Has Eastman's Financial Bubble Burst?

Your government is playing financial roulette with your home value.

According to the Eastman Audited Report, the Capital Reserve Fund (http://tinyurl.com/qaukzw2) as of March 31, 2014 has a deficit or negative balance of $607,439. That's right-- there is no positive capital Reserve Fund according to the community's FY2015 Audit. (P.8 “…due to the obligations associated with the construction of the South Cove amenities building.”)  Added to our debt laden financial position, we have the Finance and Budget Committee's enthusiastic advocacy for increasing ECA members’ financial deficit by an additional $2.8 to $4.5 million of debt with accompanying Interest payments of $1.0 million to $1.65 million (for a Total of $3.8 Million to $6.1 Million--Source: TABLE 2: SUMMARY COMPARISON OF MODELED FINANCING OPTIONS--on p. 16 of the Renovation, Expansion, Build New of May 2014) so it is not difficult to understand why Eastman property values are sinking into the lake. (See Blog Post "Eastman Tax Rates and Assessment Costs")

Yes we have the makings of the “Eastman Financial Bubble”. Like the recent 7- year housing bubble where people overpaid for homes and took on excessive mortgages, the ECA Finance and Budget Committee would like to mortgage the community’s future and your homes using debt to reduce your disposable income. The “seduction” that the Finance and Budget Committee uses is “low payments” -- classic stuff that many mortgage brokers use to get you to take on more debt then you can pay off. In Eastman's case your loan is spread out over 15 years. That's right, 15 years for the loan and that's how they tell you how small your additional debt will be going forward. Can you imagine how appealing a $5000 membership fee is to a buyer who's going to pick up 15 years of community indebtedness?? By comparison, the loan for South Cove at $3.5 M was for 9 years and we will pay interest of $526K for a total of $4,026M. If the community goes ahead with the Center $3.6 M option (or worse), over 15 years we will pay interest of $1.315M for a total of $4.915M or nearly $5Million. That is correct, we Eastman homeowners will pay almost $1,000,000 more for the almost the same amount of debt. You can thank the Troika and the Finance and Budget Committee for this financial flimflam.

The Finance and Budget Committee members ignore the possibility that in one, two or three years the Towns of Grantham, Enfield or Springfield could decide to spend $2 million or so on a new school, a senior center, indoor pool or some other desirable municipal improvement. If they did so, the payback time would be 5 to 7 years or less than half the time your Finance and Budget Committee is telling you is so cheap. The Town of Grantham is far more fiscally responsible than Eastman. It would also get a much lower rate than the 4.38% shown (on p. 16 of the Renovation, Expansion, Build New of May 2014) in TABLE 2: SUMMARY COMPARISON OF MODELED FINANCING OPTIONS. I know no one who is financially savvy paying more than 3% on their mortgage today--I would like a Finance and Budget Committee that is financially savvy and looking out for Eastman homeowners like the Hanover Finance Committee. Spreading the loan out over 15 years, we will get to pay $1,000,000 to $1,600,000 in interest in addition to the principal amount we borrow with the foolishness of this “Let’s Mortgage The Community's Future” mentality.

In addition, the less than fortunate Sewer Owners can look forward to about an additional $1 million worth of potential debt for their residences in the not-too-distant future. Unfortunately, under the leadership of West Cove Special Place Chair Henry Morneault, Sewer Owners voted to be a minority when it comes to controlling their increasing costs.

We understand why Banks salivate at the opportunity to place a loan with an entity whose tax power is unlimited. The Finance and Budget Committee, along with General Manager Ryder ought to be replaced for their fiscal irresponsibility to Eastman residents.

One need only to look to the Hanover Finance Committee to observe a group of individuals whose guidance is in the best interest of the constituency it represents. One can find their position statement in this year's Hanover Annual Report on page 50 and 51. Within that report the Majority Opinion stated:

"....in the past 10 years, total tax levy has increased an average of 5.4% per year during years when the CPI – U Index has increased an average of 2.6%. Committee members believe the continued increases in spending that outstrip inflationary increases are unstable and that the tax burden on the population is becoming too large. In recommending rejection of the FY 15 Budget, the Finance Committee urges taxpayers to send the message to the Board of Selectmen to make hard choices and hold the line on expense growth and capital expenditure decisions to help ease the tax burden on the population......"

The issue that the Hanover Finance Committee is raising affects every town and city in the state of New Hampshire. It is driven by the fact that the State is looking to the towns and cities for MORE STATE REVENUE and that we as residents will pay our share. If we had a responsible Finance and Budget Committee, we would be considering that impact on any increased cost to Eastman residents. Sadly, those on the Committee work in isolation of the world we live in, and are dominated by their greed for an upscale country club golf course and could care less about the financial welfare of the majority of Eastman residents. They are acting as “agents” for the Eastman ruling Troika. However each and every resident of Eastman is directly responsible for accepting and tolerating the financial rip off we are being subjected to.

As an aside, despite the magnitude of Hanover being 6 to 7 times the population of Eastman, their financial information as contained in Annual Report is far easier to understand than the mishmash of financial information we occasionally get from our Eastman governance. You can pick it up at the Hanover Town Hall where helpful staff will field any questions you may have. Check it out and see if you understand it better than Eastman’s jabberwocky.

Submitted by Robert Logan