The Dues Project's Reply

At the September, 2015 Community Improvement Plan meeting, Chris Wittmayer raised a
concern that the proposed dues increases may harm property values by making our lots and
homes more expensive and less competitive. The POA Board formed an ad hoc committee to
look at the issue. When the ad hoc committees report was submitted to the Board, Chris
Wittmayer provided a Minority Report to the Board. Following the Boards October meeting
where they accepted the Ad Hoc committee report, the Board posted the Committee Report and
the Minority Report on the POA website. The Board also posted a Board Response to the
Minority Report. The following is Chris Wittmayers reply to the Boards response. Please note
that this reply is focused on changing the dues to a property-value-based methodology. The
Dues Project is also exploring a variety of other options. The community should discuss a
variety of dues structures in order to find one that works well for everyone.
The black text below is taken from the POA Board's Response to Minority Report and Chris
Wittmayer's Reply is in this teal-colored type.
Areas of Agreement
The Board agrees that Governors club property values have been lagging the market for several
years and that the competition will be increasing with the addition of additional new
developments in the Triangle and Chatham County. Marketing and the "Product" (community
and infrastructure) needs to be improved in order to remain competitive. The new website, joint
marketing with the club, and improvement of our roads and infrastructure are all examples of
work underway to improve in these areas.
There is also agreement that cost of ownership is a key consideration for buyers and raising
annual dues does tend to hurt the marketability of homes; however, as the minority report points
out we need to fix the roads and not doing so also hurts the marketability of our homes.
Areas of Disagreement
The Board disagrees with several assertions in the minority report. Those assertions and the
Boards response are detailed below:
1. Minority Report Assertion: Dues structure primarily affects lower priced homes.
Board Response: The data presented by the committee indicated that 38% of the
homes actively marketed in 2015 have sold. The percentage of homes sold was higher
for those homes in the lower (43%) and medium (46%) price ranges and lower (26%) for
the higher price range homes. The data also shows that homes in the lower and medium
price categories sold at a higher proportional rate than their fraction of all GC homes and
their proportion of homes placed on the market. Higher priced homes sold at a lower
proportional rate. These sales distributions do not support the premise that lower priced
homes have been more adversely impacted by the current dues structure.
Dues Project Reply:

1. The data cited by the POA Board concerns sales in 2015 prior to any
announcement of the 49% dues increase over the coming five years. It does not tell
us anything about the effect of the future increased annual dues. Further, the fact
cited above by the POA that only 38% of the homes actively marketed in 2015 sold
is not a good result, meaning that 62% did not sell. Moreover, the POA Board's
report on the effect of the planned dues increases proves the very point that the
dues structure primarily and adversely affects GC's less expensive homes. On
p. 12 of the POA Board's Ad Hoc Committee's slide presentation it states, "The
lower the (GC) home value, the less the GC tax advantage offsets dues increases."
On p. 13, the slide presentation states, "Over the next 4 years, GC homes under
$440-600k will be increasingly defensive to homes in Orange and Durham
Counties." Stated more clearly, by "increasingly defensive," they mean
"increasingly at a disadvantage" while more expensive GC homes will continue to
have a cost advantage.
2. Concerning the Board's 2015 data, ask any realtor, or apply some common
sense, less expensive homes sell at a higher rate than more expensive homes;
there are simply more buyers in the lower price ranges and thus more
demand. Going forward, however, if the cost of ownership of GC's less
expensive homes is not competitive in the market place, those homes will further
lag the market.
2. Minority Report Assertion: Cost of road repairs has been underestimated.
Board Response: The minority report states that "people in the know" have suggested
that the projected cost of road repairs is based on very low estimates. The Board agrees
that the cost of road construction is unpredictable; however, the current projections were
made by individuals who have been involved in the actual roadwork and are familiar with
our roads. Relying on estimates from unknown individuals would not appear to be the
best approach. The Board would be willing to accept input from these individuals and
revise estimates as appropriate. The cost increases included in the most recent
estimates are consistent with higher repair costs experienced in the bidding of the current
repair phase.
Dues Project Reply: The view that the estimates of future road costs were low
was expressed by the member of the POA Ad Hoc Dues Committee during a
meeting of the committee. It was said as an aside between two members and
perhaps not heard by all during ongoing discussion.
3. Minority Report Assertion: Realtors input is uniform.
Response: The committee received input from three realtors and the minority opinion
author provided input from an additional "top realtor" that he spoke with. Two of the four
felt that the dues when combined with taxes, would not be an issue that drives buyers out
of Governors Club. One felt that the dues increase would have a significant negative
impact. The fourth felt that moving to a tax based structure would cause friction between
residents and hurt property values. Obviously there are many differing opinions in the
Real Estate Community.
Dues Project Reply: The minority remarks did not assert that "Realtors input is
uniform." It simply states that a top realtor that sells GC emphatically agreed that
the planned dues increase will harm property values for our less expensive homes.

She added that in just the last month she had lost two sales in GC when she told
them about the dues increases. If you want to buy or sell in a community, it's smart
to talk to a top realtor. That is what was done. It would be prudent to consider her
expert opinion and the lost sales. Real estate sales in the coming months will
provide additional data.
4. Minority Report Assertion: Tax-based dues structure is needed to help sell lower
priced properties.
Board Response: Assertions that residents owning lower priced properties will be
unable to sell their homes, give up trying, and rent their property (resulting in more
renters and transient residents) with fewer people joining the club are speculation and,
again, not supported by any data. The current data show that selling homes at the higher
price ranges is more difficult and requires more time. Implementing a value based
structure, which would increase the dues of a $3M home by 350% and result in them
paying 10 times the amount paid for a $300k home for the same services. The Board
believes this will negatively affect the sales of higher priced homes.
Dues Project Reply: It's a basic principle of economics, and also common sense,
that if you increase the price (our annual dues) in a competitive market, you will
reduce demand. And if the price increase is higher as a percentage of the price of
the product, you will reduce demand for that product more. The POA Board has
announced the following annual dues amounts for the coming five years:
2016: $2,468
2017: $2,715
2018: $2,986
2019: $3,285
2020: $3,351
Smart potential home buyers considering GC will add that up and see that they
will be paying $14,805 in annual dues over the coming five years. That amount is a
much larger percentage of the value of a $500,000 home than of a $2 million home.
So if a $500,000 home and a $2 million home are for sale, which sale do you think
will be more affected by the cost of dues? Also refer back to our Reply
in paragraph 1 above and the POA Board's admission that GC's less expensive
homes will be adversely affected by the dues increases.
5. Minority Report Assertion: Tax-based system is used elsewhere.
Board Response: The author indicates that a value based structure is not revolutionary
and is used in many towns, counties, states etc. This is true, but it is not the case for
homeowners associations. The dues committee determined that over 1,600 of the HOAs
represented by the Boards attorneys firm use a one lot, one assessment structure similar
to the current structure in Governors Club. Not one uses a structure based on tax value.
The committee also collected data on six NC communities that are similar to GC in terms
of size, age, number of homes, and diversity of value of homes. All these communities
use a "flat" dues structure (like GCs) in which expenses are divided evenly among lots.
Dues Project Reply: Here we are talking about apples and oranges. We are making
the point that towns, cities, and counties use the widely accepted percent of value
or ad valorem ("according to value") system to raise needed revenue. GC is more

like a town than simply a housing development. Many towns in NC are smaller than
GC. Further, our preliminary research has found that the Rancho Santa Fe
community in California has successfully used a percent of assessed value for
annual dues for decades. Their current annual dues are $.14 per $100 of assessed
value.
6. Minority Report Assertion: Committee was not representative of GC homeowners.
Board Response: One issue raised in the minority paper was that the dues committee
was not representative of the diverse owners and neighborhoods in Governors Club. The
committee and Board disagrees with this opinion. The fundamental premise put forth was
that dues should be based on the value of a home. The members of the committee were
respected members of the community that represented the total spectrum of homes
priced from under $400k to over $2.5m. Half the committee members would likely be
positively impacted financially while the other four would be negatively affected by the
suggested change. In addition to the eight members on the committee, Les Stuewer, a
member of the Board, was requested to be the Board Liaison and facilitator for the
committee. This is the same structure used on almost all the POA committees. This
structure was discussed in the initial meeting and it was stated that Les was not a voting
member of the committee. The minority opinion paper erroneously includes Les in all his
data relating to the committee structure.
Dues Project Reply: The unrepresentative nature of the committee is plain on its
face as shown in the minority remarks and the point will not be belabored here.
Les Stuewer was clearly a member of the committee and not merely acting as a
board representative. He chaired the committee and guided the discussion. The
clear purpose of the committee was stated by Chair Stuewer: "...we are attempting
to do our assessment quickly so as not let the topic simmer in the community." In
other words, lets put this proposal to an end quickly and maintain the status quo.
There was no intention to fully consider the proposal and do appropriate due
diligence. You can't carefully consider a new dues structure in two meetings. Thus,
the Dues Project was formed to do the needed due diligence.
7. Minority Report Assertion: A 2012 study by the POA Long Range Planning
Committee was ignored.
Board Response: The referenced study was the work product of a few members of the
committee. However, as a whole, the committee decided not to use the study since it
compared dissimilar communities. In addition, the committee did not believe they could
support the conclusions based on the data in the study. The study was never formally
published or acted upon since it was never included in the Long Range Plan or presented
to the Board for consideration or vetting. The Immortology Report presented to the
community in 2014 provides comparisons between Governors Club and similar
communities in the area. These comparisons are considered more accurate assessments
and their findings have been the basis for many of the actions currently underway within
the community.
Dues Project Reply: The Board did not publish the study, however the 2012 study
was a work product completed by Long Range Planning Committee members who
spent considerable time identifying comparable communities. It compared GC to
seven other gated, golf communities in the southeast. The Report concluded,
"Among the eight gated golf communities in the survey, Governors Club ranks

poorly overall. The poor ranking appears to be primarily due to a combination of

high dues (then $1,950) and taxes coupled with an absence of amenities." In the
almost four years since, our dues have gone up and amenities remain absent. To
request a copy of the 2012 study, send us an email: theduesproject@gmail.com.
The POA Board made no attempt to rebut one section of the minority remarks:
And which GC property owners benefit from improved roads and by how
much? Assume that all property owners benefit by a 10% increase in value, so:
A $100k lot appreciates by $10k.
A $500k home appreciates by $50k.
A $1 million home appreciates by $100k.
A $2 million home appreciates by $200k.
So do we all benefit equally from our investment in improved roads or do we
benefit based on the value of our properties?
POA attorney's advice: The Ad Hoc POA Dues Committee Final Report states (p.
4): The Committee received legal advice from the POA Boards attorney on changing the
GC annual dues structure. Assessing annual dues on a tax value basis would not violate
NC statutory law. However, basing assessments on tax valuations would increase the
likelihood of legal challenges under common law due to: Ceding control to external
authorities (i.e., Chatham County) and assessing based on criteria other than services
used.
Dues Project Reply: What the POA's report omits is that the attorney stated that
this opinion was just "off the top of her head" and not based on any research.
Further, if it is a problem to assess dues based on criteria other than services
used, is it a problem that unimproved lot owners pay 75% of the full dues and
make little or no use of services? Moreover, an ad valorem approach to dues would
not "cede control to external authorities," it would simply use available
government data on values to determine dues. It is common for private parties to
make use of government data in contracts.