Dealing with Aging Infrastructure

We have some infrastructure issues. I'm well aware of them. Here is a copy of a simple sketch I prepared and presented to the board on May 14. This was prepared in 2015 to track drainage requirements but I also wanted to know the true magnitude of the tree situation.

The sketch was something I had prepared for three reasons:

1. Stimulate a conversation on the board about creating a multi-year project to deal with this. We've been discussing this issue.  I see no way to deal with this but via a multi-year program, similar to the approach for our roofs, driveways and so on. I am of the opinion that it was important to come to grips with the magnitude of the problem and begin a discussion with the entire board.
2. I was concerned by the condition of the landscaping as a consequence of the removal of Ash trees killed by the Emerald Ash Borer, pines killed by a blight and some weeping willows which have been removed because they posed a danger to buildings on the property. That pronouncement of rotting willows was by our arborist. I also had concerns about coordination with the drainage project. 
3. I was of the opinion that it was reasonable to assume that other owners would be concerned. I've been the target of barbs since 2010 because this HOA cannot move fast enough for some owners. Of course if we operate as a reaction, we'll never move fast enough. I think I am not a boat anchor in this HOA.

Of course, removing dead or dying trees can cost about $1,000 each and that doesn't include remediation, plantings and new trees. Each "X" represents the location of a recently removed tree, which is now a pile of wood chips or a dirt spot. Each "D" is an area in which drainage improvements are to be made in the near future as a consequence of the roofing project.

The HOA has been moving on some of these area. First by stumping, then by grading and sodding. After that trees can be planted. The Landscaping director has stated he favors certain maples.

At the time I presented this to the board, I did so with this statement "I did this work so as to avoid duplicity and additional cost." I want to avoid making landscaping improvements and then removing them in a year or two because of necessary drainage improvements.  Drainage improvements were first initiated by a board more than 10 years ago as part of the first roofing replacement in 2002. Boards thereafter sometimes failed to do this, but all had little choice but to continue these improvements to avoid water issues in units  or garages and entrances, and to treat all owners uniformly and fairly. Of course, the cost of these drainage improvements are in addition to the nearly $1,900,000 this HOA is spending on these roofs.

I'll let you count the "X" marks. That provides some idea of the magnitude of this problem. 

During the July meeting an owner attended and expressed concern about the state of some front lawns because of tree removal. I produced this sketch and addressed the concerns as best as I could. First, by producing my sketch I wanted to assure owners that the board was aware of the magnitude of the situation. Second. I wanted to have a conversation about "cash flow." We can address this problem and correct it as rapidly as we can. However, I think the board is in agreement that we would like to do this within the current fee structure. In other words, we can certainly do remedial work (grading and turf) but adding trees may take some discussion among the board, obtain bids and then execute. That will not happen in a year. However, I am also of the opinion that with planning and judicious application of funds, we can replace these trees with something better than toothpicks, and we can accelerate the growth. Yes, it will take 10 years for these trees to come to fruition, but then, this HOA didn't have tall growths when it was built in 1978. 

This sketch is merely one example of why or how I spend about 600 hours each year as a board member in this HOA. Some may wonder where my time is spent. It isn't twiddling my fingers. I'll be posting some additional financial data in the near future. Trust me. It can take dozens of hours to perform a good financial analysis for a property worth about $100 million. 

Lakecliffe Blvd - Downgraded to "Planned 2015"

The masthead and a recent post include a diagram of the street project. Readers may have noticed that I tagged a portion of Lakecliffe Blvd as "Planned 2015." The use of "planned" was deliberate. The project has been delayed and the board has yet to provide full approval to proceed. We've been talking about this particular project since 2014. This section of this street is planned for 2015. So why is the schedule currently deteriorating more rapidly than the street?  On June I concluded that this project was in jeopardy and downgraded this project to only "planned." At this point there is a possibility it may not be completed in 2015.

How can I say this? It's my opinion that if a major project lacks a definitive schedule by July 15 of any current year that it will be increasingly difficult and more likely that it won't be completed in the current calendar year or for the budgeted price. It may also delay other, subsequent or conjoined projects.  That's the situation for the repaving of the second portion of Lakecliffe. Prior to the July meeting I advised the board and management via email that I had concerns that this street work would be further delayed. During the July meeting I concluded that urgency was lacking. In a few days it will be August, we remain in formulation and this cannot change until August 13, the next HOA meeting. There are no guarantees the board will move this forward in August. Delays will and do require contractors and the board members who are involved in this project to jump through hoops. That may be part of a plan. At this point I'd say, "Don't expect me or anyone else to jump through hoops."

What is occurring on Lakecliffe is nothing new. In fact, it was once remarked "We've been doing things this way since long before you arrived [and it worked fine]." In private I have disagreed and in this blog I've published only a small portion of what is fit to print and an alternative view.

It may simply be that a decision has been made that we've spent enough this year. We do discuss cash flow and we remain far ahead of the 2011 reserve balance requirement and the minimums set by the board two years ago. That is not an excuse to spend money. With water main failures each year, it is merely common sense to tackle mains crossing under streets. A street should last 35 years. A water main break under a street would also be terribly disruptive to residents. With reluctance on the part of some board members, the mains were replaced.

How are we doing with reserves? In 2016 our reserve balance should be about $1,500,000 higher than projected in 2011. The formal plan indicates that reserves should be $66,834 at the end of the 2016. We'll probably be at about $1,500,000 after Lakecliffe and with only nine roofs remaining in that project. The plan also indicates that our fees should be much higher than they currently are, with a collection of $488,000 in 2015 and $508,000 in 2016.

Our actual reserve collection in 2015 will be $376,000 which leaves $333 more in the pocket of each owner in 2015. That's about $28 less each month in fees. That is a lot of money.

When the board decided not to proceed with certain projects and would not set a schedule for them, I took the position we shouldn't collect money we have no intention of spending according to the plan. I've published charts on this in the past. In other words, a re-evaluation of projects by recent boards required a re-evaluation of reserve requirements. If we are going to delay certain projects then there is no need for excessive funding. In fact, this spring I initiated bids for stream repairs, which is one of those languishing areas at BLMH. (One is in good condition, one fair and one poor). It is probable this will require 5 years or more to do, and we do have some decks sinking into the streams as wooden piles rot. Boards prior to the ROCs decided to ignore these problems and probably had to once they realized what they had committed this HOA to when they began the roofing project in 2002. The ROCs, in an attempt to keep fees "as low as possible" also chose to ignore. How long can we delay? As long as boards roll the dice.

Why is scheduling for complex projects so difficult? We did a street last year. So what's the problem this year? This is a more complex project and it will be more costly. That was probably a trigger. We spent a lot last year and now we are going to spend more! Then we replaced water mains. That was probably the straw that broke the camel's back.

Let's say it is about a clash of ideals. Yes, you can take a horse to water but you can't force him or her to drink. I stated that the north section of Lakecliffe replacement in 2014 was a demonstration project. We want a street that can achieve a normal life, not fail within 10 years requiring that we tear up the HOA yet again. There is also the residual charge from the failure to increase fees yet again. But if this HOA won't come up with a real plan 5-10 years with specifics about capital projects then I have told the board publicly that I will not support reserve fee increases. In other words, I see no reason to penalize or punish owners for no purpose. Our fees really are high enough.

As I've written in earlier posts since 2009, planning at BLMH is sequential and at times haphazard; things may occur as a consequence of "no other choice." In colloquial parlance, I should state it this way. Moving forward requires that all board members agree, and some don't or do so unwillingly. Some still believe our fees should be higher than they are. In other words, a delay will keep reserves higher than they would otherwise be, as the money will not be spent.   The ownership, little involved, is usually oblivious of the politics.

The concept called "fast track" doesn't exist in the BLMH universe. We know what "emergencies" are; all other projects fall into the "eventual" category. Why is this HOA so able to deal with "emergencies?" One reason and perhaps the most important is because an emergency sidesteps the board. Management is free to act and to make decisions and is supported by a few. So the bureaucracy is side stepped and boards can justify the spending as "We had no choice in the matter."

Life cycle analysis is another foreign concept. I've observed that boards simply review the cost. That's one of three reasons our streets failed prematurely. There remains some resistance to spending more money to build something that will provide good service for two or three times longer. My point is, a street that costs $150,000 and is designed for 20-30 years is a bargain compared to a street that costs $110,000 and fails in less than 10 years.

Maintenance is also automatic but "projects" are not. We'll do annual maintenance because management and our maintenance contractor are on top of that and made plans during the previous winter. There doesn't seem to be a problem or any hesitation to spend maintenance dollars. Reserves are an entirely different matter. That is a historical perspective. Boards for decades did a "good" job planning maintenance budgets. Most get an "F" for future planning because they ignored or glossed over the reality of reserves, and began a $1,900,000 project without telling owners about the financial consequences (fees) which would be required by this board decision. Maintenance was and may remain the emphasis. Reserves, once called the "Replacement Fund" were allowed to languish. Possibly with good reason because after adjusting fees to meet reserve requirements the allocation increased from a low of 5% of fees to 25% to 30% of our fees. Our reserve contribution is the major source of our increase in fees and the financial pain experienced by some owners.

If we immediately removed reserve contributions from owner's fees that would immediately reduce fees by a substantial amount. That's the way it was for a decade or more and dealing with long term planning is a problem for most boards. Oddly, these same boards can, did and do worry about total destruction of the infrastructure. Go figure? But that's part of the "Look before you leap" and "He who hesitates is lost" mentality. We can always pull up some argument.

Annual maintenance is akin to survival planning. As some of us are operating merely from survival, it is no surprise to me that long term project planning is so difficult. We take steps to "maintain" the property. A long term president once remarked to me "You can slap paint on a pig, but it is still a pig." From this remark, I can understand why it is always like pulling teeth. There is this foundational attitude, historical ambivalence or hostility to reserves, a reluctance to spend money until it can't be avoided and the opinion that things worked well before.

Planning is also hampered by a lack of communications. Not all board members use email (according to management); that is apparently true, because some board members never respond to an email. I can only conclude that is their choice, because some of us do have Facebook pages, etc. Yes, there is also a need to discuss these things in an open forum. But then, we've been discussing this particular project since 2014 and each month in 2015.

A variety of board members have been avoiding the street project since 2007. In such an environment projects may be delayed, deferred, or drag on and on and on, waiting for someone to point out the elephant in the room. That too is nothing new at BLMH. I'm sure a few other HOAs have this problem. I've been told ours is well run. That makes me wonder about just what a poorly run HOA must be like.

Are there legitimate reasons from my urgency this year? A deteriorating street, potential water main issues, a need to hold pricing (materials costs are escalating and the board was advised of this in January-February of this year), a domino effect upon other projects (driveways, drainage work, roofs, exterior work and painting, etc.) and sufficient reserve funds. Need I go on?

What's the current status of the Lakecliffe street project and how did we get here? Let's take a look at the general sequence of events for this particular project in 2015:

• General Board discussion occurred during a meeting. I'll call this Meeting #1: Is this project to occur in 2015? Are we to go for engineering support and what is the scope of the project? This question is posed: Should we consider replacing the water mains under this street? I declined in 2014 to perform any kind of engineering for this HOA (I did the same in 2009 before running for the board and have done so consistently). Reluctantly for a few it was decided to spend some money on a proper engineer. 
• Further discussion at a later HOA meeting, which I'll call Meeting #2. Board agrees upon the segment of Lakecliffe and to approach an engineer and get an engineering bid for drawings and specifications.
• Several meetings later. Review engineering drawings. The board approves proceeding for street contract bids. Again discuss concerns about water mains under Lakecliffe. Argument: isn't this the appropriate time to do this? Board is hesitant and reluctantly agrees to get proposal for replacement of water mains. (Reluctance = a lack of enthusiasm). 
• At a subsequent meeting, with a bid in hand, the board approves work to replace mains under the street at three locations. This work is then rushed and completed in a matter of weeks so the street work can commence ASAP. I was there for the entire project as was the Maintenance Director and I was the "eyes and ears" for this HOA. I took samples and photos of the mains removed and provided a verbal report, a sample of the removed main to the board during two successive HOA meetings. 
• At meetings #5 & 6, discuss condition of Salisbury after replacement of water mains and installation of new fire hydrant and valves. Advise board of engineer's opinion about Salisbury repaving; the engineer was brought on site by management and at the request of the Architectural Director (me) while the main replacement was underway to review the condition of Salisbury. "Destruction" of this cul-de-sac was more extensive than expected. Board approves having engineer prepare drawings for replacement of Salisbury Court. Engineer's budget analysis is discussed, but no approval to direct management to proceed by the board. So, the project triggers are not pulled. As a consequence, project is again delayed. 
• Status as of July 23: Waiting for the next board meeting to decide to proceed or to abandon this project for 2015. 

So that brings us to today. We have engineering drawings for Lakecliffe Blvd, and a contractor, but no overall approval to proceed. That's the way it is. Eventually we'll get all our ducks in a row and the work will proceed. At this time, am I optimistic about the 2015 schedule? No, I am not. Am I frustrated or disappointed? Yes. More often than not, these things drag on. For example, replacing the bridge and patio over at the Thames waterfall; that's taken three years for partial completion, but the dangerous stuff was all taken care of. At this point, I'd like the stream work to be done before a deck because improved access means lower cost. So I have reluctantly decided to delay. I also told the board after three designs that weren't approved that I would not take the time to produce a fourth. More often than not, this is the course of events in this HOA.

Sometimes there are surprises. One thing discussed during the July meeting was a complete reversal by several on the board on an issue that has been a disappointment to me for three years. I was astounded. Several years of stonewalling suddenly vanished. But it took a slide show by me in June to get the point across and allow some board members to become aware of reality. Or perhaps the lawyers are now involved? Can't say. More on this amazing turn of events in a later post.

Wheaton Briarcliffe Lakes Study Phase II

A City of Wheaton Council Meeting was held on July 20. This meeting included a discussion of the "Briarcliffe Lakes Study Amendment."

The expenditure of about $32,000 was approved. The engineering company will conduct a study of impact of Downstream Properties Capacity. This decision is a consequence of the first study which included an analysis of possible solutions. The city has apparently decided that moving water out of lake 4 is the best solution. However, the study amendment also includes a house study, which I would describe as an impact study. Once a final course of action is decided upon, then it will be necessary to determine how to pay for the solution. There are purportedly FEMA grants available, but of course there is a real competition for these funds.

The study should be completed and a report issued in October 2015.

The meeting was lightly attended.

Summary
The "Briarcliffe Lakes" are in the Briarcliffe subdivision of the City of Wheaton. These lakes are part of a five lake chain which receive stormwater and are part of a very large watershed. One third of the watershed is in the Village of Glen Ellyn. However, water flows downhill and so the watershed drains into Wheaton's Lake 4, which is part of the city's storm water system. Unfortunately, this lake cannot handle the changes on storm water management by the College of DuPage. So the capacity is not adequate. It is also unfortunate but this lake is the final one in the chain. In recent years, both lakes 3 and 4 overtopped, as did Pond's 7 and 9 in Glen Ellyn. These then inundated nearby properties with stormwater. In some respects the situation is now like "musical chairs." Water from the watershed has been literally "dumped" into the lap of the City of Wheaton. It now finds it has no where to go with this. The nearby Village and College have successfully offloaded their water to others.

Real Time HOA Management - Updated

This post is not about professional managers. It is about management of HOAs in real time by the boards which direct management. It explains what that means and how it may be practiced. It focuses on fees, reserves  and maintenance which are ongoing things in a HOA, and addresses some differences of opinion about whether fees are "too high" or "too low." Yes, there are some in our HOA who have expressed the opinion that our fees should be higher. So what are the driving forces?

A diagram of the current street replacement project is included at the end of this post, for reference.

Why "Real Time" Management?
Real time management requires that we avoid automaticity, perform frequent reassessment and reappraisal of HOA conditions, adapt a flexible position, stay in action and use 5 year plans for many programs so as to smooth finances. Our HOA doesn't exist in "La La Land." What was the norm 5 or 10 years ago may not be relevant today. It is true that our facilities are aging. For example, we have lost many trees to disease and the EAB (Emerald Ash Borer). I see many scotch pines which seem to be in serious trouble, and I've reported my observations to boards for eight years. These observations have come to fruition.

As we remove dead trees, we leave scars in the earth.  Some owners have noticed this. One wrote to the Landscaping Director on March 13:

"I am a 16-yr resident.......... I spent some time on my balcony today and am feeling so sad at the loss of the 2 ash trees and 1 large pine on the south side of the building. Plus 2 crabapples and a pine behind the waterfall have died and not been replaced either since I've lived here. Would you be able to tell me if there are plans to plant new trees soon in the beds where the trees were? It's getting rather barren out there. I would be willing to chip in a few hundred dollars if it would help get the process going. My concern is that if we don't start in the near future, any further loss of trees would be devastating to the view and property value........I think it's important enough to plant trees to add the line item of a donation to my budget......."

Is our HOA typical? Difficult to say. Our HOA has 336 units in 44 buildings and occupies about 40 acres, which includes most of two "lakes" which are a significant component of the City of Wheaton's storm water system, about 15 acres of turf and more than 600 trees; only seven years ago it was about 800 trees.  I have no doubt that most of our owner/residents purchased here because of the ambiance. This is a unique property, but it remains so because it is maintained. Sadly, those recent piles of wood chips are a symbol of maintenance reality as well as of age. Yes, my condo is nice and I did upgrade the kitchen, floors, etc. However, the real draw is the property. That includes the view from my kitchen window and balcony. I publish photos of that view on this blog with regularity. It's not perfect. Sometimes there is snow, ice, mud, and a dying or dead tree. However, my spouse would not have purchased here but for the walks and landscaping. In fact, she absolutely hated the 1978 kitchen, which I immediately replaced in total, Nor did we move here to convert this property into a retirement community. Looking at reality, it is doubtful we will live here until the day we die. This is a HOA and it lacks the services and was not built with the needs of the elderly in mind. Owners will not pay the fees required to accomplish such a conversion, either.

So what is the relevance of the above to this post? Many owners expect our HOA to maintain this property, as required by statute, and it does. But not necessarily to individual liking.  Many also expect the board to do this while keeping fees manageable and reasonable. To do these things is an allocation, project management and cash flow problem and with $1.3+ million in reserves, it is doable. That's my opinion. I think the majority of our owners would agree with me, although some may not be aware of how this is possible. There may be an underlying assumption that "we have enough" in the bank. That assumption is not helpful unless it is backed by a realistic maintenance program supported by realistic fee collections and with knowledge of future obligations and requirements. This requires flexibility. That too is a component of "real time management" of an HOA.

There are also a few who are concerned that this HOA may not have enough funds. In fact, during the 2014 budget meeting, three board members were of the opinion that a larger fee increase was required. It is my opinion that the numbers don't support that position, or a concern that funds are inadequate. However, it is possible to overspend and drive a HOA into debt. That is one of the problems in any HOA; look at the bank account and flush it. Again, flexibility is required. For example, we have not yet begun the entry replacement in the buildings. This is an acknowledgement of financial reality. In fact, if we did everything we certainly wouldn't have enough money. But that is not a requirement. We do have time on our side. Time to accrue reserves, time to allocate funds to all of the various projects and sufficient time to implement most of these projects. In fact, even in the face of these concerns this HOA found the wherewithal to spend a lot of money on knox boxes. Where there is a will, there is a way. So, if budgets are so tight, if the HOA is so fund limited, than how can it spend tens of thousands of dollars to purchase and install knox boxes? The answer lies in real time management, as well as setting priorities.

In several months there will be a budget meeting by the new board. At that meeting the operational, maintenance and reserve (capital project) requirements will again be reviewed. This review is an essential part of "real time" management.

I'm of the opinion that one of the factors that drives positions is emotions including fear. It's not helpful to be fearful of large numbers. For example, this HOA is spending hundreds of thousands of dollars on street replacements nearly a decade earlier than planned. Should that cause fear?  Why or why not?

Emotional Responses
Fear is frequently the emotional response to the unknown or unexpected. Looking at HOA finances, one might be concerned about spending because of a fear that one's personal finances cannot support future fee increases. As spending increases, so does fees. Or is that simply a generalization? A concern that fees may rise to "too high" levels is possibly a fear generator for some owners. Another fear generator for a board may also be a belief that there is insufficient funds for projects for the next 10 years and beyond.

Are such fears warranted? Let's look at some of the facts and some of the assumptions owners and boards may be making, which may stoke one's fears:

1. Fees will continue to increase beyond my ability to pay them.
2. We have a lot of things to do, including replace streets, finish the roofing projects and replace dying or dead trees. Do we have the money to do this?
3. Our water mains and infrastructure are aging. We may not have sufficient funds to deal with these problems of aging infrastructure. 
4. If I look at the worst case scenario there won't be enough money.
5. We can't predict the future. 
6. The board isn't capable of dealing with the problems. 

1. Fees will continue to increase. The concern may be that I as an owner may not be able to handle these increases in my personal budget. This fear assumes that fees may increase faster than my income. Or there may be other personal costs which make it difficult or impossible for one to handle any fee increases. 

I can't say what the personal financial situation is for each and every owner in a HOA. But here is the broader reality. Fees at BLMH increased about 70% since January 2002. That's an average 5% annual increase. That may not be typical for the future and here is why.

One could assume that the HOA fees will increase by 5% each and every year, but that's not supported by current reality. Since about 1999 reserve collections actually increased by about 500%, or at a rate of 30% per year. Over that same period nearly $1,600,000 was spent on a very large roofing replacement project. At the end of this year nearly 89% of the roofs will be completed. In addition, several hundred thousand dollars has been spent on street repairs or replacements, years earlier than projected. Simultaneously, water main issues have been forcefully addressed. Other maintenance is underway at a pace that is as rapid as practical.

My point is, fees were increased as required for reserve replacements because of the roofing project, driveways, streets and so on. That rate has been generally sustained since 1999. Initially a lot of the money collected was spent almost immediately  because this HOA had set begun a large, nearly $2 million project for which it not only didn't have the funds, it didn't even have a collection program to achieve the necessary funds. Worse, the boards didn't communicate what the consequences would be. But that was then, and this is now. In recent years a significant amount collected has not been spent and is accumulating steadily in the reserve accounts. In fact, this HOA is currently collecting about $376,000 annually for reserves. That's double the collections about 12 years ago.

That increase in reserve contributions has been the largest single contributor to fee increases since about 1999. In fact, so much has been collected in that period that is has paid for the roofs, replacement of a significant number of driveways, streets (as of 2015) and even water mains, etc. Simultaneously the reserve fund has tripled in size, even with the huge increase in projects and spending required for these tasks.

The board has the discretionary power to determine the pace of projects and that means the board will determine a lot of the spending, just as it is now. Some things are vital and some are not. The pace of spending for non- vital capital projects is controllable in real time; some projects can be done at a slower or faster pace.

To summarize, the spending in recent years has been skewed by 1) catching up on projects which had been ignored or delayed, 2) the roofing project,  and 3) early or premature failures of some infrastructure. There is no evidence to support an opinion that spending will have to continue at this rate each and every year in the foreseeable future. In fact, some things can be paced while others are addressed by means other than passing the hat to the owners. 

2. We have a lot of things to do, including replace streets, finish the roofing projects and replace dying or dead trees.  That is true, however, it is also a fact that the roofing project will be completed in 2017. For example, nearly half of our annual reserve collections are being spent each and every year on the current roofing project. That's because this HOA failed to achieve sufficient reserves at the time the roofing project began. That time is nearly past. Within three years, about one-half of all fees collected annually will be freed up for other projects. That is an amount greater than was being collected in total each year for reserves just a few years ago.

It is also useful to realize that this HOA is saving a modest amount for the next roofing project, which will begin as early as 2027, but could also begin as late as 2032. Why that time difference? This HOA is installing high quality architectural roofs with significant weather enhancements and warranties. These roofs could do well for 30 years, It is very possible some will not require replacement for 35 years. (Currently, some of our basic roofs, with an intended 18 year life span have made it to 23 years). 

The street project has accelerated and the final portion of the major thoroughfare is scheduled for replacement in 2015. It is probable that the remaining four cul-de-sacs will be resurfaced within 5-8 years. Some will be earlier than planned.

Drainage improvements will be completed with the completion of the roofing project, or shortly thereafter. 

When we look at the streets, one thing to realize is this. Completing these projects earlier than planned should not be a cause for concern if 1) reserve levels are not drawn down below a "safe" level, 2) other projects are not harmed, 3) proper engineering and project management techniques are used, and 4) if we consider that once spent, these projects are complete. For example, there will be no need to do the major thoroughfare again for another 20-30 years although maintenance will be required. Roofs too will be complete. Driveways also continue to b  e replaced each year, etc.

In other words, once the money is [properly] spent to complete these projects, the next phase of these projects will not be required for decades. Is this significant? Yes it is, because the problem facing HOAs are frequently the result of a lack of savings (reserves) , delayed spending, premature failure, improper installation, ignoring maintenance and a failure to properly handle delinquencies. These things combined will create impossible pressures on the HOA. That is not happening today at BLMH.  In fact, reserve levels are substantially above the "minimums" established by the board two years ago and meet or exceed those recommended by the professionals. And that is after the replacement of streets, some water mains, and the knox boxes. These minimums were established with management and professional input. The actual, current reserve levels would be higher if we realized the amounts spent on projects completed years ahead of schedule, which I do. That too is a requirement of "real time" management; projects completed properly are complete. Beyond routine maintenance there should be no requirement to revisit them until the next phase is required, which can be decades in the future. In other words, once completed, reserve requirements should be adjusted to include only the financial requirements of the next phase.

Some fears may be simply an emotional response to perceived scarcity or personal situations.

3. Our water mains and infrastructure are aging. There may be a fear that the HOA will not have sufficient funds to deal with these problems, which are a consequence of aging. In other words, the fear may be that there is so much to do and there may be insufficient funds to do it. For example, we have had water main failures in recent years and we have lost 100 or more trees in recent years. 

Yes, there is a lot to do and yes, we can't specifically predict these failures. But that does not necessarily mean that there will be insufficient funds or special assessments or large fee increases. Nor does it mean that we must sit idly by and take whatever the universe dumps on us. 

How to manage the unknown? In recent years the board has taken several significant steps. These include 1) Reserve studies, 2) Pro active (preventative) maintenance, 3) Better engineering and project oversight, 4) Improved management. 

We can't predict certain types of failures. Water mains do age and do fail. As with everything from personal air conditions to fireplaces to hot water heaters, these things do have a finite life time. Recognizing this and acting accordingly can spread out the financial spending and avoid larger breakdowns. It also can be accomplished with proper savings. 

For example, in recent years several sections of water mains have been replaced prior to failure. Doing so was a huge shift for this HOA's boards. For decades the approach was "if it isn't broken don't fix it." That ultimately became "to keep costs (and fees)  down, we'll delay maintenance and replacement as long as possible."

The problem with these types of aphorisms, or general truths is they are only useful in general. They fail under the spotlight and are sometimes contradictory. For example one can use the following to justify just about any position taken:

1. Look before you leap.
2. He who hesitates is lost.  

Using HOA funds to get better professional guidance has been a huge shift. Engineered drawings, true professional project management, reserve studies and so on are examples. However, this does not relieve the board of its responsibilities. Oversight is required, and expected of stewards. 

3. Continued. We may not have sufficient funds to deal with these aging problems.  That is a truism. We may not have sufficient funds. However, it is also possible that we will have sufficient funds. What can we do about this? 

First, it's useful to consider the underlying causes for concern. These causes include:

1. Recent history and performance of past boards.
2. Recent infrastructure failures.

History suggests that boards (and the owners that elected them) were penny wise and pound foolish. Infrastructure projects were begun before the funds were collected. Projects were undertaken with insufficient professional guidance.  Boards operated automatically, were blindsided by the "unexpected" and at times ignored signs of infrastructure failures. There is an argument to be made that there was insufficient planning and preparation. 

When looking at the numbers for the past 10 years, with little or no analysis, a grim picture may be painted. However, a holistic view, which includes contributing factors as well as the current financial and maintenance position of the HOA provides a more rounded view. That's an example of "real time management."

The contributing factors do include infrastructure age. Owner "angst" about fees has been fueled by significant fees to fund the large roofing project, the funding required to deal with the premature street failings, water mains and so on. Some of these failures were a result of lower than necessary quality. Now, some owners have taken the approach "we should sue." Baloney. owners also pushed for the lowest bidder with no engineering guidance on some projects. Remember the 2007 arguments promoting "All we need is a bunch of handymen?" If we want to promote blame I suggest we look in the mirror. Boards, management and contractors all respond to owners. In 2001 people were complaining about fee increases while a huge roofing project was coming toward this HOA. Yet owners pushed for lower fees. I know, I was here.

But today is not 2001, or 2007. It is essential to adapt to current reality. That too is an example of real time management. 

4. If I look at the worst case scenario there won't be enough money. That certainly is true. Yes, the worst case is that all water mains fail in one, two or five years. Or half our owners go bankrupt. Or all of our trees die. Or a major fire or natural disaster damages the property. Of course, it can be argued that this could happen simultaneously. Perhaps we should all simply slit our wrists today and avoid this outcome? I don't think so. If we maintain the property, it is impossible for everything to fail simultaneously. Looking at the opposite argument, as an example it is also possible that the new roofs will perform well for 35 or 40 years. 

So how do we prepare for the unknowable? 

1. Plan.
2. Prepare
3. Prioritize
4. Communicate
5. Save
6. Use professionals with proper oversight. 
7. Adapt and adjust to current realities. 

The reader might say "We can't plan and prepare for the unknowable." Not really true. That's another generality. In fact, the less we plan and prepare, the greater the unknowable becomes. For example, the fear may then grow because in a vacuum created by a lack of planning there will be a concern that 1) We lack the funds to deal with problems, 2) we many not understand what is going on, and 3) we are spending a lot of money.  These things when combined may feed into the fear.   Oversight also requires frequent analysis of current conditions. As an example I personally use digital photos, tabulated condition reports and so on to determine not only current condition but also "the rate of change" or "rate of deterioration"  to assist in predicting infrastructure remaining life. This must be done annually in some cases and semi-annually in others. As conditions deteriorate, more frequent monitoring is required. In other words, waiting until it breaks is far too late to plan.

This means that waiting until owners complain is really a failure to manage in real time. 

Let's look at a current problem. We've lost at least 100 trees in recent years. Some were large pines and ash. These failures have left the property dotted with odd piles of wood chips and strange landscapes. So what to do? 

Some residents on seeing this are concerned. Concern is justified, fear is not. With minimal information in the newsletter, I can appreciate the concern. One of my coachings to owners and boards has been this. In the vacuum created by a lack of communications, we will each make up stuff. That's the way it is. When fear is a generator, we may go for the "worst case" scenario. 

If an owner has a concern which is not addressed via the normal semi-monthly newsletter, I suggest they come to a HOA meeting. That's far better than worrying. The questions to ask the board in any of these situations, be it water mains, streets, roofs, driveways, garages, streams and landscaping are: 

1. Do we have a plan?
2. Are we prepared? 
3. Do we have priorities and how do these influence the plan?
4. Are the plans being communicated to owners?
5. Is the board saving to deal with this problem?
6. Is the board using professionals and is the board providing oversight?
7. Do we have a board in place that can and will do the above?

In fact, the issue of dying trees was discussed before the board in 2008. The current reality didn't just happen in one or two years. Not all of the boards felt there was a need for concern. Not all board members have been committed to the use of a newsletter for communications to owners and residents. This is as old as the HOA. So owners who have concerns should come to HOA meetings and voice them in a responsible way. But let's take a look at landscaping, for example. 

There are a number of projects underway which influence landscaping and contribute to the immediate appearance. These include the street project, roofing project (drainage), driveway replacement project, and the removal of dead and dying trees. Other factors include the weather, cash flow and available manpower.  These combined factors dictate how rapidly landscaping repairs and replacement can be undertaken. In fact, it will require in total, several years to remove trees, remove the stumping, do the grading, add sod and plant replacement trees. In other words, the elves won't show up tonight and make it all right. That's the reality. Owners may complain that boards simply don't move fast enough. That's a part of setting priorities and available man- or woman-power on the board. It is also a reality of budgets and fees. However, planning for certain types of failures certainly makes dealing with them easier. Earlier boards decided to ignore the age of our trees and also decided to take a position that we could win the fight against the Emerald Ash Borer, Professional arborists agreed. Unfortunately, the drought of 2012 provided the EAB with an overwhelming opportunity.

It this a failure? I don't think so. It was a calculated risk. The HOA has the reserves to deal with this, and it will collect more each year. So why be fearful? We kept the foreign scourge at bay and protected our trees with careful application of funds via owner fees. We may have a few ash trees on the property in the future. Yes, it is a disappointment. So was Elm disease and a number of other tree diseases. However, boards make decisions about just how much money to spend to maintain the ambience. Owners push for lower fees. These opposing positions frequently collide.

Some owner have complained that money spent on maintaining our trees and keeping the EAB was money poorly spent. Let's look at reality, shall we. It can cost $1,000 to remove a tree. 100 dead trees represents a possible $100,000 in expenditures for which no value is created. The board has discussed this at many meetings. Furthermore, tree removal may require grading and sodding just to make the area presentable. That's additional cost. Finally we can plant new trees. So where should money be spent? Maintaining what we have, or just sitting back and dealing with the consequences of failure? The owners who complained about the landscaping budget were saying "We shouldn't be spending money on maintenance; just let it all die." 

In fact this HOA has been catching up on landscaping related to drainage improvements since 2010. Earlier roofing projects did not allow for the consequences of more extensive gutters and relocated downspouts. Simultaneous, we have had some roofs predicted to have a lifespan of 18 years reach 23 years of age. The relevance: Setting Priorities:

1. Cash flow and fees.
2. Critical infrastructure.
3. Phased implementation,

We're currently correcting some previous oversights. Cash flow dictates how much money can, should and will be spent in any one year in each infrastructure area. Phased implementation dictates that not everything can and will be done in one year. There are practical considerations, too.

In fact, the recent activity level has angered some residents, who want to return to the "good old days" or that sweet spot when the HOA was younger and we weren't dealing with "end of useful life"issues. That time is past. 

Some owners and some residents don't like the ongoing, phased approach. A few have taken the position that their problem should be addressed today if not sooner. Playing catch up makes that impossible. Period. When boards and owners procrastinate that puts in place some problems. These things cannot be corrected in one, or two years. Getting the reserves in place to do what is being done has taken a decade. A lot of time was lost while a variety of cans were kicked down the road. Many of those boards moved on and left others to clean up the messes that were created. There have been turf battles (no pun intended). Does anyone really think the recent flurry of activity is simply a diversion and a hobby? Or was it really necessity? How did this confluence of events occur? 

Priorities also dictate recognizing severity issues. Water mains, streets, roof failure, draining issues and so on take precedence over many other issues. Safety comes first, but this is a temperate zone. We do experience ice, snow, heaving and so on. It isn't Arizona or San Diego.

Protection of the buildings and their contents comes second. That's the way it is. This is a long term project called "Maintaining this HOA." It will continue for decades. Certainly if we were collecting $100 more each month from each owner we could do more in each year. "We an do anything, all that is required is time and money." It takes time for these projects and owner fees dictate some of that. Owner involvement does, too. We don't have owners in the HOA fighting to do the work. About the only fighting I've experienced in this HOA in the past decade was a desire by some owners to put in place board members to do their bidding. In other words "I want a board in place that will take care of my personal wants and needs (to hell with everyone else.)"

Real time management dictates that we plan, prepare and be fair to everyone. In the worst case, and I could say having our ash trees decimated is an example, the HOA will have to do some things immediately (remove and stump within a year) and then grade, sod and plant over a period of years. And yes, it will take decades for these new trees to become tall growth. That's precisely why protecting the existing, healthy trees is worth the time, effort and money. 

5. We can't predict the future. That is true, and this may promote a fear of the unknown. But there are things we can prepare for. Even children learn this in the Boy Scouts of America. They learn this and they practice it. "Be Prepared" is the motto and that isn't a buzz word. A lot of those boys take this very seriously and become very skillful. If you think the BSA is about camping, then you have missed the entire point. 

If a HOA has knowledgeable and supportive owners, if boards take planning and preparation seriously and look at cash flow, treat all projects as requiring project management and cost accounting, then things become much easier. The unknown becomes an issue of planning and resource allocation.

When we have plans in place, it then becomes possible to look beyond the nine dots. We can then look more realistically and less fearfully into the future. That's a consequence of real time management. 

6. The board isn't capable. Some owners may have a concern that the board isn't able to deal with the problems their HOA is faces, or can't make good decisions. That can certainly create a confidence issue for owners. It can also feed financial fears. 

I think there are several ways to address this. 

1. Reasonable board turnover.
2. Adequate communications. 
3. Board and owner preparation. 
4. Appropriate use of skilled professionals. 

Board turnover might seem counter productive. However, every time a board member leaves the board, he or she will be replaced. The replacement will ideally be an owner who has never served on the board. This serves two purposes. An owner takes on a higher level of commitment and learns in the process. Former board members can assist as committee members. Over time, the entire HOA is strengthened by more knowledgeable and responsible owners. Unfortunately, there is a tendency in HOAs to rely upon a few stalwarts. After all, some may say "If I wanted real responsibility I would have purchased a home." Some HOAs now have a large percentage of owners with an investor, apartment, or retirement community perspective. There is absolutely nothing a board can do about that but talk straight and be firm about the realities of HOA living. That includes telling all owners "what we are not."

Adequate communications also requires providing explanations to owners for the how and the why. Boards will say "This is a difficult job." Well, why not use the newsletter and any other forms of reasonable, universal communications to express why it is difficult? Why not express this during regularly scheduled HOA meetings, as well as the annual meetings? Why not educate the owners so they too are better aware of the planning and preparation? This too prepares them to serve on the board. I will say this, the reader would probably be astounded about the amount of resistance I have been given by boards about providing a newsletter that provides real communications. This includes both overt and covert resistance; the easiest way to torpedo a newsletter is to simply avoid writing articles. Some owners too have resisted this, preferring a "feel good" rag.

Board and owner preparation are important factors. It's common to say that "Each board member must have duties and responsibilities and prepare for each HOA meeting." However, what some may not realize is that preparation may require a lot of long walks on the property. It requires involvement by all board members. Some of these duties are best accomplished while we are physically able to walk and during hot weather, or cold, or buggy or wet or whatever. In other words, owners should plan on serving when they are physically and mentally able. It is a fact that for most of us, we begin experiencing some decrease in cognitive ability at the age of 55. This accelerates as we continue to age. So too for physical limitations.  My point is, procrastination is not good for HOAs. That includes procrastination by boards as well as owners.

Real time management dictates that we observe the HOA, walk the grounds and so on.