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Volume II, Issue 12  2008

It is the 2008 Budget Stupid!

The 2008 annual fiscal year $9,000,000 free spending budget is a flawed document and should not have been accepted by the Foundation as its operational and financial plan for this year.  MVF’s tradition of arbitrarily setting unsubstantiated multi year future spending entitlements and then bully and beg Homes Corporation and Condominium representatives to bestow their blind faith-based blessing and approval defies any reasonable or commonly accepted budgeting principles or practices.

When establishing the annual assessments for Common Interest Real Estate Associations (CIRA) such as the Montgomery Village Foundation, Boards of Directors, the procedure should be:

• First, determine the expenses necessary to meet the obligations and requirements to preserve, enhance and maintain the association’s assets, facilities and property; deliver required services and set aside reserve funds for current and future use to maintain all assets in a like-new condition.
• Next, make realistic estimates of non-assessment income for the budget year.
• Then, subtract the non-assessment income estimates from the expense requirements to arrive at the amounts necessary to be funded by assessments.
• Finally,  mail the proposed budget to the membership and at a public meeting discuss the merits of the proposed budget and funding proposals.

The MVF power structure has rejected this approach (labeling it as such a silly concept) and believes that the proper procedure is to:

• First, arbitrarily set unsubstantiated future spending entitlements known as “assessment ceilings limits”  for a 5 year period;

• Next, without discussing  or presenting the details of non-assessment income, expenses or reserve funding line item categories, engage in a six month public relations campaign in The Village News to convince Homes Corporations and Condominium elected representatives to bestow the future “ceiling limits,” a blind faith-based blessing and approval.  The campaign rationale resembles a desperate consumer pleading with his or her various credit card holders for a substantial credit limit increase or Congress’s annual vote to raise our nation’s debt limit ceiling.

• At public budget information meetings and meetings of MVF representatives to discuss the proposed assessment ceiling limits, treat those who express an opposing opinion rudely and ignore all questions, suggestions and comments.

Questions and concerns raised by those in attendance at the September 25, 2007 budget information meeting and the October 18, 2007 meeting of MVF representatives were dismissed as not germane to the vote to raise the assessment ceiling.  The questions covered: 

• A comprehensive examination of the budget by each line item
• A plan to contain costs
• The existing MVF budgeting and spending philosophy
• Accounting and reporting credibility
• Cost effectiveness of Village-wide spending programs

“Letters to the Editor” in The Gazette from Jane Hatch, President of  the Board of Northgate Homes Corporation, and in The Village News from Eileen Fishman a resident of Northgate, Michael Sheib, a resident of Normandie on the Lake II, and Mark J. Firley, President of Board of South Village Homes Corporation, cried out for :

• Greater accountability and efficiency from MVF operations
• Stopping the abuse of those who dare to question the accelerating demand for money by the Foundation
• Ending abusive comments directed at those who express a contrary opinion.
• Return to civility and cessation of neighbor-to-neighbor hostility
• Distribution of current year actual to budget results and detailed line item budget justifications before budget decisions can be made.
• A re-examination of 2007 results and the 2008 budget assumptions early in 2008.
• Accountability and explanation to residents of condominium communities of the cost of Village-wide spending programs.

All the letters were received by the Board and staff with silent indifference.

The case to reject and re-examine the 2008 budget as presented was made by North Village Homes Corporation in its North Village View column in the November 2, 2007 edition of The Village News.   “NVHC’s opposition is based on the following reasons: The 2008 budget information provided was very limited, whereby no expenditures data was provided for fiscal years 2006 and 2007 in order to generate a more accurate comparison with the requested fiscal year 2008 budget increase.  In addition, there was no breakdown of capital projects provided, including no strategic plan for future year guidance on capital projects.   

“At a minimum, our expectation from the MVF is to obtain a document breaking out the revenue/expenditures supporting each department, past year fiscal data, mission statement, personnel expenses and performance goals/indicators for fiscal year 2008, including a brief narrative describing the functions assigned to all MVF departments. 

Basically, we needed more detailed information of a true budgetary character. .. MVF must modernize its budget process and make these documents available to the paying residents in a consumer-friendly readable manner…Our MVF representative found it impossible to judge the validity of such spending as tied to a significant ceiling increase and to determine how much is really justified for future operation.  Our MVF (elected) representative has a fiduciary responsibility to analyze the type and character of such expenditures and is expected to act competently and responsibly on major assessment increase requests.”  

Unfortunately, the North Village’s View on page 15 of The Village News, the dismissal of its comments and the concerns addressed at public budget meetings and in the letters printed in The Gazette and The Village News were answered with two front page articles by staff writer, Jaime Ridgley, in the same November 2 edition.  

Headlined “MVF Board Passes 2008 Budget,” Ridgley writes “Board President Robert Hydorn commented that he was not completely comfortable with the budget, but he would vote for it.  Board members Kathy (Katherine) Gray and Scott Johnson voted against the adoption of the budget, but it passed with five Board members in favor.  Board members Jim King and Neville Levi were absent from the meeting.”   

The outcome could have been different if King and Levi, whose previous votes had supported financial reform, weren’t missing and comforted Hydorn enough to vote against the budget.  

The lead front page “In the News” feature broadcasted “Reps Vote on $3.14 Assessment Ceiling Increase to Cover 2008” and announced “Newly appointed EVP Dave Humpton is pleased that the representatives voted to cover the 2008 budget with the assessment ceiling increase.   

“He and the MVF Board will focus on the 2009 budget in December and January to map out the potential budget increases and define the assessment ceiling needs for the next 5 years.  Then, from January to March, residents will receive more information about the need to raise the assessment ceiling further, with a vote on another increase tentatively scheduled for the end of March. 

“The Foundation must have the ceiling increase decided before 2009 guidelines are set in May.  Two information sessions will take place for residents before the next assessment ceiling vote.” 

Was this an accurate account by Ridgley of what happened at the October 18, 2007 Board meeting?  Did Dave Humpton and the Board endorse at that meeting a plan to embark on another ill-advised assessment ceiling campaign, ignore the expressed concerns of so many about the inadequacy of the 2008 budget before “mapping out potential budget increases and assessment ceiling needs for the next 5 years?” 

Or was this just MVF Consultant Lois Campbell in her capacity as MVF Communications Czar still very much in control?

The Observer’s MVF Budget Presentation  

The standard budget presentation for a CIRA is a summary and analysis by income and expense categories and major grouping and totals comparing auditing prior fiscal years, the current fiscal year’s budget and fiscal year end projections compared to the proposed upcoming fiscal year budget.    

The Observer has prepared a summary schedule comparing the MVF 2006 Audit, the 2007 Budget, the 2007 Projected Actual, the MVF 2008 Fiscal Year approved budget with The Observer’s estimated budget.  Link here the summary analysis of the MVF 2008 Budget.  It's not pretty!