Updated Surplus Numbers

Updated Surplus Numbers
Updated Surplus Numbers: Actual surplus 2018 per audit was $85,163.
Boards 2011-2018 implemented policies and procedures with specific goals:
stabilize owner fees, achieve maintenance objectives and achieve annual budget surpluses.
Any surplus was retained by the association.
The board elected in fall 2018 decided to increase owner fees, even in view of a large potential surplus

Average fees prior to 2019

Average fees prior to 2019
Average fees per owner prior to 2019:
RED indicates the consequences had boards continued the fee policies prior to 2010,
BLUE indicates actual fees. These moderated when better policies and financial controls were put in place by boards

Better budgeting could have resulted in lower fees

Better budgeting could have resulted in lower fees
Better budgeting could have resulted in lower fees:
RED line = actual fees enacted by boards,
BLUE line = alternate, fees, ultimately lower with same association income lower had
boards used better financial controls and focused on long term fee stability

Tuesday, February 25, 2014

Cleaning Up After Rain and Ice Dams - Salt Shortage

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Now that the freezing rain has moved on we and neighboring communities are cleaning up. Some of this cleanup is required because of the unusual snowfall, extreme cold, the freeze-thaw and of course the rain that followed.

Streets everywhere in our area are clean, but are a pothole mess. It's been reported that nearby Chicago has 100,000 potholes and on January 17, 2014 Chicago launched the "Pothole Tracker" website. Here's an image of some of the potholes reported as patched in the last 7 days:


Wheaton and Glen Ellyn have nothing to compare to that website. Of course, BLMH doesn't have one either. We don't have a tax base of 27,000 (GE) or 53,000 (Wheaton). Instead we have the fees of 336. 

24 Days and Counting
That's the number of days remaining until Spring. We can expect freezing weather and even a possibility of snow until about April 12. I'm using personal experience to arrive at that date. That's another 47 days. We can expect more snow, more thaw and more heaving of streets in the area. As I drove down Park Ave in Glen Ellyn this morning the water department was digging. It looked like another broken water main.

When the ground begins to thaw and the frost dissipates, there will be additional heaving and more water main breaks. That will signal the welcoming of Spring. 

In the mean time, what to do?

Repairs and Salt Shortage
Our management and maintenance are empowered by the board to take the necessary steps. When we saw the extent of the icing we knew there would be some problems. One goal is to protect roofs, so the units remain dry. However, when things do go wrong, the primary goal is to handle issues that impact units. Leaks in foyers (the air-locked entryway) is secondary. An important goal is to also take care of issues in garages. We want structures to keep residents warm, dry and comfortable.

I can understand the nervousness if there is any sign of a roof leak. I've experienced a failure of a chimney cap and it was during a very, very rainy April. The concern of a resident in a roof leak situation might include "How serious is this?" "Will the leak become worse?" "Will my possessions be damaged?" "Will I have to vacate my unit?" and so on. Sometimes we may think of the worst possible situation. In fact, the worst case seldom occurs.

Some owners may become upset by a leak. "My problem is the most important" is one possible thought that is driving each of us.  However, our management is capable as are the maintenance professionals. Speaking for myself and as a board member, I want to know that we're on top of the situation, whatever it is, and that we are operating responsibly, pro-actively and if possible in accordance to an agreed upon plan. I really want to avoid being a reaction or being at the effect of things. So I look upon every winter storm and every problem from the place of "what if?" I then attempt to anticipate and if necessary I then discuss with the professionals. Once I am confident with the plan I am comfortable to let them do their jobs which includes making the necessary decisions. However, being uncomfortable is no excuse for interfering.

Boards are supposed to discuss issues and decisions in an open forum which is during the monthly HOA meeting. When there is a problem some owners will attempt to contact me and advise me of problems or their issues. I think being kept informed is well and good. However, as a board member I really cannot intervene beyond asking the necessary questions and then discussing with management and maintenance "What are we doing about this situation and are you aware of it?" I find it interesting that some owners will call or email, demand immediate action and yet, if the board is even suspected of operating beyond the view of the entire owner body, then "we are not transparent." Yes, there is a double standard.

Obviously, my approach with management, maintenance and the owners requires some trust. A board member who is distrustful may actually do more harm than good because of false or deceitful communications, obfuscation, withholding and so on. I think there is nothing worse than setting traps or operating irresponsibly. Nor is bullying a valid approach; this is 2014 and we are all very familiar with domination and manipulation techniques. Good intentions are insufficient. When the going gets tough, it is essential that everyone becomes aligned. That is not possible for some. Owners who act solely in their own interests are a real problem. Board members can be another. When mistrust exists it may be impossible to build a foundation for positive action.

Is the current situation perfect? No, it never is. Is there a double standard among owners? Yes there is. Some expect immediate attention and ignore all others in the HOA. Some don't pay their fees in a timely manner. So what? When things to wrong, the association responds. No one asks "Is this owner current" or checks a list. All owners are equal, no matter how delinquent or how disagreeable. Nor does it matter if one is a member of the proper "club." HOAs need to prepare for these types of problems and avoid being a reaction. Each building is to be protected, each address is to be maintained uniformly and fairly. Is this an impossible task? Possibly. We can predict likelihoods. But as I said, it is a double standard. Tom Skilling can provide lousy weather forecasting, which we attempt to use to make decisions and when the weather turns and we make the wrong decision Mr. Skilling provides long winded excuses and the people love it. HOAs do a far better job even with this misinformation and yet the board gets rotten tomatoes. For his reward Tom Skilling gets paid through 2022 as "possibly the highest paid weatherman" with a million dollar salary and a 12 person staff. Go figure! But he is such a warm and personable guy! Hey Tom, come on over and coffee klatch with us! We have a few owners who go for the fluff.

Immediate Steps
One thing to do with a thaw is to repair any damage and dry things out. Another is to deal with the remaining ice dams. Another is to do a thorough inspection of entrances, foyers, garages and so on. Yet another is to look at the worst of the potholes and decide how to deal with that. Looking ahead, another is to replenish salt and calcium chloride inventories. That is if we can get any. The State and municipalities have done their best to commandeer available supplies. For example, Glen Ellyn has insufficient storage and so they too have dipped into their "emergency" consignment and I understand are now purchasing. In other words, we compete with the State and local municipalities on the open market to purchase salt and calcium chloride. Who would win should GE offer to purchase 600 tons, ot BLMH offer to purchase 1 ton. I'll give you one guess. 

The High Price of Rock Salt
You may recall that Glen Ellyn (GE) decided that they needed more salt storage. In November 2013 the trustees of that village debated the necessity of spending up to $800,000 to increase salt storage because going on the market in winter is an expensive thing to do. The village does have an emergency contract but that may not provide sufficient salt or calcium chloride.  Prices in the summer contracts were about $53 a ton and the GE winter contract agreed to purchase if necessary an additional 600 tons at $54 a ton. After that, any additional salt is purchased on the spot market. In other words, GE is our competitor for purchase. This winter, with shortages and bidding for salt from communities everywhere, prices have been reported to be as high as $240 per ton and one may have to ship from Iowa. Of course, salt might be available in bags, but that is usually at a much, much higher price per ton. Rock salt is not the preferred ice melt because it only works as low as 5F and can be corrosive. Calcium chloride is preferred because it works to as low as -25F. I sometimes use the word "salt" to describe both, but the prices are lower for rock salt. 

Rock salt in 50 lb. bags is usually about $7 a bag, or $280 a ton. Of course, delivery is extra. Prices have increased because of heavy demand and calcium chloride was recently available in 50 lb. bags for about $22 or $880 a ton. 

BLMH stores a minimum of salt or calcium chloride on the property. Our contractors store most of it. With one small shed on the property and owner ambivalence or downright hostility to increasing such storage, I doubt any board will allocate the funds for an "emergency stockpile" here on the property. I say that because no one wants any sort of shed "in my backyard" to paraphrase one of the owners. However, if our snow plowing company does run out this winter, we may be in a situation where the board will have to authorize an emergency purchase. At a cost of 4 to 8 times normal,  that would require a significant expenditure. Additional storage might be preferable to avoid such high cost in the future and possible icing if we do run out. The board may consider this to avoid a similar situation in 2015 and beyond. However, none of us can predict the future. 2007 and 2008 were high useage years. The winter of 2012-13 was a low useage year. So who knows? I would think that if winters are going to be milder in general, then we can expect more winter transitions from below freezing to above freezing and with that comes more need for ice and snow melt. But who really knows?  

Ice Dams and Damage
We have had some damage because of the ice dams. The weather warmed, but not enough to clear out all of the ice and that 5 inches of snow that fell immediately prior to the melt. Our HOA has raked the roofs several times this winter and cleared gutters. After the most recent snowfall it was able to clear a lot of these dams and rake snow but not all. There had been a scramble to get a 60 ft. lift on the property to aid in raking those high roof eaves and clearing dams. That was in addition to the short reach lift which is used for roofs above garages. But the respite was too short, we got 5 inches of fresh snow a brief melt and then the rain fell. 

Do ice dams always cause damage? No. So why did we experience some damage? The ice in this photo is an ice dam and behind it is 5 inches of fresh snow.

Those icicles are the tip of the iceberg. The problem is not the icicles. It is the ice behind the icicles and some of that is under the snow and is not visible. This photo was taken the morning after the 5 inch snowfall and melting was occurring. That creates more ice and longer icicles which freeze upon contact with colder air or when temperatures fall at night. Clearing the icicles and raking the snow is one way to allow the dam to clear. Using high pressure to cut these is another technique that can be used.  However, these techniques require some assistance from the weather and can be even more difficult to achieve on high roofs. With increased difficulty comes higher costs. 

Here's a roof which had been partially raked. Beneath that snow there may be ice. The only way to determine how much ice is present is to rake, and there are limitations to the amount of raking that can be done. We can't very well clear entire roofs. The gutter has an ice dam which was formed when the melting snow hit the cold gutter. It then froze and as more and more water ran down the roof it struck the ice and it too froze:


When ice forms on roofs it prevents water from melting and running down the roof. Instead, the melting snow from above flows down the roof until it reaches snow and it then cools to form ice. Or, the water flows until it reaches any existing ice and then it stops. That is why ice on roofs is called an "ice dam." After most of the snow cleared, a sheet of ice was visible on some roofs:

What to do next? If most of the ice dam has thawed then additional calcium chloride carefully applied will be helpful. However, with low nighttime temperatures any melted ice may flow to the gutters but can re-freeze. It's a "do your best" situation. To add to the complexity a shortage of calcium chloride may require careful thought about how much to use and where. That is the precise situation currently facing many homes and HOAs in the area.

Salting Roofs?
Throwing rock salt on roofs is to be discouraged. It can attack the roof and change the color of the shingles. It may also contribute to corrosion of aluminum gutters. However, judicious use is something I'm personally in favor of and the careful sprinkling of rock salt along the ice atop gutters will help the melting. However, simply throwing rock salt on roofs is to be discouraged. Calcium chloride is the melting agent of preference. In a HOA, doing these things is best left to professionals.

Immediate removal of snow from gutters is one way to avoid some ice dams. However, that isn't always possible.

Do Ice Dams Always Result in Problems?
Ice dams prevent the water created by melting roof snow from flowing to the gutters and beyond. Instead the water flows down the roof until it reaches the ice. At that point it will stand and will flow under the ice and possibly under the shingles. Once it is under the shingles it will flow to seams in the plywood (our HOA has plywood roofs) and from there it can flow into walls, or into garages. Rain on top of iced roofs does exactly the same thing.

Melting snow which has pooled behind the dam will freeze at night. In this manner, repeated days of snowing, partial thawing and then refreezing can cause a sheet of ice to form on roofs, and can fill gutters with ice. Some residents on seeing these icicles find them attractive. Some find them to be dangerous. Some don't realize the possible damage they represent. 

Ice dams do not always cause problems. This is also determined by roof construction and by the location and extent of the ice on the roofs. 

For example, on the new roofs at BLMH, "ice and water shield" is installed along edges and along adjoining areas. These roofs have some protection, but this project is not yet complete. It is my understanding that ice and water shield was not installed on the original roofs and so about 44% of the roofs in this HOA do not have "ice and water shield." I cannot say why this was not done as part of the original construction. Was it part of Wheaton code in 1976-1979 and was it "missed" by the building inspectors? Or was it simply another cost saving shortcut taken by the builder? 

What is ice and water shield? It is a rolled sheet material that is impervious to water. If ice and water shield is installed on 3 feet of lower roof, it will prevent most damage from icing that occurs within 3 feet of the edge. If the roof has 5 feet of such shielding, then ice protection is to within 5 feet of the edge.

The new roofs include additional ventilation and additional attic insulation. This results in a colder attic and a colder roof. This too assists in the avoidance of ice dams. 

I have always remarked that the Manor Homes at BLMH are wonderful, "California Style" buildings. I say that because of the  the large sloped areas which end over the entrances of the A&B garages, and because of the complicated gabled areas. These are wonderful architectural style touches, but can contribute to real problems in heavy rainfall and when icing occurs. These are of course problems that seldom occur in San Francisco but do occur here in the midwest. The roof design is precisely why the association has done a lot of work on improved roofing with ice & water shield, relocated downspouts, additional gutters on some roof edges and drainage improvements. 

I am told some really horrible icing conditions occurred at BLMH in 1984. There was serious damage to a few buildings. Apparently the knowledge gained was put to use when the re-roofing project was undertaken. 

Can Ice and Water Shield Prevent Damage From Ice Dams?
The answer again is determined by the extent of the ice on the roof. If ice dams and ice sheets reach far enough up the roof to go above the shield, then water can flow under the shield. 

How Extensive Was Icing Damage This Winter?
First I must state the the winter is not yet over. Secondly, I don't know the answer. Damage assessment is underway and after all work orders are in and repairs made, the board will know. I have been told that there were leaks in a few units. I don't know how extensive these were. I am aware of some dripping in some entrances and of leaks in some garages. Some old roofs have been remarkably leak free. The building which contains my unit has an old roof. It did not have any leaks (yet). However, some years ago a displaced chimney cap caused quite a problem. My point is, simply having an old roof does not guarantee that leaks will occur. On the other hand, a new roof does not guarantee the complete absence of leaks. It might be prudent to have a concern about the possibility of leaks which assists awareness. Worrying is not helpful, in my opinion.

One thing about this HOA is the fact that with 44 buildings arranged on the property on curving streets we have many differing building orientations. That means that blowing snow goes against some entrances while it does not at others. Some buildings have a gabled roof entrance, some a shed roof entrance and some no overhead protection at the entrance. The roofing project is changing that. Some decks and patios accumulates blowing snow while others do not. The extensive trees, including tall evergreens protect some buildings from the heat of the summer yet prevent the benefits of warm winter sunlight from striking some of the roofs. That winter sun may be helpful in moving snow off of roofs and avoiding icing. Exterior walls of some kitchens are facing east and get morning sunlight and are thereby heated in the winter mornings. Others face west and get afternoon sun. Others face north and get little sun. This is why it is so difficult to treat problems with "cookie cutter" solutions. Such an approach does not always work in a HOA such as BLMH.

Are There Other Preventative Measures?
I have posted that I once owned a home with heat tape installed in the gutters. That was a wonderful solution. If I saw ice forming in the gutters I would turn on the electricity to the heat tape and it melted the snow and ice. Then I would turn it off. Doing this usually kept my gutters cleared. It wasn't perfect, however. In extreme cold it was useless. It had to be maintained every year, but was only used about every three to five years because most years there was no buildup to deal with. While attractive, heat tape may not be financially attractive for a HOA because of the cost of electrical wiring, cost of electricity and cost of annual maintenance of the heat tape.

Would such heat tape work here? The installation of heat tape at BLMH would require annual maintenance and testing. It would require some sort of on-off system, be it thermostat or switch, or both. Our buildings are not currently wired for this. However, it might be worth evaluating the cost versus benefits over the A&B garages. That presents a problem. It's my understanding that the last year this association experienced a really serious problem with ice dams was 1984. That was 30 years ago. So the question to ask is this. Does the cost of installing, maintaining and operating such a system for use occasionally over 30 years justify the benefit? Or is it more effective to use manual means of clearing gutters?  I also need to point out that the icing problem on buildings is more extensive than the gutters over the A&B garages. The additional areas don't have gutters and heat tape would be difficult to install and maintain throughout. Finally, to install such a system would require a commitment by boards to allocate funds for maintenance each and every year. After several years of doing this with no apparent benefit because of mild winters a board might decide it simply isn't worth the annual cost. If not maintained this would result in a system that would not be completely effective. That's a real possibility with buildings with 84 gutters over garages.

Passive systems include ice & water shield, improved attic insulation and improved attic airflow. These reduce the formation or impact of ice dams, particularly over units and above halls and foyers. They are maintenance free and do not require electricity to function. In combination with some manual maintenance on an "as needed" basis they might be the better solution. That's the approach currently in use at BLMH.

Sunday, February 23, 2014

Awful at Managing Money?

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Managing our money is one of those things that is really important. Money is, after all, what we earn from our employment or what we get in that pension or SS check if we are retired. As such it is the "fuel" for all things as a consumer. Yet, managing money is something that seems to elude many of us, and nearly all of us have some difficulty dealing with money.

"People usually get better at things over time.....But there's something about money that gets the better of us. If you look at the rate of personal bankruptcies, financial crises, bubbles, student loans, debt defaults, and savings rates, I wonder whether people are just as bad at managing money today as they were in previous generations, maybe even worse. It's one of the only areas in life we seem to get progressively dumber at." So says Morgan Housal and he recently published a list of the "77 Reasons You're Awful at Managing Money."

I've included a link to the original article. It's one of the best summaries I've ever seen. You and I may not agree with everything Mr. Housal says, but he does provides something to think about.

Here are ten of my of my favorites from Mr. Housal's list. I suggest you use the link on this page to read all of the 77:

2. Your definition of "long term" is the time between now and the next bear market, whenever that is.
10. You get upset when you hear on TV that the government is running a deficit. It doesn't bother you that you heard this on a TV you bought on a credit card in a home you purchased with a no-money-down mortgage.
11. You take out $200,000 in debt to earn a degree in a subject you're not interested in, doesn't offer marketable job skills, and for which you have no intention of working in -- all by age 22.
12. You're part of the roughly half of Americans who can't come up with $2,000 in 30 days for an emergency, even though you're also part of the roughly 100% of Americans who will need to come up with $2,000 in 30 days for an emergency at some point in your life.
13. The single largest expense you'll pay in life is interest. You'll spend more money on interest than food, vacations, cars, school, clothes, dinners out, and all forms of entertainment. You do this because you don't save enough and demand a lifestyle you can't actually afford. The future owns your income.
14. You're thrilled that the credit card you're paying 22% interest on offers 1% cash back on all purchases.
21. You associate all of your financial successes with skill and all of your financial failures with bad luck.
22. Rather than admitting and learning from your mistakes, you ignore them, bury them, make excuses for them, and blame them on others.
35. You think you're doing great by building up an emergency fund that covers three months of living expenses when the average duration of unemployment these days is more like nine months.
50.  You think it's impossible to live on less than $35,000 a year without realizing that literally 99% of the world does, even adjusted for purchasing power parity.

Here's more food for thought from another Housal article:
'As author Matt Ridley put it, "Today, of Americans officially designated as 'poor,' 99 percent have electricity, running water, flush toilets, and a refrigerator; 95 percent have a television, 88 percent a telephone, 71 percent a car and 70 percent air conditioning. Cornelius Vanderbilt had none of these." Nor does much of the world.'

Here's the Link to the Original Article:
Clicking will open a  New Window> 77 Reasons You're awful at Managing Money




Friday, February 21, 2014

Wheaton Tackles the Potholes

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Yes, it has been a tough year for the streets. Here's the latest press release from the City of Wheaton:

Public Works Street Superintendent Mike Wakefield
Friday, Feb. 21, 2014


Crews Take on Potholes Citywide Starting Monday


WHEATON, Ill. – With 22 days of below-zero temperatures and more than 67 inches of snow so far, this winter has been tough on roads. Extended periods of severe cold weather, fluctuating temperatures and excessive amounts of snow have produced excellent conditions for one thing in the Midwest: potholes.

Starting Monday, Feb. 24, two Wheaton Public Works Department crews will begin patching potholes from 7 a.m.-2 p.m. and 10 p.m.-5 a.m. each day until potholes throughout the entire city have been filled.

“This winter has produced some dramatic weather, which unfortunately creates the right conditions for potholes to form,” said Mike Wakefield, City of Wheaton Street Superintendent. “We have seen a significant number of potholes popping up in all parts of the city, so we’re going to be filling them using the same priority routes we use for clearing snow, rather than jumping from one spot to the next.”

The prioritized route system starts with main thoroughfares, then addresses secondary and residential streets, and finishes with cul-de-sacs and dead-ends. This patching will serve as a temporary fix for potholes, as crews need warmer temperatures to perform permanent repairs using new asphalt.

“Please use caution if you’re driving around pothole crews,” Wakefield said. “We appreciate your patience as we work to get to every part of the city.”

Residents can report a pothole through the Online Request Form on the City’s website or call 630-260-2116.

Note for BLMH residents. Our streets are our responsibility. The City of Wheaton will provide absolutely no assistance for the streets or the water mains on the property. Why is that? We are a PUD, or "Private Urban Development." What that means is that Wheaton collects your taxes, but other than Police or Fire assistance, you and this association are entirely on our own. 

Winter Returns, Cold But Little Snow!

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National Margarita Day
That's tomorrow, February 22nd according to Cozymels, a local restaurant:


Doesn't Look Like Margarita Weather to Me
Winter has returned overnight, blowing out the fog, drying a lot of the streets. There are icy patches. The slush is gone, replaced by something like that stuff they are using at Sochi, closer to concrete than to snow.

The falling snow will end with minimal accumulation. It's really small ice crystals and none of that fluffy stuff. It stings when it hits one's face, driven by the gusts of 40 MPH.

Weather patterns for the next 10 days will be cold and falling temperatures with today the warmest. However, snow will end with only a chance of snow until March 2. There is a possibility of snow on March 2.


Today, temperatures will reach a high of 32F and from that point it will be downhill, with temperatures falling to a low of 0F on February 27.



Thursday, February 20, 2014

Weather Update, Rain, High Winds, Possible Flooding, a Hard Freeze and then Back to Winter

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So Far, So Good. The Fog Rolls In!
At 3:00pm the temperature was 39F. That's well below the predicted 48F.  Total rainfall as been between 1 and 1-1/2 inches in Wheaton. That's more than originally expected at the news services but is consistent with the NWS predictions. Most of this has been steady but light rain. There has been no hail and runoff seems to be moderate. More rain is coming but tonight the rain will change to snow and we'll be back into winter. The NWS has now issued a dense fog advisory for this evening and the High Wind Warning remains in effect:
...DENSE FOG ADVISORY IN EFFECT UNTIL 7 PM CST /8 PM EST/ THIS
EVENING...
...HIGH WIND WARNING REMAINS IN EFFECT FROM 5 PM CST /6 PM EST/
THIS AFTERNOON TO 11 PM CST /MIDNIGHT EST/ THIS EVENING...

The Early Morning Post
It did rain last night, and temperatures will be moderate throughout the day.

Rain will return this afternoon. It will be a hard freeze tonight.

Oops, the experts were off a bit. It was raining very heavily at 11:00am:


[Update] - About 1 inch of rain has already fallen from 8:45pm February 19 through 12:28pm today, per the NWS as shown in the following:


National Weather Service Morning Projections

The National Weather Service (NWS) has issued this  Flood Watch until 3pm.:
* THE COMBINATION OF MELTING SNOW...FROZEN GROUND AND RAINFALL
  TOTALS OF ONE HALF TO LOCALLY UP TO AN INCH AND A HALF WILL
  RESULT IN AN ELEVATED RISK OF FLOODING.

* HIGH STANDING WATER AND FLOODING ARE POSSIBLE IN POOR DRAINAGE
  AND FLOOD PRONE LOW LYING AREAS. SIGNIFICANT RISES AND
  LOCALIZED FLOODING IS ALSO POSSIBLE ON AREA STREAMS...CREEKS
  AND RIVERS.

PRECAUTIONARY/PREPAREDNESS ACTIONS...

A FLOOD WATCH MEANS THERE IS A POTENTIAL FOR FLOODING BASED ON
CURRENT FORECASTS.

YOU SHOULD MONITOR LATER FORECASTS AND BE ALERT FOR POSSIBLE
FLOOD WARNINGS. THOSE LIVING IN AREAS PRONE TO FLOODING SHOULD BE
PREPARED TO TAKE ACTION SHOULD FLOODING DEVELOP.

The NWS has also issued this High Wind Warning:
...PERIOD OF STRONG TO POTENTIALLY DAMAGING WINDS LIKELY THIS EVENING...


...HIGH WIND WARNING IN EFFECT FROM 5 PM THIS AFTERNOON TO 11 PM CST THIS EVENING...

* TIMING...HIGHEST THREAT OF GUSTS UP TO 60 MPH LOOKS TO BE DURING THE EARLY TO MID EVENING HOURS.

* WINDS...A PERIOD OF WIND GUSTS AS STRONG OF 50 TO AROUND 60 MPH FOR A TIME THIS EVENING.

* IMPACTS...WINDS THIS STRONG MAY RESULT IN TREE DAMAGE...EASILY TOSS LIGHTWEIGHT UNSECURED OBJECTS AND MAKE TRAVEL DANGEROUS FOR HIGH PROFILE VEHICLES.

PRECAUTIONARY/PREPAREDNESS ACTIONS...
A HIGH WIND WARNING MEANS A HAZARDOUS HIGH WIND EVENT IS EXPECTED OR OCCURRING. SUSTAINED WIND SPEEDS OF AT LEAST 40 MPH OR GUSTS OF 58 MPH OR MORE CAN LEAD TO PROPERTY DAMAGE.

Here are the predicted temperatures:


Recent Flood Warning Bulletins
Clicking will open a  New Window> Recent Flood Warning Bulletins

Wednesday, February 19, 2014

Moving Ahead of the Ice Dams and NWS Special Weather Statement

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Efforts continue. Today BLMH had 8 people clearing more snow and ice dams from roofs. There were two lifts on the property. This is an ongoing struggle during this Freeze-Thaw and seemingly snow Every-Other-Day winter.

The association was clearing roofs last week, but the melt and rain didn't happen. Why not? Talk to our local area weather genius Tom Skilling and you will get a hour long explanation. What we did get was an additional 5 inches of snow, which created further problems. It was decided these be cleared and ice dams broken where possible before the rain comes. The lift in this photo has a 60 foot reach, necessary to get to some of the snow and ice at what we call the "D" roof juncture.
Why is this being done? Take a look at these photos as well as a few in recent posts, and you will know why.





But we did have two glorious sunny and balmy days. Now the other shoe will drop.

Here are the National Weather Service advisories issues 4:09PM today.

Hazardous Weather Outlook

.DAY ONE...TONIGHT.

RAIN...POSSIBLY HEAVY AND ISOLATED THUNDERSTORMS...SOME PRODUCING SMALL HAIL WILL DEVELOP AFTER MIDNIGHT. THE PRECIPITATION WILL LIKELY BEGIN AS A WINTRY MIX MAINLY NORTH OF INTERSTATE 88...WHICH COULD INCLUDE ACCUMULATING SNOW AND SLEET OR FREEZING RAIN.

.DAYS TWO THROUGH SEVEN...THURSDAY THROUGH TUESDAY.

A WINTRY MIX OF SNOW...SLEET AND RAIN WILL LIKELY CONTINUE NORTH OF INTERSTATE 90 VERY EARLY THURSDAY MORNING. LOCALLY HEAVY RAIN IS ALSO POSSIBLE THURSDAY MORNING...WHICH COMBINED WITH MELTING SNOW...COULD RESULT IN LOCALIZED FLOODING. THERE IS ALSO A CHANCE OF THUNDERSTORMS THURSDAY. A COUPLE OF STORMS COULD PRODUCE SMALL HAIL IN THE MORNING...THEN POSSIBLY GUSTY TO DAMAGING WINDS IN THE AFTERNOON. STRONG WINDS ARE LIKELY LATE THURSDAY AFTERNOON THROUGH MUCH OF THURSDAY NIGHT WITH GUSTS TO 50 MPH OR HIGHER POSSIBLE.

IN ADDITION...THE MILD AND MOIST AIR MASS MOVING OVER THE MELTING SNOWPACK COULD RESULT IN LOCALLY DENSE FOG THROUGH THE DAY ON THURSDAY.

FINALLY...RUN OFF FROM THE MODERATE TO HEAVY RAIN AND SNOW MELT COULD LEAD TO RISES AND POSSIBLE FLOODING ON AREA RIVERS WITH AN INCREASED RISK OF ICE JAM FLOODING THROUGH THE WEEKEND.





Higher Gasoline Prices on the Way

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It's that time of year again. Crude oil prices have risen to $100 a barrel and gasoline prices have been moving up since February 3, 2014. A month ago crude was about $93 a barrel. Analysts predict that refineries will begin reducing production to perform maintenance and to switch to EPA mandated summer gasoline blends.

The good news? It's unlikely that Illinois gasoline prices will reach recent
February peaks of:
  • 2013 $4.24 peak
  • 2012 $4.28 peak
  • 2011 $4.34 peak 
Currently the average price of gasoline in the US is $3.34. In Illinois, regular gas is average $3.481 per gallon according to AAA.

In Wheaton, the lowest regular gasoline prices today were $3.35 a gallon (go to gasbuddy.com).That's better than the prices of $3.95 one year ago today.

Tuesday, February 18, 2014

Season Snowfall and Temperature Statistics

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Snowfall and temperature statistics.


These are the preliminary snowfall statistics according to the National Weather Service:

IF THE SNOWFALL WERE TO END TODAY...WITH 67.9 INCHES SO FAR...THE
SEASON WOULD FINISH AS THE 5TH SNOWIEST IN CHICAGO SINCE 1884.

CHICAGO SEASONS WITH AT LEAST 60 INCHES OF SNOW:

RANK    TOTAL SNOW            WINTER
-------------------------------------------
 1)      89.7 IN.            1978-1979
 2)      82.3 IN.            1977-1978
 3)      77.0 IN.            1969-1970
 4)      68.4 IN.            1966-1967
 5)      67.9 IN.            2013-2014 INCLUDING FEB 17TH
 6)      66.4 IN.            1951-1952
 7)      64.1 IN.            1917-1918
 8)      60.3 IN.            2007-2008


...STREAK OF SUB-FREEZING LOW TEMPERATURE REACHING CONTINUES...

HERE IS A RANKING OF THE LONGEST STRETCHES OF DAYS WITH LOW BELOW
FREEZING...

     CHICAGO.
RANK # OF DAYS STREAK END  
 1)      78      02-12-1945
 2)      70      02-15-1948
 3)      69      02-14-1982
 4)      68      02-01-1920
         68      02-13-1893
 6)      65      03-13-1978
 7)      64      02-24-1895
 8)      60      02-09-1984
 9)      57      02-09-1976
         57      02-23-1929
11)      56      02-16-1971
12)      55      02-08-1881
13)      54      02-20-1985
14)      53      02-10-1977
15)      52      03-02-1963
         52      THROUGH 02-18-2014 (STILL GOING...)

THERE IS A CHANCE THE STREAK COULD END AT ROCKFORD OR CHICAGO THIS
THURSDAY...BUT IF THURSDAY`S LOW IS BELOW FREEZING THE STREAKS
WILL LIKELY CONTINUE FOR THE FORESEEABLE FUTURE WITH MUCH BELOW
AVERAGE TEMPERATURES FORECAST THE NEXT 6 TO 10 DAYS.

$$

Monday, February 17, 2014

Squirrel & Current Weather - COD Weather Camera

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[Update, NWS at 1:21PM. Warrenville snowfall total so far 2.0 inches]
[Update, NWS at 3:30PM, Warrenville snowfall total so far 4.0 inches]
[Update, 4:00PM. With the current storm track, snowfall should end about 6:00 PM]
[Update, 5:40PM - It's over. NWS reported 5.0 to 5.3 inches total snowfall in our immediate area. See the following WeatherUnderground.com  radar plot of the storm continuing eastward.]



The view at about 6:00 PM:


COD Weather Camera
Here's a link to a weather camera over at COD. If it is working you'll get an image. Note that it updates about once every 5 minutes, but you will have to refresh your browser to get the latest image:

Clicking will open a  New Window> College of DuPage Weather Camera

Squirrels are Everywhere
Somebody said "Hey, where is a photo of that squirrel you see from your window?" This morning our neighbor squirrel visited again. He usually stops by after breakfast and I had returned from the office in time to get several photos. I don't feed the critters, that's a rule here at BLMH and this squirrel doesn't seem any the worse for wear this winter and is apparently well fed.



Weather Outlook
Today there is a weather advisory. I went to the office early to beat the snow, which was predicted to begin at 9:00am. Here is the radar of the snow (blue) and sleet (pink) as of 9:30am. The combination of Rain/Ice/Snow is to the south and it seems it will stay that way. I certainly hope so. Snow may be undesirable, but ice would be much worse.


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Sunday, February 16, 2014

A slight format change to posts - Added "Read more >>"

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I've made a slight change to the format of the posts. It may help navigating and will speed scrolling. Longer posts will now be only partially displayed  and with a "read more" link which will expand the posts. This will allow several posts on a single screen.

What you will see is an active link that looks like this: 
Read more >>

I'll add the "Click Below to read more" text as a reminder to the reader. Simply click on the "Read more >>" to reveal the entire post. Try it here:

Click Below to read more

Saturday, February 15, 2014

Preparing for the Thaw

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This post will show some of the icing we've experienced this year and the efforts the BLMH HOA has taken to deal with this. Of course, our management, snow removal contractor and maintenance have worked very, very hard to deal with the frequent and significant snow accumulations, unusual ice conditions, salt & calcium chloride supply problems and so on.




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Thursday, February 13, 2014

Run Water to Keep Underground Pipes from Freezing

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The City of Wheaton has issued this press release on February 13:

"Run Water to Keep Underground Pipes from Freezing

WHEATON, Ill. – Within the past two weeks, the City of Wheaton’s Water Division has received 25 calls for frozen water services. This winter’s cold temperatures have driven frost about 48 inches into the ground under plowed streets and driveways, which can cause underground pipes to freeze. To help prevent your water service from freezing, the Water Division recommends running a constant stream of water the size of a pencil lead at one faucet in your home. The Water Division will issue another notice when the risk of frozen underground pipes has dissipated. "


Tuesday, February 11, 2014

Minus 13F, 60 Inches of Snowfall and Nature Persists

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The weather people say we've accumulated about 61 inches of snow this winter. That's 5 times last year's snowfall! This morning it was -13F outside. However, on the deck it was a balmy 2F. The deck gets a lot of morning sun and is sheltered from the wind. We should be experiencing something closer to the averages later in the week. The "average high" for February is 35F. Next week it's predicted we'll be in the mid 30's to a high of 44F.

There is not the usual abundance of wildlife on the property, but there is a woodpecker that makes the daily rounds and the occasional hawk. Of course, the squirrels sit in the tree and watch me. I wonder what they are thinking?

The woodpecker works his way up the tree, looking for a tasty bug. I see him often and I expect he'll be back again tomorrow afternoon.



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Monday, February 10, 2014

ComEd's Smart Meters are Coming to Wheaton in 2015

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The Illinois Commerce Commission (ICC) made a ruling on Wednesday February 5, 2014. That ruling is in the following ICC press release dated February 6.

         "ICC Approves Charge to ComEd Customers
             Who Decline Smart Meter Installations

The Illinois Commerce Commission (ICC) on Wednesday approved a new tariff to be applied to bills of ComEd customers who either don’t provide the utility the necessary access to install new smart meters or who refuse the new smart meters.

The Energy Infrastructure Modernization Act (EIMA) requires ComEd to install smart meters, for all customers over a 10 year period. ComEd has filed a deployment schedule with the ICC to meet the requirements of the EIMA. As part of the deployment plan, ComEd also provided its customer communication plan that ensures customers receive adequate notice before the smart meter refusal charge would appear on their bills.

The Commission set a monthly customer charge of $21.53 for customers, which was at the low end of a range of potential fees submitted by the utility.    The Commission determined that the charge is reasonable and reflects additional costs required to read or service the older model, analog meters. Smart meters are capable of sending customer usage data electronically, eliminating costs associated with reading meters manually.

ComEd is required to complete installation of the meters for all customers in its service territory by 2022.   In its order the Commission stated, “If customers make the decision to refuse an AMI meter now and incur monthly charges associated with this choice it should be with full knowledge that this refusal is simply deferring the inevitable.”

The order directed ComEd to ensure customers know that if they decline a smart meter or fail to allow the utility access to their property for the meter installation, they will pay the additional charge for non-AMI service, but the smart meters ultimately will be installed as provided for in the law."

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Sunday, February 9, 2014

Public Hearing for COD - DuPage County Zoning Board

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The College of DuPage has requested an amendment to the Planned Development.

A hearing is scheduled on February 20, 2014 at 6:00pm, Jack T. Knuepfer Administration Building, 421 N. County Farm Road, Wheaton Illinois 60187.

There is no information about the February 20 meeting currently on the county Zoning Board of Appeals website.  However, I have included the purpose of the hearing and COD's request in this post. [Update. There is now a link at the county zoning website for Z14-005 College of DuPage Zoning Process. The link states "The public hearing for zoning petition Z14-005 College of DuPage will be held on Thursday, February 20, 2014 at 6:00 p.m. in the Cafeteria of the County Administration Building, 421 North County Farm Rd., Wheaton, IL 60187."]

Scope of COD's Planned Development
Here is some background information. The scope of the current college development plans is on Version 2D of the College of DuPage "Planned Development Site Plan revised January 31, 2014." Click on the image to enlarge:
Planned Site Development Version 2D - January 2014
That plan includes a number of "Proposed New Buildings and Structures."  I don't recall a hearing with approvals for the "connecting road" from Fawell to College Parking 7 during the DuPage County Zoning Board of Appeals (ZBA) hearing in 2012. Nor was it included in the ZBA June 19, 2012 "Proposed Motion for Z12-022 College of DuPage." However, the entrance work and a section of the road was completed by the college in 2013.  The college indicates planned signage for that new entrance. See Note 1 on this post for the recommendation of the ZBA on June 19, 2012.

Here is the way the northwest corner of the campus appeared in 2012. That's Fawell-22nd Street running from left to right, and parking for the apartments immediately to the west of the campus. The new road runs through the former grassy field in the approximate center of the photo. On reading the petition it seems the college is not requesting permission for signage at this new road at this time. But the plan indicates that signage is coming. The other requests in the petition are included later in this post:

Here's a COD graphic with the approximate location of the proposed Waterleaf Restaurant sign.



Here is the current list of "Proposed New Structures" from the most recent site plan of the college (Version 2D, January 31, 2014):
  1. A 2 story building totalling 42,000 S.F. [a new Homeland Training Center?]
  2. New campus gateway signage. (Not an electronic changing message). [This will be at the extreme northwest corner of the campus on Fawell and at the new road constructed into the campus in 2013.]
  3. Connecting Road. [A portion was actually constructed in 2013. It goes from Fawell and into the campus and runs parallel to the property line and southward. The plan is to extend this to College Parking 7, which is east of COD's Pond 9. ]
  4. A 1 story vestibule addition to SRC [Student Resource Center].
  5. A 2 story concessions building.
  6. Waterleaf ground mounted restaurant sign. [This will be illuminated].
The Text of the Current College Zoning Request
This is an excerpt from the request.

"The DuPage County Zoning Board of Appeals will conduct the following public hearing on February 20, 2014 at 6:00pm."

"PETITIONER: Community College District No. 502, College of DuPage. Board of Trustees: Erin Birt, Board Chairman; Kathy Hamilton, Vice Chairman; Allison O'Donnell, Board Secretary; Joseph C. Wozniak, Co-Vice Chairman; Dianne McGuire; Kim Savage; Nancy Svoboda; Stephanie Torres. 425 Fawell Blvd., Glen Ellyn, IL 60137.

REQUEST: The College of DuPage is requesting an amendment to the Planned Development as a conditional use in the R-l zoning district for the following: Construction of the Homeland Training Center on the west side of campus to house educational uses associated with the College. This building is needed to replace the antiquated temporary classroom facilities. Installation of one illuminated ground-mounted Waterleaf restaurant sign on the College property, east of the Culinary and Hospitality Center building site to ensure that users and patrons of the campus can effectively and expeditiously, and most importantly safely, understand where buildings and uses are located on the campus to ensure timely arrival to cultural events. (Sec. 37-701.2 and Zoning Petition Z12-022 College of DuPage).

ADDRESS OR GENERAL LOCATION: College of DuPage, 425 Fawell Blvd., Glen Ellyn, IL 60137. Southwest of intersection of Park Blvd. and Fawell Blvd. in Glen Ellyn, IL"

The County Website
You can go to the following link to see what is currently listed by the county. [Updated]  It includes the current 2014 petition "Z14-005 College of DuPage Zoning" as well as the 2012 "Z12-022 College of DuPage Zoning."

Clicking will open a  New Window> DuPage County Zoning Board of Appeals

Note:
1. Here is the official approved committee agenda notes:

Clicking will obtain the pdf of   Development Committee Agenda June 19, 2012

Here is the excerpted text pertaining to the College of DuPage, taken from:
"http://www.dupageco.org/County_Board_Committees/Development_Committee/2012/Packets/36982/"

Page 1 AGENDA DEVELOPMENT COMMITTEE Tuesday, June 19, 2012 11:00 a.m., County Board Room 1.

"7.3  Z12-022 – ORDINANCE - College of DuPage: The Zoning Board of Appeals recommended the following zoning relief:

1. A Conditional Use for a Planned Development (PDD) in the R-1 Zoning District;
2. A Conditional Use within the PDD for schools, public and private colleges, universities and other institutions of higher learning;
3. A Conditional Use within the PDD for an existing noncommercial radio and television tower and antennas, which exceed the maximum height permitted in the R-1 district not to exceed 248 feet; and

To deny the following:

4. A Conditional Use within the PDD for a new Electronic Message Sign

In addition, that the zoning relief be subject to the following conditions:
A. That the zoning relief be subject to petitioner’s survey, not the proposed site plan which will permit only those buildings and structures that are currently located on the property; and

B. That the zoning relief does not permit any new buildings or structures, (including denial of the proposed 3 future buildings on the west side of the campus, the proposed well, watertower and treatment facility, the maintenance building, the concession stand and any new addition to an existing building; and

C. That the College be required to obtain permits from the County for any existing building orstructure on the property that does not have approval from Glen Ellyn. (Milton Township/District

4) ZBA VOTE (Partial Approval): 7 Ayes, 0 Nays"


Saturday, February 8, 2014

Signs of Spring, Condo Cookies and Young Frankenstein

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Well, it's snowing today (again!). It's my understanding that we have now passed 60" of snowfall for this winter (2013/2014).  Yet, there are signs that Spring is on the way.

The begonia in our west window has bloomed! I was very surprised to discover that while watering our plants. I consider this a positive sign and attribute the blooming to the longer days. I don't feed these plants in the winter because I want to avoid stressing them. As a consequence they appear to be anemic by this time of year and seldom bloom.


Yesterday our snow removal company was actually filling trucks with snow and transporting it to other areas on the property. The problem? We are running out of places to put it and the height of the piles is becoming excessive.

Here's the way it looked before the snowfall earlier this week:

So what to do in the interim?

G, who is as good (or better) a cook than I am has made two batches of oatmeal cookies. She knows I'm a traditionalist, which means I prefer my cookies with raisins. No chocolate chips, please. So she was kind enough to make two batches. One with dried cranberries and Ghirardelli chocolate, and the other with raisins. Yum! (Note that one has a bite).


Young Frankenstein. That's the current offering at the Drury Lane Theater in nearby Oakbrook. We had dinner with friends and attended the 8:00 performance last night. It was a lot of fun. The play is, in my opinion, "a romp." G and I recommend it.


Clicking will open a  New Window> Drury Lane Now Playing



Thursday, February 6, 2014

CDs, Reserves, Inflation and Condo Finances

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HOAs are required to have reserves. These are earmarked for capital improvements and accumulate as savings. The BLMH reserve study has a 30 year horizon. It compares the collection of fees as reserves and the spending for each of those 30 years. Some items in the reserve list require decades of savings.

BLMH is currently in the middle of the cycle for roof replacements. The association has been saving vigorously for about a decade for these roofs. So too for other reserve items.

A question for all HOAs is where to safely put those savings? Safe investments such as Certificates of Deposit (CDs) and insured savings accounts have had very low returns in recent years.

Low returns on savings has had a real impact on the savings of associations and the fees that are collected to accomplish the capital improvements. There is no doubt that fees for HOA owners are higher today than they would otherwise be, if a reasonable return on savings was possible. Recent CD rates were as low as 0.2% which is ridiculous. Inflation has been low, but it has been consistently above the returns of most CDs. In other words, the value of the principal of the CD is decreasing and it is losing purchasing power at these abnormally low rates. The financial panic of 2008 and the implosion of residential real estate has been a disaster for many condominium owners. It has put additional financial pressure on boards.

Reserves and Savings
The reserves are not a constant thing. They are evaluated periodically, are collected monthly as part of owner fees, accumulated in savings and then spent a year or more in the future. I prefer to evaluate reserves annually, as part of the budgeting process. Professional reserve study updates and re-evaluations occur less frequently, perhaps at 5 year intervals.

It is true that a portion of the reserves can build up over a decade or more. This is for large, infrequent and sometimes expensive projects such as roofs and street replacement, which should occur only once about every 20 years. (Note 4).

HOAs have the choice of saving gradually over that 20 year period, or having spectacular special assessments. If saving gradually, then these reserve amounts are a portion of an owner's monthly fees and must be accumulated in a savings account or other safe investment. For example, at BLMH the amount saved for the current roofing project per unit owner per roof using a 20 year replacement schedule is about $22 per month. That's the monthly amount for the next cycle, because the assumption is we have 20 years to accumulate the necessary amount. For current roofs, of which the remainder should be replaced in three years, the savings rate has been much higher and a larger amount has been in the fees.

In other words, for roofs replaced in 2008, 2009, 2011, 2012 and 2013 the association should be setting aside an amount via reserves for the next replacement. BLMH should be setting aside about $165 each month for each roof as reserves for the next replacement. That's about $4,500 per month for these roofs for the next replacement which will commence in about 15 years, or 2029. Once it has begun the next replacement will continue for about 8 years (Note 3). . For roofs being replaced as part of the current cycle, which is all roofs to be replaced by 2018, the association should have about 85% of the cost of these remaining roofs "in the bank." If not, then the HOA does not have sufficient funds in reserves. According to the financial documents BLMH is collecting and saving at a rate sufficient to complete all roofs by 2018.

This is true also for the replacement of streets in the association. Savings for streets over a 20 year span should be at least $2,600 per month. That's about  $7.75 per owner per month. A similar approach is used for street lighting, driveways, patios, garage floors, entrances, water mains, sewers, walks, streams and so on.  Those mailboxes will not last forever and neither will the intercoms. Of course, if a HOA has insufficient reserves for specific projects, then the amounts collected each month for these reserve items must be higher. This is called  "catching up" and reserves can be built in fewer years via higher fees. Of course "catching up" requires larger monthly fees. For example, doubling the amount collected for roof reserves will accomplish the same goal in 10 years that would otherwise take 20; but that means the monthly portion of fees for roofs increases from $27 to $54 per owner. Alternatively, and if shorter timespans are available the HOA can resort to special assessments.

As these savings are accumulating, the association puts these funds in "safe" investments such as CDs. It might be possible to purchase treasury bills, but these are not as liquid or as convenient as CDs. It is also a requirement that these reserves be accessible. While the plan might be to save for roofs, the funds or a portion thereof may be used for other, legitimate and more pressing reserve purposes. In an "emergency" the association can borrow from reserves. However, such borrowing must be repaid.

Unfortunately for us savers, the policies of our national government and the Federal Reserve Bank (the "Fed") have penalized savers. This has been deliberate, as the intent was to have savers free up those "safe" assets and put them into riskier places, such as the stock market. That is not a place for short term funds. Experts suggest no money needed in less than 5 years ever be put into such risky assets. As a fiduciary, a board member is in a special place, entrusted with preserving the assets of the association. As individuals we may feel confident in taking certain risks. Fiduciaries are held to a higher standard.

The Problem with Low Returns on Savings
The problem for individual savers and HOAs is identical. Saving and accruing interest is intended for a purpose and as an offset for inflation. This is not simply an exercise. For example, savings accounts have been giving about 0.5% per year (or less) while inflation has been running about 2% in recent years. That difference has real consequences over a period of 10 or 20 years.

Let's assume that an association has a goal to save $7,000 over a period of 20 years in a reserve fund for a specific purpose. How much would the association save each year to accomplish this?

The return, or interest on the account in which the savings are accrued makes a difference. Recent years have had returns of 0.5% or 1/2 percent per year. Here are the amounts to be saved per owner at different interest rates to achieve that $7,000 in 20 years. I'm using the closest whole dollar amount to get to within that $7,000:

Interest rate 0.50% =  $333 per year = $6,986 saved after 20 years.
Interest rate 1.00% =  $317 per year = $6,980 saved after 20 years.
Interest rate 1.50% =  $302 per year = $6,983 saved after 20 years.
Interest rate 2.00% =  $288 per year = $6,997 saved after 20 years.
Interest rate 3.00% =  $260 per year = $6,986 saved after 20 years.

As you can see above, a better return at 3% per year via CDs may require one to save $73 less per year to achieve the same savings goal.  This might seem a trivial difference. It is only about $6.08 per month. However, if the amount to be saved is much larger as might be required for a very large project, the numbers become significant. For example, if the amount to be saved over 20 years is $700,000, the difference in interest accrued per year is $7,300 or $608 per month.  In a HOA with 300 owners, such a difference is about $2.00 per month in fees. This is however, only half of the problem facing HOA savers.

Inflation and Future Costs
The other half of the problem is the reason for such saving. In my example I set a goal of saving $7,000 in 20 years. Inflation, which is defined as an increase in cost or services over time, may not allow us to achieve our goal. Why? Because it is necessary to anticipate the future cost after years of inflation and to save to reach that future price, which is our target. To do this it's also necessary to estimate inflation. Actual inflation is an unknown. So we're saving an amount each month for 20 years with the anticipation that the price of whatever it is we are going to purchase in 2034 will match the amount saved.

This doesn't always happen. In 1969 I purchased a new automobile for $1,800. 10 years later a similar new car was about $5,000. If I had been saving for a new car with the expectation it would cost about 2% more each year than the previous one, in 1979 that automobile would have had a price of only about $2,200. I would have been far short of the actual cost because the inflation in the price of the car was about 10.75% each year. Such disruptions do occur from time to time and when they do, they wreak havoc on personal plans. So too for HOAs.

All things being equal, if the return on savings and the amount or rate of inflation are identical, then we should not be concerned. The cost of whatever it is we want to purchase in 20 years will be roughly equal to what we have saved. (Note 1). However, to determine the amount to save each month commencing in 2014 we must predict the cost of that thing in the year 2034.

This exercise has real consequences for the unit owner. If we guess correctly, then everything works. If we are wrong, then there can be ugly consequences. For example, if the price of something suddenly increases, and commodities such as oil are a good example, then real, long term inflation may be higher than the returns we are getting on our savings. The cost of oil impacts everything from asphalt for streets to shingles for roofs. It also impacts the costs of other goods and services.

It's obvious that it will require a series of boards, working diligently over decades to accomplish reserve goals. I'd also suggest that it's equally obvious that some unit owners may not have the patience or financial fortitude for such long term planning.

For capital projects, 2.2% is sometimes used as the real annual inflation for the costs of such things as roofs. In other words, a roof that costs $30,000 today could actually cost about $45,361 in 20 years. HOAs need to save for those future costs. A failure to do so can result in special assessments or continuous, larger than expected annual fee increases Or, it may require a ramping up of fees for a decade or so to "catch up." Does this seem familiar? It should be for unit owners at BLMH. (Note 2).

In my example, we assume that the return on savings, such as CDs is equivalent to the increasing costs of a roof due to inflation. If the returns are very low, as they are today, then there is a real danger that reserve collections on "autopilot" will be insufficient. That is the strongest argument for revising and updating reserve studies every 5 years. Another argument is the change in the infrastructure of the HOA over time. With this information in hand the amounts collected as reserves and saved can be adjusted if necessary. Such adjustments can result in a "glide path" which avoids a lot of financial pain or special assessments. Owners need to decide; would they prefer disruptive swings in fees and/or special assessments? Or gradual increases to achieve the necessary financial goals? Owners do elect the boards that make these decisions and each board member and every board does make a difference, for better or for worse.

CDs for HOAs and Unit Owners.
Most HOAs build CD or bond ladders. So do a lot of savers and many retirees have a portion of their financial assets in CDs.

When using CDs, the funds are placed in varying maturities. This is called a "ladder." Our HOA, for example, has CDs currently maturing in months to 4 years. Some of these were purchased one, two, three and four years ago. As these CDs mature the funds that are released are either spent on current reserve projects or are used to purchase new CDs with maturities of 4 or 5 years. This approach provides both liquidity and access to varying rates. Those rates hopefully are in sync with true inflation.  The liquidity is necessary because when those large projects occur, such as the Lakecliffe repaving, some funds from CDs will be moved into savings for spending in the current year. Other CDs as they mature can be "rolled over" to purchase a new CD as the current rates. We hope the new rates will be higher than the old. The goal is to get as high as possible safe return on our savings.

Early withdrawal from a CD is to be discouraged. Such a CD is said to have not yet reached maturity. Early withdrawal of such a CD may result in significant penalties. However, some banks do allow early withdrawal, but accrued interest may be lost as a bank fee.

This chart is an example of laddering in a HOA. It compares the months to maturity to the value of the CD which is shown as percent of the total funds in CDs. In this example the months to maturity range from 0.6 to 48.2. In other words, there is a CD coming due in less than one month and the longest duration on the chart is a bit over 4 years. The chart has thirteen bars, one for each CD. In the example if a HOA had a total of $100,000 in this CD ladder, then in this chart a CD comprising 10% of the total value of the CDs would have a value of $10,000 plus accrued interest (10% of $100,000 is 0.10 x 100,000 = $10,000. A CD comprising 15% of the total would have a value of $15,000, and so on).  HOAs should track their CDs and there are a number of ways to do so. The chart is based on a real spreadsheet used at BLMH which lists each CD, the value of the CD, the maturity date and so on. Those numbers are generated by management and the treasurer and included in the monthly HOA reports.


Alternatives to CDs
It could be possible for a HOA to purchase bonds which might provide a higher return than CDs. Some funds are put into reserves for very distant projects. The next cycle of the roofs, for example. It would be possible to purchase bonds with 10 to 15 year maturities each quarter with the funds earmarked for those distant projects.

Low Interest Rates Penalize HOA Unit Owners
Is the current interest rate environment important? Yes, it is and it has been since 2008. The interest rates on passbook savings has been less than the rate of inflation. HOAs and unit owners use passbook savings for short term funds.

In my example, we are using a return on savings that is less than the projected cost increases. Recently, returns on CDs were as low as 0.2%. This has gradually improved, but at current rates of about 1.8%, and with projected annual cost increases of 2.2% there is a need to save more to make up for that difference in return on the CD and inflation. In other words, unit owners are paying higher fees today because of the low rates provided by banks and other "safe" institutions.

How much higher? Here's an example using a very large roof. Now, don't use the cost of the roof as a fact at BLMH. It's an example. So let's assume the replacement cost of the roof today is $30,000. Using inflation of 2.2% per year, this roof will cost about $45,000 in 20 years. Of course, the HOA is saving for this future event and if those savings accrue a reasonable return, that interest if also saved will offset the future cost of the roof.

So how much should it set aside from owner's fees each month for this? With CDs yielding 1.8%, the amount to be saved will have to be about $156 per roof.  Unfortunately, in recent years the return on CDs has been as low as 0.2%.  In this example, such a low return requires a savings of $180 per month for each roof.

Unit owners are paying higher fees because of the policies of our government and the lower returns on savings. In my roofing example, the additional amount required to collect per roof per month is $24. At BLMH we have 40 large roofs and 4 smaller ones, so let's use 42 roofs in this example. The HOA would have to save $1008 each month in reserves for roofs.

If the HOA doesn't do that and attempts to catch up for a previous failure to achieve the required savings rate, then the amount to save each month could be $2,000 or more. Add to that anything else that has languished in reserves. Also add make-up amounts for foreclosures, which include fees never collected, and legal costs for dealing with foreclosures, energy increases, maintenance cost increases, insurance increases, etc. and voila, we have the basis of the current fees and the annual fee increase.



Notes:
All dollar amounts are approximate and are provided as examples. It would be improper to assume that this post accurately depicts the reserve finances of the BLMH HOA. I have not rechecked all of the numbers for accuracy.

Note 1. In my example, which is simplified, I stated that if the rate of inflation and the rate of return on savings are equal, we should achieve our goal. That is inaccurate, but I simplified. In my example, we are attempting to accumulate $7,000 for something we assume will cost $7,000 20 years in the future. However, if we use 0.5% inflation as an example, then the current cost of something would be $6,300 and if it increased in price at 0.5% per year, it would cost $6981 in 20 years. we are attempting to save an amount equal to the projected cost of something 20 years in the future.

If something costs $7,000 today and inflation is 2.8%, then that same thing, be it a roof or whatever, will cost $11,829 in 20 years.

Note 2)  The notes in my post dated January 11 included this information. Has "catching up" been a factor in the fee increases at BLMH since 1998?
  • Fees for the initial 5 years of this association fees increased at an average of 19.2% per year. In my opinion this is not unusual. The transition from developer to HOA owners is frequently accompanied by some difficulties in determining actual annual budgets.
  • For the period 1983 through 1992 the average increase was 3.2% per year.
  • For the period 1993 through 1998 the average increase was 3.5% per year.
  • With new professional management which used a different approach to budgeting for reserves the average fee increase was 8.575% per year for the period 1999 to 2007. I purchased in 2001 and closed in 2002. For the previous four years the average fee increase per year had been 9.25%. 
  • In 2008 with a partial board change the fee increase was reduced to 5.5%.
  • In 2009 the fee increase was 5.1%.
  • In 2010 with the transition to the new board fully accomplished, the fee increase was 0%.
  • In 2011 to correct for budget shortfall and after a new reserve study the fee increase was 7%.
  • In 2012 and beyond fee increases have averaged about 2.6% per year.
  • For the 2014 budget the fee increase was 1%.
What the HOA has been attempting to achieve is to save an amount equal to the costs of current reserve projects as well as future projects. Current projects will occur over the next 3 years. Future projects are 5, 10, 15 and more years in the future. If inflation is constant, then we can predict what the future costs of these projects will be. But inflation is not a constant. For example, "core inflation" has averaged about 2.0%. This is distinct from the Consumer Price Index for Urban Consumers (CPI-U) which has a 2013 inflation rate at 1.50%, which is well below the 3.89% average year-over-year inflation since the end of the Second World War.

For calculating the future costs of capital projects, inflation rates of about 2.2% are frequently used. Of course, we can adjust over time. So savings for a 20 year future event should be reviewed about every 5 years. That is the role of the reserve study.

It's somewhat like driving a car. We look at where we are on the road and adjust the steering wheel. The reserve study accomplishes the same thing. At specific intervals a professional compares the savings for such things as roofs to the current condition of the roofs and to the anticipated cost of such roofs at the time of replacement. The amounts saved to date is subtracted from the anticipated future cost. The difference is divided by the number of years available to save that amount. That provides a rough idea of the annual savings required. The annual amount of savings achieved is determined by adding fees plus interest from CDs or other savings instruments.

What's an appropriate interval for a reserve study? It's a balance between spending the fees for the reserve study and the information gained. If the goal is to avoid reserve "surprises" which can result in large fee changes or special assessments, then a more frequent reserve study update is preferred. That's my opinion. It's also possible to over collect, but in HOAs where the emphasis is to "keep fees as low as possible" that's not likely.  Some years ago and prior to the 2011 reserve study the board was considering a formal study by an outside consultant. Management cautioned that such a study might "open Pandora's box." I took this to mean that the consequences might be ugly; perhaps a special assessment would be recommended and/or a very large fee adjustment. Nevertheless, the board decided to proceed.  I suspect this is the dilemma facing many HOAs which do no have a current reserve study. It's my opinion that the developer of any new condo or HOA development should be required to provide an initial reserve study prepared by objective professionals unattached in any way to the builder or management. Then HOAs would start on the right footing.

Note 3) When discussing savings for reserves, it's useful to know why those savings are necessary. We do expect the new roofs to achieve a life of at least 20 years. However, for planning purposes it's prudent to save for only a 20 year life span. If they last longer, great. If they require repairs at 20 to achieve a longer life, then the board at that time can choose to alter budgets and  reserve contributions and put the funds into the Operations and Maintenance budget for a few years to handle repairs to extend the life of the roofs. In the end, overall fees may be the same. What will be different if current boards do a good job is the future board will have some flexibility, the association should be able to avoid special assessments and fee increases should be stable. That is assuming that future boards stay the course. Investors may see this differently and investors may some day control the board.

Note 4).Projects such as roofs and street replacement may occur once each 20 years. These projects are completed in increments because it is impractical to do all roofs or all streets in one year. Roofs are replaced with a project duration of about 8 years. Streets may be replaced over a period of 5 years. This provides the HOA board with a few years of  "last minute" reserve adjustments. However, it's important to realize that the reserves are only a portion of the owner fees. Operations & Maintenance budgetary needs can put additional pressure on boards. If reserve accumulations are lagging and there are unusual expenses in a year or a few years, as could occur with water main breaks, emergencies or bad weather (double the anticipated snowfall or large price increases for snow melt, for example) then such forces, in combination, may result in spikes in fees.