Many Restonians have commented that buying the Tetra property will add to their annual assessment fees, now at $642 per year, but just how much and how it will affect our growing fees over the years?
We took a look at the numbers, and even used RA’s assumptions in the 5-year pro forma spreadsheet presented in the latest version (Draft #11) of the RA Board “fact sheet.” We extended that out to 20 years, the duration of the planned loan on the property. Here are the key assumptions we made in doing so:
- We assumed that the operating revenues and expenses continued to expand at 3% per year, the assumption used by RA for the first five years. This is actually a reasonable long-term inflation rate consistent with historic US averages.
- We assumed the loan rate for the second decade of borrowing to fund this acquisition is 5% per year, higher than the sweetheart 3.45% loan for the first decade, but a conservative estimate for a decade out.
- The number of RA member households continues to expand at 120 units per year, the increase RA assumes in the first five years (600 units).
Our calculations indicate that the Tetra acquisition will cost Restonians each and every year for the next two decades. In fact, our calculations show that the acquisition will cost about $1.9 million over that time span or more than $80 for each RA member household.
And over time, those annual losses from buying the Tetra property add up in RA assessment fee increases. By the end of the two-decade period, we will have paid an extra $83.56 per RA household because of the Tetra purchase alone.
But, as the TV advertisements say, WAIT, there’s more!
The cost of the Tetra will be in addition to the usual annual increases we have experienced in RA assessment fees and will almost certainly continue to experience, probably at the inflation rate of 3% per year RA assumes.
In brief, the chart above shows that the Tetra acquisition will add about one-fifth to the anticipated annual RA fee increases in the short term and more than one-sixth of the increases over the 20 years. The assessment fee increases begin at more than $21 next year and grow to $28 in 2035. Over the entire two-decade period, the purchase of the Tetra property will add some $83 alone to increases that would otherwise total about $402 per household, a grand total of $485 in additional RA assessment fee increases.
And all the above takes RA’s optimistic assumptions about revenues and expenses as given over the timeframe, including the "good" condition of the existing building. Does this really make sense for Reston and RA’s members?