KEY Points: Ballots Must Reach Reston Association by March 8!​

• A YES vote is critical to revoking the covenant as 229 are needed for this.

• Not voting has the same effect as a NO vote.

• If you don't have a ballot, don't know how to vote, or think you may have mistakenly voted the wrong way, please contact Brittney Copeland of Reston Association (bcopeland@reston.org).

• RELAC Water Chilling is a non-profit corporation and is not the coop that has been promoted. It has not yet published documentation for its management structure, allocation of voting shares, and compensation model.

• RELAC Water Chilling's published financial projections indicate revocation of the covenant will not threaten their ability to provide you with service if you want it from them. An almost 50% decrease in residential cluster subscriptions would have no cost impact for condominiums and would have a minimal annualized cost impact on residential cluster subscribers.

• Residential air-conditioning units are regulated to have a 72 db or less noise level, equivalent to the interior noise level of a car at highway speed.

• It is not clear whether it will be RELAC LLC or RELAC Water Chilling that will provide chilled water for the 2024 cooling season. On March 3, Simon McKeown announced that he is now the CEO of both RELAC LLC and RELAC Water Cooling. In these roles, he has the authority to provide the chilled water service needed for central air-conditioning through either organization. It is not known what compensation Simon McKeown will receive for being CEO of the two organizations.

• If RELAC LLC provides the service, their will be no guarantee of any community involvement in governing the service. If RELAC Water Chilling provides the service, community involvement in governing the service would require community ownership of stock in RELAC Water Chilling, which now seems to be off the table.

• RELAC Water Cooling has misrepresented the cost of stand-alone air-conditioning by citing an extreme example. The cost for a three ton unit and installation would be between $8000 to $13,000 based on three recent quotes for a 2000 square foot townhome on Chimney House Rd. Costs could vary based on the size of your property. Annualized costs are projected to be less than the annualized cost for air-conditioning for homes that use RELAC Water Cooling.

• As of March 3, it is not clear how RELAC Water Cooling will raise the capital they need to finance the capital investment they desire to make so improve the quality of the chilled water service. They have indicated they will provide more information on this later this week.
   

FAQ

How important is it that I vote on the referendum to revoke the covenant requiring use of the chilled water service formerly provided by RELAC and which may in the future be provided by RELAC Water Cooling?

If you are in favor of revoking the covenant and allowing yourself and your neighbors choice in what type of air-conditioning you and they can have, it is extremely important that you vote YES in favor of the referendum. Based on numbers provided by Reston Association, for the referendum to pass every YES vote is critical as a minimum of 229 YES votes are needed from the total of 343 residential units that can vote. As noted and encouraged previously on the RELAC Water Cooling website, if you do not vote, this is equivalent to a NO vote. So a NO vote can effectively be performed by either voting NO to the referendum or by not voting at all. For homes that currently have a medical waiver that allows them to have an individual air-conditioning unit, a YES vote will remove the covenant requirement that the individual air-conditioning unit be removed when the waiver is no longer applicable due to sale of the home or the waiver no longer being valid.

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What should I do if I don't know how to vote or have not received a ballot from Reston Association?

You should contact Brittney Copeland of Reston Association immediately so that you can be given an opportunity to vote. Her email address is  bcopeland@reston.org. You might also try calling Reston Association and asking for her if you are having trouble with email. 

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What will happen if the referendum results in the covenant requiring use of "central air-conditioning" is revoked?

Unit owners in the residential clusters formerly served by RELAC LLC will have a choice in whether or not they want to use the services offered by RELAC Water Cooling once it becomes operational. If they choose not to use the RELAC Water Cooling service, they will be able to get individual air-conditioning units that must be installed in accordance with applicable design review board guidelines.

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Will revoking the covenant result in a discontinuance of central air-conditioning services to the units previously served by RELAC LLC?

This is extremely unlikely. Statements made and documentation presented at the RELAC Water Cooling service town hall on February 16, 2024 indicated that if approximately one half of the residential cluster units did not subscribe to their service, this would result in no increase in projected costs for condominium owners and a $500 increase in an initial subscription for residential cluster units and commercial units. It seems unlikely that more than 50% of residential cluster units would not use RELAC Water Cooling service due to the up-front cost of purchasing an individual air-conditioning unit.

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If the covenant is not revoked, will all residential units previously served by RELAC LLC have to subscribe to services provide by RELAC Water Cooling?

The covenant would require all units to subscribe to the RELAC Water Cooling service if it becomes available with the exception of units that have a medical waiver.

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What is Reston Association's position on revoking the covenant

The position quoted below is copied from the Reston Association faq related to the referendum (https://www.reston.org/relac-referendum-faqs):

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"Based upon the uncertainties surrounding the provision of cooling services to the Reston Association members by RELAC, LLC. The Board of Directors of Reston Association recommends that members vote in favor of revoking Section VI.2 (b) (15) of the first amendment of the Deed of Amendment to the Deed of Dedication of Reston."

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What legal rights will RELAC Water Cooling have relative to not providing chilled water to those who don't subscribe in their "capital subscription"?

Statements made in the past by by RELAC Water Cooling committee members at town hall meetings have indicated that they would shut off service to non-subscribers. However, there is no viable means for cutting off service to individual units other than entering the units and capping the chilled water feed. In recognition of this, committee members have made public statements about pursuing court orders to enable them to do this. The legality of such action is not clear, particularly in light of the potential for such statements to be used as proof of coercion for subscribers to provide funding above and beyond SCC approved fees to RELAC Water Cooling..

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What are the financial trade-offs of using a service offered by RELAC Water Cooling versus purchasing and operating an individual air-conditioning unit?

Summary: The projected annualized cost of RELAC Water Cooling is at best about equal to the projected annualized cost of purchasing and operating an individual air-conditioning unit, and may be significantly more based on likely underestimation of operational costs and future capital expenditures.

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Details: RELAC Water Cooling has stated on their website that the cost of an individual air-conditioning unit is "upwards of $15,000, or more". This is not accurate.  A unit owner on Chimney House received three quotes for purchase and installation of a three ton unit necessary for their 2000 or so square foot townhouse. The quotes ranged from $8500 to $12,500 with the $12,500 quote providing a unit that could serve as a replacement for their gas furnace. Assuming a 12 year life-span for the units, this amounts to between $708 a year to $1042 a year. The expected annual electrical cost for the air-conditioning is approximately $700, giving a total annual cost ranging from approximately $1408 a year to $1742 a year. In contrast, assuming 50% of residential units do not use RELAC Water Cooling service as described above, the first year cost of RELAC Water Cooling would be the sum of a $1400 RELAC Water Cooling "capital subscription" plus 4 service payments of $340 ($1360). The total for the first year would therefore be $2760. Given RELAC Water Cooling's public statements that they will need to raise $560,000 in additional capital from subscribers to purchase a fourth chiller for the 2025 cooling season, it can be expected that the second year cost would be approximately $2500. In years three and beyond, it is unpredictable what the cost of the RELAC Water Cooling service will be, particularly in light of their stated costs requiring about a 35% reduction in expenses versus those incurred by RELAC LLC. In a best case where RELAC Water Cooling does not have to raise additional capital after the second year  and is able to maintain expense reduction of 35% versus RELAC LLC, the annualized cost of it's service over a 12 year period would be $1572 per year. This minimum estimate is more than the lower-end annual cost of $1408 for an individual air-conditioning unit for the Chimney House townhouse. Note annual maintenance costs for the individual air-conditioning units and for internal units needed for RELAC Water Cooling are not included in the estimates as the costs are likely to be comparable and are discretionary. There is some chance that the periodic replacement costs for the internal components needed for RELAC Water Cooling could increase the annualized cost for their service significantly.

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Is RELAC Water Cooling the coop that was discussed in several town halls staged by the steering committee for RELAC Water Cooling?

No, RELAC Water Cooling is a recently incorporated non-profit. As a corporation, it will be owned by shareholders, but will not be required to operate under the structure of a coop, but will be directed by a board that is voted on by the shareholders. As of March 3, it is not clear who the shareholders in RELAC Water Cooling are and whether or not they will sell additional shares that allow community control over the corporation via a majority number of seats on the board. Depending on how the bylaws of RELAC Water Cooling are written or amended and requirements on RELAC Water Cooling operating as a public utility, share ownership may be or become non-representative of the units that depend on them.

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What methods are available to RELAC Water Cooling in raising money needed for necessary repairs and capital investment?

RELAC Water Cooling is challenged in finding a way to raise the additional capital that they stated they needed to raise in the February 16 town hall. Initially they intended to sell stock as "capital subscriptions" with purchase of a subscription a requirement to receive service. This coercive and likely illegal approach seems to have been abandoned. It looks like they will now pursue donations as a means of getting the needed funding. Note that if they make donations mandatory in order to receive service, this will also likely be illegal. As of March 5, it appears they will raise some of the money they need by raising the price they charge the Heron House, Vantage Hill, and commercial properties that are voluntarily receiving their service. They could try again to get funding through methods that have not proved successful in the past including getting loans and grants. Another method might be to do a bond offering, but those are time-consuming and expensive to offer. Perhaps the least attractive to the community would be for outside investors to purchase shares in RELAC Water Cooling due to the potential control this would give them over the corporation.

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What constraints would be applicable to the service provided by RELAC Water Cooling?

The covenant that is up for referendum does not specify any requirements on RELAC Water Cooling relative to cost of service, quality of service and period of service. They will evidently be subject to fee constraints from the Virginia SCC based on being a public utility.

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Will RELAC Water Cooling be able to provide the chilled water necessary for served properties in time for the 2024 cooling season?

Public statements by RELAC Water Cooling in town halls and posted on their website indicate they are working diligently so that they will provide the service in time for the 2024 cooling season. There are a few hurdles they need to surmount, such as getting SCC approval for a $24 tariff increase, collecting enough capital to become operational, and doing any remaining legal and regulatory application work needed so that they can legally operate. A substantial challenge is that they will need to rapidly raise a large amount of capital to pay for necessary repairs that enable the reliable and better service they have stated they would like to provide by having three chillers online for the season rather than the one and a half they have stated are currently available. They have indicated that during the week of March 3 they will provide more details of how they wish to raise this money.

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Will the noise from individual Air-Conditioning units be a nuisance to neighbors?

No unless you consider the noise level inside a modern car at highway speed to be a nuisance. Air-conditioners are regulated to have a 72 dba maximum, which is in line with interior noise level of a car at 65 mph. Furthermore, a 72 dba sound source outside of a home is likely imperceptible to someone inside a neighboring home. Neighbors of residents who have individual air-conditioning units on Chimney House Rd. are consistent in stating that they do not notice the sound of the air-conditioning units installed by owners who have medical waivers.

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What is the likelihood that RELAC Water Cooling will be viable long enough for it to make sense to invest in them?

Any answer to this question is likely to be inaccurate due to a number of factors that are unpredictable. These factors include:

• How long can the three 50+ year old chillers be kept operational?

• How long can the existing piping used for providing chilled water remain in good enough shape to prevent repair or replacement costs from making the service financially unviable?

• Can RELAC Water Cooling keep their expenses to the level used in their financial modeling, which is about 35% lower than historical expenses taking into account inflation?

• Has RELAC Water Cooling's financial modeling taken into account all recurring expenses? At this time it is not apparent that they have taken into account the cost of the lease agreement with the owner of the land the building sits on.

• Has RELAC Water Cooling accounted for all potential future large hits on income and expenses, such as: legal costs due to health issues resulting from poor quality service and service outages; income loss due to a prolonged outage; customers abandoning their service in favor of other covenant compliant services.

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What happened with the original plan to have a cooperative take over the service and who is in control of the chilled water service previously provided by RELAC LLC?

At this time it is not clear when or even if a coop will be formed. As of this moment, we only know that RELAC Water Cooling is a non-profit corporation that is seeking to take over providing the chilled water service previously provided by RELAC LLC. We also know that Simon McKeown is now CEO of both RELAC LLC and RELAC Water Cooling. This gives him the option of providing the chilled water service through either organization. Given the lack of community ownership of either organization and lack of clarity into the future composition of the RELAC Water Cooling board of directors, Simon seems to have control of the future of both organizations and the future of the chilled water service that residential clusters are currently required to use.

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Who will provide service for the in-home elements needed for the central-air-conditioning service?

Formerly, this service was provided by RELAC LLC at a reasonable cost. With some searching, other more expensive providers could be found. There seems to be no provision by RELAC Water Cooling to provide service to in-home components. We would welcome feedback from them on how they suggest this issue be handled.

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What will happen to my shares in RELAC Water Cooling if a coop is formed that takes over providing the chilled water service?

As of March 3, it appears RELAC Water Cooling may be moving away from a model that requires purchase of shares in their corporation in order to get service. If they do sell shares, the following would likely apply. Given that the capital raised by RELAC Water Cooling selling shares will be used for expenses and necessary capital expenditures, the shares will only be worth what the coop is able to afford in compensating shareholders. Two likely scenarios are that the coop will either not be capitalized to provide any compensation, or the coop will require some type of contribution from coop members to create the compensation. The second scenario is at best an apples for apples exchange that ends up netting no compensation to shareholders.

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What  will happen to my shares in RELAC Water Cooling if the coop is not formed?

As of March 3, it is not clear whether or not RELAC Water Cooling will sell shares in their corporation. Any shares purchased in RELAC Water Cooling should be valued based on generally accepted accounting principles until such time that they can be sold or RELAC Water Cooling ceases to exist. If they can be sold, it is unlikely they will have any value unless sold to another property owner who needs the shares in order to subscribe to RELAC Water Cooling. If RELAC Water Cooling ceases to exist, they will likely be valued based on the salvage value of RELAC Water Cooling assets less any unpaid expenses.

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Do my shares convey with my home when I sell it?

If you are able to purchase shares in RELAC Water Cooling, they will not automatically convey to the new owner of your home when you sell it. This is contrary to claims made at the RELAC Water Cooling town hall on February 16, 2024. There is no viable means for a home owner to have their shares convey to the purchaser of their home as part of a sales contract unless the purchaser is not pursuing a mortgage. The unit owner is the entity that owns the shares, not the home, and it is not acceptable practice for mortgages to include financing for personal assets that are not part of the purchased property. Therefore, it would be up to the unit owner to sell the shares to the new owner and do this in a manner that is compliant with whatever rules RELAC Water Cooling has relative to selling the shares.