This is an op-ed submitted by Mediaworld Ventures LLC. It does not reflect the opinions of Reston Now.
To our fellow Reston Association members,
We are the Reston residents who came together under Mediaworld Ventures LLC and were selected to conduct an independent review of Reston Association’s acquisition of the Lake House, and subsequent renovation budget overrun. We were selected over many applicants for our professional expertise, our commitment to service and our cost of $1. Our sole intent was to serve our membership and help Reston Association improve its processes.
From September until December, we were involved in detailed negotiations with Reston Association and its attorney over a consulting agreement that established the terms of the independent review. Our team worked countless hours reviewing and amending the 17-page agreement to ensure the review’s integrity and members’ interests were protected. The conditions presented to us were extremely restrictive and we felt they would hinder our ability to conduct a truly independent review. Further, the agreement did not guarantee a public release of the final report by the Reston Association, which our team felt was critical to “ensuring the concerns of the community were addressed” — a condition in the RFP, set by Reston Association, which we agreed to meet.
When we reached an impasse with the Reston Association attorney we requested a meeting with the Board. At a public meeting on Dec. 7, we highlighted four major issues that we felt would hinder our ability to fulfill our obligation. We believed the Board understood our concerns regarding the restrictive terms and tone of the agreement, and we hoped it would result in a more reasonable agreement, especially after we learned that the Board signed a simpler, four-page contract with another consulting firm. Although the revised agreement we received in return resolved some of our concerns, it contained additional terms and conditions leaving a number of issues unresolved. In spite of the Association’s offer to pay for liability insurance, we felt that there was still an unacceptable level of risk remaining in the last proposed revised draft. Given the almost three months of contending with some of the same issues we had raised earlier, we felt the likelihood that further negotiations would be productive were minimal and that it would be best to terminate the negotiations.
We are very disappointed that we could not come to terms with Reston Association on this work. A more detailed review of the contract negotiation can be found at http://reston2020.blogspot.com/2017/01/review-of-mediaworld-contract.html.
Sridhar Ganesan, President, Mediaworld Ventures LLC
Two years ago this month, under the leadership of former RA Board President Ken Kneuven, Reston’s homeowner association announced its deal with a local developer to purchase his property, the Tetra office building, for over twice its county-appraised value of $1.2 million. Thus began a long slide of Reston Association into bad governance and mismanagement.
How did this happen? We don’t know for sure, but we understand Kneuven and another former RA Board President, Rick Beyer, who lives on the shore of Lake Newport opposite the Tetra property, have been friends for some time. Beyer, who was active in supporting the RA Tetra purchase, and other Lake Newport homeowners were no doubt concerned that something untoward would happen to their view and, as a result, also their property values. It is not clear whether Beyer asked a favor from Kneuven in eliminating this risk by having RA pursue the purchase of the Tetra property, but what is clear is that after Kneuven left his RA post, he ended up working as a senior consultant in the company managed by Beyer.
As for the rest of us, RA and its Board justified paying $2.65 million in part by pointing out that a proposal had been drawn up to build a costly restaurant there twice the size of the Tetra building. RA didn’t bother to note, however, that the restaurant was never approved, nor would it have been given environmental restrictions and 14 easements on the property. Moreover, RA’s appraiser put the property’s “as is” value at just $1.1 million using the Income Approach, even lower than the county’s valuation. In fact, the Tetra property had been on and off the market with little interest for most of a decade.
Nonetheless, to sell the deal in a community referendum, RA “projected” that renovations, inside and out, would cost RA members just $259,000. To date, interior repairs alone have cost Restonians $692,000 — not counting $925,000 in seller contributions and a Comstock proffer to RA which could have been used for much better purposes — and an RA consultant projects proposed exterior improvements will cost $1.2 million.
On the other side of the ledger, RA projected rental income from a rent back agreement with the Tetra owners of more than $140,000 through 2016. Unfortunately, the sloppily written agreement allowed Tetra’s former owners to walk away at the end of 2015, resulting in an immediate $100,000 loss in RA revenues. RA scrambled to make up the shortfall, but — as of November — expected year-end cash flow losses reached $902,000, some $515,000 more than RA projected for 2016 during the Tetra referendum.
If publicly known at the time, these massive misstatements, mistakes, expenses and overruns would have doomed the purchase’s narrow community approval.
Indeed, the massive renovation cost overruns were not revealed until May 2016, although RA financial data indicated RA and presumably some Board members knew there would be huge overruns as early as February. Thus, RA members were denied that important information as they cast their ballots for RA Board members in February, including the re-election runs of two Board members who strongly supported the Tetra initiative, Eve Thompson and Danielle LaRosa. Of course, they won re-election in the absence of public knowledge of the huge cost overrun.
When the cost overruns were disclosed, even the complicit RA Board found this revealed reality a bit much. Under significant community pressure, it agreed last summer to contract for an independent review of the purchase and renovation.
After choosing to sign a pro bono $1 review contract with Mediaworld LLC, using a team of Reston volunteers expert in financial matters, a few members of the Board sabotaged its own by insisting on excessive RA control and contractor liability in multiple, lengthy contract drafts. A special Board meeting with the Mediaworld volunteers in December couldn’t salvage the negotiations — another obstructionist draft resulted — and the volunteers withdrew last week, explaining the multitude of reasons why.
The increasingly urgent question is: What are some members of RA’s Board and senior staff trying to conceal about the Tetra acquisition and renovation — and why? Did they engage in illegal, unethical or just plain stupid behavior? Unless there is a criminal investigation, the chances are dwindling Restonians will ever know who, how, why and when all this financial mischief occurred as the Board and staff continue to hide the truth any way they can. The future of honest, open, prudent governance in Reston has never looked more uncertain.
The RA Board 2017 election a month away is an opportunity to reverse the Board’s recent gross misbehavior. There are four openings and, if filled with candidates who seek to reform the RA Board and the way it does business, the Board could actually represent the interests of the community rather than the guilty. Pay attention to what candidates file and what they say about the handling of Tetra, including the need for an audit, the development of an RA ethics policy with teeth and openness in RA decision making. It could be your last chance in years for meaningful change in how our community is governed.
Terry Maynard, Co-Chair
Reston 20/20 Committee
Lake House Review: Work has still not begun on a review of how funds were handled to purchase and renovate what is now the Lake House at Lake Anne. It was decided an independent review was necessary after renovations ended up to be roughly three times what was budgeted, and money had to be borrowed from the Reston Association’s operating budget to cover the deficit. The RA Board previously went through months of negotiations with the firm MediaWorld, who had offered to do the review for just $1 if volunteers agreed to help with some of the busy work, but after more than two months of back and forth, it appears negotiations have been stalled or possibly terminated.
Development on the Horizon: Per the usual here in Reston, there are several major developments in the works around town. In particular, just before the holidays, more news broke about Vornado’s planned development near Wiehle-Reston East Metro, Comstock’s hopes for a development near Reston Station, and an approval for planned lofts by Pulte Homes near Reston Station.
Very Little Crime to Ruin the Holidays: Thankfully, very few crimes made headlines in the Reston area over the holidays. There were minor break-ins at the Carlton House condos at Reston Town Center and the Hidden Creek Country Club, and a tragic accident in D.C. involving a Herndon man. In a bit of good news, the community pulled together to help find a teen boy who went missing in North Reston within 24 hours.
Fourth Spot Opens Up on RA Board: Just before the Christmas and Chanukah holidays, North Point District Director Danielle LaRosa of the Reston Association Board of Directors tendered her resignation. LaRosa also serves as the board’s current treasurer. LaRosa’s seat joins three others that are opening up on the board when three-year terms come to an end in April, for a total of four out of the board’s nine seats up for election when voting begins March 3. The candidate elected to fill LaRosa’s seat will serve the remaining two years of her three-year term. A Candidate Information Session will take place tonight for those who want to learn more about running for the board.
As we kick off 2017, what are you most interested in or concerned about around Reston? Tell us what you most want Reston Now to cover in this new year.
(Updated 9:30 p.m. Tuesday to include statement from the Reston Association Board of Directors)
It appears the work between Reston Association and a local company to conduct an independent review of the Lake House renovations will not come to fruition.
In an email sent Monday morning to the Reston Association Board of Directors, among others, Mediaworld Ventures LLC President Sridhar Ganesan said he was cutting ties with the project:
Good Morning. It has been about 10 days since we sent the last letter to you and have had no response. Please consider this email as termination of our contract discussions. Wish you all a Happy New Year.
The “last letter” referenced by Ganesan in his email is one in which he claimed RA had been “granted… certain powers” that would “jeopardize the independence of the review.”
Ganesan also serves as president of the Reston Citizens Association. His group had proposed to conduct the audit for $1, with a team of four community-based reviewers.
The Lake House, located off Baron Cameron Avenue between Lake Newport Tennis and Brown’s Chapel Park, housed the Reston Visitors Center for about 20 years before it was acquired in 2003 by Tetra Partners (now Lauer Commercial) and used as offices.
Reston Association passed its referendum to buy the building in May 2015, authorizing a purchase cost of $2.6 million. That number in itself came under scrutiny after it was discovered that Fairfax County tax estimates valued the property at only about half that price. It is now being leased for special day and evening events.
Needed renovations were budgeted to cost about $259,000; however, that number quickly ballooned to $655,000. The money was recouped by RA in the form of various employment restructuring, among other measures.
When it was estimated a full professional review of the overrun could cost into six figures, the locally based Mediaworld came into the picture. However, Mediaworld and RA could not agree on many of the particulars of the arrangement, culminating in this week’s official falling-out.
Late Tuesday afternoon, a statement to Reston Now from RA Board of Directors President Ellen Graves expressed the board’s disappointment in Mediaworld’s “unilateral decision to terminate its proposal.”
“RA was and continues to be willing to work with Mediaworld in good faith toward a mutually acceptable agreement,” Graves said. “In fact, the association’s legal counsel offered repeatedly during the course of negotiations to sit down in person with representatives of Mediaworld in an attempt to resolve the details of the remaining open issues.”
Graves said that Mediaworld “apparently could not find the time to meet to resolve the remaining issues, including many standard terms found in community association contracts designed for an association’s protection and which are generally accepted by most companies performing similar services for community associations.”
In the statement, Graves said the board “remains undeterred in its efforts to have this important project completed,” adding that a meeting would take place later this month to determine the best course of action moving forward.
The Lake House — formerly Tetra — has been hit with financial difficulties since it was purchased for $2.6 million — about twice its assessed value — in 2015. RA showed a cost overrun of $430,000 last spring, due in part to a six-figure expected rentback from former owner/tenant Tetra that did not happen.
Exterior renovations to turn the building from offices to a community use building for afterschool care, meetings and events, also cost way more than anticipated.
RA CEO Cate Fulkerson will outline the Lake House financial outlook at tonight’s regular RA Board meeting. The board is also expected to pick an outside firm to conduct an independent audit of the Lake House cost overrun.
According to RA documents and Reston 2020’s analysis, RA will spend in 2016:
- $700,000 on renovation of the interior and exterior of the Tetra building.
- More than $107,000 on operating expenses, some $95,000 comprises employee-related expenses.
- Mortgage payments that will total nearly $184,000 this year.
RA numbers show it is now bringing in money as afterschool care began this month and it is booked for many events.
Total revenues were $3,677 in August, but are expected to jump to $31,000 this month and grow each month, according to RA’s spreadsheet.
But Reston 2020 compares the numbers with the original estimates in RA’s 2015 Tetra purchase fact sheet to show the ground it must make up, including:
- 2015 estimate that operating expenses would be $45,011 in 2016. RA’s latest report puts operating expenses at $107,303–more than double RA’s “fact sheet” projection.
- No program expenses because RA anticipated that the building would be leased back to Tetra developers through 2016. Now RA anticipates $107,303 in operating/programming expenses for this year.
- 2016 overhead expenses, including “existence cost” expenses and loan costs, were expected to reach $228,623 in the fact sheet. They are now projected to grow slightly to $247,072 this year.
Read more on Reston 2020’s blog.
A committee of citizens and RA Board members voted 4-3 last week to choose Mediaworld, a Reston-based company that will use Reston Association members to conduct the review. The price is right: Mediaworld is charging RA just $1 for the investigation.
After renovations at Lake House (formerly the Tetra Building) were found to be nearly triple what RA initially estimated, RA moved $430,000 from its operating budget to cover the deficit.
The money has since been replaced, says RA CEO Cate Fulkerson.
However, RA organized a panel to choose a professional firm to “review of the processes and internal controls that were followed across the organization in handling all decision-making, governance, administrative and financial aspects of the Association’s purchase, including the referendum, planned use, and renovation of Tetra (now known as the Lake House property), that have led to cost overruns and revenue shortfalls.” (more…)
RA is holding two open houses this weekend to show off the renovations of the 33-year-old former Reston Visitors Center.
After a member referendum in the spring of 2015, RA purchased the 3,128-sqaure-foot building on the shores of Lake Newport for $2.6 million. It then spent more than $600,000, which was about $430,000 more than budgeted, for the renovations and to turn the building from an office space, which it was for the last 13 years, into a community use building.
RA has since replaced the money for the overrun in its operating fund, and is about to hire an independent consultant to audit the overrun to see how it occurred.
Meanwhile, RA is actively marketing the space and eager to start earning income from it.
Here is what is happening this weekend:
Saturday, Sept. 17, from 12-4 p.m. — On Saturday, hors d’oeuvres and light refreshments will be provided by Cafesano. The facility will be set up by Let’s Party! so that visitors can envision a baby shower or wedding reception. Flowers will be provided by Joy & Co.
Sunday, Sept. 18, from 10 a.m.-12 p.m. — The Lake House open house will focus on promoting RA’s programming. The facility will showcase RA’s new Fit Kids After-School program and other wellness classes. Morning brunch will be made available by Extravagant Affairs.
Special open house offers will include waiving the regular food and beverage fee (a $125 savings) to anyone reserving an event date within one week of the open house.
Door prizes include: Complimentary “drop-in day” to RA’s Fit Kids After-School program and a complimentary session to a RA wellness class.
Contact Member Services at [email protected] or 703-435-6530 for more information about The Lake House.
In the next week or so, a Reston Association committee will select a consultant to review and evaluate the purchase and overrun expenses related to the Tetra office property, now known as the Lake House. The consultant will review, analyze and make recommendations to the Board on processes to prevent the recurrence of such a fiasco.
One of the steps in the consultant’s review will be to wade through the public record. The record is extensive and includes documents on the RA and Fairfax County websites as well articles in Reston Now and the Connection.
As the record shows, RA made numerous mistakes over the course of about two years. It is useful to enumerate those mistakes to remind everyone what a dismal job RA did in purchasing and managing the Tetra renovation. It might also provide some guidance to RA’s independent review consultant.
Let’s start with the $2.6 million price paid for the property. In reality, paid for two properties; one real and the other hypothetical. The real was the building as an office. That cost $1.3 million. The hypothetical, a restaurant, would cost an additional $1.35 million. The prices were based on a January 2015 appraisal for the property. RA requested that the appraiser include the restaurant. (more…)
Reston Association’s Lake House is now fully renovated and open for business.
RA is promoting the facility in a “Reston Today” YouTube video as a lakefront retreat available for meetings, corporate outings, weddings and other gatherings. Rates start at $100 an hour.
The Lake House has already been booked for a number of special events in upcoming months, and will be used for after-school care weekdays this fall, RA officials say.
But the Lake House, formerly known as the Tetra Building, is still the subject of an internal investigation. RA will hold a special Board of Directors meeting on Aug. 23 (6:30 p.m. at RA headquarters) to appoint an independent firm to conduct a review of the Tetra/Lake House Referendum and Budgets and receive information on and the first draft of RA’s 2017 Operating and Capital Budgets.
The RA Board passed a motion several months ago to convene a citizens group to hire an independent auditing firm to get to the bottom of a $430,000 cost overrun on Lake House renovations.
It is still unknown what the auditing firm’s costs will be.
RA purchased the Lake House for $2.65 million in July 2015. The 33-year-old building on the shores of Lake Newport, which served as the Reston Visitors Center for about 20 years, added to RA’s contiguous open space and fended off the chance of commercial development.
But as renovations got underway, costs soon began mounting. RA’s Board of Directors voted in late May to move $430,000 from its operating fund to cover the Lake House overrun.
RA CEO Cate Fulkerson has found several budget variances and cost-savings measures to cover the $430,000, Reston Now has previously reported.
Reston Association (RA) is in the midst of soliciting proposals to conduct what it calls an “independent” review of its handling of the Tetra (Lake House) purchase and renovation overrun, a process that promises more of the same poor processes and politicized results Restonians have seen for 18 months.
Most importantly, there’s the matter of RA characterizing this review as “independent.” It is anything but that.
To be truly “independent,” the RA Board needs to step away completely from this process. Let the three community members named to the selection committee set the criteria for the review, let them then make the actual selection of the review firm and have them receive and approve the final report.
Further, and equally important, the RA staff should have no participation in the review other than to answer questions, provide information (including internal e-mails and discussion notes), and explain processes. (more…)
Reston Association’s Pony Barn Working Group has spent about two years brainstorming ideas to transform the small recreational area off of Triple Crown Road.
Money has been allocated by RA, an engineering firm has been working on concepts and the site plan was estimated to have been submitted to Fairfax County this summer.
That is, until the working group recently got the call to stop.
In late June, RA CEO Cate Fulkerson told representatives of the Pony Barn group, as well as principals working on renovations for RA’s Central Services Facility to stop work until an independent review of the Lake House project could be conducted.
RA purchased the Lake House for $2.6 million in July of 2015 with plans to renovate and repurpose the former Reston Visitors Center into a building for community use. The renovations are complete — but came in at $430,000 over estimates. RA has formed a citizens group to hire an auditing firm to determine exactly what went wrong. That review, which will cost the association more money, is expected to be done this fall.
But that is not sitting well with the Pony Barn volunteers, who says stopping their own project “sends the wrong message.”
“Our members are very disillusioned,” Triple Crown resident and Pony Barn group member Renette Oklekwicz told the board at the RA Board meeting last week. “I have heard some say ‘I don’t trust RA. Are there any surprises here? They are never going to let us finish this project.’ ”
The Pony Barn project itself morphed from a $30,000 upgrade (for a new roof and flooring for the picnic pavilion) to a $350,000 overhaul, though RA approved $350,000 last year — before any major work started. (more…)
As Reston Association gets ready to hire a firm to conduct an independent audit of how the Lake House project incurred a $430,000 cost overrun, advocacy group Reston 2020 has an eight-point plan it wants the RA Board of Directors to keep in mind.
The purchase of the former Reston Visitors Center and office space for Tetra Partners commercial real estate was approved by voter referendum in May of 2015. RA told members renovation costs for the 33-year-old building would be about $259,000. That number quickly grew to more than $600,000 as RA made improvements to turn the office space into flexible community space.
While RA’s Board of Directors has moved money from its operating fund to cover the deficit, it has also voted to discover exactly what went wrong — but that independent investigation may cost an additional six figures (depending on the length of the audit and the fees charged by a professional firm).
Meanwhile, the Lake House is now open for business. Renovations are complete and RA is charging rental fees for community events, as well as getting ready for an after-school care program this fall. All of those things will earn revenue for the project, RA projections show.
But Reston 2020 says that is too little too late.
“The issues begin with disclosing the details of discussions that led to the secret deal with Tetra Properties to the near tripling of the property’s renovation costs in 2016,” Reston 2020 officials said in a statement. (more…)
Reston Association’s Board of Directors is going to conduct an independent review of the Lake House budget development process.
But first it will call on people in the community to help review and hire an auditing firm.
The board voted on Thursday to establish a Tetra Review Request for Proposal (RFP) Selection Committee comprised of three RA members to work with RA’s Board Governance Committee to review RFPs and help hire a professional firm to do the review.
RA’s Board Governance Committee recommended last week that the independent review be done to determine exactly what caused RA’s 2016 budgeting for Tetra/Lake House to have a $430,000 cost overrun.
RA Attorney Ken Chadwick advised the board Thursday that for the review to be truly independent, it has to be done with committee members who are not on RA’s staff or board.
Several RA board members spoke in agreement.
“If you want something that can be trusted, it can’t be RA members,” said At-Large Director Ray Wedell.
Said At-Large Director Jeff Thomas: “I am not sure of the value of the review. I think we have a pretty good idea of what went wrong. But we should bring someone in who knows what they are doing and do it right.”
RA CEO Cate Fulkerson has said the former owner opting not to rent back ($100,000) and construction costs that came in much higher than estimated contributed to the deficit. RA paid $2.65 million for the 33-year-old building on the banks of Lake Newport last July.
The association will put out a call for candidates to serve on the Tetra Review RFP Selection Committee soon with an application deadline of July 15, 2016. Candidate interviews will be conducted by the Board Operations Committee at a July 18 meeting.
Meanwhile, what RA will asking potential professional firms includes:
1. A breakdown of estimated charges and a total estimated cost of the contract.
2. Resumes of those professionals to be involved, as well as the hourly rate to be charged for each one.
3. Company or group experience in conducting similar reviews.
4. An outline of how you would propose to carry out the review.
5. An estimate of the amount of time required to produce a final report, with an expected end date.
6. Any other information believed to be relevant to the proposal.
RA has a deadline for RFP responses of Aug. 1. The board will hold a special meeting in August to consider the recommendations of the selection committee.
The board also discussed what the independent task force will do. The final report will include: “a review of the processes and internal controls that were followed across the organization in decision making and handling all decision-making, governance, administrative and financial aspects of RA’s purchase, including the referendum, planned use and renovation of Tetra (now known as the Lake House property) that have led to cost overruns and revenue shortfalls,” RA said in a statement.
“The review will include all materials and documents deemed necessary by the consultant and/or were shared with the RA board and the public related to the Tetra/Lake House and may include interviews with RA staff, board members, committee members and others.”
In other Lake House news, the board also voted to approve Fulkerson’s plan to replace $400,650 of the $430,000 moved out of the operating fund. The cost savings will come mostly from not filling open staff positions. The board further directed Fulkerson to come back to its July 28 meeting with savings ideas for the remaining balance of $30,000.
The board voted to direct RA staff to provide documents by July 8 on the Lake House to three RA members who have requested materials.
When Reston Association’s Board of Directors holds its June meeting on Thursday, there will be several more areas of discussion related to the purchase and renovation of the Lake House/Tetra property.
RA plans to use the 3,100-square-foot building on the shores of Lake Newport for after-school care, camps and community event rentals.
The overrun occurred due to several factors, said RA CEO Cate Fulkerson. The previous tenant, Tetra Partners, opted not to sign two six-month rent backs, so RA did not get more than $100,000 in rental payments (and had to speed up renovations in order to start earning income from the property). Renovation costs also have come in much higher than expected. (more…)
Reston Association’s Lake House project — under scrutiny by the community for the last several weeks after a $430,000 construction overrun was announced — is going to need some major exterior work, too.
The Lake House Working Group showed plans earlier this week for what the outside of the property would, could and should look like — and that includes a dock in Lake Newport; Americans With Disabilities Act modifications to the parking lot; park areas; and a rain garden.
The group says the parking lot closer to the lake (circle) reduction, as well as ADA spaces/grading, drainage and landscaping near cluster should get first priority in the exterior renovation schedule.
But don’t look for that work to be completed any time soon. At this point, the ideas of the working group are a de facto wish list for the exterior.
The original estimate for exterior work at the time of 2015’s member referendum was $9,000 (but that was for the basics such as paint and wood replacement).
With plans for new grounds, expenses for the exterior would be about $1.2 million, some estimates say.
The working group is in charge of giving recommendations about what should be done at the building, which was purchased by RA in July 2015 for $2.65 million.
It will be up to the RA Board to approve where and when the money is spent. First, it has to find the money though.
Some ideas discussed the Lake House Working Group meeting Wednesday included developer proffers; funds raised by Friends of Reston; grants; and from RA assessments (though the group said it felt strongly this option should not be used).
Meanwhile, the interior of the Lake House is finished and will open for its first revenue activities June 27, RA CEO Cate Fulkerson said.
RA says it expects to bring in more than $100,000 annually from camps, after school care (starting this fall) and event rentals.
The board is also looking to convene a group to determine how the overrun occurred and to put procedures in place to ensure an error that large does not happen again. That will be discussed at the June 23 Board meeting.
Photo: Proposed changes to exterior of Lake House/RA