Introduction:
The following represent the current dues situation for
operating purposes and debt service for activities already incurred
Current Dues/Assessments for the community are as
follows (per household, as of 1/1/2011):
����������� Total�������������������������������������������� $3,100 per year
Lakeshore
Operating
purposes
$1,000 per year
�����������������������
Dam-Dredge Debt Service�������
$�� 250 per year*
Association
Operating purposes
$1,200 per year
Dam-Dredge Debt Service
$ 250 per year
Roads Debt
Service
$ 400 per year
Note regarding known issues with current dues
structure:
�
* Lakeshore expects to raise dues $250/yr by 1/1/2011.
�
Association Roads Loan is repaid in approx 2.5 years ($400/yr)
�
Dam/Dredge Loan repayment complete:
������������������������� Association - 11 years ($250/yr)
������������������������� Lakeshore -�� 17 years ($250/yr)
The Finance Committee has concluded that a need exists
for $650,000 worth of capital improvements per decade. Assuming that this
estimate is correct, the following represent options for raising the needed
money to address these needs. For the purposes of discussion and comparison,
each is described as if it were the only option chosen to raise the entire
amount (or, in one case, as much as can be raised by this mechanism).
This is for clarity and discussion purpose only. We recognize that the
best way to address the need may well be a combination of approaches, but any
such combination must address the entire problem, that is $650,000/decade.
OPTION 1: DUES INCREASE FOR CAPITAL IMPROVEMENTS
-
Proposal:�
�
Association � Introduce a yearly �Capital Improvement
Reserve� dues category at $650.00 per household per year
Pros and Cons:
�
Pros: This option spreads the financial
responsibility equitably among all households. It is a per-household levy
that uses the existing infrastructure of yearly payments and collections and
requires no new expenses or mechanisms to administer
�
Cons: It is an increase in the per-year costs
for each household.
OPTION 2: LAND SALE TO FUND CAPITAL IMPROVEMENTS
Proposal:
�
Sell enough property to raise $650,000 per decade
(probably two to three parcels per decade depending on price and taking into
consideration capital gains tax obligations).
Overview:
�
The current inventory of Lakeshore-owned land is 22
parcels assessed at $3.8 Million on which we paid $$37,250 in annual property tax
(2009-2010 period).
�
We will agree upon enough property to sell on the open
market to generate $650,000 per decade after Lakeshore taxes. The
proceeds to be placed in an interest bearing account. The funds are
available upon closing of the sale. If this is the method of choice to
raise funds, we would be looking to sell enough property approximately every 10
years.
Questions:
�
What is our tax liability on the sale?
�
How do we equitably determine which lot(s) should be
sold?
�
Who/how determines fair market value?
�
When is the best time to sell?
�
Should we offer lots to the community-at-large first
and at what price?
Pros and Cons:
�
Pros: This is an asset that we all own
jointly. This could be used to raise the entire $650,000 per decade
without additional dues increases and/or assessments of any kind. Funds
will be available upon closing and will be earning interest (albeit at a very
low rate currently.)
�
Cons: No one wants to overdevelop the
community. Some do not want to see ANY lots get sold�EVER.
OPTION 3: REDUCE LAKESHORE
PROPERTY TAXES THROUGH EASEMENT AND REDIRECT THOSE DUES TO CAPITAL IMPROVEMENT *ORIGINAL FC PROPOSAL
Proposal:
�
Select certain lots to be placed into permanent tax
abatement; therefore, reducing Lakeshore's annual tax burden.
Overview:
�
Any reduction in current property taxes would be
reclassified as a Capital Improvement Reserve assessment
�
The current level of property taxes paid by Lakeshore
is $40,000/year, so easing every parcel in Lakeshore�s inventory only raises
$400,000 per 10 years.
�
Initial FC proposal was to ease all but 6 lots
proposed saving approximately $18,000.00 per year in taxes, or $180,000.00 over
a 10 year period.
Questions:
�
How do lots get chosen?
�
What are the costs involved (to surveyors, lawyers,
town, etc.) in putting properties into tax abated status?
Pros and Cons:
�
Pros: Reduce annual tax bill, maintain maximum
rural beauty.
�
Cons: Render potentially millions of dollars of a
community asset worthless. NOT reversible. (Increases property value of
those households that directly abut the chosen properties � inequitable.)
There would be some costs involved to tax abate properties.
OPTION 4: TRANSFER FEE ON PROPERTY SALE *ORIGINAL FC PROPOSAL
Proposal:
�
Assess a fee, based either on a percentage of sales price or a flat rate per sale, payable on closing of
property transfer. The fee is designated for the Capital Improvement
Reserve.
Overview:
�
At a % of sales price, 1% would raise $300,000/decade
at an average of 4 sales per year and an average sales price of $750,000/sale.
�
At a fixed per-sale rate, $7,500 per sale raises the
same amount ($300,000 per decade) with the above average yearly assumptions
�
When a property is purchased, the new owner is
responsible for paying a fee to the Association/Lakeshore to help meet ongoing
capital requirements.
Questions:
�
Should transfer/sale within the family be exempt from
the fee?
�
What happens if no properties are sold for an extended
period?
�
Are there any legal fees involved in collecting these
funds?
�
Is it fairer to use a percentage-based approach or a fixed
rate per sale?
Pros and Cons:
�
Pros: Money will be made available with each
transfer of property.
�
Cons: Who really pays the fee? Who will be
responsible for collecting the fee? And how far are we willing to go to
get the fee (if someone is resistant to paying?) Cannot plan on money
coming in�we can look at historical data to predict, but past performance is no
guarantee of future activity.
OPTION 5: DO NOT PREFUND CAPITAL IMPROVEMENTS
Proposal:
�
Don't create long-term capital reserves at all.
Instead, decide how to fund a project at the time the need arises.
Overview:
�
We don't need to have excess reserves. We have
never had such reserves and the community has acted in the moment to best deal
with the situation. In some cases this was done through borrowing; in
others through sale of land, contributions, or dues increases..
Questions:
�
What needs to be done to assure funds will be
available? (e.g., Line of Credit / matching state funding to needs such as
water infrastructure loans / �)
�
Will we be able to borrow in this environment without
substantial reserves?
�
Is borrowing the best option if interest rates are
high?
Pros and Cons:
�
Pros: Eliminates the need for managing large reserves
of monies, something with which we do not have historical experience.
�
Cons: We don't know what/who the future
leadership of the lake will be and if they will deal responsibly with funding
projects as they arise. Potential for large assessments without much
notice. Interest rates could be high when we need to borrow
HYBRID
PROPOSALS
�
Any combination of two or more of the above options,
sized so the result is funding of $650,000 per decade.� Three examples are shown
�
.Example 1: ������� �$450/yr Capital Improvement Assessment ��� raises $450,000
and��������� $20,000 per year from
Property Tax reduction������� raises
$200,000
�
Example 2
����������������� Transfer
fee of $7,500 per property sale ����������������� raises
$300,000
and��������� Sale of one property at
$600,000�������������������� raises
$350,000
�
Example 3���������� Transfer
fee of one year dues (4 sales a year)�������� raises
$122,000
and��������� Retain $400 per year dues
when road
��������������� loan is repaid (2013)�������������������������������� raises $380,000
and��������� reduce property taxes by
$14,800 per�����������
��������������� year via easement �������������������������������������������� raises
$148,000
�
What mix-and-match combination can you think of that
you favor?
COMMUNITY QUESTIONS:
1) What is the
level of community consensus on Borrow-and-Repay vs
Pre-Fund-with-Reserves?
2) Land Sale vs. Ease? Where
is community on the question of Build-out? Are we there? How far
away are we? At what point on either end of the spectrum do we have 2/3
support from the community (necessary for disposition of land)? Do 2/3 community favor easing all but 6 properties?
How about all but 4? How about all but 10? Do 2/3 of
community favor sale of one lot in next ten years? Two
lots?
3) Should Transfer Fee be progressive (%
of sale price) or flat ($/sale)? Should there be any exceptions?
Should there be a start-up mechanism to avoid two-tier residents (those
who paid and those that did not)?
4) Can/should we segment this overall
issue into a start-up problem (assessment on existing residents or sale of one
lot) and an ongoing issue (dues and some other ongoing mechanism)?
5) Should we begin a project of perc-testing all community owned properties? Are all
lots realistically salable?
6) What are the tax
implications of these options as applied to Lakeshore and/or the
Association
7) What happens if capital improvement needs
develop before we have enough in the fund?