RA Blackmailed?

RA Blackmailed?

In meetings and communiqués, ARCH convinces RA to Tighten Fincial Flexibility

Frank Pfeilmeier, president of the Alliance of Reston Clusters and Homeowners, told the Reston Association board Wednesday that if it adopted its proposed change to the cap, which would place increased financial restrictions on future boards, then his organization would “endorse and actively support” the governing documents.

Then, in a surprise move, the self-proclaimed “no-cap girl,” RA President Jennifer Blackwell, started the meeting to finalize the language on the governing documents by submitting a motion to pass ARCH’s proposed change, word-for-word, which had been sent to board members via e-mail the day before. Speaking to her fellow board members, Blackwell explained her position reversal and called the ARCH proposal a “good provision.”

Moments later, Director Barbara Aaron of Hunters Woods/Dogwood, called the provision something else altogether: blackmail.

“I’m offended that a lobbying group can come and lobby certain board members to this extent,” said Aaron. “They will try to discourage the proposed documents if we don’t make the change to the maximum assessment? I think it’s blackmail. I think it’s unconscionable.”

Aaron pointed out that not one person mentioned the cap as an issue at the district meeting she hosted one month ago on the changes to the proposed governing documents. At that meeting, several members had a much different reaction to the cap. They suggested that the cap be removed from the proposed documents to ensure future boards the flexibility they might need.

“I have grave concerns about the way everything is evolving,” said Aaron at the Wednesday, Jan. 18 meeting. She explained that the majority of the board originally voted [in April 2005] to eliminate cap, an artificial ceiling on the annual assessment. Then, she said, the board reinstituted a modified cap [in September] as a compromise for some of the more fiscally conservative members.

Aaron sees this additional change, which was approved by the board 8-1, as another, unnecessary compromise that could jeopardize future boards from maintaining services.

THE CAP PUTS a self-imposed limit on the increase the board is allowed to make on the annual assessment. Each year, the maximum assessment, informally referred to as the cap, increases based on the yearly rise of the Consumer Price Index, which measures the average change in prices over time in a market basket of goods and services. Despite the cap, RA boards have historically made small increases in the annual assessment. According to RA staff, the average yearly increase has been less than the rate of inflation (see Box).

Director Rick Beyer (At-large), who has aligned with ARCH, said the new language will produce more efficient RA management.

“Although one could say it’s tight, we could manage successfully with this,” said Beyer.

When a modified cap was voted back into the governing documents, it was Beyer who had drafted it. It was designed to be a long-term solution. The modified cap would have increased the estimated 2005 cap by an initial $69 from $465 to $534, and then adjust it in future years by the greater of 4 percent or the Employment Cost Index, which has averaged 3.9 percent since 1984. The one-time $69 increase to the cap represents a decision in 1991 to roll-in a $50 recreation pass fee into the assessment. The 1991 roll-in instantly reduced the cap margin by $50, which equals about $69 today after accounting for inflation.

In ARCH’s proposal, the $69 one-time increase to the cap was erased and the yearly increase of the cap was changed from the greater of 4 percent or the Employment Cost Index to the greater of 4.5 percent or the Employment Cost Index.

Aaron pointed out that the change increased the chance that a future board would have to deal with modifying the cap again.

“Having it at such a low level is just asking for what has happened in the last 20 years,” said Aaron. “We don’t want to have that situation again.”

But Beyer seemed less concerned about the cap’s longevity, intent on reigning in financial flexibility. “Maybe this will have to be addressed again in 2025,” said Beyer. “It’s difficult to make projections 15 years out.”

RA STAFF SEEMED reluctant to endorse the change to the cap. “If you asked me is this the ideal situation, I would say no. If you asked if I could live with these numbers, I’d say yes,” said Milton Matthews, executive vice president and CEO of RA. “It doesn’t give us a lot of flexibility for unforeseen events in the future.” Ken Chadwick, RA’s legal counsel, said that instituting a cap was not “consistent with current legal drafting techniques.”

However, the board was swayed by the logic and promise of support from ARCH, which has been in talks with RA for the past two months. Pfeilmeier toured the district meetings, presenting a concern about the cap, often noting that ARCH would not announce its support for or opposition to the governing documents until they were finalized. Bill Keefe, an at-large RA director, said that he originally didn’t think the cap made a lot of sense. But rather than debate the issue further, he said he’d rather see the board go beyond this. “It’s time to move on,” said Keefe. “I think [the ARCH proposal] is very much a compromise.”

BUT AARON REMAINED unconvinced. “We have no idea what’s going to happen in the future,” said Aaron. “Why in the world would we want to tie this organization to that? How is it in the best interests of our members?”

While the board, particularly Blackwell, spent more than 10 hours at five district meetings the past two months explaining the need for the now defunct modified cap, Aaron didn’t receive answers to her questions. “This is not a compromise we’re talking about tonight, this is a great injustice,” said Aaron.

The board also finalized several other outstanding policy concerns during Wednesday’s meeting.

Board members also voted to institute a 30 percent quorum requirement for purposes of acquiring a public area or an amendment to the documents. Last year, the board voted to reduce the quorum requirement from 40 percent to 25 percent.

The board also made changes to the transfer fee. Also known as the resale fee, it charges $250 to everyone who buys a home in Reston, but allows RA members moving within the association to apply for a credit.

Late last year after responding to many member comments, the board agreed to restrict the revenue generated by the fee to be used to offset annual assessments. On Wednesday, the board changed this restriction on its use to be used on “any association expense.”

The governing documents will go to referendum next month. On Feb. 13, the association will mail ballots to members. All ballots are due back by March 31. On April 11, the results of the referendum will be announced.