Eastman, a Community in Debt

Eastman, led by its Board of Directors and its Finance and Budget Committee wants to increase its “continuous debt position”. Many members of the community are led to believe that because Eastman has a Capital Reserve Fund Policy that it is financially well run—WRONG. This financial myth is created by individuals who apparently were trained by the same parties who created the financial bubble a few years ago.

We do not have a Net “positive” Capital Reserve Fund. Eastman has current debt (i.e. South Cove) of $1,785,777. Eastman has a Capital Reserve Fund currently at $1,189,525. If you do the math, you still get outstanding debt of $607,439. This is a negative cash reserve of $607,439. This fact gets glossed over and is why you don’t get the financial facts behind why putting more money into the Center is fiscally foolish.

Here are the financial debt facts as documented in the FY 2014 ECA Audit Report (available on the Eastman website). At the beginning of the current fiscal year (FY2015) Eastman's long term DEBT was: $1,785,777 with scheduled  payments of more than $450,000 for each of the next three years and a $370 K payment in 2018. Somewhat off-setting the community's substantial debt is a Capital Reserve Fund that at the beginning of FY2015 was in the amount of $1,189,525 thereby creating a net deficit financial position for the community of ($607,439). In effect, there is NO NET CAPITAL RESERVE MONEY. Using its “mortgage the future philosophy” the Eastman Finance and Budget Committee is advocating an increase to the community debt position by an additional $2.7 to $4.5 million. This increases the Capital Reserve Net Deficit from ($607,309)  to ($3.3 M-$5.1M). Eastman homebuyers can look forward to paying this debt over the next 15 years.

This is financially irresponsible and will only in result in further devaluation of Eastman properties. Eastman’s governance is apparently incapable of understanding its own ignorance and/or foolhardy financial wisdom. Unfortunately, many Eastman members have adopted a “go along to get along” philosophy because of the disparagement those who speak up receive. Much like the American citizens who could do nothing about the financial bubble that the banks and mortgage brokers brought upon our economy, those financially responsible at Eastman are arguing that more debt increases property values.

Authoritarian governance does not allow equal opportunity of dialogue on foolish fiscal policy. It chooses un-wise parties to be on Committees such as Finance and Budget. Its members then make false unsubstantiated statements and an edict is then issued by a compliant Council to go into more debt. The only question is how low do the property values need to go before the community throws out its governance and it's governance members? If recent history is repeated more people will sell their houses for less and less rather then the demand change in governance.

Much like the strong-arm rejection of Brooksley Born by Alan Greenspan and Robert Rubin, who rejected her efforts to regulate derivatives, any Eastman member who is a dissenter to our ludicrous financial policies is subject to disparagement by the Eastman Power Troika (Goldman, Parker and Ryder). What the Eastman Troika’s financial expertise is, is a mystery unless high debt is a demonstration of competence. Yes, debt carries risk and it needs to be undertaken in a way that doesn’t hurt other people in the process. Board Members need to understand the risk of high debt and if they don’t understand, they shouldn’t be undertaking it and should commit to NO NEW DEBT.

For more information, see posting at:  http://eastmanblog.blogspot.com/2014/07/eastman-fiscal-follies.html

Submitted by Robert Logan