CONTINENTAL. From The Board President...

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1 CONTINENTAL Announcing all that is happening at Continental From The Board President... First, I want to sincerely apologize. Following our August 2018 Annual meeting I was elected President and, based on comments during the meeting, one of my primary objectives was to improve communications and transparency. The plan was to provide you with quarterly newsletters and bi-monthly blasts. The first newsletter was prepared and ed on November 8. For reasons outlined in the General Manager report, most of you never received the . If you would like to see the newsletter, it is posted on our website LAKE ELAINE As you know, since we are actively involved in litigation and we are limited in what we can disclose. Our legal team has authorized the following statement: The case involving the Lake Elaine lake area property owners and Continental Country Club is ongoing. The merits of the case had been on hold while both sides endeavored to reach a workable resolution. When a resolution proved unachievable, Continental Country Club requested that the case be dismissed. The Judge recently concluded that the case could proceed, without commenting on the merits of the claims or defenses. Both sides will now work together on developing a Scheduling Order for the logical progression of the case, which may include draining Lake Elaine and studying the underlying conditions and options. We recognize that this proceeding was slowed due to the extended settlement negotiations, but it was important that both sides had time to explore whether a resolution was possible without the need for further court involvement. Since the Board cannot respond to individual inquiries on legal matters, we will periodically update you on the progression of this matter. ELECTION RESULTS AND OFFICERS Bill McGrath and John Keegan were elected to fill the two open three-year terms on the Board of Directors. Subsequent to the elections, Steve Schlosser resigned from the Board and Charlie King was appointed to fill the open position. Bill retired after 41 years with JCPenney, with his last assignment as the Flagstaff Store Manager, John is a graduate of NAU with a BSBA in Finance and a MBA and most recently was the President and Co-Founder of an internationally known film and apparel company and Charlie is a graduate of Duke University and University of Chicago Law School. After 35 years, he recently retired from Fennemore Craig, a premier Arizona law firm where he was a Shareholder and Director. All three elected Directors are full-time residents of Flagstaff. The following Board Members are serving as officers: President David Chambers Vice President Dusty Rhoton Secretary Robert Hoadley Treasurer Dave Evans

2 CONTINENTAL Announcing all that is happening at Continental From The Board President... FINANCIAL RESULTS / 2019 BUDGET Our third quarter financial results are included in the November newsletter posted on the website. Our December 31, 2018 financial results will not be available for a few weeks but I can report that as of November 30, 2018, our revenues were $2,723k and pre-tax income was $332k. This compares to $2,644 and $143k in We recently competed our budget for 2019: 000 s 2019 Budget Projected Results for 2018 % INC (DEC) REVENUES $2,889 $ 2, % EXPENSES $2,839 $2, % PRE-TAX INCOME $ 50 $ % SIGNIFICANT EXPENSES GOLF MAINTENANCE $ 549 $ % RECLAIMED WATER $ 172 $ % LAKE ELAINE $ 49 $ % EMPLOYEE COMPENSATION $ 695 $ % LEGAL & CONSULTING $ 331 $ % ALL OTHER $1,043 $1, % TOTAL EXPENSES $2,839 $2, % GOLF OPERATIONS REVENUES $1,154 $1, % OPERATING EXPENSES* $1,226 $1, % NET INCOME $ (72) $ (41) 75.61% NUMBER OF ROUNDS PLAYED 17,130 16, % AVERAGE DAILY RATE $ $ % * EXCLUDES DEPRECIATION AND INTEREST EXPENSE. CASH FLOW CASH FROM OPERATIONS $ 50 ADD BACK DEPRECIATION $ 203 CONTRIBUTIONS TO CAPITAL RESERVE $ (150) PAYMENTS OF LONG-TERM DEBT $ (92) NET CHANGE IN CASH $ 11

3 CONTINENTAL Announcing all that is happening at Continental From The Board President... Legal and Consulting includes $175,000 for legal costs related to Lake Elaine and $100,000 for draining the Lake. The $49,000 budgeted for Lake Elaine represents maintenance costs for the Lake. In addition to the Lake Elaine litigation, your Board is being required to deal with two other major issues: WATER RATES As we all know, our area has suffered from a severe drought for several years. In an effort to deal with the current problems associated with the drought and to plan for future water needs, the City of Flagstaff approved significate rate increases for treated effluent. In addition to the rate increases, the two-tiered pricing system (the more you use, the less you pay) will be eliminated in Assuming stable usage and excluding Lake Elaine, our water costs increased 9.3% in 2018 and will increase by 7.2% in 2019 and 10.4% in 2020 with further increases anticipated. Obviously, this will have a significant impact on our golf operation. At the time of the 1990 Judgment, the cost of water for Continental (Continental Golf Club, Aspen Valley and all lakes including Lake Elaine) was $13,260 for up to 365 million gallons, which is an effective cost of about 3½ cents per 1,000 gallons. In 2012 we were paying $.50 and in 2020 we will be paying $1.80. MINIMUM WAGE In November 2016, Proposition 414 was passed by Flagstaff voters. This resulted in the following minimum wages: YEAR MIN WAGE INCREASE % INCREASE 1/1/2018 $ /1/2019 $ $ % 1/1/2020 $ $ % 1/1/2021 $ $ % 1/1/2022 $ $ % 1/1/2023 CPI assume 3% Between Flagstaff Golf Maintenance Corp (maintains the golf course) and Continental Country Club, our payroll for 2019 is expected to be $1,091,000 or 42% of our operating expenses. A significant portion of our employees are at or near minimum wage. The impact is dramatic and will continue for at least three additional years.

4 CONTINENTAL Announcing all that is happening at Continental From The Board President... THANK YOU BILL As you can see, your Club is facing some very significant issues; issues that will define the Club for many years to come. I want you to know that you have a dedicated Board of Directors and I would like to say a special thank you to Bill McGrath. Serving on your Board of Directors is a thankless job requiring many hours away from work and family while attending some rather intense and volatile meetings. It means having your integrity, motives and honesty questioned at times. Unfortunately, the level of intensity and personal attacks has expanded while dealing with volatile issues such as Lake Elaine and Short-Term Rentals. I say this only to emphasize what Bill McGrath has undertaken for your benefit. Bill served on your Board of Directors from 2005 to This was a period during the national financial collapse and a time when the Association was encountering severe financial stress. The Association couldn t afford to hire a full-time General Manager, and several of the Board members, including Bill, were actively managing the club. Bill then served another term from 2015 to This was during the heart of the Lake Elaine and Short-Term Rental controversy, and last year he served as the Association s President. I cannot over-emphasize the importance of Bill s leadership over the past year. Most importantly, he brought unity to the Board. After serving 12 years on the Board he generously agreed to run for a 5 th term. I don t think Bill wanted to run for another term, but he recognized that the decisions made over the next year or two will have a significant impact on the future of your Association and he felt an obligation. Bill is a man of utmost integrity and I hope you appreciate his personal sacrifice in serving on your Board of Directors. David Chambers Board President info@continentalflagstaff.com

5 From The General Manager... Hello 2019! I certainly hope all of our homeowners had a wonderful, safe and happy holiday season. Our whole team have been very busy getting the club ready for what we feel will be our best year ever here at CCC. Now that 2018 is in the rear view mirror it is time to focus on Although this year will pose many challenges, all of us are dedicated to making it a fantastic year. As of January 1st, 2019 the club has started a new program to better serve the needs of our homeowners. The Neighborhood Safety Group have set up an after hours hotline for homeowners to call with any security or safety concerns within our neighborhood. In November, the club mailed updated Membership Policies and Rules and Regulations to all homeowners as reminders. Shortly after in December a letter was mailed detailing the program. As a added bonus the club printed magnets for all homeowners including the afterhours hotline hours, number and acceptable callout reasons. Our goal is to provide a better living experience and we hope you find our new program beneficial. The club purchased a lighting detection machine that will also keep our golfers, tennis players, pickleball players and swimmers safe when bad weather and lighting are in the vicinity of the club. This will be installed by April 1st Lastly, we would like to apologize for the complications with our service. Our goal as a staff and a board is to provide up to date information. Unfortunately, we assumed information was being sent appropriately and it was not. We have now determined the problem and it has been corrected and moving forward homeowners will receive: quarterly newsletters, bi-weekly updates called the Continental Connection and a monthly called Things you should know for the month! Chris Shields General Manager ext: 202 cshields@continentalflagstaff.com 2380 North Oakmont Drive Flagstaff, Arizona

6 From the Golf Shop... Happy New Year! I hope everyone enjoyed their holiday season! If Santa brought you some new golf equipment and you are excited to get going with your golf season we have good news. The golf course will officially open March 1st, weather permitting. We are excited about the 2019 season and looking forward to seeing everyone at the club! Continental Country Club Homeowners will once again receive the card at no cost and receive homeowner pricing on green fees. We will offer the card to the general public for a purchase price of $ tax. The structure of The Peaks Pass will be the same. Continental Golf Club will be hosting the Flagstaff City Championship again in 2019! We are looking to make this year s event the best to date. The dates are tentative at this time but we will have confirmation in the near future. The PGA of America has an initiative known as PGA HOPE (Helping Our Patriots Everywhere). PGA HOPE introduces golf to Veterans with disabilities to enhance their physical, mental, social and emotional well-being. Currently there are 80 chapters across the nation who have helped over 4700 veterans. I am excited to announce that Continental Golf Club will be offering the program in I am still finalizing dates and times but will be sure to keep you updated on the progress. It won t be long before the warmer weather is upon us. I m looking forward to a great golf season! We ll see you at the club! Chris Mandziuk Director of Golf cmandiziuk@continentalflagstaff.com

7 Compliance Corner Hello Continental Country Club! Thank you for the warm welcome from many of you as I have stepped into the shoes as the new Compliance Officer at Continental Country Club. It has been a pleasure getting to know all of you. I live close to this community (1/2 mile!) and love our neighborhood. We have a beautiful golf course and amenities! This past month I have just been driving around the community getting acquainted with the streets and homes that are governed by our HOA. I have been following up on the courtesy notices from the previous compliance officer and have sent out a few to some of you. Please be assured, a violation letter is never a personal attack, and most people will receive a courtesy notice at some point during their residence. If you should ever receive a courtesy notice, please feel free to communicate with me or our office as soon as possible to let us know you have already taken care of the problem or have a plan to correct it. I also wanted to let you know that as your compliance officer, I am here for all residents and encourage good relations and positive communication amongst neighbors and am glad to listen or help in any way I can. I have to say that one observation that I have made so far is all of the home improvements being done to a good portion of the homes in our community. This is awesome! But, I would like to remind you to make sure to fill out a Design Review Form and submit it to our office BEFORE you start any work on the exterior of your home. This includes new roof, landscaping or painting even if you are painting the house the same color. Lastly, there is an old saying, Love your neighbor as yourself. As your compliance officer, I am here for all residents, both those who experience difficulty with a neighbor and those who are accused of being difficult. Good relations amongst neighbors is of high importance and can only be improved by positive communication. I encourage you to always attempt kind communication with your neighbor to help them understand your issue. If you require additional assistance, I am glad to listen or help in any way I can. Please feel free to contact me with any questions, concerns, or to simply introduce yourself. Should you desire to view the CC&R s (Articles & Bylaws, Rules & Regulations for Continental Country Club signed at the time of your home purchase), you may view and/or download them online from our website or contact our office to have a copy ed to you. Thank you! Linda Caniglia CC&R Compliance Officer ext: 206 cswain@continentalflagstaff.com

8 Firewise Safety Tis the season to be jolly, as the holiday standard goes. In many homes, this means a log on the fire, a trimmed tree or a menorah glowing brightly. All these signs of the season bring feelings of comfort and joy to families. But what you may not realize is that they also bring an increased risk of fire in the home. The winter months are the peak times for home heating, candle, decoration and Christmas tree fires, according to the National Fire Protection Association (NFPA). Statistics show that two of every five home decoration fires are started by candles. Fireplaces or chimneys are involved in almost two out of five home heating fires. Portable or fixed space heaters are involved in four out of five home heating fire deaths. Flagstaff Fire Department New Year s wish is for all Flagstaff residents to have a SAFE season. By recognizing hazards and using a little extra caution, you can help keep your home full of comfort and joy. When decking the halls, choose decorations that are flame resistant or flame retardant and keep them away from candles or any other heat source. Not all holiday lights are made equal so be sure that you know whether yours are for indoor or outdoor use and be sure to replace any string of lights with worn or broken cords or loose bulb connections. Use clips, not nails, to hang lights so the cords do not get damaged. Lighting candles, whether for decorating or religious rituals, should always be done with caution. Candles should be in a sturdy holder and placed on an uncluttered surface. Lit candles should not be placed in windows where a blind or curtain could catch fire. Never leave a lit candle unattended. Blow out candles when you leave the room or go to bed. Additionally, candles placed on or near tables, altars, or shrines must be monitored by an adult. Lastly, roasting anything on an open fire in the fireplace is not a good idea! Make sure that your fireplace has a sturdy screen and keep kids and pets three feet away. Have your chimney cleaned regularly and dispose of ashes in a metal container far away from the home. We know that the holidays are a hectic time of year for all Flagstaff residents. Please help Flagstaff Fire Department keep our community safe from fire this season. Sincerely, Tahlia Murray

9 A Little Birdie Told Me... Contact Information Main Clubhouse Line: Main Clubhouse Fax: Tee Times/Golf Shop: Oakmont Reservations: Bear Paw Recreation Center: Tennis Instruction Trent Hayward: Pickleball Reservations: Golf Lessons: Chris Mandziuk, PGA Michael Frye, PGA CC&R Compliance: Linda Caniglia ext. 206 Controller/Accounting Kim Rushing ext. 205 Membership & Events Tahlia Murray ext. 203 As the holiday season comes to a close, I want to thank everyone for a wonderful 2018 season and who have graciously supported the club over the years. I hope each and everyone of you enjoyed your holidays with your families. As we look forward into 2019, we have plenty of events up our sleeves. Our staff is in full force thinking about how we can be more creative and exciting with every event we host. However, we would not be able to host these fun filled events without your on going support. A few new things to look out for this year will be The Continental Connection and Things You Should Know. These communication pieces will be ed out on a bi-weekly and monthly basis to help communicate information as it comes in so that ALL homeowners are informed! Please keep the club in mind when booking your business or private parties or meetings. The club offers four rooms for rental: The Board Room (2nd Floor), The Continental Room (2nd Floor), The Venue (1st Floor) and The Marquee (1st Floor). Each and every year our teams goal is to create a lasting impression on our members and guests through superior customer service. Call the club today to schedule a tour As always if you have any questions, comments or suggestions you can call or me directly. Tahlia Murray Director of Marketing ext. 203 tmurray@continentalflagstafff.com CLUB COMMUNICATIONS Are you receiving our club s? Call to reactivate your subscription or update your address. Also, make sure we have your current mailing address to ensure you receive our mailed club publications. General Manager Chris Shields ext. 202

10 Upcoming Board Meetings Board of Directors Who: What: When: Where: The Continental Board of Directors Monthly Board of Directors Meeting Saturday, January 26, 2019 at 10:00AM-3:00PM Seville Golf & Country Club Cascada Ballroom Members are encouraged to attend and participate! David Chambers President Dusty Rhoton Vice President David Evans Treasurer Finance Committee Chairman Architectural Committee Chairman Robert Hoadley Secretary Bobby Goitia Board Member House & Grounds Committee Chairman Bulk Trash Pick-up Got Bulky Trash? Curb it! Items may only be placed curbside one week prior to the pick up date. Piles in excess of 5 x5 x10 which are not bagged, boxed, or bundled will not be picked-up. Bulky pickup starts on Mondays and goes through Friday. Trash Pick-up Dates: Jan 21st Aug 19th Feb 25th Sept 23rd Apr 1st Oct 28th May 6th Dec 2nd June 10 July 15th Bill McGrath Board Member Golf Committee Chairman FGMC Committee Gary Smith Board Member Golf Committee Member FGMC Committee Member John Keegan Board Member Charles King Board Member Bobby Zweifel Wyndham Flagstaff Resort Representative Restaurant Committee Chairman