Fees - Remember the good old days? I prefer the good "new" days

I'll take the current reality over the smoke and mirrors that were promoted in the "good old days" in this homeowner's association.

An owner who has a complaint brought to my attention the fees back in the "good old days" when he purchased a unit here. I thought the reader would find it interesting. .

When this association was built as a Private Urban Development it required that the owners via their fees would be responsible for all of the following maintenance and operating costs, and more:

• Snow removal on streets.
• Street lighting including electricity (up to 400 watts per fixture).
• Exterior building lighting including electricity (336 fixtures).
• Interior hallway lighting including electricity (756 bulbs).
• Interior hallway electrical heating systems (84 large heaters).
• Water closet utility room electric heaters (84 heaters).
• Electricity for stream pumping systems.
• Pumps and concrete and piping for the stream systems and waterfalls. 
• Cost of water for grounds maintenance and three streams.
• Maintenance of the exterior of 44 buildings, halls and garages, including masonry, panels, trim, roofs and entries.
• Maintenance and replacement of all streets, parking areas and curbs.
• Maintenance and replacement of all water mains. 
• Maintenance and replacement of all walks (about 1/3 miles).
• Maintenance and replacement of 84 driveways.
• Maintenance and replacement of all common area patios and decks.
• Maintenance of 336 limited common element patios and decks.
• Maintenance of the common area electrical systems. 
• Landscaping including maintaining 15+ acres of turf and about 800 trees and 3000 shrubs.
• Shoreline maintenance for two lakes
• Professional management fees.
• Professional accounting fees.
• Professional legal fees. 
• Professional reserve study fees. 
• Saving and growing reserves as required by State statute. 

Here is the trick question: What were the fees in the good old days for each of the 336 owners per month to do all of the above? Pick one:

• $75 per owner per month
• $55 per owner per month
• $45 per owner per month
• $35 per owner per month

To help you in guessing which of the above is the amount of the fees "back in the good old days" here is the total annual Operating, Maintenance and Reserve Budgets that the above fees would support:

$75 per owner = $302,400 per year for the association, including reserves.
$55 per owner = $221,760 per year for the association, including reserves.
$45 per owner = $181,440 per year for the association, including reserves.
$35 per owner = $141,120 per year for the association, including reserves.

Answer: Apparently the association was collecting $35 per month in fees per month per owner back in the "good old days." Of course there were no reserves. I'd love to see that original budget. 25 years later the fees were less than a "staggering" $195 per month for the average owner. In fact, over those 25 years fees increased about 7.25% each year, on the average.  If fees had been a more realistic $75 per month "back in the good old days" then the required annual increase would have been 4%. And, this association would have been saving substantial reserves commencing with day one.

 Who is to blame for this? I'd prefer to look at root causes.

Our legislature requires the association save for reserves. However, how one arrives at the numbers is not defined. Builders are not required to put up substantial reserves. So this passes to new boards. The boards can cobble together any reserve program they choose. Here at BLMH they called it a "replacement fund." Here at BLMH the first comprehensive reserve study prepared by outside professionals for this purpose occurred when the association was 32 years old. That is a long time to avoid opening Pandora's Box, as one manager described the possible consequence in 2007.

It would be better if our legislature had a statute which forced boards to use competent, professional companies to arrive at a 30 year reserve study in year one. Better still, have the builder or developer do this so owners pay appropriate fees from day one. But the legislature didn't do that, and it never will. Now the legislature has qualified all realty professionals as being qualified to manage a homeowners association. I ask, what does selling have to do with maintaining a HOA, in particular one of 40 acres, etc.? But the legislature passed this decision to a board comprised of amateurs. Which is why our board in 2011 attempted to hire an army of handymen equipped with lawnmowers and attempted to replace management with a realty professional.

If you think this is an isolated problem, think again. A friend purchased a lovely and expensive town home in 2014. That small association has limited reserves and has yet to conduct a proper reserve study. That's another problem in the making.

Ultimately the problem passes to future owners. Of course, after buying a unit with a $35 monthly fee, who is going to push for higher fees? No one. There is that expression "if it is too good to be true, it probably is" but a sucker is born every minute is the other expression.

Of course, owners did realize that this was unrealistic. I'm sure those who sold homes and moved into a condo at BLMH realized what a "bargain" $35 a month was as compared to what they were paying to maintain their houses including the lawns and exteriors as well as the water for lawns. Which is why fees gyrated to meet bills. Nevertheless the owners simply chose to ignore the elephant in the room and fought to keep fees low for as long as possible. Some owners attacked boards in 2006 and thereafter as fees escalated due to aging infrastructure, but many of the real culprits had already sold their units and moved on. The board members and owners who remained were left to hold the bag in 2008.

This is one of the problems with HOAs. It has given far too many a bad name. There has been a lot of anger in the HOA community since 2002 and I do mean well beyond the confines of BLMH. People bought at very high prices and were squeezed by increasing fees as older HOAs dealt with the realities of aging infrastructure. In 2008 the foreclosures began and HOAs saw declining revenue. It resulted in a death spiral for some associations. Not all were as fortunate as BLMH with 336 units and a small group of owners who were willing to notify owners in writing and at personal expense of the magnitude of the problem in 2010. I was one of that very small group.

I'd suggest that we remember the "good, new days." These are the recent years when the association is being properly maintained, it has the fees necessary to support the maintenance efforts, it doesn't kick the can down the road, current owners are paying their fair share and are seeing results. The association has a 30 year plan and works diligently on a 10-year plan each and every year.

I'll take the current reality over the smoke and mirrors that were promoted in the "good old days."