By Deborah Goonan, Independent American Communities
Slowly but surely, homeowners’ associations are beginning shift costs and liabilities for assets and amenities back to public entities, including special tax districts.
Today, let’s look at two examples of Recreation Districts (also known as Park Districts) as an alternative to HOA maintenance of amenities.
City commission votes in favor of parks and trails special district
Posted: Feb 27, 2018 8:43 PM EST
Updated: Feb 27, 2018 8:43 PM EST
By Morgan Davies – MTN News (KBZK)
BOZEMAN – Bozeman city commissioners voted 4-1 on Monday to begin plans to create a parks and trails special district throughout the city.
For most neighborhoods, HOA fees go to the upkeep of their park; however, this can get costly for some residents, especially if their neighborhood park is enjoyed by people all over Bozeman.
“Very few people in HOA think about parks all the time. So, get the professionals in there, let them do it on a bigger scale so they can hire a mower, get the right equipment, things like that. It will be less expensive and we will be giving everyone in the city an equal experience,” said Deputy Mayor Chris Mehl.
Right now, everyone is paying property taxes which do go to some park maintenance. A typical Bozeman family is paying $76 in fees for parks annually, plus whatever their HOA fee may be. By creating a special district, HOA fees for some neighborhoods may go down.
“The proposal would go up to $92, but again a lot of those people wouldn’t be paying their HOA. So, they would either break even or see a slight decrease,” Mehl said.
Read more (Video):
The end of double taxation
Last March, the City of Bozeman began to investigate the possibility of creating a special tax district to maintain parks and trails currently maintained by HOAs. Less than one year later, and City Council has voted in favor of moving forward with that plan.
According to a development agreement with the City, Bozeman HOAs have been maintaining their own parks, in addition to paying $76 annually toward a City-wide park maintenance fund in their property taxes. The establishment of a new Parks and Trails District, according to the report linked above, will increase property taxes slightly, from $76 to $92 annually.
Presumably, HOAs would be able to reduce their fees, since they would no longer be responsible for the cost of landscape maintenance and insurance coverage for playgrounds and green spaces they currently manage.
Overall, the shift would eliminate the current double taxation of homeowners for recreation facilities, while significantly reducing the potential for significant HOA liability.
HOAs can face devastating financial impacts due to personal injury lawsuits, or for repair and replacement of equipment and landscape following a fire or natural disaster.
Before the Parks and Trails District can be created, residents of the District will have the opportunity to approve or protest its establishment. Several other Montana cities have already successfully established their own Park Districts.
University Park at odds over country club’s fate
By Chris Wille
Real Estate Editor
Posted Feb 11, 2018 at 10:43 AM
Updated Feb 12, 2018 at 3:08 PM
Preserved or developed, land is highly valued
Correction: Homeowners would pay an average of $99 a month for a proposed recreation district bond. An earlier version of this story incorrectly said the cost was $99 a year.
The dense old growth forest that hangs over the twisting entrance to University Park and the long drive to the front gate sets the stage for the entire community. That imposing stretch of nature sells a lot of homes, as does the entire lush and very green neighborhood, the pride and joy of the residents.
University Park’s 1,208 acres hold 53 lakes and ponds, a golf course with 27 holes, other green space and only 1,202 homes, about one per acre.
Nancy Phillips once lived in University Park. “Aesthetically, it’s so beautiful and it’s a private community,” she said. A Realtor with Michael Saunders & Co., she sold 15 UP homes last year and 12 the year before. Some homes she’s sold two to three times.
The long winding road up to the gated entrance “eases tensions” and “absolutely” helps close sales, Phillips said.
“Green space in the park is very, very important.”
“The residents I represent,” said John Whyte, president of the homeowners association, “all come back and tell me the reason they buy here, the greatest No. 1 thing here, is the natural beauty. We want to protect that … have it under our control.”
Currently, Neal controls the HOA with his two appointments to the board of directors. Residents elect the third member. Should this purchase proposal pass, Neal would surrender HOA control more than a decade before it expires as prescribed in community documents.
Should the land purchase fail, Neal stated in a letter that he would develop the property.
Recreation district opponents reject the idea of establishing a government entity that has the ability to place bond referendums before registered voters, thus taxing all property owners should ballot measures pass. They don’t want to pay off any bonds, now or new ones in the future. They say they don’t believe they should pay for a golf course they do not use. Worse, they say, the Planning Group intends to buy the land for millions more than it is worth. They also claim secrecy and a lack of communication surround the entire process, an allegation strongly rejected.
Good deal or bad deal?
The key numbers : University Park has 1,200 homes with roughly 2,000 residents. According to the report, there are only 325 golf members and 1,100 social club memberships.
If the recreation district is established by a majority of registered voters, the plan is to issue $24 million bond to purchase 266 acres encompassing the golf course, club house and related amenities. The cost to homeowners will be $99 per month for the next 30 years. However, some opponents of the plan object to the fact that the Recreation District could issue new bonds in the future.
On the other hand, if the HOA were to purchase the golf course, it would have to deplete its reserves or borrow money at a high interest rate. And, of course, the HOA would also be free to raise assessments over the next 30 years.
According to Florida Statute, residents have the right to file an objection in civil court, with regard to any new ordinance or bond issue in the District, within one year after it is enacted. (See FL Statute 418.25) Any amendment to the District’s charter can also be challenged on Constitutional grounds.
What makes the issue of land control so contentious is the proposed purchase price, and the fact that some owners feel they are being held hostage by the developer, who promises (threatens?) to close the course and develop the land if homeowners cannot agree to purchase the property.
And although a majority of owners want to preserve green space and enjoy social activities at the club, not everyone is thrilled with the idea of subsidizing the cost of golf for a minority of homeowners in University Park.
But, as an added concession to homeowners, if this proposed land deal goes through, developer Pat Neal will turn over control of the HOA ten years earlier than planned.
The bottom line is that, according to attorneys involved in the deal, the governing documents for University Park clearly state that the developer/golf course owners have the right to sell the land at any time, without any consent from the HOA or property owners.
In other words, if homeowners don’t want the land to be redeveloped, they apparently need to pay for the privilege of keeping it lush and green.
In this case, the majority of homeowners have the financial means to buy the land from the developer.
Recreation Districts vs. homeowners’ associations
There are some advantages to shifting ownership and management of reacreational amenities to a special tax district, as opposed to a homeowners’ association. As a public entity, the special district must conduct open meetings in public. That means nonresidents, environemental groups, and the media can also attend and serve as a watchdogs for the public interest.
Public access to records is a matter of state law, and there is no corporate veil to hide behind, as there is with most association governed communities.
The governing body is elected by registered voters who reside in the district, whereas the HOA currently allocates one vote per unit of property owned. That makes the Recreation District a more democratic institution.
Additionally, financial liability to homeowners is far greater for HOA members. HOA assessments and fees must guarantee payment of insurance premiums, plus any non-covered losses. Members are also on the hook for rebuilding after a disaster. Another common risk factor for HOAs: payment obligations for legal expenses that exceed insurance policy limits, or that are excluded from coverage.
For example, recall the recent $20 million verdict against Lamplight Village HOA in Centennial Springs, Las Vegas, Nevada. The HOA liabililty policy limit is only $2 million. The Plaintiff will seek recovery of $18 million directly from the HOA, who can then turn to homeowners with demands for special assessments. (The case is likely to be appealed, but the ultimate outcome is uncertain.)
By contrast, Recreation Districts are under the direct control and supervision of local elected governments, with easy access to administrative staff, legal counsel, engineering and building code experts, and maintenance equipment. Thus, parks and recreation areas are likely to be better maintained and more closely monitored to avoid safety hazards that lead to catastrophic injury.
That’s why an increasing number of taxpayers and local governments are exploring ways to deprivatize maintenance of infrastructure and amenities currently under the management of volunteer homeowner boards of association-governed common interest communities.
418.21 Governing body.—
(1) The governing body of a recreation district shall be determined by ordinance of the municipality or county that created the district and must be either:
(a) A five-member or larger board of supervisors elected from among the residents of the district, or
(b) The governing body of the municipality or county that created the district.
(2)(a) If the governing body is a board of supervisors, the ordinance must specify the date of the election and must provide that each property owner or resident in the district has the right to vote in the election. The ordinance may also provide for the staggering of terms of the supervisors. The ordinance may also provide for the establishment of designated geographic areas within the district from each of which are elected one or more members of the board of supervisors to represent that area, provided the ordinance is made contingent on approval by a majority vote of the electors in each designated area.
(b) Members of the board of supervisors shall serve without compensation.
(3) If the governing body is the governing body of the municipality or county that created the district, that body may appoint a district advisory board to advise it on all matters relating to the district. Members of the advisory board shall serve without compensation.
An explanation of how the public can protest a Park District in Montana.