Updated Surplus Numbers

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

Average fees prior to 2019

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

Better budgeting could have resulted in lower fees

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

Saturday, February 28, 2009

Update - The First 90 Days of the New Board

2 comments
Roofing Project, Ice Dams, Possible Assessment for Unit B Owners, Possible Elimination of Guest Parking

My preliminary observations were revised on March 2. On further review of my notes I have added items 11, 12, 13, 14 15, 16, 17, 18 and 19, and expanded some of the other items. I delayed this posting to allow the new board to operate for a period of time to see where they are going, and to coordinate my efforts here with those produced by the new "Communications Director". Here is what I have observed during the past two board meetings. On the more substantive front of actual “deliverables”, we have a revised newsletter, and a 5% assessment increase. I am not aware of any other tangible results by the new board members. However, the board is off to a good start and I appreciate the efforts of our volunteers.

Our new board members include our association President, a Landscaping Director, and a new position “Director of Communications”. We however, have the same overall number of board members. As a result, one of the existing board members now performs the duties of Treasurer and Architecture Director. This is a somewhat lopsided allocation of duties, considering the ongoing financial and architectural issues. Our “Architectural Director” is involved in the numerous projects here at BLMH and that includes the roofing project.

The three new board members ran on their strengths, according to the ROC documents distributed to unit owners prior to the election; these board members were placed on the slate by the ROC and were “chosen [for] our back-grounds in conflict resolution and team building”. So I am led to believe that budgeting, finances, building maintenance, architecture and engineering are not the strengths of the new board members. I assume that is why we now have one existing board member responsible for architecture, which is essentially all building, street and related projects, and this same individual is also the treasurer.

Here are my observations from my attendance to the January and February board meetings:

1. At the conclusion of the January board meeting, the unit owners who were present were given an opportunity to address the board. During that meeting there had been a long conversation between the board members about the newsletter, a website and other aspects of communications. I was given my 30 second opportunity to address the board and I chose the issue of communications. I asked “It may be well and good to expand the technology and methods of communications, but I ask, what is the boards’ purpose in this communications? What are our goals, aspirations, and commitments, and what is the vision driving this communications?” The board President nodded and that was the end. The other new board members looked at me blank faced. I do not know if this look signaled incomprehension or not. My question was not answered and it was not even addressed in the new, expanded newsletter. The “Architectural Director” has told me that he, in fact, does have a 5 year plan. I’m hoping an outline of this will make it to the newsletter. Otherwise there seems to be no plan and no vision. Or perhaps the new board is unwilling to state that commitment. I do appreciate the hard work the board members, who are all volunteers, are willing to do. I realize they have some significant issues to resolve, the scope and duration of the roofing project being one. I am aware that these tasks will be solved in a manner consistent with the commitments of the board members. But what are those commitments and what is the vision driving us forward??

2. The board is divided on the scope of the roofing project. One of the new board members, the “Landscaping Director” has displayed a dislike for our “engineer” and the company the association uses for most of the serious maintenance, and is anticipated to bid on the roofing project. Our “Landscaping Director” has made disparaging remarks about “what these people do”, which leads me to conclude that he has little tolerance or appreciation for the work that is performed.

3. The scope of the roofing project may include new entrance shelter for those buildings which currently do not have such an entrance covering. See the photos below for the gabled entranceway and the ungabled entranceway.

4. It has been proposed by the Architecture Committee head that with the re-roofing, a shed roof be installed on those buildings which have ungabled entrances. If I understand it correctly, this would be an extension of the existing roof and would be a “shed”, or sloped, roof. The “Landscaping Director” was openly critical of the “engineer” whom he incorrectly assumed was responsible for the design. He was corrected by the professional manager who pointed out that design was "borrowed” from a nearby association “Briarcliffe Knolls”.

5. Some of the board, including the Architecture Committee head would like to include insulation as part of the roofing project, and others, including the “Landscaping Director” does not. There is an opinion that this is the responsibility of the owners of the second floor units. The Architectural Committee head has stated that all unit owners would benefit from insulation as such insulation would prevent the rise of air and loss of heat through the roof in the winter. During several opportunities during the meetings, he has spoken of his perspective of taking advantage of opportunities when presented during projects. His stated goal is to keep long term costs down while improving BLMH. He expressed his concern about ongoing repairs that are absorbing cash and stated that as Treasurer, he has a new respect for the amount of money spent on these items. In the case of the insulation, he stated that this is an opportune moment as the roofs will be opened as part of the project. He stated that he is concerned that some roofs have inadequate ventilation. This is difficult to assess, as access is through ceiling hatches in the closets of the second floor units. For that reason, it has been extremely difficult to inspect the interior of the roofs on a regular basis. He also stated in January that he and the "engineer" have discussed powered roof ventilators and the difficulties of getting electricity to them. Note: I am in a second floor unit, and I have insulation in the attic above me. I also have a roof vent fan. The unit owner previous to me installed the insulation. I pay the electric bill for the roof fan. I will not benefit from the insulation project as I already have insulation, unless the association increases my attic insulation. I am of the opinion that most of the benefit of attic insulation would accrue to the owners of the second floor units. However, the use of a "radiant heat barrier" stapled to the bottom of the rafters could be justified. Such an barrier can directly influence roofing life, it is inexpensive, and has a side benefit for the occupants in the summer. Cost is somewhere between $0.15 and $0.30 per square foot. I am also of the opinion that the association would be of service to unit owners if insulation were offered, at cost, to unit owners as part of the project. During the January meeting, I suggested to the board that solar power ventilators be evaluated. However, the best method of providing ventilation is through ridge and soffit vents. These provide excellent ventilation, require no electricity or maintenance and prevent moisture and heat buildup, thereby extending the life of the roofing materials. Elevated temperatures will damage roofing plywood and boards, underlayment and shingles. Such temperatures are present when there is inadequate ventilation. Mold can also be a problem, and mold can migrate through the walls of flooded units and into the attic. We do not have continuous ridge vents.

6. There was a discussion on the perceived problem of “roof dams”. Our “Landscaping Director” argued that he had determined the quality of the attic insulation by observing the melting snow on various roofs. It was his opinion that, based on his casual observation of melting or not melting snow on the roof tops, that we have no insulation or damming problems. Note: I do think it is possible to make some generalized statements about the presence or source of "ice dams" on our buildings. See the diagram at the end of this post for an "ice dam" caused by a lack of ventilation. However, what is shown in the diagram was not described by the "Landscaping Director". We don't know the temperature in the roof cavity, which is a critical piece of information. During the board meetings there have been a number of complaints about icicles from the gutters in front of the garages. These are not indicative of ice dams caused by a lack of ventilation. Here is my point: the garages are uninsulated and so the temperature in the space between the garage ceiling and the roof above is probably about the same as that of the garage interior. Ice dams occur when there is a lack of ventilation. This results in heating of the airspace beneath the roof, the snow on the roof melts and runs down the roof. In the case of the space above the garages [which are unheated], this is simply not applicable. Icicles do form because our dark shingles absorb radiant energy, convert it to heat and the snow melts. Unfortunately, our metal gutters cause the melting snow to refreeze, and this builds up a layer of ice in the gutters. The melting snow flows over the ice and drips down, resulting in some spectacular icicle formations. I have found a simple solution; reach up with broom and dust the snow away from the roof above the gutter. Voila, most of the formation of icicles is prevented.

7. There is a difference of opinion on the board concerning how to go about this roofing project and the need for a project manager. The “Landscaping Director” in particular has made statements questioning the need for a project manager. The Architectural Director is in favor of a project manager. There is a discussion underway to break the project into different bids and contracts, separating the project into roof repair and carpentry, roofing, and insulation. In my 30 seconds to address the board, I cautioned them about the issues of managing and coordinating different contractors and assuming responsibility for different aspects of the project. On the part of the new board members, it is my opinion that there seems to be little comprehension or appreciation for the technical and contractual challenges they can face.

8. As part of the roofing project, it has been proposed that the gabled window on the second floor “B” unit be replaced. These are approximately 30 years old and the Architectural Director sees replacement as a pro-active and preemptive measure. As he expressed during the meeting, failure of the roof or sills will result in costly repairs. Doing this as part of the roofing project, while the roofs are exposed will be cost effective and will avoid those repairs. A failure, if it occurs can cause costly damage to the unit below. The Architectural Director stated several times that he is in a quandary about increasing the scope of the project to include the windows. However, he also stated that as Treasurer he is also aware of how money is spent each month and is sensitive to the need to avoid "throwing good money after bad" or of building in future problems. Note: I can appreciate the opinion that expecting these windows and sills to last until the next roofing project, which would require a leak free life of 45 or 50 years as asking too much from the hardware.

9. There is a discussion underway about who is to bear the responsibility for the cost of the new window. There are those on the board who apparently are of the opinion that this should be born by the owner of the B unit, and it was suggested that they pay for this over a finite period of time, perhaps one year. This is consistent with ownership of windows by unit owners. Note: I neither agree nor disagree on the cost issue. However, I noticed that the “Communications Director” who opposed the 5% monthly increase in appraisal this year was mute during this discussion. I am a bit confused. Why would a 5% appraisal increase warrant opposition but a proposed 33% monthly increase for a year result in silence? This seems to be inconsistent, at the least. There has been no discussion at the board meetings regarding different approaches to payment, and little discussion regarding the pros and cons of replacing the windows and putting the cost on the "B" unit owners.

10. During the January meeting, there was a 20 minute conversation about light bulb maintenance and replacement in the common areas. This centered about who and when (the frequency) of this. This entire discussion was the result of that phenomenon I call "unintended consequences". Our past boards have been under pressure to retard the increase in assessments. It was apparently decided to reduce the frequency of professional cleaning of the entrances, stairs and halls. This also reduced the frequency of inspection and of course, the frequency of light bulb replacement. In the period between inspections and cleanings, to have a burned out bulb replaced, one had to call the professional management company. Some unit owners had complained of burned out bulbs. So a new discussion was now underway to look at alternatives, including increasing the frequency of cleaning of the halls. During the January meeting a unit owner also expressed outrage at the state of their entrance and complained that it had required them to clean the windows. The discussion included expressing the possibility that the daily maintenance "crew" take bulb replacement on. The "Landscaping Director" expressed the opinion that they are on the site, this would require very little time, and besides "what do they do, anyway" or words to that effect. Note: I have replaced the bulb in the garage when it as burned out. Big deal! As a result of this long discussion, my spouse decided not to attend the February meeting, She felt that this item, though important, was far to high on the list of items to be discussed, and was somewhat disappointed in the meeting. She decided that she had more pressing business in February and could not justify attending that meeting. I am hopeful that she will attend meetings in the future. However, we do discuss these in detail and so I can understand why she would not attend.

11. During the meetings, there were discussions among the board members regarding the ice on driveways. One unit owner complained about ice at their entrance. Other unit owners complained of standing water in garages. The Architectural Director addressed this by stating at both meetings that he is in favor of changing the gutter discharge point so that melting water or rain is carried to the storm sewers by another means, rather than discharging in the center of the driveways and flowing via gravity on the surface of the driveways. He said that one of the reasons for the standing water is inadequate slope of some of the driveways. He stated that changing the discharge point of the gutter and directing the water underground would address the issues of water flowing backwards into the garages and of much of the ice formation on the driveways. He further stated that this should be accomplished as part of the overall roofing project, and the driveway re-asphalting. He also stated that the board was not in agreement about this and that the initial attempt at one building had proven that simply moving the water to a discharge along the side of the driveway was not a solution; in the case of that building, standing water was the result and this indicated a need to carry the water underground to the storm sewer, and address problems of slope in some of the driveways. The Landscaping Director countered that such changes don't make sense and there must be a better way.

Note: I see a potential problem in transporting the water underground to the storm sewers. In our town, the design criteria of the city code defines the "frost line depth" as 42 inches. This means that during the winter, it is anticipated that the earth may freeze to a depth of 42 inches. This poses a problem when attempting to design conveyances for control of water runoff. If not properly designed, such underground conveyances will freeze in the winter, resulting in water backing up and freezing at the surface. Of further note, my building has water flowing back into the garage on an ongoing basis. This occurs in at least two locations. One is the discharge point of the gutter, which is at grade and also resting against the building. Water discharges from the gutter and strikes a rise in the asphalt, pools and flows via gravity into the garage. The second entry point is at the southwest corner of the garage, at which point the driveway is level. The slightly bermed trees force water to flow to that corner and when there are piles of snow or heaving, both of which we experienced this winter, the water flows into the garage rather than down the driveway. We have had over 1/2 inch of standing water on about 75% of the garage floor. This winter, on two occasions I removed most of it with a large, curved snow shovel which I used as a plow. My spouse has had to do the same, and even today we still have some standing water. Last fall, I did send a letter to the board about this problem. (see the September 16th, 2008 topic "Rain"). During the January meeting I was informed that raising and extending the downspout to discharge water further out on the driveway where it begins to slope was not possible as it would interfere with plowing. I was also told that I will have to wait until the roofing and driveway projects. So, with the current, nebulous and undefined schedule, that could be 5 years!

13. The subject of "Guest Parking" was discussed at length during the February meeting. The board is seriously considering discontinuing "guest parking" and opening up all parking at BLMH to the residents. However, there might be a "handicapped parking" space in each of the current guest parking areas. This is under further review, after taking comments from the floor. Note: I am of the opinion that this is prompted by inability of management to control residents who refuse to vacate guest parking, and habitually use it. Unfortunately, parking is a premium with only one garage space per unit, and one space in front of the unit owner's garage entrance. Eliminating guest parking means that visitors or even unit owner's contractors and installers could have no where to park. This problem is exacerbated by the lack of sidewalks. In the winter, there is no choice but to walk in the street to wherever one's automobile is parked. I expressed my opposition to cancelling guest parking to the board; I expressed that I am opposed to acquiescing to unit owners who are intent upon breaking the rules and I am concerned about support of anarchy. What are our standards, purposes and principles?

14. During the January meeting I took another 30 seconds to advise the board that I wanted to coordinate my communications with those of the "Communications Director" and the board in general. I also stated that I was sensitive to the results of negative advertising and I would be responsible in my communications. The board President nodded thanked me for my statement.

15. During the February meeting, a unit owner requested a clarification of the policy for dish antennas. This was clarified and it is possible, with approval of location and entry and routing of cable, to get such an approval. However, request with specifics of location and cable entry must be submitted to the management company in writing, for review. After review if the installation meets requirements (no cable drilling through roofs, etc.) then approval will be given. It was suggested that this be addressed at length in the newsletter.

16. During the February meeting, the subject of census forms was discussed. At the conclusion, I expressed the opinion to the board that a valuable opportunity had been missed. I was disappointed that a feedback mechanism had not been incorporated into the form, for the unit owners to use to express their most important concerns. This would be a wonderful place to solicit volunteer for specific purposes. Note: Such a feedback mechanism would be consistent with the promises of our new board members. I do think it is well and good that a few of the unit owners attend the board meetings. But we represent about 5% of the unit owners. However, that 5% has undue influence on the board and the board's decision making process; those few of us who show up and voice our complaints or concerns are having a disproportionate influence on the board. This is not a good thing. For example, in the last gubernatorial election, only 37% of the registered voters in Illinois even bothered to show up at the polls. We all know the result of that election.

17. During the February meeting, the Landscaping Director advised that he had met with our arborist who had provided a significant amount of information to him, including a map showing the location and of all trees and a list. I believe he said that we have 800+ trees. The Landscaping Director stated that our trees were in excellent condition. This prompted me to ask our Landscaping Director "What is the projected lifespan of our trees". I was told something to the effect "A long time". I expressed that my concern was the 30 year age of the trees and the lack of replacement plans. Note: Some trees have relatively short life spans. For example, many fruiting trees, such as apple trees have a lifespan of 35 years. We have many flowering, ornamental trees. It is my understanding that some of these species begin to decline in 25 years. I don't know what we have, but examples of short lived trees (25 year lifespan) include fruitless mulberry, some ash, mimosa, true willow, catalpa, sycamore, boxelder, chinaberry, poplar. Examples of medium lifespan trees, with a life of 25 to 50 years include crabapple, redbud, hackberry, green ash, silver maple, cottonwood, ornamental pears, golden raintree, some hollys, myrtles. Elements such as urban stress, poor adaptation, insects and weather can all decrease the lifespan of trees. We have no replacement program at BLMH.

18. The subject of subcommittees and subcommittee members or assistants was discussed by the board. This included their duties and responsibilities, limits of authority and functioning of such subcommittee members. At present, the Communications Director has two assistants. There was a discussion of the need of the Landscaping Director for assistance. He has 40 acres to observe and that is literally a lot of ground to cover. Note: This would have been a great item to add on the census form. It certainly belongs in the newsletter.

19. There was much more discussed at the meetings. I can't put everything here, and it is not my purpose to record the entire open portion of the meeting. All unit owners and residents are welcome to attend each meeting, unless otherwise specified by the board. Each month, the date, time, and location of the meeting is posted in the foyer of each of the buildings. As I stated in item #16, those attending the board meetings constitute about 5% of the unit owners. That 5% has undue influence on the board and the board's decision making process; those few of us who show up and voice our complaints or concerns are having a disproportionate influence on the board. This is not a good thing. The board does not have to act in accordance with the wishes and desires of the unit owners. Nor does it have to take pro-active steps to determine what the wishes and desires of the majority is.

20. I have observed the new board President during the meetings and she appears to be functioning more as a moderator, than as a leader. This may be the result of contentiousness or friction between board members, which surfaces at other times, such as during closed, executive sessions, or it may simply be her "style".

Gabled Entrances

Here are two photos as examples of gabled and protected entranceway and unprotected entranceway. It is proposed to extend the roof of the "unprotected" entrances to provide a protected entrance. This would be done as part of the roofing project. Stated goals include reducing ice formation and providing pedestrians with protection from the elements when entering or leaving the building.
Diagram of "Ice Dam"

Cross sectional sketch of the formation of an "ice dam" over an unventilated space. Note that one of the requirements is sufficient heating in the space above the ceiling for snow to melt on the roof. This is not being experienced over the garages at BLMH.

Wednesday, February 11, 2009

Am I in Violation?

0 comments
A while back, it was pointed out to me that the plant in the photo was resting on the balcony handrail and that I was therefore in violation of the "rules and regulations".

I would like to point to the hook above the plant in the photo. The plant is, in fact suspended about 1 inch above the handrail. Conclusion: No Violation here!

Tuesday, January 6, 2009

How Important are Assessments for Upholding Resale Value?

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"Indeed, the most important thing that any individual homeowner can do to protect the value of his biggest asset is to see that the house is always kept in good repair. There's no price bonus for the best-kept house on a shabby block, but there's a big discount on the worst house in a good neighborhood."

The above is from the online version of the Wall Street Journal, in an article titled "Read This Before You Remodel" on January 6, 2009.

Here is a link to the original article, but it may only be accessible to those who are subscribers:

http://online.wsj.com/article/SB123120680932356151.html

Saturday, November 22, 2008

Where Our Assessments Will Go in 2009

2 comments
This is based upon the budget mailed by our association to unit owners on October 23, subsequently discussed, voted upon and approved at the November 2008 meeting. What I have done is to calculate monthly fees and percentages, using the information we, the unit owners, received in the mail. That information is provided each year to unit owners as part of the annual budget process, the financial statements and the approved budget.

I have my comments, and any replies to reader comments will be at the end of this post.

First, our monthly assessments have increase, but by an amount less than the COLA projections for 2009 by the Federal government. This is as predicted by our managers, who said they expected the rate of increases to abate as we build up the reserves for the forthcoming roofing and street projects.

The assessment is split into two components. One is to fund day to day operations. That includes energy, maintenance, the green spaces, the trees and snow removal, administrative expenses and fees, insurance and taxes, among other things. The second part of the assessment is for funding General Reserves, which are sometimes called "capital expenses" or "capital projects". These are larger, predictable and scheduled replacement items such as roof replacement, street paving, concrete work including curbs and so on.

The budget for my "B" unit for 2009 includes a monthly fee of $86.68 for funding the General Reserves, or "capital expenses". All other fees collected go to funding the day to day costs of operation.

There are, I have been told, 15 different assessment tables, which vary by size, location and view of the unit. So your assessments will probably not match mine. [The previous statement added December 5].

The following are based on the assessment fees for my "B" unit. I include dollar figures and percentages. For other "A", "B", "C" and "D" units, the percentages are the same, but the monthly fees will be different. [it is my understanding that units are in 15 different assessment groups] [comment added 12/12/08] To calculate for your unit, take your monthly assessment and multiply it by the percentage, to determine your actual monthly cost for each item. For example, if my monthly assessment was $299.30, then my share of the cost for utilities would be $299.30 x 6.10%/100 = $18.26 per month. (Note that because we are dealing with percentages, they have to be divided by 100 to do the arithmetic properly. In the example, 6.10% = 6.1/100 = .061. To calculate the amount for utilities in a $299.30 monthly assessment, after dividing the percentage by 100, the arithmetic is .061 x $299.30 = $18.26).

Major Budget Categories

These are the major assessment distribution categories for [my] "B" unit, according to the budget, with percentages:

Taxes = 0.51%

Utilities = 6.10%

Maintenance and Repair/Janitorial = 1.73%

Common Area Maintenance = 20.59%

Waterfall/Creek Maintenance = 0.17%

Building Maintenance = 28.98%

Administrative Expense/Insurance = 13.98%

General Reserves = 27.95%

Sub-Categories

The budget is further distributed into the following sub-categories, and the percentages and monthly dollar amounts for [my] "B" unit are:

Taxes

Taxes = 0.51%, $1.58

Utilities

Electric = 4.66%, $14.45

Water = 1.19%, $3.68

Pest Control = 0.25%, $0.79

Maintenance and Repair

Janitorial Contract = 1.73%, $5.36

Common Area Maintenance

Grounds Contract = 8.04%, $24.93

Grounds Maintenance = 4.23%, $13.13

Drainage Restoration = 0.85%, $2.63

Tree Maintenance = 2.96%, $9.19

Seal coating = 0.59%, $1.84

Snow Removal = 3.91%, $12.14

Waterfall/Creek Maintenance

Aerators/Lakes/Streams = 0.17%, $0.53

Building Maintenance

Maintenance Contract = 12.81%, $39.72

Panel/Trim Replacements = 1.86%, $5.58

Lighting = 0.76%, $2.36

Miscellaneous Repairs = 4.23%, $13.13

Painting = 7.20%, $22.33

Roof Repairs and Maintenance = 0.42%, $1.31

Administrative Expense/Insurance

Petty Cash = 0.03%, $0.08

Postage = 0.24%, $0.74

Printing and Duplicating = 0.34%, $1.05

Management Fees = 5.05%, $15.67

Legal Collections = 0.10%, $0.32

Accounting = 0.25%, $0.79

Miscellaneous Administration = 0.17%, $0.53

General Reserves

Paving = 7.79%, $15.76

Lake Restoration = 1.56%, $3.94

Carpet = 0.52%, $1.31

Roof = 12.46%, $47.28

Concrete = 3.11%, $10.51

Masonry = 1.96%, $7.88


My Comments, and Replies to Reader Comments:
General Comments

This is the lowest assessment increase since 1998, and it is less than the government projected COLA for 2009 (as based on the Social Security increase in benefits, which is 5.8% for 2009)! The assessment increase of 5% will raise the assessment of my "B" unit by $14.68 per month. The majority of the increase will go to fund the "General Reserves" and the projects listed above.

In 2009, the assessment fees include a 10% increase in the amount allocated to reserves. The budget for day to day costs is only about 1.42% higher for 2009 than the actual, projected costs for 2008. This would imply that the board and our professional managers are doing a good job of controlling costs. The board and our managers discussed the budget during a closed meeting in October. At that time, inflation was projected to be over 4% for 2009! I don't know what went on in that meeting, but this budget does lend credibility to our manager's statement during the November open meeting that "assessments are stabilizing and reaching equilibrium".

Our monthly assessment fees will be allocated as follows: 72.05% to cover day to day expenses and 27.95% for funding general reserves.

How Can I, a Unit Owner, Use This Information?

I originally did this exercise several years ago, and calculated the allocation of the budget as it applied to my personal assessment fee. This was for my own use, but I did send the results to our managers and I received a written reply from the board.

I did it because I wanted to know where the money was going. If you tell me that we spend $57,000 a year on something, I am somewhat overwhelmed by the large number. So I like to break the numbers down to something I can better relate to. This also lets me compare the association costs for certain items to my personal costs, such as utilities. It also makes the entire budget much more personal. I can see exactly how much I am paying for "printing and duplicating" each month, for example. Of course, I can't decide to spend or not to spend the money on a day to day basis; that has been decided by the board and this budget is pretty well fixed in stone, as they say.

However, it does give me a few things to think about. For example, in 2008 we had several water line breaks. I understand one of these cost about $17,000. There is no such item in the budget and so that money had to come from somewhere else in the budget. How much did that cost me last year? In looking at the budget, I can see an item for $15,000 and that costs me $3.94 a month. Using a little arithmetic, a water line break costs about $4.47 each month out of my pocket, or about $53.58 for the year.

Each of these items adds up. The board is discussing hiring consultants and engineers to do reserve studies and other consulting work. If that costs us $30,000 in 2009, I'll be paying $7.88 each month for that study. If we were to spend $60,000 on engineers and consultants, that would cost me $15.76 each month, or $189.12 next year for my share of the cost of the study. Is it worth it to me to divert that money from the General Reserves? Is it worth it to you? I would like to have some assurance by the board of the tangible benefits, examples of what they might be, and the actual costs before I am asked to fund things like that. Even though it is not budgeted, our management advised us in the "state of the association" letter that this is under discussion by the board. The board will decide because the board has the authority to do so and just about anything else they vote as a group as "necessary", even if it is not in the budget. This is essential to fund unexpected events or emergencies. Otherwise how to fund repairs due to water line breaks? However, that discretionary power can also be exercised by the board to change direction on long term projects. They can stop projects and create new projects at any time, and for any reason. So bear in mind that while this is the approved budget, the actual expenditures for 2009 will vary from it, and as we have no specific, agreed upon timetable for the projects in the General Reserves budget, those too may change.

If you have questions or concerns about assessment fees or where and how our General Reserves will be spent, I suggest you begin looking at proposals from the board from the perspective of "Is it included in the existing, approved budget?", How much will this cost me each month?", "Has the board adequately explained the tangible benefits?" and "Did the board present this for discussion?" The ROC won seats on the board with a promise of "improved communications". I think getting more advance information and the opportunity for more input into this process of spending money would be a part of such communications. However, I am convinced of the necessity of the plan for new roofs. What I do not know is 1) What is the timetable and specific schedule? and 2) Is our new board committed to replacement of the roofs? I don't think the new board has recommitted to the program and it is currently discussing "reserve studies" which can be construed as meaning the new board intends to alter the program.

I suggest that if you are a unit owner and you have any questions or concerns, then attend the monthly meetings, listen intently, and ask questions. I assure you, that is what I am doing. I also suggest you check this blog every week.

I realize that it is difficult or impossible to reduce the cost of some of the "built in" amenities at BLMH. These were designed and installed many years in the past. Another example of how decisions made today, will influence the distant future.

We do have to maintain the grounds and trees, and pay for electric lighting. But we can manage the planning of future expenditures. Each time our board "votes" on something, they are deciding on spending (or not spending) our assessment fees and they are voting to save or not to save for General Reserves. Today’s board will determine our future assessments. If our board does not adequately save then they will mortgage our future. However, that choice is ultimately determined by each of us, as unit owners. We exercise that choice when we vote, which determines who we place on the board, which in turn hires our management company. The decisions our board makes this year will determine the financial well-being of our association for many years in the future.

Thursday, November 13, 2008

Thursday the 13th - Board Meeting and Congrats to the Board

4 comments
[Note: My response to reader's comments is contained at the end of this post].

Last night (actually, earlier this evening) was the conclusion to the budget process for 2009 and the meeting of the board and unit owners. Owners from approximately 50 units attended the meeting, which is about 15%. After discussion, which was at times impassioned, the proposed budget was passed by the board, with one "nay" vote. This was not an easy decision. My congratulations to the board for listening to the unit owners, and for making a difficult but I believe, the appropriate choice. That choice approved a 5% increase in the assessments for this year.

There were arguments against and petitions made to either reduce the proposed increase or eliminate it entirely. Discussions also included possible methods of reducing costs. Some unit owners complained about the lack of "service" and collecting leaves, dirty entry windows, etc. That is the crux of the matter; reduce services to reduce costs and some unit owners complain. Other issues raised included reducing painting costs, changing from wood trim to more durable materials, pulling back funds spent on greens maintenance and trees. I think the board attempted to answer questions and address the issues with courtesy and in detail. The discussion of the budget and related matters prior to the vote took one hour and 2o minutes!

During the open session near the conclusion of the meeting, I congratulated the board for their consideration and for making this difficult decision.

In the very near future [December 1, 2008], I will add a summary of "where the money goes" for a monthly assessment, and the corresponding amounts. I have already prepared the spreadsheet for this, and I did so in advance of the meeting so that I had some idea of the impact of the budgetary process on my personal assessments. I have been doing this for several years. Here is a link to an earlier analysis, which was made from the annual budget and the financial reports provided to all of the unit owners for the annual meeting: How My Assessments In 2006 Were Spent or Allocated There are some current numbers for reserve allocation at the end of this post.

I have some comments and opinions to this meeting and to the general budgeting issues at the end of this post. In particular, I address the issue of funding reserves at our current rate and the impact this has on our monthly assessment fees.

One of the points raised repeatedly by several unit owners was the pain experienced by some of us as a consequence of the current recession. I think all of us are experiencing this. However, as I observed during the open session near the closure of the meeting:

  1. Oil prices have recently decreased by a substantial amount. This provides immediate relief to all of us. This will offset the 5% increase and prices are expected to moderate until the middle of 2009. In our immediate neighborhood, 87 octane gasoline is readily available (as of November 13) for $2.23 to $2.29 a gallon. Link: Find Gas Prices by Entering Your Zip Code . Our gasoline prices are about the same as they were in October 2004. [On November 18 I added the chart below. This is for Midwest Gasoline Prices for the past 10 years. As you can see, prices have been "rolled back" to 2004. On November 18 I also added data from the S. Louis Fed at the end of this post. Oil futures are expected to remain low throughout 2009] .


  2. Forthcoming 5.8% cost of living increase to those collecting social security benefits will also aid those who are living on these fixed incomes. Of course, we all are "living on fixed incomes" but those who are retired have been feeling inordinate pressure, and perhaps more angst with the current financial turmoil.
For the record, I do not like assessment increases. However, nor do I like special assessments, or the possibilities of a leaking roof. It is a fact that for the nearly 8 years I have been a unit owner, the board and professional managers have been increasing the assessment so as to increase the reserves so as to address some significant, looming maintenance issues. I know this because I have attended meetings, sent letters and interviewed the managers and the board on this matter several times. I did this first as a potential buyer and after purchase as a unit owner.

I do have the same concerns many of my fellow unit owner have. I understand the argument made during the meeting that as monthly assessments increase, our units become less affordable. Affordability can negatively impact the possibility of the sale of our units. However, these are general statements and at some point in the near future, I will do a study of the point of stability for our assessments. At present, we are successfully growing our reserves. We are on track to address the roof replacement and repairs. Once the reserves have reached an equilibrium point, and I think we may be there, the increases may only be required to offset inflationary pressures on the reserves and to accommodate increases in operating expense. This point was made repeatedly by the management company during the meeting. I agree with their analysis of the current situation.

I have a concern about the schedule for roof replacement. As I expressed to the board during the meeting, we will not accrue all of the necessary reserves until the year 2014. Actually, in January of 2014, we will be short $177,167 if we continue to fund at the present rate [the rate approved at the November meeting]. Our professional manager pointed out that we have reserves for other purposes that could be temporarily "borrowed" to complete the roofing at the currently projected schedule.

I presented spread sheets at the meeting, to substantiate my evaluation of the financial information. By 2014, some of the shingles could be 22 years old if they have not been replaced. That is far beyond the expected life for roofs of the type we have. In advance of the meeting I did discuss this with the Chairman of the Planning Commission for a nearby community, whom I am fortunate to know. He advised me that his city's engineers anticipate roofs of our type to have a life of 15 years. By that it is meant that we could expect to be "leak free" for that period of time. Unfortunately, I was unable to provide this information to the board and to the unit owners who were present. However, the discussion and presentation by the professional managers made it very clear that they are well aware of this time constraint and the urgency facing us.

In response to some of my questioning on the age of our roofs, the management company stated that the last roof was shingled in 1999. That is, the last building to have a second layer of shingles atop the old, was completed 10 years ago. If the roofs are replaced on an "as needed" basis, the last roof, which I assume would be the one last maintained in 1999, would be re-roofed in 2014. That is exactly 15 years from the date the second layer of shingles were laid on the roof.

I think the board needs to have an inspection made of the all of the roofs and publish a schedule for replacement, with the anticipated year of replacement for each building. This information should be made available to the unit owners. I expect that some studies have already been completed, as the board has made disparaging remarks about the condition of some of the roofs on some of the buildings. What is missing is a formal, published schedule. Unit owners who have experienced leaks, should be assured of when their roofs will be formally repaired and not just patched. This would promote certainty and alleviate concerns. Currently, people see annual assessment increases, with no tangible benefit. The publishing of a date, a true date, would be very encouraging to us all.

In these economic times, it is vitally important that people be provided with as much certainty as is possible. We cannot control the economy and there are also many aspects of our lives and circumstances that we cannot control. However, there are things that we can manage. Scheduling, budgets and projections are all tools that can promote certainty. With that comes stability, improved confidence and optimism. Link: People Will Be Strange



The suggestion was made during the meeting that committees be formed to assist the board members, who are all unpaid volunteers, in accomplishing their tasks. This is an excellent suggestion. I would hope that the board will quickly prepare guidelines for these committees, so that ad hoc groups, operating outside and beyond the board, do not further destabilize the situation and add concerns to those the unit owners are already experiencing.

The possibility of transferring assets to our city, so that we can avoid maintenance costs, which is to say, pass these costs on the city, was also raised from the floor. This has been previously discussed by previous boards and was diligently researched. At this time, some members of the board and the managers were not optimistic. There are the costs of meeting city codes and severe alteration to the complex in doing so. I also am pessimistic of the opportunity to do so. I recently listened to our Mayor discussing the budgeting issues facing our city. For example, tax receipts on gasoline formerly paid for all city street repairs. According to the Mayor, this year the city paid over $1 million from general revenues to cover street maintenance no longer covered by motor fuel tax receipts. The city is also projecting tax revenue decreases and increasing deficits. The "state of the city" meeting in January may shed more light on this, but the Mayor has stated that "City staff expects the next five years to be financially challenging". In that environment, I don't think the city will welcome us with "open arms" and the cost increases they will bear as a consequence. However, I suppose the board could propose and vote on a professional study to determine the feasibility and compliance issues we would face. We could then get bids from contractors to bring us up to the necessary standards. After knowing in detail the costs and types of alterations necessary, the board could then present this to the unit owners for our consideration. An initial study could be funded for $25,000 or so, which would only require a one-time special assessment of about $75 per unit owner. Or, the board can divert funds from the roofing project. I'm interested in knowing how the board would proceed with this one!

Good luck to all of us in the coming year, and to those of us who are struggling, I say "hang in there" and I strongly urge communication with the entire board about your personal situation. I have found letters to be the best method, followed up with telephone calls to articulate what I have written.

My Additional Comments and Observations:

Playing "Catch Up" with the Reserves, and dealing with rising costs:

First, this is not about pointing fingers or spreading blame or guilt. What follows are my observations and some arithmetic. We are all accountable for doing our own evaluations from time to time. I did my first BEFORE I purchased a unit about 8 years ago and our professional manager answered all of my questions, including my great concern about the state of the reserves. I purchased anyway, and all of us have made our own choices and decisions. If we don't do our own arithmetic from time to time, then we are not fully informed. In that case, we can only take what we get and then complain about it.

I'm putting these numbers out here so you are informed, and to provide a service to all of the unit owners. This is from my independent analysis of the information that is provided to us all. What I am doing does not relieve you of doing your own research. If you are angry, I can't do anything about that. However, you need to know that this problem began at least 15 years ago. It is my experience that the recent boards and professional management team have done everything possible to correct this problem, and to keep us informed.

Keep in mind that in 1999 we were paying about $1.15 a gallon for gasoline. I doubt if any of us were saving a $1 for each gallon of gas we put in the tank, so as to help pay for the fuel increases that have occurred since then. So too with our board. They cannot predict what inflation and the price of gas will be in 2015. If in 1999 they had raised our assessments $25 a month to help cover the effects on reserves as a consequence of someone's "predicted" $4.00 a gallon gasoline in 2007, I suspect unit owners would have been irate. And with good reason.

The board could not with certainty have predicted what has happened. What we do know is inflation does occur and it is historically between 3.5 and 4.1% per year over long periods of time. Or I should say it WAS. Because that is what economists do; they give us historical data and we apply that to the future. But who knows what the future will bring? We do know that the price of oil affects the cost of most materials, and even labor, as wages increase to keep pace as costs rise. That's why social security benefits are rising by 5.8% in 2009. We are all struggling with rapidly rising costs and the assessments required to raise reserves. Some of this is way beyond our control or that of the current and recent boards. If you are angry about volatile and rising gasoline and energy prices and the consequences on the economy and our association, that is something all of us are at the effect of. I suggest you direct your anger at the politicians who collectively have avoided a cohesive energy policy for the past 30 years!

Returning to the present situation, during the board meeting and during past budgetary meetings open to unit owners that I have been able to attend, I have been present to complaints about the increases in assessments. The board and our professional managers have done a very good job explaining how we found ourselves in the current predicament. For the nearly 8 years I have been here, the board has been accumulating reserves to make up for the fact that for many years there were either inadequate or NO contributions to reserves. Unit owners have overwhelmingly stated at the meetings I attend that they are opposed to "special assessments". That gives the managers, and our board, little choice.

To demonstrate the consequences of these choices, as of January 1, 2009 I will be paying a monthly assessment of approximately $47.28 to the roofing reserves. And so it is with paving, concrete and masonry reserves, to which in January 2009 I will be contributing $34.15 each month. These items combined are consuming $81.43 of my assessments each month!

If each unit owner contributes at this level of funding, the roofing reserve would accumulate in excess of $2,800,000 in 15 years! That is about 70% greater, or $1,160,000 more that is actually needed for roofs! So why are we today required to make this monthly contribution? It is because we don't have 15 years. We are "catching up" to the funding needs so that imminent roofing work which has already begun can be completed no later than 2014, and before we are all dealing with the breakdowns and expense of failed roofs. That's it, plain and simple. To put it bluntly, I am today putting $47.28 monthly into a roofing fund because 10 and 15 years ago there was $0 being put into this fund each month. So if there is no funding for 7 years, then the funding must be nearly doubled in the final 8 years to accumulate the necessary reserves. As a consequence, our current monthly roofing reserves payments are larger.

How much should the funding have been 15 years ago, back in 1998? If the average monthly assessment of the unit owners had been $25 greater than it was on January 1, 1998 and if that amount were put into reserves and, if each successive year the amount collected were adjusted upwards to compensate for inflation (let's assume by 3.5% per year), as of December 31, 2008 our reserves for roofing would have about $1,144,000! If we had been funding the roofing reserves commencing in 1998, our monthly assessment in January 2009 for roofing reserves would be about $36.50. Our actual payments, because we did not fund the reserves in 1998 will be about $47.29 each month into the roofing reserve fund. So our assessments are $47.25-$36.50 = $10.75 higher each month.

If we use that yard stick for concrete, paving and masonry reserves, which I am funding at the rate of $34.15 each month commencing January 1, 2009, these funds will accumulate in excess of $1.700,000 in 10 years.

If you are a long term owner at BLMH, you can take some consolation from the fact that the board, instead of funding the reserves for the roofing project, allowed you to keep that money all of these years. How much did you keep? I estimate that if the funding had begun 30 years ago, our assessments would have been $14 greater each month than they actually were in 1980 and would have increased at the rate of at least 3.5% each year to keep with inflation. At that rate, in 1990 we would have been paying $19.75 each month for the roofing replacement fund and in 2000 we would have been paying $27.86 each month for that fund. In 2009 our assessments for this fund would be $37.97 and we would have accumulated $1,692,000 in the roofing fund as of December 31, 2008.

Funding reserves is not an easy task and requires predictive skills and the ability to make adjustments each year. It is necessary to determine the point of replacement, and project the costs at that time. For example, let's assume that roofing must be done every 15 years to avoid leaks and damage to the units. So a second set of shingles can be put on each roof in 15 years. In another 15 years, the two sets of shingles are then stripped and repairs to the wood structure beneath the shingles, new membrane and totally new shingles are installed. If that approach is used, then we could say that we need to save enough to 1) Add new shingles in 15 years and 2) To completely re-roof in 30 years. If that is so, then the annual amounts we would be adding to the roofing reserves should be the amount necessary to shingle in 15 years PLUS the amount necessary to completely re-roof in 30 years. We also need to increase the amounts collected each year to compensate for inflation, as the cost of materials and labor do increase each year.

As for projecting the costs, let's assume that the new roofs will cost $1,650,000 in 2011. How much would such a project cost in 30 years? If inflation is 3.50% per year, and costs rose at the rate of inflation, then the cost of such a project would be $4,474,599 in the year 2040! If inflation were 4.0% per year, then the cost would be $5,145,775! The actual calculations need to include various factors. These may include, but not be limited to the differences, if any, between the interest accrued on the money saved in reserves and the rate of inflation, actual costs which may rise over time at rates greater or less than the basic rate of inflation and, adjustments for current inflation. So having a management company which is good at these types of calculations and keeps a "pulse" on true costs, is essential for projecting reserve requirements. These numbers may seem large, but keep in mind the cost of a unit in 1978 and what they are selling for today. Even automobiles prices have increased. As I recall, I purchased a new compact car in 1969 for the price, including tax, title and shipping of $1,800!

My final comment on reserves and the assessments for them is this. When we as unit owners are inclined to compare our funding requirements and assessments with those of neighboring associations, it is essential that we also determine what the nature of their reserves are and how they got that way. I can imagine a situation 20 years ago, at a time that we were not funding roofs, in which a unit owner in a neighboring association attended a board meeting and said “I don’t know why our monthly assessments are so high! The people over at BLMH, their assessments are nearly $50 a month less than ours!” Of course what that neighboring unit owner did not take into consideration, was that we were not funding some of our future maintenance needs, while their association was doing so!

The "Good News" about Funding of Reserves:

There is good news. This does substantiate our professional managers' assertion that these increases will stabilize the reserves. For if we are overfunding by 70%, then that implies that the $81.43 I am paying each month into those reserves is also about 70% greater than it would need to be if we had been consistently funding these reserve items for the past 15 years. So what does this mean? Once that we have accumulated the necessary funds, we can begin funding for the next repair cycle for the roofs at a rate consistent with a 15 year/30 year schedule. That schedule implies that the actual funds needed for roofing reserves, if consistently funded for the entire 15 years, would be $27.82 each month for each unit. This will have to be adjusted annually, but it won't be necessary to include an additional "catch up" amount for roofing, which currently is about $19.46 each month. See Note (2).

If I assume a similar percentage of overfunding for "catch up" for paving, concrete and masonry, then I am paying a "catch up" amount of about $14.05 each month. If my assumptions are correct, then I am paying total "catch up" amounts of $19.46 + $14.05 each month, which is currently $33.51 each month.

I am not suggesting that it will be possible to reduce our assessments in the future. What I am suggesting is that this implies that our fees are stabilizing. Increases should begin to taper off to an amount consistent with inflation. Long term inflation is typically in the range of 3.5 to 4.1% each year. Of course, there are no guarantees for the future. In fact, the inflation for the previous decade was below the normal. There are economists who are predicting we are now entering a decade of higher than normal inflation. We, the unit owners, and our board and the professional managers have no crystal ball.

However, it is my opinion that we have seen the worst and if we can bear up under the current situation, we may find some daylight in the very near future.



On The Subject of Reserve Studies:

During the meeting of November 13, the board and professional manager presented viewpoints about obtaining a reserve study. It was pointed out that this needs to be done with guidance and direction. The example was made that a consulting firm could tell us that we need to fund the reserves to replace the decorative lighting on the buildings. We don't need to spend money to have someone tell us that! It was also pointed out that a reserve study is a double edged sword. Yes, we will get confirmation that we are on track for major items, such as roof replacement. On the other hand, such a study might render opinions about things like underground piping and so on, that could put additional pressures on our already buckling unit owners. That is not prudent at this time.

I am of the opinion that now is not the time for a reserve study. However, I do see circumstances under which I would, as a unit owner, DEMAND that a study be done. For the present it is my opinion a study is not required because immediate, major items have already been identified and are being well funded. These are roofs and driveway paving. So why not continue on this course and as these are addressed and completed, then in 2012 or so, if we need additional outside confirmation or guidance along the lines of 1) What don't we know or what are we missing? and 2) What would be an appropriate funding level now (in 2012 or so), that will accommodate our needs for the next 30 years?

However, during the board meeting, one member of the board suggested that an assessment increase not occur in 2009. I want to state for the record that it is that type of approach that got us where we are today! The years we had 0% increases or assessment decreases are well documented, and I am of the opinion that some of the current members of the board were elected because of the frustration of some of the unit owners at the assessment increases since 2000. I urge all unit owners to keep the recent past in mind. We do not want to go through this again. We and the board must be rigorous in funding the needs of our community.

It is my opinion that the only circumstance that can justify a 0% assessment increase, or an increase that is below inflation is the determination that 1) All reserve items are well funded and on budget and 2) There are no "unknowns" out there. To determine if our board and managers are on track and are not being blindsided, a Reserve Study would be a very useful tool to determine this. So I think that a reserve study must be completed PRIOR to any reduction in assessment increases to a level below the current rate of inflation. If the board does otherwise I will vigorously oppose such an action.

My opinion for deferring a reserve study at this time is based on my observations at the meeting and the following: 1) We have already identified major items and are funding those, and this funding is for the immediate or very near future; 2) We are really tight on funds and I don't think unit owners will want to provide additional amounts via assessments to fund a study at this time; and 3) The economy is in turmoil and any reserves study would make assumptions about projected costs. At this time, such projections are more unreliable than is usual. We don't really know what the price of oil will be in 6 months or 1 year from today. That impacts the price of roofing, asphalt for driveways and vinyl plastic siding and trim, for example.

As of today, it is expected that the current recession, which extends beyond the U.S., will reach a bottom in mid- to late 2009 or early 2010. When the economies begin to pick up, we will have a much better idea of the cost of critical commodities such as oil, and the reliability of such projections will also improve.

The Impact of a Recession on Major Projects:

There is a "silver lining" to the. That sounds contradictory, but because of the recession we are in, prices have fallen or stabilized for many of the materials we need for these same projects. Hard times also mean that contractors may be more willing to negotiate. Combined, these factors mean that while prices may not decrease in the near term, nor should they increase. We do not know what will happen beyond the summer of 2009 but right now, and probably in the spring, it should be possible to get good bids and accomplish work with a potential savings on some of it. That means we may be able to do more roofs in 2009 that the board is projecting we can do. If so, we can do more of the oldest roofs next year. I am sure the board and management team will be watching this closely. Once that final bids are received for work to be completed in the summer of 2009, they will know what is possible. I am very optimistic!

Energy Initiatives and Our Forthcoming Projects:

I would prefer that we hold funds for the purpose of determining how this association can benefit from possible energy credits and so on, that the U.S. government will probably make available for the purpose of reducing this country's "energy footprint". Roofs are a significant energy component on buildings because of their exposure to sun light and insulating properties. So too, siding could be replaced with energy efficient improvements. If the government moves as rapidly in the direction and provides the funds that some economists are forecasting and calling for, this association could be in a wonderful position to reap some of the benefits and address some of the issues we are facing. It is too early to determine exactly what benefits are possible but this is something that really bears close monitoring and has the potential to impact our roofing project in a major way!

The Economy:



For information on my view and economic outlook, go to this link. You may return to this blog by using your browser "back" or "return" button. Link: Nov. 11 Outlook on the Economy



Additional Supporting Information:

Oil and Natural Gas Futures, as per the St. Louis Fed on November 14, 2008. These indicate continuing low prices through 2009. For the original data, go to http://research.stlouisfed.org/publications/usfd/20081114/usfd.pdf



Oil Futures, per the Federal Reserve:




Natural Gas Futures, per the Federal Reserve:



Notes and response to Reader's Comments:

(1) Replaced and updated price chart for gasoline on Nov. 18.

(2) Revised Nov 21, per comment.

(3) Comment: "I don't understand how the board got us to this". My response: It wasn't simply "the board". It was the boards, as there have been different members over the past 30 years. It was also the "unit owners" that is, us, you and me, who got us here. Our professional managers identified the problem and then worked with the boards, since about 2000 to correct this problem. That is why we today, have the reserves and the replacement program. I have a further comment on this. We the "unit owners" elected some new board members this year including a new president, because a majority of us exercised our rights and elected members of a group which represented "change". It is my opinion that members of that group had an agenda to lower our assessments. Unfortunately, what we did was to "shoot the messenger" and replace some of the people who identified the problem and worked with our professional managers for over 8 years to correct it. It is ironic that some future board will take the credit, when our assessments level off and the roofs are replaced. All I can say is, some of these problems take years to occur. So too, it can take years to correct these problems. As I explained in my comments, we had two roofing programs here at BLMH even if we weren't completely funding them. As unit owners, I am convinced most of us were oblivious to them. The first roofing program is to add a second layer of shingles in 15 years and the second is to remove, repair and reshingle in 30 years. So this problem began 30 years ago.

(4) Further response and Nov. 24 response to "who was minding the store": As to how we got here, it took a while and I suspect the board, over the years, succumbed to pressure from unit owners. From time to time, there has been grumbling about assessments. There will ALWAYS be grumbling about assessments! Our professional management was changed in 1998 or so and since then, there had been more assessment discipline which includes long term planning and the funding to accomplish those needs. I surmise that prior to 1998 the professional management and boards had a different emphasis, which seems to have been characterized by “keeping assessments as low as possible”. How else to explain a program that for 14 years consistently had assessment increases below the annual “cost of living” increases published by the U.S. government? Each year of that period, the average assessment was about 1.5% below the annual social security increases, for example!

During the recent 13 years and with the new management we have been on average above the “cost of living”. As I have stated elsewhere, this was to “catch up”, so as to adequately fund the reserves, and meet day to day operating costs. So we have changed from assessment increases that were consistently below the rises in the “cost of living” to assessment increases that have been on the average above the “cost of living”.

However, for 2008, our assessment increase will be 0.8% below the published U.S. government SS “cost of living” increase.

These differences may seem small, but they add up and have big effects on the reserves.

Let me demonstrate. Let’s assume the monthly assessment was $100 in 1983. Since 1984, the various boards and managers have given us a variety of assessment increases. Sometimes less than 0%, sometimes 0% and an increase as high as 12.0% (in 1989). This resulted in total monies collected from assessment fees from 1984 through 2008 of $16,761,887.

If the board had instead voted assessment increases that were consistently the same as the U.S. government COLA figures of the Social Security administration, the total monies collected from assessment fees from 1984 through 2008 would have been $17,482,301.The peak assessment increase would have been 7.4% in 1982 and would have been below 4% for all but four years!

The big difference between the two methods is this; our assessment fees in 2008 would have been about $225.04 each month and the association would have collected more money! As I said, these small differences do add up. I’ll publish the spread sheet at some time in the near future, so you can see the exact number, year by year.

So to answer the question,” who was minding the store?” I have to answer, “Who was arguing for assessment decreases back in 1982, 1983, 1985, 1986, 1988, 10991 and 1992”? So now perhaps you see why I am concerned about a repeat of the past.

Thursday, October 16, 2008

Monday the 13th

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Well, the "new" board meeting was to have been held today, October 13. This was a closed session designed for budgeting purposes.

There has been a long pause of silence since the elections.

Is there anybody out there??