Dealing with Misdirection

From time to time anonymous posters come to this site and leave comments designed to intimidate and/or for the purpose of misdirection.

I won’t honor these people who prefer to hide and attack anonymously, or who spread misdirection, untruths, half truths, rumors and bile. However, I  won’t allow gross untruths to go unchallenged. These statements are deliberate attempts to pass responsibility to other parties, are an attempt to alter the reality of what actually occurs during meetings, or to alter the decision making process.

This is 2010, a “new year” and it will not be a repeat of 2009. 

Budgeting 2010, Part I

I received my "official" 2010 BLMH budget via the mail. I also have a spreadsheet that was made available to unit owners who attended the January(1) association meeting.  As I stated in an earlier post, I refrained from publishing until after the board decisions had been made and after they had released their "official" data to us, the unit owners.

The association spreadsheet provides a glimpse of the proposed and actual budgets for 2004 to the present. Only "2010 budget" information was included. I assume the "actual" information for 2009 was not the audited data for the year, and so is possibly "preliminary" data.

For your information, here is a chart I made of the Operational and Maintenance expense portion of the budgets.

You will notice a spike in 2009. I suspect the actual for 2009 includes the expenses for concrete, landscaping modifications, etc. which were associated with the roofing and driveway projects. As near as I can surmise, the spreadsheets do not indicate the amounts spent on reserve items in 2009; for example, roofs and driveways. Or, if they do, the amounts are buried within maintenance items. However, no clarification was provided.

One item of interest was the expenditure for "Grounds Maintenance" which was nearly 59% greater in 2009 than it was in 2008 (3). The actual difference was $16,423. This is not a trivial amount. I am not aware of the explanation for this variance. Was this a one time event? Is it related to the driveway and roofing projects of 2009? Our 2010 budget increases the amount for this category by 12.4% above the actual expenditure for 2009.

You will also note that expenditures for operational and budget items continue their upward trend. Several items of interest here. First, the budget adapted for 2010 is identical to the budget for 2009. However, the actual costs for 2009 were 3.96% greater than the budgeted amount for 2009. Nonetheless, our Board of Managers decided that the 2010 budget will not be based on the "actual" budget for 2009. So it appears to me that we may have a possible 3.96% shortfall built into the operating and maintenance budget for 2010.

Second, even though costs continue their upward trend, the board has decided to hold our monthly fees at the same level as 2009. So the question is, if costs do increase, where will the funds for any budget shortfalls come from? My guess is, from reserves if the board can find a way. Third, this budget is after the great uproar by that group called the "Residents of Change" and their vow to go over the budget and bills "item by item".

Here is a graph of our actual expenditures, with 2010 using the amount projected by our Board of Managers. You will note that the trendline is continuously upwards. From the "actual" in 2004 to the end of the trend line in 2010, the trend in increasing at 3.35% per year. However, our association is budgeting for a 0% increase in operating and maintenance expenditures in 2010. I think there will have to be a few budget cuts to accomplish that. So where will those occur? I suppose our Board assumes that the annual inflation rate, which is currently 2.7%, will have no impact on us. In other words, energy, contractors who held the line on costs last year and so on, will not pass along their costs increases to us as the economy moves out of recession and expands. All  costs will be exactly the same as that budgeted last year (2), and therefore will be nearly 4% less in 2010 than they actually were in 2009. Hmm, I don't think Com Ed is going by that play book.

Please don't make the assumption that a 4% fee increase was required in 2010 to meet rising costs. That portion of the budget allocated to operating expenses and maintenance is about 75% of the total annual budget. So, if the amount allocated to reserves is a constant amount per year, then our total budget shortfall will be about 3% in 2010, using the data provided by the Board of Managers.

According to the Balance Sheet dated November 30, 2009 as of that date, BLMH had a surplus of $6,643 for the year to date. I am uncertain if that Balance Sheet reflects the expenditures for roofs and driveways in 2009. I hope some of this becomes clearer with the balance sheet for the calendar year ending 12/31/2009. You will recall, the driveway projects for 2009 are incomplete and were scheduled for completion in 2010. Of course, our new Board of Managers may choose to go in another direction, to save funds. I understand another "reserve study" has been ordered by the Board of Managers, as announced at the January(1)  association meeting. Obviously, the board is trying to find a way out.

I'll be publishing additional information on the adapted budget and I will also be publishing my projections for the driveway and roofing projects for BLMH. I had hoped the Board of Managers would have provided us with this information but they apparently chose not to, or did not do the analysis necessary. No matter, I have done mine.

==========================================
Errors and Omissions

(1) In the original post, the December meeting was cited.
(2) In the original post, was mis-spelled.
(3) the original post compared the 2009 budget.**
**With kudos to a sharp pair of eyes!

Something for Relaxation

Click on the triangular button in the center of the image to play the file.

A Glossary of Site Statistics

During the most recent association meeting, statistics were mentioned for the "official"  BLMH website, including "hits". I was asked what that statistic means and here is a brief explanation, and some additional data on meaningful statistics used for gauging the visitors to websites.

There are several ways to measure visitors to a website. As is the case with most statistics, these are sometimes quoted and have various uses. Different tools use differing methods of measurement.

To provide some indication of the statistics available, here are some actual statistics for one of my sites, which is non-commercial in nature. A glossary is provided after the statistics:


Site Report - Date Range: 1/20/2010 to 1/26/2010  

Report Summary
  Total Visitors 117
  Total Pageviews 167
  Total Hits 334
  Total Bytes Transferred 13.6M

  Average Visitors Per Day 16
  Average Pageviews Per Day 23
  Average Hits Per Day 47
  Average Bytes Transferred Per Day 1.95M

  Average Pageviews Per Visitor 1
  Average Hits Per Visitor 2
  Average Bytes Per Visitor 116,723
  Average Length of Visit 405sec



Glossary of Terms
Hits
A "hit" is simply any request to the web server for any type of file. This can be an HTML page, an image (jpeg, gif, png, etc.), a sound clip, a cgi script, a pdf file and many other file types. An HTML page can account for several hits: the page itself, each image on the page, and any embedded sound or video clips. Therefore, the number of hits a website receives is not a valid popularity gauge, but is rather an indication of server use and loading.


Visitors
A Visitor is defined as a series of hits from any IP address or host separated in time by no more than 30 minutes. This definition makes several assumptions:

• A hit from the same IP address in under 30 minutes is probably the same person
• A hit from the same IP address separated in time by more than 30 minutes is likely to be a different person, and is counted as such

However, a "visitor" is not necessarily a unique person. It is not a unique IP address or host name. Unless cookies are used, it is not possible to determine these things precisely from a web server's log files. This is because many of the largest internet access/service providers recycle IP addresses out of necessity, because they have so many members. Therefore, "Visitors" is defined according to an industry-standard formula that is reasonably accurate, and will give numbers close to the actual figure for virtually all websites.


Pageviews
A "page" is defined as any file provided by a web server that would generally be considered a web document. This includes HTML pages (.html, .htm, .shtml), script-generated pages (.cgi, .asp, .cfm, etc.), and plain-text pages. Image files (.jpeg, .gif, .png, etc.), sound files (.wav, .aiff, etc.), video files (.mov, etc.), and other non-document files do not count as pages. Each time a file defined as a page is served, it is registered as a "Pageview". On my sites, each page registers separately in this statistic. I know how many views each page generated and therefore I know which pages are the most popular with visitors.



Length of Visit

The time users spend on a site is an indication of how useful and compelling they find the content to be.  This statistic varies based on the tools used to generate it. On my site, this statistic shows how much time visitors are, on average, spending on the site.  



Bytes (Transfer / Bandwidth)
A "byte" is a unit of information transferred over a network (or stored on a hard drive or memory). Every web page, image, or other type of file is composed of some number of bytes. Large files, such as video clips, may be composed of millions of bytes ("megabytes"). Since website and server performance is heavily affected by the amount of bytes transferred, and web hosting providers often charge according to this measure, it is very important for site owners to be aware of and understand. Common terms incorporating the word "byte" are:

• Kilobytes (K)- one thousand bytes
• Megabyte (M) - one million bytes
• Gigabyte (G)- one billion bytes
• Terabyte (T) - one trillion bytes

Cookie
The cookie file is a file that resides on the client machine. The typical internet user's PC is called a "client". The cookie file contains data passed from web sites, so that web sites can communicate with this file when the same client returns. The web site only has access to the part of the cookie file that represents the interaction with that particular web site; that part of the file is called a "cookie", and a cookie file may contain hundreds of cookies. The cookie file has caused some issues with respect to privacy, because PC users do not know what information is being stored in the file.

Finances for Unit Owners

I was asked a few questions about the recent post on inflation. I have decided to host a discussion group which will delve into some of the aspects of finances and financial planning for unit owners. It will also include discussion of related topics, such as how finances and planning, both short and long term, are vital parts of the work performed by our board of managers, and how they are bound under Illinois law, and the meaning of fiduciary duties.

Before you ask, I am not a CPA. Just a normal person with normal common sense and normal financial acumen. However, I am also a successful businessperson, I have been successfully employed as a manager for very large and complex projects, and I have served on the boards of several corporations. I have about 40 years of "real world" experience dealing with and successfully solving "real world" problems. I have earned a living as an engineer, and I train.

So if you are interested in joining our group, which will include graphical presentations, etc., then give me an email or, you can talk to one of the various people here at BLMH with whom I associate. They'll get the word to me.

Today's Financial Tidbit

So what has been the result of inflation during a recent 10 year period and what does that mean to me?

According to an article in Morningstar dated January 21, 2010, the federal government has released information that inflation 2001 through 2009 was a cumulative 124.5%, or about 2.5% per year.

What does this mean?

• If I had $10,000 in the bank in January 2000, it would have had to accumulate sufficient interest that on December 31, 2009 the bank balance would have been $12,450, to retain my purchasing power. In other words, to purchase the same goods in services on December 31, 2009 would cost 24.5% more than they did in 2000.
• If I had purchased a unit in January 2000 for $149,000 it would have to have had to increase in value to $185,505 as of December 31, 2009.
• If I had purchased $10,000 worth of an index mutual fund in the S&P 500 it would have had to be worth $12,450  as of December 31, 2009.
• My $200 monthly fees at BLMH would have had to increase to $249 as of December 31, 2009. This just to keep up with inflation, but includes no fees to make up for accumulation shortfalls in reserves.

So how did it turn out?

• That investment in the S&P 500 decreased in value from $10,000 to $9,040 according to Morningstar and the federal government, that's a loss of 9.60%.
• My fees increased  to about $300, which is a increase of 25.5% over inflation. That increase is to fund roofs and driveways, etc. According to public record, in 2000 this association had reserves of about $300 per unit. Not nearly enough!  Comment: Let me say it this way; if our funding of reserves in 2000 was "adequate", as some believe, and no fee increases above inflation are necessary, then that same $300 would today be $373.50, if it were accumulating at the rate of inflation. Would this be enough to replace a roof today? Well, a little arithmetic provides this answer. Each building would have about $2,988 in reserves for a new roof. Hmm, that's a few tens of thousands of dollars short! As our professional management has stated, repeatedly, our fees are what they are to make up for past underfunding of reserves. For the past year our "board" has been officially mute on this subject; i.e., when this comes up during association meetings, they make no comment and appear as deer's in the headlights of an automobile, preferring to stare blankly and allowing the "professionals" to address the unit owners. From this I assume the board do not agree. "Brian" says they don't read this blog. So I wonder where they get the information they use to make their evaluations, and upon which they base their conclusions?

I suggest in reading this that you keep in mind that many experts suggest that purchasing a "home" as an investment is not a good idea. The primary purpose of a "home" is to provide a place to live. It also gets one into a situation where they can paint the walls any color they choose, can put nails and hang paintings wherever they choose, and install the appliances of their choice. Here at BLMH I have the best of both worlds; I can control my unit and am responsible for its maintenance and I can avoid most of the unpleasantry associated with exterior maintenance. These same experts state that investment should be a secondary objective.

The New York Times has a wonderful calculator which provides a great tool for incorporating costs into the home ownership and buying equations. It applies also to condominium owners. I have found this calculator and others like it, to be useful for budgeting purposes. It provides me with some idea of "minimum" costs of ownership and also allows me to make some projections 10, 20 and 30 years into the future. The calculator includes features that allow adjusting fees, taxes, annual costs such as maintenance and renovation, and so on, many available through the "Advanced Settings" tab on the site.

New York Times "Buy versus Rent" Calculator

Who Is Managing the Managers?

We have a very important association meeting on Thursday. Our board will discuss the proposed 2010 budget with unit owners. I did send a letter to the board of managers, via our professional management and I raised my concerns and briefly stated my case. I received a response that my letter was "passed to the board". However, there was no indication that the board will address the issues I raised. I understand there was an association "non-meeting" the other day, which was attended by a professional manager, some members of the board of managers and some unit owners. I have been told that concerns about the budget were discussed. This meeting was not posted to the unit owner body; nor was it listed under the "Events" tab of our official website. I was not made aware of the meeting prior to its occurrence and therefore could not attend. I assume that was also true for the majority of unit owners.

I suggest unit owners attend the association meeting on Thursday and determine if the proposed budget is viable.  Certain board members have stated that our fees are "high" and at one time issued a statement about unit owner "outrage" over our fees. I conclude that they are pre-disposed to lower fees and have also made it known that our management should be replaced. In such an environment, there is pressure on the professional managers to say what the board wants to hear.

I am not in favor of increased fees. I am in favor of long term planning, i.e. 10 years or longer and budgets to accomplish these plans. Such budgets prioritize spending and the accumulation of reserves and will provide the funding necessary for maintaining this association. I have written letters to management and the board of managers, presented my case in those letters and here and have made statements at board meetings. This has resulted in "unpleasantries" directed against me.

I have not published my findings on this site because I want the members of the board to produce their plan. The proposed budged incorporates a plan which could create extreme pressure on future boards and unit owners, and some hard and unpleasant choices. I stated my case in a letter to the board. I want the plan of the board stated clearly to me and to all unit owners. I want to know how much will be accumulated year by year for roofs, drives, streets and all other maintenance and I want to know the proposed expenditures year by year. How many roofs will be replaced in 2010, 2011, 2012, 2013, and so on until all are completed and how will this be achieved with the proposed budget? When will these projects; roofing, drives, etc. be completed with the proposed budget? How much money is anticipated to be spent on each of these projects year by year? How will the problems with Lakecliffe be corrected? How much money is being allocated to this problem and is it sufficient? How did management and the board come to their conclusions and what data was incorporated?

If our fees are insufficient to achieve a "10 year" plan and if the board intends to hold fees constant, then where will the money come from? Special assessments, a reduction in services or from a loan to this association which will be repaid by the owners as higher fees? Are we, in fact, mortgaging our future? If services costs are to be reduced to achieve the budget and "10 year" plan, then where and how will they be reduced? What inflation numbers and other assumptions are incorporated in our proposed budget? Does this board have a "10 year plan" and if not, why not? If it doesn't, then how can it state that the budget is a "good" budget. It has been said that any road will take us where we are going, if we have no idea what our destination is. So it is with planning.

We, the unit owners are responsible for managing our board. Ultimately it is our responsibility to be assured that whatever plan our Board has, which is behind the proposed budget, will maintains fees constant and achieve all of the maintenance at BLMH next year and well into the future. That includes accomplishing and solving all identified problems or issues.

It is my concern that our board is constructing a budget which justifies their proposed positions and fee structure and which passes severe problems to future boards and future unit owners. It is our job to manage our board in such a way that problems built into the current budget are not ignored or glossed over and are not passed to future boards and to future unit owners. I frankly do not want to attend an association meeting in 2015 in which angry unit owners again storm the gates and loudly proclaim "how could this happen"? We are creating that future today and our board will pass a budget which includes solutions or problems and possibly both. There are choices to be made. That is why they were elected. I want them to articulate those choices to me and so should you.

"Brian" has stated in a comment on this site that our board "probably does not read" this blog. As the person who is creating our official association website, under the direction of the Communications Director, he is in a position to to make such a statement. If he is correct, it is unfortunate that our board wants "good news" people surrounding them, and doesn't want unit owners to ask the hard questions.

I will review the position of the board and management and I will then compare it to my analysis and I will then publish my agreement or disagreement. I ask that concerned or involved unit owners attend the meeting, take notes, ask questions and support me in this endeavor. Ultimately you are supporting yourself.  Someone has to ask the hard questions.