropped and decided we were okay,” he said.
“We never lost an employee and we knew that even with homes going into foreclosure, we’d always get the money.”