Nearly a dozen Reston Association members pleaded with RA’s Board Governance Committee on Tuesday to investigate how the Tetra/Lake House purchase got $430,00 in the hole so quickly.

The RA Board announced in late May that renovation costs at Tetra, now called the Lake House, have far exceeded forecasts. The association purchased the property for $2.65 million in July 2015. At the time of a member referendum in May 2015, RA estimated renovation costs at the 33-year-old building, which it plans to use for community and event space, would be $259,000.

Those renovation costs quickly grew exponentially.

The board voted last month to move $430,000 from its operating fund to cover the deficit — as well as organize a task force to investigate how the overrun occurred.

The speakers at last night’s meeting urged the committee to organize an independent task force. It had been suggested by RA Vice President Michael Sanio, head of the Board Governance Committee, that the task force should be comprised of board members, an RA Fiscal Committee member and a community member.

“It must be completely independent,” said RA member Eric Carr. “To staff it with yourself is a farce. “Whatever conclusion will be a sham and will not be accepted by community.” Read More

Reston Association is calling for a independent review of the Lake House deficit  — with a task force made up primarily of RA Board members.

The RA Board voted May 26 to move $430,000 from its operating fund to cover cost overruns on the project. RA bought the property, then known as the Tetra Building, for $2.6 million in July 2015. The purchase was approved by a member referendum.

Several factors, including previous tenant Tetra Partners opting not to rent back for 2016 and renovation costs that were much more than expected, led to the deficit, RA officials said last month.

RA hopes to finish renovations promptly and begin programming at the 3,000-square-foot building on the shores of Lake Newport. RA expects to bring in more than $100,000 annually from event rentals and after-school care.

In addition to voting in May to transfer the money, the board also voted to start a review of Lake House 2016 Budgeting.

According to a proposal by Michael Sanio, Board Governance Chair, the association will convene a Lake House Budget Task Force that will consist of several RA Board of Directors members; a rep from RA’s Fiscal Committee; and an external community member.

The Board Operations Committee meeting is at 6 p.m. Tuesday at RA Headquarters, 12001 Sunrise Valley Dr. There will be a public hearing portion, where members can offer their opinion on the Lake House budgeting review process.

The Lake House Task Force would be expected to provide its final report to the RA Board on Sept. 28. RA documents said the task force will:

• Review budgets and referendum information prepared and distributed by the RA, as well as the process utilized to prepare those documents.
• Review the steps taken for the acquisition and remodel of the Lake House to ensure that the correct financial, accounting and project management/controls were followed.
• Recommend revised RA processes to ensure future construction projects and operating budgets are accurate and conform to best practice industry standards.

The overrun on Reston Association’s purchase of the Tetra building will have implications that will reach far into the future.

That’s the analysis of Reston 2020’s Terry Maynard, who crunched the numbers and found some of these key points:

Not counting the Tetra subsidy of $275,000 for external repairs, the Tetra budget will be $624,640 over budget by year-end. That’s $28-$30 per RA household; not an absence of impact on assessment fees as reported in RA’s Pro Forma Financial statement in RA’s referendum marketing “Property Purchase Fact Sheet” no matter how cleverly disguised by cuts elsewhere in RA spending.

As a result, the entire Tetra effort will be in the hole more than $400,000 by year-end versus the Pro Forma Financial statement’s prospective surplus of more than $200,000.

Still uncompleted repairs, particularly improvements to Tetra’s grounds, and the need for new furnishings will add to the growing cost next year and beyond.

By the end of 2020–the final date presented in RA’s Pro Forma Financial in the Voter’s Guide–RA will probably be more than one-million dollars in the hole, costing Restonians $40-$50 per household instead of the $10-$12 projected by RA.

Beyond that timeframe, a published pre-referendum analysis showed that RA will not operate Tetra in the black until 2048 using RA’s own assumptions and other conservative ones the beyond 2020 endpoint of RA’s Pro Forma Financial statement.

In 2015, Reston Association purchased the 33-year-old building — now called the Lake House — on the shores of Lake Newport for $2.6 million, which was nearly twice its assessed value.

RA plans to use the building for community and recreational space, and event rentals and afterschool care are expected to bring in about $100,000 annually.

But RA announced in recent weeks that the project, still under renovation, is experiencing large cost overruns. The RA Board voted last week to move $430,000 from its operating fund to cover the current deficit.

Maynard’s analysis say “it is unlikely Tetra will ever be profitable given RA’s track record of recovering less than 27 percent of the costs on all the other facilities it operates from swimming pools to the Nature House. Our assessment fees pay the other 73 percent of those costs.”

Read the rest of his study on Reston 2020’s blog.

This is a commentary by Reston resident Ed Abbott. It does not reflect the opinion of Reston Now. If something is on your mind, Reston Now will print well-organized letters to the editor. Send them to [email protected].

Many years ago, I served in Admiral Rickover’s nuclear navy. He drilled the idea of responsibility into the heads of all the sailors and officers in his program. He said, “Responsibility is a unique concept. … You may share it with others, but your portion is not diminished.”

“You may delegate it, but it is still with you. … If responsibility is rightfully yours, no evasion, or ignorance or passing the blame can shift the burden to someone else. Unless you can point your finger at the man who is responsible when something goes wrong, then you have never had anyone really responsible.”

Let’s apply that same concept of responsibility for Reston Association’s Tetra project to statements made by several Board members during May 26, 2016 Board meeting.

As you may recall, that was the meeting where the Board approved an additional $430,000 for the renovations for the “Lake House” building (formerly the Tetra building).

The original estimate in the pro forma was $259,000. The total now for the renovation is almost triple the original estimate.

I will start with RA CEO Cate Fulkerson. In her presentation, she addressed the failure of the pro forma cost estimate to accurately predict the actual costs.

Ms. Fulkerson said, “I own that mistake with my staff.” (Emphasis added.) She admits that she was responsible for the estimate but goes on to implicate her staff. She is responsible for the work of her staff and therefore responsible for whatever mistakes they made. She cannot diminish her responsibility by blaming her staff. Read More

It’s been a week since the Reston Association Board voted to move $430,000 from its Operating Fund to use towards unexpectedly large expenses incurred by renovations at the Tetra/Lake House property.

RA purchased the building for $2.6 million in summer 2015 in order to fend off feared commercial development and add a community space.

A variety of things led to the overrun, including the previous tenant opting not to rent back for 2016 and rehab costs that came in much higher than expected, RA officials said.

But the reality is the cost gap is large and RA officials are not going to abandon the project. In fact, RA CEO Cate Fulkerson says the association needs to get Tetra/Lake House ready for business in order to start making money at the 3,000-square foot building on the shores of Lake Newport.

RA will begin after school care programs at Tetra/Lake House in the fall, and plans to rent it for events, meetings and parties. RA expects to eventually bring in more than $100,000 annually from those things.

But that does not mean the expenses will stop. The renovations, which have been somewhat scaled down as costs climbed, are not done. And at the May 26 RA Board meeting, representatives of the Lake House working group showed the board an elaborate landscaping and parking lot renovation idea that would cost a not-yet-identified amount should RA go forward with it in the future.

What should happen now? Should RA look for proffer and sponsor funding to pay for future costs? Should it cut their losses and sell the building? Should it charge non-RA members higher rates for rentals?

Do you think RA members will end up paying more than a few dollars in their annual assessments because of the deficit? Do you have any money-making or money-saving ideas?

Chat in the comments and have an nice weekend.

This is a commentary from Reston resident Terry Maynard. It does not represent the opinion of Reston Now.

As RestonNow readers know by now, RA has at least a $451,000 budget shortfall in its operating income and capital investment for renovations of the Tetra property to bring it up to County code and other standards that make it usable for its intended purposes.

If I am reading the Board of Directors and Fiscal Committee agenda packages for this week correctly, the so-called Lake House Working Group is asking for an additional $428,000 for renovation of the property in addition to the $259,000 —  increasing the projected renovation costs by 165 percent — apparently budgeted for Tetra property renovations this year although it is unclear that the previous sum was ever approved by the Board of Directors. (See the “Lake House” presentation to be given to the Board in the agenda packet, p. 11.)

That’s a total of $687,000 in renovations to be put into a building that, at a $2.65 million purchase price, was already a $1.5 million above fair market value. So if the supplementary capital budget is approved, through this year RA will have spent $3.35 million for a building worth about one-third of that. And that will probably not be the end of what of the investment needed to make the Tetra property usable. Read More

Reston Association says the Lake House property is facing a nearly $500,000 cost overrun and is seeking the Board of Directors’ approval to move $430,000 from the 2016 Operating Fund to cover some of the costs.

There are several reasons for the big gap. Among them: Former tenant Tetra commercial real estate was expected to rent back the property through 2016.

Instead, the company, which had its offices in the building since 2003, left at the end of 2015. That means RA did not receive about $107,000 in payments and was also responsible for paying $20,000 in property taxes. Tetra did not break a contract — the contract ended at the end of 2015. It did, however, unexpectedly opt not to sign two six-month renewals, said RA CEO Cate Fulkerson.

“When [Tetra president] Bill Lauer died [in 2015], it was his intention to rent back through 2016,” said Fulkerson. “His wife, Rosemary, said the company just could not stay — it held too many memories. So we said OK, but it accelerated our plan by a whole year.” Read More