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.

Another Year Comes to a Close

As December 28 approaches we are nearly upon the end of another calendar year. It is a time to pause and reflect. We might be inclined to wonder if 2016 will be more of the same, or better or worse than 2015.

I'm of the opinion that we should not expect things to be better unless we have put in place those things that are required to make 2016 a "better" year. In a HOA, if the boards, owners and other residents operate the same as they did last year, then it should be expected that the results will be no different than the previous year.  Of course, there will always be circumstances beyond our control. I won't be worrying about those in 2016.

As for BLMH what is to be expected in 2016? It will be whatever we create as owners, residents and board members. Added to that will be a few breakdowns and a few surprises.

Living in a HOA is community living. If we think of life as having "ups and downs" and accept this as normal, then we discover that community living is like a heartbeat:

Community living involves certain risks. We assume our neighbors will be good neighbors and they assume we will also be good neighbors. We assume everyone will pay their fees, will keep the rules and will cooperate with management and the board.

We assume some people will show up to perform the tasks of board members. We also assume things will proceed smoothly. As the above graph demonstrates, even the blood flowing in our veins and arteries does so with some inconsistency.

Our heartbeat becomes smooth and unchanging only after death. So it is with life in general; only after we are dead will the chart be a straight line:

I expect 2016 will have ups and downs and more of the same as did 2015.

The attitude and involvement of our owners follows the classic bell shaped curve in which there are several distinct groups and most fall into the center. Here is an example of such a curve for grading tests; as can be seen, most test scores would be a "C" or average. There will be a few "A"s and at the other extreme a few "F"s. The curve shows the percentage of students who received each grade:

Similarly, the owners and residents of a HOA fall into similar groups. We aren't grading them, merely describing where they are in most things.

For example, there is the keeping of rules. That is measurable. Paying fees in a timely manner is a rule, completing census forms is a rule, cooperating with the neighbors in a community is a rule and so on.

Some owners don't keep the rules in any month. They may fail to pay their fees, may fail to move their vehicle preferring to store in on the street, leave their trash receptacles outm or may get into a feud with a neighbor. They will be the small group to the left of the curve. Most owners pay their fees in a timely manner, cooperate with the HOA management and the board and in general are nearly invisible to others and could be described as "good neighbors." They are the group in the middle. To the left of the curve are the group that doesn't vote at annual elections. To the right of the middle of the curve are those who do vote during annual elections. To the right is also a smaller group which attends HOA meetings, those who participates as committee members and further to the right are the members of the board (currently numbering 6 out of 336).

What we cannot predict is in which group each of our HOA owners will fall, beyond that obvious central group. In that group most owners will pay their fees and will be more or less invisible. Similarly if we charted events at our HOA, we could conclude that most will follow last year's events and fall within that central group of "C's".

If the above is correct, then why would we ever expect 2016 to be any different than 2015? Another way to say this is to state that if owners expect a "better" 2016 they will be the one's who create it. It won't happen by itself. In fact, entropy is the nature state of the universe. Unless we create a better future it will most likely be worse than the past.