RISE UP, RESTON!

Statement of Terry Maynard, Co-Chair, Reston 20/20 Committee at Board of Supervisors Hearing on the Reston Road Tax

 Statement of

Terry Maynard, Co-Chair, Reston 20/20 Committee

re FCDOT’s Proposed Reston Station Area Transportation Service District Tax

Fairfax County Board of Supervisors Public Hearing

February 28, 2017

Good afternoon.  I am Terry Maynard.  I reside at 2217 Wakerobin Lane in Reston.  I am speaking on behalf of the Reston 20/20 Committee.  

The Reston TSD road tax proposal you are considering is a sham based on erroneous assumptions, defective logic, and inaccurate official public statements. 

The greatest fiction in this tax scheme is the foundation assumption that Fairfax County faces a $350 million “funding gap” for improving Reston station area streets over four decades.  Of that so-called gap, FCDOT proposes that $139 million should be paid by a Transportation Service District (TSD) tax on Reston station area property owners.  That includes an estimated $40-$45 million on owned residences.  That’s about $1 million per year in added homeowner taxes in 2016 dollars.
 

In fact, there is no gap.  In making this assumption, FCDOT implicitly declares that Reston homeowners must be taxed because:

• The County cannot move any current tax revenues in its $4 billion budget to improve Reston’s streets.  
• The County can’t use any future station area property tax revenues to invest in Reston’s streets.
• The County can never raise the rates on any county-wide taxes that would help generate billions in future tax revenues. 

To insist on these assumptions is an outright falsehood, and FCDOT and you know it.

Moreover, the idea that homeowners should pay a special tax to meet a basic infrastructure requirement is ludicrous.  How many of you pay a special annual tax for improvements in public streets or intersections near your homes?  The answer is “None.”  No, our public streets are a collective County asset, not the funding responsibility of neighborhood homeowners.

If logic were actually applied, it would dictate that only those who benefit financially from the street improvements would pay for them.   Two parties benefit:  Developers through profits averaging over $1 billion per year on their Reston station area development, and the County through some $11 billion in future station area property tax revenues. 

Moreover, if Reston’s developers can’t afford an added $1 million per year contribution to their road fund out of the $45 billion in profits they will likely earn in the next four decades, they really shouldn’t be in business in Reston.  

Worst of all, this scheme calls for 87% of homeowners’ future taxes to be spent on building streets on the grid’s periphery that will generate more traffic and would otherwise not be built because adjoining development would not be profitable.  From homeowners pockets to developer profits.  That’s not even happening in Tysons. 

Homeowners, on the other hand, will not earn an additional penny and, contrary to official statements, they will face more congested streets under the RNAG plan as a result of your decision to lower urban traffic service standards. 

In one line, this taxation scheme calls for Reston homeowners to pay more for less. 

Yet the County continues to flog the proposal with inaccurate and incomplete statements. 

• It “assumes” that the proposed tax rate will remain flat, but this is a teaser rate that will escalate quickly.
• It rejects the need to invest in any additional bus service despite the planned doubling of Reston station area population and jobs.
• It fails to acknowledge that any “sunset provision” in the scheme could be easily eliminated by the Board.

This entire endeavor is political theater to legitimize a Board-driven effort to create another tax revenue stream.  If this is approved, you will likely use the same bogus approach to create comparable tax districts in the dozen or so other County re-development areas identified in last year’s zoning ordinance amendment. 

Stop the phony political theatrics to justify a dishonest scheme.  Manage County spending rather than creating deceitful gimmicks to add to Reston homeowners’ growing tax burden.  Stop this unjustified and unfair tax now.

Thank you.

Official Board of Supervisors Agenda Item for Reston TSD Road Tax Hearing, 4:30PM, February 28, 2017, Government Center

Below is the official Board of Supervisors agenda text for the upcoming Board hearing on the proposed Reston Transportation Service District (TSD) road tax.  A couple of early observations:

• There is no "sunset" clause provision terminating the tax after 40 years as stated in Supervisor Hudgins' February newsletter.  
• The item "assumes" the initial $.021/$100 valuation will remain unchanged throughout the 40-year period.  

Here's the full text:

 4:30 p.m. Public hearing concerning consideration of a request to endorse a funding plan for transportation improvements related to the Reston Phase I Comprehensive Plan Amendment (Reston Transportation Funding Plan). The proposed Reston Transportation Funding Plan addresses the $2.27 billion (in 2016 dollars) need for transportation infrastructure improvements to support the land use recommendations in the Reston Phase I Comprehensive Plan Amendment. The proposed plan allocates roughly $1.2 billion of the improvements over 40 years from public funds–Federal, State, local, and regional funds that are anticipated for countywide transportation projects. It also recommends that approximately $1.07 billion of the cost for these improvements be raised from private fund– sources of revenue that are generated within the Reston Transit Station Areas (TSAs): Wiehle-Reston East, Reston Town Center, and Herndon Transit Station Area and used exclusively for transportation improvements in the Reston TSAs. These private revenues would include developer contributions through actual construction, a transportation road fund that would collect contributions from new developments in the Reston TSAs, and a transportation service tax district that would allow the Board to levy and collect an annual tax from all property owners in the Reston TSAs. The proposed Reston Transportation Funding Plan includes initial rates for the Road Fund and Service District. These proposed initial rates, however, are subject to Board approval. Specifically, the Board will take a separate action to approve the Road Fund Guidelines and, following a separate public hearing, create the Service District. The initial rates included in the proposed Transportation Funding Plan are as follows:  Road Fund:  Residential per Dwelling Unit Rate: $2,090 Commercial per Square Foot Rate: $9.56.  It is anticipated that these rates would be adjusted annually, based on inflation.  Service District: Rate per $100 of Assessed Value: $0.021.  The proposed funding plan assumes this rate would remain flat during the life of the service district; however, the actual rate would be adopted annually by the Board of Supervisors. Property outside the Reston TSAs would be unaffected by the service district. More information about the development of the Reston Transportation Funding Plan can be found here:  http://www.fairfaxcounty.gov/fcdot/restonnetworkanalysis/ Questions regarding this proposed amendment may be directed to the Fairfax County Department of Transportation at 703-877-5600.

 We have discussed the absurdity of a TSD tax on Reston station area homeowners as well as the underlying fraud behind this financing proposal.  If you agree with us that this tax proposal is unwarranted and unfair, please do one or all of the following:

• Contact Supervisor Hudgins and tell her your concerns (Catherine.Hudgins@fairfaxcounty.gov)
• Sign our petition to stop this tax.  
• Attend and testify at the upcoming hearing.  

Summary and Questions from Mediaworld Team Members about the RA Board Meeting at which the Board Decided to Buy Tetra, January 22, 2015

   Installment I -Jan 22 2015 RA Board Meeting by TerryMaynard on Scribd

   Installment I -Questions Re Jan 22 2015 Bd Meeting by TerryMaynard on Scribd

"The Absurdity of a New Reston Road Tax," Terry Maynard, Reston Connection, January 4-10, 2017

The following is the text of the subject op-ed written by Reston 20/20 Co-Chair Terry Maynard.

On December 19, while most of us were getting ready for the holidays, a bare quorum of the County’s Reston Network Analysis Group (RNAG), a group appointed by Supervisor Hudgins, met and voted by a narrow majority to endorse a new tax on Reston station area homeowners to help pay for future street improvements there.  The vote was literally no more than an endorsement by a developer-dominated group of a totally unwarranted tax that will subsidize for profit development without a single community representative from the Reston station areas affected by the prospective tax.   
 

The RNAG vote specifically endorsed a proposed Tax Service District (TSD) that imposes added property taxes of $.021/$100 valuation on all property owners—including residences—living near Reston’s Metro stations.  As laid out by the county transportation department (FCDOT), residents will end up paying about 40% of the $350 million in TSD taxes over the next 40 years—some $140 million under a set of assumptions that grossly understate the likely costs residents will pay.

Absurd County Assumptions

And why?  Because the Board of Supervisors directed FCDOT to find a new revenue source to pay for improvements of the streets in and around Reston’s station areas, of course, without asking if a new funding source were needed.  Then FCDOT generated a phony $350 million “gap” in Reston road funding over the next 40 years that could only be filled with some new tax revenue source—as directed by the Board. 

The funding “gap” is based on a number of bogus assumptions.  First, at the heart of this tax scheme is the absolutely incredulous assumption that the County is unable to re-allocate any of its current $4 billion in annual County General Fund tax revenues to improve Reston’s streets in and around the station areas.  The amount that needs to be diverted each year is less than $9 million, a sum that barely rates as a rounding error in the County budget. 

Second, if for whatever cockamamie reason the County seriously believes it can’t divert funds to improve Reston’s streets to support massive development, it could ever so slightly raise the tax rate on any of several existing County-wide tax mechanisms to generate the needed funds.  In a more perfect world, the Board could even twist developers’ arms to have them pay for all the road improvements since they alone will profit to the tune of more than one billion dollars per year over the next four decades.  Another special tax on Reston homeowners (on top of the existing community-wide special tax district charging $.047/$100 valuation to fund the Reston Community Center) or any part of them is totally unwarranted; the street improvements are merely a fabricated excuse.

Third, the TSD proposal ignores the order of magnitude growth in the taxable value of planned Reston station area development over the next four decades.  Right now, Reston’s station areas are valued at about $6 billion.  Four decades from now they will likely be valued at more than $60 billion, and maybe as much as $90 billion, based on long-term area experience.  Even without a rate increase, that means the County will collect over $11 billion in basic property taxes from Reston’s station areas over the next 40 years, an average of more than one-quarter billion dollars in Reston station area taxes per year even without the TSD.  Surely three percent of those $11 billion-plus revenues could be used to fund Reston’s road improvements.

Fourth, don’t fool yourself into assuming those new TSD tax funds will just be added to Reston’s current transportation funding level.  The bulk of the added tax revenue generated by this TSD tax stream will most likely be offset by the County’s diversion of much of its current Reston station area transportation funding to other areas of the county.   

And, once the tax is approved, station area residents will be stuck:

• This tax doesn’t require a referendum approval, just the approval of the tax-ravenous Board of Supervisors, backed by the pre-holiday endorsement of the phony RNAG group.
• There is nothing to keep the Board of Supervisors from raising the TSD tax rate—and residential tax burden—just as it has with a similar TSD in Tysons.
• Finally, there is no sunset provision on the TSD proposal.  When that initial roadway investment is completed, station area homeowners will continue to pay the TSD tax indefinitely.  

Stop the Scam:  Restonians Pay while the County Collects Forever

And there you have the massive scam of the alleged “gap” in Reston station area street improvement funding.  There really is no “funding gap.” There is just another County scheme to pick homeowners’ pockets.  It reflects the Board’s refusal to put an additional penny into Reston streets despite billions of existing and future tax dollars sources.  At the same time, Restonians will face worse traffic by virtue of the County’s explicit intent to lower traffic flow standards such that intersection delays will nearly double during rush hour.   

The notion of a Reston station area “funding gap” is a swindle perpetrated by the Board to justify the creation of another tax revenue stream unrelated to any legitimate new tax funding need.  As a Restonian, whether or not you live in a Reston station area, you need to oppose this preposterous County tax scheme. 

• You can do so by contacting Supervisor Hudgins’ office (Catherine.Hudgins@fairfaxcounty.gov) and telling her that you are against the Board’s imposition of this unnecessary and unfair tax. 
• You can also sign the petition on Change.org (https://www.change.org/p/fairfax-county-board-of-supervisors-stop-the-tsd-road-tax-on-reston-metro-station-area-residents) calling for the defeat of this absurd tax.  
• And you can testify at the upcoming RNAG community meeting in January (date & place TBD), the Board of Supervisors public hearing on the RNAG funding plan (February 28, 2017), and the Board’s public hearing on the specific TSD tax rate proposal in March (date TBD). 

Please step up and help stop this unwarranted additional special tax on Reston station area homeowners.

Terry Maynard, Co-Chair

Reston 20/20 Committee

STOP THE RESTON ROAD TAX NOW!

   Stop the Reston Road Tax --Final--rev by TerryMaynard on Scribd

SIGN THE PETITION: Stop the TSD road tax on Reston Metro station area residents.

Reston 20/20 has posted a petition on Change.org to stop the planned imposition of a Transportation Service District (TSD) tax on property owners in Reston's Metro station areas.  Below is the text of the petition.  Please click on this link to Change.org and add your voice to the voices of other Restonians who are tired of added Reston taxes for worse public services.  

The Fairfax County Board of Supervisors will likely approve a Transportation Service District (TSD) creating an additional property value driven tax on all property owners in Reston's Metro station areas by the end of 2016.  The TSD's purpose, based on faulty assumptions, is to fill an alleged $350 million "gap" in tax revenues for improving roadways in the station areas as high-density development unfolds.

The Board will most likely approve a TSD that will add 1-3 cents to the property tax rate now experienced by station area property owners.  Moreover, three years of experience at Tysons with a similar TSD indicates that the Board will double or triple the rate within 3-4 years.

The added tax will not be difficult to absorb by developers who will see huge financial gains there in the coming years.   Estimates based on recent experience suggest commercial real estate profits will average more than a billion dollars per year in Reston's station areas over the next four decades--and County property tax revenues will grow right along with the growth in property values.

Unlike County and developers' coffers, however, station area residents will not see any revenue gain from the development that occurs there.  Nonetheless, they will have to pay this added property value-driven tax as property values and tax rates escalate.

Moreover, not only will they not derive any financial benefit from the tax like their commercial and county counterparts, they will actually experience worse traffic conditions by County intent.  Specifically, the County is lowering the performance standard for these roadways, including Reston's four key through north-south and east-west boulevards, from a Level of Service "D" to Level of Service "E."  That means peak period congestion there is likely to cause at least 55-80 second delays at each intersection.

There is no logical, ethical, or other valid reason why Reston residents should pay more road taxes for worse road service so others can profit even more from the arrangement.  Those who profit--real estate developers and the County--should pay the full burden of improving Reston station area roadways to accommodate the massive job and residential growth planned there.   The Board of Supervisors must not approve a Transportation Service District (TSD) for Reston's Metro station areas.

This petition will be delivered to:

• Fairfax County Board of Supervisors
  Chairman Sharon Bulova
• bos@fairfaxcounty.gov
  Fairfax County Board of Supervisors

The Proposed Reston Transportation Tax is a Fraud

“The simplest explanation is usually the best one.”  Occam’s Razor

For the better part of a year, the Fairfax County Department of Transportation (FCDOT) has been trying to persuade a group of Restonians called the Reston Network Analysis Group (RNAG) appointed by Supervisor Hudgins that some or all of Reston homeowners need to pay an added tax to improve the road networks around the Metrorail stations.   

The need to improve the roads and intersections, FCDOT says, is obvious because of all the development that will be going on around these station areas in the decades ahead and, of course, Restonians should pay at least a share for those road improvements.  In fact, FCDOT continues, we have the model established in Tysons were residents are paying added taxes to help defray the costs of roadway improvements there. 

FCDOT is so convinced of the importance of Restonians paying an added property tax to help cover the cost of these improvements that it has offered up no less than ELEVEN different tax scenarios for the resident RNAG to consider.  

All of these 11 scenarios somehow relate to how the taxes at Tysons were developed, which is irrelevant to Reston unless, unbeknownst to us, whatever features the Tysons’ model(s) have are written on a stone tablet and brought down from the mountain top.   What about the models for other redevelopment areas such as Baileys Crossroads, Seven Corners, or the linear Highway 1 re-do in Mt. Vernon?  Reston is, in fact, its own beast with its own features, needs, opportunities, issues, and goals—and it is unclear that any of these characteristics are the same as they are in Tysons.   Yet FCDOT and RNAG have never taken a minute to examine these issues.  FCDOT has just presumed that whatever fits in Tysons will fit in Reston.  

Moreover, all eleven scenarios are complex involving different types of improvements, share splits between public and private (which, of course, don’t line up with citizens normal understanding of those two terms), residential versus commercial, and so on.  The only reason to introduce all these complications is to confuse the issue of who should pay for the roadway improvements by focusing on irrelevant issues.  It is very much like a three-card Monte or shell game:  Introduce a lot of motion (or commotion) and re-direct attention to confuse the mark. 

The bottom line is that there is no compelling reason that Restonians should pay any added property or other taxes whether through a tax service district (TSD) covering the transit station areas (TSAs) or a special tax district (STD—a la the Reston Community Center STD) covering all Reston. 

Using Occam’s razor, that a simple, straightforward explanation is the best one, we believe the best answer to financing the needed roadway improvements is, “Those who benefit financially from the Reston roadway improvements should contribute financially to their implementation.”  There are three parties to this effort:  The County, the developers, and the residents.

• The County will benefit financially from new property tax and other tax flows (eg—sales tax revenues from new retail businesses) created by the new development in the TSAs.
• The developers will benefit to the tune of billions of dollars from the added rent income from their new development as well as the continuing profits from existing development.
• The residents will receive absolutely no financial benefit.

In contrast, Reston’s residents are guaranteed to see worse transportation capabilities.  FCDOT has guaranteed this by setting a lower standard for managing peak traffic flows that will not only hurt those who live in the TSAs, but those Restonians and others who travel to or through them.  Moreover, they are also guaranteed worse local bus transit service because FCDOT states that it will not increase local bus service, just move the existing routes around.  So, yes, the goal of the County is to make moving around Reston more difficult, but it still it wants to charge some or all Restonians a tax for this more limited capability.

The only reasonable and honest rationale for the new Reston transportation tax—again, using Occam’s Razor to look for a simple, straightforward explanation—is that the County Board wants to create a new property tax revenue stream that it can adjust, meaning increase, at its prerogative anytime indefinitely.   

In short, the elaborate financial calculations and manipulations by the FCDOT for the RNAG are simply a ruse—a straight-up fraud—to create a new property tax revenue stream for the County that is unlikely to be spent in full in Reston and will definitely make Reston mobility more difficult.  

Act to stop it while you can.   Write to: 

• Tom Biesiadny, FCDOT Chief
• Kristin Calkins, FCDOT RNAG Project Manager
• Supervisor Hudgins
• Andy Sigle, RNAG Chair
• Cate Fulkerson, RA CEO
• Sridhar Ganesan, RCA President

Find out about new road taxes at the RNAG Community meeting next week.

Next Monday, June 27, 7PM, North County Government Center, FCDOT will present a community meeting on funding the proposed re-shaping of the roadways in and around the Dulles Corridor to accommodate the massive growth planned there over the next 40 years.  We anticipate two key elements of the FCDOT presentation (although we do not have the presentation). 

• First, an update on the scope of the mitigation efforts that will be required to handle the traffic expected as density mushrooms along the Dulles Corridor.   So far, FCDOT has gone through two of the three tiers of mitigation (from easiest/cheapest to most difficult/expensive).  According to  in late March, even with these Tier 2 improvements, 31 station area intersections will still be operating at Level of Service (LOS) “F” during the peak AM or PM or both hours.   

Second, in a presentation to just the Advisory Group this week, FCDOT noted that it has found unexplained $223,000,000 in savings for the “grid of streets,” which were always planned to be paid for by developers only.  However, no explanation is provided on how all this money is to be saved.  

We are perplexed by how FCDOT managed to reduce the cost of the “grid of streets” for developers by nearly a quarter-billion dollars (22%) without significantly lowering County expectations for these roadways.   We don’t know what features (number of lanes) or amenities (bike lanes) might have been cut to achieve this savings.  In short, it sounds too good to be true. 

On the other hand, FCDOT is proposing that station area residents pay a new property-based tax.   It described two new funding options (new #6 and new #7) that would entail a new Tax Service District (like the one all Restonians pay for the Reston Community Center) for station area residents that would cost them $0.015/$100 valuation to fill an $85-$110 million funding gap depending on the option selected.   Please see the footnote below that says New Option #6 would actually need to have another $0.005/$100 valuation—or a total of $0.020/$100 valuation—to cover cash flow needs.  Always read the small print.  FCDOT says this would add $75 to $100 to each taxpayer’s bill (depending on the option) for a property valued at $500,000.

 

At the risk of repeating ourselves, we would make the following points on the proposed taxation of Reston station area residents to fund these roadway improvements:

• Station area residents will derive no benefit from these roadway improvements; in fact, just the opposite.  It is the stated intent of FCDOT to degrade to intersection Level of Service goal for these streets from LOS “D” to LOS “E.”  More broadly, this degraded service intent extends specifically to the through streets—the ones Restonians beyond the station areas use to travel from one side of Reston to the other—even though they do not intend to go to or from the station areas.    
• At the same time, developers will likely earn nearly $6 BILLION over the next five years from their existing and new Reston station area construction.   The roughly 6,000 homeowners in the station areas will not receive one extra dollar in income because they live in the station areas, yet they will be taxed an added $85-$111 million over the same five-year timeframe.   If that tax cost were paid by the developers, it would represent less than two percent of their net operating income in the same five-year period.

And please note that:

• The $.015/$100 valuation (or the more likely $.020/$100 valuation) tax is almost certainly a “teaser rate” introductory tax.  Tysons’ Tax Service District tax rate went up one full penny per $100 valuation in one year, and will likely continue to rise.  We can expect the same in Reston.
• Property appreciation will have its usual impact on property taxes:  As the property value rises, so will the Tax Service District tax—even if the rate doesn’t change.
• Tax Service District will never go away.  Just because the construction cost gap is closed in five years doesn’t mean there won’t be maintenance costs forever that will be paid by this residential tax.  And it is not at all clear that the money will even go to Reston or to roads.
• Forcing residents of the station areas (or all Reston as previously proposed) to pay an additional tax for roads that will be less passable than at present is nothing less than massive and grotesque corporate welfare served up by the County to appease developers who are already making billions in profits each year.

Moreover, if $233 million FCDOT cut in the “grid of streets” cost can be cut from developers’ contribution to the grid, why couldn’t the developers easily pick up the $85-111 million FCDOT wants the residents of the Dulles Corridor to pay?  After all, to do so would still mean a savings of $122 million or more for them—and presumably decent streets.

All these are observations and questions Reston attendees at next week’s RNAG community meeting may want to pursue with FCDOT.  Again, that meeting is next Monday, June 27, at 7PM at the North County Government Center.  

Come and learn about the cost and financing of future streets in our station areas and how much you may have to pay for them.  

Did RA commit to spending hundreds of thousands of dollars on Tetra without Board authorization?

Below is a spreadsheet provided by Reston Association showing RA costs it has budgeted and incurred ("Actuals" in green) on Tetra as of May 2016.  As we all think we know at this time, the RA Board of Directors authorized $259,000 towards the renovation and re-purposing of the Tetra office building to RA uses in 2016.

What the table appears to show by way of the green cells extended across the calendar year is that RA committed to spending $625K on Tetra before the May 2016 meeting at which the Board added $430K to cover cost overruns above the $259K budget, including $504.5K to the general contractor for interior work.  The single line, covering actual and expected payments to "Construction--General Contractor, Interior" suggests that RA knew by March (when the first payment was made) that it had a contract or other agreement with this contractor to pay nearly double what the RA Board had budgeted for work on Tetra.  Actually, RA had made payments on eight of these contractual arrangements before the May RA Board meeting, all pointing to contracts or agreements reached months in advance of Board approval to commit to this spending.  In fact, the RA staff had to get the RA Board of Directors' approval at the May Board meeting because more than $249K was due in that month--which would have blown up the budget--alone on top of the $139K spent already this year. 

If we are reading this spreadsheet correctly, it appears that RA staff committed RA and Restonians to spending some $366K that the Board had not approved and, in fact, may not have even been aware of.  Of course, this all occurred in RA Board election season, so it would have been impolitic for RA or the Board to let the public know of these known large cost overruns on a timely basis.  It could have been very costly to incumbents trying to be re-elected.

If the above is true, shouldn't those RA staff who were not authorized to commit these funds be removed from their positions for this egregious breach of trust?   And if members of the Board of Directors knew about these unauthorized financial commitments before the May Board meeting, shouldn't they be removed from office?

Tetra just keeps swallowing Restonians' money.

As RestonNow reported, two weeks ago RA CEO Cate Fulkerson told the RA Board of Directors that renovations for the interior of the Tetra building were more than $428,000 over the budget used to sell the Tetra purchase to Restonians in last year’s referendum, nearly tripling the original $259,000 budget allocated for that purpose.   

To add fuel to the costly fire, the RA Board of Directors moved forward approving a $430,000 Tetra budget increase without examining causes or remedies, other budgetary shortfalls, future spending requirements, or likely cost recovery, much less holding those accountable who were responsible for the inaccuracies leading to this gross cost overrun.  

Unfortunately, a more thorough cash flow analysis shows the hole is much deeper than so far reported by RA (and we still lack significant cost information).  For those of you who don’t want to read all 2,000 words of this post, here are the 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 $562,000 by year-end versus the Pro Forma Financial statement’s prospective surplus of more than $208,000. 

• 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 fact, it is unlikely Tetra will ever be profitable given RA’s track record of recovering less than 27% of the costs on all the other facilities it operates from swimming pools to the Nature House.  Our assessment fees pay the other 73% of those costs.

• An independent, realistic, and thorough re-examination of Tetra’s costs and prospects should be conducted by some entity other than RA and, until that is completed, work on Tetra should stop.

• Such an examination would probably conclude that the most cost-effective way to cope with this situation is to tear down the building and turn it into a nature area—even if we would still be paying off a promissory note.

Now on to the many ugly details.

As shown in spreadsheet appended to this post (including explanatory notes) based on official RA reports, the Tetragate budget through this year is more than $624,640 over budget, not the $428,000 RA reported to the Board two weeks ago.  That’s a cost of $28-$30 per RA household, not the no impact forecast of the RA Pro Forma Financial statement.  Half of that nearly $200,000 extra expense is the $100,000 in Tetra rental income budgeted for 2016 that disappeared with the previous Tetra property owners in December.  

The rest of the added $200,000 overrun comes from bits and pieces large and small. 

The biggest chunk may be the “unbudgeted cost of $39,467” discovered in a footnote in the unaudited Fiscal Committee 2015 year-end report.  That “unbudgeted cost” may (or may not) include the $16,414 in loan costs and recordation taxes listed as “Acquisition Costs” in the Financial Pro Forma that was used to sell the Tetra deal and was a driver of RA’s 2015 and 2016 Tetra budgets. 

That’s an added loss of $23,035 unless, of course, the “unbudgeted costs” are in addition to the budgeted $16,414 in which case another $40,000 should be added to the overrun.  For the moment, we’ll give RA the benefit of the doubt.  Still, we wonder how much “unbudgeted” RA staff time and money was spent putting together the Voter’s Guide, including its outrageous Pro Forma Financial statement.

For no readily identifiable reason, real Tetra promissory note payments for 2015 appear to have been $15,000 (a month’s payment) greater than shown in the original Pro Forma Financials.  We just read the promissory note. 

The other cost overruns are just chump change with you and me being the chumps. 

The bottom line, as they say, is that instead of being $208,000 to the good by the end of this year as the RA Pro Forma Financials project, the Tetragate fiasco will put RA more than $562,000 in the hole—and the hole will get deeper in the future.

Even with one million dollars spent repairing Tetra by year-end, including Tetra’s $275,000 subsidy, the renovations will not be complete.  What about the property grounds?  An RA-prepared spreadsheet supporting the just approved $430,000 in additional capital expenditures includes an entry early this year of $11,000 for “Property Park Concept Planning.”  (For the record:  It is not clear that RA staff shared this spreadsheet with the Board.  It was not in the publicly-shared “packet” for the Board meeting two weeks ago.)  So we should have a plan soon to improve the grounds that already exceeds the total RA’s Pro Forma Financial originally allocated for a capital improvement of “$9K on initial grounds maintenance.” 

That’s real “initial grounds maintenance”—not a new “concept,” not a new “plan,” not a new “park” as stated in the RA spreadsheet.  As a WAG (the budget-building approach RA’s CEO said RA used in its Pro Forma Financial statement—waving a wet finger in the air), the actual grounds renovation could add another $50,000 - $100,000 to the overall cost of the Tetra property in the next year or so.  When will RA choose to disclose the projected cost of that exterior effort and other needed, but so far deferred and undisclosed, Tetragate costs?

Speaking of WAGs, the same detailed RA spreadsheet used to build the just-approved budget supplemental has an entry of $20,000 for “furniture” purchases this year.  What furniture? The building will need a large amount and diversity of furniture and equipment (electronic equipment is budgeted separately) to serve the multiplicity of uses envisioned for it from weddings to daycare.  $20,000 just won’t get you there.  RA could limit its expenditures on furniture to just $20,000 this year—to get the daycare off the ground with mini-chairs and tables for starters--and spend more, quite possibly doubling that sum, next year and beyond.

Another added cost for this year not disclosed in the Pro Forma Financial statement or the recent capital addition is the cost of utilities this year.  According to RA’s Pro Forma Financial statement, RA shouldn’t be paying anything this year for gas, electricity, and water because Tetra should be paying for these utilities under the lease terminated in December 2015.  Nope, now we are paying those costs which will be about $10,000 this year using RA’s estimating methodology.

With just these added, but as yet undisclosed Tetra costs, the $624,000 shortfall deficit we will find ourselves in by the end of the year, and RA’s forecast cumulative cash flow deficit of $250,000 in 2020, we are likely to find ourselves approaching a cumulative Tetragate hole of one-million dollars by the end of the decade—four times that projected in the RA Pro Forma Financials.  That will require an added $40-$50 in annual assessment fees for every RA member household in Reston over the next four years. 

And that brings us to the greatest unknown about the future:  How much net income will RA actually generate from programs and activities held at the Tetra facility and, in particular, how much of Tetra’s continuing costs will be covered by revenues generated by programs operating the Tetra facility?

RA’s Pro Forma Financial statement projects a rosy future with Tetra programs generating a net operating income of more than $82,000 in 2018 and growing steadily (at the assumed 3% inflation rate) thereafter.  Still, with mortgage payments, the property will operate at a more than $100,000 loss from 2018 through 2020—the far end of the Pro Forma Financial—with that loss shrinking slowly as forecast operating income grows. 

Even if income grows are RA projects, RA will continue to operate Tetra in the red well beyond the time it has to re-finance its mortgage in 2025 at who-knows-what interest rate, plus closing charges.  In a RestonNow op-ed on April 20, 2015, I provided a chart that showed RA would operate Tetra in the red until 2048—and that was extrapolating from everything RA said in its pro forma and using conservative cost forecasts to cover gaps in the Pro Forma beyond 2020!  Presumably, Restonians will make up for that continuing shortfall through additions to their annual assessment fees.   

What is worse is that RA has a horrendous record of cost recovery for all its facilities from swimming pools to the Nature House, much less making a profit.  There is little chance that Tetra will ever pay for itself, much less contribute to RA’s net income. 

In preparing for the most recent RA budget season, Larry Butler, Chief, RA/PRC, presented the Board with a briefing that spoke to cost recovery among RA’s various facilities at its July 30th meeting.  What an ugly picture he presented. 

The bottom line is that RA recovers only 26.9% of its costs for all its various facilities.  The other 73% of the costs are covered by our assessment fees.  In its benchmarking, RA ranked itself second to worst in cost recovery among Arlington County (the worst), Vienna, City of Fairfax, and the FCPA.  Based on this record, why should we believe Tetra will ever even break even, much less be an RA profit center easing our growing assessment fee burden?

How did this happen?  Why is the RA Board in the position now, less than a year after buying Tetra, of realizing suddenly—or at least begin to share with RA members—that virtually everything they and the RA staff told us about the cost and revenue prospects for Tetra is untrue or, at best, extremely unrealistic? 

A number of Restonians, including myself, pointed out the many faults in the pre-referendum financial work RA did, the horrible condition of the structure, the limits on alternative construction and uses, and the grotesque sales price prior to the signing of the Tetra agreement.  Yet the RA Board, staff, and outside legal counsel failed miserably to do their due diligence on assessing and reporting fairly the limited prospects of the Tetra property.   Instead, they turned themselves into a marketing machine of misleading and inaccurate information to sell Restonians on the referendum. 

Reston needs to re-examine every element of its anticipated Tetra facility program costs and revenues (as well as other operating and capital costs) in a realistic and systematic manner.  In so doing it must use explicit and publicly shared assumptions fitting the now limited allowable Tetra hours of use and the planned re-configuration of the Tetra facility.   RA needs to present the results to Restonians and before the next RA budget preparation cycle in a revised and more realistic pro forma financial statement running to at least 2025 when Tetra faces re-financing and including a full report on what has happened and recommendations for handling future such investments.

Such an examination must be thorough, realistic, and independent—which means it must be conducted by someone other than RA, possibly by a committee selected by, say, the Reston Citizens Association’s (RCA’s) Board of Directors.  If such a re-examination of the Tetra purchase and use is conducted, a highly unlikely event in my expectation, I wouldn’t be surprised if its conclusion is that the most cost-effective way to proceed with Tetragate is to tear down the building and turn the property into a natural area even as we continue to pay off the promissory note.  

In the meantime, until the RA staff, the RA Board, and the Reston public knows the true costs of moving forward on Tetra, work on its renovation and programming should stop.  We are just pouring money down a rat hole that we are unlikely to ever recover.  

That is the ugly financial truth of Tetragate.  

   Preliminary Tetra Budget Cash Flow Analysis:  Approved Budget vs. RA Pro Forma Financial Statement, 2015-20... by Terry Maynard