To Cap or Not to Cap?

To Cap or Not to Cap?

Members opposed to the maximum assessment cap ask that it be decided in the governing documents referendum.

Compared to other homeowners associations, the Reston Association is “abnormal” when it comes to having a maximum assessment cap, said RA Director Barbara Aaron at the Dec. 13 Hunters Woods/Dogwood district meeting.

“Most homeowners associations don’t have a maximum assessment cap,” said Aaron, who conducted the third in a series of district meetings on the governing documents. “None of the [budget-making process] has anything to do with this artificial constraint.”

A crowd of about 30 people at the meeting at the Reston Community Center at Hunters Woods seemed to agree with Aaron. And, bucking the trend of the previous two district meetings, no one argued in favor of the cap, which dates back to the last governing documents revision in 1984.

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 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).

“I still don’t understand why we have a cap,” said James Hubbard of Reston. “It seems you’ve made a good argument for not having a cap. Maybe the squeakiest wheels talked and we got a cap?”

Hubbard said it might not be a sound policy decision to reissue the cap, suggesting that the decision be included in the upcoming governing documents referendum. “You should give the people a chance to vote on whether or not to have a cap, not just listen to the usual squeaky wheels,” said Hubbard.

Agreeing with Hubbard, Sean Heare said a cap should not be included in the governing documents. “This should be a separate item in the referendum,” said Heare.

Aaron explained that the board voted 5-4 in April to eliminate the cap. But in September, the board reinstituted a modified cap after some members said they would not support the documents without it.

The modified cap would increase 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 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.

“Basically, we tried to compromise in the hope that we would have more support for the documents,” said Aaron.

For a while, it seemed any problems concerning the cap had been put to rest. But at the first district meeting on Dec. 3 at Lake Anne Elementary, division over the cap resurfaced. The president of the Alliance of Reston Clusters and Homeowners, Frank Pfeilmeier, suggested that the modified cap was too high and asked why the board needed “such wide discretionary spending.” The issue was raised again at the South Lakes district meeting on Dec. 10.

ANOTHER ISSUE BROUGHT up at the two-hour meeting, which has now been a topic of concern at all three district meetings, is the transfer fee. Also known as the resale fee, this fee charges $250 to everyone who buys a home in Reston. Because of administrative reasons, RA members moving within the Association will also be charged the fee, but can apply for a credit toward the following year’s dues. The fee will also increase by a percentage of the assessment each year at the discretion of the board.

“Why is it necessary to collect from people who already live in Reston? Are you hoping people will forget [to apply for the credit] and then use it as a source of income?” said Carol Daniels. “I’m opposed to that aspect of this. I think this is a burden for people who live in Reston.”

RA President Jennifer Blackwell explained that the credit system was the only way the Association could limit the fee to new RA members, given the administrative constraints.

Many people have supported the transfer fee at past work sessions and public hearings because the board has directed funds from this source to offset annual assessments.

THE RA BOARD has worked for nearly four years to revise the governing documents, which codify the rules and regulations governing the Association. In the summer of 2004, the Association hired Bob Diamond, an attorney with Reed Smith LLC, to help the board make systematic revisions.

In the past year, while making policy decisions, the board has held numerous public hearings to consider and incorporate input from the community. In the last few months, RA has started down a final stretch of outreach efforts before the documents go to referendum. In late January, the board will meet to vote for a final version of the proposed governing documents. On Feb. 13, the governing documents referendum will be sent to members. Ballots will be due back March 31.

To pass, the referendum requires 40 percent voter turnout and two-thirds approval from voters. RA is expected to spend roughly $70,000 to generate the required 40 percent voter turnout.

“We’re pulling out all the stops [to get the vote out],” said Blackwell. “This is the first time we’ve had district meetings.”