Welcome to the New Board

Summary
This is to welcome the new board, indicate some of the changes and provide a glimpse into the lively discussion which occurred at the annual budget meeting. That meeting was attended by a few owners. I also provide additional information on the plans for improved cost accounting and why it should occur.

Mission Impossible?
Each owner expects repairs to be made to the building housing their unit, when a problem arises. Many owners expect immediate response when they face a problem. Each owner expects their driveway, entrance, or street to be plowed, or repaired immediately if not sooner. Each owner expects good streets, walks, lawns, wonderful landscaping, trimmed trees, working streams, mosquito abatement, working lighting everywhere, clean hallways with nice carpeting, serious exterior repairs with fresh paint every 6 years, a good driveway, a good garage and a good roof. Some expect to step off their patio into a green garden. The list of requirements is extensive. Yet, each owner also expects "fees as low as possible" with only small annual increases. Some expect someone else to pay these costs. The bad news? The only people who can pay for any maintenance and improvements in this HOA are the owners. We each expect the same treatment and conditions. That means, we each get to pay an equal amount because there is no one else to pay for these expectations. Each owner should also get the same treatment. In other words, there is no one else to pass the buck to.

This HOA isn't Illinois, which is $100 Billion in debt, and it isn't the U.S. Government, which can print money at it's discretion and bail out banks and stupid homeowners, etc. .

I'm sure the reader understands the difficulty each of us face when preparing our personal budgets. Multiply that by the long term planning required by 336 or 84 entrances in 44 buildings and you will get an idea of the magnitude of the problem facing the board and management. Here is the really bad news; a few of our owners are completely oblivious to the facts. They pretend they live in an apartment or a retirement community. The good news? They aren't a majority. The reality? As fewer than 50% of our owners vote in an annual election, it's very easy and very possible for a minority to gain control. That's what happened in 2008.

This is a large, complex, aging HOA which is a PUD. Some of the projects facing this association require 5 to 10 years to complete. Some are very complex. Each needs to be identified and then a plan developed to deal with these problems or projects. This implies a lot of planning. It also requires comprehensive budgeting. Many of us have difficulty planning our personal budgets. Image the difficulty facing our boards. With professional help our boards are required to develop plans for decades, determine the finances and savings required to accomplish those plans and then collect and save the funds so those plans can be realized.

It is also expected these plans will be accomplished with only small annual fee increases. Or none.

2015 will be an interesting year. Having a full board will certainly make a difference.

Welcome
It was that time of year and BLMH held the annual election. We had sufficient candidates and votes to completely fill the board. This is the first time in several years.

Welcome to the new board members and thanks to the old. Prior to the election the president made a brief statement at the annual meeting to thank everyone on the board.

Architecture & Maintenance Duty Changes
We will split the duties of the Architecture & Maintenance, and two of us will be preparing the newsletter. I'll continue to be active in all of these areas, but I will focus on long term issues, projects and cost accounting. This will be essential with continued street replacement on the horizon and other infrastructure issues or problems. Our HOA and its facilities are now well into "middle age." That's a time when additional infrastructure replacement becomes essential. It is time to identify these areas, their real costs, establish timetables that the board can agree upon and the plans to accomplish these tasks.

Finances, Budgeting, Project Planning and Cost Accounting
What was necessary at the budget meeting was to come to an agreement about what will be required for Operations & Maintenance (O&M) budget for 2015 while accommodating known reserve requirements for 10 years hence. Those reserve requirement will have a significant impact on the budget.

As I have written in previous posts I have a goal to stabilize association finances. Our reserve study is an important part and includes a 30 year projection. What is also necessary is a more detailed plan for the coming 10 years. The plan was touched upon at the annual meeting and outlined more thoroughly at the association budget meeting in October. Several owners attended and experienced a serious discussion and debate about reserves, the projects anticipated to occur in the next 10 years and the funding requirements for these projects. There are differences in opinion. To make this more difficult the update to the reserve study is not complete.

I was able to provide the board a projection of reserves balance on January 1, 2015 which was confirmed by management. I was also able to provide a detailed list of projects, timetables, costs and possible reserve balance on January 1, 2024 which is 10 years hence. It was beyond the scope of the meeting to determine the precise calendar for these projects. However, that was not a necessity for determining the annual budget for 2015.

The board also looked into the Operations & Maintenance budget for the coming year. Adjustments were made to several expense categories in anticipation of higher costs in 2015. Of course, projections are just that. However, the boards have had many of the tools necessary to make these projections a reality. Those tools include professional management, the previous year's budget and the projected, actual costs of that budget. The board also has the current reserve study, the costs to date for the replacement of the street and the roofs, and the current reserve balance.

What was necessary to complete this was to determine the percent remaining for roofs, probable costs for the remaining streets, and the list of projects recommended by the reserve study for the interval 2015-2024 and their projected costs. The final questions during the budget meeting to be answered by the board with management assistance included:

1. Fees required to fund these projects.
2. Possible schedule 2015-2024.
3. Projected reserve balances 2015-2024. 

Ideally, the following would also be known for each project. Do do the following will require more work than can be accomplished during a budget meeting. The information I provided to the board and management prior to the budget meeting and during that meeting took many hours. The following will take many more:

1. Percent completion to date and percent remaining.
2. Costs to date.
3. Anticipated or projected costs to complete per items 1 and 2.
4. Anticipated project overages using the above items and the reserve study. 

Why do the above? This is a large HOA. Some of these projects require 5 to 10 years to complete. Some are very complex. This implies a lot of planning. Many of us have difficulty planning our personal budgets. Image the difficulty facing our boards. With professional help our boards are required to develop plans for decades, determine the finances and savings required to accomplish those plans and then collect and save the funds so those plans can be realized.

Masthead Photo
The newsletter always contains a masthead photo which shows one aspect of the grounds and property. These are recent photos. The purpose is to indicate what residents see each and every day, somewhere on the property. Those photos provide a sampling of the 44 buildings, walks, grounds, streams and lakes. Each and every one of these and the acres they occupy are to be maintained with owner fees.

I'm including the masthead photo for the coming newsletter here. Other photos in the newsletter are also taken on the property where that is practical. One can assume all outdoor scenes are at BLMH unless otherwise noted. That includes wildlife, grounds, trees, shrubs and the lakes.

The photo above was taken early the morning of October 19, 2014. That's frost on the hill in the background with the sun rising behind the trees to the east-southeast.

How Improved HOA Cost Accounting Will Reduce Fees

Summary
Our HOA has based it's annual financial plans on the following;

• Previous year Operations & Maintenance (O&M) Budget and Actual Expenditures
• Identified changes to the O&M budget for the following year (utilities, contracts, etc.)
• The most recent reserve study projection

What has been lacking has been cost accounting for projects with recognition of current reserve balances compared to projected balances and unfinished work. For example, in 2014 this HOA began a street replacement project 6 years earlier than planned. Yet, if we simply look forward to the expenditures 2015-2024, the reserve study indicates all streets are to be replaced in 2020-2022. A failure to identify the fact that we have replaced 20% of the streets in our HOA in 2014 overstates the future reserve requirements for this project. A failure to identify such expenditures as "complete" or "partially complete" will overstate the requirements for reserves in future years.

To further complicate this, our "trunk line" or major street artery is Lakecliffe. That street carries all traffic of this HOA and is therefor the major street in this HOA. This implies that this street must be built to more costly standards to avoid resident disruption caused by premature street failure. Other, feeder streets which serve only a portion of the residents may require less costly street construction. Of course, all streets should be constructed to a standard which provides at least 20 years life. 

The completion of one-half of the major street in this HOA in 2014 should have an impact on future street replacement reserves. Will it? Not necessarily. This will occur only if cost accounting procedures identify this significant infrastructure improvement and future boards are enabled to adjust reserve requirements. 

The impact on future fees will be determined by identifying the actual costs to improve the 2014 portion of Lakecliffe and then apply those costs to the remainder of the costs for the streets in the HOA. So too for other capital improvements. This is typical of the cost accounting requirements for all projects, be they streets, roofs, driveways, garage floors or whatever.

A failure to properly adjust capital budgets as determined by current percent completion, actual costs and future requirements will result in less than optimal reserve funding.

One Picture (or two) is Worth a Thousand Words
Here's two charts which provide an idea of what is possible:

Ths chart indicates possible annual funding of reserves for the HOA. This is for reserves only. Operations & Maintenance (O&M) budgets are not shown and are in addition to this:

This chart indicates the same annual funding of reserves as monthly cost per owner.

The two charts are identical, but the numbers are displayed as monthly fees per owner and as annual reserve collections for the HOA.

The reader will notice that the actual monthly fees are lower than the projected after 2014. There is a valid reason. That reason is simply this. Improved tracking of reserve requirements versus actual costs would determine that we were accomplishing more at lower cost. This means lower future reserve requirements. If requirements are lower then fees would be lower.

If this HOA simply and automatically follows the reserve study funding things would be very different. That's the blue line in the charts. However, this HOA is using project management, cost accounting and rigorous fee analysis to determine the budget requirements.

Had we not done so, here is what this HOA would have experienced:

• 2014 fees per owner for reserves of  $117.06 per month per study versus $111.17 actual per owner. 
• 2015 projected fees per owner for reserves of $120.04 per month per study versus $93.27 actual per owner.

In other words, our owners should expect lower fee for accumulating reserves. If we compare the automatic fee increases dictated by the reserve study to the actual reserve requirements, our owners will have a monthly fee $18.43 lower, or $221.16 lower in 2015 to meet reserve requirements.

Of course, future events are never guaranteed. Future reserve studies and future boards may alter this plan.

The Groundwork and the Case for "A Better Way"

Summary
There is a tangible benefit to improved planning. We have more to do. The question remains who will do this? Will it be a board priority and will the board then allocate the necessary resources to get it done?  I say this HOA continues to operate from a planning perspective on a year by year basis. That is not realistic nor is it adequate. If we simply adjusted project schedules and collected an annual amount equivalent to the average fee required to support reserves for the next 10 years, I am of the opinion our monthly fees would actually decrease. We need to establish a new baseline for fees and we need better annual capital project cost accounting, including percent completed, percent remaining, dollars spent to date to achieve completion and dollars required to complete.

Hint: Click on images to enlarge

This post presents the problem and a solution. We need to establish a new baseline for fees and we need better annual project cost accounting, including percent completed, percent remaining, dollars spent to date to achieve completion and dollars required to complete. We also need to carefully monitor expenditure of Operations & Maintenance budget hours for capital improvements. Mis-allocation will result in higher or lower than necessary fees. Most likely higher. Why do this? We need fees that are realistic for the identified needs of the HOA and we need to avoid stressing owners.

Chart 1:

The chart above indicates the allocation of fees since 2002. It's readily apparent that a substantial part of the fee increases is attributable to funding of reserves. It wasn't until 2005 that the reality of the costs of the infrastructure replacement hit home at BLMH. Yes, the boards of 2000-2005 did increase annual reserve funding from $148,000 to $185,000. But in 2006 the amount collected and contributed to reserves hit $240,000 and that requirement did have a real impact on owner fees. To fund reserves, fees had increased about $23 per month.

For the first 26 years of this HOA the contribution for the "replacement fund" or "reserves" via fees was apparently less than about $35 per month per owner. In 2002 the average monthly fee for reserves had increased to about $36.73 per owner. It then increased with leaps and bounds at an average rate of about 10% annually from 2002 to 2014. After 12 years of increases the amount contributed by the average owner per month toward reserves has reached about $111.17.  Fees put into reserves has tripled since 2002. During that same time Operations & Maintenance budgets had increased only 39%.

Chart 2:

Annual Fee Increases For Reserves Have Not Been Stable
The above chart shows the annual fee increases attributable to Reserve collections from 2002 to 2014. Now, reserves are supposed to be a long term component of fees. In other words, reserves are supposed to accumulate over decades so that things such as streets, roofs and so on can be replaced. Many of these "things" have normal life spans of 15 to 25 years. In other words, it should be possible to predict the amounts to be collected each year so that the appropriate reserves can be saved and special assessments can be avoided. There are exceptions. It is difficult to predict the life span of certain aspects of infrastructure, such as water mains and sewers.

Considering that infrastructure replacement is a long term thing, it should be possible to smooth the amounts contributed to reserves. Reserve studies look ahead 30 years. Of course, if there is no reserve study collections are probably achieved via educated guesses. Another problem may be a reserve study that is truncated and incomplete. In either circumstance funding of reserves will also be incomplete. On the other hand, it's possible to over do it. There is a very real benefit to owners if the management and the board uses a well prepared reserve study and develops realistic, definitive plans from that study. That is precisely what I have been advocating.

Benefits of Long Term Planning and Stable Reserve Funding
One benefit is have the funds available to do the necessary work when the funds are needed. Another is the ability to communicate these plans to the owners, who are the shareholders in the HOA. Small incremental increases are easier for owners to manage via their personal finances. Another benefit is the lowest possible fees for all owners, today, tomorrow and 10 or more years into the future. The Illinois Condominium Act states that all owners are to be treated equally. I take that to mean current and future owners. In other words, fees should be smoothed and realistic so that everyone pays a fair share. Of course, some HOAs may prefer targeted special assessments in combination with modest annual reserve collections.

Unfortunately, BLMH has Not Experienced These Small Incremental Increases
Bear in mind that approximate 30% fee increase for reserves in 2006 resulted in a $13.64 monthly fee increase for the average owner at BLMH. That does not include any increases for Operations & Maintenance (O&M). That $13.64 has been collected each and every month for eight years.

The year before, in 2005, the amount of the increase for reserves was about 10%, or about $4.22 per month per owner. These increases add up. In 2008 owners were irate because of the fee increases. There was a lot of talk and hot air about using handymen to maintain the complex. They really missed the elephant in the room, which was the steady increases in reserve contributions.

I'm confident that some of our owners have been stressed because their income and personal budgets have not been able to compensate for 10 years of increases. Nevertheless, our overall fees have increased about 4.5% per year (2002 to 2014). Some would say that is a modest annual increase. Perhaps, but owners have had to allocate a larger portion of their disposable income to HOA fees each and every year.

Better Way - A Work In Progress
There must be a better way. We are part of the way there, but this HOA continues to operate from year to year. That is perfectly understandable for O&M which does react to fuel increases, insurance rates, water and electrical rates and so on. But reserve contributions? We can certainly determine long term reserve requirements, and we are doing a much better job at that. But are we using the information we are being given? Do we truly have a workable plan? I say this HOA continues to operate from a planning perspective on a year by year basis. That is not realistic nor is it adequate.

For example, does this HOA annually compare the amounts collected for reserve items to the percent completed to date and then recalculate the remaining sums to be collected to complete these projects? Our boards have always emphasized O&M planning. We are beginners at project cost accounting as applied to reserves.

There is a consequence to our new awareness. In 2014 more than 33% of the fees of the typical BLMH owner went into reserves. In 2002, less than 19% was allocated to reserves. That 14% increase required an additional $74.44 average monthly fee from each owner. Yes, that 14% reserve fee difference represents a large number. As I said, these things do add up over time.

The average allocation to reserves since 2005 has been more than 29%. This HOA has collected more than $3.8 million for reserves from 2002 to the present. Most of that sum, or about $3 million has been collected for reserves in the period 2006 to 2014. More than half of the total has been collected via fees in the last 5 years. Nearly 42% has been saved, but that will probably decrease by December 31 as the bills for all 2014 projects are paid.

There are certainly benefits. Our streets are projected to be replaced in 2020-2022. That project began this year and it did not require a special assessment. It is likely the south portion of Lakecliffe will be replaced in 2016 and that other work will be done prior to 2020.

Predicting the requirements for reserves and smoothing fees is a recent thing at BLMH. Returning to Chart 2 you will notice that in 2011 the changes are approaching zero percent. You will also notice that in the prior year there was a 0% increase. That was possibly an aberration by a new board. It is very, very difficult for anyone to be elected in September and then three weeks later attend an annual budget meeting and make a valid decision. I've commented that this HOA should shift to an annual budget plan spanning from March to February or some such. This would give the board time to get "end of year" financial data together, come up to speed, and then vote the new budget. Fees would be calculated for the period July through June. I don't ever expect to see this in my lifetime at BLMH; change can be difficult.

Returning to the chart it seems that the amounts required for reserves may be stabilizing. In 2011 there was a large increase to get our reserves up to where the most recent reserve study indicated they should be.

In fact, if we simply adjusted project schedules and collected an annual amount equivalent to the average fee required to support reserves for the next 10 years, I am of the opinion our monthly fees would actually decrease.

How can that be? In 2007 our management predicted that our requirements for reserves would eventually plateau. For planning purposes it is assumed that infrastructure costs increase at an average of about 2.2% per year. In other words, once the fees for reserves match the requirements of the infrastructure of a HOA, then the annual increase for reserves should not be more than 2.2% on average. Reserves being 1/3 of or annual fees implies our reserve fees should not increase by more than 2.2% in any year.

Of course, there is always the unexpected. That could include a large insurance premium increase, a significant or unexpected infrastructure failure, a new reserve study which identifies previously unrecognized capital items, and so on. There is also the possibility that we are doing a better job on some of the larger capital projects, such as the roofs. We could come in under budget. If so, the funds not spent could be allocated to other projects. That could have a beneficial impact on owner fess. With long term O&M budget increases of about 1.1 to 3% per year, it would be reasonable to expect fees to stabilize at a new baseline. I cannot state what that baseline should be. Will it be higher or lower than our current fees? Once established, its also reasonable to assume that there will be annual increases of between 1 and 2% per year.

There is a tangible benefit to improved planning. We have more to do. The question remains who will do this? Will it be a board priority and will the board then allocate the necessary resources to get it done?

A Possibility of Funding Overshoot
However, for a HOA such as BLMH which collects via 10% [reserve portion] annual fee increases there is also the possibility the HOA will overshoot and collect too much. In other words, there is a real possibility that a HOA can collect more than is required. That is precisely why I pressed for a reserve study update in 2014. We are nearing the end of a major capital project. It seems the roofs will come in under budget. That includes the roofs and drainage modifications.

If we do overshoot, that will relieve some of the financial pressure by the earlier street project. However, my charts include the period through 2024 which includes completion of all roofs, streets and entryway doors, mailboxes and intercoms. In other words, we seem to be funding reserves adequately [per the 2011 reserve study].

This HOA has been ramping up fees for reserves steadily for over a decade. How much each year? About 10% more each and every year, on average. This is how we went from a reserve balance of about $300,000 to over $1.7 million, while doing the roofs, driveways and about 20% of our garage floors. However, this is a moving target. We are within three year of the completion of the roofing project and we began a major street project this year. In other words, on January 1, 2015 this HOA will probably have about $1.2 million in reserves.

One thing our management and board can do to smooth fees is adjust completion schedules for streets, etc. We're supposed to replace all of the streets 2020-2022. We began in 2014. However, if we look closely at all of the projected reserves expenditures from 2014-2022 and then collect the average amount each year while closely monitoring expenditures, it should now be possible to collect an average amount each year for each and every of the next 10 years.

What would that look like? Here is a chart which includes annual Operations & Maintenance budget increases of 2% while meeting all requirements for reserves identified in 2011. It extends to 2024. It does not include a fully realized baseline fee adjustment because at the time I prepared this chart is was unknown.

Chart 3:

What would this mean for owner fees? Here's a chart 2002 to 2024 which includes 2% annual increases for Operations & Maintenance (O&M) . In fact, for the period 2009 to 2014, the average annual fee increase for O&M budgets was 1.1% per year. Assuming a 2% annual O&M increase would be reasonable, wouldn't it? It is important to point out to the reader that the O&M budget is arrived at annually. Only reserves should be accumulated from year to year. If there is a O&M shortfall, it is possible for the board to "borrow" from reserves. That money must be paid back, and I would think it should be repaid within one year. In other words, if the board miscalculates the O&M budget by 1/2%, that would require an adjustment in the next year. How much of an adjustment? In 2014 our O&M budget was $886,827. A 1/2% error would require a $4,434 adjustment. That's about $1.10 per month per owner. My point? A 1/2% error is not catastrophic.

Chart 4:

Note:

1. I am aware of the prevaling wisdom that a fee increase of 0% is not a good idea. In general I support that. After all, we all know that costs do increase each year. Long term inflation for consumers may increase the price of goods and services by 3% or more per year. However, if a HOA becomes a "supersaver" and puts aside as much as 33% toward reserves, at some time a limit will be reached. At some point in time, that HOA will be saving more via reserves than might be required.  
2. The reserve study update will be helpful in sorting this out. But it is not yet ready and the annual budget meeting is a few days away. What would you do? 
3. I have the same information available as do many of our owners. I used the information of the published budgets to determine what was happening. However, I also added the information contained in the reserve study of 2011. I also walk the property and count such things as remaining roofs and driveways and note their condition. Anyone can also walk the property and count the number of completed roofs and driveways and so on. Most owners might not be aware of the details and intricacies of the reserve reports. These things are discussed openly at HOA meetings, as are bid selection, costs and so on. I also realize that it is impractical for owners to attend every HOA meeting and take notes. So I put the funding level information here. 
4. There is no certainty; that is true. One of the very real fears for a HOA board is the possibility of undershooting the requirements of the budget and then either requiring a special assessment or a large fee increase in the next year. I am aware of the argument that " a 2% fee increase is better than a 0% increase followed by a 6% increase." However, I am of the opinion some of this fear is not grounded in current reality. Remember, in 2002 this HOA had about $222,000 in reserves. We were about to begin the replacement of all streets and the roofing project. The financial plan was clearly inadequate and the fears of the boards must have been real and palpable. This HOA had dug a deep, deep financial hole and it took years to fill it. "That was then and this is now." It isn't 1999. We do have reserves. We do have a bona fide reserve study and we have an update in preparation. Our current reserve study includes new entry doors for all buildings, completion of roofs, garage floors, streets, curbs, gutters and so on. All prior to 2024. 

Cinnamon Bun Taste Test - condo Cooking

I was asked if there is a video of a taste test. Here is one I made in March 2013.

A portion of this batch was baked in a metal pan, so it would be crispier. That's the preference of the tester.

More Cold Weather Cooking - Cinnamon Buns Part 4 & 5

This is part 4 and 5 of my multi-part video on making cinnamon buns.
Part one was making the yeast sponge. Part 2 was about the ingredients and making the dough. Part 3 was about additional preparations.

Part 4 the dough has risen and I begin working the dough. Part 5 is creating a dough roll, cutting it into buns, baking and then adding a lemon glaze. There is a also a brief discussion about the significance of yeast and the impact of various rise times.

The original videos were filmed on December 24, 2013. This has been but one on my very long task agenda. I estimate that if I took on no additional duties responsibilities or tasks it would take me about 60 days to clear my task agenda.

That won't happen.

More Cold Weather Cooking - Cinnamon Buns Part 3

This is part 3 of my multi-part video on making cinnamon buns.
Part one was making the yeast sponge. Part 2 was about the ingredients and making the dough.

Part 3 is about the background work including grinding cinnamon, melting butter and preparing the lemon for the glaze while the dough rises.

Yes, there are some spelling errors. For example, drixxled is really drizzled. Deal with it!

More Cold Weather Cooking - Cinnamon Buns Part 2

This is part 2 of my multi-part video on making cinnamon buns.
Part one was making the yeast sponge. This part is about the ingredients and making the dough.

More Cold Weather Cooking - Cinnamon Buns - Part 1

A version of the above photo was in the Chicago Tribune a few years ago.

With the arrival of Fall on September 23, the outdoor cooking season is growing to a close. We can continue to BBQ for a while longer and I'll post two different styles of gas BBQs I use.

With the arrival of cooler weather it is time to think about baking. G beat me to the punch this year and made apple pie with fresh Cortland and Honey Crisp apples from Michigan.

When it does finally drop below 40F that will be the signal to begin serious baking.

One of my favorites is home made cinnamon buns. This is the first in a series of videos on making cinnamon buns. I've used a variety of recipes, but my preference has been adapted from a 1967 edition of the Joy of Cooking, which I own. I've experimented over the years and made modifications. I now have a recipe which is consistently delicious, isn't overly "yeasty" and can be tweaked to be lighter, reduce calories and add nuts, etc. However, my basic recipe has some lemon rind in the dough with raisins and a small amount of candied fruit. It is allowed to rise several times and by altering the time will be lighter and fluffier. I also modify the amount of butter,etc. but most people prefer the real McCoy,

Part one is making the yeast sponge.

In Momentum, for the Present

Each of the board members gave a short progress report to the owners who attended the recent annual meeting of the HOA. How many owners was that? Oh, about 14% if we include the members of the board! The motivated owners who attended are actually statistically outnumbered by the delinquent owners. Is that a good thing?  Meanwhile, some promote this HOA as a retirement community. Whatever it is, as long as they pay their fees, the owners can call it whatever they like. I prefer "Club Med Wheaton." Club Med offers just about everything for singles, couples and families, but doesn't have a "Club Med Retirees" website. Same as BLMH.

2014 Reality
I provided a two-part presentation to the shareholders. Part one is included in this post.  The second part will be posted later. During the meeting I overheard one owner say "Norm's been on the board for more than four years, hasn't he?" No, I haven't but it does seem to have been much, much longer.

The Importance of Momentum
You might well ask "Is momentum important?" In this circumstance it is. I define momentum in this circumstance as the ability to define a plan so as to achieve a desired result,  There is such a thing as negative momentum. For a decade or more this HOA implemented a plan "to keep fees as low as possible." It was a stunning success for our owners in the 1990s; low fees accomplished by minimal infrastructure repairs and no saving for long term reserves. Then in 2002 the new roofing program began and the bill came due.

At BLMH our momentum was in reverse. Yes, a HOA can achieve negative momentum. It is what is called "a downward accelerating spiral." If a HOA falls behind in maintenance and reserves as this one did, it is very, very difficult to catch up. The professionals I have discussed this with do agree. It takes time to build finances, it takes time to build a team, it takes time to shape opinions, it takes time do the the necessary maintenance (not only for this year but for past years) and it takes time to undo past mistakes. It takes time to demonstrate the possibility. It takes time to get owners on board, and it takes time to counter the misconception "What we did always worked." Based upon what standard? Yes, it is true we do have a plan. But then, this HOA has always had a plan. The problem is seldom planning; it's execution. We've had decades and decades of plans. So how is it we had no reserves?

If in reverse momentum and if things are spiralling out of control, time is one thing we might not have. In 2008 the clock had run out. Not simply for this HOA. That was the environment I encountered.

It takes an incredible amount of effort to get a body which is at rest to begin to move. If it is going in the wrong direction, even more energy may be required to shape opinions and alter the course. It is important to realize that the boards at HOA operate entirely at the whims of the owners. Past boards trained our owners and created financial expectations. The owners then elected boards to implement those expectations. It was a circular, mutually reinforcing system, and in our little bubble it was perfect, for a time. How to break the bubble, create a consensus to change opinion and create a will to succeed? Well, the bubble would and did break of it's own accord. No help from me was required. "If it is too good to be true it probably is" and it was. It was smoke and mirrors. Bute everyone loved it.

To move forward in such an environment persistence and communications are a necessity. At BLMH the first task was to improve the newsletter concurrent with slowing the current direction. Only then could movement be created in the necessary direction. It was somewhat like getting in the way of a boulder rolling downhill. During the two years prior to my work on the board my task was to slow down that downhill boulder. Only after it was stopped could the real work begin. Only after a sufficient number of owners were willing to take the steps toward "a better way" could the real work begin.

There was no real consensus about the newsletter. But there is always a need for results. I did what I always do. I don't care about promises; those are so easily broken.  I do care about commitments and that's what I made. The newsletter is a reflection of my commitment to commitment. I have 50 years as an adult of training, education, trials, errors, failures and results to draw upon in this arena. I have learned what works best, what doesn't, and how to get results. I applied all of them here.

For the next four years, the task was to move that boulder, this behemoth of a HOA, in the necessary direction. It was initially slow going, but a tremendous amount of background work had to be done and commencing in the fall of 2010 there was very little time remaining to get visible action. There wasn't a team in place capable of the necessary tasks or capable of making the necessary decisions. Building such a team of volunteers was job one. Of course, most owners were of the opinion "not me." Yet, only after that work and foundation was in place could the energy be expended in a useful way to implement and achieve the plan. In essence, the immediate task was to push that boulder uphill.

After stopping this behemoth, only then could this entity be guided in a controlled manner and in the desired direction. That was another challenge. Simple movement requires constant pressure and constant intervention. But what was really necessary was accelleration. It's a continuous, never ending process. This HOA lost momentum about 1990. It apparently coasted for a decade. The situation in 2008 was a direct consequence.

Achieving momentum required developing sufficiently detailed plans to get that backlog done. In my case, I developed a very specific 5-year plan. Some of it was published here in 2010. Vital portions were presented to the owners and it is my guide for my various presentations to the board(s). I didn't and don't generally call it a "5-year" plan because our society has so little capacity for anything long term. Some owners (too many) demand immediate response, immediate satisfaction and immediate results.

Revealing the Reality of a 5-year Plan
At the annual meeting I used the term " 5-year plan" as the linchpin of my presentation to the owners. A few years ago such an expression was greeted with "Why should we pay for the benefits of future owners?" Yes, we have made progress.

In fact, each year I hone that plan, incorporating what has worked, what has not, new issues or problems that have been uncovered and financial reality. The 5-year plan is therefore a work in progress. But it and the accomplishments are real. This procedure is what I call "continuous improvement."

Momentum requires putting in place many things. First and foremost it requires developing that plan. It requires the identification of problems, establishing priorities, numerous detailed surveys, the preparation of detailed plans, many discussions with the board, management and the contractors and then assembling the teams to do the actual work. It also requires getting the job done. This is not easy in a cooperative venture. Persistence is required. Once the plan is developed it must be uses. Large projects requires years and I consider BLMH to be in actuality one very large project with many smaller components. Achieving momentum is far more difficult in a sometimes belligerent, hostile environment with intransigent individuals. It's all part of the challenge.

To build momentum requires developing consensus and agreement with the board and management. There are compromises to be made. It is necessary to know what is really important and what is not. Momentum is a fragile thing and it can be easily destroyed. To build momentum requires real accomplishment. Paint, sod and mulch alone won't get the job done. Part of the plan is to build value. That requires infrastructure maintenance. In fact, looking at the list one could argue nothing has been added to this HOA. Some of the maintenance initiatives are improvements, most notably the design of the roofs. But that was started in 2002 by others. What I have done has been for the primary purpose of creating stability and some certainty.  I have also avoided waste of precious capital.

This is the partial list of accomplishments using the "plan" since October 1, 2010.
This list was presented to the owners  It is a product of momentum, planning, preparation and perseverance:

"I’ll be brief. It’s been a very difficult four years, but a lot has been accomplished and this Association has moved forward in many ways. The difficulties included increased delinquencies, a steady stream of foreclosures and infrastructure issues. I provided a partial list on the candidates form:

1. 26 roofs replaced
2. 43 drainage improvements
3. 41 driveways sealcoated 
4. 17 garage floors replaced 
5. North portion of Lakecliffe replaced
6. 4 years of street patches
7. 1 foundation lift
8. 5 wingwall foundation repairs underway
9. Engineering analysis of all remaining streets completed
10. 5 brick retaining walls added or to replace rotted timbers
11. 2 new benches with patios 
12. Thames stream partial repair and new bridge and walks installed
13. 2 stream pumps and pits replaced, 3rd scheduled 2014
14. Testing of all water main shutoff valves 4” or larger
15. 1 flood
16. 8+ water main breaks (six in 2013!)
17. Surveyor surveys and drawings of north and south lakes undertaken and completed
18. Dam Study and permitting underway
19. COD issues
20. City council meetings attended and discussions
21. One reserve study prepared
22. A second reserve study reviewed and a third underway
23. 300 pages of reports prepared and submitted
24. 150 spreadsheets prepared
25. Substantially improved newsletter
26. Strengthened delinquency accounting and procedures
27. Improved financial controls; the association has strengthened procedures pertaining to delinquencies, and now has a financial contingency account to deal with water main failures. It also has a “bad debt” account for foreclosures."

I've done exactly what I said I would do and I have fulfilled my obligations as Vice President and Architecture & Maintenance Director of this HOA. I've followed the procedures I published here on the blog. I sometimes did this with absolutely no help and at times with every possible impediment.

There remains more to do. At present I'm creating the latest iteration of my 5-year plan for presentation to the management the board and owners.