A Disagreement I'd Rather Not Have

One of the hardest things in exposing one’s opinions to public view is the task of publicly and openly disagreeing with a friend. Recently, another blog began commenting on the new budget and the proposed Capital Contribution Fee.

Let me be clear – I’m not a disinterested observer – I had some hand in trying to meet the objections to the original proposals and I believe that both the proposed budget plan and the Capital Contribution Fee are legal and desirable for our community.

Allow me to deal with some of the criticisms leveled at the budget, the CCF, and the process:

The proposed budget is based on a set of assumptions about income, spending, investment and reserves. That’s all any budget is – it’s a plan, produced under uncertainty, that outlines an organization’s operational goals and the resources planners believe are necessary to achieve those goals. A budget may be thought of as an action plan by which an organization allocates resources, evaluates performance and formulates more detailed plans.

1. What’s really new is that MVF is attempting (for the first time I can find on record) to develop a longer-range budget – one in which larger projects (call them capital intensive) are enumerated and allowed "the light of day" YEARS in advance of any realistic delivery plan. It was done both to increase financial discipline and to allow our membership increased transparency – to get a view on things proposed, and not just things immediate.

2. The discussion about the Capital Contribution Fee is not a surprise, nor was it a 2011 item – this discussion has been going on in public for at least eighteen months. One of the objections raised by the community representatives at a prior meeting was that there was insufficient information about "longer range" plans and requirements, which the Capital Budget (which would be funded principally by the CCF) was designed to address.

3. As a result, there is a projected interdependency between the CCF and the Capital Budget – an interdependency designed specifically to provide for two difficult-to-reconcile goals – (a) To allow for expanded investment in the infrastructure of an aging community (b) without overburdening the assessment of our current members. The two are linked, not because of some dark purpose, but because the assumptions need to be spelled out clearly – without funding, the plan needs to be reworked. (Truth: Not every item in the plan will or should be done – but without some means of ranking proposed costs, how can one even begin to analyze costs and benefits to create priorities? How else ought we decide? By chance or whim? Our neighbors deserve more from us than that, surely.)

4. It’s been stated that the community representatives have been "summoned" to a meeting on Sept. 19, implying either a command performance or a parallel to Lincoln’s incarceration of several Maryland legislators to prevent "the Free State’s" succession from the Union. While that spin makes great reading, the truth is much more mundane. The representatives are normally part of the budget process, and have been convened several years running to discuss (and amend) the budget, the CCF and several other initiatives. What’s new, if anything, is a desire on the part of this Board to include the reps (and the communities in whose name they vote) into the process at the earliest (and perhaps most speculative) phase.

5. I won’t tax the readers' patience with a point-by-point reply to the rather scary sounding legal citations quoted elsewhere. But let’s examine just the highlights. The anti-CCF folks point to a New Jersey case, in which a condominium association charged a fixed fee to all new owners. That case (Micheve) was decided on three key grounds:

a. That the fee is discriminatory against new residents. The trial court in New Jersey has been roundly criticized in legal circles for using this argument. Indeed, it flies in the face of a U.S. regulation that mandates any condominium wishing to utilize FNMA-backed mortgages have "an initial capital working fund" … "in an amount that is at least equal to two months of the estimated common charges for each unit." The language of the court excluded homeowner associations and focused exclusively on condominiums, which are covered in separate statutes in New Jersey. The trial court has been criticized precisely because it chose to ignore the "funding" requirement and impose its own unique definition of "fairness" without adequate reference to other New Jersey and federal statutes, and its application in other circumstances is suspect at best.

b. That the flat fee was discriminatory because the benefit fell equally to all unit owners, but the fee was assessed without regard to the proportion of interest arising from the ownership of different units within the development. The MVF proposal avoids that objection by establishing a test based on economic grounds, namely, sales price. A perfect measure? No, but one that can be justified as fair and proportional under the current legal tests. A greater investment contemplates a greater capacity to carry the cost. A witty comparison has been made to the recent debt ceiling "debate" in Washington, but the analogy rather misses for me. Here, we are at least trying not to create some arbitrary "flat tax" – we are being progressive (in the economic and political dimensions) as regards the funding of our community life.

c. That the process used to impose the fee was defective because the condominium association did nothing to solicit the views of their membership before it went into effect, and it fell outside the scope of their by-laws. Even in New Jersey, this is being appealed in several places. The key difference is that in Montgomery Village, the by-laws are being followed, both in substance and in spirit, using the duly authorized power of the representatives to supplement the inherent powers of the document and of the Board.

6. I won’t for a moment pretend that these reforms are immune to criticism – and I was among those who led the effort to tighten the language and to make sure the community was and will be included. I bless all those who stood with me then, and ask them to examine the revisions and see if they meet the objections heard over the last two years. Even if we risk "stirring a few hornets' nests" by discussing what "might be" instead of what "will be" or "must be," I think our
members deserve nothing less than a vision, backed by a realistic plan, and a budgeted way to achieve the objectives we can agree upon as we move toward our future community.