guest blog by Deborah Goonan
The HOA, Association of Poinciana Villages (FL), wants to become a city. In fact, a group of residents have been attempting to become a municipal corporation for several years. The group has recently completed a feasibility study that it will submit to Florida Legislature.
It seems as though the large subdivision of Poinciana is tired of being underfunded and getting no services from Osceola and Polk Counties, despite the fact that 47,000 residents pay taxes to both Counties and the state of Florida. Their mature HOA cannot provide needed services provided to residents of nearby cities of similar size. Apparently the residents pay assessments, while the developer does not. The residents are tired of Developer Avatar retaining majority control since 1971 and want each resident to have voting rights, instead of a 9 member Board of Directors voting on behalf of each of Poinciana’s Villages. What a concept!
Who can blame these residents? After all, compare PUBLIC local government (municipal or county level) to PRIVATE governance in HOAs.
*A municipality has access to property and sales tax revenues, low interest loans, issuance of municipal bonds, state and federal grants. * The HOA is limited to collection of assessments that are NOT based on assessed property values. (often the $50K home pays the same assessment as the $500K home and even commercial property owners) The HOA has very limited access to financing through loans.
*A municipality can take advantage of economies of scale, and can cooperate with nearby towns and cities, or enter into local agreements to provide needed services. * HOAs have no option to collaborate with neighboring communities or public entities to provide needed services. In fact, its governing documents (the so-called CC&Rs contract) often state that the local governing entity will NOT provide such services, because the Developer has given away owner rights to these services as part of the development agreement at the time permits were issued.
*Local government elected officials are compensated, are publicly vetted, and they generally possess experience relevant to their respective roles. They often have term limits. Should these officials fail in their work, they are usually voted out of office in the next election. If they engage in unethical or illegal conduct, they will eventually be investigated, and held personally liable, without constituents having to bring a legal suit. *The HOA Board is comprised of volunteers who are practically immune from personal liability and oversight. The burden is placed upon owners and residents to investigate wrong-doing or spend personal funds in filing a civil suit.
*Voting and elections in a city – one vote per registered adult voter vs. one vote per unit (dwelling) owned. That means tenants vote, and each adult in the household gets to vote. No one in the community gets more than one vote. * The HOA Developer is granted weighted voting rights and appoints the Board as long as he controls most of the votes. After turnover, Boards are often elected by representative voting members, proxies, and other dubious means. Of course, allocation of voting rights is inequitable: the more property one owns, the more votes one has. They and the managers they hire often lack necessary personal and professional skills to do the job.
*The city has sovereign immunity, limiting its legal liability. * The HOA is a corporation that must insure itself against potentially high legal liability.
This is one evolving story to monitor closely.
(article on Poinciana seeking municipality status)
(PINCHOS residents group statement on reasons to incorporate)
(Letter from PINCHOS to Florida Legislators)
Becoming a city should also allow homeowners now paying dues to convert those dues to tax deductible taxes.
Very good point Nila!
The Cato Institute disagrees with these home owners, who obviously don’t know what’s good for themselves:
source: “What Are Private Governments Worth?” Regulation. Fall 2005. Emphasis added.
Couple of observations:
1. This Cato study is almost a decade old, and based on pre-great-recession data. What about all of the under-water home owners, and those displaced through foreclosure? Just a wild guess, but I bet that would drastcally change the results if the study were replicated.
2. The Cato study looks at ONE real estate market in the DC metro area, arguably one of the priciest markets, and one that was relatively unaffected by the recession, because that’s where all the politicians and givernment workers own homes! Definitely NOT typical of real estate markets throughout the US.
3. It would be quite interesting if the US Census tracked various demographics in private vs. public governments. The Census breaks out multifamily and condominuim housing to some extent, but does not differentiaite between single family home residents inside vs. outside HOAs.
4. What about the time value of money? HOA assessments are not tax deductible, and the fact that owners pay extra money – with no tax benefit – over time, means that a substantial sum of cash that COULD be invested in other ways is instead tied up in the “private government” machine.
A few years ago during research being done for one of the lawsuits in my HOA, the attorney requested a comparison of property values inside our HOA as compared to outside. The information was provided by one of the leading Realtor/Brokers in the city. His comparison came back that properties within this same zip code that were outside of my HOA were worth 15% more. Today, I would not be surprised if that percentage isn’t considerably higher.
Economic conditions lowered property values but regardless of the market a debt-ridden, failed maintenance, and lawsuit plagued HOA adds to the already depreciated value. And the home owners have no control over it. You can’t paint the house, add landscaping or a new roof to increase the value because all of that is under the control of the HOA board. If you do, you are subject to fines, liens, lawsuits and foreclosure. The home owner cannot save their own sinking ship!
St. James Plantation HOA in Brunswick County, North Carolina became their own town in, or around, 1999.
Please see:
St. James Residents Look To Form Town . – Google News
news.google.com/newspapers?nid=1454&dat…
Google News
Residents of St. James Plantation, the subdivision across the Intracoastal Waterway from Oak Is land, want to become a town with their own government next year. … than seven incorporated towns in Brunswick County: Navassa, Varnamtown, … Incorporating is a smart financial move, said Earl Dye, a St. James Plantation …
Then see: The Town of St. James, NC
http://www.townofstjamesnc.org/
Pingback: Update: Osceola delegation denies HOA residents’ third request to make Poinciana a city - Neighbors at War!