Tetra is back. Remember the big brouhaha in Reston last year when the Reston Association acquired the modest office building on the corner of the dam holding Lake Newport’s water? After a contentious community referendum narrowly passed, RA borrowed $2.65 million to purchase the property assessed at half that amount ($1.3 million), a property on the market for years with no takers. Not to rehash the deal, but RA sold the acquisition on the basis that it was such a deal at $2.65 mil, as well as RA’s desperate need for space and the revenue it would most assuredly generate. Indeed, it would pay for itself.
Fast forward to last week when new numbers started leaking to Reston homeowners, those who must pay the Tetra mortgage and, as it turns out, a lot more.
First we learn from a presentation the CEO prepared for the May 26 Board meeting that “rehabilitating” the Tetra “lake house” will cost about three times ($687,000 vs $259,000) the estimate included in the referendum information. Please note, this is a fluid estimate. The final overrun will likely be considerably higher. Furthermore, revenue from the Tetra building is currently projected at minus $4,000 for the first year compared to the earlier estimate of plus $96,000. Poof! It is certainly not paying for itself yet. Nor is it clear when/if it will.
So, Reston, we have a problem. How to pay for the huge, growing losses?
At its May 26 meeting, the RA Board decided to simply dump $430,000 taken from the Association’s 2016 operating funds into the capital account to cover part of the overrun. They did so over the strong objections of Board members Ray Wedell and Lucinda Shannon, who felt they had been seriously misled by information provided last year, and called for an independent investigation of the overruns and options for stopping the bleeding. But, they were voted down 6 to 2. Go to YouTube-May 26, 2016 Reston Association Board meeting to see how it all went down, including CEO Cate Fulkerson acknowledging mistakes were made and bravely stating, “I own them.”
RA will have to pay for the cost overruns from somewhere. What are the options? Obvious answers are: 1) cut administrative/overhead costs; 2) reduce services to the membership; 3) levy a special assessment on the membership; or, 4) increase the annual assessments. Or, a combination of these. For best analysis of the numbers fiasco, see Terry Maynard analysis at www.reston2020.blogspot.com.
For some reason, in thinking over this apparent failure of fiduciary responsibility on the part of RA leadership last year and again last week, long dead U.S. Senator Everett Dirksen’s quote comes to mind. “A million here, a million there, and pretty soon you are talking about real money.”
Some folks do not see the humor. Online media and blogs contain suggestions that RA senior staff involved in the referendum and budget fiascos should forgo routine performance bonuses, for example. Others are drafting petitions calling for a recall vote for Board members (still serving) involved in the Tetra deal last year and the recent unquestioning vote to cover huge cost overruns from sources not yet identified in the budget. The rumbling you hear is not necessarily more impending rain!