Is There Any Hope?

At the February 23rd Round Table, a Membership Lot owner expressed concern about his prospects for being able to build on his lot in the future. The future that he had in mind: the year 2020. He had a question that is probably on the minds of many Membership Lot owners: “Is there any hope for me?”

LHCC President Wayne Poyer didn’t offer any promises and didn’t offer a lot of hope, but what he did offer came down to Rule 20, Aqua Virginia’s line extension policy. If, as Wayne Poyer described, Rule 20 is the source of salvation for Membership Lot owners, we thought it would be enlightening to review some of the history of LHCC’s treatment of Membership Lot owners and how this rule took shape.

There are a few facts that are important to understand utilities at Lake Holiday: the role of the SCC and the relationship between LHCC and LHEUC. Utilities in Virginia are regulated by the SCC, and utilities have tariffs approved by that Commission. These tariffs include both rates and rules, such as line extension policies. The SCC issues a certificate of public convenience and necessity to a utility. This certificate covers a specified area (often called the certificated area) and carries with it the obligation to serve all potential customers in that service area, subject to the line extension policy in the tariff. For LHEUC (and now for Aqua Virginia), that is the entire Lake Holiday community. LHCC owned 100% of the stock of the utility LHEUC. Under its Articles of Incorporation, LHCC was formed “to promote the…welfare of the members….” Logically, LHCC would be required to operate LHEUC to promote the welfare of members, which includes Membership Lot owners.

Some Lake Holiday critics of a utility’s contribution to a line extension make 2 false claims: that line extension credits (e. g., the old Rule 16 and now Rule 20 credits) would result in a “run on the bank,” and that the cost of the line extension work would raise utility rates. These critics exploit a lack of understanding of accounting and utility regulation to create fear of draining capital out of the Utility and higher rates. The truth is exactly the opposite of what line extension critics claim.

Line extensions provide utilities with new capital and they serve to help lower utility rates for existing homeowners. The Rule 16 credit was capped at an amount less than $3,000 per lot, and it is provided as a credit against the tap fee paid by the owner making the extension. Taps fees typically far exceed the amount of a line extension credit because the tap fee is intended to return capital to the utility for the investment required to build the system to which a new owner connects. In 2006, the tap fee was $8,868 and the Rule 16 credit was $2,861. Thus, every new line extension in 2006 would provide the utility with over $6,000 of fresh capital, less its cost to install the meter and finalize the connection.

In accounting terms, tap fee payments that come with line extensions are accounted for as a return of capital. For LHEUC, the return of capital would have boosted its interest income or helped lower its borrowing costs. With lower net expenses, LHEUC would have needed lower rates to operate. For Aqua Virginia, whose rates are set on a rate of return basis, the return of capital from a tap fee accompanying a line extension serves to lower Aqua Virginia’s investment. With a lower investment, the maximum profit that Aqua Virginia can earn is lower, and it is spread over 1 more rate-paying customer. These forces combine to lower homeowner utility rates, all other things being equal.

Up until the end of 2006, LHEUC’s line extension policy was embodied in Rule 16 of its tariff. Despite the fact that Rule 16 had been in effect for many years, it had been largely hidden from Membership Lot owners. Dave Ingegneri, the former GM of Lake Holiday, testified in a deposition that Chris Allison:

felt it was in the community’s best interest to not publicly announce Rule 16, but certainly, if somebody would request the information we would release it and certainly, Rule 16 is a public document, so if anybody really wanted to find the information they could.

In other words, the burden was on Membership Lot owners to discover Rule 16 completely on their own. But Chris Allison wanted to make that burden even harder. According to Dave Ingegneri, Chris Allison authored a document entitled Membership Lots and Water and Sewer Lots that was included in a number of disclosure packages to prospective buyers. The document falsely claimed that “LHEUC, the utility company, is not empowered by the SCC (VA State Utility Regulating Agency) to expand the current water and sewer infrastructure.” The truth is the exact opposite. LHEUC (and now Aqua VA) was obligated to extend the utility infrastructure in its certificated area, subject to its tariff.

Chris Allison is not the only LHCC leader that has acted against the interests of Membership Lot owners. Frank Heisey made false promises to Membership Lot owners and repeatedly failed to mention LHEUC’s Rule 16 obligations. In the February 2004 President’s Report, Frank Heisey wrote:

LHCC is responsible for expansion of the water and sewer system.

In January 2002, Frank Heisey replied to an email from a concerned Membership Lot owner. He wrote:

The issue with the future of membership lots is an issue of when and where we should extend water and sewer lines. We do not have the capital reserve to do this now based on all of the other issues facing us with the infrastructure….

Note that Frank Heisey was writing as the President of LHCC, and that he wrote “…when and where we should extend…” rather than “…if we should extend….” He wrote that LHCC didn’t have the money “now” rather than “we will never do that.” Tellingly, he didn’t breathe a word about LHEUC’s obligations under Rule 16, something that would have benefited this particular Membership Lot owner. Membership Lot owners were not seeking out Rule 16 precisely because the President of LHCC was telling them that LHCC was responsible for expansion and that LHCC would resolve the “when and where [it] should extend” once its finances improved.

As we previously discussed, in the 3 year period from 2004-2006, Membership Lot owners contributed about $1.4 million to LHCC. Much of this money was contributed because of representations from leaders like Frank Heisey.

But in a 2006 deposition, Frank Heisey discussed extending utilities to Membership Lots: “We had no plans for doing that.” Would Membership Lot owners have paid $1.4 million to LHCC if he had said “we have no plan and no obligation?” Did Frank Heisey make those representations because the money paid by Membership Lot owners was almost exclusively used for pay for benefits to homeowners like himself? To the best of our knowledge, not a single Membership Lot owner has ever made and completed a Rule 16 line extension request over more than 30 years. At least 1 of these owners so desperate for utility service would have pulled this off if LHCC had not concealed Rule 16 from them.

Former LHCC President Chris Allison described just what Rule 16 could mean to a Membership Lot owner in 2006. For a Membership Lot owner just 1 lot away from the end of the utility line, Rule 16 would mean that the Membership Lot owner was “probably not going to have to pay very much….” But to benefit from Rule 16, Membership Lot owners needed honest information about LHCC’s plans and LHEUC’s obligations. They never got it.

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Our references to representations from LHCC about its obligation to extend utilities are not isolated. In 2003, Frank Heisey wrote LHEUC President Jack Fastnaught and the entire LHEUC board that he had legal advice that “LHCC is responsible for new lines….” In 2004 LHCC President Heisey and LHEUC President Chuck Brewer jointly wrote to every property owner that “We must expand the water and sewer system to meet the on-going growth and development in our community.” Discussions in public meetings often went far beyond broad-brush, general statements. At a May 2005 joint LHCC Board and Master Planning Task Force meeting, engineers from Patton Harris Rust Associates (PHRA) presented a project to extend utilities to 70 lots in Section 8A near Dogwood Drive and Mill Court. The project had a specific per lot cost estimate of $13,000, and the LHCC Board approved a motion to “facilitate the Dogwood Project.” Today, those lots sit just as they did in 2005 – without utilities.

By the end of that same year, prospects for Membership Lot owners would take a bad turn. In September 2005, we filed a lawsuit against both LHCC and LHEUC that focused attention on the line extension issue. A little more than a month later, LHCC signed contracts to sell LHEUC’s assets to Aqua Virginia. The deal was never put to a member vote. When Lake Holiday was under a court-ordered building moratorium and the Circuit Court was overseeing LHEUC’s affairs, then LHCC President Frank Heisey wrote to members that “selling of the utility company would require a 2/3 majority vote of the eligible membership. This in itself would not be a quick or easy process, nor should it.” The sales contract with Aqua Virginia was hurriedly signed on the eve of LHCC’s 2005 annual election of directors, after which Heisey would no longer be on the board. One representation to members while the Circuit Court was involved; an opposite action when that oversight was gone.

Despite the fact that LHCC already had a deal in place to get out of the utility business, about 2 weeks after signing that deal, its subsidiary LHEUC filed a rate and rule change request in which it attempted to remove any obligation to extend utilities to Membership Lots. Why was LHCC rushing to eliminate the Rule 16 obligation when it would soon be out of the utility business? Were its directors concerned that line extension issues were now part of a lawsuit, and LHEUC’s Rule 16 line extension obligation would now come to light?

Had LHCC bothered to make one, a quick check with the SCC would have revealed that a utility is obligated to serve new customers in the service area covered by its certificate. When asked in a deposition about the SCC’s response to LHEUC’s effort to eliminate Rule 16, Dave Ingegneri testified that “it [the SCC] would in no way approve that, those tariff sheets without Rule 16.” Whose idea was it to eliminate Rule 16? According to Ingegneri: “Chris Allison’s.” Ingegneri went on to describe where LHEUC’s own board had problems with the proposed tariff changes, but Chris Allison went to a Utility board meeting to offer a dictate:

the outcome or the, the [sic] dictate was, if you guys [the LHEUC board] don’t approve it the Association board will.

We collected and filed with the SCC over 450 complaints to fight LHEUC’s effort to increase rates and eliminate its line extension obligations. In just 3 weeks, the SCC ruled that LHEUC’s changes were “defective and should be given no effect.” LHCC had concealed the existence of Rule 16 from Membership Lot owners for years. When it attempted to eliminate any obligation to extend utility lines, it didn’t even bother to provide notice of its plan to these same owners. Instead, LHEUC apparently hid behind the notion that no notice of utility rule changes needed to be sent to Membership Lot owners since they were not Utility customers at the time. All of this is old news to our regular blog readers. We’ve written about LHCC’s shabby treatment of Membership Lot owners during the tariff change effort, and the SCC’s initial rejection of LHEUC’s rate and rule change. LHCC made 2 efforts to undo the SCC’s initial ruling, but the Commission let its ruling stand.

In February 2006, at the same time that the SCC was reviewing LHEUC’s rate and rule change request, LHCC, LHEUC, and Aqua filed a Joint Petition with the SCC to sell LHEUC’s assets to Aqua. It took the parties about 3 1/2 months from signing the contract to file their petition with the SCC. That petition contained a new line extension policy, or the proposed Rule 20. This new proposal was materially different from the previous tariff. Under Rule 16, LHEUC contributed 3 1/2 times the estimated annual utility revenue per Membership Lot, or about $2861. Under the proposed Rule 20, that contribution would drop all the way to $0.

In March of that year, we joined the utility transfer case (PUE-2006-00013) as a Respondent in that proceeding. We were the only Respondent to join the proceeding. Many Membership Lot owners purchased their lots 30 years ago, expecting to have a second home at Lake Holiday. Most own 1 lot that is of little value. With the passage of time and the high cost involved to understand the facts and participate in a utility transfer case against one of the largest water utilities in the entire country, most have given up. Some twist the fact that we were the sole respondent into a characterization of us as trying to block the utility sale. The truth is that we urged the SCC to not approve the transfer as it was proposed, which is lawyer-speak for saying we wanted certain provisions of the original deal changed. That is exactly what happened. After our testimony, the original line extension deal was changed dramatically.

In June, we filed testimony, largely complaining about the line extension policy that LHCC and Aqua proposed. We encouraged adoption of a line extension policy where Aqua Virginia would contribute 3 1/2 times estimated annual utility revenue to the cost of line extensions. We argued simply for continuing the in-force Rule 16, a requirement for the utility to make an investment in line extensions that had been in place for more than 30 years. In July LHCC and LHEUC responded. Chis Allison on behalf of LHCC and Mark Kropilak on behalf of Aqua filed 30 pages of testimony to argue against our proposal. To the question of Aqua’s willingness to contribute 3 1/2 times revenue, Kropilak had an answer: “No.” Chris Allison was spending legal dollars to reduce Aqua Virginia’s contribution to line extensions. Why? Since Aqua Virginia is unrelated to Chris Allison, why was he spending LHCC’s money in this manner?

By August, the SCC staff had reviewed our testimony and LHCC’s rebuttal, and SCC staff members filed their own testimony on the line extension issue that we raised.

Here’s what the SCC had to say:

The proposed main extension rule also forms the main argument, or at least one that squarely falls within the jurisdiction of this Commission, by the Respondent [Ogunquit] in this proceeding.

All water and wastewater utilities currently contribute three and half times the annual revenue per customer to the cost of a main extension.

Staff is concerned that Aqua’s rule differs radically from all other water and wastewater utilities regulated by the Commission.

LHCC, its subsidiary LHEUC, and Aqua Virginia proposed a line extension policy that “differs radically” from the policy for “all other” water utilities regulated by the SCC. The policy proposed was different from just about every other water/wastewater utility in the entire state of Virginia. That’s the policy that LHCC put forward to the SCC to serve Membership Lot owners, whose interests LHCC was allegedly serving. We, quite reasonably, opposed that policy.

Less than a month later, Aqua Virginia filed new testimony, adopting the position that both we and the SCC recommended. Aqua wrote:

We have now moved to a position, consistent with the Staff testimony, for Aqua Lake Holiday (under the general provisions of its main extension rule) to invest in the applicant’s main extension in the amount of 3 1/2 times the estimated annual revenues anticipated to be generated by the home to be constructed on the applicant’s lot. In addition, regarding the payments for intervening lot connections, the payment of these refunds will be extended to ten years from the original five years that was proposed. These changes will cause an increase in the investment needed from Aqua.

We appreciated the opportunity to present our ideas in a public forum and play a role in persuading Aqua Virginia to improve its line extension policy. The changes for which we argued applied not just to us, but to all Membership Lot owners equally. The SCC and its staff played a central role in making Aqua Virginia’s line extension policy more typical of the policies in place for other utilities. What’s clear is that, despite its obligation to promote the welfare of Membership Lot owners, LHCC played no role in improving the line extension policy. Instead, LHCC spent Membership Lot owners’ own money to come up with a bad plan and then paid lawyers to block our efforts to improve it.

Even with all of our references to testimony, the resolution of the line extension issue was very swift. Most testimony in the case was filed in electronic form with follow-up paper copies. Once Aqua Virginia agreed to make its line extension policy more like every other water/wastewater utility in Virginia, we supported these changes, and our further participation was limited to expressing this support. We did not contest any element of the SCC staff testimony, and we did not even appear at the hearing in Richmond. If we were seeking to block the utility sale, we would have done both things.

It took just a couple of days to reach an agreement to stipulate into the record our pre-filed testimony, and we were “excused from participation…,” all of which is discussed in the SCC’s November 2006 order granting the transfer. LHCC’s directors have managed to spin our successful but limited involvement in the transfer case into the false notion that we fought hard to block the transfer itself and lost. Wayne Poyer repeats this worn-out lie in the April 2008 President’s Report, where he describes our involvement in the transfer case as “legal obstacles thrown up (unsuccessfully) by a Member of the Association.” The sale of LHEUC’s assets was not approved by the SCC on the terms proposed by LHCC; it was approved on terms very similar to the terms that we recommended. Wayne Poyer needs to recheck his definition of “unsuccessful.”

In the fall of 2006, the Utility sale was moving toward closing by the end of the year. But Chris Allison remained as unsympathetic to the plight of Membership Lot owners as ever. After working to conceal the Rule 16 obligation, Chris Allison responded via certified mail to a Rule 16 extension request from an owner in Section 6A. A summary of his response: LHEUC will contribute its required $2,861.46. You just need to send in your check for $1,499,713.59. The property owner in Section 6A had been waiting years for utilities, perhaps over 30 years, and probably only recently learned of LHEUC’s obligations under Rule 16. For Chris Allison, who worked to conceal and remove those Rule 16 obligations, to waste the postage to send a letter requesting a deposit check for nearly $1.5 million is far beyond mean-spirited. It’s petty and callous.

Under Chris Allison’s leadership, LHCC wasted thousands of dollars fighting our recommendations before the SCC. Chris Allison discussed just how much money LHCC spent at a board meeting in March 2007. In our video Allison Attacks Masters, Chris Allison said that LHCC spent $200,000 on the SCC proceeding, and that one half of that – or $100,000 – was to fight our recommendations. He claimed that our recommendations amounted to “only 2 lines” in the final SCC ruling. In a final stab at Membership Lot owners, Chris Allison wasted $100,000 fighting to make Aqua Virginia’s line extension policy unlike every other water/wastewater utility in the state. Unsurprisingly, he lost. Instead of recognizing his error of fighting black letter law, he tried to make us the scapegoat by suggesting that our actions triggered legal spending.

The following table summarizes LHEUC’s old Rule 16, the proposed Rule 20, and the Rule 20 actually adopted by the SCC:

Proposed & Adopted Rule 20 vs Old Rule 16
# Feature Old Rule 16 Proposed Rule 20 Adopted Rule 20
#1 Credit to original applicant 3.5 X avg annual utility revenue $0 3.5 X avg annual utility revenue
#2 Future credit for intervening lots that connect later 3.5 X avg annual utility revenue $1,000 $2,000
#3 Expiration of credit for intervening lots 10 years 5 years 10 years

In the summer of 2007, LHCC made a hasty, ill-conceived effort to amend the deeds of dedication in 4 sections where most Membership Lots are located. That effort, called the Utility Extension Program (UEP) was a big flop. At the February 2008 Round Table Wayne Poyer told the concerned Membership Lot owner that:

the best minds in this community contributed to that and in fact authored it.

Really? We’re one of the largest owners of Membership Lots, and we were never contacted about helping to develop a utility extension plan. We’ve spoken to hundreds of other Membership Lot owners, and none of them were contacted either. It’s not credible that “the best minds in this community contributed” when most Membership Lot owners were never even contacted. In fact, the plan was crafted by LHCC’s Development Executive Committee (or DEC, discussed in our video Only 3 For The DEC, which at the time (and still, as of this writing) included no Membership Lot owners. It did, however, include Chris Allison.

During the debate over the UEP kickoff, Wayne Poyer said Membership Lots had “virtually no value” (predictably in our video clip Virtually No Value). LHCC concealed the existence of LHEUC’s Rule 16 from Membership Lot owners for years; it went so far as to deny its obligations. It tried to eliminate those obligations under that rule without sending any notice to these owners. When it came time to sell the Utility’s assets, LHCC jointly proposed a new line extension policy that required Aqua to make no contribution to the cost of line extensions, and then blocked our efforts to secure a larger contribution from Aqua. Five of LHCC’s current directors (Wayne Poyer, Dave Buermeyer, John Martel, Noel O’Brien, and Pat Shields) were on the board in 2006 that fought to block what became Rule 20. In fact, for all the importance Wayne Poyer now attaches to Rule 20, there’s no link to it anywhere on LHCC’s official website.

On February 23rd, Wayne Poyer described the plight of Membership Lot owners as a “sorry situation” and for the Section 6A owner on the video, he had a harsher outlook: “tough.” It’s time for LHCC to own up to its deplorable behavior of thoroughly obstructing Membership Lot owners’ efforts to get utilities.

LHCC’s directors have spent a lot of time and money to insure Membership Lots have “virtually no value.” They have drained hundreds of thousands of dollars from LHCC. Yet the hope for Membership Lot owners, according to Wayne Poyer, is in the Rule 20 protections that LHCC obstructed at every turn.

It’s time for Membership Lot owners to ask themselves a hard question: have LHCC’s directors lived up to their responsibilities to serve the interests of those property owners? The answer can be found in another question with a simple, objective answer: Does my lot, after more than 30 years, have utilities yet?

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We Probably Will Not Meet That

Back in April of 2007, we wrote about the contingent payments that LHCC might receive from Aqua Virginia. These payments made it on to LHCC’s 2006 financial statements, audited by Kositzka Wicks & Co of Alexandria. They made it on in a big way – in the amount of $794,213. In our April post, Dear Mike Kilmer, we criticized allowing contingent gains that might never be received to be recorded on financial statements. We expressed the view that recording contingent gains was inconsistent with the accounting principle of conservatism and inconsistent with FAS No. 5. Despite this criticism, the only response we received was from Mike Kilmer, which was really no response at all. Through LHCC’s 11/30/07 Balance Sheet, the most recent one we have available as of this writing, the contingent gain remains on the books.

We quote from Kositzka Wicks’ 2006 audit letter:

…we conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made the Association…

2007 is now in the history books, and we don’t think any check is coming from Aqua Virginia for 2007’s contingent payment. Let’s forget what actually took place and consider only the reasonableness of the estimates provided by LHCC.

In our earlier post, we provided a variety of readily available data to show that no reasonable estimate would predict the contingent payments would be received for the next several years. In fact, Aqua Virginia’s publicly available SCC filings from February 2007 show that their accounting entries do not record these contingent payments on their financial statements. If Aqua Virginia’s auditors believed there was a reasonable expectation that these contingent payments would be made, wouldn’t they be recorded on Aqua Virginia’s books?

Did LHCC give its auditors complete and accurate information?

In February, Wayne Poyer told the auditors in his management representation letter:

There are no estimates that may be subject to a material change in the near term that have not been properly disclosed in the financial statements. We understand that near term means the period within one year of the date of the financial statements.

Then, in July Lake Holiday homeowner Bill Masters raised the issue of collecting the contingent payments at a public meeting. Wayne Poyer openly told members:

Mr. Masters criticizes the $76,000 which Aqua America will return to the association, assuming we meet a certain number of hookups. And he’s right about that, that’s part of the contract. He’s also right that during this terrible market downturn we’ve got, we probably won’t meet that.

Here’s an actual audio recording of Wayne Poyer’s remarks:

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We. Probably. Won’t. Meet. That.

Evidently, Wayne Poyer convinced the auditors on February 26th that the Aqua Virginia contingent payments would be received. Then he flip-flopped when speaking to members – a little more than 4 months after his representation to the auditors. That seems to fall within the near term time frame, and not getting the money seems to be material.

Maybe not collecting the early year payments that make up the $794,213 is not a “material change” to Wayne Poyer.

Unfortunately, LHCC’s representations to its auditors also raise other questions. Wayne Poyer informed the auditors that “…as of February 26, 2007…there are no liens or encumbrances on such assets nor has any asset been pledged.” Really? Does the $750,000 Wachovia note executed on February 2, 2007 count? Does the deed of trust pledging LHCC real estate count? Those documents are part of the balloon note that Wayne Poyer and John Martel signed to refurbish the clubhouse. Both the loan documents pledging assets and the letter to auditors claiming there were no assets pledged were signed by the same person – Wayne Poyer.

These are simple and straightforward representations to LHCC’s own auditors. Why aren’t they accurate?

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Twenty Certified Letters Later…

…can the President of LHCC just pick up the phone, call a homeowner, and say “Oops, we goofed. We’re truly sorry”? Apparently not.

That answer was hidden away in a tab of LHCC’s board book called “For Your Interest.” LHCC directors now bury letters and emails from property owners to the board in this tab instead of reading and discussing them during the open meeting. That’s one way of blocking criticism from making its way to video and onto the internet.

Fortunately for Lake Holiday property owners, this “don’t discuss criticism” technique flopped at the December 27th board meeting.

The first example of this involves homeowner Robert Middleton, whose property was hit with a lien of $1800 for alleged violations of Lake Holiday’s sign prohibitions. A hit of $1800 – ouch! As the board discussed in our Compliance Reporting video (it’s in our video gallery on our Videos page), if Middleton violated any sign prohibition, he didn’t do it on his own property. In that video, GM Ray Sohl said that the signs should have simply been taken down instead of placing liens on Middleton’s property. It’s possible that Middleton himself watched the video and used it to support an argument that the liens should be removed, which is something that the board did not acknowledge at the November meeting. At the December 27th board meeting, shown in the following video, the board finally decided that Middleton is “no longer liable for $1800.” It’s good that LHCC reversed course on this issue.

The board discussed how to communicate this good news to Middleton, who apparently refused to accept several recently-mailed certified letters from LHCC. Ray Sohl described that LHCC has sent 20 certified letters to Middleton over this alleged violation, which apparently turned out to be no violation at all. Perhaps Middleton grew tired of seeing his own money spent to send him certified letters to communicate the message “We are 100% right, you are 100% wrong, so we’ve put an additional lien on your property.” An unsurprising outcome.

Some directors were reluctant to communicate with Middleton directly. In the video the best option developed by LHCC President Wayne Poyer was to put a message in a plain, unmarked envelope addressed by hand. That only seems strange to someone who does not understand that the board prefers to sneak their good news to Middleton to avoid having to acknowledge their error. Director Pat Shields even recommended no further effort to reach out to Middleton, ignoring that LHCC decided to remove the lien. Shields tried to focus attention on Middleton as the culprit, rather than LHCC itself: “He’s played the rules since this whole thing started.”

We have a simple suggestion for LHCC: have a senior official pick up the phone and call the man. Try starting the conversation off with: “Ooops, we goofed. We’ve removed the liens. We’re truly sorry.” Stop trying to shift the focus to Middleton’s alleged wrongdoing and away from the fact that LHCC improperly filed liens. We’re sure a straightforward, sincere apology will go a long way toward addressing any bad feelings Middleton may have.

Ray Sohl supported further efforts to reach out to Middleton for a good reason:

…you want to encourage participation of all members. The more participation you have, the more responsible community you have.

The secretive “For Your Interest” tab also revealed the second example of the unwillingness of LHCC’s leaders to admit a mistake. In our post It’s Not Our Problem Anymore we criticized LHCC’s efforts to wash its hands of helping property owners deal with utility problems. Apparently, LHCC has reversed course on this issue. LHCC Secretary Ken Murphy, a former LHEUC board member, has initiated efforts to communicate with Aqua Virginia and the SCC about utility complaints from Lake Holiday homeowners. Judging from the discussion in the video, complaints continue to roll in. We don’t see entirely smooth sailing, based on Murphy’s comment that he has “yet to identify the person at Aqua who will listen to me.” A little more than 1 year ago, LHCC closed on the sale of LHEUC’s assets for more than $1 million, and Aqua Virginia continues to serve Lake Holiday. Given those facts, one would hope that the board identified some responsible people at Aqua Virginia who would listen. One would also hope the board kept the contact information of those people. Nevertheless, we applaud this long-overdue correction.

Burying these 2 fixes in a section of the board book that is not intended for open discussion shows just how hard it is for LHCC’s leaders to admit they made a mistake. When faced with having to admit its error in putting a lien on Middleton’s property, the board preferred to communicate via cold and impersonal certified letters rather than a simpler and cheaper phone call. The personal phone call is both simpler and more appropriate in this situation.

Lake Holiday property owners are justifiably concerned about utility problems, and the board has tried to distance themselves from these concerns. If the board abandoned that effort and plans to play an active role in resolving these problems, that’s a good thing. The proper response to both our post and the complaints raised by others would have been to publicly acknowledge the mistake and openly commit to a new course.

Stubbornly refusing to admit a mistake sends an “I’m unreasonable” message to the world.

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2007 Year In Review

Update: In response to feedback, we’ve adjusted the audio track and added a break of a few seconds about halfway through the video.

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It’s Not Our Problem Anymore

Frustrated by utility problems and LHCC’s changing tune on its responsibility to resolve them? That’s no surprise in light of some recent comments by board members. After cashing the check from the utility sale, without notice or explanation LHCC’s directors seem to have withdrawn their commitment to support homeowners having problems with utility service.

On May 20, 2006 LHCC held a meeting at the Reynolds Store Fire House to try to sell property owners on approving new governing documents. Then LHCC President Chris Allison and current President Wayne Poyer were in attendance, along with then GM Dave Ingegneri.

Utility issues were raised by a number of owners at that meeting. LHCC and Aqua Virginia filed their petition to sell LHEUC’s assets to Aqua Virginia just 3 months before, and owners were concerned about the consequences of selling the Utility. Before the sale was approved by the SCC, Aqua Virginia was operating LHEUC for LHCC, so property owners got a glimpse into how Aqua would behave as the new utility owner.

Homeowner Duran Field described a problem he had with a lift station near his home. He told Chris Allison that after an initial response from Aqua Virginia, he called 7 more times and never received a single return call. He ultimately had to ask GM Dave Ingegneri to intervene to get the problem resolved.

Field, whose voice is heard first on the audio clip, summarized his experience:

I’m not saying that the long term consequences of selling to Aqua are good or bad. Short term, I’m not that impressed.

Field justifiably wondered about the impact a loss of control would have on utility customer service. At the end of the clip, then LHCC President Chris Allison soothed Field’s concern:

You’ll still call Dave Ingegneri. You will still call Dave Ingegneri. Those people are going to have to be responsive to us.

The meaning of Chris Allison’s comment is crystal clear, especially since he repeated it twice. Even after the utility sale, the Lake Holiday GM, who reports to the board, will be the point of contact for utility issues; the sale would not result in a loss of control because the Lake Holiday GM, paid by property owners, would insure that “those people” (i. e., Aqua Virginia) would be responsive.

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Field and everyone else in the room could be comforted by Chris Allison’s tough talk. Or could they?

Fast forward to November, 2007. Much had changed. By this point, LHCC had closed its sale of LHEUC’s assets to Aqua Virginia. It had deposited the proceeds of $1.16 million in its bank account, and it was well on its way to spending most or all of that money. Dave Ingegneri resigned as GM in June of 2006. Ray Sohl took his place that October. Chris Allison was no longer President, having been replaced by Wayne Poyer, who as an LHCC director listened to Chris Allison’s May 2006 comments without objection.

But one thing had not changed: utility troubles were still a top concern for property owners in late 2007.

The video clip is part of a discussion of John Martel’s proposal to hold board workshops from the November 26th board meeting. Board member Jo-anne Barnard, formerly of the US Patent Office, described her thoughts on Martel’s proposal. During her remarks, she pointed out that the information section of the board book included “a lot of complaints about the water company.” That water company is now Aqua Virginia.

Did Wayne Poyer tell Jo-anne Barnard that complaining utility customers should call Ray Sohl at 540-888-3549 x 104 or email him at gm@lakeholidaycc.org?

Of course not. The check cleared. The representations that LHCC board members made to owners before the sale was approved to discourage objections to the transfer were now meaningless. Those representations have been long since forgotten. Owners that remember these commitments made by board members aren’t sticking to the board’s positive agenda.

So what exactly did Wayne Poyer tell Barnard? He said “it’s not our problem anymore.”

Jo-anne Barnard made no attempt to correct Wayne Poyer or recommend a different approach to addressing utility problems. The complaints mentioned by Barnard are now filed away in a tab of board members’ board books, but they are no longer automatically part of the open discussion at board meetings. Why not conceal the complaints when revealing them would only risk greater exposure of the broken promise?

LHCC board members have consistently told property owners one story to overcome objections and manufactured a different, opposite story later. Another example of this behavior occurred in the Utility sale itself. In the August 2000 President’s Report Frank Heisey wrote to property owners that “selling of the utility company would require a 2/3 majority vote of the eligible membership….” Then, when we challenged the Utility sale in court unless it was approved by property owners, Frank Heisey and LHCC filed a response with the court that said that they “deny that the sale requires a vote of the members….” No requirements changed, and no mention was made in court of the discarded earlier statement of what was required.

This conduct is not some recent discovery. We’ve covered this before in our post Deliberate Behind the Scenes Manipulation of Information, the title of which is a direct quote from former LHCC President and current director Pat Shields. Why is this pattern of behavior repeated year after year? Lake Holiday property owners don’t hold their leaders accountable for the flip-flopping.

Changing commitments and concealing complaints to deny a problem. That is the problem of LHCC’s leaders.

The problem won’t go away until owners wake up to the flip-flopping, publicly acknowledge it goes on, and take control of their community away from double-talkers.

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No Timeline + No Quoted Price = No Real Plan!

We’ll soon be asked to amend our deeds and approve LHCC’s Utility Extension Program (UEP). We believe the UEP as proposed is not a legitimate method to extend utilities and should be rejected. We encourage everyone to vote NO on these deed changes. We’ve prepared some questions for the LHCC Board about the UEP and some additional facts to evaluate any response. We believe that most people who take a hard look at this program will come to the same conclusion we have: it’s just a bad idea.

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Dear Mike Kilmer

Mike:

We’d like you to double-check LHCC’s accounting treatment of the contingent funds which might be received from Aqua Virginia relating to the sale of the Utility. Your name came up in LHCC Treasurer John Martel’s explanation to the board of directors regarding certain accounting entries. He explained that an accountant required that these contingent monies be discounted to reflect their value in today’s dollars, or their present value. In simple terms, he said the discount was required because an accountant “cannot let that ride.”

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