Are We Destined To Repeat The Past?
By Lloyd Sherman
The Present – During the period of 2021-2022 we are deeply entrenched in an education program to enlighten property owners on what it costs to run the Village and based on comments being made, many feel this is more of an indoctrination than it is education, with the end result to support and propose a substantial assessment increase for resident property owners.
The FRATF indicates they will be making their recommendations to the board in August of 2021. Information sessions were just provided in June of 2021 and one has to wonder how many truly informed recommendations can be provided during this next two months, especially when it appears that it will be business as usual.
In a 1948 speech to the House of Commons, Churchill paraphrased Santayana when he said, ‘Those who fail to learn from history are condemned to repeat it.”
So, looking back to 2014-2015 might be worthwhile and see what was said and how it turned out. Please note that this information is taken from previous documents provided to the members during the two-tier campaign.
The Past – This period represents the last time an assessment increase went before property owners (members). It is critical to review some of these documents and see how the information (hype if you prefer) was presented:
INVESTING IN OUR FUTURE – A call to action by the HSV Assessment Committee (Exhibit 1)
This document started out addressing the action being taken and a little history. You can read it in its entirety by opening up the Exhibit. In the body of this document, I will address some of the highlights and provide comments:
- Additional Assessment Funds Use
- Roads – $6.3 million over five years
- Water Supply – $1.25 million over five years
- Sewer – $2.5 million over five years
- Culvert Replacement – $500K in 2015, then $250K a year
- Replacing high-ticket Equipment – $750K per fire truck; $150K per trash truck
I don’t know about you, but I am hearing the same requirements coming from FRATF today for yet another proposed assessment increase to take care of exactly what previous boards and POA staff offered.
- Three-pronged approach
- Assessment increase – A rate increase is the best action that can be implemented in a timely manner to take care of our most pressing infrastructure and capital needs.
- Improved amenity performance – Going forward, we need to decide how best to lower subsidies without sacrificing quality.
- Funding for future growth – Raising funds for future operation and improvements. Includes development of new sources of revenue.
All worthy goals. However, the best laid plans require the proper execution and commitment to stay the course. None of which was done. Additionally, these approaches were in the wrong order. An assessment increase is the last step that should be taken, not the first.
Exhibit 1 – INVESTING IN OUR FUTURE – A call to action by the HSV Assessment Committee
A-Call-to-Action-by-HSV-Assessment-CommitteeHow Will the Assessment Increase Be Spent (Exhibit 2)
This was a six-page document so only certain items are being brought forward. See Exhibit 2 for complete details.
Funds Available for Capital Purchases – In this chart it was depicted that “Funds Available” would be nearly $6 million in 2017 after paying for all non-capital expenses (employee compensation, materials and supplies, maintenance and operating expenses.
This will be pointed out again later but compensation is currently projected at $18.6 million for 2021 which is 130% of net assessment revenues (In other words we now pay more to staff the POA than we receive in assessments)
Employee Compensation – This section indicated that compensation will keep pace with the cost of living which was estimated at 2.5% per year with the increase or frozen at 2015 levels for two years if no increase.
If this area wasn’t so sad, it would be laughable. The chart indicated that compensation would be something less than $15 million in 2017. The problem is that the empire building had already begun for the upcoming setup of the staffing for the implementation of the CMP. In 2021 the budgeted compensation line is projected at $18.6 million. If compensation had followed their projections, it should have been around $16.2 million coming into 2021. It is the opinion of this author that there is much more that can and should be done at the compensation level.
And finally, the coupe de gras and I quote:
“One thing is clear. No new amenities will be funded from this assessment increase”.
Let that one sink in!
Exhibit 2 – How Will the Assessment Increase Be Spent?
How-Will-the-Money-Be-Spent-White-PaperINVESTING IN OUR FUTURE WHITE PAPER: TWO TIERS (Exhibit 3)
Objective for the Assessment Increase – And I quote:
“Regardless of the assessment method used (flat rate, two-tier, ad valorem, etc.), the objective of the assessment increase is to replace the $3 million lost per year to declining assessment revenues, and do so starting in 2015. Any method selected must be expected to meet that objective to be considered in the proposal.
This means two things: 1) the vote must pass, and 2) upon passage, the increased assessment must deliver the replacement revenue.”
So, what did the two tier bring us?
- It forever pitted lot owners against home owners when it comes to assessments. Lot owners have the majority and can heavily sway the vote to pass higher fees on just home owners.
- The road shows and education program (which were expensive) also woke up a sleeping giant. Not only did this strategy not work, it backfired big time. Current bad debt is projected at $4.6 million for 2021. So, all of the “revenue” from the two tier not only disappeared but it has created a situation where we now have worse bad debt than we have ever had.
Bottom Line – Whether intended or unintended, decisions have consequences. Why would we want to pour additional assessment revenues back into exactly the same machine that got us to this point? We need our organization RIGHT-SIZED before we make this kind of a decision.
Exhibit 3 – INVESTING IN OUR FUTURE WHITE PAPER: TWO TIERS
Two-Tier-White-PaperBy Lloyd Sherman, June 20, 2021
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Thank you for reading. If you like, please comment below. We love to hear your opinion, but comments must be made using your first and last real name, or they will not be accepted. If you would like to submit an article for publication, please contact us through this website. Be sure to bookmark this website. Click here to visit the Hot Springs Village People Facebook Group.
Paul Collins
06/20/2021 — 4:47 pm
Being a new resident all the information provided is very helpful to understand the history of past years. It seems there are many complex factors needing intellect decision.
Thank you
Diana Podawiltz
06/20/2021 — 9:23 pm
Lloyd, Exhibit 3 states that we cannot have a Declaration Change vote until 2020. Didn’t we have a vote in 2018? Don’t we now have to wait until 2025 to have another Declaration Change vote?
This is good information, thanks for sharing.
Lloyd Sherman
06/21/2021 — 7:46 am
Yes Diana, that is correct. 2025. Must have been a typo.
Gene Garner
06/21/2021 — 3:40 pm
The first amendment to the Declaration became effective April 20. 2006 and the second amendment became effective on April 20, 2013. That meant the next amendment was possible on April 20, 2020 but since no amendment was passed the next eligible date is April 20, 2027. The Nov. 30, 2018 vote would have been recorded in 2019 with an effective date of April 20, 2020.
If you look on the first page of the HSV Declaration or read Article XIV Section 1 Duration of the Declaration you will see there’s a 7 year wait between amendments.—Gene
Diana Podawiltz
06/21/2021 — 5:31 pm
Help me understand. So we can take a vote anytime but, it can’t become effective until 2027??
Gene Garner
06/22/2021 — 2:28 pm
Diana, the Declaration, Article XIV, Section 1 Duration states;
The Covenants and Restrictions of the original Declaration and this amended Declaration shall run with and bind the land………for a term of seven (7) years from the effective date of this amended Declaration after which time said covenants shall be automatically extended for successive periods of seven (7) years unless an amendment is approved by the affirmative vote of two-thirds of those voting at an election called for such purpose. A majority of all lots or living units whose Owners are in good standing shall constitute a quorum…….. Provided, however, that no such amendment shall be effective unless made and recorded one year in advance of the effective date of such change.
I’ve deleted the non-essential verbiage –that’s what the periods mean. In other words the Declaration can be amended every seven (7) years but the amendment has to be “made and recorded one year in advance of the effective date of such change”.
The last try we had at amending the Declaration was made with the Nov.30, 2018 vote. If it had passed the POA had time to call a meeting of the Owners, announce the results of the vote and explain to the Owners what consequences would result. Then the POA could record the amendment with the County Recorder’s Office in 2019 with an effective date of April, 2020.
We can’t have a vote at any time, it has to be coordinated so the amendment is “made and recorded one year in advance of the effective date”. We know the last amendment was effective April 20, 2013, so 7 years from that would be April 20, 2020 for the effective date and a “made and recorded date” of 2019.
As it stands now the next open effective date is April 20, 2027 with a made and recorded date of 2026.—Gene
Diana Podawiltz
06/22/2021 — 5:51 pm
Thank you Gene. From this it looks me to me like if POA BOD is considering a Declaration Change, they should be planning a vote in 2025.
Melinda Alvord
06/25/2021 — 1:55 pm
Diana Podawiltz, this is correct and was referenced by Larry Seiner at the FRATF meeting on June 7, 2021. He said something to the effect that if the village wants to make any changes in the Declarations, a vote would need to take place in 2025 and we should not wait too long to begin planning for that possibility. To recap: 1) start planning very soon; 2) vote in 2025; 3) certify vote in 2026; 4) effective date of any approved changes to be April 20, 2027. It’s a long and involved process.
John M Szczepaniak
06/21/2021 — 5:44 pm
We probably made a mistake in rejecting all the amendments in 2018. There was a lot of pressure to “send a message” and vote no on everything without much thought of what the consequences might be.
Tom Blakeman
06/21/2021 — 6:46 pm
No John. We did not. What we did was reject a bunch of dreamers who have no clue as to what the Village needs to prosper. We will need to do it again soon.
The Village is run by a small group of folks who have never actually run an efficient, money making and conserving business operation. This includes those who got grandfathered in by simply being here in the beginning and were lucky enough to have “bought in” early, those who came out of the military where they never had to figure out how to be profitable – because there was no downside to economic failure (and they have a guaranteed and inflation indexed
pension and benefits) because Congress and the tax payers always bailed them out, and those who have come here from other areas with windfall profits from their real estate (like Californians) or being on the corporate brown nose gravy train ( which doesn’t exist much anymore unless you retired from Silicon Valley).
What we have now is a bunch of “well dooers” calling the shots and another bunch of deep state bureaucrats (you know full well who they are) milking the system. This is exactly like our federal political hacks and our entrenched federal workforce.
Unless we wake up and understand that we need a “Culture Change” like Lloyd Sherman recommends. . . We are screwed.
Walter Chance
06/21/2021 — 9:03 pm
FRATF, if it doesn’t recommend a major restructuring of our organizational chart, along with cutting positions and expenses, along with a clear picture of our finances with deep dives in every department ,will not get an assessment increase passed if an increase is what they recommend. If the vote is possible, I hope the new BODs realize that we should not even be considering any assessment changes until we have a new GM, which whom will not be hired until Q1 of 2022. The new GM can then look at FRAFT recommendations and how they arrived at them.
Tom Blakeman
06/22/2021 — 6:27 am
FRATF has told us they won’t be looking into those things because it is “beyond the scope of their charter”. Here’s what’s going to happen: in August they will present their findings and recommendations to the board. The board will choose an assessment increase for the resident property owners only. It will be $50 to $100 per month. In September the POA will embark on a major selling campaign. There will be meetings, slick brochures, radio ads, videos produced, etc, all promoting the vote. Said vote will be scheduled for early November so that they can implement the increase effective on January 1 2022. Subsequently the board will appoint one of the current Senior POA Managers as GM to replace JP and the money eating monster called POA will keep on devouring our NEW and old assessment dollars.
Andy Kramek
06/22/2021 — 9:17 am
You omitted only one thing there, Tom. The major focus of the ‘selling’ campaign will be on non-resident property owners. I expect a major push by the POA to ensure that as many as possible are registered as “in good standing” so as to be eligible to cast their vote in favor of the increase on residents. However, not this one!
Walter Chance
06/22/2021 — 8:00 pm
Any large increase in assessments will result in less revenue as you will see a lot of residents leave. Some struggle to make the 70 a month. Resales will increase. New home construction will decrease significantly as demand will drop. Any new buyers will buy existing homes because they will be less expensive. The only way forward is to decreases expenses and overhead and get financial house in order in a transparent way. Otherwise the POA will have a lot more issues than crumbling infrastructure.
Gene Garner
06/23/2021 — 9:37 am
I don’t know if mortgage rates will stay low but if they do the housing market will probably stay hot and more people will be buying homes–hopefully in the Village.
I agree with Tom, there will be an increase in resident owner assessments. Probably to $100 a month. I also agree with Tom that there’s a small group of Villagers that want to continue the misdirection HSV has been going the last 10-15 years. They want the low cost “fine dining”, entertainment and amenity fees that are subsidized by the resident property Owners.
The money that’s been poured into Troon, the De Soto Club with other Village restaurants and the ridiculous CMP could have repaired all the culverts and our streets with money left over. And those are just a few of the bad decisions instigated by the group Tom mentioned.
I believe an assessment increase is inevitable and the only question I have is “what can we do about it”.—Gene
Sue Posner
06/25/2021 — 3:05 pm
The present which includes the overall, as HSV isn’t in a bubble isolated. Uncertainty from a pandemic none of us have lived through before. The so called “recovery” is not robust and still fragile, still a pandemic, economic pressures like inflation rising, demand but less supply, interest will rise, these always lag. Psychological and economic trauma can only be healed/corrected by focusing on the now, not overwhelming by prediction. There are no guarantees in prediction! It is all about staying steady during the present, and near future by cutting unnecessary expenses, holding onto some savings, not knee jerk things, want less, don’t demand of others. HSV is not crumbling, not built all at once, not finished, nor beyond livability. POA few act as if we had raging wildfires, earthquake or hurricane destruction and have to do a total rebuild. If have one thing break down doesn’t mean it all broke down. Give time for recovery and confidence to correct. Ask yourselves, how much time do you have left on earth, could you really accurately predict, of course not, HSV is the same. Try having community gatherings not to be talked at, but to talk to each other (sorely missing) not virtually all the time either.
Marcy Mermel
07/07/2021 — 2:18 am
All – I may be misunderstanding the comments here, but I think it is being discussed that the assessment increase will not go into effect until 2027?
Please go to Declaration, article X, section 5 (within the context of sections 3, 4, 6….etc.)
I believe the amendments to sections 3-6 from 2013 allows a vote regarding assessments ANY YEAR, and does not have to wait on the 7-year effectiveness.
See below the concluding statement in same article, section 7.
“Section 7. Date of Commencement of Annual Assessments: Due Date. The annual assessments provided for herein shall commence on the date fixed by the Board of Directors of the Association to be the date of commencement…”
Am I misunderstanding the discussion?