Budgeting, Planning, Home Ownership and Completing the Year

I've made a thorough analysis of the budget and the reserves. This includes a long term - 10 year - projection with possible outcomes. For whatever reasons, our board has decided not make such an analysis or, if they have, they decided not to release it to the unit owners. I updated my initial analysis prepared in the fall of 2008, which I never released. I have been waiting for the board to release some information and they finally did provide details of the "reserve study". Thank you for that!

My information is, and has always been, from publicly available information; the same information each and every unit owner is given. I say that because in the past I have been accused of having access to "special" information, even by certain board members! One of my numerous fax pas here is to read everything I get and study it. Apparently we aren't supposed to do that.

I'm not going to publish all of the planning details and scenarios I have constructed because this is a public site. However, I'll publish sufficient information to inform unit owners of what is going on, and of possible outcomes. If you want further information, then email me. As the board has not released their specific plans to us, the unit owners, we really have no specific idea of where we will be in 5 or 10 years, nor of how we will get there. That's called "a lack of accountability". Assurances that "it will all work out" are unacceptable to me, and should be to each and every unit owner. This is not about trust; it is about achieving results with the hard earned money we provide to this association.

I'd like to take a few moments to address the subject of "Home Ownership". Our board has decided to call us "homeowners" in lieu of "unit owners". As a former home owner, I don't agree with that title. As a former home owner, I was 100% responsible for all maintenance, planning and the financial decisions that accompanied them, as well as for the consequences of all of my decisions, both good and bad. That meant, that I was the one who got up early to shovel the walks and driveway, I was the one who did the mowing, plant feeding and fertilizing, tree maintenance, painting, landscaping and so on. I was the one who removed the various wildlife that decided to move in and I was the one who decided how much money to allocate to hiring contractors, maintenance people and so on, and when the funds were fully expended, I put in the "sweat equity" to complete the numerous tasks.  I also needed to make choices. I discovered that overall costs were lower if I maintained my property well. Carpets lasted longer, using better exterior paint more often, with replacement of trim kept the critters and carpenter ants out and better appearance. But I had to give up a few things, such as driving the automobile a few years longer as money was diverted to property maintenance.

Here at BLMH I do not make those decisions and I am not even fully informed of the planning process and the issues surrounding these decisions. I think it is ludicrous to be considered a "homeowner". Apparently, getting involved and even asking questions is a "no no" here. So I am and will continue to be a "unit owner", no matter what attractive label the board concocts in a misguided attempt to make me or other unit owners feel good. I also think that the 50% or so of unit owners who don't even bother to vote are not sufficiently engaged in the process of being a "unit owner". Of course, my view is not consistent with the official "party line". If you doubt me, perhaps you can find out how many dues paying members this Association has for its social club. This was a very, very big deal in 2009. Supposedly "the majority of us" really, really wanted this. So how many of that majority actually belong and pay dues? 75%? 66%? 51%? How about less than 5%! I'm willing to take a bet on that one, and I'm willing to be corrected.

That's another issue I have here. I am told I am a "homeowner" but as soon as I begin asking questions and attempt to act as one, guess what happens? Seems I have stepped over that invisible line. It's not about me. It's about "us", the unit owner body. Each of us should be provided with the same information. If one of us has a concern about holes in the budget, and the board provides information, verbally or in writing, shouldn't each of us get that same information? Remember, we are all equals here. Or we are supposed to be.

I have concluded that "homeowner" is some sort of honorary title, and as is the case with most of them, is worth less than the paper it is printed on.

The bottom line is this. We are, each and every one of us, "unit owners". We have made some sort of financial commitment and we have chosen to live her. We pay fees each month for the privilege, and taxes and a mortgage. As a "unit owner" I expect the board to manage this association in such a manner as to carefully use the funds I provide to them each and every month, and to maintain this association in such a manner that it is in the same shape today and 20 years from now, as it was when I purchased nearly 10 years ago. That means, formulate long term viable, strategic and equitable financial plans for infrastructure, roofing, paving, the grounds and the 800 or so trees, and everything in between. And exercise those plans and provide for the safety and protection of each and every unit owner at BLMH. And justify their actions to me and every other unit owner at BLMH. I will remain engaged in that process and will continue that oversight as my right and privilege as a "unit owner".

A budget is sufficient and adequate if it includes a long term maintenance plan. Our fees have two components; day to day maintenance, and long term maintenance. These are entirely discretionary. However, as I have pointed out on numerous occasions, the Illinois Condominium Act binds our board to act in certain ways. They are legally responsible. This reduces their freedom to act in ways contradictory to the good benefit of the unit owners. But where there is a will there is a way, as the saying goes. Reminding the board of their duties and obligations, and pointing out glaring failures is another "no no" and invisible line I have stepped over. Oh, but I'm supposedly a  "home owner"?

Is all of this too much to ask of the board? I'll let you decide. Asking questions seems to have resulted in attacks on my property, and that includes this site and the issues accompanying it, and the feeble attempts by people to disrupt it. I too have some information about who has said what to whom, as well as information about the numerous attacks on my personal property. Some of this was shared with the local police department. The board declined to meet with me in a timely manner to discuss this, and ignored my letter. This despite all the rhetoric about resolving all communications issues and even creating the position of  "Director of Communications". I concluded that what was lacking was the will, or that a member of the board or members could be involved in some manner in these attacks.  Is that rational or not? Again, I'll let you decide.

I find it amusing that someone would go to the trouble of interfering with comments at this site and then make it a point to say "Oh, but I don't live here", Nice try! I have been told that about 3% of our society is insane, which is to say "disconnected from reality". With approximately 336 unit owners, that means we possibly have about 10 individuals here at BLMH that fall within that definition. I am sure there are a few who would classify me as one of them.

If the board doesn't like me or my actions, they can take me to court and attempt to stop me legally. Any board member who makes statements or disparaging remarks about this site are doing so in their official capacity as members of the Board of Directors of BLMH. Such statements such as "someone should hack Norm's site" or stop me in some manner are threats and if overheard can be construed as direction or guidance by the board to attack me. I will no longer tolerate any such statements or the resulting attacks on my property.  To individuals who have made such statements, I suggest you consider who you made these statements to or who was present or within earshot when they were made, and discuss this with them and correct this. If a board member was present when others made such statements and said nothing, then you abrogated your duties and were in fact, in "collusion". Be aware that I am prepared to go to any legal length to handle this. The local police are aligned in this. By the way, this was to have been a part of the topic of the meeting I requested, and which the board refused to address in a timely fashion. So much for a commitment to communications. I am thankful for the recent call from our newly elected President, but I am unconvinced the attacks are over, and if they resume the new board members have inherited this problem and responsibilities.

In the spirit of completion, Anon. "December 23, 2009 11:04 PM" why don't you fill our unit owner "December 28, 2009 12:14 PM" in on what it is that has been going on and of which she or he is totally unawares? You know exactly what I mean and it is time for your little charade to end. If you don't want to tell the unit owners, then I will. So either leave or I will unmask those whom I am aware of and I will tell everyone everything I know about this and the attacks and if necessary I will obtain legal affidavits. And I assure you that you, the board and ultimately the unit owners here will not like the consequences. If you have any doubts about any of this, I suggest you discuss it with Mark Maute at First United.

On that note, have a happy new year and I'll be publishing the projections later this week.

Budget and Reserves

I've read the budget which was released to unit owners. This included the reserve study prepared by management and which I requested be released to unit owners. As directed by the board, management did release the study to unit owners with the proposed 2010 budget.

I don't know if unit owners have read the study. If not, I suggest you do so. It includes some interesting information.  I have updated my 2008 spreadsheets and I will be providing additional insights and perspective into the 2010 budget. Until then, I suggest the reader review the 2010 budget and in particular, the management's comments on "Roofs". To quote the report "Maintaining the current funding will limit the association to replacing no more than 5 buildings (10 entries) over the next 8 years, beginning in 2010. Management is not convinced that any of the roofs will be able to wait 8 years to be completed."  I would suggest that unit owners contact the board and ask them what their plans are, in view of this appraisal by management.

Let me state that my interest in the portion for the reserves is basic. About 72% of our fees are allocated to the day to day "budget". The budget released and with the letter dated December 1 is interesting. It seems to be essentially a duplicate of the budget for 2009. After board discussion about some items such as "bad debt" this has not been added to the budget. So there appears to be little concern on the part of the board about uncollected fees,  foreclosures and so on!?!

Our board has control of the spending of all fees collected. About 72% of the fees go to that part of the budget which is not allocated to reserves. However, some of these expenditures are less discretionary in nature than are others. For example, expenditure for electricity is mostly fixed by basic needs, such as lighting. Snow removal is another item for which there is limited budget control. The board can decide to allow more snow to accumulate before the removal service arrives for a "push". But would the residents tolerate this reduction in service?  Grounds contract and  maintenance includes discretionary items, but the board has decided to increase this slightly for 2010 and apparently will not be cutting any items in these budget items, which nearly equal the cost of the Maintenance Contract, which was so hotly debated by new board members last year - go figure!  It would seem to me that this is one area that could be closely scrutinized and budget improvements made. The board has discussed this during association meetings; for example, re-allocating landscaping budgets, re-thinking some of this, and applying river stone or equivalent around some of the buildings affected by rainwater run-off and muddy, etc. But there has been no action to date.

Some members of the board did pledge to go over the entire budget and even peruse each and every bill during their election campaign in 2008. However, the submitted budget is nearly identical to last years budget. So that effort has apparently been abandoned or has proved to be fruitless.

Returning to the proposed budget, about 28% of the fees are allocated to the reserves. That 28% is nearly equal to the amount of fee increases in recent years, lending credence to our professional manager's statement at several association meetings, that our reserves were underfunded. In other words, most of the increases in fees in the past 5 to 10 years have been allocated to funding reserves. According to the information released, the fees for reserves are collected and allocated for the purpose of roof repairs (54.5% ), paving (18.1%), concrete (12.1%), masonry (9.1%),  lake (4.5%), carpet (1.5%), infrastructure 0%) and lighting (0.0%).

The board has chosen not to fund certain items. As noted above, lighting, which is the amount for replacement of fixtures is currently 0%. Management suggested that some infrastructure funds be moved from "contingency" to "reserves". The board has apparently chosen not to do so. Concrete may be underfunded, as noted by management in the report.

Now why would the board avoid funding an infrastructure reserve and minimize funding of other reserve items? One reason is to keep fees at current levels. To fund additional reserve items or increase funding of reserve items would require a reduction in operating expenditures or a possible fee increase. I think it is also worth considering the methods available to the board for manipulating funds. Funds allocated to general operating expenses are available at the discretion of the board. If the money is not spent or appears not to be spent in the budget year, it can be moved to another category and spent at any time. Funds in reserves catagories are essentially in a "savings account" for use for the designated item. It is more difficult to move or manipulate these funds. Pulling funds out of reserves for spending on discretionary things is a "red flag" item. So I can understand the possible apprehension on the part of the board or board members in placing funds "off limits" in reserves.

However, given the history of this association, I think unit owners must be wary of the funding of reserves. In 2008 there was an attempt to replace our current management, who are financially astute. A return to the "good old days" of underfunded reserves is a real possibility if we take on a new manager. And I don't care what certifications or credentials a manager possesses. I have seen highly educated people do remarkably stupid things. Under pressure of a board to reduce fees, it would be very easy to simply let our reserves fall off a cliff, and leave future unit owners holding the bag. This did occur here prior to 2000, is currently occurring at other associations in the area, and certainly could occur here, again, if directed by the board and allowed by unit owners.  To put it bluntly, I am not certain current board members have the financial acumen or the association's health in mind. For example, after the open debates about funding an "infrastructure" reserve, in which valid points were made, it would seem to make sense to create such an item, and management seems to favor this. However, our board did not. So they have chosen to ignore "infrastructure" and prefer to gamble with the "contingency" funds available, leaving these funds available for discretionary spending rather than the funding infrastructure repairs. It is my opinion this is not a good method to run a business.

Work in Progress

I delayed posting information about the proposed budget for several reasons. I wanted to take sufficient time to update my spreadsheets pertaining to reserve expenditures. I prepared this in 2008 but never released it because the board did not release their plans, until now.

I also wanted to provide sufficient time to unit owners to read and absorb the proposed budget, prior to reading my analysis and comments. I have completed this and must admit I still have questions. However, I will release what I have.

I also was surprised to see revised R&R procedures in the newsletter delivered December 20. I am unaware of any "open" meeting in which this was discussed in the presence of unit owners. During the December meeting, it was announced that the procedures were "in review".  So I have to question how this was formulated. This topic is does not fall within the specified guidelines for "executive session" meetings. This leads me to wonder what else is being discussed behind closed doors and is being withheld from unit owners?

Thought of the Day

It is better to remain silent and be thought a fool, than to open your mouth and remove all doubt .
-- George Eliot


This is paraphrased from the passage:


Even a fool, when he holdeth his peace, is counted wise: and he that shutteth his lips is esteemed a man of understanding. 
-- Bible, 'Proverbs' 17:28

Thought of the Day

"The opposite of good is not evil, the opposite of good is indifference,"
- Abraham Joshua Heschel

Thought of the Day

"Knowledge pursues me but I am faster....."
-Anonymous

Age and Income Driven Spending

I recently pointed out that there are about 112 million blogs out there in the so called "blogosphere".  Of course, many are of dubious value, but some have redeeming qualities.

The U.S. government "Bureau of Labor Statistics" which I have used in other posts, provides data on how Americans live.  But it is sometimes difficult to extract the information. In an a nation consumed with the "10 second" sound bite, some information simply cannot be disseminated in that time period. Of course, we all have 10 minutes for Tom Skilling's analysis of the weather - go figure!

Here is a site which provides a useful calculator. It provide you with the means to compare your spending with that of your peers, based upon your age. Have fun!    BLS - Age and Income Driven Spending