Dear Miller and Smith

Attn: John Conrad

We’ve received the letter you distributed in response to our mailing seeking support for a Special Meeting to remove certain directors.

You seem to be living in the past and out of touch with today’s events. You write that the “Association now has a record of prompt payments and receipts.” That was the past. The Association has nearly depleted approximately $2 million in cash and is seeking to borrow money. This is the present reality. You write that “the real estate values of [our] homes and properties have increased substantially in the past five years.” That was the past. Nearly every piece of real estate appreciated dramatically in the past 5 years. But now, the ubiquitous signs along Rt 522 of one of your company’s own builders offering 100% financing are a testimony to a simple fact of today: those homes aren’t selling as they did in the past, and the appreciation is reversing direction. This is the present reality.

Your letter contains several mis-impressions that we’d like to clear up. First of all, we have never criticized Miller & Smith for seeking to maximize its profits. Your company is a for-profit enterprise and has a considerable investment in Lake Holiday. We recognize your desire to maximize the return on that investment. We do not now and have never criticized your company for negotiating to obtain the best deal possible. In fact, the officers and employees of Miller & Smith have fiduciary obligations to serve their employer. There is nothing wrong with that, and we have never said or written otherwise.

We have been critical of the LHCC Board’s focus on serving your firm while ignoring the interests of other members. The LHCC Board has a fiduciary obligation to serve all members fairly. Let’s look at some important facts. For example, your letter states:

Yes, we have special privileges, like if we want to pay for, and install sewer and water to our lots and build the streets, we can gain access to the sewer and water. The same privilege that any member now enjoys.

At least we agree on that point: yes, you do have special privileges. We oppose special privileges.

In the period of 2005 to the present, your company extended water & sewer lines to 115 lots in Section 10. In the same period, we are aware of just 1 membership lot owner who successfully obtained water and sewer – and that was with our help! If this were a ball game and the score were 115 to 1, most people would say the team with the “1” is not enjoying too many privileges.

You repeat another Chris Allison lie when you write that the “governing documents of Lake Holiday do not permit the Association to extend sewer and water to lots.” Really? What is the passage in any existing Lake Holiday governing document that does not permit the Association to extend water and sewer? The reality is there is no such passage that prohibits the Association from extending utility lines. This false claim is used to encourage the passage of new governing documents that allow for individual assessments. These assessments are not allowed under the existing governing documents, and your company is protected from having to pay such assessments for the overwhelming majority of your lots under the 1984 Settlement Agreement. These individual assessments – which your company won’t have to pay – can be used to help defray the cost of extending utility lines to your company’s lots. Are you pushing for new governing documents to authorize these individual assessments to defray your line extension costs?

We seem to have an honest disagreement over utility fee waivers in the 1984 Settlement Agreement and the Development Agreement. There’s no question that these agreements contain language waiving utility fees. There is a serious question over whether such waivers are permissible under Virginia law. We believe a utility should stick to its SCC-approved tariffs, period. If a tap fee or utility availability fee is due under that tariff, we believe that every member – whether it’s Ogunquit or Miller & Smith – should pay it. If our contention is correct, the “concession” of paying the tap fee you reference in your letter is really no concession at all.

The utility fee waivers in the 1984 Settlement Agreement raise utility rates for homeowners. If your company is not paying the utility availability fee for the 115 lots in Section 10, those funds have to come from somewhere. That means higher rates for homeowners. When one factors in your lots in Section 7 and your future development of other lots you own at Lake Holiday, the impact on utility rates will be even greater. We care about utility rates for homeowners because utility rates that are too high make it more difficult to sell homes and lots.

We’re sure Miller & Smith is not well served by the unresolved question of discriminatory fee waivers. Let the SCC review these documents and decide whether these utility fee waivers are in fact discriminatory. Join us in raising these matters before the SCC in the transfer of the Utility’s assets to Aqua Virginia so these issues can be put to rest once and for all. If the SCC approves the Utility sale, it is in all of our interests that new utility rates are fair and non-discriminatory.

You are critical of us, writing that we have “misinformed people” and “bombarded [members] with mistruths….” But your letter is completely devoid of specific misinformation that we have provided. Can you identify where we are wrong in our facts? If we are wrong on the facts, we will correct them. We want to get this right.

Likewise, we are sure your company wants to get the facts right. So we want to bring to your attention a lie that you are spreading. You claim we are engaged in an:

underhanded attempt to obtain sewer and water to [our] lots for free — at [members’] expense….

Chris Allison and Wayne Poyer are fond of spreading this lie, so let’s focus on the truth. We have never sought and will not accept other members of LHCC paying for extending water and sewer lines to our unserved lots. Period. If there’s any doubt about that simple statement, print it off and save a copy.

What’s really at stake in our dispute with the Association and the Utility? We want the same right that you enjoy: the ability to extend utility lines at our expense using our subcontractors doing work in accordance with LHEUC and Frederick County standards. We don’t think this should be a special privilege.

We think that what’s fair for you ought to be fair for us, and for every other member for that matter. But LHCC’s directors seem to treat us differently. At a public meeting, Chris Allison and Wayne Poyer suggested we were “stealing cadillacs” by reviewing the profits we might make if we can get water and sewer to our membership lots. They neglected to mention that you converted 115 lots in Section 10 to lots with water and sewer and have since sold 15 of these lots to 2 builders for total consideration of almost $1,250,000. That sum of money would buy a few cadillacs. You earned those profits by investing your money to improve your property and successfully marketing it. All we want is that same opportunity. Why is it that Chris Allison and Wayne Poyer see your company’s efforts as legitimate business activity, but characterize our activities – just like you did – as underhanded?

You suggest that we are unfairly attacking an “excellent group of individuals….” But what shall we make of your comment that the people we are nominating to serve on the board will be “inclined to follow” our directives? To the best of our knowledge, you have not personally communicated with our director nominees, so it would be impossible for you to know what they are inclined to do. The real truth is that we have never discussed with any of our director nominees getting anyone other than us to pay for our water and sewer service. For you to suggest that you know their inclinations without speaking to them is grossly misleading. Why is it so important to Miller & Smith to have the directors on the board that we are seeking to remove? Are they the only Lake Holiday members capable of serving on the board?

John, your company has a significant investment in Lake Holiday. So do we. And so does every owner. We have brought to light a number of problems at Lake Holiday. You seem to be trying to sweep these issues under the rug by characterizing them as misinformation. It is time to move beyond merely identifying problems. It’s time to work together to develop and implement solutions. Our effort to remove certain directors is a drastic step, but it is a sincere effort to fix things.

We have concluded that the board as it is presently constituted is the problem. Just before the July 4th holiday, we communicated with most if not all of LHCC’s directors by phone and email. One hung up the phone. Most didn’t respond. The few that did respond indicated Chris Allison would not permit such discussions to take place. At a meeting planned weeks in advance, no principal from LHCC or LHEUC bothered to show up. We suspect these are not the kind of business practices that your firm supports or encourages.

The Chris Allison-led board is disconnected from the community. You need look no further than the results of the June 10th election on revising the governing documents to realize that the current board is completely out of touch with the concerns and goals of the community. Nearly 2 out of every 3 voters who voted against the documents joined with us and voted “No” by our proxy. The Chris Allison-led board ignored the concerns expressed by the community in that vote – just as they are ignoring the real concerns inherent in the effort to recall 7 members of the board.

We agree with you this is a turning point for Lake Holiday. The behavior of certain board members needs to be fixed now.

We can either all – Ogunquit, Miller & Smith, homeowners and vacant lot owners – work together to solve Lake Holiday’s problems or we can watch them spiral out of control. We are working hard to find real solutions.

Your spreading the lie that we are after free utilities isn’t a solution.

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