A 7% Fee Increase on the Horizon?

This was the statement made by our professional manager during the August association meeting.

As I have stated repeatedly here, I have done my own economic analysis of BLMH. However, the current board persists in charting its own path. I understand a unit owner made a statement at the July meeting to the effect "this board doesn't listen". That could be the subject of a lively debate. However, I simply have a lot of questions. I don't get many answers.

My first question is this. Why has the management flip-flopped on this? In 2009 management was specific in its analysis of our finances and provided the board and unit owners with an appraisal of our finances relative to the future. Management said it had "doubts" about this association's ability to properly fund the roofing, driveways and other projects so as to complete in a timely manner.

Then, management "flipped" during the fall budget meeting and acquiesced to the new board and stated during the association meeting that "a fee increase is not necessary at this time."  The board majority seized upon this as a justification and then passed a 0% increase in fees for 2010. I wrote a letter to management, protesting this and asked for an explanation. I never got one. Let me be clear here. I could be at BLMH for another 30 years. I don't intend to mortgage my or the association's future.

Now, one year later, we are still waiting for the formal reserve study, which was received by the board, but as announced by our President, has been returned to the firm for rework, and management now says a 7% increase is a necessity.

Why the change in one year? Our Treasurer expressed grave concern last year and stated that "unit owners are better able to budget small increases each year." He has also repeatedly stated that he is opposed to special assessments and with that, mortgages or other machinations which will encumber the unit owners.

As for the current board, there was no austerity program promoted, announced or discussed with unit owners. Read your "Manor Briefs" and the tone and content. Do so see any suggestion of financial concern? A need for serious belt tightening or the promotion of an austerity program? Well, I suppose glossies with schmooze is what the unit owners want and that's what we get.

Wouldn't a 0 percent fee increase require a similar 0% spending increase, at the very minimum? One would think so; that's common sense, isn't it? But there is and was no austerity program. No belt tightening. Coffee and donuts with the board, at association expense, was one board response to their announced fee decrease.

It seems day to day spending has increased.

The Landscaping Director, who initially stated he wanted to decrease lighting to reduce energy costs, has now flipped and has promoted a very expensive "permeable asphalt" driveway and more recently, has taken the position that more insulation is required in roofs, at greater expense. The justification seems to be the perceived requirement to bring our association up to current (new) building standards. That very expensive and unnecessary approach seems to be the plan.  So are we now to mortgage our future?

On the other hand, the request of management may simply be a negotiating ploy. Ask for 7% and perhaps this group will give up something. But I doubt it. This group "believes" our fees are too high, and there are a few willing shills in the audience to shout "hear hear" when the time comes.

If there were any doubt about our finances and the financial ability of this association, shouldn't there have been some corresponding and correlated action on the part of the board? They were told there were issues and concerns. They responded by spending unit owner's fees on a reserve study. Probably a prudent decision. But if there are any doubts, why gamble while we wait for the results of the study?

If I assume that management's doubts about our financial ability is true and accurate, then what? Our Architectural Director has stated to me that he is certain our current reserves and annual contributions are adequate to do all of the roofs and drives, etc. However, no one has produced a spread sheet demonstrating that. Such a sheet would incorporate planned or unplanned cost increases due to inflation. What if the board is incorrect and we don't have enough funds? Well, I suppose that the Architectural Roofs can go and we can revert to inexpensive shingles and basic re-roofing. Insulation can also be dispensed with. Will that happen? If we run out of money can some one tell me how to avoid this without special assessments or an association mortgage? If this occurs, would we then have two styles of roofs here at BLMH? One for the "haves" and one for the "have not's" I suppose.

Of course, the question to be asked is, "who benefits by delaying or deferring fee increases?" while these projects continue. The obvious ones are those who intend to sell their unit or units, and those who receive the new style roofs. If one can sell their unit, then the future fee increases will fall on the "new" unit owners. There may be others who will benefit; I'm not a politician nor am I capable at Machiavellian intrigues. I'm simply a professional problem solver, so what do I know?

It's just conjecture on my part, but perhaps the hope is to keep fees low for a period long enough to complete some of the roofs. Wouldn't it be easier to sell your unit if it had a brand new architectural roof and steady fees?

However, the nature of the current recession may thwart such intentions, because according to experts it will take years for real estate to return to "normal.". I suppose that means sluggish sales and discriminating buyers. So how to sell? Perhaps an upgrade of the unit (a new kitchen, anyone?) and/or substantially lower price. According to experts, selling in the current environment is not easy. So why are many "sellers" of real estate unwilling to lower their price to match the current reality? If you are under water you can't. If you are above water, you might be unwilling to let go of those 2006 prices, at the top of the bubble. It has been said that the strongest forces in human beings are greed and fear.

So what is directing people here? I suggest that there might be a third force at work. In that vein, here is an image of a billboard that is sprouting across the heartland of America. I saw one of these while travelling and decided to share it here, for your entertainment. Entertainment, it seems is a big deal here at BLMH. So, enjoy! While you are chortling, or feeling smug about the "yokels" who made this and similar signs,  I suggest you remember that at BLMH it is YOUR money they are spending. So have a good laugh!

Comments, Corrections, Omissions, References

================================

1. The 7 percent requested by management is solely to fund reserves. There was no request for additional funds for operations. So if there are any spending increases, where are they to come from? 

2. I have avoided publishing certain financial data here. However our board feels no such restraint and recently posted our 2008 audited financials. i sent an email to the board president and I stated this was not prudent.