Streams Project

 

Waterfall #2, new walk and bridge - partially completed status in 2014

In 2010 the HOA Board decided that the streams at this condo association were to be maintained, reversing two decades of decline.  The streams are an important architectural feature of this homeowners association. This video indicates project highlights, which required 6 years and included decks, bridges, 3-manmade streams, pump pits, pressurized water lines, and the installation of retaining walls and numerous concrete repairs. I led this long term project, and the replacement of 500 feet of water mains, a major street, replacement of 26 large roofs 2011-2014, 60 driveways and numerous garage floors as well as drainage and lawn improvements 2011-2018.

The decision made in 2010 was made at a time that owners were struggling with the consequences of the banking disaster of 2008, and the recession of 2007.  There were foreclosures and delinquencies.  The board had to answer the question "Do we need to implement a cost reduction program?" and "How to go about reducing costs?"

One item discussed was the streams.  These are man-made, two were in poor condition and all use city water at HOA expense.  Shutting them down would reduce maintenance and utility costs. On the other hand, they couldn't simply be abandoned.  The board would have to come up with a plan to remove them.

Here's the owner delinquency situation.  At the time of these discussions the delinquent amounts were spiking:

Delinquency Amounts 2008-2018

The board in fall of 2010 decided to maintain the streams and replace a failed pump. At the time, I told the board this decision would have long term consequences and as a board member I set about designing a program to restore the streams and reduce water consumption.

The program needed to wait until the roofing project was completed.  We also needed to address serious problems with Lakecliffe, a street which was failing.  Most driveways needed to be replaced and numerous garage floors had issues.

It took a number of years to complete the project envisioned in 2011, and the significant steps were completed in 2018.

A 15 minute YouTube video:

https://youtu.be/6-hM55JWLzs

Notes:

1. The man-made streams consist of an elevated waterfall and concrete bowl.  Water flows downhill from the bowl, via manmade streams to a crushed stone pond.  At the pond a pump, buried in a pit, pushes the water back to the waterfall via a buried pipe.  The elevated, concrete bowl is built above a layer of clay.  Cracks in the bowl allow water to escape into the soil, below.  The water migrates through the soil, flowing downward until it reaches clay, which is a barrier impervious to water. Upon reaching the layer of buried clay, the water continues to flow downhill along the surface of the clay.  At Stream #3 that flow is toward Lake #4. Decades ago, a wall was constructed adjacent to a building and drain tiles and crushed stone installed to divert water around the building, with limited success. Additional work on that drainage system was included as part of the streams project.
2. Actual annual operating costs include water and electricity for the pumps. Water is required to initially fill the streams and water replenishes that lost via leaks.  The ponds can and do overflow particularly during rainfall.  The property is not level and has about 15 acres of turf. Rain water and snow melt flows from roofs and will find its way to some of the streams. This can exceed the capacity of the ponds. (See photos, Note 15).
3. During warm weather the waterfall pumps must operate continuously.  If the pumps stop, the streams will empty.  They must then be recharged with costly city water.
4. The stream water pumping systems are maintenance items and can failure. Because the pumps run continuously for about 6 months each year, a pump will wear and will require maintenance after 3-4 years.  The water lines to the waterfall are under pressure and these can and do fail.  The line for Stream #1 did and a major section was replaced in 2018. The pump pits were installed in 1978. These were galvanized steel.  These rusted and failed, allowing water and mud to fill the pits, burying the pumps and making pump maintenance costly and difficult.  During the stream project all of the pump pits were replaced with heavy duty plastic double walled cylinders suitable for direct burial. Other mechanical improvements were made to reduce the labor required to maintain the pumps and pits.
5. During the work on the streams, waterfalls and ponds, a lot of grading occurred to direct the flow of seeping water away from buildings.  Such water can undermine concrete patios and building foundations. Additional direct burial piping was installed to direct such flow to storm sewers and to streams.
6. The bowl for Waterfall #1 was replaced.  Repairs were made to the bowl for Waterfall #2.  It is likely additional work will be necessary on the waterfall bowls, in particular at Waterfall #3 if the seeping of water through cracks is to be further reduced. 
7. The streams project was delayed by other, more urgent and expensive projects. The overall state of association infrastructure was "disrepair" as of 2010.  The stream project required detailed cost analysis.  The reserve studies of 2010, 2011 and 2015 were helpful. G& D Management and the contractor who did the work were essential, as were the maintenance company.  It was necessary to identify issues, determine solutions and costs. Concrete technology has advanced and we used a concrete for parts of the project that included strong fibers dispersed throughout the mix. The additional cost of this advanced concrete was minor. 
8. It was a goal to reduce operating costs.  These costs include labor to maintain and repair, water consumed and electricity. This project is not complete.  My plans and notes are included in seven boxes of documents, drawings, sketches and notes I accumulated 2011-2018.  Some board members had little interest in this information. It will be shredded and will vanish, as did the years of Newsletters the boards of 2019-2021 deleted from the official association website.
9. Some board members have preferred splashy, expensive landscaping projects at the ponds, rather than maintaining the system. Such eye candy should only be done after the maintenance is done. For years it wasn't.  The Landscaper promoted these expensive and profitable projects, the owners appreciated the eye candy and re-elected those boards. Shrewd board members, interested in re-election accommodated.  However, this deferred needed maintenance, ultimately contributing to the demise of the stream system and higher costs and owner fees.
10. The waterfall and pond of Stream #3 was found to be in the best condition. A large deck had been installed earlier (in the 1990s?). However, thereafter the other stream systems were ignored, or maintenance suspended and relegated to patching small problems.
11. The stream project began in 2013 with the identification of sub-projects and phases of the work.  Actual concrete work began in 2014. A portion of stream #1 between Thames and Lakecliffe was repaired. That section, from the gazebo to the pond was muck.  It was dug out, a layer of clay placed, then a liner and crushed stone above.  The gazebo which was rotting was removed. It was planned to install solar shales, but one board member wanted wood.  So nothing happened. 

    

    Commercial quality solar sails
    Photo from Newsletter July-August 2017

    
    
12. In 2014 an engineering study of the streets provided sufficient information to determine a course for action in dealing with the failing streets.  The street project would occur 2014-2022 if the boards agreed. Lakecliffe, Salisbury were replaced 2014-2018 with patching of Dover, Harrow, etc.  Significant work remained for 2019-2022. In the spring of 2015, an updated survey of the streams was conducted with management. The completion of Lakecliffe and Salisbury streets were anticipated and in 2015 a schedule was created for completing or patching the remaining streets.
13. I videotaped the stream survey and presented it to the board. We discussed the scope of the work and I proceeded with detailed planning.  That videotape is incorporated in the YouTube video and in included in its entirety.
14. During the period 2013-2018 significant repairs were made to the water mains on the property.  Several fire hydrants were replaced, several B-valve shutoffs were replaced, and about 500 lineal feet of water mains were replaced.  This too had to be balanced with all of the other maintenance projects.
15. Not all board members were supportive of these efforts.  Special thanks to the President 2012-2015, and the Treasurer and Maintenance Director who departed the board in the fall of 2018.  They were the prime motive force to accomplish many of the projects at BLMH.
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    One year after I had this retaining wall put in,
    the board voted to hire a landscaper to replace it with large slabs at great cost!

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

(c) N. Retzke 2021

Creativity in Running a Homeowner's Association

One of the great impediments for boards is a failure to realize and identify "change." Board members may actually take the position "This is how we have always done it" or "If it isn't broken don't fix it."

Unfortunately, putting our heads in the sand doesn't prepare us for the future, nor does it empower us in addressing change when is occurs. Which is why board may also say "How could this happen?" when things occur. Of course, there will always be unforeseen events. However, a lack of planning and preparation is the greater problem.

One easy task is to take a budget from 10 years ago and compare it to a current one. One can quickly identify some significant events. However, with the short term service of many boards, turnover and even a sometimes lack of willingness on the part of boards to do the work, some HOAs may have great difficulty completing even this simple exercise. Nevertheless, there is real value in doing so.

Several months ago I told the board at our HOA that it wasn't so many years ago that this association spent about $6,000 annually on water for the grounds, streams, etc. Recent budgets have reached nearly $60,000 annually. Identifying these types of changes provides the opportunity to apply creative solutions. However, boards may be content to deal with $25 monthly charges and other minutiae. Furthermore, if boards members take the position "Our fees are not high enough" for proper maintenance, there may be personal agendas present which interfere with identifying budget areas which could benefit from creative solutions.

Questions weren't raised by all of the board members when I pointed out the change in water bills in recent years. Doesn't that seem odd?  Furthermore, in 2010 there was an interest on the part of some in our HOA to investigate fraud. That was the position of some owners and even a few board members. When I question this, it was stated that this was the only reasonable explanation for rising costs in the HOA.  That too smacked of personal agendas at work.

Are there other areas in your HOA where improved scrutiny could result in significant savings? Firstly, one has to give up their preconceived notions and positions. For a board this should be easy because we are "fiduciaries." But in practice it isn't. Secondly, it requires some diligence in the form of research, getting off our duffs and really investigating the property, and then having unbiased discussion with management and maintenance. After all, they are the real experts. So we have to ask open ended questions of them without wasting their time.

Here are several areas discussed in recent years, or currently under discussion, as examples.

1. The utility rooms in our garages are electrically heated in winter. Would improved insulation be beneficial?
2. To determine the condition of the heaters in the utility rooms, maintenance personnel frequently inspect by opening the doors. This releases all of the heat in the rooms. Would temperature monitoring be a better way?
3. Recent changes in water metering charges has apparently resulted in annual meter costs to the HOA of more than $20,000. Perhaps there should be changes made?
4. Recent changes in water billing rates has resulted in water usage bills to the HOA in excess of $40,000 per year. Should a board consider methods to reduce water usage?

Of course, any changes will likely cost money and that means that "cost benefit analysis" is a necessity. Furthermore, this will add to the tasks of any board. Our boards for years preferred to avoid making conditional studies and even avoided the preparation of an independent reserve study for more than 30 years. Long term planning was avoided to "keep fees as low as possible" and owners colluded with this. Limited owner involvement or desire, and at time board unwillingness to be forthright and transparent will restrict opportunities. Add the "Don't fix it if it isn't broken" mentality which is really an attempt to avoid preventative maintenance, and one can see that in HOAs there may be no desire to be creative. It is truly easier to "slap paint on the pig" than to do almost anything else. And boards do take the easiest route, or the one which favors their personal agenda.

Boards do know what is required. "Follow the money" was a favorite expression of our longest serving board president. But that isn't as easy as it seems, and too often it is used as a baseball bat rather than a research tool. But then again, we all want to hit something, and some want to be "a home run hero."  In fact, there are no quick solutions to really difficult problems and a large, aging HOA is a difficult problem.  Nevertheless, the simplest solution may be the best one. To find a solution to a problem one must first identify that a problem does exist.

Currently, one of the major discussions is how to save ducklings on the property. That has taken precedent over the difficult discussions in several HOA meetings. We each have our priorities. Mine is doing what must be done to avoid those 5%, 7% and higher annual fee increases while dealing with serious problems and maintaining the property. However, I am of the opinion that now that fees increases have moderated for several years that some owners think that "this is the new normal." It isn't. It would be far, far easier for boards to charge 3% to 5% annual increases to owners, and some would prefer to do that. However it would not take long for our fees to rise to $500 monthly. One must ask how "affordable" our units would be should that occur. But we do avoid the difficult discussions. 

Owners and Boards - Part 5 - A Better Way

"Water Fowl at BLMH - Are We Sitting Ducks?" That's the caption for the photo on the masthead. 

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This post looks at the finances and strategy behind a possible "bright future" for this HOA. This post suggests a better way to achieve our financial future while avoiding the "fee whiplash" which has been often imposed upon our HOA owners. I am of the opinion this "better way" will also achieve the "lowest possible fees" while avoiding the much higher future fees accomplished by past plans and it will maintain the property. When I say that I am looking specifically at 2014 fees compared to 2004 fees.

The work I have done in my four years on a board in this HOA has been simply what is necessary to create such a future. It has been for the specific purpose of setting in place a foundation; I had a plan in 2010. That plan is a long term plan, The real work, creating that future so that it can be realized, has not yet begun. What I have accomplished is merely the clearing of a space. The stakes in the coming HOA election are very high for the owners at BLMH. Much, much higher than most realize.

These charts from Part 4 indicate a possible fee approach. In fact, I could improve upon this, and I could do it without penalizing future owners or current owners. But it won't happen unless I get help for this very specific purpose. So what's more important? I do know what is easier. I can assure the reader that long term planning is far, far more difficult than being a reaction and chasing the PODs on the property. However, the rewards of good long term planning are real and will show up in the pocket book of every owner. That can be accomplished with improved infrastructure while avoiding such disruptions as occurred on Lakecliffe, or with 1000% fee increases to support our reserves. So what are the real duties and responsibilities of boards? Is it chasing stray dogs and picking up trash? Or is it managing this HOA?

I suggest that we really do need a change here at BLMH. I call it "A Better Way." Which approach will owners prefer? Will it be "A Better Way" or the "Old Way" and a continuation of "Fee Chaos?" With an election coming this month, we'll soon know.

The Alternative
"Water Fowl at BLMH - Are We Sitting Ducks?" That's the caption for the photo on the masthead. 

I suggest that if this HOA decides to avoid "A Better Way" then the owners and board have decided to be "sitting ducks." 

The current plan of this HOA cannot and will not accomplish everything set forth in my "Better Way" plan. Why is this? There has been no board consensus for this and therefor no directive to accomplish it. There has been insufficient allocation of resources and planning to accomplish it. Recent boards have not seen the possibility and I've been too damn busy with current projects, dealing with the clean up of the breakdowns created by other boards while being jerked around by some of the owners. The other reason is simply because most owners have been uninterested. Not interested that is, until there is a breakdown.

The fact is, if owners demanded that boards do this with as much fervor as they showed when they thought their dogs would be fined via a special fees, why, this would already be done.

A few years ago (2008) my spouse attended a HOA meeting wherein the board spent an inordinate amount of time deciding how best to change a light bulb. My spouse decided this HOA was nuts and prefers not to attend HOA meetings. In the past year, this HOA board has spent an inordinate amount of time attempting to decide how to deal with "doggy bags" on the property. Some things may never change.

Current and recent boards have been very busy dealing with dog poop, light bulbs and simply keeping this behemoth running while avoiding larger disasters and keeping certain disruptive owners at bay. I extend the definition of "disruptive" owners to include foreclosures, delinquencies and any owner who repeatedly breaks the rules.

Some are of the opinion that "a better way" isn't necessary. Their position is "What we did worked before." No it didn't, and it doesn't. How anyone can say that with our current fee levels is beyond my comprehension. I assert there was a facade of work-ability and our current fees are the proof.

However, some of our owners and that includes various members of boards are in complete denial about this. Some are so far in denial that they cannot and will not accept that there really is another way. That poses a real problem. If we are sufficiently incapable of admitting what didn't work and our roles in this, then I think we are incapable of making good decisions. This is the primary reason I have considered selling my unit. The other reason?  I have concluded I might be wasting my time here.  There really is a "Better Way" but if this HOA is disinterested and prefers the "old ways" and fee chaos, then I will "move on" if not literally, then figuratively.

Reserves - The Achilles Heel of BLMH
Our HOA is a PUD. We have streets, street lighting, water mains and sewers to maintain. In the 1990s a "kick the can down the road" fee plan gave owners until about 2004 much lower fees. This was accomplished by minimizing the fee contribution to reserves, which were called a "replacement fund." While possibly legal, as fiduciaries boards should not operate that way. Since 1990 the Illinois Condominium Property Act, Section 9(c)(2) provides that an association shall, under certain circumstances, allocate a portion of the assessments to capital reserves. There have been numerous books published for decades on the subject and even more articles. For example, “Reserve Study Guidelines for Community Associations, Planned Developments and Condominiums”, Richard Wyndhamsmith, Windhamhouse, Inc., 1989.

Boards, as fiduciaries must certainly realize the future will become the present. One of the primary financial reasons for reserve planning is to avoid special assessments and the necessity of bank loans. A secondary reason is to plan for capital replacements. In a PUD with streets and water mains this is even more important. It is vital to the financial health of the HOA and the well-being of owners.

As an afterthought, boards may consider the disruptive effect of large upward changes in fees caused by the collection of reserves.  Conceptually, various boards have understood that this HOA will be here "forever." In practice, boards have a great deal of difficulty translating that into the planning and decision making process required to support a HOA. 

I do really understand the position of many owners. Why should any owner put even a single nickle into something they may sell in one, five or ten years? The operative word is "may" and that is where most owners fail. Understanding the difference between "will" and "may" is all the difference between financial success and failure.  Wishful thinking is not indicative of reality. This is true for owners, boards and entire HOAs. Boards are held to a much, much higher standards than owners. Not all boards are capable of the level of achievement required. That's why each and every owner at BLMH is today paying about $600 more in annual fees than should have been required. Kudos to the past boards. You saved yourselves a lot of money. I'm sure you were popular at the time. Those owners who sold their units prior to 2007 are most grateful. Of course, they are not here today to pay the current fees. Did you do your fiduciary duty?

A Different Path Leading to A Better Way
Part 4 of this post looked at some of the underlying realities. That post and other recent posts looked at the facts behind both the recent financial successes, but also how this HOA experienced failures, the extreme difficulties required to alter that, and our consequentially higher fees today.

I look at the past for several reasons. It is in part to counter the argument "What we did in the past worked." Most importantly, it is to raise the awareness of HOA owners about the stark realities caused by the decisions made by owners and their elected boards. These decisions do make a difference, and there are both good decisions and poor decisions to be made. Making poor long term decisions will have serious financial consequences.  At BLMH we got to this place and time because of past financial and infrastructure maintenance decisions.

Currently, this HOA has taken the initial, tentative steps for a different path. The plan is not yet complete nor is it understood by most owners or the entire board. If you think it is "cast in concrete" then you are mistaken. Just as the owners are learning by this experience, so too are the boards. To get to this particular place on the path has been expensive and much of that expense has been born by recent owners from 2000 to the present. But we do now have true reserve savings. We do now have some financial "breathing room." I caution that current stability may be deceiving and temporary. We need to do more to achieve stability. I do not suggest higher fees. I suggest that boards do more work (planning and preparation) with the guidance of management and the support of the owners.  We all want to succeed. We all want improvement. It's stupid to spend one's time in a cage, like a gerbil, running in circles and doing the same stuff over and over and over. Yet, the gerbil may be totally oblivious to any other mode of existence. Our boards have frequently operated like the gerbil in the cage. Confined to a never ending treadmill with no apparent HOA future. That's the consequence of a lack of vision and it is a fact that boards had no vision.

Breaking the Treadmill
I think more planning and far, far less "knee jerk" reacting to events is not only desirable but achievable. It is the path to breaking the treadmill. Staging an annual budget meeting is not planning.

Planning however, goes hand in hand with preparation. Preparation requires knowledge. That is precisely why I have studied several decades of finances. It is also why I have studied and observed every driveway, every roof, darn near every foot of street, the streams, walks and so on. Not once, but over and over and over. Perhaps this HOA has become my private treadmill?

With this information in hand, I've provided hundreds of pages of reports to the board, constructed hundreds of spreadsheets, made hundreds of projections, life cycle studies, cost studies and so on. In 2010 I somewhat reluctantly made my own reserve study of the HOA. It was enlightening. I did publish a few of the charts that I constructed and I also provided many more to the owners and the board.

What Have I Learned Since January 2010? 
Our annual budgeting process should be improved. We currently have created a real opportunity. This window of opportunity is closing. A decision must be made to move forward or to stagnate and move backwards. For example, would you like to know what your fees will be three years from now?  Would you like to know what infrastructure work will be done in 2015, 2016 and 2017? I do know the answer to these questions. How is it possible I know this? I suggest owners ask why our past boards didn't know the answers. I also suggest that owners ask why have they not been provided with a formal plan about this? There are a variety of reasons. Past boards were unwilling to make a commitment.  The current board is not in agreement. Boards generally remain forever stuck in whatever the current year is. That "tunnel vision" includes this year only.

Because of the current process the owners and boards cannot see more than 12 months forward, and that is only in October when the annual budget session is held. After that each year is pretty much a planning free fall. We can improve this process, but we don't have to. No one can force us to do better. Some of us many not know how. These are the primary reasons we continue on our same, old, weary financial path.

Management will support the board in any worthwhile endeavor. Is such planning worthwhile? Here's are several examples. We now recognize "bad debt" in our finances. We now discuss a spreadsheet at each HOA meeting which indicates the current state of delinquencies and graphically indicates all important delinquencies since 2008. By "Important" I mean delinquencies above a specific numerical value.  An owner fine or a $.06 delinquency is not of any serious financial consequence to this HOA.  We have added a "contingency" item to the annual budget. That supports boards in addressing critical infrastructure failures, notably our water mains. I argued for this for several years. These things did not simply occur. There has been resistance. Management can prepare any chart or table the board wants, but cannot do it for free. So some of this is prepared by me. Some of this has been an uphill battle as are most things here at BLMH. The old, largely unsuccessful ways are really ingrained here. That's what happens in a nearly 40 year old apparently successful, but in reality what has been a financial disaster of a HOA. Am I being harsh? Not at all. We are each paying more than $600 annually in higher fees because of past decisions. I think I am being kind. I've had it with political buzzwords like "fees as low as possible" while boards act to the contrary and take actions which will guarantee higher future fees. Each and every owner should be wary of politics and simplistic phrases. If we haven't learned this by now, then I must assume we never will. A failure to learn from the past and put what we have learned into consistent action is the real rain on this parade.

Is Making Such Improvements Worthwhile? 
Is the security of knowing our HOA has a plan to address such a reoccurring problem a good thing? Is avoiding special assessments while addressing our O&M and infrastructure repairs a good thing? Or would our owners prefer to roll the dice each year? Not me. Every 13 year old Boy Scout understands the meaning of preparation. If they don't they will be taught and will learn. After all, "Be Prepared" is the Boy Scout motto. At BLMH we have those who can't or won't. It is what it is and all owners reap the benefits and the costs, including the higher fees. Know it or not, our owners are gerbils in a cage, controlled by our boards. Some on various boards have said "It worked before, so why should we now change?

If We Fail, Then What?
If we fail to shift then our future boards will have the benefit of the current savings and a very rough plan for replacement of much of the critical infrastructure of this HOA.  Driveways, roofs and drainage improvements should be completed in 2016-2017. After that? If we fail to improve our planning process then future boards will continue to be stressed and there will continue to be unnecessary disruptions for residents and more uncertainty about finances. We really can do better. What would you prefer?

Currently, reserves are accumulating for the completion of these projects and also for entrances, garages and the next phase of the street project. The reserve plan includes proper provisions for a more distant future including certain aspects of the next cycles. The first roof was replaced in 2002 and if it survives 20 years it will be replaced in 2022. Where will that money come from? If the reserve study is followed then we are gradually saving about 1/18 of the price of that roof each year. If future boards continue on that plan, then the money will be there when needed for this purpose. If they don't the it won't be there. This HOA will then face special assessments of monthly higher fees.

The plan is imprecise and the current board has made a commitment to the financial portion of the plan. There has been no commitment to adhere to the infrastructure goal of the current reserve study and plan. What the board has done is collect the money necessary for the plan and that is a good thing which is why we today have our fees.

The street project began in 2014, 7 years earlier than anticipated. Future boards will be faced with some difficult decisions. In 2015 it will be vital to look closely at the streets and decide how best to properly extend the life of the existing streets while avoiding disruption to owners. A plan must also be decided on how best to undertake the replacement and/or resurfacing of the remaining streets.

How to do this while maintaining financial stability? It will not be easy and there will be opportunities for failure. Failure will mean deferring projects such as the improvements to entrances. Failure will require higher fees than would otherwise be necessary. That is the real tragedy of the 2014 replacement of Lakecliffe. This post presents a better approach.

A Financial Foundation
The current plan establishes a financial foundation, a significant toehold. It is nascent and incomplete. This HOA has commissioned an engineering evaluation of the streets. It has also commissioned a reserve study update. These two things when combined will complete the foundation and will provide a powerful tool for the board of 2015.  This tool will be a significant aid to determine how to approach the infrastructure projects from 2015 to 2025. I hope the board and owners will properly and fully use it and incorporate it into a more thorough planning process. Many past boards have attempted to delay financial unpleasantness and made poor choices. Doing so was a mistake then; it would be a mistake now and into the foreseeable future.

I hope our HOA does not squander what it has been given or has taken from recent owners via those substantial fee increases. I have confidence in management and our other professionals. I have less confidence in our owners. Why? There will always be the desire to cut fees now and deal with the financial problems later. Some current owners will be inclined to say "I won't be here in five years and so why should I fund any of this?" Boards are comprised of owners. Enough said.

The Critical Five Years - A Radical Departure in Budget Planning
The condition of our HOA infrastructure and our immediate financial well being will be largely determined by how this HOA manages infrastructure projects and finances for the next 5 years. It will be determined by the quality of those plans. It is unfortunate, but the planning process continues to emphasize immediate, annual fees. This includes immediate Operations & Maintenance needs as well as identified and acceptable reserve requirements. It currently emphasizes fee collection while pushing longer term problems away for a future board and future owners to deal with.

The approach that has been taken is an extension of the tried and true BLMH budget process. Each year the board agonizes over the numbers for the coming year and then adds in the reserve requirement per the tables, or the dart board. That determines the fees of each owner for the coming year.

However, in 2012-2013 a subtle but radical change occurred. Radical for this HOA, that is.  I proposed the board consider the benefit of adjusting infrastructure replacement dates to smooth reserve collections. This was not "pushing things back as far as possible" for someone else to deal with and pay for.  It is the taking of a flexible approach for the commencement of certain infrastructure improvements, as dictated by infrastructure condition, reserves and current fees. I did include changes to the infrastructure costs, which I have determined from the actual costs of roofs, entrance walks and drainage improvements. Doing these things provided the board with a degree of financial control never before experienced in this HOA.

This shift in our budgeting process indicated our fees could be lower in 2014 than would otherwise be possible. It was a subtle change and the board agreed. If this had not been done your fees in 2014 would have been higher than they were.

Why do we really need a better way? In 2010-2014 we were caught in a vice created two decades earlier and promoted for 20 years. We are today replacing roofs after the end of their "useful life." This also what occurred for the north section of Lakecliffe Drive. Doing things that way affords no flexibility, puts management, the board and our budgets into a mode I describe as "no choice but to do it now at whatever cost." Owners of course bear the total brunt of those costs. Boards now struggle to get the job done while attempting to reduce the cost. We sometimes succeed. However, there is no flexibility.

My Proposal
I am proposing a more flexible and thorough, but very realistic approach to budget analysis. It does require a more thorough analysis than calculating the increase in contracts, electricity and so on and then deciding how much this HOA must collect. The approach I am advocating is one I have used. It is more difficult to achieve but it has real benefits.  Smoothing finances is something that is required. Doing so demands that boards have solid long term plans in five year increments. Such plans accomplish these things.

1. The plan creates a series of glide paths to stabilize and smooth finances.
2. The plan recognizes all O&M and infrastructure requirements. 
3. The plan prudently spends money to uphold owner value.
4. The plan prudently spends money so that the property is properly maintained in a fair and equitable manner for all owners. 
5. The plan minimizes property disruption and resident inconvenience.
6. The plan prudently spends money to avoid fee disruption. 
7. Determine best practices for the HOA. At what point should infrastructure replacement occur? When does the annual cost to repair exceed the cost to replace? What about the hidden cost of owner disruption? Boards will be inclined to repair indefinitely because maintenance costs are hidden among the thousands of work orders this HOA processes each year. However, the real costs do increase year, by year, by year. 
8. Establish project plans, set in place project management and minimize the disruption to the property manager(s). In this manner the HOA gets better quality. Better quality equates to lower long term costs and better results. 

These charts from Part 4 indicates a possible fee approach. In fact, I could improve upon this, and I could do it without penalizing future owners or current owners. But it won't happen unless I get help.

Would You Like a $10 Monthly Fee Reduction?

In my ongoing struggle to shift the conversation here at BLMH, I'm going to broach another subject.

Would you like to see a $10 monthly fee reduction? It is possible. However, it will require that our entire board change it's focus from Rule changes, garage and flea markets, coffees, expanded newsletters and so on, to something called "finances".

Some on the board, including our treasurer are already there. Others seem to be clueless.

What would it take to reverse the trend in escalating and increasing fees? What would it take to REDUCE fees?  Would that help to increase unit sales? So why aren't we looking at that?  It will take a lot more than talk; it will take action. We don't seem up to the task of real change.

Our new board members, and the one existing board member made a 'shoot from the hip' decision to hold fees constant this year. Unfortunately, this was not accompanied by an equal decision to hold the line on the budget. Simply publishing a budget which is a statement that "the budget for 2010 will be essentially identical to that of 2009" won't get the job done. As I recall, 2010's budget is based upon the published budget of 2009, not the ACTUAL expenditures. In other words, it wasn't based on the amounts actually spent in 2009!

How to reduce our fees by $10 a month? It's easy. Just cut expenditures by $40,000 this year. But to do that, the board will have to begin a serious discussion which goes beyond lip service about "scrutinizing" every bill - that was a campaign slogan in 2008. It will have to begin serious discussion about reducing expenditures. And ACTION. However, currently, those on the board who ran on "scrutinizing" have now shifted to "it's only a little bit of money." New items are proposed and discussed, but discussion of costs and impact on budget are avoided by saying things like "wouldn't this be good" and "it's only a little bit of money", etc. Supporters are readily available to make supporting statements to the board and to any unit owners who attend meetings. No one says "this will cost more" except our treasurer. Last year's treasurer objected to some of these conversations for the same reason, and stated so at association meetings.

Yes, talk is really cheap, especially when it is someone else's money.

Do we want to get serious about unit sales? Do we want to do something for all UNIT OWNERS here at BLMH?   Good luck, it will be necessary to get the ENTIRE board aligned and on track!

Instead, we now have people telling me that "wouldn't it be good if we had an on-site custodian?" etc. Seems somebody is committed to spending money here. The management tells me we are too small an association for a full time custodian. A unit owner who seems well connected, tells me that we, the association, could purchase a unit or pay the monthly fees of a custodian. Great. Let's reduce the income of the association by about $4,000 each year (that's the custodian's fees we won't collect) AND increase expenditures. Of course, we would have to pay "insurance" for the custodian, his Social Security, taxes, tools, etc. Or, should we just subsidize the business of some "out of work" contractor?  Yes, there is a lot of money here at BLMH, and I'm sure there are a lot of under- or un- employed handymen and contractors who would love to land the contact here at BLMH. Perhaps that was the idea behind all of the talk by new board members in 2008 about how we didn't need a professional maintenance company. We could do it with a few "handymen".

Where there is smoke, there is fire, it is said. Seems someone is planning the next "change" here at BLMH.

Comments, Corrections, Omissions, References
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1. We have large reserves. It seems that some money will be shifted from that to cover operating expenses. How can that be? The board added "coffee and donuts with the board" this year. We still have a glossy and larger newsletter. We have a new website. There was no vote to increase budgeting for these items, or above 2009 levels. In fact, our budget this year was voted to be EXACTLY as it was to be in 2009 as published in Fall 2008. So how can we spend more and yet not collect more? So where will the money come from?  The only possible method is taking it from reserves. I'm still waiting for the details of 2009's actual expenditures, in which some money was spent on landscaping, etc. as part of driveway and roofing (relocated downspouts), etc. I still have no idea exactly how much was spent in 2009. Some work performed in 2009 was possibly billed and paid for in 2010.

2. Our treasurer is an appointee who is experienced from previous boards. One board member ran in 2008 and was elected that year. All others are new for 2010 and have no prior HOA board experience. We have a new appointee who was voted and passed in April's meeting. The open discussion by the board stated he was an employed contractor. That statement also said he would be the Landscaping Director. On that basis the board voted unanimously to appoint. The new Landscaping Director made no statement nor addressed the unit owners who were present. So we can only trust that the statements made by those on the board who promoted him, which includes our CD, were factual in this matter.

3. I'm not proposing an "across the board" or declaration to reduce our fees by $10 per month. What I am proposing is:

• Evaluate all expenditures with the purpose of holding all current spending at or below ACTUAL spending in 2008.
• Eliminate board member "pet projects". Nothing is sacred, except critical services, roofing and driveway projects. If this association is not maintained then property values will decrease. 
• Do absolutely nothing to spend additional moneys.
• Create a true contingency fund.
• If this board can demonstrate the will to accomplish the above, then begin a serious undertaking to reduce expenditures and fees.