How Bill Masters Saved Lake Holiday $120,000

At the April board meeting, LHCC directors discussed a serious problem: they pledged the clubhouse (LHCC common area) as collateral for a loan from Wachovia without first obtaining owner consent. Several board members referred to this as a breach of their fiduciary duty, since common area can’t be mortgaged without first obtaining more than two-thirds consent of Lake Holiday’s owners and that consent was never obtained. GM Ray Sohl introduced the solution to this problem: “the board of directors has expressed an interest in re-collateralizing the existing clubhouse loan.”

The board’s solution: ask owners to retroactively approve mortgaging common area, and if approval were not obtained, to refinance the Wachovia loan at a great expense. Doing so would require paying about $18,000 in refinancing costs, paying approximately $20,000 more in annual debt service over 5 years, pledging 91 LHCC-owned lots, and allowing Wachovia to put a bank hold on $150,000 to $200,000 of LHCC’s cash. Add that up and you get a cash savings of $120,000.

That initial discussion of the problem was lengthy. Our nine video clips cover over an hour and ten minutes in Clubhouse Loan Pts 1-9:

By July, preparations were underway to put the re-financing to an owner vote. LHCC announced the upcoming vote on July 21st. At the July 28th board meeting VP Dave Buermeyer, guided by Wayne Poyer, proposed the specific language to describe the issue to owners. Right away he met with resistance from 2 board members, John Martel and Jo-anne Barnard. Martel claimed that the language gave the refinancing proposal an “air of legitimacy that it probably never really achieved.” Then, Martel did an abrupt about-face and retreated from that position when Poyer seemed to be bothered by his remark. Jo-anne Barnard called the referendum “meaningless” because despite the high cost, the board had already decided to do the refinancing even if owners didn’t approve it. Nevertheless, every other director was satisfied with the decision to proceed with the refinancing. Many felt no further discussion was necessary.

Barnard and Martel felt the significant cost of the refinancing did merit further discussion. Barnard corrected the cost estimate served up by Poyer and Buermeyer. She observed:

It doesn’t cost $20,000. It costs $20,000 and $18,000 in the near term every year at the same time that we have to do the dam.

Here’s the July discussion in clips Oct 08 Referenda Pts 1-5:

So what’s the biggest problem in refinancing the clubhouse balloon note to fix pledging the clubhouse without first obtaining owner approval? The clubhouse isn’t even pledged as collateral on that note. Either Poyer and Buermeyer weren’t being candid about their reasons for proposing the refinancing or they never even bothered to check the documents. If they had taken just a moment to read the collateral exhibit, they would have seen that it clearly contains a description of real estate that is not the clubhouse.

A cautionary word to the non-lawyers that try to comprehend an important legal document like the loan collateral exhibit: it’s a whopping 2 pages, and the description of the property used as collateral involves potentially hard-to-understand legal terms, such as “231 Redland Road.” Proceed carefully!

After watching the video of the July meeting, property owner Bill Masters did bother to check the documents, and the exhibit showing the collateral for the loan very clearly listed the collateral as 231 Redland Road, the location of Lake Holiday’s management office. Masters contacted GM Ray Sohl, and directors Barnard and Martel to understand how they missed this.

Sohl initially disputed Masters’ assessment and insisted the clubhouse was used as loan collateral. Masters had to show Sohl that the loan for which the clubhouse had been used as collateral was paid off and closed months ago. Keep in mind that Masters was making his argument to Sohl and several board members using documents he originally obtained from the Lake Holiday office in the first place.

Barnard and Martel were surprised by his claim but promised to investigate. To further support his contention, Masters supplied loan documents to Barnard and Martel and Frederick County tax maps, one of which appears nearby. In a few days, Sohl, Barnard, and Martel came to the same conclusion that Masters had: the clubhouse wasn’t pledged on the loan in the first place, so there’s no reason to spend all that money on the expensive refinancing supported by Poyer and Buermeyer.

The cash savings, as Barnard herself pointed out at the board meeting, is about $120,000 over 5 years. When Masters discussed with Barnard the significant cash savings, Barnard disputed her own number. Evidently, dollars that Masters saves don’t count as much as dollars that the board very nearly wasted. Beyond the cash savings, Lake Holiday retains clear title to its 91 lots and has unrestricted use of the $200,000 that it would have had to pledge to do the refinancing. Masters managed to accomplish all of this while holding down a full time job and not serving on the board.

Barnard’s attempt to discount the savings is just evidence of the board’s spin machine revving up. More evidence of that is Sohl’s email to Masters, thanking him for catching the “error,” but pointing the finger at Wachovia for not securing the loan with the right collateral. Maybe Wachovia’s Mike Wilkerson has a different opinion of who owns the “error.”

Much can be learned from this episode to improve Lake Holiday. LHCC directors voted to spend over $120,000 of the organization’s cash based on the erroneous belief that the clubhouse was pledged as collateral, a belief that reading the loan documents would have quickly corrected. While Barnard and Martel were against spending money on refinancing, at a minimum they and every other director are guilty of approving a significant expenditure without bothering to read the underlying documents. That’s wrong. If any director did read the collateral documents and recommended the refinancing based on a claim that he knew to be false, that would be far more troubling.

When Masters first called Ray Sohl, he encountered far too much resistance. Sohl spent too much time defending the position that the clubhouse was pledged as collateral, perhaps because the board had already invested so much time to approve the refinancing. If the clubhouse were not pledged, it would make all the resources devoted to the refinancing an embarrassing waste. Fortunately, Masters took the time to make the phone calls and send the emails to overcome Sohl’s resistance. Masters was in an exceptional position because he had previously requested the relevant documents and closely followed the board videos, two things for which he is often unjustly criticized. But it shouldn’t be that hard for owners to get the management office to reach an obvious conclusion. While this went from start to finish in about 3 days, that was too long because the loan collateral exhibit was so clear and unambiguous. The initial response involved too much defensive posturing. If Masters had not persisted after receiving Sohl’s initial response, the savings may have been lost.

Fortunately, Masters saved $120,000 of Lake Holiday’s cash. What the community learns from this affair may be even more valuable.

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This Has To Stop

Whatever one may think of John Martel, he consistently manages to come up with great one-liners. Mind you, they’re not going to be heard on the big movie screen anytime soon. They’re just pithy observations on the problems at Lake Holiday. We took the title of this post from his remarks on the issue of ordering tote bags for new owners for the Welcoming Committee.

Too many bags were ordered at a price double what they should have cost because the wrong person ordered the bags.

Wayne Poyer described the mix-up:

A batch of bags was ordered which, based on the rate of people coming into the community, it’s going to last about 40 years.

As Martel said: “this has to stop, this has to stop.” We’ll go out on a limb and guess that the Welcoming Committee only welcomes new homeowners and not new membership lot owners with one of the too many totes ordered at an exorbitant cost.

The budget review was made a little more difficult when it was discovered that one of Mike Kilmer’s staff incorrectly coded an expense item as an income item. Robin Pedlar thought Kilmer’s firm was “overpaid.” According to Martel, the distribution of work between the LHCC office and Kilmer’s firm has created problems. His view:

It’s hard to sort out who’s doing what to whom.

Kilmer’s firm is paid $4250 per month (an annual rate of over $50,000), and the board was reviewing other cutbacks to balance the budget at the May 15th budget meeting. Despite that, Pat Shields didn’t think that meeting was the appropriate time to address the value of Kilmer’s services.

In the video of overpaying for too many tote bags, Robin Pedlar worried:

If this is indicative of how phony all the numbers could be, it scares me.

She was not alone in her concern about sloppy accounting. Wayne Poyer asked somewhat rhetorically:

How bad is our accounting?

Let’s look at one area, the relationship between delinquencies and receivables. In our videos 2008 1Q Delinquencies and How Bad Is Our Accounting, Treasurer John Martel gave the numbers on delinquencies: 114 homes (including trash assessments), 70 water/sewer lots, and 242 membership lots. Based on LHCC’s published assessment rates, this is a monthly delinquency of $30,748.08. Yet the difference between LHCC’s reported accounts receivable in March and April of 2008 is only $9,299.73. If the delinquency rate is actually that high, why didn’t accounts receivable go up by a larger amount? If it’s not that high, why is the board over-stating the delinquency rate and budgeting based on this over-statement? As Poyer himself remarked, the delinquency report “just doesn’t pass the nonsense test.”

Budget-related videos from this meeting also include a discussion of getting foreclosing banks to pay their dues and a brief review of Kilmer’s role (which includes a little spat between a frustrated Martel and Suzy Marcus). A few unrelated topics were addressed after the budget review: creating the nominating committee; handling road violations, in which directors acknowledged that the roving patrol is not authorized to stop alleged violators; and relisting lots for sale with Oakcrest.

If you find it odd that in all this budget talk, the name of Steve Locke doesn’t come up much, we do as well. Steve’s resume says he’s a certified financial planner and a former member of the Financial Management Task Force. He had little to say about changes to the budget, a topic that is very relevant to his background and experience. What is the point of serving on the board if you don’t have much to say on the topic most directly related to your background or work experience? Congratulations, Steve. You’re our Silent Sitter for the May budget meeting.

With all of the excitement about accounting and budgets (a subject that caused Robin Pedlar to comment a little past the half-way point of the budget meeting that “we’ve got to move faster or I’m going home”), we realized that we neglected to announce our Silent Sitter winner for the April 28th meeting. The most important topic covered at the April 28th meeting was a proposal to refinance the clubhouse balloon note. In a meeting where directors openly acknowledged they breached their fiduciary responsibility, Suzy Marcus sat in almost total silence. She neither objected to the characterization expressed by several board members that the board (of which she was a member) had in fact breached its fiduciary responsibility or raised any concern about the cost to fix that mistake. Important issues require the input of all board members. Congratulations, Suzy. You’re our Silent Sitter for the April meeting.

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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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Quick Takes on the March 27th Board Meeting

Here’s our quick take on the March 27th board meeting. We now include video thumbnails directly in posts. If you click on the thumbnail, a video player will pop up and begin playing the video. Look for this feature in future posts. If you have problems using this feature, make a comment on our Help page.

We’ve uploaded 15 videos from the March 27th meeting, representing over 1 1/2 hours of about a 2 hour meeting.

One of the first orders of business: fill the board seat vacated by Rick Bleck, who did not meet the 1 year ownership requirement for nomination set forth in LHCC’s bylaws and was invisible on the campaign trail but was elected anyway. There were 2 candidates: Bill Masters and Mike Sweeney, who is the husband of board member Robin Pedlar.

LHCC’s own Articles include the requirement that “A Lot shall not have more than one membership, but the single membership shall be shared by all owners of the lot.” Since Robin Pedlar is a director, she must be a member. If there’s only 1 membership for a lot, there’s no membership opportunity left for Mike Sweeney. LHCC’s directors get around that major roadblock by obtaining a legal opinion from Juan Cardenas of Rees Broome. That opinion starts out “Assuming Mike Sweeney is a member of LHCC….” As far back as Aristotle in 350 B. C., this con job has been understood to be a logical fallacy, often referred to as “circular reasoning.” Check it out: Assuming pigs can fly, then pigs can fly. Use it, like Wayne Poyer did, to impress passive directors and gullible neighbors. Just don’t actually try to fly, because that will expose the fallacy pretty quickly. Buermeyer gave a speech intended for the camera that encouraged diversity on the board yet offered Masters the hope of joining the board only if he became a clone of Buermeyer himself. Buermeyer and Pedlar abstained; Murphy and Marcus avoided controversy by skipping the meeting. Task #1: pass a resolution to make the vote on this charade an open vote. Watch LHCC’s rules trampled on and tossed away in these 2 clips, Breaking The Rules Pt 1 and Breaking The Rules Pt 2. This action shows the board will recklessly violate LHCC’s own governing documents to keep its grip on power.

GM Ray Sohl gave the management report, Mar 08 GM Rpt Pt 1 and Mar 08 GM Rpt Pt 2, in which the topic of the effectiveness of the Roving Patrol was raised. Is it effective? The board moved that question to Executive Session, so members will never know just what the roving patrol led by Zeb Brevard, the roving patrol supervisor, actually does all day. Treasurer John Martel, who sometimes struggles with accounting issues, offered a friendly health tip in his Treasurer’s Report. Wayne Poyer raised a concern that an owner/builder was possibly blocked from using white garage doors, which should automatically be approved, in our clip Garage Doors and asked Judy Platt about stocking the lake with non-native fish.

There have been 2 serious accidents on West Masters Drive, so the topic of guard rails (Guard Rails Again Pt 1 and Guard Rails Again Pt 2) came up again. We’ve heard reports that a driver was very seriously injured, perhaps paralyzed, in a recent accident on West Masters. If guard rails had been installed, the seriousness of these accidents may have been reduced. Steve Locke did offer a suggestion: put up caution tape. Action on the guard rail issue was “tabled” because of LHCC’s “serious financial headaches.” Estimates for dam culvert work (just 1 part of a much bigger project) came in at approximately $175,000 compared to a budget of $45,000. This $130,000 surprise didn’t find its way into Wayne Poyer’s April 2008 President’s Report, which discussed dam costs.

Changes were made to construction guidelines, apparently requiring a member to be in good standing for all properties owned, rather than the property for which construction approval is applied, before approving new construction permits. If allowed to stand, this will just about kill any new construction at Lake Holiday. The board also discussed taking more aggressive action against serious compliance violations. That could mean spending more money on lawyers at a time when money is in short supply. With her husband’s help, Robin Pedlar outlined the plans for 2008 social activities and suggested that LHCC in effect have a second set of books to get around the troubles created by accrual accounting. Directors seemed comfortable they could find a way to shift expenses from one time period to another to make everything work.

Dave Buermeyer led a discussion of changing LHCC’s water conservation rules, but most of that discussion focused on eliminating the single word “services” from a motion actually made by Jo-anne Barnard. Barnard was concerned about expressing positive comments about Aqua Virginia’s services when there have been so many complaints from Lake Holiday homeowners that Aqua Virginia’s service is “not at an acceptable level.” Buermeyer lost control of his own topic, and in the end, voted against the resolution he presented. John Martel seemed to have no idea what he just voted on, since he voted against Buermeyer’s resolution but said that he wanted the resolution to pass. Maybe that one word “services” was the glue that held everything together. Maybe some would pout and block their own ideas if they couldn’t have it their own way.

The Middleton story that we previously covered has recorded a new chapter, after he put “No Trespassing” signs on his property. Wayne Poyer vowed to “do it much more crisply than we did the last one.”

We’ve also added a link on our sidebar to SchoolMatters, a Standard & Poors website with test scores, demographics, district finances, parent reviews, and other information on schools nationwide. It’s easy to compare schools. Our link is for Frederick County, VA schools. Check it out.

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Silent Sitters Face The YouTube Era

One of the hot issues at the February 25th board meeting was videotaping board meetings. In fact, the issue made it on to the agenda for that meeting. However, when the board reviewed changes to that agenda, the videotaping topic wasn’t changed or dropped. It was just silently skipped during the meeting.

If the board wasn’t prepared to discuss videotaping, homeowner John Platt certainly was. Platt gave a nearly 10 minute presentation on the perils of videotaping that ranged from behavioral control to breaching personal security and identity theft. We can sum up Platt’s message in 2 words: stop videotaping.

Videotaping open meetings fosters good governance. Governance at Lake Holiday extends to committees and task forces, which are the principal advisors to the board. Together, the board, committees, and task forces make decisions that affect about 2700 lots and approximately $210 million of property value (based on February 2008 Frederick County tax valuations). The board, along with committee and task force members, opted to take on the responsibility of governing their community. That authority comes – and should come – with scrutiny.

Videotaping also helps to address something that LHCC Treasurer John Martel acknowledged:

We also have a lot of baggage that we have to overcome.

Homeowner Bill Masters records the meetings. Both Wayne Poyer and GM Ray Sohl have publicly acknowledged that Masters has a right to make these recordings. In fact, at the December 27th meeting, LHCC’s directors briefly discussed recording board meetings on their own.

Getting videos on the web quickly takes some work. To further his goal of fostering open governance, Masters gives the raw video tapes to us to take the most relevant or interesting portions of these meetings and get them on the web as quickly as possible. In many instances, we have video clips of important discussions available on YouTube before LHCC releases a written synopsis of what took place at a meeting. Anyone, including LHCC itself, is free to embed the codes to display any of these videos on a website. The videos are provided at no cost.

Some LHCC directors complain that we edit videos or provide clips that are not representative of what took place. That’s trying to bundle an obviously true statement with a crazy one, hoping that people can’t tell the difference between the two. A typical board meeting takes place over several hours, and the clips we make are no more than 10 minutes long. We don’t set or control this limit; it’s set by third-party video sharing services. It’s self-evident that we edit them. That much is true. In every case where we make an edit, we insert a clearly visible transition effect. If you don’t see a clearly visible transition effect, the video you see is an unmodified video stream.

The claim that something is unrepresentative or taken out of context is the crazy part. Lake Holiday’s board meetings are divided into tabs, as the agenda for the 2/25 meeting demonstrates. These tabs are discrete topics that often have little to do with one another. For example, on the 2/25 agenda, Tab 14 involves a roughly 3 minute discussion about selling a 1991 Ford pickup for $150. The very next tab is a roughly 26 minute discussion of a policy to fill board vacancies. One does not need the context of the old truck sale to understand a policy on filling board vacancies.

The videos we present are clips from a larger meeting. Given that the videos are made available at no charge, technological and practical considerations make it impossible to deliver a 3 hour watch-on-demand meeting video in rural Virginia. YouTube, backed by the multi-billion dollar resources of Google, doesn’t do it. Hollywood movie studios don’t do it. Those that attribute sinister motives to Masters or us for failing to deliver community association videos in their entirety for free display their technical ignorance. Maybe their motives are on display as well.

Dividing meetings into clips allows a viewer to watch what he wants, when he wants. We are not extracting unrepresentative comments from the video when there were opposite or contradictory comments readily available. When we quote John Martel as saying that “we also have a lot of baggage that we have to overcome,” he did not contradict this assertion before or after making that remark. In fact, after Pat Shields expressed an opposing point of view, Martel repeated his position more firmly and succinctly: “Lake Holiday has baggage.”

There are a lot of benefits to providing videos on the web. The majority of Lake Holiday owners do not live at Lake Holiday, so internet-hosted videos enable more owners to observe how their community is governed. Very few owners actually attend meetings, and those that do typically do not stay for the entire meeting. We’ve uploaded more than 100 videos to YouTube, and these videos have been watched over 4000 times. That’s roughly the equivalent of 40 people attending 45 minutes or more of every board meeting for a year. Since board meetings frequently draw no attendees outside open forum, videos create community involvement.

Many of our videos are informative, such as our series on the dam or the maintenance building (Dam Pt 1, Dam Pt 2, Dam Pt 3, Maint Bldg Pt 1, Maint Bldg Pt 2, and Maint Bldg Pt 3) available by clicking the nearby thumbnail or visiting our Videos page). Most videos show LHCC’s directors conducting routine business, such as reviewing the Treasurer’s Report or the GM’s Management Report. Unfortunately, too many videos show the board engaging in what we believe is inappropriate behavior or making a bad decision. A dramatic example of this is the Keep It Over Here Punk video, featuring the antics of director Steve Locke and Bob Fraser. In all cases, owners get to watch their board in action and form their own opinions. If board members find that their conduct appears unflattering when watched on video, the proper course is not to try to pull the plug on videotaping; the proper course is to change that conduct.

As a result of watching board videos, we’ve observed too many board members sitting in silence and then unanimously rubber-stamping a motion or resolution. Typically, we’ve given our Silent Sitter award to a director that we thought was especially passive. During the February meeting, directors Noel O’Brien and Robin Pedlar said very little. However, Noel O’Brien made a strong statement in favor of installing guard rails on West Masters Drive without delay. In light of the recent serious accident on that road, O’Brien is on the right track. Pedlar also voted against the recently adopted policy on filing board vacancies, an unnecessarily cumbersome procedure. These are positive steps, but we think they need to do more. Perhaps some directors are realizing that passivity is not such a good thing after all. Sorry, Robin and Noel. No award for you this month.

We’ve never given an officer our Silent Sitter award. In award terms, LHCC’s officers get off easy, since several have regular responsibilities at monthly meetings that force them to speak up. Sometimes, in the course of that speaking up, officers say things that hurt Lake Holiday. At the February 25th meeting Wayne Poyer complimented John Platt on his “excellent presentation” focused on putting an end to videotaping. Poyer offered this praise despite Poyer’s numerous acknowledgements of Masters’ right to make those recordings. We certainly support Poyer’s allowing Platt the time to make his point. But fueling Platt’s views, especially since they are contrary to opinions that Poyer has expressed, only increases political divisions at Lake Holiday. Poyer should have firmly conveyed that open governance, however uncomfortable it may be at times, is a good thing, and that it is supported by the LHCC board.

For keeping silent on this point, Wayne Poyer is our Silent Sitter for the February 25th board meeting. Congratulations, Wayne! You’re a Silent Sitter!

Making videos of public meetings is an issue that has been closely analyzed outside of Lake Holiday. In March of 2007, the New Jersey Supreme Court decided a case that raised issues similar to those in the discussion of videotaping at Lake Holiday. In the NJ Supreme Court case, Robert Wayne Tarus, a 15 year resident of the Borough of Pine Hill, was blocked from videotaping public meetings. Tarus was a frequent critic of the Borough Council. The court decision referred to remarks the mayor made to a local paper about Tarus: “If he was a decent resident, we would have no problem.”

The court also discussed the Borough’s concerns about how Tarus would use or edit the videos he made:

Finally, during oral argument before this Court, defense counsel for the Borough explained that a primary concern expressed by Council members was that ‘this political opponent . . . was going to take tapes and take them back to his basement and edit them around and turn us all into monsters.’ Thus, by their own admissions, when they blocked plaintiff from videotaping the meetings, the Mayor and Council acted on an impetus that found its genesis, to some degree, in animus against the plaintiff. In that context, we find those actions to be arbitrary and unreasonable.

The concerns that the Borough expressed against Tarus are nearly identical to those that LHCC board members have expressed about Masters’ recording the meetings and our editing the videotapes.

Tarus won his case, and the NJ Supreme Court ruled:

The law has embraced the undeniable fact that modern electronic devices are silent observers of history. These legal foundations support a finding that there is a common law right to videotape.

The NJ case also addressed the concerns expressed by John Platt that videotaping has a negative impact on other meeting attendees:

Video cameras and recorders have become a commonplace item in our every day life. They are a common security device and confront us at the bank, in stores and even in apartment houses. Exposure to video recording of all of us is a normal occurrence on the streets and in public gatherings such as athletic contests and sporting events where participants and spectators are under constant television surveillance. Such exposure is actively sought by all those running for public office in order to place their image and their ideas before the voters. … Today, hand-held video cameras are everywhere — attached to our computers, a common feature in consumer still-shot cameras, and even built into recent generations of mobile telephones. The broad and pervasive use of video cameras at public events evidences a societal acceptance of their use in public fora. … So too, we are not persuaded by fears that the use of video cameras in non-judicial settings will generate intimidation and harassment. … Trepidation over the effect of video cameras in public meetings is overstated. The prevalence of video cameras in society and the open nature of public meetings militate against such hyperbolic concerns. Although some citizens may be fearful of video cameras, we find that consideration insufficient to deny the right to videotape. … The legal foundations described above, with roots wide and deep, offer a glimpse into our evolved understanding of the right of public access and support our finding that there is a common law right to videotape.

Writing for a unanimous NJ Supreme Court, Chief Justice Zazzali referred to the ideas of Jeremy Bentham, Patrick Henry, and James Madison, offering these powerful words:

In short, our civic forefathers have long recognized that spores of corruption cannot survive the light of public scrutiny. … Openness is a hallmark of democracy — a sacred maxim of our government — and video is but a modern instrument in that evolving pursuit. … Arbitrary rules that curb the openness of a public meeting are barricades against effective democracy. The use of modern technology to record and review the activities of public bodies should marshal pride in our open system of government, not muster suspicion against citizens who conduct the recording.

Perhaps Poyer was less than firm in sending that message because openness and hallmarks of democracy do not really enjoy the support of LHCC’s board. Perhaps the disappearing agenda item on videotaping will resurface, and LHCC will seek to block such recording by a policy resolution. We hope not. Whatever happens, watch it play out on YouTube.

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The Denial Game

We previously wrote about the near-scuffles at the February 23rd Round Table. There’s a discussion of these shouting matches on Bill Master’s website, The Summit Advisor. One of the multiple posters in that thread uses the anonymous ID Guest47.

Guest47’s posts aren’t accurate on the basic facts of what took place at the Round Table. Fraser was not “countering Master’s allegation that the board and committees engage in secret meetings” on the clip, as the poster contended. Fraser’s first outburst occurred after Steve Locke attempted to ask audience-member Masters a few questions in what looked like a scripted event. Fraser’s second outburst occurred after the meeting had concluded. Both of these facts are clear on the video. At one point, Masters did ask a question – not make an allegation – about his concerns that the board was having private discussions, but this question and the response concluded without incident – almost 1 hour after Fraser’s first outburst. Since Guest47 can’t even get basic facts straight, we’re not going to devote a lot of energy to unscrambling his post.

Bill Adams confessed to us that he regularly posted on Master’s website under this exact same anonymous ID, Guest47. The combination of these posts and Adams’ position in the community (he’s Chair of the Buildings and Grounds Committee and serves on the Activities Committee) prompted us to reflect on Adams’ conduct and prior writings.

There is a larger point in scrutinizing the opinions of these individuals, and it’s a point with which the Lake Holiday community desperately needs to come to grips. Lake Holiday has a widespread problem, and it is so damaging the community that if it’s not fixed, it will destroy it. What is it? A lot of people are playing a game of denial.

In his posts, Guest47 complained that Masters is a “constant nuisance” and has a website that serves “the lowest level of intellect whose purpose is to provoke others….” – and then he proceeded to praise Fraser’s conduct. Every reasonable person who watches the Keep It Over Here Punk video (also on our Videos page) will say that the behavior of Locke and Fraser was designed to provoke. But Guest47 denies this reality.

For a period of time Bill Masters allowed Bill Adams to serve as the editor of The Summit Advisor, and as Adams himself stated in October 2005, he wrote “most of the Advisors’ articles.” In that capacity Bill Adams often was highly critical of the conduct of LHCC’s board. Here are a few highlights.

In July 2006 Adams wrote:

Leadership at Lake Holiday has a history of bad decisions.

He went on to list a dozen bad decisions to support his point “in hopes of awaking some determination for improvement.” We calculate that the cost of these bad decisions exceeds millions of dollars.

Just a short time later, we distributed a petition for a special meeting to remove the majority of LHCC’s board, and Bill Adams signed this petition calling for the removal of then President Chris Allison. He added the notation on our form: “Regretably [sic], this action is necessary.” Regarding our petition Bill Adams wrote:

The petition itself does not seek to grant water & sewer expansion to Oqunquit lots at community expense as has been suggested. … The sentiment of the Board and its defendants is that the Ogunquit proposed replacements are pro-expansion and willing to commit community funds ($M’s) to that cause. We do not believe that to be an accurate assessment. While we cannot speak for the individuals (nor should the board) we believe their interest is more toward fixing some inherent problems with the board itself.

Adams supported fixing “inherent problems with board itself.” He saw residents facing a “disproportionate share” of expenses. He continued:

In any new development the Developer would incur the total costs of such amenities (along with roads and infrastructure) and would recover the expense via the sale of lots. Amenities are normally employed to attract buyers to the development. Instead, we the residents are contributing a disproportionate share to these capital improvements such as the clubhouse, gatehouse and bus stop. Ever get the feeling that…(never mind).

The unfinished thought from a person who otherwise has no problem expressing himself is denial taking over. Adams also took up the issue of the Utility sale. A portion of the proceeds from the sale of LHEUC’s assets was in the form of a contingent note stretching out 15 years. Of this contingent stream of payments from Aqua Virginia, Adams wrote:

…the 15 yearly payments of $78k are contingent on an aggressive new connection quota! In a declining housing market, we can probably kiss that $1.17M goodbye. We understand that interim hookup fees are also deducted from the $800k. At $8686* each, if 92 lots are connected, the utility company is a give-away. Free! Some deal!

Both we and Bill Masters have been critical of the collectibility of the contingent payment stream from Aqua and that LHEUC was sold too cheaply. As far back as August 2006, Adams expressed the same criticism – describing it sarcastically as “some deal!” Adams largely stopped his public efforts to foster change; we and Masters have not stopped such efforts because the governance problems that underlie these events remain unfixed. The fix for those unable to face reality: deny the validity of Masters’ points and label him a “constant nuisance.”

In October 2005, after the Court granted our petition to block LHCC from voting its own lots in elections, Adams wrote:

As hopes of passing the documents erodes, the board may be scrambling for ways to keep it alive. One hope may have been the 223 lot votes denied by the court. Was the board intending to use them to pass the documents? We may never know. Another hope might have been that a fair portion of the population would vote for the new documents. Receipt of mail-in votes may have dashed that hope as well. Nobody who I talked to is supporting the documents. With imminent failure at hand, the cancellation of the vote may have been to [sic] only alternative to a major embarrassment.

Adams’ statement that “we may never know” if the Board was intending to vote LHCC-owned lots is more of the denial game. LHCC’s board passed Resolution 2004-8 expressing its intentions in writing. We were not in Court on this issue based on speculation but rather on published statements. Hiding behind vague and inaccurate words is denial. Facing “imminent failure” LHCC canceled the September 2005 vote on new governing documents. Adams continued his criticism of these proposed documents, which he felt were:

…verbose and convoluted rules intended to keep lawyers employed. We could actually go out and enjoy the lake and amenities without worry that we would lose our rights. God forbid we ever need legal interpretation of existing rules like “no clotheslines”. Instead the misery lives on – Postponed until another angle can be contrived.

By May 2006 when substantially the same governing documents re-surfaced for a vote that June, Adams forgot about the “misery” and gave the documents back-handed praise, claiming they were:

more readable than earlier versions, with a nice cover page, uniform margins and paragraph numbering. … Many comparative reviews are possible, e.g.; with the existing documents, with the 40 “Recommended Changes”, and between versions on the revised documents. The feasibility and value of such comparisons is questionable, given the complexity and time frames.

Translation of Adams’ gibberish: The documents look pretty, they’re hard to understand, time is short, but I just can’t bring myself to tell you to approve them. When you have to resort to praising the deed to your property – perhaps your most valuable investment – because it has a nice cover page and uniform margins, you are in denial. Fortunately, thanks in large part to Bill Masters’ efforts to inform the community, approval of these new governing documents failed by a wide margin. To those denial gamers who claim that we are an unpopular lone wolf, pause and reflect: nearly 2 out of every 3 voters who voted against these documents joined with us and voted “No” by our proxy.

At the same time in a post entitled A Development Diary, Adams offered sharp criticism for recent board actions:

Adopting Goldberg’s rules, any unchallenged presidential motion automatically becomes a unanimous board resolution. Totalitarian Democracy is invented. Fearing litigation, the Board refunds all builder conformance fines imposed by the Architectural Committee. A revised Enforcement Guideline is created detailing every conceivable construction infraction and remedy. An ex-board president (who signed the Development Agreement) and a favored Builder are installed by the Board on the Architectural Committee without customary apprenticeship. The third Construction Supervisor and ArchComm liaison in a year quits along with a long standing ArchComm member.

“Totalitarian Democracy.” Those are very strong words to describe a community association. Despite those strong feelings, Adams could not muster the courage to explain that he was the “long standing ArchComm member” who quit over the problems he described. When you distance yourself from your own first-hand experiences, you are in denial.

Like Adams, we’ve been critical of the adoption of Goldberg’s Rules of order. But our website is labeled a “hate site.” People that play the denial game often lash out at those who challenge them to face reality.

Unfortunately, these examples of denial are not limited to Adams. In August 2006 Miller & Smith sent a letter to all property owners, stating in part, “Yes, we have special privileges….” (Our own reply has been posted here for everyone to see since that same time. For another twist on the denial game, review our comments on free water & sewer. As recently as the Saturday 2/23 Round Table, Wayne Poyer was still repeating the free water & sewer lie.) At around the same time former LHCC President Lou Einstman was allowed to post his own answer to Miller & Smith on the front page of The Summit Advisor:

When I left the Board in 2004, there was almost two million dollars in the bank. Today, the treasurer is predicting that we will be broke by September if we can’t get a loan or a line of credit. Where did all that money go? Maybe the changes that Heisey and Allison made in the way business is conducted weren’t so good for the community after all.

Einstman regularly attends board meetings, so he’s in a position to observe board conduct first-hand. On the responsibility of being a board member, Einstman wrote:

This isn’t a social position! Some of the present Board members seem to think that all they have to do is show up for the meetings. They don’t do their homework. They don’t understand the issues nor do they know how they want to vote on them. This irresponsible attitude is very discouraging.

Others have been similarly critical of board conduct. Former LHCC employee LeeAnn Stevens revealed that board members came to her asking for explanations of what went on in the boardroom or complaining that actions were taken without discussion. Both Einstman’s and Stevens’ sharp words parallel the criticism that both we and Masters have leveled at the board.

Our Silent Sitter award is certainly more colorful, but it is a legitimate attempt to draw attention to the very same problem that caught Einstman’s attention over 1 year earlier – but remains unaddressed. To those put off by our Silent Sitter award, take note: Einstman’s modest caution failed to correct the problem. In the spring of 2007, months before introducing the Silent Sitter award, we called Lou Einstman and asked to meet to discuss solutions to these and other problems. He declined our request. Instead of acknowledging our shared observation, Einstman’s response is to tell the critics to stop complaining and “get out.”

We’ve documented that Einstman supported the election of Rick Bleck, who did not meet the 1 year ownership requirement for nomination set forth in LHCC’s bylaws and was invisible on the campaign trail but was elected anyway. Bleck said very little while he was on the board, and what little he did say qualifies as T-shirt quote material. Promoting the election of people who “don’t understand the issues” when you’ve criticized that behavior as “irresponsible” is just part of the effort to conceal and deny legitimate problems.

Einstman was critical of the Heisey and Allison years but has supported Wayne Poyer’s leadership. Is it because Einstman was on the outside looking in during Allison’s tenure, and Poyer gives him special treatment? Watch the video below of audience member Einstman walking up to board member Robin Pedlar and carrying on a conversation while the board is conducting business. Watch the heads of most board members turn down to ignore Einstman’s inappropriate behavior, and Martel completely disregard what is taking place right next to him. Ask yourself if Wayne Poyer would have been that slow to react if Bill Masters had engaged in that conduct, or if Poyer would have responded in such a polite and restrained manner. Einstman plays the denial game for a simple reason: he’s now getting the insider perk of favorable treatment not afforded others.

Over and over again, it’s the same thing. At the January 26th board meeting, Treasurer John Martel was skeptical of spending $4650 for an automated device to measure the level of the lake. Our video Lake Level Pt 1 (also on our Videos page) makes this clear. At the February 23rd Round Table, a question from Bill Masters which expressed similar skepticism and proposed an alternative solution, was met with mocking giggles incited by Wayne Poyer and a sarcastic comment from Martel. We’re not aware of any proof to support Wayne Poyer’s claim that an automatic lake level monitoring system is required by the state for dam certification, and we doubt any board member had such proof before voting to approve this expenditure. We challenge them to produce such proof. Mocking Masters and others is the denial gamers trying to turn the tables on critics so they can continue playing their game.

In August 2006, “guest #47″ offered these comments on The Summit Advisor:

In defense of Bill Masters; Bill is a persistent advocate of frugal spending and accountability. As many know, he is not afraid to publicly challenge those in authority if they are not perceived to be acting in the community interest. Admittedly, Bill can become cantankerous when his questions and comments are evaded or dismissed. What he lacks in tact he makes up for with determination. To directors and proselyte with provincial follow-the-leader mentality he is a nuisance to be discredited and avoided. For those unaware, the brief utility board tenure involved his criticism of the unnecessary and expensive planned replacement of manholes, and the awarding of contracts to a friend of the utility board president’s without a bidding process. He was disparaged and removed from the utility board. After he left, many of his alternative ideas were adopted with no credit given.

Note the use of the word “nuisance.” Masters is a good kind of nuisance in August 2006, but in February 2008 he’s the bad variety. In the October 2006 election, Masters sought a board seat, seeking to try to remedy the same problems the he and Adams had been describing for years. He lost the election, not because of a failure to capture votes from residents, but because Miller & Smith was allowed to vote about 100 lots in Section 10 that residents had been told could not be voted. In fact, Adams himself wrote about the deed changes Miller & Smith made in July 2006, at about the very same time they were made. Presumably, he knew about the Miller & Smith ballot box deluge that would catch the community by such surprise about 3 months later. Instead of flashing warning signs, he discussed the deed changes in relatively unremarkable terms.

By November 2006, Masters had had enough of Bill Adams’ playing the denial game. Despite being allowed to edit the front page of Masters’ popular website, Adams turned on his neighbor by posting that the 2006 election outcome (which included Masters’ loss) was a vote for the “continued positive agenda” and that following the Annual Meeting, “everyone left happy.” He called the outcome “truly resident driven.” Shortly thereafter, recognizing his role was about to be eliminated, Adams resigned, perhaps hiding out as Guest47 ever since.

The clubhouse renovation was underway by the spring of 2007, and Adams played an important role in reviewing the security system for that project. To his neighbor Masters, Adams privately criticized the handling of the clubhouse security contract but confided that he was unwilling to publicly address his complaints because he did not want to jeopardize his insider involvement. Putting the past behind him and praising Adams’ contributions, Masters tried to coax a public discussion of these issues on The Summit Advisor, but Adams in a rare post under his own name responded that the topic was “not open to public debate.”

Adams, like Einstman and others, could not be weaned from the insider perks, so the denial game continues. The biggest insider perk: playing a role in spending over $2 million of your neighbor’s money every year. Plain and simple, it’s a power trip. It’s empowering to have the power to make expenditures and meet with professionals (e. g., high-priced lawyers and accountants) one otherwise would not be able to make or meet on one’s own, and especially so for those without the every-day responsibility of a job (Adams, for example, is a retiree). Loss of involvement is one price to pay for speaking up, and that’s a big force driving the denial game. In our Maint Bldg Pt 1-3 videos (you guessed it, they’re also on our Videos page), director Pat Shields said he would consult with Adams and Bob Fraser, one of the stars of Keep It Over Here Punk video, on this project. He didn’t say a word about consulting with Bill Masters.

Dr. Sanity, an MD and popular blogger who applies psychiatry to broader social observations, has written about people that are in denial:

When confronted, they become angry and usually contend that it is their confronter who has the REAL problem, not them.

Attacking us and Masters for making the exact same criticism that they have made is just the denial gamers attacking their confronter. We’ll anticipate one criticism to this post from the denial gamers, that it’s a personal attack. It’s not. All of our comments are focused on the political opinions and conduct of people engaged in governing their community or who are openly discussing their community’s governance. That makes their conduct and their opinions legitimate topics for public discussion and debate.

Guest47 criticized those who “anonymously attack and vilify people such as Poyer, Allison and Fraser.” Yet Guest47 hides behind an anonymous ID and attacks us and Masters. We make every post here, and make no secret of who we are and that the opinions expressed in these posts are ours. The absurdity of Guest47 criticizing anonymous attacks while he launches his own is self-evident. Guest47’s hypocrisy takes on a pathetic quality.

Dr. Sanity has also discussed denial as a “defense mechanism” that is “almost always pathological….” and set forth the factors that define a pathological defense:

  • the defense is used in a rigid, inflexible, and exclusive manner
  • the motivation for using the defense comes more from past needs than present or future reality
  • the defense severely distorts the present situation
  • use of the defense leads to significant problems in relationships, functioning, and enjoyment of life
  • use of the defense impedes or distorts emotions and feelings, instead of rechanneling them effectively

Judge for yourself how accurately the attack-the-confronter response and the characteristics of a pathological defense apply to Lake Holiday politics.

The denial game costs the Lake Holiday community dearly. Thousands of lives have been affected. Tens of millions of dollars of Membership Lot property values have been destroyed. People have been obstructed from enjoying their property for over 30 years. The obstruction has lasted so long that victims have died without ever getting a remedy. That these serious problems have been unaddressed for so long is a mark of shame for Frederick County and the state of Virginia. The governance problems that Adams and Einstman complained about are still unresolved. They’re the exact same problems that Masters has complained about and the exact same problems that we’ve complained about.

Instead of fixing these problems, the denial gamers say our blog is a “hate site” and Masters “cannot accept any ideas which are not his own.” The denial game continues, the problems thrive. As do the websites that seek to address the problems that have plagued Lake Holiday for decades.

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Our Problem Now

63 days. That’s how long it took for LHCC’s board to flip flop on the utility problem at Lake Holiday, especially when board members started having problems of their own.

As we discussed in our post It’s Not Our Problem Anymore, on 11/26/07 Wayne Poyer said just that: problems with utility service weren’t the board’s problem anymore. He ignored the fact that his predecessor Chris Allison promised members that the LHCC GM would play a central role in resolving utility problems after the sale to Aqua Virginia. Poyer distanced himself from utility issues when addressing problems raised by ordinary homeowners. But at the January 28th board meeting, the story changed when board members started reporting their own utility problems.

John Martel complained that:

Aqua’s customer service has been and continues to be both inadequate and ineffective.

In his view Aqua Virginia engaged in “questionable billing practices.” Martel described his own problems with Aqua Virginia and what a company customer rep told him about it. According to him, she said:

I will send that problem to the billing department but I don’t think they’ll do anything about it.

Martel’s concerns are echoed by directors Steve Locke and Robin Pedlar. Locke characterized Aqua’s conduct as “intentional corporate incompetency.”

Robin Pedlar remarked:

Do we know are there any people here at Lake Holiday that are happy with the service? … I don’t know anybody.

Several directors planned to meet with representatives from Aqua Virginia on Thursday January 31st. According to Martel, Aqua Virginia “finally, finally agreed to a face-to-face meeting.” If that meeting didn’t produce satisfactory commitments from Aqua Virginia, the board planned to complain to the SCC.

We first reported about this situation many months ago. The very same topic is covered in our video clip Crazy Aqua VA Bills (also on our Videos page) from the March 2007 board meeting, now 11 months old. Poyer and the rest of the board didn’t want to get involved at that time. In response to an open forum question from a homeowner with a utility problem, Pat Shields suggested that the homeowner had a water leak between the meter and his house, despite the homeowner’s efforts to establish he had no leak. To diagnose his inaccurate water bills, the homeowner reached a drastic conclusion: “Just don’t flush.” Now, in January 2008, Poyer told fellow board members very matter-of-factly that Aqua Virginia’s meters just don’t work, suggesting he’s known about this problem for some time.

When ordinary homeowners write to the board about their utility problems, Wayne Poyer says “It’s not our problem anymore.” When John Martel has a utility problem, it’s time to “get tough” with Aqua Virginia and start down the path to filing a complaint with the SCC.

We’ve seen no public acknowledgement from the board about utility problems homeowners have been experiencing in Lake Holiday’s newsletter or website. To claim to be a utopia, one must sweep a lot under the rug.

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