Lakecliffe - "Looks expensive"

It's day 3 and I got up early to make scones and again moved my automobile off of the property. Today some identification of underground stuff is underway. The next step in construction will be stripping of forms and backfilling. I don't know the precise timetable for that.

I received a couple of comments that are both interesting and printable. This post will respond to one of them. Another post will respond to the "time to move on" comment.

The replacement of Lakecliffe "Looks expensive." Yes it is. All of the infrastructure in this HOA is expensive. From water mains to streets, streams and waterfalls, walks and other common areas and so on. Expensive to install and expensive to maintain. Maintaining a 36-37 year old village of "Manor homes" is expensive. Lakecliffe is actually the tip of the iceberg.

For example, every time this HOA experiences a water main problem, the direct cost to deal with it begins at about $7,000. That's about $21 for each owner. A really serious break at an inopportune moment can cost much more, about $300 for each owner or one entire month's fees. We get one or more water main breaks each year; it's my understanding we've had 15 or more in recent years. I suspect some are the consequence of City of Wheaton changes to their water main system. It's called "water hammer" and dead ended mains can cause that. In conversations the city has denied this. I haven't given up on that, but there are so many problems and issues at BLMH and no one to deal with them. So this will wait and probably never be addressed. The treasurer frets about the money, the board struggles to comprehend the problems while I look for causes and solutions. The owners look on and some complain.

A few years ago this HOA, even with annual water main breaks, had no specific budget item for this. It's useful to ask why not? One answer: it provided a fiction of lower annual budgets, and therefore lower monthly fees. Nevertheless, infrastructure failures must be paid for. BLMH has never has a special assessment. So where in the budget did the money come from for these water main failures?

At this point the reader is probably wondering "What do water main breaks have to do with an expensive street?" In a HOA in which boards struggle to come up with dollars for various infrastructure failures or cover lost income as the result of delinquencies and bad debt, it has everything to do with it. It's a tale of boards since 1999 that have struggled, with fits and starts, to accumulate sufficient reserves so each building gets a new roof while dealing with a variety of infrastructure problems. Lakecliffe is another infrastructure failure and a budget problem.

I will get back to that street, but a few paragraphs are necessary to get to why street repair is so expensive.

If you think budgets are scary now, you should explore the budgets for the decade of the 1990s. Budgets today may be stable. On the other hand, some initiatives are stalled and we don't have a solid grip on some infrastructure costs and timelines. Some things are being pushed down the road. That's the BLMH way.

Is maintenance of infrastructure desirable?
That's the fundamental question. If we don't maintain the property, then we can reduce the expenditure of money. We then don't have to collect those fees. It's all so simple, isn't it? But it isn't that simple. Some of the same owners who complain about their fees also chase any board member, manager or maintenance worker who comes within 150 feet. They want that piece of conduit painted, that slab of concrete replaced, new grass and so on. Why? Because "What do we get for our money?"

So even the most judgmental owners want the property in their immediate vicinity to be maintained. Not simply maintained, but manicured. They want money to be spent and a lot of it. But it has to be to their personal benefit and specification.

Boards are required to look a bit farther ahead than that. Boards are also squeezed by financial reality and owner demands. One would think that maintaining infrastructure to achieve full life would be something boards and owners would want to do, or at the very least compare cost to long term benefit. Investigate the cost of alternatives, and decide "maintain or not?" However, the operative phrase is "long term." For owners who plan on selling in one, two or five years, "long term planning and saving" is irrelevant and unnecessary. It is viewed as a waste. I suggest that is what's behind the statement of some boards and owners who promote the phrase "We have enough money." The financial problems won't occur next year or the year thereafter; any HOA with even minimum accepted financial controls can deal with those problems. It's the future beyond five years when roads and driveways will fail, roofs leak and so on.  So crass owners say "Let the future owners deal with that; I'll be long gone." If the board in place doesn't play ball, then the politically savvy can always contrive to put in place a more compliant board.

If the budget is at risk the knee-jerk decision is often "do not maintain" because on face value, that's the lowest immediate cost. There was no preventative maintenance of Lakecliffe, until it failed. Then the patching began. Maintenance was discussed repeatedly and for a time I was rebuffed repeatedly. I put forth my best arguments but it would have taken maintenance dollars. Dollars that didn't exist in the budget, or were being spent on water main failures. Or money that wasn't received because of foreclosures and delinquencies. No one wanted to spend the money and the group in 2008-9 was also too busy looking for scarecrows such as alleged management fraud, waste, and so on.

I can state with absolute certainty that more board time was spent in recent years yakking about the fireplace issue than dealing with the street problem. That's not a real surprise. We could still drive on that street so it can be dealt with later. It couldn't be failing could it? It was only 6-7 years old. Some owners took the fireplace issue a bit farther and harangued management and the board. Their fireplace was the overwhelming concern of a block of owners because it is an "in our face" problem. Some owners want the entire cost paid by the HOA. They wrongly assume their fees will remain constant. Some apparently can't do simple arithmetic. But they were assured by that earlier board that "we have enough money." Some owners trust only in those who tell them what they want to hear. The damage to this HOA is permanent.

An expensive street
Yes it is. Recent repairs and replacement have probably cost each owner about $450. Some of that was only necessary because of the failure of the street. Normally it would be strip and replace. Over a period of years I urged a closer look by an engineering professional and the current board agreed. Thank god. The problems had gotten out of control and the cores revealed that the base was so moisture laden it was on the lower edge of a slurry.

Alternatively, we could have simply thrown $100,000 at it. However, it was prudent to determine just how bad that street condition really it was and what to do to avoid digging it out in another 10 years. But not everyone agrees. After all, some of us won't be here in 10 years. So why waste "my" precious dollars today? That in a nutshell is why fees are today higher than they should be. I would also argue that this is why the street is in the present condition. Even well meaning board members are inclined to "duck and cover." After all, why be the bearer of really bad tidings in a HOA where the few can't wait to shoot the messenger?

Of course, the street problem is really a larger financial problem than might be readily apparent. The area being replaced is about 1/5 of the entire surface area of all streets. In other words, the premature failure of the other streets is also a real possibility. If so, the cost of early failure to each owner will be about  $1,125. That's about $10 each month for a decade in higher fees. Simultaneously, this HOA has to begin accumulating fees for the next street replacement in 15-20 years. It does all add up, doesn't it? Most owners are oblivious because these amounts will be embedded in those monthly fees. For BLMH, this "kick the can" down the road approach has assured higher fees in recent decades. It has also assured that any board that attempts to deal with these problems will be attacked, and so we are.

A worker yesterday commented that the street looked to be 30 years old. It isn't. It's 12 years old and has had 5 years of serious patching.

Protecting our investments
So what will this HOA do now to protect this very expensive investment? At BLMH, boards struggle with the finances. So some things just don't get done. For example, this HOA does not have a formal maintenance program for the streets. Boards discuss this from time to time, but with the exception of spot patching, there is no maintenance done.

Why is that? It's all about money. Money and poor decisions promoted by owners. What am I talking about? While it is true that a well designed and properly installed street may last up to 25 years, here are the underlying facts. “With a good maintenance program consisting of regularly scheduled inspections, spot repairs to damaged areas, and periodic application of a sealer, asphalt roads will have an expected service life of 20 to 25 years. If maintenance is ignored, the service life of an asphalt road can be as short as 10 years.”

Here at BLMH, maintenance of streets has been generally ignored. I took the initiative to assure it was discussed, but street maintenance will increase the annual maintenance budget. Several years ago a manager sided with the "do nothing" board and argued against crack filling. However, there was no interest or willingness on the part of anyone to get the opinion of a registered professional civil engineer. It was made clear to me that any opinions, if they were to be sought, were to be from paving companies. Why? Because such opinions are free. They may also provide bad advice. Something went very, very wrong on Lakecliffe. How else can a street experience early signs of catastrophic failure in only 8 years?

The hidden costs
The failure of Lakecliffe had hidden costs. The residents of about 96 units have had to deal with the consequences. I am one of them. I've also spent untold hours, probably two hundred or more, researching this problem, looking for causes and solutions, preparing sometimes elaborate reports for boards or emails and arguing until I was blue in the face about the merits and necessity of action. All for naught. 

Why do I say that? It's simply because all of my time and efforts were a complete waste. Boards did next to nothing for a critical 4 years and the street failed. Then we slid into damage control. My goal was to prevent failure. I didn't achieve that. It was impossible to achieve with the structure at BLMH. What is necessary is an organizational structure called a "structure for fulfillment." What BLMH has is a "structure for failure." Today, the same people who argued against spending money now come to meetings and wail about how inconvenienced they are. It's all the board's fault, they say. So it may be, but they are the ones who elected the "do nothing" boards and they are the ones who have done everything possible to disrupt this HOA.

To be honest, the personal costs to me were enormous.

Our fees are "too high"
That's the underlying problem to be dealt with by the current board, and all recent boards. Owners chant this en masse. Chants are easy. Doing the real work, that is not easy.

"Our fees are too high" was a comment most recently made to me by a board member while the street work was progressing. I do understand that some of our residents probably can't afford to live here and I have stated so. I have also spent more time, personal money and energy attempting to figure this out than any other person in this HOA. I have also spent more time in recent years attempting to come up with solutions than anyone else at BLMH.

Some of the contributing factors to our fees were made several decades ago. In rough numbers the current monthly cost to each owner to live in this PUD carries a premium of at least  $70 per month.

• Monthly catch-up fees for reserves not collected 1990-1999 = $50.
• Monthly cost of premature failure of Lakecliffe = $10
• Monthly cost of water main failures = $10

I sent a personal letter to each and every owner about the real problem of budget shortfalls in what, 2009? A few board members pitched in to cover the mailing costs. The "change" group and some ever ungrateful owners had run some of the earlier board off. The fundamental idea was "we have enough money" and so that group was elected.

That $70 per month is going into the HOA coffers to cover the current and necessary costs of dealing with the numerous infrastructure problems and of course, previous failures of boards to collect and accrue sufficient fees for streets, roofs, garages, streams, etc. It is today being spent on "Damage Control."