Sugar Valley Lakes
What is wrong with our Homes Association?
There is something terribly wrong with the Homes Association at Sugar
Valley and Hidden Valley Lakes. And, what is wrong is directly affecting
the Sugar Valley property owners and the whole community. For the
property owners, our property values have been on the decline. In August
2008, I attended the Linn County tax foreclosure sale where lot after
lot at Sugar Valley sold from $1 to $10--yes vacant lots were selling
for one dollar! This year, in 2009 there was another Linn County Tax
Sale and lots were again selling for just a few dollars.
In addition to the property owners losing value on their own property, the entire community
suffers from the loss of revenue due to the fact that more and more
property owners are not coming to the area (and spend money) to enjoy
their lake property anymore. More and more property owners have
stopped paying their Annual Assessments. The Association's
own web site recently published that for 2009, forty six (46) percent of
Hidden Valley members and thirty seven (37) percent of Sugar Valley
members did not pay their Annual Assessments. In this article, I will describe what I
believe to be the root cause of why our Homes Association is failing the
entire community.
The purpose of our homes association is laid out very clearly in the
declaration of covenants and restrictions as duly recorded in 1973. The
covenants state in part: “Whereas, Developer has deemed it desirable,
for the efficient preservation of the values and amenities in said
community, to create an agency to which should be delegated and assigned
the powers of maintaining and administering the community properties and
facilities and administering and enforcing the covenants and
restrictions and collecting and disbursing the assessments and charges
hereinafter created. That’s it. There is only one purpose of our homes
association. It is the preservation of values of our property and
amenities. With respect to this purpose, our homes association has
clearly failed in its mission. Property values are at an all-time low.
The Linn County Tax Foreclosure sale with Sugar Valley lots selling for
$1 is clear evidence of that fact.
Before I move on to the root cause of the problem with the Homes
Association, let me present one more clause from the Covenants. It is
the Covenant (Contract) dealing with Assessments. Article VI, Section 2
states: “Purpose of Assessments. The assessments levied by the
Association shall be used exclusively for the purpose of promoting the
recreation, health, safety, and welfare of the residents in The
Properties and in particular for the improvement and maintenance of
properties, services, and facilities devoted to this purpose and related
to the use and enjoyment of the Common Properties, including, but not
limited to, the payment of taxes and insurance thereon and repair,
replacement, and additions thereto, and for the cost of labor,
equipment, materials, management, and supervision thereof.” This clause
has a lot to do with what is wrong with the Homes Association. Now, let
me present what I believe is wrong with the Association.
The root cause of the problem with the Homes Association is that it is
no longer functioning as a homes association. To be fair, the current
board of directors didn’t start this problem. The previous board did
not, and neither did the board before that. It all started a long time
ago; about 20 years to be more specific. In the beginning, the average
lot cost about $5000. The annual assessments were only $25, the
Association collected the money, enforced the covenants and maintained
the common properties and everything was included as part of the
assessments. In the 1980’s, my Dad played golf every week and didn’t pay
anything more than his annual assessments. That’s the way it is supposed
to work. That’s the way it does work when an association is functioning
as an association.
Instead, our Homes association is functioning as:
A Country Club
A city or municipality
A for-profit business (even though it is a failing business)
Some evidence that the Association wants to be a country club can be
found on the sign at the Sugar Valley Clubhouse. It reads “Welcome Sugar
Valley Golf Course and Country Club.” But other facts are present. A
country club membership provides access to benefits, but services are
provided for additional fees. We as members to the Sugar Valley country
club are being asked to pay additional use fees for the amenities. To
use the golf course, we are asked to pay green fees. To put our golf
cart on the course, we are asked to pay trail fees. To put our boat on
the lake, we are asked to pay boat registration fees. Even to drive our
Golf cart or ATV down the roads we are asked to pay registration fees.
There have been discussions of other fees to use the beach and the
swimming pool. These are properties of a country club, not a homes
association.
The Association is also trying to run the sub-divisions as a
municipality with a right to make new laws or ordinances. The board
thinks that just because they make and pass a motion at a board meeting
it is as effective as law. For example, in the past, the board decided
that it was going to start charging members a fee for a building permit
to build a new home on their lot. According to the covenants when a new
building is erected on a property, the plans and specifications are to
be approved by the “Developer and the Board of Directors of the
Association, or by the Developer and architectural committee. “ There is
no provision giving the association the right to charge any fees. The
board however believes that it has the right to simply pass a regulation
making the charges valid. Since that initial fee was initiated, the
regulations have even been extended to charge fees for other permits
they say are required by members when they want to improve their
property. In another example, the Board supposedly voted to charge
partial year assessments from the hundreds of people who purchased a lot
at a county tax sale over the past four years. When the Association
manager was challenged by this member this past summer, the board
indicated that it had voted on and approved this practice. Most new lot
owners when presented with an invoice for a partial year assessment,
simply pay the fee assuming that it is in accordance with the covenants.
Of course, they are led to believe that when the invoice states that the
fees are valid. The Covenants, however do not give the association the
right to pass such a rule. In fact, the covenants state that the owner
of the lot at the time an annual or special assessment is set by the
board is the one personally responsible for the obligation. There are
many other examples (too numerous for this article) of ineffective rules
and regulations that are being enforced by our Association as if they
are legal ordinances passed by a county or county government.
The Association is also trying to provide services to its residents as a
city would. A city, for example generally provides sewage drainage
services. But in a city, everyone benefits from these services. In our
subdivisions, only some of the residents and people with a holding tank
can benefit from such services. Yet, the association has seen fit to buy
expensive equipment and hire employees and provide administrative
recordkeeping just to serve that small minority of property owners.
(Most people don’t know that over 90 percent of the lake lots don’t even
have a sewage holding tank on their lot.) Last year, when the
association’s pump truck was broken, the Association even paid $9000 to
a local sewage disposal service to have the members holding tanks pumped
during the “emergency.” Many of the residents even like to refer to the
Board president as Mayor and the Board as council members and that the
city manager is running the place. Believe me, some of the board members
would like us to believe they have more power than they actually do.
Unfortunately, they do have the authority to write checks to spend our
assessment dollars.
Finally (at least for this article), our Homes Association is trying to
act like a for-profit business. If you spend much time at the clubhouse
or look closely at the financial records, you will notice there is a lot
of cash flowing at our country club. This cash is in addition to the
extra member use fees described above. The association has a gravel
hauling business, a sewage tank pumping business, a golf pro-shop, a
fast food diner, a convenience store and a private club complete with a
Kansas liquor license. The association rents out the golf course for
private tournaments, closing the course to members on many weekends.
Last year, the Association earned more non-assessment revenue than it
took in from the Covenants for Assessments. The officers and employees
are using our assessments as seed money to fund the business. The
Association is their ATM. The bad news is, every year the business is
losing money! But with all this revenue, why are we losing money? The
answer is simple of course. With all the administrative and operational
employee overhead, we are spending more than we are taking in.
But, what is the solution. Many honest and fine board members in the
past have overlooked the root cause and thus the only solution to the
problem. Some believe that throwing more money at the problem is the
solution. Over the past 6 years, the Board has attempted elections to
get the membership to approve additional Annual or Special assessments.
They have failed. The majority of membership doesn’t want higher
assessments, especially when they see no improvements and witness
declining property values. Yet, every year, the association manager
increases the assessments anyway under a clause of an in-effective
amendment to the original covenants as recorded in 1981. What is the
result of this annual increase? More members vote with their feet. They
stop paying their assessments. Every year as the assessments are
increased, the paying members are left holding a greater share of the
responsibility to pay the bills (or I our case fund the business
activities described above). The total revenue actually decreases. So,
raising assessments is not the answer. The only remaining option is to
cut costs. But how?
Folks, we have to change the business model! The only way for this Homes
Association to survive is to again become a homes association. We have
to get back to the basics. The basics are: collect assessments and use
those assessments solely for the purpose of maintaining and improving
the common properties. Now where have we seen that before? The Covenants
of course! We have to stop running this association as a country club,
as a municipality, as a for-profit enterprise. It takes a lot of people
and a lot of money to conduct these activities. By the time we spend all
the money on the employees it takes to conduct these activities, there
isn’t any money left over to maintain the common areas. The results are
evident. Bath houses are closed or not repaired, roads are full of
potholes, the lake has no fish, the beach has no sand and no restroom,
the parks are overgrown with brush and people cannot fully enjoy their
property. Then property values go down. The agency created for the
efficient preservation of the values of the community has failed. We
have lost our homes association.
Robert Lowe (October 2008 with update in Oct 2009)
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