RRAR NCAR Assessment FAQ

1. A one-time $50 assessment, to be billed in the summer of 2008. Local associations may keep $1 from each collection in order to defray their costs. All other money collected will be directed to the NCAR Issues Mobilization Fund.

2. A $25 increase in annual state dues, beginning with the 2009 billing cycle. Association policy will be revised to provide that a total of $30 from each dues payment will be directed to the NCAR Issues Mobilization Fund. A pro-rata provision will be developed for new members who join in mid-year.

3. The Executive Committee will explore ways to expand the network of fundraising partners on issues affecting private property rights and real estate in North Carolina.

4. A special Presidential Advisory Group will be appointed to examine the makeup and governance of the NCAR Issues Mobilization Committee.

5. A ceiling of $10 million will be established for the NCAR Issues Mobilization Fund. At such time the balance reaches $10 million, the $25 dues increase will be removed at the next billing cycle. The $25 increase will be reinstated, if and when, the Issues Mobilization Fund balance falls below $5 million. Association policy will be revised to reflect this action.

We are in the middle of an economic downturn. Isn’t this the wrong time to be asking our members for a special assessment and dues increase?
We recognize that this is a challenging time for real estate and that some of our members are struggling financially. However, organized real estate is under attack. We have a wide range of issues and future battles on the horizon – and not just the real estate transfer tax. Those issues include building moratoriums, steep slope ordinances in the mountains, adequate public facility ordinances and coastal storm water regulations. In addition, for at least the foreseeable future, we will need to defend our clients against real estate transfer taxes.

The cost of voter education in our state is expensive, but our recent track record proves that we can be successful when properly funded. The alternative will be far more costly for real estate professionals. If we don’t defend the industry from attack, then housing affordability and private property rights will be irrevocably damaged, which means a smaller percentage of individuals will be able to buy and sell their homes.

How was this proposal developed?
In January, NCAR President Wendell Bullard appointed a Presidential Advisory Group (PAG) to take a hard look at the Association’s funding sources and ability to respond in the future to issues affecting the real estate industry, housing affordability and private property rights. The PAG met twice (Feb. 20 and March 19) before delivering a report and recommendations to the NCAR Executive Committee. The Executive Committee met May 2 and voted to take these recommendations to the NCAR Board of Directors at its June 10 meeting in Raleigh.

Where will the money from the proposed dues assessment and dues increase go?
All of the money will be directed into the NCAR Issues Mobilization Fund. Local associations will be allowed to keep $1 per member from the one-time $50 dues assessment to offset their handling costs.

How is Issues Mobilization currently funded?
Five percent of each member’s dues dollars is deposited in the Issues Mobilization Fund. Based on 40,000 members, that means $200,000 is placed in the fund each year.

How much do we currently spend on Issues Mobilization?
Prior to 2007, annual expenses were in the range of $100,000 to $150,000. During 2007, we were faced with fighting a statewide transfer tax proposal during the legislative session, and then we had to fight 16 local transfer tax referendums. The total cost of those battles was $1.7 million, of which $934,000 came from the Issues Mobilization Fund. The remaining dollars (nearly $800,000) came from the NC Homeowners Association ($20,000) and our allies – the NC Home Builders Association, local Realtor associations and Multiple Listing Services, and the National Association of Realtors.

In addition, we funded other important issues in 2007, such as the Jordan Lake storm water rule research, support of the Charlotte transit tax, sales tax initiatives in Pitt and Cumberland counties, a battle over the balance of power in the city of Asheville , and a research study on the impact of real estate on the state’s economy.

Since the beginning of 2008, we have spent $308,000; most of it was spent in the defeat of four transfer tax issues in Orange , Gates, Tyrrell and Ashe. The $308,000 figure is significant because our current 5% dues contribution has brought in only $229,852 as of May 21.

How much money is currently in the Issues Mobilization Fund
The current balance of the Issues Mobilization Fund is $263,176.71. We began 2008 with $338,108 and have brought in a total of $229,852 through the 5% dues allocation, along with $3,636 in contributions. As of May 21, we have spent $308,420 this year--most of it related to the four successful transfer tax battles on the May election ballot.

NCAR has $2.1 million in undesignated reserves. Why not just use the reserves instead of placing an additional burden on members?
Those reserves are the Association’s ultimate insurance policy against an unexpected turn of events such as a radical reduction in membership or the replacement of our Association headquarters.

The larger issue is that the PAG and Executive Committee do not believe reserves is a prudent or feasible way to fund the immediate and long term needs for Issues Mobilization and, therefore, the PAG and Executive Committee recommend adoption of the 5 proposals.

The Association has a 2008 budget of $5.3 million. With approximately $3 million in designated and undesignated reserves, that means we have 57 percent of our annual revenue in reserves. According to a 2006 study by the American Society of Association Executives, the average association with 30 or more employees has 68 percent of its annual operating revenue in reserves; the median is 50 percent.

Who decides how and when Issues Mobilization money is spent?
As included in the NCAR Operating Policies, we have a committee comprised of the four NCAR officers, the Executive Vice President, the NC-RPAC chairman, the Legislative Committee chair, and the Legislative Committee vice-chair. The committee meets to approve expenditures from the Issues Mobilization Fund. Committee members work closely with the NCAR legislative and political staff. Requests from local associations for Issues Mobilization funding are reviewed by the committee and given appropriate consideration. The NCAR Policy Manual states: “The Fund shall be organized and operated for the purpose of collecting and disbursing monies to support or oppose federal, state and local issues that impact real property and real property owners in North Carolina .”

(One recommendation from the Executive Committee calls for the creation of a Presidential Advisory Group to examine the governance and makeup of the Issues Mobilization Committee.)

Was it wise to spend so much money on the transfer tax issue?
Absolutely. The initial legislative proposal was to create a statewide 1 percent transfer tax. This tax would have cost property sellers more than $700 million per year. If the .4 percent local transfer tax had been approved by the 16 counties in November 2007 plus the four counties in May 2008, the annual cost to taxpayers would have been in excess of $55 million. We successfully defended the property rights of our clients and earned the respect of millions of North Carolina property owners.

The Stop the Home Tax campaign has utilized state-of-the-art political tactics to educate the public and convince voters that a transfer tax is truly a bad idea. The Stop the Home Tax campaign has received an Award of Excellence from the Associations Advance America awards program, sponsored by the American Society of Association Executives and the Center of Association Leadership .

Although we defeated many counties on the transfer tax issue, they still have the power to put the issue back on the ballot. What is NCAR doing about that?
Our organization has a three-part strategy best defined as “Defend, Change, and Repeal.” We are committed to defend the real estate industry from ongoing attacks; we are taking steps to impact change in the makeup of the N.C. General Assembly and local elected officials, and; our ultimate goal is to repeal the transfer tax authority granted to local governments.

Several bills have been introduced by legislators this year to repeal the transfer tax authority. However, the ultimate success of those bills is reliant on receiving the support from leadership in both chambers.

What’s the rationale behind the special assessment?
We have an immediate need for Issues Mobilization funding, and a one-time assessment would address that by raising about $2 million in the third quarter of 2008. This funding would put us in a better position to successfully deal with issues on the immediate horizon and it will keep us from draining our association reserves.

As a means of illustration, consider this: In the May 6 election, it was necessary for us and our allies to spend close to $300,000 in order to defeat a transfer tax referendum in Orange County – a county with about 95,000 registered voters. In contrast, Mecklenburg and Wake counties each have about a half-million registered voters. A similar battle in one of those counties would be much more expensive than the one recently won in Orange County .

It is likely that additional counties will be seeking transfer tax authority in the November 2008 election or sometime in early 2009. Polk and Clay Counties have already announced their plans to win voter approval for the Home Tax. A county may place the issue on an election ballot with only 45 days notice to the voters. In fact, a county may choose to have a special election on an issue of this nature. The dues assessment will provide us the financial wherewithal to respond quickly as needed.

When will local associations send out the dues assessment notice?
Based on the recommendation made by the Executive Committee, local associations will be asked to send out the notice by July 1, 2008, with a request for payment by members no later than September 1. The NCAR Board of Directors has the express authority to impose assessments on its REALTOR® members. According to Article VII, Section 3 of the NCAR bylaws, “when the financial status of the Association reasonably requires additional funds, the Board of Directors shall have the authority to impose an assessment in such amounts as are reasonably required for the Association, such assessment to be imposed equally upon each REALTOR® member.”

On or around June 20, NCAR staff intends to provide each local association executive a PDF file explaining the assessment and the reasons behind it. Associations will have the option of including the PDF document with the assessment invoice.

Responsibility for payment of an assessment that has been duly imposed rests with the REALTOR® member who has been assessed. Unlike NCAR dues, the NCAR bylaws do not require local boards to pay for NCAR assessments of their members.

OK, so why do we also need a dues increase?
The dues increase will provide a long-term source of funding and help avoid future assessments. Currently, about $5 per member is allocated to Issues Mobilization. Under the proposal, $30 per member in future member dues would go to Issues Mobilization.

Two years ago, the NCAR Board of Directors approved a $10 dues increase for the creation of the NC Homeowners Alliance. Why aren’t we using that money to defend the industry?
The NC Homeowners Alliance (NCHA) has a much different purpose than that of the Issues Mobilization Fund. A $10 dues increase (from $95 to $105) was approved, effective in 2007. The money was specifically designated for the funding of a 527 organization, the NC Homeowners Alliance, and the creation of a new staff position to advance the interests of the profession in the news media. As required by IRS regulations, Alliance funds are used to educate the public about issues and specific leaders that have a strong track record on these issues. As we approach the fall 2008 elections, the Homeowners Alliance board is making plans to be actively involved in that process. In 2007, $20,000 was spent as part of the effort to educate the public about the negative implications of the transfer tax; spending more than that would potentially jeopardize the tax treatment of the monies in the NCHA account.

NC-RPAC is a political action committee, formed under laws enforced by the N.C. Board of Elections. NC-RPAC funds are used as contributions or expenditures to support or advance candidates running for legislative and local office. Contributions to NC-RPAC are voluntary. In 2007, only 28 percent of the N.C. REALTOR® membership contributed to NC-RPAC.

How many members will leave the association because of this dues increase?
There’s no way to know for sure but previous experience in other states indicates there will be, at most, a minimal impact on membership. For example, Maine initiated a $200 per member assessment and experienced no loss of members. Other states such as Washington,Illinois, Arizona and Maryland imposed assessments and saw no loss in membership. N.C. members may be contemplating getting out of the real estate business but it’s unlikely to be because of this change in dues structure.

Won’t the dues assessment damage the 2008 NC-RPAC Fund Drive?
That’s a valid concern but there’s no evidence that will happen. In Washington state, there was concern that the 2006 RPAC Fund Drive would be affected after a $100 dues assessment. In fact, both RPAC receipts and the number of contributors increased. When Arizona initiated its $60 per year dues assessment, that state had its two best RPAC years ever. NC-RPAC enjoyed the support last year of 28 percent of our members. Those individuals are among our most loyal and we would expect their RPAC involvement to continue in 2008 and into the future.

Some of our members are experiencing financial difficulty. How do we know that NCAR is being financially responsible with the dues dollars they already have?
A complete audit is conducted annually on NCAR and its affiliated entities. The audit is reviewed by a volunteer Audit Review committee and shared with the Executive Committee and Board of Directors.

In the spring of 2007, then-President Danny Brock appointed a Program Audit Task Force to review all NCAR programs for possible cost savings and efficiencies. Many of the Task Force’s recommendations were incorporated into the current NCAR budget and future planning purposes. One example is that, beginning in January 2010, the Vision Quest and Inaugural programs will be consolidated. This will result in cost savings for NCAR and the many individuals who currently must travel to attend two separate meetings.

While NCAR prides itself on having an excellent professional staff, the organization has also done an excellent job of managing its staff expenses. The total staff expense for NCAR is 33.7 percent of the 2008 budget of $5.391 million. According to a recent edition of the Operating Ratio Report, published by the American Society of Association Executives, the average staff expense for an association of comparable budget size is 37.8 percent.

In preparation for the 2009 budgeting process, NCAR Treasurer Tom Barton has requested NCAR executive staff to make recommendations on potential cost savings. One preliminary recommendation is for a significant across-the-board cut in staff travel and staff development. The 2009 budget will be voted on by the NCAR Board at its October meeting.