Thursday, May 05, 2016

Sperlonga, Equifax to record HOA payments for credit scores | 2016-05-04 | HousingWire

Sperlonga, Equifax to record HOA payments for credit scores | 2016-05-04 | HousingWire:

"Sperlonga will use its technology to automatically extract assessment payment data and account status every month for all HOA property owners, according to a release. It will then report the account data to Equifax.

"We believe this will have a major impact on the HOA industry," Sperlonga CEO Dan Berman said. "According to the Community Association Institute, associations along with property management companies collect approximately $70 billion in assessment payments each year and CAI estimated there were at least 333,000 community associations in the U.S.""


Nobody knows how much HOAs and condo associations collect because government has washed its hands of any responsibility for this massive privatization of services and infrastructure. But in any event, now people who fall delinquent on their HOA assessments will have a problem with their credit rating.

Man admits stealing $2.5M from homeowner associations - The Washington Post

Man admits stealing $2.5M from homeowner associations - The Washington Post:

"BALTIMORE — A man who prosecutors say financed a lifestyle of nightclubbing, NBA games, manicures and limousines by stealing $2.5 million from his clients has pleaded guilty to wire fraud.

The U.S. Attorney’s Office said in a news release that 39-year-old William Francis of Elkridge entered the plea Wednesday in federal court in Baltimore.

Prosecutors say Francis owned two companies which managed HOA reserve funds, which were typically held in savings or money market accounts.

According to his plea agreement, Francis defrauded at least 51 of his company’s HOA clients by taking reserve funds.

Prosecutors say Francis spent the money on Washington Wizards games; adult entertainment venues and nightclubs; dog grooming services; a nail salon, and a limousine service.

Francis faces a maximum of 20 years in prison at sentencing Sept. 13."


Yet another embezzlement from HOA reserve accounts. When will state legislators understand that there has to be oversight of HOA/condo finances?

Thanks to Shu for this link.

Wednesday, May 04, 2016

Bill would grant tax deduction for homeowners association assessments - Chicago Tribune

Bill would grant tax deduction for homeowners association assessments - Chicago Tribune:

"The same residents also pay local property taxes to municipal, county or state governments. But unlike other homeowners, only their local property tax levies are deductible on federal tax filings. Their community association assessments that pay for government-type services are not. Now a bipartisan group of congressional representatives thinks that's inequitable and needs to be corrected. Under a new bill known as the HOME Act (H.R. 4696), millions of people who live in communities run by associations would get the right to deduct up to $5,000 a year of assessments on federal tax filings, with some important limitations:

• Deductions would phase out if their incomes exceed $115,000 for single filers, $150,000 in the case of joint returns.

• The property would have to be their principal residence, not a vacation or rental home.

• To qualify for write-offs, the assessments would have to be "regularly occurring," mandatory levies that directly benefit taxpayers' properties and that exist solely because of their automatic membership in the homeowners association.

The bill's primary author is Rep. Anna G. Eshoo, D-Calif. Co-sponsors include Reps. Mike Thompson, D-Calif., and Barbara Comstock, R-Va.. Though the bill has little chance of moving through the House or Senate during this election year, it sends a message to the legislative committees now working on possible tax code changes for next year: Congress needs to acknowledge the role the country's community associations play in providing municipal-type services. The way to do it is to allow deductions on a capped amount of the money residents are required to pay to support community services."


The bill has industry support. I would be surprised if this passed, because it would cost billions of dollars in lost income tax revenues, but it it interesting to see bipartisan support for the idea. Here is  link to the text of the bill.

Tuesday, May 03, 2016

Documents meant to combat fraud in condo elections raise more questions | Miami Herald

Documents meant to combat fraud in condo elections raise more questions | Miami Herald: "Representatives of Sunshine Management Services, which manages the complexes, said it implemented the new system of securing affidavits to prevent electoral fraud. The company has said residents have repeatedly complained about falsified signatures on the ballot or ballot envelopes in elections of association boards.

But an investigation by El Nuevo Herald and Univision 23 showed that the affidavit system put in place by the company has substantial irregularities."



Monday, May 02, 2016

Hundreds protest against condo fraud in South Florida | Miami Herald

Hundreds protest against condo fraud in South Florida | Miami Herald:

  "More than 250 South Florida condo residents marched Saturday through the streets of Doral to demand that authorities take steps to stop a wave of fraud hitting their neighborhoods.

With posters, flags and whistles, the group of protesters marched through downtown Doral shouting about alleged abuses by their board of directors and the private companies hired to manage the condominiums.

“We want our demands heard in Tallahassee,” said William Mendieta, one of the organizers of the march and resident of the Las Vistas condos in Doral. “We have left behind apathy and indifference to unite with other condos so that together we can make one request: Justice!”

It was the fifth public protest since an investigation by el Nuevo Herald and Univision 23 in March revealed the systematic frauds facing condos in Miami-Dade County — including at least 84 fraudulent votes in November election for the board of directors at The Beach Club condos in Fontainebleau Park, and a fraudulent bidding process in which a company won a $5.2 million contract in a competition against two front companies."

'via Blog this'

Puerto Rico Will Default on Government Development Bank Debt - Bloomberg

Puerto Rico Will Default on Government Development Bank Debt - Bloomberg

"Puerto Rico will default on a $422 million bond payment for its Government Development Bank, escalating what is turning into the biggest crisis ever in the $3.7 trillion market that U.S. state and local entities use to access financing...A default on those constitutionally guaranteed bonds would be the first by a state-level borrower since Arkansas missed payments on its debt in 1933. That would likely trigger a restructuring of the commonwealth’s $13 billion of general obligations, which would be the largest-ever in the tax-exempt market."
This situation has been building for a long time. Puerto Rico has $70 billion in muni bonds, they have been in the grip of a severe recession for a long time, and now they are in the process of defaulting on these bonds, piece by piece. There is an unusual problem in that Puerto Rico is a US territory, not a sovereign nation, so it can't go to the International Monetary Fund or pursue other sovereignty-related remedies. It isn't a state, either, and it can't go bankrupt. Congress passed  law in 1984 saying that US territories can't use Chapter Nine, the bankruptcy provision for local governments. So Puerto is betwixt and between, as the saying goes. They can't pay and they can't discharge or reorganize the debts, so they are defaulting. The Republican-controlled, do-nothing, blame-Obama-for-everything Congress could fix this, but so far they haven't.  Republican Speaker of the House Paul Ryan clearly wants to take action.

Sunday, May 01, 2016

LaHood alleges misuse of HOA funds for pool - San Antonio Express-News

LaHood alleges misuse of HOA funds for pool - San Antonio Express-News

"More than $300,000 in homeowner association funds for a swimming pool that was never built are at the center of a criminal case filed against two men with ties to the city of Windcrest.

Bexar County District Attorney Nico LaHood said Robert Colunga and Tom Pittman were indicted by a grand jury in April on the first-degree felony charges. Although a civil lawsuit is pending in the project, LaHood said he believes a criminal case also is warranted against the two men, and possibly others, the case involving plans for a pool to be built in San Antonio’s Stone Oak area."


Texas is about as laissez-faire as any big state when it comes to regulating what goes on in HOAs. And these private associations have a lot of power over people there. Civil litigation alone doesn't get the job done. With $300K in losses, it isn't hard to see why criminal charges are being filed. The question is, how many other associations have similar problems that haven't come to light?

New Local Law Says Parents of Bullies Must Pay Fines if They Don’t Control Their Kids | LawNewz

New Local Law Says Parents of Bullies Must Pay Fines if They Don’t Control Their Kids | LawNewz

Interesting approach. I'm always intrigued by local ordinances that experiment with unusual approaches to solving problems. There is something called "vicarious liability," where one person is held legally responsible for the conduct of another person, but I've never read about it being applied in this way.  Bullying is a big problem and currently nobody pays for it except the kids who get bullied. Teachers and principals pretend they don't know it is happening, parents deny that their precious snowflake would ever bully anybody, the police pretend that crimes like assault and robbery aren't crimes if they happen in a school, and the bullies get away with it. So here is an effort to fine the parents of the bully. But is it legal to impose fines on parents for not preventing something their kid did when he was at school, supposedly under the control of school officials?

Michigan Lawsuit Shows U.S. Voters May Not Technically Have the Right to Elect Their Mayors - CityLab

Michigan Lawsuit Shows U.S. Voters May Not Technically Have the Right to Elect Their Mayors - CityLab

From the State of Michigan's brief, defending the power of state-appointed emergency managers to take over running a city:

"Here, Plaintiffs are still free to vote in federal and state elections. And they offer no adequate support for the proposition that the right to vote in local elections, once extended, becomes a fundamental right as opposed to simply a right to participate on equal footing. ...Nor do Plaintiffs’ cited cases offer support for a recognized right to participate in local political processes, even where the local unit is a legislative body."


I've posted about this case before.  The State of Michigan says that as long as there are state and federal elections, the right to vote is not impaired--you have no right to vote for local government officials. If the state "extends," i.e, give you out of the goodness of their heart, that right, then it still doesn't include the right to choose the people who make the real decisions.
The implications go beyond Michigan. Extend the principle to other parts of the local government system. County boards, special districts, school boards, and the rest of the alphabet soup of local government entities.  Do you have the right to choose the people who make the decisions on those bodies? Or can a governor put them in receivership?
As for HOAs, if the state can take away your power to choose the city council and the mayor, making constitutional rights arguments about HOA elections would seem like a lost cause. So this case is significant. It is in the District Court now, meaning the lowest level of federal court where trials are held. But if it goes up on appeal to the Sixth Circuit, it could become a major case on voting rights and autonomy of cities. The Center for Constitutional Rights is co-counsel, challenging the emergency manager law. You can read up on it there.

Saturday, April 30, 2016

Colo. Court Case Puts Spotlight on Special Districts That Issue Munis | The Bond Buyer

Colo. Court Case Puts Spotlight on Special Districts That Issue Munis | The Bond Buyer

"A broad ruling by the Colorado Court of Appeals in a case of a developer's egregious fraud has sent lawyers to the state's General Assembly for legislation to protect existing special districts that issue tax-exempt bonds...The case involves a high-profile developer, Zachary Davidson, who used sham contracts to make him and five associates organizers or "eligible electors" who formed a special metropolitan district in Greenwood Village, Colo. that issued almost $35 million of bonds now in default. Davidson included nearby condominium purchasers in the district and obligated them to pay taxes to help pay off the bonds, even though the condo owners were unaware they were in the district or that bonds had been issued. Davidson stole millions of dollars of bond proceeds for his personal use and was eventually indicted on 20 felony counts by an Arapahoe County, Colo. grand jury. He eluded law enforcement for months and ultimately committed suicide by hanging himself from a tree in Withlacoochee State Forest in Florida at age 46. After several years of litigation, the Colorado Court of Appeals issued a ruling on April 21 favoring the condo owners' Landmark Towers Association, Inc., ruling in part that Davidson used sham contracts to give him and his associates control of the special district and the bond issue."


Here is a link to the opinion.  The court ruled, "In sum, because the TABOR election was conducted illegally —with the participation of ineligible voters and without constitutionally required notice to eligible voters — the District’s taxes to pay the bonds were levied illegally. Pursuant to TABOR’s refund provision, the District must refund all illegal taxes paid with ten percent annual simple interest. Id. at § 20(1). The Landmark buyers are also entitled to an order enjoining the District from levying any further taxes without proper voter approval."

So now the lawyers and people buying these special district muni bonds are afraid that other people will head for court to unwind the tax obligations imposed on them by these special districts.  They want the Colorado state legislature to save them from more litigation. As I have written before in connection with Florida's special districts, some of these arrangements are so undemocratic and autocratic that they make HOAs look like the Golden Age of Pericles.

And the Colorado special district debacle has the potential to shift the national picture on these "dirt bond" districts:  "The Treasury and IRS are now proposing rules to expand that test to add two new requirements. Under rules they proposed February, a political subdivision that can issue tax-exempt bonds, would also have to serve a governmental purpose and be governmentally controlled "with no more than an incidental private benefit. The proposed rules have met with a firestorm of criticism from muni lawyers who have warned they would threaten existing special districts and potentially millions of dollars of bonds."

Stay tuned--this sort of thing flies under the public's radar, so you never know what a state legislature will do with it.

Rauner turns to privatization push during second year in office - Chicago Tribune

Rauner turns to privatization push during second year in office - Chicago Tribune

Illinois Governor Bruce Rauner is a private equity billionaire with no political experience and no idea what he is doing, except that he hates the very idea of government and public employees and unions and wants to destroy all three.  He used his personal wealth and his connections to other fat cats to basically buy the job.  He funneled millions of his own money into a record-breaking tsunami of money and outspent Pat Quinn almost two to one.  He also had the help of the Chicago Tribune, which is relentlessly anti-union and pro-big business, and the Chicago Sun-Times as well (there were some interesting financial connections there).  His big idea is to turn Illinois into a Republican state. He wants to destroy the Democratic Party's political base. Destroy unions, the tort system, public employee pension systems, and the workers' compensation system.  Let cities and school systems go bankrupt so they can break their contracts with unions. Enact term limits to get rid of powerful Democrats in Springfield. It's basically Scott Walker in Wisconsin without the charm.

But Democrats won big in both houses of the state legislature, and they won't commit political suicide by abandoning the people who voted for them. So how was Rauner to impose his "turnaround agenda" on the state? Simple: refuse to sign budget bills, starving social service agencies and the public education system of funds. That's what he has been doing since the day he was elected. Poor people, the disabled, the elderly, and students will suffer until the legislature turns the whole state over the Rauner and his party. Social service providers are laying people off and going out of business. Chicago State University just laid off 1/3 of it's staff.  And the suffering goes on, and on, and on.

Rauner  is one of these American corporate tough guys who proves how tough he is not by suffering himself, but by enjoying the suffering of the little people.

Now his big idea is to privatize every single state function that he can.  There seems to be no principle behind this--no set of guidelines for which services would be better to privatize and which to keep inside government.  And of course he won't work with the Democratic Party that controls the state legislature, so this is going to be done through executive action.

The risks here are obvious. People may end up paying more for less. The opportunities for corruption increase. Wages will be lowered and people will be laid off, leading to consumers having less purchasing power, which may hurt the state economy.

I wish I could find some silver lining in the so-far disastrous Rauner administration, but I can't. This man is just destroying everything he can't control, and he doesn't seem to care who gets hurt.

Friday, April 29, 2016

Master-Planned Communities Look to Innovative Future - Urban Land Magazine

Master-Planned Communities Look to Innovative Future - Urban Land Magazine

"One of the notions presented to the panel was to offer health care for MPC communities. “If a company has 10,000 employees and can offer insurance to all of them, why can’t an MPC insure the 5,000 people in the community?” Cecilian asked. “When we consider millennials today, the two great concerns are health care and student loans. Why not look at the residential community to provide group health insurance? It’s a very interesting concept, especially with what’s happening in tele-medicine. You could make group health insurance part of the real estate package...Among the other topics considered: raising equity or debt through crowdfunding and providing for driverless cars. Crowdfunding in MPCs could be used to support community amenities, create retail options earlier, or construct revenue-producing venues such as golf courses. “Crowdfunding is coming and hitting real estate very quickly,” said Kaufmann. “Smaller-scale projects could be crowdfunded. There is a lot of money out there and it’s not that hard to organize. You should think about it for some pieces of the community.”


Notice how the development industry always uses the fuzzy, feel-good word "community" instead of explaining exactly how your HOA, run by unpaid, untrained volunteers, would somehow become responsible for your health insurance.  And crowdfunding instead of assessments to pay for "community amenities" means that your private streets and the pool would be dependent on people chipping in whatever they want by clicking a button on a website.  

What could possibly go wrong with this bright, shiny future?