Op-Ed: Summing Up RA’s Tetra Deal

by RestonNow.com May 4, 2015 at 1:00 pm 96 Comments

This is an op-ed by Reston resident Terry Maynard. It does not represent the opinion of Reston Now.

As the end of the Tetra referendum period approaches, I thought it useful to summarize the key reasons why RA members should not pay $2.65 million to buy this property. I hope it encourages you who have not yet voted to decide to dig around in your old RA mail (digital or postal) and submit your ballot with a “NO” vote.

1. No further development of the property will be permitted. The alleged compelling reason for buying Tetra is to prevent development there. The fact is that almost every square foot of the Tetra property is protected from further development by multiple layers of legal, regulatory, and plan restrictions.

In contrast, Reston National Golf Course is protected from development only by plan language, not a law. The difference is between what’s prevented by law at Tetra and what’s preferred in the plan at RNGC.Maynard chart

For the Tetra property, the most important of legal restriction is the state’s Chesapeake Bay Preservation Act, which calls for water bodies and the first 100′ of perennial waterfront areas (like Lake Newport) to be protected from development.

(The attached map of the Tetra property shows the area protected by this law and other restrictions.) The Virginia Department of Environmental Quality says:

“The Chesapeake Bay Preservation Act and regulations require that a vegetated buffer no less than 100 feet wide be located adjacent to and landward of all tidal shores, (etc.) … These features, including the 100-foot buffer, comprise the Resource Protection Area (RPA) … Generally, vegetation in the 100-foot buffer must be preserved on lots that include an RPA, and established where it does not exist. “

For more on RPA legalities as applied to the Tetra property, read this RestonNow op-ed from a local land use attorney who explains in detail that there is no possibility of lakeshore development there.

Second, there are legal flood plain and spillway protections on the property that, except for a patch next to the Tetra building, similarly preclude development along the lakefront and down around the dam to the stream below.

Third, an RA easement covers most of the property beyond the RPA for its parking lot, access roads, and the pathways beside them as shown on the map. Moreover, if a developer wanted to build on the Tetra property, its proposal would have to be approved by RA’s Design Review Board, including inputs from neighboring “affected parties.”

For all practical purposes, nothing can be built there without RA Board approval.

A fourth, thin added layer of protection — like that which protects the golf course — will be provided by the new Reston Master Plan when it’s approved by the Board of Supervisors this June. The new plan changes the area’s designation from a “convenience center” to remain “as built.”

Trying to peel that legal, regulatory, and political onion would almost certainly be impossible. Yet even RA ownership of the property would not guarantee the property will remain green space as the Board’s stunning decision to swap an acre of our hardwood forest (to become a parking garage) for a roadside drainage ditch illustrates.

2. The sales price and related RA financial assumptions are outrageous. The RA Board’s sales contract with Tetra calls for it to pay $2.65 million (Article 2, p. 2) for a property that RA’s appraiser says is worth $1.3 million as built, assuming it’s in good condition (p. 22). The County puts the fair market value of the property at $1.2 million in its latest real estate tax assessment. The additional $1.3-$1.5 million in the appraisal comes from assuming additional offices are there — that cannot be built!

Both the RA appraisal and the County assessment assume the property is in good condition. It is not.

The RA-sponsored property condition report put the cost of repairs at $257,000, cutting the fair market value of the property as built to about $1 million at the outside, not $2.65 million.

So how bad is the building’s condition? The property appraisal, which focuses on “comps” rather than condition, states the building has had “atypical” repair and maintenance expenses in recent years, including pest control. It also has a “musty odor” (p.11) in the conference room. Last year’s repair and maintenance expenses exceeded $9,200 ($2.95/SF) (p. 20).

RA’s Criterium Engineering property condition report paints a worse picture. Photos in the report appendices show extensive water damage in the main conference room (#34), the HVAC room (#36), leaking windows (#42), and water damage around light fixtures and a hardwired smoke alarm in the utility room (#64), all suggesting extensive long-term water damage. Besides damage to insulation, drywall, and framing that may require replacement, the photos indicate possible fire hazards requiring rewiring. Many photos of the exterior also show rotted — and probably infested–wood in the trusses, columns, siding, railings, and other wood elements.

Fixing all this will cost more than the $275,000 Tetra has limited itself to repair by last week’s sales contract amendment, an RA Board concession that leaves RA members to pick up the difference.

On the revenue side of the ledger, the RA Board Fact Sheet (p. 6) points to an $82,000-plus yearly net operating income the property will allegedly generate after the Tetra lease expires. In contrast, the appraisal suggests the Tetra building as an occupied office space would generate a net operating income of less than $62,000/year. (See p. 21.) What justifies RA’s higher income forecast?

The key to answering that question lies in RA’s $122,000 annual “potential” net revenue forecast (RA Fact Sheet, p. 4) that drives up its net income projection. Yet RA has provided no details on its revenue assumptions regarding capacity usage rates, comparable rents, the operating cost elements, or usage restrictions due to its location in a residential area. Questions regarding this supposed revenue stream have been numerous, diverse, and all remain unanswered by RA.

Given the $2.65 million loan on the property, RA member assessment fee hikes well beyond inflation (an average of 21 percent higher Reston 2020 estimates over 20 years) will be needed to offset the negative net cash flow from the property for two decades at least. Reston 2020 puts those losses near $2 million over the next two decades even using RA’s unsupported revenue assumptions.

3. There is no compelling need to buy the property. The key RA driver for the purchase is the irrational, Board-driven fear that a new building will be built there. I, and others, have shown the extreme improbability if not impossibility of that happening. Irrational fear usually leads to irrational and ultimately bad decisions, such as buying a property in poor condition at two and one-half times its fair market value.

A second RA argument is preserving the continuity with RA green space east and west of the Tetra property. RA owns the easement on virtually every foot of the Tetra property connecting its Brown’s Chapel and Lake Newport tennis courts properties. The band of green space will remain green space whether or not RA owns it.

The final argument is that RA can use the Tetra building for meetings and programs for demand that is otherwise not met. A look at RA’s facility scheduling calendar shows its spaces are little used. RA says its children’s summer programs are oversubscribed. Assuming RA’s assertion is true, it is unclear why meeting 10 weeks of excess summer demand per year is worth $2.65 million when RA may rent RCC, Fairfax County Park, and other facilities when needed.

All in all, despite RA fear mongering, there is little justification for buying the Tetra property, much less at two and one-half times its fair market value as built. A purchase could make sense at about a $1 million price point — its fair market value –but RA members were not given that referendum option.

In these circumstances, I strongly urge you to VOTE “NO” if you haven’t done so already. Thank you for your time to read this.

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