Ask the guy who is trying to get his HOA incorporated as a municipality.

So, I live in one of the largest HOA’s in the State of Maryland. We have about 4800 homes, and over 65 miles of road. We also have about 2 miles of Chesapeake Bay waterfront, ranging from beaches to 120 foot high cliffs. We have an artificial lake, which is stocked with fish and also has a beach. We used to have a horse stable, but it was unused, so now it is just an open field. We used to have a rifle range, but it was converted to an officially sanctioned horseshoe competition area. We have a bunch of wooded trails.

  And it is all falling to shit.  Our HOA dues are about $450 per year, plus there is a $250 Special Tax District, so the HOA costs about $700/year, and we are slowly losing amenities. The lake has almost yearly problems with algae blooms.  The road I live on at one point used to be about 75 feet from a 120 foot cliff.  Due to erosion, it is now 25 feet from said cliff, and the cliff moves closer every year.  The road is closed in that area.  Over 500 of our homes are empty, many of them in pre-foreclosure and foreclosure, and many of said properties are really in bad condition, which lowers property values, which puts people underwater, making more people walk away from their properties.  

A group of people researched ways to bring more money into the community.  Raising the HOA fees is right out, because it requires a vote of 50%+1 of the property owners.  Do you know how difficult it is to get 2,401 people to vote to increase their bills?  Dissolving the HOA is even more problematic, and may not be legally possible.  We tried to get money from the county for roads maintenance by opening the roads up  to the public.  By adding our roads to the County's roads, they get more money from the Shared Highway User Revenue from the State.  We expected about $200k.  They gave us $30k.  Oh, and we had to rip down our gates, so crime increased...  Gee, thanks.

So we looked at incorporation. It turns out that Maryland has a very good home rule statute, which delineates revenue sharing between counties and municipalities. Also, municipality SHUR funds come from a different pot, so we would get over $400k from that. We would be eligible for all kinds of Federal and State grants, and our ability to keep our neighborhood looking good will increase. Currently, including the STD, we spend about $2.8m/year as an HOA. After incorporation, we estimate that we will have a budget of over $4.5m/year, but our out of pocket expenses will go down, since we will be able to eliminate most of the HOA fees, and just keep a rump HOA for legal purposes.

The first step is a petition, which must be signed by 25% of the registered voters living within the boundaries. We turned that in two weeks ago, and think we got about 28%. (2300 people signed, we think 1850 were valid, we think we needed about 1670).

Next comes writing the charter, and getting the county to approve the charter.  Big roadblock.  If the county disapproves of the charter, they must give us written reasons why.  We get one more shot at approval.  If they deny it, the process fails, with no appeal allowed in the law.  We still hold out hope, since we do not think that elected officials will deny something that 1850 registered voters asked for, in a county that gets about 20k votes in local elections.

If the charter is approved, we go to referendum next November, and if it is approved by the electorate by simple majority of those who vote, the municipality stands up 30 days later…

Hopefully you got through that Wall o’ Text, so any questions?

Coke or Pepsi?

Whatcha gonna name it?

Where is Jimmy Hoffa? Why is a boxing ring square?

Calvert Shores, Maryland.

How common is incorporation in your area? There are parts of Maryland that have a million little municipalities. But then there’s Baltimore County, which to my knowledge doesn’t have a single incorporated city or town in it,* despite having plenty of residents.

*Non-Marylanders should note that Baltimore City is not part of Baltimore County.

That’s interesting. $2.8 million doesn’t sound like a lot to maintain 65 miles of roads. Presumably there are standard estimates for how much it costs to maintain each mile of road, but I have no idea what those are.

Wow. How did your HOA get so large? I’m used to the HOA I have for my condominium, which must have twenty or thirty units at most. I didn’t realize housing estates with HOAs existed that were so big. Those fees seem exorbitant, unless they’re making up for significant property taxes.

Is the main reason it is failing because there aren’t enough residents? Or is it badly managed? Who would manage the new municipality?

Do you pay property taxes as well as the HOA fees? Under the new system, what would your property taxes be and what would remain of the HOA fees?

If we succeed, we will be the first new municipality in Maryland since 1995, and I beleive there have been less than 10 incorporations since the home-rule law was passed in 1957.

$2.8 million is the entire expenditure for the HOA. Roads makes up about $2 million. We have 7 full time employees, and our own road construction equipment. Before the STD was put into effect, most of the roads were dirt or gravel, with only the main roads paved. We have tar and chipped all of the roads now, and continue to add layers on to make the roads stronger. Roads budget also includes salt for winter, and overtime and plow trucks for when they are needed,.

How firm are the potential funds you’re talking about getting after incorporation? What happens if you incorporate as a municipality and then don’t get the grants you mentioned? Is there a back-up plan?

As a municipality will you be assuming any obligations for services that are currently being provided by the county?

Our development started in the 1950’s as a summer retreat for residents of DC. Originally, there were fewer than 400 houses, and no one lived here year-round. Families would stay here, with the father commuting to DC every day (1.5 hours away) The land was divided up into 5000 parcels, not all of which have been developed.

In the early 1970’s, the Thomas Johnson Bridge was built across the Patuxent River, connecting the southern end of Calvert County to St. Mary’s county. The area started to develop a little at that time.

Patuxent River Naval Air Station in St. Mary’s County had long been the Navy’s Aviation RDT&E base, but in the late 80’s and early 90’s the Navy moved all of its Aviation Headquarters functions from DC down to Pax River. All of the office workers, and engineers were permanently based here, as well as foreign military sales. This caused a building boom in the area, as property values skyrocketed. 10’s of thousands of well paid civilians, as well as thousands of military personnel moved to the Southern Maryland area. Calvert County issued building permits for every plot in the HOA that could be built on (and some that never should have been built on) and we expanded to 4800 homes, without any added funding from the county for infrastructure.

On top of the HOA fees, we pay normal Calvert County property tax, but see less of a return from our money than anyone else in the county. By law, the county has control of schools, hospitals, jails, and courts. Those are the only services we receive from the county. For everything else, we fend for ourselves, and pay over $700 annually for it.

If you go to google maps, search for Chesapeake Ranch Estates, MD, you will find us. The gray area on the map is CRE + Drum Point + some other HOA’s + Solomon’s Island. CRE makes up the North East third of the Gray area.

The Home Rule law states that we will be entitled to 17% of the county income tax for the residents of the area. We estimate that is $1.3 million.

The other two municipalities in the county receive an offset on their property taxes from the county. County property tax is $0.89 per $100 assessed. The offset they receive is about $0.33. We will assume County functions, just like the other municipalities, so that we get the same offset, which will bring in $2.7 million. We will probably impose an$0.05 local tax on our own, which will raise another $400k. The State has automatic grants for roads that we set conservatively at another $250k, but will probably increase.

The only number that is up for debate is the offset, which I know will be a bone of contention. Even if we do not receive the full amount, we should still meet or exceed the roads portion of the HOA fees. The roads portion of the HOA fees ($200) and the STD ($250) typically net us $1.9 million. So for the average citizen we will replace about $450 of the HOA fees with an average of about a $100 tax hike, and be able to fund the roads to a higher level, and provide some of the services that the county provides. This is before we even look at special grants. The other $250 of the HOA fees will still be applied, because that is for M&O of the amenities the beaches, the lake, the horseshoe pits, which most residents want to remain privately owned.

What are typical house prices?
Are there things that a municipality can’t regulate that the HOA can?

I know municipalities have limited authority to regulate amateur radio antennas, whereas HOA can do much more.

And HOAs can regulate things like what trees to plant and such where I think municipalities have less ability to do so.


Is this the Ranch Club?

Why/how is dissolving the HOA not a legal option? If everyone on the board quit and any held money was divided among the homeowners . . .

Yeah, this is what I was going to ask - does your HOA have all the nightmare powers you read about - like restricting parking in your own driveway, only being able to paint your house from the list of approved colors, regulating size & number of holiday decorations, etc, and if so, what will happen to those powers when you become a municipality?

After finally reading the remainder of the thread, I see that it is. I used to visit there frequently. Good friends of mine lived there. (Still may; we’ve fallen out of touch.)

Did you have an interest in small government before this or did you become active out of necessity?

How many of the homeowners are showing up to meetings? A good percent?

Are you going to run for mayor?

Do you own a top hat?

Funny that you mention the amateur radio antenna. The HOA just gave $1000 to help with the construction of an amateur antenna to integrate into the county emergency management system. During the last hurricane, our county communication went down, so we are trying to fix that (why the county isn’t paying for it, I don’t know).

The HOA will still exist. We have rules, but they are not draconian. You can request anything, we have an Architectural Review Committee to approve projects. Basically anything you build has to fit in with the rural setting.
The municipality has more power to ensure that you keep your property presentable. By passing a health ordinance we can make sure that the lawn gets cut. If not, we can fine the owner, and if the fine is not paid it becomes a tax lien. The current HOA levies fines for such things, but it is difficult and expensive to take the homeowner to collections for the fine.