A Range of Possibilities - An Envelope of Reality

When planning, there are a range of possibilities. Predictions are for the charlatans, the politicians and the fearful. Planning is for the pragmatists.

During a recent HOA meeting in which we were working on the annual budget an owner addressed the board about the future.  The owner's address was probably influenced or triggered by the annual meeting, during which I made a 20 minute presentation about finances, budgeting and projects for our association. It may have also been influenced by the contrarian position of a board member.

I brought my crystal ball with me to the budgeting meeting. I've done this from time to time as a tongue in cheek metaphor for what some board members and many owners expect us to do.

The owner who addressed the board about budgeting provided the usual insights. Of course owners want low fees and of course owners want the property maintained. Furthermore, owners who rent their units as he does do intend to make money. And, of course there are some very large projects in our association on the horizon. These include possible tuck pointing, more street replacements or resurfacing, water mains, streams and so on.

The owner wanted to deal in "real numbers" whatever that means. I remind the reader that during the annual meeting I had presented a series of extensive, probable projects which would occur during the period 2016-2025. I gave a DVD of that presentation to each board member. In fact, it is possible there could be reserve expenditures of $3.2 million over that 10 year period. I also stated during the annual meeting that the reserves could reach $2 million in 2025, as the association saves for the really long term mega dollar infrastructure replacement projects.

However, the owner again expressed the need to save for the future. I pointed out that we are doing that. That this is the "New BLMH" and when this HOA began the current roofing project, it didn't have the reserves to do so, and at the then current saving rate could never achieve the project in the required timeline. That was 2003. Today we are already saving for the next roofing project about 25 years from now. The owner stated that he was concerned about how we would do that project.

I pointed out that I will be dead in 25 years. Simply a fact given my current age. It is probable that no one of the current board will be a board member in 25 years. However, precisely how future boards go about projects 15-30 years in the future is not the issue for a current board.

What is the issue is formulating a plan that recognizes the future needs and puts in place a realistic means to fund these very distant projects. We are doing so. I also stated that I am in favor of certain engineering studies to determine how best to go about some of these projects and at what possible future cost.

I reminded that owner that the first ever professionally prepared Reserve Study in this association by an outside, unbiased firm occurred in 2010, when this HOA was 32 years old.  No prior board had ever done that.

I took some time to go into details about a number of projects, including streets, streams, decks, water mains and so on. I stated the precise amount we are currently saving each year for that future roofing project, I pointed out that recent boards are not "kicking the can down the road." We are addressing all of the issues head on.

I also pointed out to this owner that this is a very different association than it was when he was a treasurer and architectural director prior to about 8 years ago. Since then we've removed more than 100 dead and dying trees, and are in the midst of a landscaping revitalization project. Since then our major street has been replaced even though it failed prematurely and it has been replaced with a properly engineered 30 year street, our roofing project has been completed (70% since 2010), we have pro-actively replaced more than 300 feet of water mains, rather than simply apply bandaids. We have replaced 63% of our driveways and the remaining are in "good" condition, We have replaced a number of garage floors, some unit decks, several unit patios, replaced portions of streams, removed a failing bridge and common deck and installed new walks and a bridge. We've addressed numerous rainwater handling issues throughout the entire property involving most entrances and the common areas. We have developed a rolling 10-year plan which dovetails into our 30-year plan. We perform annual site infrastructure surveys. Obviously, something has changed. I also pointed out that since 2009 we have about 33% new owners. Since then it seems we have a shortage of quality units for sale.

One of my goals is to leave this association in much better condition than I found it. We are accomplishing that. I also want fees to be consistent with the needs of the property, the financial ability of the owners and with the recognition of the value of our units.

To accomplish this requires recognizing that there are a range of possibilities encapsulated in an envelope of reality.

A Range of Possibilities
What does a "range of possibilities" mean? It means that there are many possible outcomes to our plans and one of my goals is to provide the association and future boards with the tools and finances to provide reasonable flexibility.

I have no interest in spending all of the money, nor do I have an interest in taxing current owners for nebulous and uncertain "worst case scenarios." I stated that the "worst case scenario" is the immediate failure of serious infrastructure, such as our water mains. That isn't happening and it won't, crystal ball notwithstanding. I do want owners to live comfortably in a sufficiently maintained property in which the streets are good, the driveways maintained, the garages and roofs are functional and so on. I have stated that I am suspect of those who say "we have enough money" and I am also suspect of those who say "we don't have enough money." The real question is this "Do we have sufficient funds to deal with current reality and provide for future replacement?" We are annually saving more than three times the amount that this association was saving when I purchased a unit it 2002. We also have three times the reserves. We also don't have three large mega dollar projects coming upon us (back then it was roofs, driveways and streets; everything else was kicked to future boards.).

Yes, something has changed.

Our property is aging, yet we are no longer under duress. We have a plan and with that and the financial plan we do truly have options. We aren't practicing breakdown maintenance, or kicking the can down the road. We have shifted into preventative maintenance as a preferred standard. It is probable that we will begin replacing our front entryways, mailboxes and intercom and electric door closure systems within the next 10 years. However, it is impossible to state precisely when that project will begin. Future boards will determine this. So too for completion of street repaving, major stream work and so on. I cannot take responsibility for what boards did here prior to fall of 2010. Nor can I take any responsibility for the future. I can honestly say we do have a realistic plan. A range of plans which provide for a range of possibilities. That is propelled by my vision. Isn't this one of the duties of the president of an HOA?

We are collecting the reserves necessary to do this work. However, the begin and end, or completion dates will be determined by others in a range of dates. This creates a range of possibilities.

Of course, we must also set priorities. I do, each and every year. The setting of these priorities determines what in fact does occur each year. Running the numbers and doing those infrastructure surveys are a priority. It seems for many years that they weren't. But that was then and this is now.

However, all of this is contained within an "envelope of reality." Our units are, in fact, selling for about one-half the price of the average condominium in Wheaton. Our association is nearing 40 years of age. Not everyone gives a hoot about extensive grounds with walking paths, rolling grassy areas, waterfalls and streams. Yet, many of those who live here do really love it. Some say they plan on dying here. Almost everyone comments on how quiet and peaceful it is. No bars in sight. This isn't for everyone.