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
(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.
Top 5 Restaurants, Per OpenTable — According to OpenTable customer reviews, the top 5 restaurants in Reston are PassionFish, Big Bowl, Vinifera Wine Bar & Bistro, Il Fornaio and Neyla Mediterranean Bistro. [Patch]
Tetra Misses Revenue Forecast — Local advocacy group Reston 20/20 faults the Reston Association for “horrible” revenue forecasting for the RA’s Tetra/Lake House. Programming revenue for Tetra is expected to be $82,535 for 2016 compared to the $175,000 budgeted in May. Total costs, however, were below budget. [Reston 20/20]
Arlington to Reston Commute — Redditors are weighing in on the feasibility of an Arlington-to-Reston reverse commute. The emerging consensus: mornings aren’t too bad but evenings are rough. [Reddit]
Photo courtesy @MrErrett
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.
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 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.
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
Reston Association CEO Cate Fulkerson says she will forgo $15,000 of her own salary raise and potential bonus as part of cost-savings measures to help make up for the $430,000 deficit caused by the Lake House renovation project.
That move is part of more than $355,000 in money-saving moves Fulkerson presented to the RA Board at an operations and budget meeting Saturday. Fulkerson said Wednesday she expects to find an additional $75,000 or more in permanent variances by the end of the month.
RA purchased the Lake House, then known as the Tetra building, for $2.65 million in July 2015. But costs soon began mounting, and RA’s Board of Directors voted in late May to move $430,000 from its operating fund to cover the Lake House overrun.
The deficit was caused by several factors, including the previous tenant opting not to rent back through 2016 and renovation costs that were far more expensive than forecast. (more…)
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.” (more…)
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. (more…)
This is an op-ed by Reston resident Ed Abbott. It odes not represent the opinion of Reston Now. Something on your mind? Send us a letter at [email protected]
I attended last night’s meeting of the Board of Directors and witnessed the Board’s approval for funding the renovations of the Lake House.
Cate Fulkerson, the Association’s Chief Executive Officer, gave a Power Point presentation justifying the expenditure of $430,000 similar to the one that she presented to the Finance Committee on Monday.
Each Board member discussed their views after which the Board voted approval for the expenditure. As a result, both the Board and Ms. Fulkerson have failed their fiduciary responsibility in accordance with the Association’s governing documents. Here’s why:
The Board of Directors of the Association has a “fiduciary responsibility” requiring them to act in the best interest of the corporation. This responsibility is written into the Virginia’s state corporation law. Reston Association is a non-profit corporation and has filed articles of incorporation with the state. Those articles of incorporation comply with Virginia law. (more…)
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. (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.” (more…)