MXB Wire 2020 Voter Compass Update for September 4, 2020

In this special installment of the MXB Wire I report on the five homeowner associations that Steve Larsen illustrates in support of his advocacy to impose an 8% rental tax during the information session on February 10, 2018.

My name is Greg Pichler. You are watching my special installment of the MXB Wire for September 4, 2020.

the 2018 list of "neighborhoods" that charge either a percentage fee on rental income or flat fee

In his 2018 list of neighborhoods that charge either a percentage fee on rental income or flat fee Steve Larsen includes only five homeowner associations to illustrate his advocacy for a rental tax, including Salt Meadows, Cotton Patch Hills, Ocean Ridge, Ocean Breezes and Breakwater Beach. [1] [2] Although in his campaign material Larsen asserts that Middlesex Beach is an "outliner" in terms of charging tenants fees, that is a false narrative. [4] The opposite is true. The vast majority of homeowner associations do not charge what are referred to as "resort fees". Further, the second false narrative which Larsen advances is that these fees are only charged to tenants and not to owners. In fact the fees these homeowner associations charge are "usage" fees, which are indiscriminantly charged to both owners and tenants.

Salt Meadows

Steve Larsen lists Salt Meadows as a "neighborhood" that charges tenants a 150.00 dollar fee per rental incident. [2]

In fact Salt Meadows is a homeowners association located in Fenwich Island, Delaware. According to a real estate agent with ResortQuest Salt Meadows charges a 150.00 dollar "resort" fee to tenants for use of the pool. [5] The fee is what is known as a "usage" fee. The usage fee is indiscriminantly charged to both owners and tenants.

As the homeowners association has closed its pool, the usage fee is entirely waived for the 2020 season.

analysis

Middlesex Beach does not have amenities, like a pool.

Cotton Patch Hills

Steve Larsen lists Cotton Patch Hills as a "neighborhood" that charges tenants a 50.00 dollar fee per rental incident. [2]

In fact Cotton Patch Hills is a homeowners association located in North Bethany, Delaware. According to a real estate agent with ResortQuest Cotton Patch Hills charges a 50.00 dollar "resort" fee to tenants for use of the tennis courts and other amenities, like a pier. [7] The fee is a "usage" fee. The usage fee is indiscriminantly charged to both owners and tenants.

analysis

Middlesex Beach does not have amenities, like tennis courts or a pier.

Ocean Ridge

Steve Larsen lists Ocean Ridge as a "neighborhood" that charges tenants a 200.00 dollar fee per rental incident. [2]

In fact Ocean Ridge is a homeowners association located in North Bethany, Delaware. According to a real estate agent with Wilgus Realty Ocean Ridge charges a 200.00 dollar "resort" fee to tenants for use of the pool, tennis courts and the private beach. [6] The fee is a "usage" fee. The usage fee is indiscriminantly charged to both owners and tenants.

analysis

Middlesex Beach does not have amenities, like a pool or tennis courts. The association does have a private beach, which it could treat as an amenity and charge usage fees, like Ocean Ridge does.

Ocean Breezes

There is no homeowner association called Ocean Breezes in Delaware. There is a self-described homeowners association called Seabreeze within the municipality of Dewey Beach, Delaware. Seabreeze charges a 3% rental tax. As Seabreeze appears to have the jurisdictional authority to levy taxes, all tenants booking a rental property in Seabreeze on the service, Vacation Rental by Owner, are automatically charged a 3% tax. [2]

analysis

The Middlesex Beach Association is an incorporated legal entity that is not within a municipality. The association does not have the jurisdictional authority to tax properties.

Junction and Breakwater Trail, Rehoboth Beach, Delaware

There is no neighborhood called Breakwater Beach in Delaware. There is an HOA called Junction and Breakwater Trail, Rehoboth Beach, Delaware. [2]

The Usage Fee Alternative

In the altenative to a rental tax, the association can elect to follow a number of these homeowner associations insofar as how they define access to the private beach as an amenity and charge a usage fee. The usage fee would not discriminate against a tenant in favor of a owner. Rather a usage fee would collect fees according to the use of a particular amenity. As the budget for the beach patrol is 100,000.00 dollars or thereabouts, the assocation could elect to detach the cost of the beach patrol, e.g., access to the beach, from the assessment and charge a separate annual fee for metered access to the beach, e.g., a beach pass. In this scenario a beach pass would cover access to the beach for one and only one patron.

Currently, an MBA beach pass covers access for a maximum of twenty five people and is bundled in the annual assessment.

Given the annual budget of the beach patrol is currently 100,000.00 dollars per year or thereabouts, given the association consists of 240 properties or thereabout, this will reduce the annual assessment by approximately 400.00 dollars. Given the demand for an average of ten beach passes per property, each seasonal beach pass would cost approximately 40.00 dollars. Residents, like Chuck Taylor and Peggy Taylor could elect to only purchase two seasonal passes for 80.00 dollars, whereas rental property owners like the property at 53 Dune Road, would need to purchase up to 16 seasonal passes, one for each tenant, for 640.00. Under this scenario the owners who consume the most utility at the beach pay the most money towards the amenity, e.g., the beach.

Under this plan homeowners, having no more than two adults, who do not offer their property for rent, can save as much as 320.00 dollars off what they are paying currently.

endorsement declined

In my article, MXB Wire 2020 Voter Compass, dated August 15, 2020, I gave candidate Steve Larsen a conditional endorsement given his record of service to the association provided he recuse himself from all motions touching on the rental tax issue. Over the course of a board meeting on Saturday, August 22, 2020 I personally asked Larsen to contact me in private so that I would have the opportunity to learn if he would be willing to recuse himself from all motions dealing with the rental tax. He never did contact me.

In his revised campaign material Larsen is clearly doubling down on the ill advised rental tax. In his revised campaign material, Larsen also explicitly calls me out, alleging I have "mischaracterized" his position as well the position of Marty Shecter and Nancy Glasgow. [4] However, nowhere in Larsen materials does he explicitly state what his plan moving forward is. This is a typical ploy that people use when they are caught in a lie.

The problem with Larsen's assertion that I am misrepresenting his position is since 2018 when Larsen reportedly backed the 2018 rental petition, Larsen has never explicitly stated what his revised plan moving forward is. Nowhere in his revised campaign material does Larsen spell out the formula by which he is proposing to collect monies from the tenants of the vacation rental properties, nor whether the fees will take the form of a flat fee or a percentage fee against rental income, nor does Larsen provide a rationale behind how his plan is not in conflict with the laws governing homeowner associations in the state of Delaware. In effect Larsen leaves his position flapping in the wind.

Over the course of the board meeting held on March 14, 2020 Larsen stated he had developed a draft of an amendment for the covenant change to charge a fee against owners who lease their property. However, Larsen never shared the draft of the amendment.

Larsen, personally, lacks the requisite skill to author the proxy for a covenant change, himself. That's why Larsen seeks to force the community to engage the resident lawyer to draft it. In effect Larsen is compelling the vacation rental property owners to pay the legal expense to put a matter that is detrimental to their interests up for a vote.

I am not a mind reader. If Larsen has moved off the 2018 Rental Tax petition authored by Marty Shecter and Nancy Glasgow, which he reportedly backed at that time, it is incumbent on him to explicitly lay out the change to his position and not for me to guess at what he is proposing.

In any event I therefore change my endorsement on Larsen from a conditional endorse to a decline. I personally cannot endorse Steve Larsen for a fourth term on the board for the reasons stated in the article, MXB Wire 2020 Voter Compass, and the reasons I state in this article.

Shecter, Glasgow and the 2018 Petition

Whereas I find Larsen to be evasive and at times disingenuous, Shecter is perhaps the most genuine of the three (e.g., the three being Larsen, Shecter and Glasgow). Shecter has consitently stated that in his words "vertical motels" are the problem in Middlesex Beach and the owners of these "vertical motels" need to be taxed to compensate the balance of the community. In his mind Shecter believes that vacation rental properties have a much larger impact on the services, trash collection, beach patrol and community patrol than other properties. Under his plan Shecter is seeking to tax vacation rental property in the amount of 240,000.00 dollars. Under his plan Shecter is seeking to compel ocean front vacation property owner to chip in 8 dollars for every one dollar he chips in. The problem with Shecter arguments is that you cannot double charge for services you have already billed for. Trash collection, beach patrol and community patrol are covered as part of the annual assessment.

Nancy Glasgow's sole motivation behind the rental tax is to make someone else pay for her utility at the beach. Glasgow has little interest in the details as long as it gets done.

our joint future

On September 19, 2020 you as a property owner will be asked to make a choice. Who do you trust? Do you want to charge ahead with an ill conceived, rental tax following the formula of a number of municipalities, who have the jurisdictional authority to tax its residents, who fund staffed visitor centers and the like? Do you want to charge ahead with a tax that will claw out monies from one set of neighbors to benefit another, or will you side with the more pragmatic candidates, who have listened to the resident lawyer, Mary Schrider-Fox, who advised the board a number of times that any rental fee would have to be cost justified?

Do you want to engage in civil litigation and gamble in civil court that a judge will see things as Shecter and Glasgow see them that a simple majority vote suffices, or will you act to stay out of civil litigation and not risk further erosion to the association's prospects of accessing affordable insurance premiums, which are set to dramatically increase in 2021 due to the frivolous lawsuit, DMF Associates Versus the Middlesex Beach Association.

I speak, of course, of pragmatist candidates Ellen Throop, Carol Paul, Bill Leconte, David Wiecking and myself; people who are worthy of your trust.

incumbent candidate profiles for the election now scheduled for September 19, 2020

• Ellen Throop;
• Steve Larsen;
• Marty Shecter and
• Nancy Glasgow.

References