51°Clear

Op-Ed: Speculating With a Credit Card

by RestonNow.com — March 25, 2015 at 11:00 am 10 Comments

Tetra BuildingThis is an op-ed by Reston resident John Farrell. It does not necessarily reflect the views of Reston Now.

As was properly described by the first commentator to last week’s letter on Reston Association’s planned purchase of the Tetra building, the RA Board is speculating in land.

A definition of speculation is: “to form a theory or conjecture about a subject with no firm evidence.”

The first reason listed in President Ken Knueven’s powerpoint to justify borrowing $2.65 million is essentially “something bad might happen.” How? What? When? At best, we get vague answers.

Another definition of speculation is: to invest in property with the hope of gain but the risk of loss. We all know what the risk of loss is: at least $2.65 million. What is the quantifiable gain that the RA Board is hoping for?

But wait there’s more.

The second bullet on the powerpoint is that RA would revegetate the property, i.e., plant trees. Except Fairfax County will not allow vegetation to be place in the emergency spillway which covers most of the property because vegetation would block the floodwaters and force the flood levels in Lake Newport and upstream even higher.

The whole point of an emergency spillway is to give the floodwaters from very large storms a way to escape Lake Newport without blowing out the dam as happened to Lake Ilsa (now Audubon) in 1972 during Hurricane Agnes. That’s why the property is covered mostly by parking lot.

But to top it all off (pun intended), there’s this:

I hear our leaders have already secured a loan to buy the land! That’s right, before the referendum even opens for voting in April, someone at RA has been out shopping for a loan. And they got one. From whom? That’s a secret. At what interest rate? That too is a secret. But one term is known and should send shivers down the back of every RA member.

First, the principal and interest payment will equal 8-9 percent of the $15 million budget. That means either our assessment will increase or the services and programs offered by RA will have to be cut.  How many life guards camp counselors and grounds maintenance people does this sum represent?

It’s not a mortgage on the property. It’s a pledge of our assessment payments.

What that means is, if there were to be a default, the lender doesn’t take the land and building, they take our RA assessments payments. This is significant on four counts.

First, RA is planning to buy the land on the equivalent of a credit card. The loan is secured by RA’s income, just like your credit card issuer decides the limit on your credit card based, in part, on your income. Would you buy stocks or your house on your credit card?

Second, the lender apparently doesn’t believe the property is adequate security for the loan. Translation: even the lender doesn’t think the land and building is worth $2.6 million.

Third, the amount of money available to pay for lifeguards and cut the grass in the medians will be reduced because the lender will get paid out of our assessments first.

Fourth, RA’s credit capacity will be reduced by the full amount of the $2.6 million, thus reducing borrowing capacity that might be used for other essential capital expenses like replacing a dam or spillway at one of Reston’s lakes or buying the Reston National Golf Course.

It’s like taking your kid’s college savings account and buying Yugoslavian war bonds.

I asked Knueven at the first District/Community Meeting at North Point if someone at RA knew what RA’s borrowing capacity was. They didn’t know and haven’t answered that question in the two weeks since that meeting. Maybe that’s why no questions were taken during the next District/Community Meeting at Lake Anne.

How does any of this make any sense? Who or what is the driving force behind this scheme? I’ve been asking everyone I can find since I first heard about this idea and it too is a closely guarded secret.

Something on your mind? Email an op-ed to [email protected]. Reston Now reserves the right to edit all submissions.

  • HmmmmmmmDC

    A very well written and reasoned argument for why our 17% of our annual budget should not be spent on land and a building we don’t need.

  • MJay

    Thank you for providing this information. I am further dismayed that all of the candidates running for RA appear to support this purchase. As such, we can’t even vote these people out before things get further out of hand. If your information is even close to accurate, it seems like we are trapped in a vicious cycle when it comes to RA spending our money and operating in the shadows. I hope someone at RA comes to their senses and puts a halt to spending an initial $30k on a vote until all information is on the table.

  • FULL TIME BOJANGLER

    Well written and informative. The secrecy is unreal. I don’t know if there is a direct correlation, but when someone buys a condo, the finances of the entire condo association are looked at by the underwriters. If enough of the condo owners are behind on condo dues (as was the case during the crash), new buyers can’t get loans. What if all objectors, as an act of civil disobedience, don’t pay our RA dues for a while? Screw them. All they can do is put a lien on our property, and I doubt they can even do that until some sort of “due process” plays out. I’d gladly pay a late fee later to make a point now.

    • Secret Observers

      ….What if all objectors, as an act of civil disobedience, don’t pay our RA dues for a while?

      ….since so much of this deal has gone beyond the authorization of the board and the secretive of all the actions should prompt an investigation maybe even criminally as well as an audit investigate RA.

      ……clearly gives way to have the board impeached

      John, thank you for helping us to understand the dark side of RA from your good heart and sincere love to Reston.

      (Suggestions from one of Reston observers with legal experience)

      – Instead of paying due to RA, contribute to form a non-profit organiztion similiar to “Rescues Reston” such as “Investigates Reston”, “Reveals Reston” or “Independent Review Board” with John Farrell as President or Secretary. – Collect questions and participation by inexpensive communication by social media such as email, facecebook, twiter for formal inquiry regarding secret, allegations and rumors about RA President/CEO/BOD. -Send letter (on behalf of ten, hundred or thousand … residents) to RA President/CEO/BOD to request their formal responses – Post their responses on social media or Restonnow. -If they do not provide satisfactory answers or responses for the record and continue to hide their secret, hire a legal counsel to supeona with Virginia “Homeowner Bill of Rights”. or file public complaint for breach of fiduciary duty in Virginia court
       

      …..Monsters live in the dark. As does RA.
      “In 2015 Wild Wild West”

  • Mad Reston resident

    I think these actions clearly violate the trust and expected responsibilities of the board. I think it clearly gives way to have the board impeached and I think since so much of this deal has gone beyond the authorization of the board and the secretive of all the actions should prompt an investigation maybe even criminally as well as an audit.

    I think all can agree RA is far overdue for a makeover.

    • Castle Stormer

      Well said, all.
      AT 6 PM tomorrow evening, Thursday March 26, this RA Board will hold its second and final “hearing” on this subject before they spend upwards of $30,000 on a quickie referendum plus costs of marketing costs pushing for a YES vote for taking on our first ever debt for thisoverpriced property without a purpose. Only one thing can stop them.
      That is a big turnout by you and the community! At the RA offices on Sunrise Valley Drive at 6:00 PM!

    • JoeInReston

      Fortunately for residents, its election time. Be sure to vote!

      • John Farrell

        All the candidates support this purchase.

  • Eddie from North Point

    Thank You John Farrell for trying to get this purchase out in the open. Please continue to keep us informed. The actions of the board and the paid CEO are very disturbing, and the lack of transparency is troubling.
    We all need to show up at tomorrow’s board meeting and make our feelings known, before we rush into a quickie referendum that further legitimizes a questionable purchase to begin with.

  • New to Reston

    Monsters live in the dark. As does RA.

×

Subscribe to our mailing list