Budget Realities and Priorities

I've posted several times about budgeting in our HOA. This post focuses on solutions to some of the problems our boards have faced when trying to construct a budget. Budgeting has consequences, both short- and long-term. A variety of boards have struggled for decades with our HOA budgets.

So what can be learned from these struggles? What has worked and what hasn't?

1. Setting priorities.
2. Acknowledging reality.
3. Don't let things get out of control.
4. Balancing reserves and operations & maintenance budgets.
5. Communicating with owners.
6. Avoiding pitfalls.
7. Avoiding panic.
8. Acknowledging what worked and what did't.

Our budgets have had some interesting setbacks and a variety of approaches. One recurring failure has been a past lack of communications. I am convinced some boards really didn't know what they were doing, or if they did, they were unwilling to communicate the problems to the owners.

There has also been a lot of focus on minutiae in the past. That can occupy all board time, but may not be effective. Minutiae can lead to a failure to prioritize, can divert resources and can obfuscate the really important things. Running in place doesn't accomplish anything.

Here is an example of a failure to set priorities. In 1999 this HOA saved $20,000 in the annual budget toward the "replacement fund" which was the description for this HOA's reserves. The common elements of this HOA are valued for insurance purposes at about $90 million. In other words, in 1999 the board put aside about 0.02% of the value of this HOA for capital improvements and maintenance. This was an inadequate amount for such a large HOA that was more than 20 years old. If this were a $100,000 home, it is like saying the owner decided to put aside $22 annually for long term upkeep. Woefully inadequate.  Last year the board budgeted $433,789 toward reserves, or about 25 times as much. This was not a one year phenomenon and boards have put more than $300,000 toward reserves each and every year since 2008. The average including 2008 has been $391,046 per year.

How did this happen? Several things:

1. Separate the budget into two components; Operations & Maintenance and Reserve contributions. 
2. Create equal focus for short term issues (next year's budget) and long term capital maintenance. 
3. Shift from annual budgets which focused on "reasonable" annual fee increases. These budgets collected enough for the next year to the detriment of long term maintenance.
4. Revitalize maintenance efforts with an emphasis on avoiding procrastination. 
5. Make the commitment to get frequent reserve studies by unbiased outside consultants. 
6. Study those reserve studies, discuss them with management and trusted contractors and compare the data to the various site surveys conducted by the board. 
7. Keep accurate records of infrastructure repairs. 

Reality can be difficult to acknowledge. Boards will do their best but some times thing don't work as planned. We can't know the condition of hidden infrastructure, nor can we predict with absolute certainty how much water we'll use next year, or how much snow will fall. Nor can we predict the extent of foreclosures or delinquencies. It is prudent to be humble and acknowledge our shortcomings. In doing so, we can build financial structures which allow us to deal with most issues. 

1. Closely monitor delinquencies, and build charts to trend these. Review this monthly. I create a monthly chart which provides 50 months of historical data for the board.  
2. Put in place and use systems to enforce fee collections. There are no exceptions. 
3. Know the laws of your state and use them to enforce collections. Each owner is an equal; in other words, living is an HOA is a benefit, not a right and there are costs for this. 
4. Monitor the state of the infrastructure. Do annual "condition surveys" for everything from walks to driveways to roofs to garage floors. 
5. Keep good records of the infrastructure, including dates and locations of repairs or replacements of driveways, garage floors, roofs, decks, patios and so on.
6. Don't allow maintenance to fall behind. It is almost impossible to catch up. Remember that boards are volunteers. Some volunteers may not understand that a HOA is a business and that board members are supposed to work. 

To avoid allowing things to get out of control is simple: 

1. Keep your eye on the ball. Don't look the other way.
2. Don't allow maintenance to fall behind. 
3. Don't allow reserves to fall behind. 
4. Don't run the HOA as a social club. 
5. Treat all owners fairly and equally. No special favors!
6. Don't operate the board as a popularity contest. 
7. Put in place communications systems for owners. Explain everything to everyone. 
8. Perform diligence in monitoring delinquencies. 
9. Don't pay undue attention to naysayers. This isn't a popularity contest and former board members may tell you "That won't work." Don't simply acquiesce to their negativity; determine why "it won't work" and then come up with creative solutions. 

Balance reserve and operations & maintenance budgets:

1. Don't make overly tight or restrictive O&M budgets. Remember that we can't predict the future with absolute certainty. 
2. Do your due diligence when constructing O&M budgets. Review contracts, determine scheduled utility increases and so on. Look at what worked last year and why. If it didn't then determine "why not" and make a financial adjustment for the next year.
3. Review reserve studies. Remember these may be "worst case scenarios" and are a guide for boards and a tool. Boards ultimately determine the schedules and scope of capital projects. 
4. Don't spend money you don't have. In other words, don't "mortgage the future" of owners and boards and don't promote grandiose projects or schemes. 
5. Avoid "kicking the can down the road" and setting financial traps for future boards. If there are long term budget issues, it is best to communicate them to the owners. It is also best to determine how to solve these issues. Remember, losses can accrue and can become unmanageable very quickly.  
6. Avoid short shrift for reserves. All owners, both present and future are to be treated equally. That means that current owners as well as future owners need to contribute equally to long term projects. 
7. Design budgets which provide some financial latitude. It is easy to move annual O&M surpluses into reserves. If there is an O&M budget shortfall, it can only be solved by borrowing from reserves or special assessment. 
8. If there are O&M surpluses, don't forget to count them as reserve contributions and then adjust the budget accordingly. 
9. If capital project maintenance is delayed, then that unspent money in the reserve account isn't a surplus. It is simply unspent, and delaying creates maintenance backlogs. Acknowledge any backlog and inform owners and the board. 
10. If O&M maintenance is delayed, communicate to the next year's board the issues so that budgets can be constructed which identify these delays. To do otherwise is to set maintenance "land mines" for future boards. Would some board members torpedo future boards? Or throw them "under the bus?" Yes, they might. 

Communicating with owners is paramount. Some owners will complain, but most assume all is well unless told otherwise. 

1. Communicate where possible in writing. Newsletters are a great way to inform owners of plans and issues.
2. Avoid painting rosy pictures. Many boards are inclined to sweep problems under the rug and avoid informing owners. That is a huge mistake. 
3. Don't under inform owners and don't torpedo future boards. Yes, some boards or board members are insecure and will do this!
4. Avoid pretending owners don't care. In fact, for most owners their HOA purchase is one of the largest financial decisions they will make. 
5. It is arrogant to assume owners aren't concerned simply because they aren't involved. Yes, we do need to communicate and re-communicate. In our HOA nearly 33% of our owners purchased their units since 2009. Yet, we've had members of the board state "I already explained that," or "No one reads the newsletter." This has been an excuse for not putting things in the newsletter in recent years. Yet, the same board member(s) will say "We need to publish the Winter Tips this month." These are the same winter tips we have published with few changes for decades. Obviously, there is a personal agenda in these matters.

Avoid pitfalls, or clean them up as soon as they occur:

1. Communicate regularly with owners.
2. Do background work for reserves each year and regularly update reserve studies.
3. Adjust future reserve requirements to reflect any inability to do capital projects during the stated timeline. For example, our HOA doesn't always do or complete certain projects in lock step with the reserve studies. That results in reserve balances which might become larger than expected. It also creates future financial requirements for this work. A failure to recognize how those balances grew as they have, or to recognize those future requirements can lead to future financial surprises. 
4. Don't plan projects which don't exist in the reserve study.
5. Don't spend money you don't have. 
6. Use the reserve study as the tool it is intended to be. Review funding plans, annual fees collected for reserves and the status of all reserve projects. Adjust the spreadsheets annually. 
7. Update infrastructure surveys each year. 
8. Don't allow maintenance backlogs to occur. 
9. Forcefully manage delinquencies. 
10. Use engineers and architects where prudent. 
11. Don't overestimate the skill of contractors or management. They aren't engineers or accountants. 
12. Hire project managers for really large and critical infrastructure projects. 
13. Don't become over involved with minutiae. 
14. Don't micromanage contractors.
15. Don't send management on wild goose chases.
16. Don't occupy a board position too long and do train your replacement. 
17. Do long term research each and every year. 
18. Boards should be able to communicate using email and create spreadsheets, etc. 

Avoid panic. Things can and do go wrong. Sometimes, we can do everything properly but things will go wrong. That is normal. However, sometimes we fail to plan and then there will be surprises. It is nearly impossible to get a budget for a large or aging HOA to the penny. Yet, some board members will try to do this and then if reality doesn't match their delusion, they will panic or will say "You made a mistake." What a diversion! Here's a more empowering view of budgets:

1. Budgets are tools for determining annual fees. Nothing more and nothing less. 
2. Budgets will always be imperfect. Boards can't predict annual snowfall or delinquencies.
3. Accept imperfection and build fault tolerant budgets.If you don't know how, then learn.
4. Learn to use spreadsheets if you don't know how. Most community colleges have adult education classes at reasonable costs for everything from spreadsheets to word processors. 
5. Establish priorities. If some costs increase, a well constructed budget can fund the increase with little difficulty.
6. If a board takes a long term view, then it becomes possible to see budgeting as a long term event. Fees can be adjusted and reserve contributions allocated to smooth the annual fees and accomplish all financial and maintenance goals. That is the real challenge of budgeting and many boards may not be up to it. 
7. Avoid punishing all owners if there are foreclosures or delinquencies. Yes, it may be difficult for boards to deal with these, but there are methods by which the financial pain can be reduced or avoided.  If a board finds this difficult, well, that's all a part of the job. 
8. Avoid emotional entanglements. This is about running a business. It is possible to deal with foreclosures, delinquencies, unforeseen maintenance problems and so on, and yet arrive at annual fee increases of less than 2%. And, it is also possible to meet maintenance objectives within those fee constraints. I know, because we do this. 
9. There is no substitute for planning and preparation. 
10. There is no substitute for a long term view. Construct budgets in tiers with 5-year, 10-year and 20-year plans. Most reserve studies have a 30 year horizon. The further out we go, the more imprecise the budgets become.
11. I suggest focusing on the 5-year plan and allowing for the creation of the longer term plans while recognizing how imprecise a 30-year plan really is. 

Acknowledge what works and what doesn't:

1. First and foremost, be honest. Don't pretend that what you are doing is working. Get the data to determine what works and what doesn't. 
2. Second, put your personal agenda aside.
3. Third, do the numbers. If you don't do a good budget, or determine what things cost, then you must simply accept whatever shows up. When it does, don't be surprised.
4. Fourth, do the work. Do those infrastructure condition surveys. Do develop annual maintenance plans. Do communicate effectively with owners. 
5. Fifth, don't undermine others. We may each think we are God's gift to the universe, but we aren't.  
6. Sixth, know when you have done what you can and then move one.
7. Seventh. Nature abhors a vacuum. In other words. no one will miss me and I will be replaced shortly after I am gone. Someone will get the job done. No kidding!

Let's party like it is 1999 - Another Mud Pit Eliminated

One step at a time, slogging through one mud pit at a time. "Mud pit" is a metaphor for the problems dumped by previous owners and boards, upon me and the boards from September 2010 to the present.  It is also a description for a real situation.

1999
I recently reviewed my documentation for the association. Back in 1999 this association allocated $20,000 to reserves, or slightly more than $59 per owner, per year. That was about 2.25% of the annual budget. This information was provided to me after a conversation with management and my attorney.

Wow. At that rate, this association would collect sufficient funds in 85 years to do the roofing project the board of 2002-2003 decided upon. Don't misunderstand me. This association would have collected nothing for streets, driveways or any of the common elements. In far fewer than 85 years this place would have been beyond a dump. It had only taken 24 years to run it into the ground.

Recently, a former board member expressed his concern. We are currently allocating about 33% of our annual budget to reserves. Where was he in 1999, when boards allocated a little more than 2%?

In a recent post about the situation in 2001, which is the year I considered purchasing here I said this: "Back then, we were experiencing "entropy." In science, "entropy always increases and available energy diminishes." In other words, back in 2001 this association was dying."

Yes, those boards and the owners at BLMH apparently did decide to do their best to kill the association. No wonder that a few years later a long term board member stated to me "You can slap some paint on a pig, but it is still a pig." Back in the "good old days" this association spent money on utilities, painting 1/5 of the buildings each year, the janitorial contract and on the landscaping. If there was any money left over, it was then spent on other maintenance. So I guess that board member was really telling the truth.

Back in 2001, the budget was $280,063 for utilities, snow removal, janitorial, grounds maintenance, and utilities. Back then this association budgeted $5,000 for water and $60,000 for electric. Our maintenance and grounds (that's maintenance and landscaping) was budgeted at $135,000 for the year and there was nothing spent on tree maintenance or drainage. The budget for total common area maintenance which includes these items was $191,000. For the next year, the board cut the budget for these items to $154,536.

The  can was apparently being kicked down the road.

Return to the current Reality, 2016
However, that was then and this is now.  Recent boards have spent nearly seven years dealing with and addressing long term issues, including a failure to fund reserves and perform some essential maintenance. Here's an example from what should have been a simple problem. A nearby owner said this about our efforts to deal with the "Mosquito Glade" which formed during every significant rainfall on the walks and grounds behind two buildings:

"I would like to THANK the board of Briarcliffe Lakes for the wonderful green grass outside my patio door. My patience has finally paid off after at least ten years of crabbing. So once again, THANK YOU!"

I appreciate that owner's sentiments, but I do get a lot more damning emails than empowering ones.

The above photo is a cut from my YouTube video of that location on August 3, 2010. That's normally the dry season here. So that view of walks and lawns is something typical of what occurred in spring, and early summer as well, or during any significant summer rainfall. Notice all of the trees which provided the shade? Those were planted by the developer because this location was one of the first built and they wanted to show some foliage. After 30 years the area was overgrown, trees were intertwined and the place was a mud pit. Three walks were underwater. This was exacerbated when boards in 2002-2007 decided to add additional gutters on the buildings along the garage side, as part of our HOA roofing project. Those gutters directed water into concentrated areas. In the photo above, the downspout added after 2010 funneled even more rainwater into the area in this photo.

So we had a small pond forming with each and every rainfall of more than 1/3 inch. This carried soil onto the walks, and the deep shade prevented grass from growing. Boards failed to put in ground cover. So our HOA had our own little swamp. BTW, some couldn't figure out why property values were falling. A lack of reserves, a scarcity of maintenance solutions, and unhappy owners.

That doesn't sound like a formula for fulfillment or success to me.

This was indicative of the mess I inherited in September, 2010. Our major street had failed 8 years after replacement, there were water mains bursting, garage floors failing, about half our roofs were 18 years old (or older), about a third of our driveways crumbling. streams failing, a building settling, patio replacements incomplete, multiple drainage problems, etc., etc. ,etc. And then there was the reserve study which indicated a need for multiple 10% fee increases and a $1.5 million panel and trim replacement project. Oh, yes. That was a banner year. While we can argue about the individual issues, it is the cumulative effects that are more important.

The above photo is the same area of the "Mosquito Glade" today. You can see the new downspout which added rainwater to the area. Not visible in the photo is the incredible, but subtle work done to create a shallow swale and carry the runoff to the walk, and from there into the street and to a nearby storm sewer entry. To accomplish this we had to lower that walk about 18 inches, and put in a retaining wall. "Another simple problem as determined by our uninvolved owners."  This is indicative of the approach I have taken for each and every project here.

Here is a longer view of the same area; this was once deep shade, overgrown with intertwined trees and mud, and frequently underwater:

Why did it take so long?
No excuses, but when boards decided in 2002-3 to embarked on a really expensive program for fancy roofs, added gutters and downspouts but made no allowance financially or otherwise to deal with the consequences, well, it takes time and money to change the course. I appreciate that those in our
"instant gratification" or "entitlement" society might have some difficulty grasping the magnitude of the problem and the fact that something that takes 20 years to create could take a few years to correct.

After attempting to figure it out, four members of a board after 2008 simply walked. They realized a "neighbors club" wasn't going to get the job done.

I do understand. This is a mostly thankless job that requires determination and financial acumen. It requires a really long term perspective. Certainly not a job for the "hip shooters" or politicians in society. For every email I get thanking me for whatever it is I did, I get many more cursing me. A few years ago I even got nails driven into the tires of my car, and more than once.

How to shift a HOA?
I decided to tackle the problems directly and do what I could to convince the boards to deal with the issues. I also decided to open up the Newsletter and expand it into a really informative, but possibly boring fact sheet about this association.  Interestingly, some were resistant and some were so resigned that they refused to believe that change was possible. Today, a few prefer to pretend the problems remain insurmountable, the water mains will fail and that how this has been achieved was simple luck. Hogwash! On the other hand, that makes the naysayers invaluable, as the seers of failure.

This specific project, which is really a small one, took more than a few conversations with the contractor, management and me to figure out the best way to do this. It took some surveying to determine the actual change in elevation to the east and to the west, to see which was the better approach. It took some discussion about where best to simply send the water. It took further measurements after JULIE told us where the natural gas, phone, cable and power lines were. We needed to determine just how deep those power conductors were, before I could commit to a plan and place it before the board.

Then I got a budgetary number for the approximately 75 feet of replaced walkway, and grounds work to accomplish this. As a maintenance/project item we prefer to use sod for large areas, and that was the approach. We can't wait for grass to grow to keep the soil in our sculpted swales in place. Nor do we have "an army of handymen" to pluck the weeds.

Even after all of this planning, it was determined a small tree tucked into the corner of a building should be replaced, so we can properly grade the area. That tree, because it was planted immediately adjacent to the building has been hacked and trimmed many times. It was one I decided not to remove in the first stage of the project. This is consistent with multiple board decisions to "save our trees". But dealing with water runoff from board dictated roofing projects is also a requirement. You will note that downspout. It didn't exist prior to the time the roof was replaced. Prior to this, water could flow to the front of the building. Now it is directed to the rear. Multiply this problem by 84 and you get some idea of the magnitude of the the problem we've been facing with the new roofing project. Ditto for the problem at 84 entrances.

You will notice another one of those 84 new downspouts in the photo below. That water flowed into the "Mosquito Glade." The hacked tree is still waiting to be removed, so we can properly do the required drainage work. Multiply this by 168. 84 entrances and 84 building rears.

A multi-step solution
First, I had to get the trees thinned out. In a HOA where everyone "loves the trees" this can be an issue, and was. I mean, we all love our trees and grounds, but when push comes to shove, a lot of owners simply don't want to spend any money to maintain them. Ergo the $0 tree maintenance budget for 2001. In 2002 a board relinquished and budgeted $15,000 for that purpose. In fact, even the Landscaping Director in 2009, when confronted with the condition of our ornamentals and their age, stated to me "They live a long time" in response to my concern as an owner about the fact that most ornamentals only thrive for 25-35 years, and we really needed to budget for the failure of hundreds of trees. In 2008 this HOA was 30 years of age, as were most of the trees. Some, including the weeping willows on the property were even older.

After thinning out the trees in the "Mosquito Glade", this permitted additional sunlight to dry out the mud pit. This was not a real solution, simply a stop-gap measure.

It took another few years to get this to the top of the queue. In the mean time I, as Architecture and Maintenance Director had to replace 70% of the roofs on the property (about 30), replace our failed major street, replace about 300 feet of water mains, do stream maintenance (significant concrete repairs), replace about six garage floors, about 30 driveways, provide drainage improvements to deal with the rainwater and spring melt runoff of the extended, relocated roof gutters at about 50 entrances, replace a failing bridge and the sinking common area patio it led to, complete the concrete patio project suspended about a decade earlier, and of course, figure out how to prioritize this, present it to boards over a span of six years and determine how to pay for all of this.

During the same time, our boards also spent tens of thousands of dollars on tree removal (old willows, dying ash, etc.) and so on.

My point is, there are a lot of plates to keep suspended here. And that included the fireplace fiasco.

So it is finally, in the fall of 2016 that I am able to complete this project. It is typical of hundreds of projects in the HOA. That's what I mean when I say to owners "We are catching up on a maintenance backlog."

It is also why boards in HOAs such as this really need a long term perspective. We've had boards which survived only 2 years. On the other hand, becoming a boat anchor isn't all that empowering or effective, either. We've had a few of those, too.

This is typical
This project, which in the scheme of things cost this association little money, as compared to the roofs, driveways and Lakecliffe street replacement, is in fact typical of the problems larger HOAs face. We all have limited budgets and we do need to prioritize projects.

Some boards prefer to kick the can down the road, and some like the power, forcing owners to come and beg, so the "squeaky wheels get the grease." What a terrible way to run a HOA!

It really isn't 2001 - Shift from Breakdowns to Preventative, or from Entropy to Momentum

In recent  blog posts I've emphasized how really different it is here at BLMH as compared to a few years ago. I've conveyed similar information in our HOA newsletter.

The Naysayers take the position "This is an expensive association to maintain." Yes, we do have incredible grounds, streams and so on. But here is one thing to consider. Today, we have about the same infrastructure we had when I purchased here in 2001 (closing early 2002). In fact, the infrastructure is the same as it was in 1978 when this unique association was built.

Little has been added and little has been removed from our infrastructure. In other words, little has changed since 1978 regarding our infrastructure.

Our recent battle with aging trees is being addressed by a program I would call "Landscaping Restoration" and the association is spending a significant amount of money for this, more than $80,000 in 2016, and that is actually the first pass, as we continue to remove trees, deal with the scars left behind and address myriad issues. Compared to the funds expended for the roofing project, replacement of Lakecliffe and pro-active water main replacements, this is actually a pittance.

Let's look at 2001

What follows is the 2001 year end information for this association. Our owners can compare this to the published budget for 2016:

1. Collections in 2001 = $899,374
2. Expenses for Operations & Maintenance (including management, etc.)= $834,344
3. Contributions for Reserves= $108,000
4. Reserve balances as of 12/31/2001= $295,451

[Note: I recently reviewed my notes per discussion with my attorney and management prior to purchase in 2002. In 1999 this association allocated via the budget $20,000 to reserves; that's $59.52 per owner.]

I recently pointed out to our board and to any owners who were willing to attend the recent HOA meeting, we are now collecting about 4 times the amount this association collected for reserves in 2001. In fact, it is probable that we'll contribute even more this year because any O&M budget surplus is saved and applied to Reserves.

I'd also like to point out that in 2001 this association was facing a major roofing project, which it began in 2002-3 and which, based on reasonable cost estimates for the first roof, it was projected to cost about $1,680,000 at that time. The association also replaced all of the streets in 2002 or so. There were no special assessments to collect the money to do this, simply a never ending series of fee increases.

I can understand why some really long term owners and board members have had some difficulty accepting the current reality. But that was then and this is now. Management stated to any owner who attended a HOA meeting in 2009 that it was reasonable to expect that fee increases required for reserves (infrastructure)  would taper off as the HOA addressed a maintenance backlog and caught up and built those reserves. That is exactly what has happened.

Back in 2001 it would have required 41 years to accumulate the reserves this association is currently accumulating in 10 years, and is applying to the infrastructure of our association. Let's put that into perspective. Our current owners can expect to see results in less than 10 years, whereas owners in 2001 would have had to wait up to 40 years to see the same results.

There is a single word we can use to describe this situation, and it is "momentum." Yes, we are in momentum! What does that word mean? "In physics, the property or tendency of a moving object to continue moving."

This is exactly the opposite of where this association was in 2001. Back then, we were experiencing "entropy." In science, "entropy always increases and available energy diminishes." In other words, back in 2001 this association was dying.

It is useful to realize that this association will collect nearly 5 times the amount for reserves in 2016 as compared to 2001. Since 2009 it has spent a substantial amount of money each and every year on infrastructure improvements and dealing with absolutely necessary maintenance.

If it didn't, we would have no streams and have more than 100 scars throughout our landscaping, the roofs would be languishing, we'd be driving over potholes, driveways would be ruts, and so on.

However, as we close out 2016 we are also addressing one of our "mudholes" on our grounds, and after nearly 6 years this is the final, major one. Back in 2010 I filmed the "mosquito glade" in our association. It took a few years to deal with this affirmatively, in two large steps. The first reduced the amount of standing water, and the project this year should eliminate it. But we had many, many other issues including rainwater handling problems at many other locations, and some of those resulted in ice on driving surfaces. And, of course, there was the problem with our major arterial street Lakecliffe.

 Here's my August 2010 video about the problem behind Harrow and Lakecliffe:

----> Mosquito Glade at BLMH

As I stated in the video "Where there is a will, there is a way." However, that "will" must include realistic financial planning. Only after we set in place the financial planning can we prioritize the problems, develop solutions,  and then, as the funds are accumulated we can look at our "problem list" and put these plans into motion.

This is precisely what I've been doing for six years. Yes, Virginia, it really isn't rocket science.

Cubstock, 2016

Sometimes, one or two photos do say it all. 

According to UPI: "The parade 108 years in the making captivated Chicago on Friday as an estimated 5 million fans turned out during a celebration ceremony for the Cubs' World Series triumph over the Cleveland Indians."  Here's a link to the original UPI article:

November 4, 2016 Cubs-Parade-5-million-celebrate-Cubstock-2016

Time to do a little cookin'

We're well into fall and the colors are gorgeous. With cooler evenings we are provided with the opportunity to cook a bit more hearty than we do in the summer. So, it is time for meals made from homemade chicken soup. Here's the finished product with egg noodles. One can also use rice in place of the noodles. We cook a soup base and add the noodles or rice just before eating.

Here's how we prepare the soup base. 

Step One. Prepare onion, carrots and celery. Cut the fryer up, removing breast meat from the bone, and separating the small parts (breastbones, rib cage, back and wings).

Step two, Cook the small parts in olive oil with turmeric and paprika. Remove and set aside to cool slightly. .

Step three. Separate the legs from the thighs. Then cook the breasts, thighs, legs in olive oil with turmeric and paprika. 

Step four. Add two cans of chicken broth (about 30 ounces) of stock, and two cans of water. Add the carrots and celery, salt, parsley and celery seed. Note: season to taste. 

Then add the cheesecloth bag of small parts. Bring to a boil and reduce to simmer. Add additional liquid if necessary to cover all the ingredients. Allow to simmer at a low boil for an hour. 

Step six. Remove the bag of small parts and allow to cool. . 

Step 7. Allow the chicken to cook until is falls from the bones. Remove from heat and then debone the chicken and remove any bones and any skin from the soup. Take the contents of the cheesecloth bag and remove any meat from the bones and add the meat to the crock pot. Discard any bones, skin and the cheese cloth. 

Step 8. Put the crock pot on high and allow to cook for another hour, It should look like this. Take a taste and add seasoning if desired. \

Step 9. Prepare egg noodles or rice. Place in individual bowls and ladle the soup over the noodles or rice. Add parseley and serve. 

Are HOA Newsletters Important?

A newsletter may be the only means of communications with complacent or uninvolved and consequently uninformed owners. Here's an example.

I am and continue to be very concerned by the overall owner malaise and lack of participation here at BLMH. Overall I would much prefer a higher participation rate by owners. I think we had about 20% attend the annual meeting and we did achieve a quorum. But I think voting percentages below 50% are too low and I am certainly distressed when fewer than 33% vote. I've provided my perspective in the newsletter. In fact, my primary interest in being the president of our association was that it gave me access to the "President's Message" which is the first item in our newsletter. Why? Because "In communications we can accomplish anything."

The causes are many and some are historical. This association made no demands upon owners for decades other than keeping the rules and paying monthly fees. In fact, paying monthly fees is one of the rules, so I guess I could say that the only requirement to be an owner here is to keep the rules. That is the minimum standard. A very long term board member once quipped to me when we were discussing the impact of budget increases on owners "I didn't think we catered to the lowest common denominator."

Yet, that is precisely what that board member and many earlier boards have done. It is not a surprise to me that we have long term owners (25 years or more) who live on the property and never in the last 15 years do they attend association meetings or even vote in the elections. They have decided they live in an apartment complex and benefit by the labors of the various boards. Of course. they have their complaints to fall back on as an excuse for not participating or attending. "Stupid is as stupid does."

I see the newsletter as a means of supporting all of our owners, be they active or not. I prefer an enlightened and informed ownership over the opposite.

Why are Newsletters Important?
I’ve been observing and attending HOA meetings regularly for about 10 years. For my first HOA meeting only I and my spouse were the owners in attendance. This was in February or March of 2002. We were excited to be new owners. When the president addressed us "What do YOU want?" the wind went out of our sails. Some things haven't changed here at BLMH.  Furthermore, boards have had an adversarial relationship with owners at times. So we have an association history to deal with. That includes entrenched, uninvolved owners and any former board members who have a personal position or legacy to protect.

I do appreciate the resistance of some board members to a newsletter. Newsletters are a lot of work. Board members prepare them and walk the entire property with their committee to distribute them. Via the newsletter board members reveal themselves to the owners, and that can be uncomfortable. One long time board member has had a lot of negative things to say about the newsletter and since 2008 there have been differences of opinion.

I see the need for a factual and far reaching newsletter this way:

1. There is the obligation of the board to communicate with all owners in a fair and balanced way. 
2. All owners should be given as much information as possible and the newsletter is our only method of communicating with all owners and our residents.
3. The newsletter can be an informative and educational tool for owners and for future boards. 
4. We should have a concern about the future of our associations and the ability of future boards to carry on many long term programs and plans. In fact, reserve studies do have a 30 years horizon. Our association expands this to include a 10-year rolling plan. How are future boards to be prepared to continue this? As a matter of fact, all future boards will come from the ranks of our owners. It is best for the association if all owners are prepared to assume these duties in the future, 
5. Owners vote each year for their board, It is my opinion that owners be well informed of the substantive issues in an association. A fact filled newsletter is one very important way of achieving this. 
6. One of the purposes of the newsletter is to engage owners in the operation of their association. 

I do have a real problem with some of the attitudes that have been expressed by board members from time to time over the years, including “If owners want to know what is going on they should come to HOA meetings.”

Yes, owners should attend meetings but there is no formal requirement that they do so. In fact, some previous boards and board members have actively discouraged owner attendance and participation. The most crass think they can do it better than anyone else. So today we have to deal with the 66% of our owners who were trained by those earlier boards, as well as the more recent 33% who may not be aware of the realities of association community living.

It really shouldn't be that difficult, and via our active programs and the current newsletters I intend to lay the foundation to prove that. I stated in our most recent newsletter "Moving from Reaction to Creation-  We are now entering a new chapter at our association because of the capital reserve program that is in place, the completion of the roofing project, the replacement of major portions of our water mains under Lakecliffe and the replacement of Lakecliffe and Salisbury. The past 10 years at our association has included breakdowns and reactions to many factors, including a maintenance backlog and the financial pressure created by both internal and external forces. There is a lot of work to do and for that, see the other reports in this and future newsletters. Even better, come to an association meeting.'

Owners Make Ciritical Decisions
Our owners vote for their board and decide who will be on the board. That includes themselves. Our association is again understaffed, But we have had two owners step forward and expressed a willingness to be on a committee. Each and every one of us makes a difference. As I stated in the November-December newsletter "Annual Meeting  Thanks to those owners who exercised their right to vote and thanks to those who attended the annual meeting. Thanks also to those who have expressed a willingness to be on a committee; you will be contacted about this.   Each board member gave a concise presentation about the State of the Association. My presentation focused on our 10- and 30-year plans and I presented a series of charts, documents and explanations for about 20 minutes. Each board member was subsequently given a DVD copy with audio added.  I prepared a version for YouTube."

Bottom Line
The obligation to communicate rests with the board as one of our fiduciary duties. Some of our recent newsletters provide more insights into the decision making processes here at our Association. There has been a deliberate evolution of the newsletter since the Fall of 2010. I have pointed out to the board on several occasions that our ownership has shifted dramatically since 2009. Since then about one-third of our units have been sold. I interpret this several ways, including the fact that some of these owners are not really aware of the meaning of community living and they don't carry the baggage of 25 years of living here at BLMH, nor is it likely they are fully aware of our rules and regulations. The newsletter is an obvious way of informing them.

It is fortunate that many of our rules and regulations are common sense items. But one might be surprised by some of the complaints that surface. I use the problems that surface with new owners to support my position that continuous education and reinforcement is a necessity. The Newsletter is the obvious tool. I am hopeful that more owners will participate in our HOA, but I have observed some resistance by board members since I purchased here in 2001 (closing early 2002).

It may be that the board is at times its own worst enemy. However, I do appreciate that some board members may be averse to more meetings and more work. I do know that I am.

Our Newsletter:
For the November-December issue of our newsletter, click on the following:

BLMH November-December Newsletter, less our Winter Tips Insert

A Range of Possibilities - An Envelope of Reality

When planning, there are a range of possibilities. Predictions are for the charlatans, the politicians and the fearful. Planning is for the pragmatists.

During a recent HOA meeting in which we were working on the annual budget an owner addressed the board about the future.  The owner's address was probably influenced or triggered by the annual meeting, during which I made a 20 minute presentation about finances, budgeting and projects for our association. It may have also been influenced by the contrarian position of a board member.

I brought my crystal ball with me to the budgeting meeting. I've done this from time to time as a tongue in cheek metaphor for what some board members and many owners expect us to do.

The owner who addressed the board about budgeting provided the usual insights. Of course owners want low fees and of course owners want the property maintained. Furthermore, owners who rent their units as he does do intend to make money. And, of course there are some very large projects in our association on the horizon. These include possible tuck pointing, more street replacements or resurfacing, water mains, streams and so on.

The owner wanted to deal in "real numbers" whatever that means. I remind the reader that during the annual meeting I had presented a series of extensive, probable projects which would occur during the period 2016-2025. I gave a DVD of that presentation to each board member. In fact, it is possible there could be reserve expenditures of $3.2 million over that 10 year period. I also stated during the annual meeting that the reserves could reach $2 million in 2025, as the association saves for the really long term mega dollar infrastructure replacement projects.

However, the owner again expressed the need to save for the future. I pointed out that we are doing that. That this is the "New BLMH" and when this HOA began the current roofing project, it didn't have the reserves to do so, and at the then current saving rate could never achieve the project in the required timeline. That was 2003. Today we are already saving for the next roofing project about 25 years from now. The owner stated that he was concerned about how we would do that project.

I pointed out that I will be dead in 25 years. Simply a fact given my current age. It is probable that no one of the current board will be a board member in 25 years. However, precisely how future boards go about projects 15-30 years in the future is not the issue for a current board.

What is the issue is formulating a plan that recognizes the future needs and puts in place a realistic means to fund these very distant projects. We are doing so. I also stated that I am in favor of certain engineering studies to determine how best to go about some of these projects and at what possible future cost.

I reminded that owner that the first ever professionally prepared Reserve Study in this association by an outside, unbiased firm occurred in 2010, when this HOA was 32 years old.  No prior board had ever done that.

I took some time to go into details about a number of projects, including streets, streams, decks, water mains and so on. I stated the precise amount we are currently saving each year for that future roofing project, I pointed out that recent boards are not "kicking the can down the road." We are addressing all of the issues head on.

I also pointed out to this owner that this is a very different association than it was when he was a treasurer and architectural director prior to about 8 years ago. Since then we've removed more than 100 dead and dying trees, and are in the midst of a landscaping revitalization project. Since then our major street has been replaced even though it failed prematurely and it has been replaced with a properly engineered 30 year street, our roofing project has been completed (70% since 2010), we have pro-actively replaced more than 300 feet of water mains, rather than simply apply bandaids. We have replaced 63% of our driveways and the remaining are in "good" condition, We have replaced a number of garage floors, some unit decks, several unit patios, replaced portions of streams, removed a failing bridge and common deck and installed new walks and a bridge. We've addressed numerous rainwater handling issues throughout the entire property involving most entrances and the common areas. We have developed a rolling 10-year plan which dovetails into our 30-year plan. We perform annual site infrastructure surveys. Obviously, something has changed. I also pointed out that since 2009 we have about 33% new owners. Since then it seems we have a shortage of quality units for sale.

One of my goals is to leave this association in much better condition than I found it. We are accomplishing that. I also want fees to be consistent with the needs of the property, the financial ability of the owners and with the recognition of the value of our units.

To accomplish this requires recognizing that there are a range of possibilities encapsulated in an envelope of reality.

A Range of Possibilities
What does a "range of possibilities" mean? It means that there are many possible outcomes to our plans and one of my goals is to provide the association and future boards with the tools and finances to provide reasonable flexibility.

I have no interest in spending all of the money, nor do I have an interest in taxing current owners for nebulous and uncertain "worst case scenarios." I stated that the "worst case scenario" is the immediate failure of serious infrastructure, such as our water mains. That isn't happening and it won't, crystal ball notwithstanding. I do want owners to live comfortably in a sufficiently maintained property in which the streets are good, the driveways maintained, the garages and roofs are functional and so on. I have stated that I am suspect of those who say "we have enough money" and I am also suspect of those who say "we don't have enough money." The real question is this "Do we have sufficient funds to deal with current reality and provide for future replacement?" We are annually saving more than three times the amount that this association was saving when I purchased a unit it 2002. We also have three times the reserves. We also don't have three large mega dollar projects coming upon us (back then it was roofs, driveways and streets; everything else was kicked to future boards.).

Yes, something has changed.

Our property is aging, yet we are no longer under duress. We have a plan and with that and the financial plan we do truly have options. We aren't practicing breakdown maintenance, or kicking the can down the road. We have shifted into preventative maintenance as a preferred standard. It is probable that we will begin replacing our front entryways, mailboxes and intercom and electric door closure systems within the next 10 years. However, it is impossible to state precisely when that project will begin. Future boards will determine this. So too for completion of street repaving, major stream work and so on. I cannot take responsibility for what boards did here prior to fall of 2010. Nor can I take any responsibility for the future. I can honestly say we do have a realistic plan. A range of plans which provide for a range of possibilities. That is propelled by my vision. Isn't this one of the duties of the president of an HOA?

We are collecting the reserves necessary to do this work. However, the begin and end, or completion dates will be determined by others in a range of dates. This creates a range of possibilities.

Of course, we must also set priorities. I do, each and every year. The setting of these priorities determines what in fact does occur each year. Running the numbers and doing those infrastructure surveys are a priority. It seems for many years that they weren't. But that was then and this is now.

However, all of this is contained within an "envelope of reality." Our units are, in fact, selling for about one-half the price of the average condominium in Wheaton. Our association is nearing 40 years of age. Not everyone gives a hoot about extensive grounds with walking paths, rolling grassy areas, waterfalls and streams. Yet, many of those who live here do really love it. Some say they plan on dying here. Almost everyone comments on how quiet and peaceful it is. No bars in sight. This isn't for everyone.

Certainty versus Chaos - Why I choose to run the numbers

This week we began the budgeting process for our association. However, one board member was unable to attend the meeting and so we were unable to complete. He and I did discuss the issues that came up during the meeting and I did provide a letter with the text about this to the missing board member. I'll get a copy to management and each board member early next week.

I was asked if I really like running the numbers. My response is that in fact, I don't. But I consider it better than the alternatives, which include uncertainty, breakdowns and chaos.

This is something I learned in real life, in my business and in my work in financial planning, which includes retirement planning, saving and investing. I also learned it is far, far better to practice preventative maintenance rather than breakdown maintenance.

I am also certain that no matter what we do there will be unforeseen circumstances and breakdowns. That's normal. However, diligent and rigorous planning can reduce the occurrence of these problems, which the unprepared will erroneously call "accidents." Boards can and do become completely ensnared dealing with the consequences of breakdowns and that includes angry or upset owners. IMHO it is far, far better to spend the time planning and preparing. However, not all agree with this approach.

It is a process
It does require many steps to put in place a workable plan for a large association like ours. The same approach has benefits for all home owners associations. Our larger association covers about 40 acres with two lakes, 44 manor style buildings, 15 acres of turf, three streams with waterfalls and ponds, our infrastructure including 84 driveways, 84 patios and decks, the electrical systems for our street lighting, the streets, walks and water mains.

What are some of the things that have been put into practice in recent years, and which I've emphasized in my 6 years on the board?

1. Regular, professionally prepared reserve studies (by outside, unbiased firms).
2. Regular condition surveys of the property. This includes nearly all aspects of our infrastructure includes the streets, driveways, garages, walks, drainage and rainwater conveyance systems, roofs, patios, decks, streams, waterfalls, ponds, gazebo, building entries, carpeting and other common area elements,
3. Regular consultation with our management and contractors and also with engineers about identifying perceived problems, dealing with maintenance and infrastructure repairs and replacements and so on. 
4. Frequent cost estimates and proposals to obtain the best possible numbers for updating the reserve studies using our internal data as well as that of the reserve study professionals. 
5. Annual or semi-annual financial reviews of the state of capital programs. Are we on track? Are we falling behind? Are we missing anything? 
6. All of the above is then incorporated into our regularly prepared reserve studies. These are prepared by outside, unbiased firms.  
7. Using professional contractors for all aspects of maintenance has additional benefits. Our managers and contractors provide regular assessments of the state of the infrastructure to the board. Obviously, there is also a real benefit to working with the same firms on a repeat basis. However, we have had board members take the position that an army of handy men could do as well, and some board members have taken the position that it is easier to hire a new firm than work out the issues with an existing firm. 

After we have done the above we also do the following:

1. Additional analysis of the 10-year plan on an ongoing, annual basis, This is in addition to the 30 year plan, The 30 year plan is "fuzzy" but we can really get a good picture for the 10-year plan. 
2. Avoid kicking the can down the road. This can create false security because reserves that are not spent in accordance with timetables will accrue. When boards and owners see these growing numbers there is a natural tendency to think that we might be collecting too much for reserves.A failure to keep current also creates "time bombs" which will show up at the most inopportune time. Certain repairs are impossible or extraordinarily expensive during our winters. Furthermore, future boards may be unprepared to deal with the cumulative effects of maintenance backlogs. 
3. Avoid knee jerk or automaticity when designing budgets. We do try to come up with realistic annual budgets, but we can't predict everything. For example, our association does maintain the streets in winter. That means snow plowing and the application of ice melt on streets, drives and at building entrances. We really can't predict how much snowfall we'll get in any year/  

There are financial choices to be made and balance to be achieved
We also have to face the issue that really long term infrastructure problems, those beyond 20 years, can be difficult to properly save for or to implement.  Can anyone really predict the cost of a replacement program 30 years distant? For example:

1. Determining how much to save for a large and distant infrastructure program can be difficult. Factors to be considered include long term inflation, impact on savings (return on investment). In recent years and for planning purposes we've seen annual inflation numbers promoted from 2.0 to 3.8%. That is quite a spread over 30 years. 
2. To prepare for really long term projects may require supplemental analysis such as engineering studies. I have a moderate amount of confidence in the professional firms who prepare our reserve studies. However, we've seen projects promoted which would have required several million dollars, one of which we determined was unnecessary and we could and were addressing via annual maintenance programs. That program was already in our Operation and Maintenance budget in the amount of $20,000 per year. That's $500,000 that will be spent over 25 years and that is much less costly than the $1 million to $1.5 million that was expected to be required. This is an example where regular preventative maintenance is superior to deferred maintenance accomplished by reserves.  
3. The above example is also superior because it more fairly applies the fees of owners. Each year a small portion of the current owners' fees is applied to this infrastructure work. 
4. In considering our fees for reserves and the amounts to be saved, the Illinois Condominium Act requires that the "budgets adopted by a board…..shall provide for reasonable reserves for capital expenditures and deferred maintenance for repair of replacement of the common elements. “ It is also stipulates that “the board of managers shall take into consideration the financial impact on unit owners, and the market value of the condominium units, of any assessment increase needed to fund reserves. “  
5. I would also think that balance dictates that we consider both current and future owners. "Kicking the can down the road" can result in lower fees for current owners to the detriment of future owners. After all, the maintenance will have to be done one day. On the other hand, Saving for nebulous and uncertain projects 20 to 30 years into the future can result in higher than necessary fees for current owners, which essentially transfers wealth into the pockets of future owners who might be the beneficiaries of lower fees in the future. 
6. In some circumstances there may be alternatives to be considered for large and expensive capital projects. There can be undesirable outcomes to be considered. For example, in 2003 a board decided to begin a more costly roofing project. That will have long term benefits for owners as it may increase the life of the roofs by 10 years. This was also the approach used in replacing a common street used by all 336 units. 
7. Earlier boards made a decision to go with a less costly street replacement and that necessitated significant repairs commencing six years after that street was put in and complete replacement at an age of about 12 years. So a street which should have had a life of 25-30 years failed, and this caused major disruption for all owners. We should strive to avoid these types of problems. 
8. Balance dictates that all owners, both current and future be treated fairly. This means that reserves must be fairly accumulated. For example, all owners should pay for the benefits of maintaining infrastructure, That includes roofs, driveways, streets and so on. If future owners want to add amenities such as swimming pools, community buildings and so on, they should pay for this in part via a special assessment and future owners should be fully responsible for paying for the benefits. Charging current owners for such distant improvements and benefits is inappropriate, in my opinion. 
9. Saving millions of dollars for distant projects can be problematic for another reason. Current owners may pay for these benefits, but future boards and owners may be inclined to spend the money saved over decades in different ways. We cannot control the actions of future boards and owners. So amassing large reserves may simply prove to be too tempting to future owners who will vote for boards to reduce their fees. There is a balancing act for current boards to consider. 

Good boards take all of the above into account. It can require more work to establish certainty for future capital intensive infrastructure projects. In HOAs comprised of volunteer boards, there may be some resistance by current board members to doing this work. It may also be viewed as something that is optional and will benefit future owners. Current boards may be inclined to pass this duty to future boards. That is a mistake as it does take many years to accumulate the necessary funds. Here at BLMH, the real saving for our mega dollar roofing project began about the same time as that project began. Too late in my opinion and it did require some large fee increases for reserves over a 10-year period to accomplish. I've pointed out that this was a major contributor to recent fees increases. In 2001 12.28% of the fees in thour HOA went toward reserves. By 2011 is was nearly 34%. Over one 10-year period the contributions to reserves increased an average of 9.64% each year. Two of those years the increases were more than 22%. In two of the years the increases were 0%. 

Note: 

1. The annual fee to deal with Operations & Maintenance for the average owner at BLMH has increased about 40.7%. However, over that same period the annual fee to deal with Reserve requirements has increased 227%. These large Reserve contributions were embedded in the total fee, so it was not readily apparent to owners what was actually occurring. 

Planning for 2017, one of "the good new days"

We are beginning the planning for 2017, and more details about this later in this post. The next association meeting will the budget meeting. The board will determine the annual budget and then the fees to meet the budget. Last year it took two months to hammer the budget out. It nearly required three. It shouldn't be this difficult, but there are two opposing positions about how to run this HOA. One is based upon "the good old days" which really weren't all that good. Then we have the "good new days" which is my position. This post looks at some of the planning details.

In the current election we achieved a quorum. But the majority of owners didn't attend the annual meeting. For them the annual election came and went. The four members who were on the board and were running again were elected. No one volunteered or stood up to take on the 7th position. However, we do have two owners who expressed their willingness to be committee members.

The October meeting will include the annual positioning of board members to fill the available slots. With a board comprised of six, the position of president has importance beyond the implied leadership or possible cache of that position.

I view the role of president as significant, but there are limits when we are a volunteer board. However, there is one overlooked responsibility for the president. With a board of six, there will be times when tie votes are cast with three "ayes" and three "nays." In such circumstances, the president casts a second ballot, which is the tiebreaker. So the president's vote carries unusual weight and this might not be a good thing. For example, if the board was deadlocked about budgeting with three favoring a lower fee increase and the other three favoring a higher fee increase. This did recently occur and at the time the president (me) did cast the tie breaking vote, so the lower fee increase was passed. I'd prefer we have seven board members, but the owners have again decided otherwise.

What will happen during the October budget meeting? Who knows? But we again have an even numbered board. This isn't the best way to run a homeowner's association. It leads to strife and more backdoor machinations by the politicians among us. However, I will try again. But I may not be able to do much beyond making recommendations and it remains to be seen who the president for 2017 will be.

Whatever happens, here will be my planning priorities for 2017. However, what happens will be determined by the other five board members. All it takes is one to stonewall a project, or push a personal agenda. For example, it didn't take much to champion and spend about $15,000 on lock boxes on the property. It didn't take much to stonewall the common area patio behind Thames:

1. Continue the expanded, topical newsletter.
2. Continue to reach out to owners to engage them in the business of this HOA. An entirely different board than the one we currently have will be completing the current 10 year plan. Who will this be and how will they be prepared? 
3. Continue street repairs in the cul-de-sacs.
4. Complete the rainwater handling (drainage) improvements required by the new roofs. 
5. Continue dealing with the numerous scars of recent landscaping problems and the death of about 100 trees. 
6. Continue site condition surveys. In 2017 it is time to look again at garage floors. 
7. Continue work on the streams. We have two which are degrading. 
8. Make a decision to repair or replace the gazebo.
9. Make a decision of when to move forward with the replacement deck behind Thames and deal with the drowning duckling issue. 
10. Continue operating in accordance with 10-, 20- and 30- year plans.
11. Update the reserve study and the 30 year plan. 
12. Move forward with the replacement of brick sills on the property. 
13. Engage the board and owners in a responsible 40 year plan for our water mains. An engineering study is required. 
14. Expand my liaison efforts with our city. Our association comprises about 1.25% of the city population, and yet we represent far lower costs to the city than does the average homeowner because we are a PUD.
15. Attend "coffee with the council" and monthly city planning and council meetings. 
16. Continue efforts to influence the management of the city stormwater system which comprises lakes A, 1, 2, 3 and 4 and reduce the impact of serious storms on our association and the neighbors downstream. 
17. Continue to put pressure on Glen Ellyn and the College of DuPage to take responsibility for the consequences of paving over a substantial part of the watershed and piping the rainwater into Wheaton.  One-third of the watershed feeding Lakes 4 is in Glen Ellyn.
18. Continue maintenance efforts to avoid a backlog and to keep efforts current. 
19. Begin a study to determine best way to maintain the masonry on our buildings. This is a very, very long term project; longer in duration than our water mains. 
20. Continue work to maintain the water mains and continue discussions with the city to take responsibility.
21. Continue to push back against owners or board members who run their personal agenda to the detriment of the association and other owners. 
22. Make efforts to convince all residents to use those expensive lock boxes. 

Of course, there are different priorities to the above. Some things on the list will not happen. However, it is a certainty I will not be on the board in a few years. It is a certainty none of the other board members will, either. 

Fees - Remember the good old days? I prefer the good "new" days

I'll take the current reality over the smoke and mirrors that were promoted in the "good old days" in this homeowner's association.

An owner who has a complaint brought to my attention the fees back in the "good old days" when he purchased a unit here. I thought the reader would find it interesting. .

When this association was built as a Private Urban Development it required that the owners via their fees would be responsible for all of the following maintenance and operating costs, and more:

• Snow removal on streets.
• Street lighting including electricity (up to 400 watts per fixture).
• Exterior building lighting including electricity (336 fixtures).
• Interior hallway lighting including electricity (756 bulbs).
• Interior hallway electrical heating systems (84 large heaters).
• Water closet utility room electric heaters (84 heaters).
• Electricity for stream pumping systems.
• Pumps and concrete and piping for the stream systems and waterfalls. 
• Cost of water for grounds maintenance and three streams.
• Maintenance of the exterior of 44 buildings, halls and garages, including masonry, panels, trim, roofs and entries.
• Maintenance and replacement of all streets, parking areas and curbs.
• Maintenance and replacement of all water mains. 
• Maintenance and replacement of all walks (about 1/3 miles).
• Maintenance and replacement of 84 driveways.
• Maintenance and replacement of all common area patios and decks.
• Maintenance of 336 limited common element patios and decks.
• Maintenance of the common area electrical systems. 
• Landscaping including maintaining 15+ acres of turf and about 800 trees and 3000 shrubs.
• Shoreline maintenance for two lakes
• Professional management fees.
• Professional accounting fees.
• Professional legal fees. 
• Professional reserve study fees. 
• Saving and growing reserves as required by State statute. 

Here is the trick question: What were the fees in the good old days for each of the 336 owners per month to do all of the above? Pick one:

• $75 per owner per month
• $55 per owner per month
• $45 per owner per month
• $35 per owner per month

To help you in guessing which of the above is the amount of the fees "back in the good old days" here is the total annual Operating, Maintenance and Reserve Budgets that the above fees would support:

$75 per owner = $302,400 per year for the association, including reserves.
$55 per owner = $221,760 per year for the association, including reserves.
$45 per owner = $181,440 per year for the association, including reserves.
$35 per owner = $141,120 per year for the association, including reserves.

Answer: Apparently the association was collecting $35 per month in fees per month per owner back in the "good old days." Of course there were no reserves. I'd love to see that original budget. 25 years later the fees were less than a "staggering" $195 per month for the average owner. In fact, over those 25 years fees increased about 7.25% each year, on the average.  If fees had been a more realistic $75 per month "back in the good old days" then the required annual increase would have been 4%. And, this association would have been saving substantial reserves commencing with day one.

 Who is to blame for this? I'd prefer to look at root causes.

Our legislature requires the association save for reserves. However, how one arrives at the numbers is not defined. Builders are not required to put up substantial reserves. So this passes to new boards. The boards can cobble together any reserve program they choose. Here at BLMH they called it a "replacement fund." Here at BLMH the first comprehensive reserve study prepared by outside professionals for this purpose occurred when the association was 32 years old. That is a long time to avoid opening Pandora's Box, as one manager described the possible consequence in 2007.

It would be better if our legislature had a statute which forced boards to use competent, professional companies to arrive at a 30 year reserve study in year one. Better still, have the builder or developer do this so owners pay appropriate fees from day one. But the legislature didn't do that, and it never will. Now the legislature has qualified all realty professionals as being qualified to manage a homeowners association. I ask, what does selling have to do with maintaining a HOA, in particular one of 40 acres, etc.? But the legislature passed this decision to a board comprised of amateurs. Which is why our board in 2011 attempted to hire an army of handymen equipped with lawnmowers and attempted to replace management with a realty professional.

If you think this is an isolated problem, think again. A friend purchased a lovely and expensive town home in 2014. That small association has limited reserves and has yet to conduct a proper reserve study. That's another problem in the making.

Ultimately the problem passes to future owners. Of course, after buying a unit with a $35 monthly fee, who is going to push for higher fees? No one. There is that expression "if it is too good to be true, it probably is" but a sucker is born every minute is the other expression.

Of course, owners did realize that this was unrealistic. I'm sure those who sold homes and moved into a condo at BLMH realized what a "bargain" $35 a month was as compared to what they were paying to maintain their houses including the lawns and exteriors as well as the water for lawns. Which is why fees gyrated to meet bills. Nevertheless the owners simply chose to ignore the elephant in the room and fought to keep fees low for as long as possible. Some owners attacked boards in 2006 and thereafter as fees escalated due to aging infrastructure, but many of the real culprits had already sold their units and moved on. The board members and owners who remained were left to hold the bag in 2008.

This is one of the problems with HOAs. It has given far too many a bad name. There has been a lot of anger in the HOA community since 2002 and I do mean well beyond the confines of BLMH. People bought at very high prices and were squeezed by increasing fees as older HOAs dealt with the realities of aging infrastructure. In 2008 the foreclosures began and HOAs saw declining revenue. It resulted in a death spiral for some associations. Not all were as fortunate as BLMH with 336 units and a small group of owners who were willing to notify owners in writing and at personal expense of the magnitude of the problem in 2010. I was one of that very small group.

I'd suggest that we remember the "good, new days." These are the recent years when the association is being properly maintained, it has the fees necessary to support the maintenance efforts, it doesn't kick the can down the road, current owners are paying their fair share and are seeing results. The association has a 30 year plan and works diligently on a 10-year plan each and every year.

I'll take the current reality over the smoke and mirrors that were promoted in the "good old days."

All it takes is time

I don't want to understate the difficulty of operating with a less than fully staffed board in which tasks are not spread equally. On the other hand, I don't want to overstate the difficulty, either.

However, that old expression "We can do anything, all that is required is time and money" remains as true today as it did 50 years ago. The dilemma for most associations is both a lack of funds and volunteer boards which are understaffed.

Why could there be money issues? Early owners are inclined to press for lower fees and might prefer to ignore the requirements of a 30 year reserve program. If things become too far out of kilter, boards may delay crucial and expensive maintenance. They may undersave for reserves. Later owners won't want to pay the price for these earlier owner and board missteps.

Boards are always under pressure from a few owners. "Personal Agendas Running Wild" could be the title of a sometimes humorous video about the wants, needs and desires of the few. Boards may become insular and I've seen boards "circle the wagons" and avoid or discourage new board members. This may eventually haunt associations.

 It is not unusual to see boards fracture into groups. Come to our association meetings and at times you would think there were two meetings underway. One board member constantly carries on side conversations with a sub-group. This is also an example of undermining. I've attempted to reign in the side bar conversations. I've even interrupted them and asked if they were running their own meeting. I was accused of being rude.

That's how far out of tilt some associations can become.

At some associations the splits may be along age lines. Retirees may approach a board position as their main social activity and power base. Yes, it can be fun getting to know contractors, local municipal officials, members of the police department and so on. There is power in spending money, particular if it is a large sum. Spending the money of others can be fun; watch the politicians in Springfield and Washington. The board job can be expanded to fill all available time. Boards can also dump the difficult tasks on younger or more capable board members. This may keep younger people off the board. After all, they are working, may have family responsibilities and duties far beyond the limited confines of the association. For anyone who is really busy, expanding time for tasks is considered to be a waste of time.

Ironically, with all of the changes in technology dumping on younger members may mean the board fails to retain some of its most capable members. I've also written about the real possibilities of cognitive decline as we age; this can begin as early as 50. I've written about the reality of physical health for people who are 70 and older. A failure to design association boards which are comprised of tiers of ages, or which become very insular, or which don't mentor and attract younger owners is a formula for disaster.

Time is our enemy and there will also be an insufficient amount.  Ultimately we are looking at resources, and human resources in a home owners association may be scarce. In our association with an understaffed board comprised of 1.8 percent of the owners, we are in a resource desert.

Continuity, Backlogs, Leadership and Vision

Here's the results of my annual driveway survey. It is an example for what follows in this post. We'll be replacing four driveways this year, which gives us 52 new driveways, or 62% since 2009. The older driveways are in good condition but crack filling and future replacements will be necessary. I'd like to point out that replacing four driveways per year, on average, will replace all driveways every 21 years. Our driveways have a useful life of 15-20 years, so replacing all at such a pace is within the guidelines we've established.

Yes, recent boards have been playing "catch up" to the problems created by earlier boards. The driveways are an example.

• Since 2009 52 driveways were replaced
• Based on lifecycle studies, only 32 should have been replaced
• The additional 20 that were replaced since 2009 were part of the maintenance backlog created by earlier boards. 
• Add to this streams, patios, common area patios, garage floors, etc. which were maintenance delayed. 

The current driveway data was collected by me and provided to the board [There were actually two surveys this year; one in the spring and one as fall approached]. This approach is typical of ongoing and frequent conditions surveys I instituted in this association in 2010. In 2016 there was no resistance to replacing the four driveways because I had take photos of all of the older driveways and presented that information to the board.  This is an example of an approach which avoids sticking our heads in the sand to the detriment of the association and its owners.

Driveway Survey August 2016

Prior to 2009 we had problems with aging driveways. The boards were faced with the magnitude of the roofing project and rising annual fees to accommodate it. Fees and the roofing project are only part of the problem.

It seems that annual condition surveys were suspended prior to 2011. With the infrastructure aging, it was easier I suppose to simply sit back and deal with those upset owners who came to association meetings. So the squeaky wheels got the grease. This approach has other problems, including the establishment of a substantial maintenance backlog.

Irate owners finally stormed association meetings. Most of the "kick the can down the road" leadership was replaced. However, the new board faced some real challenges in 2009. I think they replaced more than 12 driveways in 2009-2010. That was the tip of the iceberg.  They had made some big promises to win those seats in 2008. Those promises, combined with a real maintenance backlog led to a steady stream of owners attending association meetings with their hands outstretched. So the squeaky wheels had taken over the association. Expectations were high. Walking the talk is the difficult part.

The earlier boards had left several land mines behind for the replacement board of 2008. That included severe animosity toward any board by some owners. A failure to communicate was another. So we had a backlog of maintenance issues, an underfunded mega dollar roofing project underway, our major street was failing, we had chronic communications problems and owners were angry. That was directly a consequence of a failure of leadership and vision by earlier boards.

The true magnitude of the problem became apparent with the reserve studies that followed.

Another casualty was future boards. Is is any wonder that owners don't want to participate? But I'm making excuses for the owners. There is no excuse for avoiding involvement and protecting one's major financial investment. But too many owners used the problems as an excuse and simply promoted their personal agenda. Some had difficulty believing what was so. After all, the earlier "kick the can down the road" boards hadn't communicated and then the new "neighborly" board painted a rosy, fictional picture. Some owners were confused and had a right to be.

Solving the Problem
To deal with these types of problems takes leadership by example and vision. Not everyone comes to a volunteer board position to work; after all it is a power position and it does carry some cache in the community. When the going gets rough, some will run, some will attack those who communicate the bad news, and some will attempt to assassinate the champions. Others simply fulfill the role of underminers. There may be personal agendas and legacies to protect.

The new board of 2008 attempted to resolve the communication issues. But they lacked the backbone to tell the owners what was really so. After all, if one runs on a political slate of "change, " "neighborliness" and "we have enough money" it becomes difficult to tell the owners otherwise. So there was some real silliness. For example "We can maintain the property with an army of handymen." One of the board actually had a non-owner handy guy come to an association meeting to promote his agenda. Another silliness was "porous asphalt." At best these were diversions. At worst they pushed serious matters far lower on the scale of priorities.

It was difficult for the board to own up to the serious delinquencies and foreclosures that occurred commencing with the financial crisis of 2007-2008. They couldn't replace a rosy picture and communicate reality. It is really difficult to walk the talk, and our new board at the time discovered just how really difficult that is. The reserve study of 2010 was the sign to leave and all that they needed was to find an excuse. I was it and three ran for the exit.

There is that old expression "Lead, follow or get out of the way." When faced with underminers I'd prefer they simply get out of the way. But not all do. Nevertheless, there has been sufficient opportunity to move this association forward.

Major Steps
Here are some of the major steps undertaken at our association in recent years:

• Reserve Studies.
• Using reserve studies as the tool they are meant to be.
• Frequent condition surveys
• Establishing priorities
• Responsible budgeting
• Honest and thorough communications
• Continuous improvement
• Using data rather than automaticity.
• Acknowledging that budgets must consider property values, the financial impact on owners and the assessment increases necessary to fund reserves. 

Not everyone agrees with the previous steps and it has been an uphill struggle. You really can't "teach old dogs new tricks" if they are too inflexible and set in their ways. But they may be absolutely certain that they are right, never mind the numbers; that's an inconvenience. I supposed the "new tricks" expression could be the slogan for some HOAs. I can't take credit for the current amounts we collect via reserves. That goes to the boards of 2000-2010, who ramped up our reserve budgets by very large amounts. The average fee increase for reserves from 2002 to the budget meeting of 2010 was nearly 13% each year. It would have been higher had I not argued for a moderation of these increases in recent years, based upon:

• Current infrastructure knowledge
• Current 10-year infrastructure projections
• Current 30-year projections
• Knowledge of the financial impact on owners and property values.

Leadership and Vision

There are many aspect to leadership in a homeowners association. 

• Setting long term goals
• Establishing priorities for goals
• Managing our managers
• Managing a diverse group of volunteers
• Dealing with belligerent owners who run their personal agendas
• Building better boards
• Mentoring new board members
• Communicating responsibly to owners while avoiding glossing over inconveniences

It is unfortunate, but some association board members become bullies, some lose their vision and some fail to communicate honestly and authentically with owners. 

Nevertheless, I do think we have sufficient owners with the necessary qualifications to fully staff our board and tun the association. But to do so requires dealing with the bullies and some honest work. Perhaps that's the reason why "Ken" the apple orchard guy doesn't hire young people to help him in his orchard. At 95 Ken was pruning and climbing ladders with a half-bushel basket attached with a harness. He said younger people would expect a Cola machine and some would have their mothers come along. As for the older? Simply too lazy, I guess.