Blog 5  How and Why to Become a Fairhope Single Tax Member

Who can be a member?

Why be a member? 

The last blog, "Who is Fairhope Single Tax?" discussed how less than 1/2 of 1% of the people in the Fairhope area are members of FSTC.   That means just 100 families in the Fairhope area. 

 What are the advantages of being a member?   All the values from the land accrue to the benefit of the lessee, not the members, so why be a member? 

Only members may vote on who is a Council member.  Only members may attend meetings.  (No one can tell me when this became a rule.  That provision is in neither Constitution nor the by-laws.  In the early years the lessees were welcome at meetings, and could debate issues.  They just did not get a vote.)  Lessees can come early to the meeting. The first thing on the agenda is ‘member and lessee concerns.’  They can express concerns at that time, and are dismissed before the meeting starts.  Lessees do not get notice of the meetings, and as far as I know, do not know they have the right to express concerns if they did know about a meeting. 

Only members get information about FSTC.  (FSTC started the Fairhope Courier back around 1896 and used to be proud of what they did and tried to get a circulation that reached people all over the world with what FSTC was doing.  Now the press is prohibited from attending meeting.  No one can tell me when that became a rule.)

Only Members may run for office.  There are 12 positions on the FSTC.  All get paid.  No one is volunteer.  The Secretary gets around $40,000.00 a year and is elected.  The others all get $2100.00 a year.  According to the IRS 990  for 2012  the FSTC files each year, each Council member (besides Secretary) works 2 hours a week.  That comes to $21.00 an hour.  Council members do not have to be lessees.  Just members. 

Only members get to divide up the assets if the FSTC ever dissolves.  Those 100 families and the 40 or so who live out of town would divide all the assets of FSTC amongst themselves. 

Yet there is another provision in the lease that says:   "(7) The Fairhope Single Tax Corporation agrees that in case of its dissolution, either by voluntary act of its members or otherwise, and the division of its assets among its members, the Lessee, if a member, shall be entitled to have the land herein described and leased- or so much of it as the lessee may designate- included in the lessee’s portion, at its actual value at the time, exclusive of improvements thereon, and if it exceeds in value such portion, to purchase the excess at such valuation. If not a member, the Lessee may at such time acquire title to the land herein leased by paying to the Corporation its actual value exclusive of improvements upon it."
  

What, the members would get the assets if the FSTC ever dissolved?   But what about my land?   You have a leasehold value that I believe to be quite high--in fact, from what I've read, your leasehold is worth basically 100%.   But FSTC takes a different view.  They are telling lessees on Highway 181 whose property is being taken by the State,  that FSTC should get all the money, but will let the lessee keep 30%. 

Wait a minute.  Don't the lessees pay full market value for the property they lease?  Yes.  If a lessee sells his unimproved land for, say $100,000.00, does FSTC take any of that money? No.  It belongs to the seller/lessee.  The new buyer/lessee pays the seller/lessee the entire amount.  Well, what if the State of Alabama came around a year later and decided they needed the entire piece the new lessee had just paid $100,000.00 for?  Suppose the State appraised that property for $100,000.00.   Would the new lessee get that $100,000.00?  Well, from what I've read  (SouthTrust vs. FSTC and the related Drummond Coal case http://caselaw.findlaw.com/al-court-of-civil-appeals/1249424.html) the new lessee should.  However, the Council of the FSTC feels differently. 

Suppose the FSTC goes to that new lessee who had just paid $100,000.00 for the land,  and said, "FSTC owns the land.  We are entitled to all the money.  But we will be nice and let you keep $30,000.00 and we'll just take $70,000.00?"   Would you think that was fair?

That is exactly what is happening to lessees on Highway 181 right now.  FSTC knows that if the lessee does not accept the settlement offer they FSTC had its lawyer draw up, and takes FSTC  to court, the court would have to follow a procedure that would most certainly give most, if not all the money, to the lessee.  FSTC knows this.  They paid for this information with the lessee's trust fund money.  FSTC, however, does not feel they have a duty to tell the lessees this. (see the case sited above)

The Oath that every member of FSTC must take says that it is their “responsibility to consider the desires of the lessees."   I wonder what the 'desires of the lessees' would be in this case. 

But, I am digressing. Let's get back to the possibility of FSTC ever dissolving.  What would happen?  Well, FSTC would appraise your property, and if you are not a member, they would expect you to pay the appraised value of the property you have already paid for.  

Your contract with FSTC—your lease, says, “The Fairhope Single Tax Corporation agrees that in case of its dissolution, either by voluntary act of its members or otherwise, and the division of its assets among its members, the Lessee, if a member, shall be entitled to have the land herein described and leased- or so much of it as the lessee may designate- included in the lessee’s portion, at its actual value at the time, exclusive of improvements thereon, and if it exceeds in value such portion, to purchase the excess at such valuation. If not a member, the Lessee may at such time acquire title to the land herein leased by paying to the Corporation its actual value exclusive of improvements upon it."  http://www.fairhopesingletax.com/lease/lease.html

This part is confusing because the FSTC lease provision 5 says:  "The Corporation further agrees, that in the distribution of the benefits which its purpose is to secure for residents upon its lands, no distinction shall be made between individuals who are members of the Corporation, with the exception of the right of members as participants in the government of the Corporation; all shall be treated with strict equality."

Well, FSTC is not going to dissolve.  That's not something I need to worry about.

Are you sure? There are just 240 members of FSTC.   I have no idea what all that FSTC property is worth, but it would be worth quite a bit.  It is probably enough to motivate some members to try. 

Oh, they would never try to do that. Why not?  They have before.    Back in the 1970s the FSTC Council tried to make FSTC a private, for profit  corporation where the members would get all the income.  From the Rezner vs. FSTC case , Sept. 11, 1987, it says:  "the plaintiffs sought ... an injunction to prevent the dissolution of FSTC.”  See:   https://www.courtlistener.com/ala/6Rsa/fairhope-single-tax-corp-v-rezner/

 Since lessees do not get information, they can't be watchdogs.  Members get some information and have a duty to watch out for the best interests of the Corporation and make sure it is not corrupted.  That is probably the most important reason to join. A member swears an Oath to bring understanding to the citizens of the area, and to do what is in the best interests of the Corporation.  I think the ‘corporation’ is the ‘community of lessees’ but I have never seen a definition.   

How can someone become a member of FSTC?

The FSTC Constitution just requires a person to be over the age of 18, pay $100.00 and be approved by the Executive Committee.  The Executive Committee is made up of the five directors.  Only they can vote on who becomes a member.  If a candidate for membership, his spouse can automatically become a member without taking the course. That spouse's membership is lost if the original member dies or loses his membership.

A member does not have to be from Fairhope.  A member does not have to be a lessee.  They are now required by the Executive Council to complete a 12 week course on a 19^th century economist, Henry George, and his book, Progress and Poverty.  It is interesting that so much emphasis is placed on Henry George and his single tax theory, especially since his ‘single tax’ theory cannot and does not exist today.  It does not exist here in Fairhope and it does not exist anywhere else. 

It is interesting that neither the FSTC Constitution, nor the Lease, nor the by-laws mentions Henry George.  FSTC was chartered by the State of Alabama as a “special purpose, single tax and other mutual economic benefit economic association.” The charter mentioning 'single tax' does not say Henry George, but does mention his single tax theory which does not and cannot work today.   Henry George never intended to tax that tax from just a few people and spend it on the many who do not pay that ‘tax’. 

Suggestions by members that the course be made more relevant, or shortened, or the course material be put on a website, have all been dismissed by the Council. 

The course is just given two times a year.  The class is limited to 20 people.  After taking the course, a candidate files an application for membership with FSTC.  Then they wait, often for months, for an interview by the Membership Committee.  After being questioned and approved by the Membership Committee, the next step is approval by the Executive Council. 

 The Executive Council, without any precedent in FSTC history or law, has been voting on membership applications in Executive Session (basically a secret meeting that members can't attend and votes aren't recorded.) They have blackballed such outstanding people as Betsy Hunter and Mike Wesley and Mia-Burmeister-Laws in these secret sessions with no reason given, and no vote recorded.   

At the March 26, 2014 meeting of the FSTC, FSTC counsel McDowell stated that when litigation or a person’s good name/character is to be discussed, Executive Session is warranted with no explanation, but no votes or decisions can be made during Executive Session.  Many were hopeful that this  practice of blackballing candidates for membership in Executive Session would stop, and even that the Council would resubmit the applications of the membership candidates they kept out with a secret ballot without giving a reason. 

They were disappointed again.   The summer of 2014 saw three more candidates refused even though they had completed the course.   Vote was taken in secret and no reason was state. 

 Members have suggested that the Council have a policy that states why they may turn down an applicant for membership.   So far that suggestion has not been discussed by the Council.

Still, to be a viable organization, FSTC, needs active and interested members.  I urge you to join.

There is no guarantee that after taking the course and being recommended by the Membership Committee, that the Executive Council—the five directors—will approve the application.  It is important that people try.  A stagnant organization is not a healthy organization.   

  

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 The Rezner 1987 decision

Blog 4 Who is Fairhope Single Tax?

Blog 4

Who is Fairhope Single Tax?

Who is the Fairhope Single Tax today?   Almost no one. 

Less than 1/2 of 1% (100 families) in the Fairhope area are members.  Only members are part of the FSTC.  Only members get any information.  Only members can vote on  FSTC Council members.  Only members can attend meetings. 

That means that 99.5% of the people in the Fairhope area know nothing at all about how the FSTC operates. 

Ah ha.  Bet I got you there.  You are thinking, I know about FSTC.  Didn't they donate the bay front parks?  Yes, back about 100 years ago. 

When they FSTC started over 100 years ago, its founders made many sacrifices. They left their homes in Iowa and moved to a new much less developed area. There were very few of them. They had to acquire land for the settlement, they had to find a way to earn a living in this new area, and they had to do without until they could build the basic infrastructure. There was no guarantee of success, therefore the name "Fair hope". And, becoming a member cost the equivalent of a year's income for a family. 

Today moving to Fairhope does not require sacrifice and an uncertain future. It had become a lovely town. Today, becoming a member requires taking a 12 week course and paying not a year's income, but $100.00. Not members today are direct descendants of people who did make that sacrifice. Many members, even FSTC Council members are not even leaseholders. They are not part of the experiment. 


What are they doing now and where do they get the money? 

FSTC has given generously to the Fairhope Library, the Fairhope History Museum.  FSTC has built sidewalks.  The FSTC gave generously to the veteran's memorial.   They give $3,000 toward the Thomas Hospital golf tournament every year, and have given generously to Thomas Hospital in general.  They have helped area public schools.  They have done many good things with the money.

Where do they get the money?  They take it from a trust fund for the benefit of the lessees.

FSTC was chartered by the State of Alabama as a 'mutual benefit' organization.  A mutual benefit organization is for the benefit of a specific group of people.   Like a yacht club.   FSTC 's group to benefit is the FSTC Community--the Colony. 

The 'FSTC Community,'  as defined by the FSTC Constitution, is the community of those 'leasing the lands.'  It includes about 3035 leaseholds  (businesses, farms, homes, etc.)

The FSTC lease, its legal agreement with its lessees, says this:

Provision 3 of the FSTC lease agreement:

..."no part of the rents paid by Lessee upon the land herewith leased, shall be appropriated as dividends to its members or any other persons, but that all shall be administered as a trust fund for the equal benefit of those leasing its lands."

Provision 4 of the FSTC lease agreement:

"in the distribution of the benefits which its purpose is to secure for residents upon its lands, no distinction shall be made between individuals who are members of the Corporation..

To read the entire lease, click here: 

http://www.fairhopesingletax.com/lease/lease.html

Back in 2003 FSTC got a designation from the IRS giving it a tax exemption.  To do that FSTC  had to say it was a public welfare corporation.  'Public welfare' corporations cannot be 'mutual benefit' organizations, unless that public welfare is something like a housing project for the poor, and therefore it can benefit that group.    So, how did FSTC transform itself from a Mutual Benefit to a Public Welfare organization.  That will be the subject of a future blog. 


The City of Fairhope includes much of the 'FSTC Community,' but not all.  Many  leaseholds are outside the city limits.     The 'Fairhope Community, ' which includes the 'FSTC Community' and the City of Fairhope, is much larger.  The  'Fairhope Community' stretches from Weeks Bay to Fish River and includes Marlow and Barnwell, and Point Clear and Montrose.    I'm estimating that there are 20,000 parcels paying property taxes in the 'Fairhope Community' -- including homes, businesses, farms, etc.  Just 2900 of them are FSTC leaseholds.  That's 14% who are leaseholders. 

The 2900 leaseholds in the FSTC Community pay a 'demonstration' fee the other 17,100 parcels in the 'Fairhope Community' do not pay.  The demonstration fee goes to a trust to benefit the lessees.  FSTC uses that money to benefit not just the 'FSTC Community,' but the entire 'Fairhope Community.'  FSTC (that tiny group of 100 families) feels that anything that benefits the entire community,  benefits the lessees.  That means that 14% pay the 'demonstration fee' that is to benefit them, yet it is used to benefit the other 86% who do not pay demonstration fee.

I've heard some  members who are lessees say,  "I don't mind giving extra to help Fairhope because it is so wonderful."  I don't mind giving extra either--and have done so many times. It is my choice on how I spend my money. 

There are 5000 plus leaseholders who are not members.  Do they get a choice?   Lessees  have a contract (lease) with the FSTC that says, "The FSTC agrees that no parts of the rents paid by the lessee upon the land herewith leased, shall be appropriated as dividends to the members or any other persons, but that all shall  be administered as a trust fund for the equal benefit of those leasing its lands.”   No other persons.   Trust fund for equal benefit of those leasing its lands.  Those are contractual rights and complying with them is a duty of the FSTC. 

The FSTC lease also says that "in the distribution of the benefits which its purpose is to secure for residents upon its lands, no distinction shall be made between individuals who are members of the Corporation, with the exception of the right of members as participants in the government of the Corporation; all shall be treated with strict equality.

Is the FSTC complying? 

Does the FSTC  have the right to take this money from a trust fund to benefit the lessees, and use it to benefit so many others?

The Alabama Supreme Court also ruled that the FSTC had  'fiduciary' responsibilities as trustees for the trust to benefit the lessees.   Suppose you set up a trust to benefit your  child or grandchild.  Then suppose the trustees spent the trust  on a worthy cause, say, world peace.  Would you consider that a breach of the trustee's fiduciary duty?

Do the lessees get a say on how their trust fund money is spent?

They do not.  Lessees get no information from FSTC.  Their only communication from FSTC is their yearly rent bill which includes the property taxes, the demonstration fee, and a $100.00 administration fee.  FSTC does not break the bill down into separate parts for its lessees. Many lessees have no idea how much is property tax and how much is demonstration, or that there is a $100.00 fee tacked on for administration.   

 FSTC does not ask lessees  what they desire.     In the almost 30 years I have been a lessee, I have never been asked how I felt my trust money should be spent. How can FSTC possibility know the desires of the lessees if they do not ask the lessees?
  The President at a hearing on June 9, 2014, "This is an internal piece of business dealing with FSTC owned by FSTC members.  The members have stakes, not tenants."  I am confused.  I thought the FSTC was about using the Colony to demonstrate how a 'single tax' could benefit that Colony.  How can the Colony demonstrate that when the demonstration fee is not used to improve the Colony? 

At that same June 9, 2014, the president of FSTC said, "We certainly suggest that any tenant who believes in Henry George philosophies, take the course and pay $100 and become a member.  That is what we hope."

If lessees want a say, why don't they become members? 


Next blog I'll examine what it takes to become a member of FSTC.