Tight security and a Lawyer

The board decided to hide behind a security guard and an attorney during the most recent association meeting.

The board made no attempt to answer any questions about the budget surplus, apparently pretending it doesn't exist.

I'll make this observation. This is the first BLMH HOA meeting where the board arranged for an attorney and a security guard to hide behind.  It makes me wonder about the mental state of one or more board members. Second, the board spent a lot of money needlessly rather than address owners who disagreed with the board position.

I did receive the "official" 2019 budget. It indicates an "approximate 1.88%" fee increase. From my experience at BLMH most owners don't pay attention to the budgets. They think of the budgets in terms of "I can (or can't) afford the proposed fee increase."

I think management is probably laughing about all of this. To quote the current president "Stupid is as stupid does."

Proposal by the board for a fee increase in view of a $128,012 budget surplus

I got my proposed HOA budget for 2019. The new board can't even do the arithmetic. Here's a small portion of my comments to this so called "Board of Fiduciaries".

I have reviewed the “2019 Proposed Budget”. There are serious issues. I want to be clear about one thing. The board is solely responsible for the budget. Management provides bookkeeping service and guidance, but the decision is the boards.  The facts indicate that a fee increase is unnecessary, and the proposed increase is not 1.88% per the documents, it is actually 1.66%.

There are certain principles in these matters that guide boards:

1. Treat all owners equally and fairly. Treat them as the shareholders they are. Board members are representatives of the owners. Board members are not “higher” in stature than are the owners. They are not the exclusive member of a club of elites.
2. Boards must operate as fiduciaries. Fiduciaries represent the owners and are held to a much higher standard than other owners or management. “In the performance of their duties, the officers and members of the board, whether appointed by the developer or elected by the unit owners, shall exercise the care required of a fiduciary of the unit owners.” - Illinois Condominium Act
3. Avoid running one’s personal agenda when on the board.  To do so is a breach of fiduciary duties.
4. Board members are required to use business common sense.
5. Board members are required to operate with full awareness of the facts and merits which guide their decisions.
6. Board members must vote independently using only the facts and the guiding principles listed here. This is not about politics. Politicians are not required to be fiduciaries.  Board member are so required.
7. When using the guidance of experts, including the association’s management company, the board members must remember that these experts are not fiduciaries. They will not be held accountable as such. They provide professional guidance, but are also hired contractors. Contractors operate at the whim, beck and call of the board and can be replaced. And our management does know that. In fact, attempts have been made by boards at BLMH to replace “non-compliant” managers. For any board member to threaten a manager for failing to “go along” with the agenda of that board member is a breach of fiduciary duties.  Fiduciaries must do independent, confirming research in the fulfillment of their duties.
8. The president serves as spokesperson for the board of directors in most matters relating to general association business. As an officer of the association, the president has an affirmative duty to carry out the responsibilities of the office in the best interests of the association and as a fiduciary for the owners. As such, the president has special responsibilities to keep the entire board informed and to acknowledge conflicts of interest during the formulation of budgets, rules and so on. A failure to do so is a failure in the duties of president, which is even more significant than the duties of the remainder of the board.

The numbers indicate this board voted for an unnecessary fee increase. Each and every board member has failed in their duty to the owners of this association. Because I understand this was a “unanimous” vote the entire board has acted irresponsibly. Here is how:

1. A failure to make a decision entirely using only the facts. Those facts include an extraordinarily large projected surplus with no indication in the proposed budget that anything else will occur in 2019.
2. The board ignored all of the recent surpluses. The facts indicate that budget surplus occurred each and every year from 2012 to the present. Did the president inform the board of this? Why not? Board members promoting fee increases are duty bound to inform all other members of the board of such things during financial discussions about setting the budget.
3. The board ignored the fact that the reserves requirements are being met.
4. The board ignored the fact that additional $hundereds of thousands of dollars have been contributed to reserves since 2012. This is optional; boards in the past have transferred all budget surpluses to reserves using this means. Under the circumstances a board comprised of fiduciaries should also discuss the possibility that any reserve funds exceeding “reasonable reserve requirements” be returned to owners. If this is not discussed that too is a breach of duty. Apparently the board failed to vote independently upon the merits of the proposed budget. Why was that? Did it play “follow the leader”? Did board members vote to support a buddy on the board? Or did they simply take the easy path, rather than do their duty? Each board member represents the owners only. Voting to support the agenda of a “friend” or bully on the board is a breach of one’s fiduciary duties.
5. The board failed to take into account the current situation for all owners in the Association. For example, did the board review and discuss the any recent evictions, foreclosures and seriously delinquent owners when making this decision? “ All budgets ....shall provide for reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements. To determine the amount of reserves appropriate for an association, 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…” - Illinois Condominium Act (complete text of this section of the Act is contained later in this letter.)  I can state the when I, as president,  introduced this as a discussion topic during a recent budget meeting that one board member who insists upon annual fee increases attempted to shut down this conversation by stating that “We are not supposed to cater to the lowest common denominator.”  Bailey, Scudder and Seery were present for that pronouncement.   Boards are supposed to represent all owners!
6. The board is not mandated to make reserves “as high as possible”. Per the Illinois Condominium Act, the board must provide for “reasonable” reserves.
7. The board failed to take into account the willingness of the City of Wheaton to assume responsibility for the Associations Water Mains. That willingness represents $millions in savings for owners; more money than the recent roofing project, which took more than $million in owner fees. Why was this  ignored? Because one board member says “It will never happen?”  Really? Neither the board or management can predict the outcome of this future event. But boards can destroy it by failing to do everything in its power to make it a reality. Such a failure under those circumstances would be sabotage of the owners.  The board is obligated as fiduciaries to do everything in its power to make this transfer occur.  What has it done to move this forward? My guess: “Nothing”. Yet, the board apparently prefers to pretend to ignore this significant financial event when constructing a budget. That’s disgusting, particularly for the sole purpose of orchestrating a fee increase.
8. The board is not to base fees upon their personal financial ability, or inability to meet the fees required to live in our association.  Nor is it to raise fees because of the financial ability or willingness of friends or neighbors in the association, because they “can afford it”. Your “friends” and “neighbors” have no fiduciary responsibilities. Only the board does.
9. Board members are to vote independently. Following the lead of anyone on the board is a failure of fiduciary duties.  It is lazy and irresponsible to vote a certain way on a board comprised of fiduciaries because someone told a board member to do so. For example, board member question: “Is this fee increase necessary?” Response of the president: Absolutely necessary.” The board member who asked the question thereupon voted for a fee increase.
10. To use one’s position on the board to promote one’s agenda, and in this case, to promote an unnecessary fee increase for no other reason than because “I can do so because I am a board member” is callous and self-serving. At its worst, it is malicious.
11. Voting for an unnecessary fee increase simply because “it is a small one” or because of a belief that “We always must have a fee increase” is a failure of duty. There is no legal or financial reason for an annual fee increase. Fees are to be based upon the numbers and the facts available. This is another manifestation of a personal agenda on the board.  Personal beliefs and agendas are not facts.

It is likely that boards since 2012 have directed an additional $440,000 into reserves than was required by the budgets. All of it came from budget surpluses. Apparently the board wants more.
One definition of “Greed” is a fear of not having enough. Apparently this board is being greedy. 

Some owners have asked me why I chose not to run once again for the board of this HOA.

1. I decided to create an opening for others to step up to the plate. “Nature abhors a vacuum.”
2. I decided to see if my eight years of guidance, mentoring and positive results had made any difference with the entrenched on the board.
3. I wanted to observe how a board with three members (now four) with 50+ years of "experience" would operate, after I departed. LOL. They all reverted to being "the lowest common denominator" which is the term one board member used to rebut the discussion I initiated about the financial impact on our owners when the board constructs the budget. I was quoting the following at the time: " All budgets ....shall provide for reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements. To determine the amount of reserves appropriate for an association, 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…” - Illinois Condominium Act. 

Yes, we have had board members who hold owners in complete disdain and disregard. All owners that is, who aren't personal friends.

I had concluded after eight years on the board that we had board members who were grossly incompetent or unsuited to be fiduciaries with such responsibilities.  They were not operating for the benefit of the owners, but for personal agendas, and the agendas of their leader on the board, or friends. However, the only way to dislodge them and prove my case would be to leave the board.  They would soon show their hand. Owners could then choose.

The answer to question #2 is obvious: Nope, none at all.

That’s not good for the owners of this association.  I guess the primary duty of owners is to pay the bills for the decisions of the board.  We have had some really incompetent boards. Will 2019 be better than this? Or just another bad board?   

In my letter to the board I said "I look forward to a candid response from the board. Not from management. These decisions are being made by board members and they need to stand on their own two legs, rather than hiding behind management and lawyers. “The incompetent gleefully spend the money of others to defend their poor decisions. “ – Norman Retzke""

I suggested to the board that they take a stroll down memory lane:

Over a period of 11 years, from 1998 to 2009 the boards ramped up fees at an average annual rate of 6.85%. Owner fees nearly doubled over that period, reaching about $295 per month in 2009. But by the fall of 2008 the angry owners had enough. The president and most of that board was replaced.

In 1998 I understand the reserves totaled $86,321.  By October 2008, with Lakecliffe Drive failing, the board had allocated only $90,208 to Paving and that included all streets and 84 driveways.  The roofing project began in 2005 at 1775-1777 Gloucester, the address of the president at the time. That roof had previously been re-shingled in 2001, according to a 2006 letter my management. That was the only roof  completed prior to 2009.  By 2009 the reserve allocation for roofs was lacking about $1,241,000, which is the reason the board prior to 2009 stated during board meetings that it would replace roofs “at the last possible moment” and maybe one or two per year. There was no formal pronouncement, but I concluded this was because of funding issues.   There was no money allocated in the budget for water main failures, yet they had occurred frequently commencing 2001 or so.  There was a large and growing backlog of other projects, as the board attempted to accumulate sufficient funds for the roofing project. Yet, no formal information to owners. There had never been an independently conducted outside reserve study for the association. 

Yes, there were real money issues and a lot of angry owners.  Some people prefer to operate out of the past, because it is easier the living in the present.

But that was then and this is now. This association is very, very different today than it was in 2008.  Board members should operate in the present.

 It is my understanding that other Associations now visit ours to see what a really well run and maintained association looks like. Yes it is very different today. It really is time to live in the present, not in the past.

According to the Illinois Condominium Act:

(765 ILCS 605/9) (from Ch. 30, par. 309) 
    Sec. 9.

(2) All budgets adopted by a board of managers on or

after July 1, 1990 shall provide for reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements. To determine the amount of reserves appropriate for an association, the board of managers shall take into consideration the following: (i) the repair and replacement cost, and the estimated useful life, of the property which the association is obligated to maintain, including but not limited to structural and mechanical components, surfaces of the buildings and common elements, and energy systems and equipment; (ii) the current and anticipated return on investment of association funds; (iii) any independent professional reserve study which the association may obtain; (iv) the financial impact on unit owners, and the market value of the condominium units, of any assessment increase needed to fund reserves; and (v) the ability of the association to obtain financing or refinancing.

The above emphasis is mine. Here is the most  recent reserve projections for this association. This was presented to every owner and board member who attended the September 2018 annual meeting. It has also been presented to boards earlier, as part of normal board business discussions.

Present for this were current board members Bailey, Calvo, Scudder and Seery.  The data indicates reasonable reserve requirements have been met. I'll be posting more on this.

Projected Reserve Balances

It has come to my attention that one owners is now stumping for the board and promoting a fee increase. Based primarily upon that individual's ability to pay it, and the fact it is a "small" increase.

Merely an opinionated owners who wants to support her friend on the board. These opinions are bullshit.   Boards are fiduciaries and they operator for all owners, not simply for those who can afford small fee increases. Here's what one of the friends of the current president says about this. I need to point out that this fee increase is unnecessary and that this individual is "tony" and can afford the small increase:

"I believe modest increases (maybe not every year) are important to avoid getting into a similar deficit situation as we were years ago. If Briarcliffe Lakes was in great shape and there was no possibility of costly surprises in coming years, I would support your endeavor.  However for me, that rational is unrealistic. Being prepared and gently padding the reserves, regardless if budgets/projections warrant it or not, in my opinion are the right path to take.  "

A few years ago this same owner was also promoting a multi-million dollar mortgage for this association. Why? Probably because she could afford the payments. But not everyone can. My point is, owners act on their own behalf; they are not fiduciaries. Boards who pick and choose the comments of owners as a justification for their actions are irresponsible. They are not operating as fiduciaries.

Bad business decisions are bad decisions, and the association is to be operated like a business. Board members are not a group of elites in a private club.

The question owners should ask in these situations is this: "If the board is not operating on my behalf, then on whose behalf are they operating?"  If owners don't like the answer, then they should do something about it. 

LOL

A little entertainment - dealing with idiots

Here's a recent comment interchange; Of course, the person who commented as "Anonymous" could be in Moscow. However I prefer to take this comment as authentic and from someone living at BLMH,

 Anonymous said...

Norman, you remind me of the president elect, you like to hear yourself talk and think that this HOA would fail if you were not on the board. And give the 2008 board issue a rest.. My god man, hold a grudge much...

January 17, 2017 at 2:46 PM

"Anonymous January 17, 2016 at 2:46 PM" Here is my response:
You are an idiot. The 2008 board told owners "we have enough money" and authorized a reserve study. When the numbers came in they said "What are we going to do" and I know, because I was there. That's what idiots do. They promote a position and then when the shit hits the fan and they are to be held accountable, they walk. The board of 2008 didn't walk, they RAN to the exits. 

January 18, 2017 at 7:39 PM

"Anonymous January 17, 2016 at 2:46 PM" Continuing my response:
If you are willing to stand behind your convictions and opinions then you should stand behind them. We have an open position on the board. I say to you "Go for it." I also suggest you publish your identity, but you won't. Cowards and bullshit artists never do. Or you can send me a private email. But you won't because you are are a stupid low life. As I said, you are an idiot. Prove me wrong.

January 18, 2017 at 7:53 PM

Clueless

In any given month, our HOA monthly meeting is attended by two or three owners. In an HOA with 336 minus the 6 currently on the board, this poses a real problem.

In a nutshell, our owners are clueless. Becaused they don't attend monthly meetings they aren't aware of the board discussions and the issues. They aren't aware that the longest term board member who advocates "financial" responsibility and who began a $2 million + project with no means to complete it in less than 20 years has argued during budget meetings for two years for substantially higher fees. Or substantially more onerous rules. That's after a decade of a cash strapped HOA.

There are a lot of quaint expressions that I have heard. "Clueless", "Stupid is as stupid does", and so on. Some times these do sum up a situation, Frequently they are misused. "Slamming the barn door shut after the horses have left" is another expression. It seems to fit current circumstances. Yet another expression is "You can't teach old dogs new tricks." But I do keep trying. Some learn and some don't. Some will and some won't. [I've been training people in business and as a volunteer for nearly four decades; some of these groups achieved extraordinary things.]

A lot has been accomplished since 2008. Some subtle pressure was required, and some not so subtle pressure including a palace revolt. There is only so much I can do. Owners are oblivious to the doings in executive session. That's a great way for politicians to torpedo other board members if they are so inclined and owners are completely unawares. In a HOA if the owners are unawares they may continue to elect the politicians and any "feel good" group. Not that we all have a feel good plan. Here at BLMH one plan enacted for a long long time was to delay repairs as long as possible so funds funds could be accumulated for that behemoth roofing project. Owners noticed, too and that's why some owners came to HOA meetings a decade ago and complained "What do we get for our money?"  This type of strategy puts owners in a position where they must come to a HOA meeting and argue to get their improvement. "The squeaky wheel gets the grease." and those inclined to be power brokers love it. After all, what good is power if one can't exercise it? Me, I've got better things to do with my time and talents. As I've stated repeatedly I don't have to live here. I've set up home bases in MI and and AZ.  I can rent or sell my BLMH unit at any time. I'm not a member of that less than 5% group who promotes themselves and the "Neighbors Club." In other words, this HOA needs worker bees far more than we, the owners, need them.

In my brief tenure on the board I have upgraded the newsletter from a "feel good" sales brochure or fluff piece to something that informs owners of some of the issues facing the HOA. I refer to our owners as "shareholders" which is precisely what they are, but that is like pouring gasoline on a fire. For many reasons, as well as my willingness to go against the grain and get things done, it is my understanding that one board member has told management that I'm unfit to be on the board. Some people play games, throw others under the bus and treat everyone with disdain. It is not unusual for the entrenched to do whatever they feel is necessary to protect their legacy. But board members are supposed to be fiduciaries! As I've stated repeatedly, owners do get the boards they deserve. Previous boards, cash strapped because of their lack of planning deferred maintenance and put all of the "reserve" money into an ill planned and underfinanced roofing project.It took another board to raise the money to do the work they began, I spent 5 years putting together a program to not only get that project done, but also all of the other maintenance items ignored or deferred.

In fact it took a new board to get a reserve study and to raise fees to the level required to fund these projects. One board member who presided over this multi million project made the point of accosting me during a HOA meeting and stated "You spend all of the money," It can be difficult for us to take responsibility for our actions and it is better to blame others for our lack of accomplishment. I will stand on my record, as imperfect as it is. Boards are required to treat all owners equally. In taking up the mantle of responsibility I was required as a fiduciary to finish this project for the remaining 280 owners. After all, we are all equals, aren't we? We are each to be treated fairly and consistently and uniformly, board members included.

Using the approach advocated by the most experienced board members, the president got a new roof first, and the rest of the owners after an interval got new roofs in the increment of 2 to 3 roofs per year. Simple arithmetic indicated the rest of us would get new roofs in 14 to 21 years, at which time some roofs would be 30+ old. The fly in the ointment was the fact that these roofs were designed for 18-20 years maximum. However, the "fiduciary" boards were apparently more interested in taking care of number one. Recently, the concern was raised by a resident of the first building to be re-roofed that this roof might be "defective." This roof was installed without the attic insulation added in following roofs. Attempts by a resident to get insulation added were rebuffed by me. I stated that "There are a lot of people here who have old roofs and are waiting in line. After the completion of the project, we'll revisit that first roof." That was insufficient and "where there is a will there is a way." No matter that many other owners had 15-20 year old failing roofs.  There is a simple decision if one does not have attic insulation and some owners have dealt with this so called "deficiency" by installing attic insulation at their own expense.

The problem facing our HOA is simple. Very little owner involvement, board issues and inadequacies, personal agendas at play. and board members who have no where else to go. Here is one valid concern. Our HOA board is comprised of individuals who are entirely above the age of 65. Mental degeneration begins at the age of 50. We begin to lose cognitive ability at the age of 50. Certain illnesses accelerate that. So would you entrust your major financial investment to a bunch of amateurs above the age of 65?  I guess our HOA owners feel that's perfectly appropriate.

Stupid is as stupid does. My point? It's your money and you can flush it as you see fit, or entrust it to those you choose! That's exactly what owners do when they post their annual votes, or decide not to vote. In our HOA we have great difficultly getting half of the owners to cast their annual votes. Of course, some of the pap pieces provided by some candidates on their forms doesn't help; after all, the politicians would never get elected if they stated " I think owners are stupid and I want much higher fees." But that is the reality. To the owners all I can say is "Don't come to a HOA meeting and complain "How could this happen.""

One thing I've learned at BLMH is this. One would think that those of us who are trapped, who can't leave or lack the financial wherewithal because we have no where else to go would be the most capable, and the most interested in HOA success. That is absolutely not true. Those of us who have no where to go are most interested in maintaining power, running our agenda and maintaining the status quo. After all, if we left, what could we do? Watch "Wheel of Fortune" I guess.