Some of the recommendations that will be presented to the Reston Association (RA) Board of Directors later this year began to emerge on Monday night during a meeting of RA's Special Committee on Governing Documents Review. The July 28 meeting touched on a host of issues ranging from amendments on RA’s articles of incorporation to discussion on policy issues including changes to the "cap," the maximum dollar amount of assessment that RA my charge its members. After lengthy debate, the committee members in attendance, with the exception of Glenn Downing and Chad Davis, the new Reston Citizens Association (RCA) president, voted to raise the cap by $50, as unanimously proposed by the finance subcommittee.
After reviewing expense projections for the coming decade, the finance subcommittee, in its report to the full committee, found that "if no action is taken RA’s assessment revenues, limited by the cap, will not be sufficient to pay for our existing programs, services and facilities."
John Higgins, RA treasurer and a member of the special committee, warned that there is a "strong likelihood" that sometime in the near future, RA will have to stop doing some of the things that members say they like receiving from their homeowners’ association.
Within the subcommittee, there was apparently a majority of committee members, like Mary Ellen Craig, who favored eliminating the cap altogether. Craig said RA is "hamstrung by the cap," but according to the report, the subcommittee agreed that this was not a politically feasible alternative given the "necessity for broad based support to meet our current referendum requirements."
In an interview on Tuesday, RA president Susan Jones said she disagreed with those who advocate eliminating a cap. "I'm not in favor of taking the cap off, but we need to make sure we can deliver the services people have come to expect," she said.
"WE DECIDED to retain a cap," Higgins said. "We deferred to the wisdom of the founders in 1984. Caps make sense as long as they are sensible."
According to the report, the 1984 decision to cap assessments was based on the assumption that the then-2,150 residential units in Reston Town Center would be written into the Deed and become part of the association, that plan was derailed due, in part, to questions over covenant enforcement, Higgins said.
The subcommittee also considered, but ultimately rejected keeping the status quo, focusing on revenue enhancement and creating an assessment based on the percentage of members' tax assessed values.
"We are not going to be able to do our mission if we don't relieve the pressure," Jones said. "Personally, and I feel very strongly about this, I think we have to address this problem now before we have a problem."
The chairman of the special committee, Lee Rau, agreed calling the panel's discussions on the cap, "Probably the most important issue we will discuss."
Higgins, who is also the RA treasurer, outlined the finance committee's recommendations saying that the subcommittee explored numerous ways to deal with limiting the cap. "The committee focused on defining a long-term solution; one that could be readily communicated to and accepted by RA’s broad based membership; and one that honored the intentions of the 1984 document drafters to keep a mechanism in place to limit any potential for runaway spending," the report read.
Jones who was president when the original documents were drafted 20 years ago explained her understanding of the cap. "Because it was created by this roll in, the idea of the cap was really to control operating expenses and not get an out-of-control-board." Jones said. "I think the sentiment in the community is to keep it but to do our job within it. I don't think people don't want us not to be able to maintain and replace our capital asset, that's part of our job."
THE SUBCOMMITTEE ISSUED two recommendations to the full committee, both of which were passed. The recommendations will be sent to the full RA board which will vote on each individual amendment. A final package of recommendations will ultimately be sent to the membership to vote in a referendum, that like Southgate, would require a 40 percent turnout and a two-thirds majority vote to pass. "We've got to be very careful that we don’t present something that won’t get the vote out," said Downing.
The subcommittee’s first recommendation would provide for a cap on operating costs and it would also place a limit on new capital initiatives, according to the report. "Based on recent member surveys," Higgins told the committee, "It was clear that they want to see our current recreational facilities maintained, but they are more cautious about new capital funding.
"The change is the way in which the cap is utilized not computed," Higgins stressed. "The recommendation is to apply the cap to RA’s operating expenses, not capital expenses."
Committee member Glenn Downing objected to the recommendation to split operating expenses from capital expenses. Under the given scenario, Downing warned that large capital replacement projects or upgrades would not be subject to the $300,000 rule requiring a referendum for all capital projects of $300,000 or higher. "What if a replacement facility costs $10 million?" asked Downing.
Susan Jones, the RA president, dismissed Downing's warning. "Nothing we have costs $10 million to fix. "I don’t think we need to get everyone’s opinion on every issue."
Jennifer Blackwell agreed with Jones, adding that she worried that such a precedent would potentially pit Reston communities or clusters against one another. There is no incentive for people in Hunter’s Woods to vote for improving a pool in another community, she said.
Monique C.M. Leahy said Downing’s recommendation would "kill" many potential RA projects.
"Maybe it should," Downing shot back.
Davis, the recently installed RCA president, agreed. "I’d like to, but RA can’t do everything they would like to do," Davis said. "Getting more money is not a way of cutting."
Vera Hannigan was in the audience on Monday night as a member of the recently re-established Reston Homeowner's Association (RHA). "To put the cap only on operating expenses is really a joke. What you are doing is getting rid of the cap," she said. "The cap is supposed to be on the assessments not on how you are going to divide out how you assess. This is nothing more than a shell game."
Hannigan, a former RA director, said she has seen RA boards shift large projects into categories like restoration, rehabilitation, renovation. "To call something a new project is a joke for them," she insisted. "They're going to shift it around to wherever it works for them. We are going to lose control of the assessments, they will be free to go wherever they want to go and they will go where Mr. Simon has always wanted to go and that is the level of Columbia, Md. which runs in the thousands of dollars of year."
Jones disagreed. "Just think about what would happen if we had to go to referendum every single time, which costs between $35,000 and $70,000 and do a Southgate-style effort, that would just totally tie the hands of the board," the RA president said. "We elect the board. Every year the community has an opportunity to vote in three new people. If people don't like what the board is doing, they shouldn't elect them. The ballot box is also controlling."
THE SECOND RECOMMENDATION from the finance subcommittee stems from an action by the RA board in 1991. That year, the board changed the funding formula for the RA pools and tennis, thereby changing the cap margin. That decision, the report said, would help restore the cap margin which shrunk dramatically after the 1991 board decided to eliminate user fees for the funding of RA pools and tennis operations and facilities. From 1964 to 1991, the annual assessment increase went up about $7, in 1991, that number jumped to $62. The decision "put the whole burden of funding for capital facilities and repair and replacement of those facilities on the annual assessment rather than user fees," the report said.
Years ago, the tennis and pools were user funded with memberships nearing $400, Jones and Hannigan, in a rare instance of agreement, said. Members bought memberships. "Every year we had to raise the fees and then every year the number of people who joined fell off," Jones added.
Jones said RA was facing a crisis that threatened to shut down RA pools and tennis courts.
"The fee was close to $400 every year, back then that was a lot of money. My salary was one third of what it is today," Hannigan said. "So we took a pass on it, and quite frankly so did everyone else."
The 1991 board then leveled a fee to all RA members of about $50 to $62 so the board "rolled in" the user fees into the general assessment. When the cap was set, Jones explained, the assessment was $150, and the cap was set at $250 with a $100 cap margin. "Every family paid it, it wasn't discretionary," Hannigan said, adding that a lot of money went into RA reserves after the roll in.
"The roll in took away something between $50 and $60, but that is where much of the pressure on the cap came from, because they didn't adjust the cap when they did this," Jones said. "The board had to do this, but what they should have done is also make an adjustment to the cap. I'm in favor of making that adjustment"
RA’S 2003 FLAT RATE assessment limit is $422, but the actual flat rate assessment last year was $430, leaving an $8 cap margin.
To address these "inequalities," the subcommittee recommended a $50 increase, from $250 to $300, per unit to try and restore the base amount while adjusting for this change in funding policy. "Our intention is not to raise the assessment," Higgins said.
"To say they are not going to raise dues but just going to let the cap go up, that's a sham," said Hannigan. "They may not go up a lot the first year this goes into effect, but I can assure you that $50 in additional money will be taken out of people's assessment within three years, if not sooner."
"This whole thing is based on a need to create a cap margin that will serve the purposes of the cap but not totally hamstrung the organization. We are getting very close to the cap right now," Jones said. "If you straight line our budget, we don't have a whole lot of wiggle room and a couple of the things we are considering next year are doing a recreation plan, a pool plan, a reserve study, these are things that have to be done, this isn't like building a new sports stadium."