The board voted for a 0% fee increase for 2010 during the January meeting. Now, there are some, including myself, who are concerned that this may have been a mistake. Three experienced board members made statements during the meeting in favor of a small increase; one is our current treasurer and two are former board members including past treasurer and president. I understand management made a statement which contradicts their earlier, published data.
So who do I believe and how can I protect myself in the event one side of that debate was in error? What can I personally do? Well, let's take a look at the underlying concerns unit owners might have.
If our association has made an error, then they will at some time in the future, raise our fees. In fact, fee increases are unavoidable if for no other purpose but to compensate for inflation and erosion of the dollar. As I told one of our board members during the recent "coffee with the board" social "if you want to play you need to pay". So, what can I do to prepare for these future increases?
In my specific case, I am currently paying a monthly fee of $308.57. A 2 percent increase this year would have raised it by the following amount:
0.02 x $308.57 = $6.17 per month
So, I have two choices. I can save this for the specific purposes of preparing for future increases or, I can spend it. As I am now "forewarned" and I do believe that there are going to be future fee increases, it would make sense for me to put this amount aside. So that's exactly what I am going to do. I am going to put 12 months worth of this 2% increase, or 12 x $6.17 which is $74.06 for all of 2010 into a special bank account which I call my "Savings for future fee increases" account.
In my case, because I am a "B" unit owner, I have been putting a small amount into this account each month, so that I can be prepared for the day when I must replace the "dormer style" window as part of the roofing project. That project will be somewhere between 2 and 7 years in the future, if our management company is correct in their assessment of the situation.
That was easy, wasn't it? So I am now prepared for the future. I'll reevaluate this each year at the time the board does the budget assessment and I'll either increase the monthly amount or decrease it as I see necessary. If the board does not exceed the "Operating and Maintenance" budget and our reserves grow adequately then, I might be in a position where I actually have a surplus in that savings account. That would not be a bad thing now, would it?
I agree with a comment our treasurer made. He said something like "unit owners can financially deal better with small annual increases than larger, infrequent ones". Amen brother!
If you also agree, then I suggest that you too put a small amount aside each month, in a cookie jar or whatever, for those future assessments. You too will be prepared and if our board reverses direction at some time in the future, or there is a large increase in monthly fees, you can just reach into your cookie jar and not be overly concerned about the effects of a larger increase.
Think about it!
Above: Intermittently, for a time, boards informed owners of association finances
Newsletter 2008 excerpt is an example of earlier board willingness to communicate with owners.
The boards of 2019-2021 prefer not to do so.
https://tinyurl.com/BLMH2021
Life and observations in a HOA in the Briarcliffe Subdivision of Wheaton Illinois
Best if viewed on a PC
"Briarcliffe Lakes Manor Homes" and "Briarcliffe Lakes Homeowners Association"
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 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:
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
My increase too would be $6.17. That is not hard to factor into a budget. Look at it this way, just give up one thing a month, such as dinner out, or a book purchase, etc. That's far easier to do than to have to come up with 6% or 8% or 10% or.................I am in total agreement with you. Thanks.
ReplyDeleteAnon. 1:38pm, to answer your question about anxiety, let’s do the numbers. I’ll use my actual fee as an example. The goal of my savings plan is to reduce the impact of future fee increases on my monthly budget. Of course, the more I save today, the better prepared I will be, but in my example I decided to save all of the very modest fee increase discussed, but not passed by the board.
ReplyDeleteOur board announced a 0% increase in fees, so my fees per month will not change for 2010 and will be $308.57 for the entire year. However, I’m going to save an additional 2%, which is $6.17 each month for the entire year (12 months), which I will put in my “fee cookie jar”.
I don’t know what the board will do next year, but let’s say they decide, for whatever reasons, to increase our fees by 6%, which is the number you used in your comment. In my case, that means that my fees will increase by
0.06 x $308.57 = $18.51 each month
So, when I get my bill from the association, it would be
$308.57 + 18.51 = $327.08
However, in 2010 I saved, in my “fee cookie jar” the amount of $6.17 each month.
I'll remove $6.17 each month from my "fee cookie jar" and use it to help pay for my monthly association fee. So I am actually reducing the amount I have to take from my household budget each month, as follows:
$327.08 - $6.17 = $320.91 taken from my household budget each month
So, in my example, my household budget for 2011 would be adjusted by this additional amount each month:
$320.91 - $308.57 = $12.34 per month additional
It just so happens that $12.34 is a 4% increase over my fees in 2010:
$12.34/$308.57 = 0.04, which is an increase of 4%, or
6% increase – 2% from “cookie jar” = 4% budget increase
So I would have to adjust my household budget, in 2011 for a fee increase of 4%, rather than the announced 6%. This reduces the bite on my finances, because I saved a few dollars to assist me in covering this increase. If our treasurer is correct, and I think his statement has merit, it is easier to adjust for small increases. That has certainly been my personal experience. Eventually I’ll spend all of the savings in my “fee cookie jar” but by then I can adjust my discretionary budget or, hopefully, will have a bit more income. Even people on fixed incomes do get SS increases nearly every year. But, as I told a board member recently, as far as I am concerned, “we all are on fixed incomes”.
So, by saving a little each month, I will be better prepared for a larger increase should it occur. The source of some of my concern is the question of where to adjust my personal budget to come up with funds to pay for large fee increases. I don’t know what you consider a “large increase” to be, but for me, I take notice when fees increase at greater than 5% in any one year. I wrote a long post on that, and I should point out that our average fee increase for the period 1984 to 2010 has been 4.89% per year. A 0% fee increase is "off the radar" as they say!
So, if you save 2% of your fee this year, you will give yourself a one year reduction should the fee increase next year, or return to our long term average, which it will. Of course, you can save more. If you save 4% this year, then you would accumulate enough to help for a longer period of time.
Knowing that you have that “fee cookie jar” should lower your anxiety.
Hope this answers your question.