Guide to SKP Co-ops                                             

Preface:

The following dissertation is a partial compilation from a Manual for SKP Co-ops and Boards of Directors prepared in 1993 by O. Grant Simons, a member of the Escapees RV Club and a member of a co-op.  His insights into human perceptions combined with a clear understanding in the unique qualities that comprise Escapee Co-ops across the United States is frank, refreshing and enlightening.  It is an excellent read and the original manual, which is more comprehensive and technical in nature, is now the first section of every co-op corporation's directors manual.  If it isn't, it should be. This reduced version is to provide you, the member or potential member, better insight into the thoughts, aspirations and strategies that has resulted in the creation of SKP KOFA Ko-op Retreat Inc.

Introduction:

For almost a decade, the SKP co-ops have been fumbling, stumbling, with members grumbling because there is little or no guidance available to assist the members, directors and leaders of co-ops.  Expertise is gained from experience or study.  Most persons chosen as directors have never experienced the government of a corporation, much less, a nonprofit corporation.

This publication is the first extensive effort to provide any compiled form of direction for boards of directors and leaders in the co-ops.  As a member of a co-op for almost nine years, I have experienced the aches and pains that are destined to befall every co-op.  It is hoped this publication will be used by every co-op as a 'springboard' to launch each director and co-op leader on a search for addition training materials resulting in making the co-op a utopian place of caring and sharing, as they were intended to be.

The facts:

  1. There is no written source of information for co-op directors except for a few tidbits from National.
  2. The succession of directors in co-ops has, from the beginning, been a case of the 'blind leading the blind.'
  3. Most new directors coming on the boards don't have the foggiest idea of what they are suppose to do.
  4. New directors don't want to make a mistake so they 'go along' with the 'old' directors.
  5. Boards or directors too often react to pressure from one or two individual 'noisy' members, resulting in rule by the minority.
  6. At board meetings, directors hesitate to vote in the minority because they will be criticized.
  7. Directors are reluctant to debate issues lest they be called 'argumentative' or 'difficult.'
  8. Directors are elected for their popularity but as soon as they become directors, the members begin taking pot shots at them either because of the decisions they did or did not make.
  9. The relationship between the members and the board is 'we' and they' as though the members and the directors are on opposite sides.
  10. Directors are reluctant to ask for help or admit they might have been wrong because of the criticism that would result.

This publication is not going to cancel these facts overnight.  It will however, give those who volunteer to represent members, the confidence they need to stand up to the many arguments and criticisms that come from uninformed members.

Too often, directors are chosen because they have great personalities and are well liked, NOT because of their qualifications as directors.  Members cannot be expected to understand what is required of a director if the directors don't know either.  Therefore it stands to reason that if voters don't know what a director is suppose to do, the most popular person will be selected.  When it comes to the co-op board of directors, qualifications seem unnecessary.

Rest assured that, almost without exception, when you begin to accept and implement the information in this publication, you will be criticized and argued with almost immediately.  Why?  Because of the four underlying issues which run through this publication.  They are:

  • The member can receive no income and make no profit, however small.
  • The member does not own any part of the co-op (or it's money).
  • The members, not the board, govern the co-op.
  • You can't beat the system, it can't be done.

The SKP co-op was conceived as a means for members of the Escapee Club to develop RV parks for the exclusive use of its members and their guests.  Financing was solicited who in turn were guaranteed, first, that they were able to lease the lot in the park when it was developed, and second, that if they changed their mind, could get a full refund and third, that at any time after the park was completed the person could terminate their lease and get a 100% refund of what was paid 'out of pocket' for the lease plus any assessment they may have paid.

Because of this method of development, an erroneous belief that the co-ops were co-operatively 'owned' came into being.  The reality is that the co-ops are co-operatively governed, but not co-operatively owned.  H. Oleck in his book, 'Nonprofit Corporations, Organizations and Associations' states,

'a nonprofit organization is, by definition, one that nobody owns, in that nobody is supposed to get from it any personal profit.'  

The contention, hostility and anger in the co-ops that has resulted from this misunderstanding is hard to overcome because, as Mr. Oleck further remarks,

'As in all human activities, a number of people (estimated at 5%) always seem willing to evade or violate the rules or laws of decent society in order to obtain personal power or wealth.'

In new concepts, there are new uses for old words.  One such word used is often misunderstood and, therefore, deserves an explanation is the word 'assessment.'

'An assessment is an amount of money paid equally by every member for durable improvements made to the park such as a swimming pool, laundry, fencing etc. and is added to the value of a lease or membership.

An assessment is not to be confused with costs of upkeep such as painting, re-surfacing roads, attorney fees or other items considered to be 'expenses.'

The generally accepted use of the term 'co-op' cannot be applied to the SKP co-op.  The concept of the SKP co-op does not include commercialism as part of its purpose which is...

'develop and operate an RV park for use by members at a lesser cost that can be achieved by rental or ownership; to  provide a place where visiting members of the Escapees club can park - on a space available basis while in or traveling through the area; to provide opportunities for fellowship and recreation in a community of people with common interests.'

There is nothing unique about a corporation buying land and developing an RV park such has been done by the co-ops.  Nor is it unusual for a corporation to enter into leasing agreements with persons for the use of their property.  A SKP co-op park is unique because:

The cost of the lease is determined, not by prevailing markets but by dividing the development costs by the number of sites available to be leased.  The cost of a lease can increase only by 'assessment' of the members wherein each is required to pay an equal share for additional durable assets or improvements to the park or by board action.

  • When a member terminates, a full refund is made to that member of the 'out of pocket' monies paid by the member for the lease and any subsequent amounts paid for durable park improvements via assessments.
  • Money spent for personal improvements to the leasehold is refunded less any depreciation, as determined by the committee appointed for that purpose.
  • Members (leaseholders) make their leasehold available to the corporation for renting to non-member members of the Escapees Club and guest of members.  This provides income for the corporation which is divided on a 60/40 basis.  For example, 60 percent of the income benefits all members in the rental pool by a reduction of their annual fee. Forty percent of the income benefits the corporation and all members as a whole.

The Corporate Status:

SKP co-ops are organized as nonprofit corporations wherein all members have voting rights.  Most members have not experienced membership in a corporation, particularly a nonprofit corporation where they are responsible for their own government through the democratic process of debate and voting.  

A common misunderstanding in co-ops is that, because they are small and the emphasis is on the social aspects of life in the park, that a co-op is not really a true business like bigger organizations.  The SKP co-op corporations are small but the laws governing corporations do not accommodate a difference in size.  Every 'nonprofit' or 'for profit' corporation, large or small, must abide by the law or suffer the same penalties if they fail to do so.

As mundane as definitions usually are, they are sometimes the only key to understanding.  Black's Law Dictionary defines a corporation as:

'A corporation is an entity created by law that is separate and distinct from the members who comprise it.

What, exactly, does this statement say?

'A corporation is an entity created by law.'

Consider the corporation as a 'person' for whom the board of directors is responsible.  It could be said that, because the corporation is an 'unnatural' person, it has no soul or brain, therefore, the law provides for that soul and brain by requiring a board of directors to conduct the business affairs of the corporation.

'(An entity) that is separate and distinct from the members who comprise it.'

The members of a corporation are not part of the corporation but are separate from it.  Their tie to the corporation is the board of directors.  The board is the only mechanism permitted by law that can conduct the business affairs of the corporation.

Members are not part of the corporation; nor do they own any part of it.

Nonprofit corporations must be 'non-stock' corporations by law in most states.  Members cannot own any part of a 'non-stock' corporation.  SKP parks are 'non-stock' corporations.  Non-stock, nonprofit corporations are not 'owned' and cannot be owned by any one.  The money, or income, that finances the development can come from any source as determined by the organizing board of directors.  In the case of SKP   co-ops, the money was obtained from members of the Escapee Club who wished to become members of the 'co-op.'  The money was not given 'in trust' but as development capital the corporation could spend to accomplish the purpose stated in  their articles of incorporation.  Once the funds are delivered, the donor has no further claim.

The Nonprofit Corporation:

Nonprofit organizations have existed since history began. Subject to revision by the lawmakers both federally and by the states, some have become very complicated, detailed, and restrictive while at the same time are more lenient in some parts of the country than in other states. The laws in every state define a 'nonprofit' corporation.  The wording will vary but each definition is distinct and absolute in three basic precepts.

  • 'Nonprofit' means that no part of the income or profit shall be distributed to any corporate member.
  • A nonprofit corporation may make a profit but that profit must be used to benefit all members according to the purposes stated in the articles of incorporation
  • A nonprofit corporation may compensate members and officers for expenses incurred in service to the corporation.

It is clear that the corporation is permitted to make a profit provided none of the profit is distributed to any individual member.  

The Members:

Corporations may have:

  • No members.
    Until recently, Escapees Inc had no members.  We 'Escapees' were members of the 'Escapees Club' only.
  • Members who do not have voting privileges.
    At present, Escapees Inc. is this type.  Your membership card says, 'a member of Escapees, inc. which is the corporation we call 'National.'
  • Members who have voting privileges.
    The members of the co-ops have full voting privileges with no restrictions.  Each member has equal voting power.

Most nonprofit corporations do not establish small, closed communities such as the co-ops. The intimacy of the co-ops tends to generate a proprietary attitude among members which can work for good or bad.  A proprietary attitude can create loyalty, support, fellowship, caring and sharing attitudes and many other desirable qualities. Yet, it can also generate selfishness, greed, dissension, distrust, jealousy, controversy and even legal confrontations.  

The existence of bad attitude can usually be traced back to a lack of good or proper leadership at the board level.  It also leads to decisions being made by the members which are influenced more by personal interests of an individual or a 'faction' of individuals rather than a rational consideration for the good of the membership as a whole.  Whether the attitudes of the members is productive or counter-productive depends on the leadership given by the board of directors.

When members become emotional, demonstrative or irresponsible, a board must remain firm in its resolve to represent and work for the good of the whole membership.  A board cannot afford to bend to the will of a 'noisy minority.'  Co-op members, like anyone else, like to make money.  They are taught all their lives to make a profit from any opportunity that presents itself.  As a result, many co-op members cannot (or will not) believe that it is unlawful for a co-op member to make a profit - no matter how small.  To avoid controversy and attempts to circumvent the law, the board need to continuously remind those members that the law must be adhered to and explain the requirements of nonprofit law.

To be a member of a SKP Co-op, a person must be a member of Escapees Inc and then enter into a lease or membership agreement with the corporation.  It may come as a surprise to many members that this agreement is contractual in nature.  Universally, members must abide by the lease or membership agreement, articles of incorporation, bylaws, rules and regulations.  Failure to do so is a breach of contract not only punishable according to the terms of the documents, but could be brought to court as a breach of contract.  The 'waitlist' of persons desiring to become members is, believe it or not, a viable contract that would stand up in any court.

Members are the core of and the only reason for the existence of the co-ops.  It is from the members-at-large that directors, officers, committee members, and all the volunteers necessary to the ongoing purpose of the co-op are recruited.  The members determine the destiny of the co-op and the authority of the board.  The relationship between the members and the board is the most important element in the life of a co-op. A successful and harmonious relationship will be one of unity - not 'we' and 'they' relationship.  The board as leaders bear the responsibility for making this relationship become and continue to be a reality.

Members are accorded specific rights via the bylaws and articles of incorporation.  They also have rights under state and federal law.  The co-op corporation too has rights as well.  It is best, if there is a question or even a suspicion that the rights of the individual or the co-op might be violated, the matter be referred to a 'grievance' committee before any action is taken which might affect those rights - not afterwards.  A difficult action for a board to undertake is the involuntary termination of a member.  Bear in mind, although the member does not own any part of the corporation, they still have rights which are protected by the courts as 'property' right.

Members are naturally concerned about what happens to the co-op because it is, for them, at least a part-time home.  It is important the board make every effort to keep them informed as to the business affairs of the corporation by providing copies of minutes of board meetings, annual meetings and periodic financial statements.  In fact, the statutes are universal that the records of co-ops are to be open for inspection by any member at any reasonable time, and that they may make copies as they desire.  Statutes also include civil penalties for officers who interfere with this right.  

Bylaws:

'Officers of a corporation may be designated by such additional titles as may be provided in the articles of incorporation or bylaws' (Arizona statute)

'Regular' meetings of the board of directors may be held with or without notice as prescribed in the bylaws'  ( Arizona statute)

'.... unless the articles or bylaws otherwise provide.'  (Arizona statute)

Statutes sometimes demand, but all expect that nonprofit corporations will have bylaws.  Statutes provide directions for nonprofit corporations that will protect the rights of the members and the public.  Statutes demand nonprofit corporations bylaws include many 'parliamentary rules.'  These include notice of meetings, methods of voting, election of directors, number of directors, duties of officers, records to be kept, quorum for board or member meetings, procedures to amend articles; and on.

Many states define bylaws as 'the code or codes of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name or names by which such rules are designated.'  In layman's terms, bylaws can be described as the 'instructions for the conduct of the business and activities of the corporation.'  By comparison, co-op rules are 'instructions for the conduct or behavior of the members as related to the park.

An axiom to remember is: Put only in the articles and bylaws the minimum information required by statute plus the specifications that are important enough to be carved in stone!

Other Controlling Documents:

Bylaws are not the only 'rules' which govern or regulate nonprofit organizations.  There are others and their effect depends on a 'hierarchy' or order of precedence in which each is superceded by the other beginning with constitutional law.  The hierarchy is:

  • Public law
  • Articles of incorporation
  • Bylaws
  • Rules & Regulations
  • Parliamentary law.

Note: The lease, or membership agreement is the basic contractual transaction between the corporation and the member.  It cannot be emphasized enough that the wording and conditions expressed in that document must be consistent with all other governing documents.  

The Board:

The board is comprised of volunteer members of the co-op.  These volunteers are placed in nomination by the 'elections' committee because they volunteer to serve, not because they have special qualifications to fill the position of director.  They are, for the most part, elected on a basis of popularity and affability, because the members have no criteria by which to determine their fitness for the position.  Often times, some members volunteer simply to fulfill the need to complete a roster of candidates. The likelihood that successive generations of members will be less naive than the present generation is suspect.  It is because of this condition that the information contained herein and in other pages of the co-op website was compiled.  This information can establish the 'norm' by which the co-ops can perpetuate the thinking of the originators as time goes on.

Although there are exceptions, directors who have served the co-ops:

  • Are mostly retired persons.
  • Are diligent and concerned about the co-op.
  • Have never served on a board of directors.
  • Know little about bookkeeping and accounting
  • Do not understand the concept of nonprofit corporations.
  • Are dubious about their ability to read and understand the statutes regarding nonprofit corporations.
  • Have no administrative experience in a corporation.
  • Were elected without having been told of any qualifications necessary for the job or personal risks involved.
  • Have their own ideas as to how the organization should be run.
  • Find it difficult to admit they don't know what they are suppose to do so are reluctant to seek advice.
  • Believe they are totally protected from personal liability because they are 'indemnified.'
  • Do not comprehend or are willing to accept the 'servant', 'stewardship' or 'trustee' role of the board.
  • Have difficulty relating statutory regulated business with a 'social club.'

Contrary to the majority opinion, the board of directors is the board of directors of the corporation but does not govern the co-op.  The members govern the co-op with the administrative assistance of the board.  The co-op is the park, the improvements, the social life, the members, activities and surroundings but it is not the corporation.  

It is essential that a corporation have members but a corporation must have a board of directors for two reasons:

  1. The law requires it;  
  2. Without a board of directors, a corporation could not function for any purpose because a corporation, as such, has no soul or mind.  The board performs that function.

The board does not have the authority to govern the corporation or the actions of the members except as permitted by the articles of incorporation and/or bylaws.  Board of directors often assume the members are responsible to the board when the exact opposite is true.  The courts have established that:

'the board of directors or trustees of a corporation are merely its managing agents for the purposes of its business, they have no power unless specifically authorized by the members.'  (from Corpus Juris Secundum)

The board is delegated by the members to perform the business necessary for maintenance of the corporation, its property and the park in general and other business as defined in the law, articles of incorporation and/or bylaws of the corporation.

Actions that affect members should always be approved by the membership.  The board may recommend matters to members that are not part of the 'business affairs' of the corporation, but the board may not always implement those matters except as provided by the articles of incorporation or bylaws.

For example, consider 'rules' which relate to the social conduct of the members.  Rules are necessary because people have the tendency to overstep their bounds of mutual respect.  But, rules are not part of the 'business' of the corporation.  Development of 'rules' is a responsibility of the members - not the board.  The board must, however, determine whether or not any of those rules would violate the civil or property rights of any member because, should that happen, the corporation - not the members - would become involved in the litigation that would result.  Properly, the board should only suggest rules to the membership for their consideration.

Remember: Bylaws are the instructions for running the corporation; Rules are the instructions for the behavior of the members.  

Rules & Regulations:

No discussion of bylaws can be complete with reference to 'rules'.  Rules, like bylaws, seem to proliferate in co-ops to the extent of being ridiculous.  Why is it that commercial parks, membership parks, state and federal parks can publish less than a page of 'rules' when it takes pages to regulate the behavior of people in a co-op that is suppose to be a 'caring-sharing' group of people?

The words 'rules' and 'regulations' are often confused.  In a co-op, their use is to differentiate between the types of 'members.'  In SKP co-ops, there are two types of members - those who are members of Escapees Inc. and members who are 'leaseholders' in a specific co-op.  Therefore, rules generally apply to all members of Escapees Inc, members of the co-op, and their guests.  Regulations apply only to members of a co-op who are leaseholders.

But, as long as there are going to be rules, it is important that the authority to make rules be firmly established by provisions in the bylaws.  There are three schools of thought as to who should have the authority to make the rules that govern behavior.

  1. The board makes all the rules.
  2. The board makes all the rules but they must be ratified by the members.
  3. The board recommends rules to the members.

'Rules' regulate the behavior and conduct of the members but do not regulate the conduct of the business of the corporation.  Therefore, it makes sense that the members make their own rules and furthermore, that the members be required to enforce them.  A co-op that requires the board (or of all ridiculous things, the manager) to enforce rules is not only unfair and an imposition upon them but is a clear cut case of passing the buck!  

If members are to govern, they must accept the responsibilities that go with governing.

Nonprofit Status:

Sometime since the birth of the first SKP co-op, the identity and principals of 'nonprofit' and 'tax exempt' got mixed up.  At one time, someone made the statement that 'if you are 'nonprofit', you can be 'tax exempt.'  Sounds great, doesn't it?  Tax exempt, hooray, we don't have to pay any taxes!  Wrong!

The description, 'Nonprofit' does not denote status.  'Nonprofit' or  'not for profit' identifies the type of business to be carried on by the organization.  A corporation cannot lose its 'nonprofit' designation, nor can it change that designation except through a dissolution process.

'Tax exempt' is a corporation status that can be applied for through the Internal Revenue Service.  There is a classification for which the co-ops can qualify for tax exemption.  That classification is that of a 'social club' and is described and defined under the IRS code 501(c) (7). However, just because a co-op is described and defined under this IRS section does not mean it has been granted tax exempt status.

There is a big difference between 'tax exempt' and 'nonprofit'.  A corporation can be 'nonprofit' without being 'tax exempt' but cannot be 'tax exempt' without being 'nonprofit.'  A nonprofit corporation must meet certain criteria in addition to being 'nonprofit' in order to be awarded 'tax exempt' status.

Because co-ops end the year with essentially zero taxable income, it would appear that, in most cases, to be 'tax exempt' would be more of a burden than a blessing because of the additional restrictions placed on tax exempt organizations.  All SKP co-ops are 'nonprofit' corporations of which none hold 'tax exempt' status.

Corporation Income:

As said before, the corporation and the members are separate entities.  So it is with money.  The corporation has its money and the members have theirs.  In the SKP co-op, the members pay the corporation for their membership privileges and provide money to the park.  Therefore, the SKP co-op corporation, being a nonprofit organization, must refund to the members any unexpended income which has the effect of lowering the member's annual fees which is another of their benefits.

Some co-op members insist that, because the organization is a 'co-op', all the assets, including the money, belong to the members.  The truth is that none of the co-op's money or assets belongs to the members!   The corporation may owe some money to the members but even then, the money does not belong to the members until they are paid!  Remember, all their lives, members have been taught that profit-making is one of the most important goals in a capitalistic society.  There is nothing wrong with that unless they mistakenly expect to make a profit from being a member of a nonprofit organization.

'A nonprofit corporation is not a money making device for the benefit of its members, and it may not sell stock or pay dividends.'  (Parliamentary Law and Practice, H. Oleck, Cami Greene)

In the SKP co-op, the board needs to continually remind the members of the separation between the members and the corporation to prevent the member's 'proprietary syndrome' from resulting in actions by the member's that could jeopardize the organization.  This includes the value of gifts, donations, and income from the collection of fees and penalties received from any source.  Can it be said more plainly than, 'nonprofit, means members cannot make a profit.'  Nonprofit means nonprofit for the members but does not prohibit the corporation from making a profit.  But there is a catcher here.  Any profit the corporation makes must be used to the non-cash benefit of the members.  Failure to adhere to these basic understandings may jeopardize the corporation in the threat of involuntary dissolution by the government.

There are three transactions in SKP co-op which would most likely result in a profit to a member.  They are:

  1. Any amount added to the value of a membership as a result of acquisition of assets paid for by fund raising activities or by donations or gifts from any source.
  1. A member's share of the rental pool being applied to the  coming year's annual fees that was greater than the member had paid as annual fees the previous year.
  1. Income from invested corporate funds being added to the value of a membership or in any way distributed to any member.

Corporate income is money or value received by the corporation from any source.  It can be used to pay for operation expenses, social activities, improvements to the park, or establish dedicated funds for future use by the corporation for major asset replacements due to deterioration or depreciation.  Co-op corporation income is derived from a number of sources.  

  • Annual maintenance fees paid by members.
  • Interest from invested funds.
  • Contributions from friends.
  • Income from lots in the rental pool .
  • Payment for leases received from incoming members which exceeds the amount the corporation owes to the departing member.
  • Laundry
  • Storage rentals
  • Various fees and penalties
  • Any other income the corporation might legally receive.

Please note that none of the above listed sources include income received by the fund raising organization.  Nonprofit organizations are formed to provide benefits of some kind (but not income) for their members or others.  Perhaps the thing that bothers most co-op members is that the benefit they receive cannot be a cash benefit!  

Aside from the rights and privileges and pleasures of being in a community of kindred souls by belonging to a co-op, there are economic benefits.  The cost of membership can be kept at a minimum so each successive member can acquire a membership for payment that is much less than a comparable membership in a commercial, condominium, housing association or for-profit co-op accommodation.  Besides that,

  1. The members govern the organization so their rental (annual fees) is determined by their own action and not the landlord.  If they set the fees too high and there's something left at the end of the year, they get a refund of their share of what's left.  That's a pretty good benefit!  
  2. Members who participate in the rental pool receive a refund of all or a portion of the annual fees they paid for the current year.  That's a pretty good benefit!

So, why can't a co-op member make a profit?  The answer is simply that, because the co-ops are nonprofit corporations, the law forbids it.  Corporation income is exactly that - corporation income, not member income or profit.  

Epilogue:  

The success of the SKP co-op concept is undeniable.  Conceived by RV'ers for RV'ers, the co-ops have prospered year after year with a growing waitlist of new members.  It is hoped this 'short' dissertation from the 'Manual for SKP Co-ops and Boards of Directors' has brought you better understanding into how SKP co-ops were formed, are governed and the rights and responsibilities their members hold.  Your board of directors are your front line to the smooth operation of the co-op.    

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