Omohundro Presents Motion to Purchase 2115 Hot Springs Village Lots from Land Commissioner
At the June 16, 2021 Board of Directors Regular Meeting, Director Omohundro made a motion to submit an offer of $22.50 per lot for the purchase of 2115 (the motion says 2118) Hot Springs Village lots located in Saline and Garland County from the Arkansas Commissioner of State Lands for a total purchase price of $47,655. These lots have delinquencies in both property taxes and POA assessments.
Several directors seconded the motion.
Omohundro said, “Stephanie Heffer provided a lot-strategy presentation to the Board of Directors during the 2021 annual retreat to discuss delinquent properties, strategies for collection of those properties, and recent transactions that are occurring with lot sales by the Commissioner of State Lands.”
Staff Met With State Land Commissioner
“The Board at that time directed staff to further research the status of the lots held by the Commissioner and provide the Board with a recommendation strategy going forward. John Paul, Kevin Sexton, and Stephanie Heffer met with Tommy Lands, the State Land Commissioner; Kelly Boyd, Chief Deputy; and Lisa Pelton, Director of Real Estate with Arkansas Commissioner of State Land on May 18, 2021,” explained Omohundro.
“The goal of the meeting was:
- To assess what entities or individuals are purchasing the land,
- What the likelihood of future assessment revenue is, and
- What options if any are there for the Hot Springs Village Property Owners’ Association to purchase the remaining inventory of lots held by the Commissioner.”
It was determined that there were 2,115 lots held by the Commissioner in both Saline and Garland Counties. These lots were in a ‘negotiable’ state. This means the POA may make a reasonable offer for purchase and upon acceptance would receive Special Warranty Deeds for the properties.
One hundred and sixty-eight additional properties are not negotiable until two years has passed from the original auction date At this time, it would cost the POA $31,489.16 in back taxes and Staff does not recommend doing this.
Reasons For Staff Recommendation of Purchase of Lots
- Mitigate risk of costly POA development costs in unserved areas. (Areas with little or no existing infrastructure, i.e., water, sewer or roadways)
- Reduce costs associated with delinquent assessment collections.
- Use POA owned land for timber sales adding a new revenue source.
- Improve ability to hold a successful campaign where votes of property owners in good standing are required to meet quorum.
- Encourage ‘scaled’ development in specific targeted areas of the Village with cluster housing instead of the shotgun approach we have today.
- Take lots out of inventory that are in natural drainage ways or are otherwise unbuildable or cost-prohibitive for construction.
- Lots in some cases can be used for trail crossings or trail construction in areas where little or no existing amenities exist.
- Lots in developed neighborhoods can be used as green space or park space to improve livability of the area.
- Remaining lots, those that are undeveloped and prime for home construction will have a higher value and be sellable by either real estate companies or for sale by owner. Right now, the glut of lots available for sale have brought the prices down to a level that is detrimental to all property values.
- Ensure large investor groups do not purchase blocks of properties with an intent to control a vote or have an unfair influcnece over a vote presented to the property owners for consideration.
- The lot sales occurring at the Commissioner’s office overinflate POA revenue and under account for bad debt. Attaining the lots will provide the Association with a realistic and sustainable assumption for assessment collections to better budget for current and future capital needs.
Director Sexton was able to negotiate the price of the lots down to $22.50 per lot from an original offer of $25.00
The total purchase cost will be $47,655 and is not budgeted but will be offset by lot sales from the POA inventory.
The total additional annual recurring tax liability for these lots will be approximately $28,000.
Heffer said, “there are many reasons [to purchase the lots]. The first and foremost is having control of those properties where now they are in a perpetual cycle of delinquency. Over and over and over.”
“As recently as 30 to 45 days ago, [around] 2,000 of these properties have been sold by the Commissioner to all kinds of prospecting entities across the country and even out of the country that we don’t anticipate realizing any assessment revenue from in the future. They will end up back in this cycle, which is basically a seven-year cycle where we are spending money on collections. These lots overinflate our revenue projections. It just makes good sound sense to get these things back in our inventory so that we can be proactive about how we then utilize them. Whether we are trying to build on them with builder partners, placing them in some kind of suspension strategy because we don’t really want to build in those areas. It would be costly for us as a POA. Those are some of the main reasons,” stated Heffer.
“Taking the lots out of inventory will improve property values…We have such a glut in our lot inventory that lot prices are very, very low unless you are on a golf course, on a lake,” explained Heffer.
Chair Corry said, “with the speculators that occurred 30 to 45 days ago, does that in any way cost us manpower, people, when they come in?”
Heffer responded, “we have one employee dedicated to it, pretty much. That is all she does is manage these properties that are changing hands from the Commissioner.”
Corry asked, “how many are changing hands due to the sale at the Commissioner – the Speculation?”
Heffer answered, “there is none now. The action we would be taking would take all but 158 out of that inventory. It really would put a stop to it.”
These lots may not have clear title. This is looked at inhouse (in the POA).
Director Avila asked, “did you indicate when we had our Discussion Session that some of the other HOA’s like Bella Vista and Cherokee Village, that those speculators had gone after land there, too?”
Heffer said that Bella Vista is an exception. “They have NO land for sale through the Commissioner. But they have a very hot market. Their market is very different than ours. But you look at Cherokee Village, Holiday Island, Fairfield Bay, there are a number of other master-planned private communities in the state that are very much like us and they are seeing the exact same kind of traffic.”
Director McLeod said, “they are getting these speculators and some of them are from out of the country and they are just buying a whole bunch of lots. Nothing is going to happen with them. They are going to turn around and try to sell them and make some money on them and they could be in the middle of nowhere. When they do that, somebody buys a lot and they decide to build a house we have to put the road in…,” sewer, water. We need to get control of all those things and the 2,000 that we don’t have control of are probably going to cost us a lot of money over the years. But we need to get control of as many as we can.”
Heffer stated, “while this doesn’t eliminate our risk, it certainly mitigates it. The POA will have close to 7,000 lots in our inventory and we start to get to a more manageable level where we don’t have quite the risk out there.”
Interim General Manager, John Paul, said this allows us to see where there is a grouping of lots we own and we can approach builders or a developer and sell these properties in a cluster.”
McLeod said, “this helps us control our future.”
Heffer said, “we are having a pretty good year in lot sales….we have collected in excess of $90,000 to date on POA lot sales.”
“This gives us an opportunity to generate more income in the future,” explained Heffer.
The motion passed unanimously.14_Memo__Fact_Sheet_-_AR_Commissioner_of_State_Lands_
By Cheryl Dowden, June 20, 2021
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