Who are we?

Persuasion

By Rick Dowswell, CMCA, PCAM

 Common Ground

 May/June 2004

Four consecutive years. Four consecutive proposals to increase dues defeated. It was time for Lake Monticello to try a different approach.

In 2001, for the fourth straight year, the members of the Lake Monticello Owners’ Association strongly defeated a proposed dues increase. The vote wasn’t even close. While 51 percent approval was required, only 29 percent of members voted in favor of the increase, which would have funded several necessary capital-improvement projects at our large-scale, gated community in central Virginia.

As Lake Monticello’s newly appointed general manager, I was disappointed and concerned, as was the rest of my management team. We had no idea what the community’s financial future held, but clearly, Lake Monticello was at a crossroads. It was time to think up a new way to make our case for increasing dues to residents.

FEE FOR SERVICES

Lake Monticello is a private, 3,500-acre community of 4,595 lots, more than 3,700 single-family homes, and 10,000 residents. Located 15 miles east of Charlottesville, the association was developed more than 30 years ago around a 350-acre artificial lake. Our $3.3-million annual budget, half of which comes from assessments, allows us to provide our residents with a generous array of amenities, services, and operations, including the lake as well as a clubhouse, 18-hole championship golf course, marina, beaches, swimming pool, and other facilities–all linked by 62 miles of private roads.

Established mainly as a recreational community, in recent years Lake Monticello has turned into something more, as retirees and young families alike have gravitated to its natural rural beauty, low cost of living, and wide range of attractive amenities. Since 1998, the number of homes has increased by 37 percent, and the association is now nearly 80 percent built-out. For decades, Lake Monticello exercised frugality, austerity, and conservative budgeting to get the best possible use of its limited funds, but eventually this influx of new residents prompted the board and management to look closely at the community’s aging infrastructure and the growing demand on its facilities and amenities. They had a financial challenge: How would the association pay for this increased upkeep and meet the needs of residents?

The answer wasn’t immediately clear. Lake Monticello’s governing documents grant the association the right to collect appropriate member charges in the form of dues, levies, and assessments–as compensation for services rendered and to finance association activities. But the bylaws also restrict Lake Monticello’s authority to change the annual dues rate, levy special assessments, or add new fees without a majority affirmative vote by members. That is, regardless of how critical the need, the authority to raise assessments rests not with the board, but with the owners.

Given these limitations, it’s perhaps not surprising that dues increases had been increasingly difficult to achieve over the years, and that in the end the association concluded that it needed to find a new source of revenue. The board and management considered a number of alternatives, such as charging fees for things like guest entry, member use of beaches, and access for contractor and commercial vehicles conducting business in the community.

Then, they came back to an idea that had been developed and pursued by a previous administration, led by thenGeneral Manager Bernie Howe, CMCA, PCAM, and board member David Bessant: an amendment to the Virginia Property Owners’ Association Act to allow associations to charge residents a capital-improvement fee. While this proposed legislation failed to survive committee review in the Virginia House of Delegates in 2001, it now provided the kernel for a new idea. Instead of a capital-improvement fee, Lake Monticello would try to enact a property-transfer fee–and also take one more shot at convincing residents to approve a dues increase.

SURVEY SAYS

Having learned our lesson from the defeats of four consecutive dues increases, we opted not to put the matter to an immediate vote before our members. Instead, we went out of our way to solicit their input. Our approach followed the advice of author Bryan Molitor, who in his book The Power of Agreement suggests: “If you are going to need someone’s vote eventually, then involve them in the process early and often.”

Working with the board, staff, and members of the association’s planning and finance committees, our management team developed a survey that would ask members about our proposed funding options. This simple, one-page document included an introductory letter from the board that asked for residents’ help and gave a concise explanation of the two major issues: a property- transfer fee and a cost-of-living adjustment in annual dues. The actual survey was short, requiring respondents to indicate their feelings about the fee and dues increase–“strongly support,” “support,” “no opinion,” “oppose,” or “strongly oppose”–and giving them space to write additional comments. We also offered an opportunity to win a $50 gift certificate to those people who returned the survey by the designated time. With everything in place, we mailed the survey with our year-end billing notices, saving Lake Monticello more than $1,500 in postage.

Our inclusive approach paid off. We received 1,852 completed surveys–an astounding 40 percent response rate. And the results themselves were even more positive. Fifty-eight percent of our respondents said they favored the property-transfer fee, while 63 percent approved of a maximum 3 percent annual cost-of-living dues increase.

Our residents had spoken, and now it was time to tell them exactly what they and their neighbors had said. We embarked on a communications blitz spearheaded by Communications Manager Peggy Alexander, who had been instrumental in helping shape the survey. First, we published the survey results in a comprehensive article in Lake Monticello News, our quarterly newsletter. I also mentioned them in my “Manager’s Report” column, as did our board president, Joe Galvin, in his “President’s Message.” Meanwhile, in various conversations at committee meetings and social events, the board appealed directly to residents to take responsibility for funding Lake Monticello’s services, amenities, maintenance, and upkeep.

When it came time to put the matter to a full member vote, at our annual meeting in June 2002, we continued our communications efforts. We published reminders to vote in the Friday Flyer, our weekly news sheet, and broadcast them on our two dedicated cable channels. The board wrote a statement of support for the two measures that was included in the annual meeting notice. And, in his “President’s Letter” in the same notice, Joe Galvin wrote: “We must recognize that the cost of doing business has changed, and we must change with it. The members made it clear in the…survey results where their priorities lie–with a well-maintained, upgraded Lake Monticello community we all can enjoy and be proud of.”

Finally, the annual meeting arrived, and the association submitted to members two proposals prepared by our longtime attorney, Frank Buck, Esq.–one to institute a $500 property-transfer fee, to be levied on anyone who bought a home in Lake Monticello on or after Aug. 1, 2002, and another to allow the board to raise dues by up to 3 percent a year. Both measures passed overwhelmingly. Curiously, the tallies exactly mirrored the survey results, with 58 percent of residents voting in favor of the property-transfer fee and 63 percent approving the dues increase. The second figure was truly startling, considering the lukewarm reception members had given to past dues-increase proposals.

Regardless, by now voting in favor of the proposals, our residents guaranteed two new sources of much-needed revenue for their community. Lake Monticello averages 400 property transfers a year, meaning the $500 transfer fee brings in $200,000 annually–money the board has dedicated exclusively to capital-improvement projects. And the dues increase means an additional $40,000 in assessment income, which goes to our general operating fund.

After the vote, Lake Monticello continued to reach out to the community. Via our media outlets, the board and management congratulated residents for their commitment to a healthy, progressive future, and since then have continued to involve them in the process of maintaining property values and a high quality of life. We also spread the word outside our gates, sending a letter about the new transfer fee to local real-estate agents, attorneys, county officials, and closing companies. Now, all that was left to do was make the best use of our new revenue. Lake Monticello’s Finance Committee got to work, developing a five-year plan for improvements that the board passed last September. The plan included a ranked list of 14 project “assumptions,” with the top five priorities assigned their own project managers:

1. Improve the lake and associated structures.

2. Expand the administrative office and workspace.

3. Upgrade the playgrounds.

4. Rehabilitate or replace the marina building.

5. Accelerate the road improvement program.

‘LAKE MONTICELLO SPIRIT’

Of course, nothing is perfect, and, true to form, not everyone was sold on the merits of our new transfer fee. At the 2003 annual meeting, two different proposals initiated by individual members were submitted for vote. One would have repealed the transfer fee entirely, while the other would have devoted all proceeds from the fee exclusively to roads.

Both proposals failed, with members voting against them by 74 and 62 percent, respectively. As Lake Monticello’s new president, Bob Strassheim, wrote in the following week’s Friday Flyer: “The members spoke once again in favor of a stepped-up system of maintenance and constant vigilance in order to protect the integrity of the community, further validating their position on the property transfer fee and supporting the board, committees, and management to continue the planning process. LMOA thanks you for your Lake Monticello Spirit.”

Indeed, we were so pleased with the outcome of the entire project, this past December we included another survey in our year-end billing statements. This time, we asked members for their input on police-department services and a proposed marina facility. Early results are on pace for another 40 percent response rate. And now we see what we did wrong with our four failed dues proposals. All along, we wanted residents to support our efforts to improve Lake Monticello and to involve themselves in the upkeep of their community, but we never really asked them to. But look what we accomplished when we did.

Rick Dowswell is general manager of the Lake Monticello Owners’ Association, in Lake Monticello, Virginia.

Copyright(C) 2004 Community Association Institute. All rights reserved.

YES AND YES

Lake Monticello members approved two amendments to the association’s bylaws.

Bylaws Section 8.01, Dues

The Board of Directors shall, from time to time, establish such membership dues as it may deem necessary for the adequate performance by the Association of its functions, including particularly maintenance of roads and other non-private areas in Lake Monticello; however, such dues may be increased by the Board of Directors beyond the dues of a current year by not more than three percent (3%) for the upcoming calendar year. Dues may be made payable at such intervals as the Board of Directors may from time to time determine.

Bylaws Section 8.03, Property Transfer Fee

There shall be a Property Transfer Fee of $500.00 imposed on the Purchaser upon the purchase or transfer of an improved or unimproved residential lot or Marina Point unit in accordance with the following:

The Property Transfer Fee shall be used only to fund capital improvements.

The Property Transfer Fee shall be maintained in a separate reserve account.

The Property Transfer Fee shall be due and payable to the Association within three (3) business days after the deed or installment purchase contract transferring ownership of the lot or unit is recorded in the Clerk’s Office of the Circuit Court of Fluvanna County, except as provided by D. and E. of this Section 8.03.

No Property Transfer Fee shall be imposed on any gratuitous transfer of a lot or unit between any of the following family members: spouses, parent and child, siblings, grandparent and grandchild, or a lot or unit transferred by an owner to a trust of which the owner is the beneficiary. There shall be no Property Transfer Fee due for property transfers to the Association.

Payment of the Property Transfer Fee shall be suspended upon transfer of an unimproved lot if the purchaser delivers to the Association within three (3) business days after the deed or installment purchase contract is recorded in said Clerk’s Office a sworn affidavit declaring the purchaser’s intention to resell such lot within twelve (12) months of its acquisition as an improved lot. If the Property Transfer Fee is not paid within such twelve (12) month period as a result of the subsequent resale of the improved lot, the Property Transfer Fee shall become due and payable immediately.

A purchaser shall not be a member in good standing until receipt by the Association of the Property Transfer Fee.

FOLLOW THE MONEY

Here’s how to make the case for new fees or increased dues.

Operate existing services and amenities within your current budget guidelines. That way, members will see you’re spending each dollar properly.

When developing other funding options, involve members early in the process. Ask for their ideas and opinions through surveys, focus groups, informational meetings, and public hearings.

KISS–keep it simple, stupid! People want to understand precisely what they’re voting on and why. From various discussions we had with members, we realized they might have rejected past proposals due to the complexity of either the scope of the project or the associated funding plan. In proposals that combined both elements into one ballot item, community leaders never really knew what members didn’t approve of–the project or the funding.

Allot the dues increase or new fee to specific community needs. Setting up a separate bank account, for example, can demonstrate accountability and help build trust in your leadership.

As you develop various projects within your long-range plan, keep members informed. Focus on the merits of each project, and explain how you’re using any new funds.

Celebrate your community’s successes! –R.D.