Lago Vista Independent School District (LVISD)

 

I asked the 2010 LVPOA BOD what obligations does the POA have to the city or to other developers? Simple questions. But, the answers...

When you're reading these, I hope you'll use your active thought processes to ask yourself some questions. Wouldn't an honest broker with no agenda simply answer questions? Are these logical responses to rational questions? Do the responses answer or obfuscate? And so on.

This post is primarily emails which are self explanatory for the most part. Some are long winded but I'd been working on this since June and it was now October. I was tired of the runaround so I was intentionally being very detailed to make it harder to not understand. It was time to get some answers, if that were possible.

I made a mistake and it took me two emails to get all my questions out. That is why there are two emails from me with no intervening emails from them. I thought they were easy questions. Remember, as I've stated in prior posts, the LVPOA Board kept saying in an email and in meetings that we had a "community obligation". I was trying to find out if that truly existed. As far as I can tell, it does not exist. But, they won't admit that it does not exist, so they act as though it does. I go through the emails here and you can judge for yourself. This process did start out ok, but little did I know...

On October 03, 2010 6:19 PM I asked the Board these four questions.

1. Normally, contracts are between the signing parties COLV and the LVPOA has been separate legal entities for 25 years. Was the LVPOA a signature party in any "pay money instead of adding parks" agreements between any non-POA developers and the City?

2. If the LVPOA did sign papers, what are they, and how can I obtain copies of any contracts where our POA signed papers obligating the POA to do anything at all with any non-POA developers when they signed with the city to "pay money instead of adding parks"?

3. Is there any contract of any kind the City can produce to show the POA is obligated to provide a park to the city at any price.

4. I have heard and am asking if it is true that several developments are listed in the Certificate of Incorporation that have never joined the POA and are denied access. If I am listed as a potential member in any other organization, but never buy in, then the organization doesn't owe me anything. So, is that true, and if so they made their choice - so how is that the current shareholders problem?

A few hours later, October 03, 2010 10:17 PM, I added these questions.

1. Which city council members live outside the LVPOA and are NOT LVPOA members?

2. In accounting Assets minus Liabilities equals Shareholder Equity, that's the member's shares financial ownership stake. If you sell a park, that is not the end of it. As the city grows there will be pressure to sell another, and another and so on until the shareholder equity evaporates and is gone. So, from a shareholder perspective, it would be best to maximize shareholder value by returning shareholder equity to the shareholders from the organization whenever a park, large amenity, or other irreplaceable asset is sold. Further, given the attitude of the city, at some point, the LVPOA may be liquidated to become a public utility. By shrinking the value in advance it lowers our equity they would eventually pay which also argues for dispersing the funds back to the shareholders immediately if a park, large amenity or other irreplaceable asset is sold.

2.1. What is the mechanism for returning our equity invested with you to us?

2.2. If a park is sold, then will you return our shareholder equity derived from that irreplaceable asset?

On October 04, 2010 12:25 PM Deborah Sorchevich wrote in part "As far as the City Council members, they are all members of the LVPOA. As far as your second question is concerned, however, I think those are issues that the LVPOA Board would have to decide if they ever agreed to sell a park to the COLV. Thank you for raising these kinds of questions."

That was a good answer to one of my questions, but it didn't really answer the other ones, so on October 04, 2010 3:34 PM I responded in part:

Thank you. I understand there are community dynamics at work but community dynamics are limited by contracts. I am more familiar with for profits, and the POA is a non profit so I continue to learn.

The second question is crucial. It describes a potential steady diminution in our beneficial interest based on factors affecting decisions being made now which are likely to persist. Since the second question affects the value you hold in trust for us, and since preserving shareholder value is a core attribute for organizations - I would argue that the second question is critical, that the effects and results should be decided before even considering a meeting to sell any asset since after the fact is too late.

I would urge that the proper time to consider the second question is now because at it's core the question is relevant to the decision whether it is in the organizations or shareholders interest to offer anything for sale at all, as well as what to do with any proceeds post sale, should a sale occur.

On October 04, 2010 3:54 PM Dave Freeman responed in part:

I think you've overlooked a very important issue, let me explain.

If the board had sold, or were to sell a park to the COLV, any funds raised from this would have been immediately put into a building fund for the express purpose of building a new asset for our members/shareholders. i.e. a smaller version of K-Oaks on the land we purchased adjacent to the Activity Center in 2009. This new asset if and when it's constructed would be for the use of our members/shareholders.

This is a very effective way of balancing the needs for both outdoor and indoor assets as more of our members/shareholders become residents.

The BOD and the LVPOA staff are charged with effectively managing the assets. There never has been, or to the best of my knowledge never will be a situation where an LVPOA asset is sold and the members/shareholders get individual cash settlements.

I hope this clarifies and answers your concerns.

On October 04, 2010 4:44 PM I wrote in part:

I agree sometimes it makes sense to reinvest. This may be one of those times, or it may not. That is why I am asking the question, for you all to consider it. Remember I am a POA advocate, so take it in that spirit.

What I think the BOD is overlooking is that reinvesting in a growing asset makes sense, reinvesting in a shrinking asset usually doesn't.

The same pressures on the BOD now will increase as the city grows. So there will be another time when the one park isn't enough and a future board will likely offer another park. This cycle is likely to persist because we are not standing up for our contractual rights, we are bowing to public sentiment. I don't see this as likely to change. No one I talk to does. Therefore if we sell a park, we are likely looking at reinvesting in an ever shrinking asset.

As it shrinks, it's value will decrease, the number of supporters adversely affected by having a public park near them will also increase.

1. Even considering it drives buyers to other people's lots, why buy into a POA that is shrinking or might shrink further in the future? That potentially reduces our lots attractiveness anywhere in the LVPOA footprint.

2. Supporters of a private POA are already apathetic but if a public park is put next to them, then a rational person will say, "why am I paying private fees for a park that is public", and they go over to the public parks side from the potential supporter side.

3. People with lots near the public park may ask to be let out of the POA and they would be justified in doing so.

4. That will decrease POA funding, put people on the side of making the POA parks into public parks, and is bad publicity for the POA driving down lot values and causing additional pressure to simply make them public to get it over with,

5. It's also a potential lawsuit because it turns an attraction into a nuisance and drives potential buyers away from those lots. They can argue that the POA is diminishing their lot's value. 6. Also, some will say if it happened to my neighbor, it could happen to me which makes it uncomfortable to live in the LVPOA which undermines support,

7. All of that means already apathetic support is undermined and pressure increases to simply become a public park system.

8. Unless one of my other questions turns up some contractual reason for the POA to sell a park, the above holds, ESPECIALLY if the rationale is public sentiment, not contractual obligations

9. By not forcing the City to face Its obligations, by solving it for them, the POA is encouraging more of the same from the City and other developers, this likely increases the pressure over time as more developers take advantage of this opportunity to build but put their costs and headaches on the LVPOA, there will be more people outside the POA who think they are entitled to it because you solved it for the these developers,

10. Potentially, it's a death spiral for the valuation of the POA.

Those are hypothetical but based on existing conditions and well established real estate common knowledge, along with rational extrapolations from existing conditions. I could go on but those should give reason enough for the BOD to take this as a serious question and thoroughly evaluate it now.

Normally investors cash out at the top, not the bottom.

I am not saying I want to cash out. I am saying the BOD should consider the long term effects I outlined and whether it would be best to return the shareholders investment at a high value rather than a low value, thus the question.

End of email

To put the above email in perspective, remember my purpose in writing was because there was a private park sale meeting that blew up, then a request for a joint POA BOD and COLV City Council meeting that Mayor Randy Kruger has torpedoed, and finally most important for several months now no one would simply say, a park sale is off the table. I could not figure out why anyone would sell a park under those conditions, or why a board of directors would assert some "Community Burden" over shareholders in a private company. Also, I was writing to see who was legally obligated to who and for what.

I know a lot of the above is obvious to most business people and would never need to be stated. But, I was dealing with people who would indicate a sale was off, but not just say it, and who kept voicing this "Community Burden" that meant we are paying for private facilities and parks that could be used to benefit other developers and the city at large. This is unlike most other private entiries which exist to serve their customers and shareholders.

Our POA is supposed to be a structure left in place by the developer to allow them to cash out while providing attractions to attract buyers to maintain an after market for our lots within the POA footprint. But the City and usually the POA Board itself tend to say the LVPOA has a "Community Burden" for the other lots outside its footprint, which makes no sense.

Can you imagine someone on Sam's Club Board of Directors saying Costco didn't allow for enough warehouses, so now Sam's Club has a "Community Burden" to give Costco use of Sam's Club warehouses whenever Costco needs one? Of course not! That would never happen!

But, what the city and our LVPOA often does is the same thing. In other words, because other people don't prepare as they should, we have to give them our amenities, which we pay for. They are fond of saying only a few currently live outside the POA boundaries but there are many LOTs outside the POA boundaries. Those are put in place by other developers just as our lots were put in place by our developer.

Given that they wouldn't admit to understanging what private means, and kept referencing this "Community Burden", in emails and in the meeting I'd attended, I wanted to break it out in detail. I wanted to find out if they just didn't have good business sense, were ignoring known business principles, or find out whatever it could be.

It's one thing not to know, it's another to know and ignore facts. They can't unring a bell. By going into this excruciatingly detailed list it would be impossible for anyone to reply by glossing over items without it being obvious.

On October 04, 2010 7:41 PM Gary Gates wrote:

Mr. Waite:

I support Mr. Freeman in all the time and effort that he has taken to answer your continuing hypothetical question. I further support his answer as they are the best that anyone could give to your queries. Mr. Freeman has 2 years left on his term as a member of the POA. The sitting board has 2 members leaving in a month and a half, and 2 members have three years. The sitting board made and offer to the city to sell one park, the least uses, for fair market value of just under $1,000,000.00 and the offer was declined and is a dead issue. Future board will do what they think is best for the POA and to continue to ask hypothetical questions is not something Mr. Freeman be expected to properly answer. Nothing committed to today obligates future BOD. I am not sure people appreciate that for Mr. Freeman the past four year has seen this gentlemen working 40 or more per week, and most likely many more hours on the POA business. I for one would appreciate your asking questions that have to do with the hear and now rather then dwell on long term questions and hypothetical question which are beyond the control of this boar and are the responsiblity of future boards. Thanks you.

End of Email

In the above email, it works both ways, the park sale is dead for the 2010 board but the cannot obligate the 2011 board. That sounds reasonable until you remember the 2011 board will carry over 3 of the 5 members. 3 of 5 is a majority so yes they can obligate the next board, the 2011 one, at least.

But, to be fair, lets assume there is no way to control the future board even with 3 of the same 5 members being carried over. In that case, it makes sense for me to store the question and ask it again later when the new board is seated. That is exactly what I did.

Also they were not answering my questions from the beginning, which is why we'd now gone through some excruciatingly detailed emails just to explain basic business to them, and they are on the board of a private company.

I had spoken with realtors and business people as well as other LVPOA members in an effort to try to understand what was going on with this Board. I'd shown them the emails and I'd gotten advice on what normal people should know. Most of the people I spoke to were incredulous. So, finally, the gloves came off.

I tried to explain shareholder interests to this board at this point. I was not trying to write a textbook, and I was using words in their common meaning, not an accounting one. Basically, I was simply trying to get the idea of shareholder value across because if you've kept up with these emails, the pattern was they were going to sell in a private meeting with no outside input, no public review, when it wasn't needed to sell it.

One thing that had struck me through this whole ordeal was this Board won't admit to owing the shareholders anything but they will force a "community burden" on the shareholders. That is the context for this email, trying to explain to a board of directors of a private company what shareholders are.

Please note I have since heard various estimates on the number of lots in the POA, the 11,200 was what I was hearing at the time.

On October 05, 2010 1:21 AM I wrote:

Mr. Gates,

You are an officer in a corporation, thinking ahead and preserving shareholder value is a board of director function. I am asking routine shareholder questions. You are taking it personally. I think that is part of the problem. Instead of circling the wagons, it would be helpful listen, learn, and to get some advice as I have done and continue to do. We have 11,200 lots each of which has one beneficial (ownership) interest, one per lot, in the POA itself. It's like shares in a corporation. The value of the organization DOES affect the current value of my investment as it does all the other members based on the number of lots. That means if you reduce the value of the organization, you reduce the value of our shares in it. A POAs actions are supposed to attract and retain investment in our personal lots. The BODs actions affect the value of our lots by changing the amenities mix. We shareholders hold a financial interest in the LVPOA itself at all times. As an investor, I have the right to expect that my capital is being used wisely and that the BOD is taking care to optimize the values of the organization and the shareholders lot values. Both my beneficial interest and my lot value are affected now. That means asking questions. I don't fault anyone for not thinking of everything. I certainly don't. But there is no question these are valid shareholder concerns about common knowledge items. Any professional will tell you the same. The fact you would prefer to get personal rather than get input is disturbing on several levels but you can fix it.

You need to understand that if you decrease the value of the organization you are decreasing the value of our beneficial interests in it. You are contemplating selling off assets which are irreplaceable to the organization now. You are contemplating damaging shareholders financial interests in their nearby lots, perhaps permanently by taking an attraction to those lots, and turning it into a repulsion away from those lots - thereby decreasing those lots marketability - now. Surely those owners will notice now. You also risk damaging the organizations viability now. You risk lawsuits now. All of that can cost ALL lot owners in the POA through special assessments now, reduced beneficial interest now, reduced lot value now, as well as knowing selling a park is limiting the maneuverability of future boards then as well now. And that is NOT an exhaustive list, I simply tire of typing.

I would think that would call for a review.

If you will talk to any UNBIASED professional real estate person, and perhaps an UNBIASED CPA, I believe you will find that everything I said is common knowledge. I am surprised at your response. I would have expected it to generate either a great deal of interest in a professional review, or a presentation of a valid opposite business case where the BOD clearly demonstrates in business terms they had thought it through prior and assert the benefits outweigh the risk.

Why would you put the POA and our lot values at risk instead of undertaking a full in-depth valid professional review? That is not a good attitude for an officer.

You are all officers in a very pricy corporation. You have a responsibility to your shareholders on two fronts, one to the organization itself to enhance and maintain it's value for shareholder benefit, and two to maintain a market for our lots through attractive amenities. Neither of those is enhanced by getting personal. Both are enhanced by looking at it professionally. If you don't see that, you need to obtain additional professional advice because those are fact statements, not opinion statements.

If the goal is NOT to collapse the POA - then the BOD should have thought this through already, have a business case in place already, and should have had defensible arguments when shareholders ask questions already. Since you don't, that indicates either: someone has brought new information to the table, or someone doesn't want to evaluate it. The professional course is to think through the ramifications of your decisions prior to doing something, rather than making decisions, then getting personal and hoping for the best.

Again, no one thinks of everything, I certainly don't, that's why I research and ask opinions. As an officer on a BOD, it would be wise if you would do the same. But it is very troublesome that common knowledge is being ignored.

End of email

I know it sounds excruciatingly detailed and that makes me come across bad to them at the time and to you now, But, when a set of directors over several months will talk about us having a "community burden", but won't admit to owing the paying customers, their own shareholders much, and are willing to sell a park on a whim with little real information and in a private meeting, it just finally got to me. To this day, I am astounded.

On October 05, 2010 8:39 AM Dave Freeman wrote:

Brad,

let me state this very clearly, there is no intention as you refer to "of collapsing the LVPOA". I think the actions of all past board's of directors have been quite the opposite.

* In 1999 the LVPOA built K-Oaks. This was an increase in LVPOA assets.

* In 2005 the marinas were significantly expanded. Once again an increase in the LVPOA assets

* In 2007 the LVPOA purchased land contiguous to Emerald Park ramp, this as you know became Emerald Park. This new park is an addition to all of the parks which were originally deeded to the LVPOA by NRC. This resulted in an increase in LVPOA assets.

* In 2009 we totally rebuilt the Bar-K pavilions. Another increase in LVPOA assets.

* In 2009 we purchased 1.5 acres of land contiguous to our property at the Activity Center. Another increase in LVPOA assets.

* In 2010 we totally rebuilt the Bar-K bath houses. Another increase in LVPOA assets.

All of these actions do not point to any collapse of the LVPOA, do they !!!

One thing you have to understand, each and every board of directors has been frugal with the amount of annual membership dues which are charged. The resident population of LVPOA members has been very lucky for many years that they get the benefit of being the ones who get to use these physical assets, while by and large the non residents help subsidize these asset expansions. If we as residents had to pay for these assets, we'd be paying very much more than our current annual dues of $125.00

Brad, a couple of months ago you were asked at a public meeting, if you planned to run for the board, you said no. With all of your questions I can only wonder why you didn't.

Since the current board has only a few weeks to remain in office, I would ask you to save any future questions on this particular subject for next year's board.

I'd also like to ask you have you voted yet ?

End of email

On October 05, 2010 9:08 AM Gary Gates, responding to the same email as Dave, wrote: "I think that you have chosen to spend far to much time looking at things that are hypothetical and really are way out of the realm of possibilities. The POA is an association which has an unpaid Board that devotes their time and efforts on behalf of the shareholders. To have one shareholder or even your few associates take up the valuable unpaid time of one or several Directors is unfair to those who serve free of charge. If you have this many concerns about what the BOD is doing, why do you refuse to run for office? I am proud of what my fellow Directors have done while I have been on the Board. The Association is in excellent financial shape, we have a dedicated staff who run our ship in a very fiscally conservative way, and an unpaid BOD who donate an inordinate amount of time to see that all of the shareholders are well represented. Yo, Mr. Waite seem to be in the minority from all the feed back we have received and for us to continue to spend time on your issues is taking our time away from other shareholder business and is very unfair. As I have said all discussions about selling any asset is a dead issue for this sitting board, what future boards chose to do is an unknown and they can not be expected to be bound by any thing that the current BOD has said or done "

On October 05, 2010 4:51 PM in answer to my original October 03, 2010 6:19 PM questions above, Deborah Sorchevich, wrote in part:

The LVPOA was not a signatory in any "pay money instead of adding parks" arrangements with developers.

The LVPOA does not have a contract of any kind showing the POA is obligated to provide a park to the city.

There are no developments listed in the LVPOA Certificate of Incorporation that have never joined the POA; I understand that some people have suggested that Vista Villas is in that situation, but that is not true. Vista Villas is currently an unplatted area within the original city limits but outside the POA.

She apologized for taking a little time to get to it, her thought was appreciated, but not needed, it was only roughly 2 business days, so she'd responded in a timely manner in my view, and I told her so in a separate email.

But for Dave and Gary this had gone on since June, it was now October. Finally I had enough, and I unloaded.

On October 06, 2010 8:00:00 PM I wrote:

Thanks for the data. Dave asked questions of me, plus some of this is a response to Gary's email to save space. You asked for this response, it is not a provocation. First, I do not think you want the POA to collapse, when I said that I meant that since I assume you want to do the opposite, it might be wise to consider rational points. Second, I am waiting on additional input before casting my vote since there are several good candidates. Obviously I'll vote. Third, I am a shareholder asking routine shareholder questions, making routine shareholder points. No person can think of everything, no five people can think of everything. A smart person recognizes this, watches, learns, seeks input, and revises their decisions when new information comes in. Gary, facts are facts, they aren't dependent on how many people voice them. Fourth, there is a pattern of the board, and at least one ex board member, taking personal issue with professional questions and even attacking people wanting to use their own facilities that they pay for. Several people have told me we weren't the first, nor the last to endure this. I shouldn't need to be on any BOD to get the products promised by any company, or to ask questions of it, especially where I am a shareholder. I won't apologize for standing up with others to get what we paid for. Fifth, as a member I am not limited by time, nor do I have any conflicts of interest, as a board member, or in an election, I would. In short, I have an investment in my property to protect, an interest in the usage of POA facilities we fellow members which we pay for, as well as a beneficial interest in the POA to protect.

You asked about people speaking up. Few want to speak up and be bullied, shouted down, told they should move out and such. Many have noticed this has been a strategy for some here in Lago Vista for some time. I really don't care on my part, but that is not your average person's reaction. Most get scared and quit, or don't want their identity known, and express appreciation when others will speak up for them. I'm fine, alive, and undiminished. I point this out to all who tell me they remain afraid of the bullies. It is not bullying to stand up to fight back against the bullies and we all know it.

You wondered why people seem apathetic; between attacks endured when one does speak up, some who go about personalizing professional questions in attempts to both distract from the issue, and to make the routine questioner seem like an attacker, as well as the POA itself blurring the line between POA responsibilities and those of the city over many years, to the point that people think a private POA is a public utility, these might hold your answers.

For example, I began this with a strong desire to keep the POA private. Since then, between the lunacy of a BOD on a private shareholder owned entity not wanting to admit what private, members only, means, through enduring personal attacks, to having to address the distractions raised by some trying to make routine questions sound like an attack, to the lack of consideration of readily available input, to a blurring of the lines between public and private, I can see where some already say just make it public and get it over with. I really can. I couldn't at first, I didn't get it, but I can understand how people think that way now. I still disagree and will continue to speak out, but I don't blame them. If you can't read that and understand how very bad that is for the POA then that is very sad.

Dave's response didn't answer my question exactly because he thinks it's for another board. I'll accept that. Some have said they feel unappreciated for all the work. So, I'd like to point out, Dave did provide a lot of related comforting information and that was appreciated. Deborah also answered some questions earlier, she answered fully and completely and I already told her I appreciate that. I answered Dave's questions, and Gary's email above. Hopefully, Gary and the rest of you will appreciate the time I took from other things I could be doing to answer personal stuff when I was asking about professional items. So, this ends it for now on my end, unless you ask more of me.

Again, you asked for this response, it is not a provocation, nor does it require any answer, but I don't mean to take the final word because that tends to make people feel bad.

End of Email

Notice after all this I still did not have an answer about the future of the park!

Several directors had said it was a matter for the new board. So it had to wait. In the meantime, several of us communicated with candidates so we could pool resources to save time for all concerned, and waited for the election so I could ask the next board. The questions for the next board continue in the next post. That's where it gets even stranger.