The Ducks are setting up Housekeeping

Spring isn't far away, in fact the Spring Equinox will be early in the morning of March 20. As usual, we get a range of weather at BLMH this time of year. Today it is overcast and 43F. Just three days ago it was much colder and we had a fine dusting of snow. There was a sufficient amount over two days that the bobcats arrived and cleared the driveways. That was supposed to be a major winter storm, but it was mostly confined in this area to lake effect.

Today the ducks are setting up housekeeping, in anticipation of the restart of the water falls and the stream. They do want ring side seats. What a difference a few days makes.

Ducks at Waterfall #1

Here's the same view three days ago. The waterfall is in the center of the photo and hidden by about 1/2 inch of snow:

Revenue through Vehicle Stickers - Glen Ellyn

In recent blog posts I've pointed out the financial distress that the Illinois State budgets have caused for communities.

One issue faced by Wheaton is where to come up with the funds necessary to support the many programs of the city, and that includes pension obligations.

Nearby Glen Ellyn has a vehicle sticker program. These are purchased annually by residents. Wheaton does not currently have such a program, but at one time it did.

It has been reported that Glen Ellyn "Residents are required to purchase stickers for every car registered to an address in the village. The stickers are $25. Seniors can purchase one sticker per household at $8, and there is a discount for buying three years of stickers at one time. Citations for not having a sticker cost $50." According to some in the village, this is an unpopular program. The Village of Glen Ellyn has created a survey on vehicle stickers, and they are asking for residents to give their opinions.  The survey is available online, but I was surprised to see that there is no requirement for a name, address or phone number. In other words, a lot of other people from all over could be responding to the survey, the information for which was published in an online nearby newspaper.

Here is some highlights from the October 14, 2016 Glen Ellyn Finance Commission meeting in which the village's vehicle sticker program was discussed. :

"Vehicle stickers are required for all residents of Glen Ellyn. This process is managed in-house and has been very time consuming over the years but has generated nearly $400,000 in revenues. There are pros and cons to this program. Pros included the $400,000 in revenues, a diversified revenue stream for the General Fund, and identification of vehicles for police. The con is that this program is very labor intensive and unpopular with many residents. Village costs are $6,200-$8,600 per year for maintenance of this program."

Here are some additional comments of the village Finance Chairman and Commissioners about this :

1. [The] program cannot be eliminated without making up the $400,000 elsewhere. 
2. [An alternate could be ] to increase the cost of commuter parking but.....that revenue goes to the Parking Fund and not the General Fund. 
3. [The Chairman] added that he does not like the option of boosting property tax to make up the cost of a user fee. 
4. [If this program were eliminated it was stated that] there is not a lot of labor savings but maintaining the database is highly burdensome. 
5. [In other] local community behavior with respect to village stickers and it was noted that those who do not have the program have a food & beverage tax, something Glen Ellyn does not have. 
6. It was added that if food & beverage tax was imposed at ½ percent, it would make up the $400,000 lost from the vehicle sticker program if eliminated. [It was noted that to] increase Home Rule Sales Tax because you are getting both residents & non-residents. 
7. The Home Rule Sales Tax would be a ¼ percent increase to make up the revenue lost from vehicle sticker program if eliminated. 

Emotional Intelligence and HOA Boards

What's Emotional Intelligence?

"People with emotional intelligence (EQ) have many characteristics that make them great employees. They have the ability to work with different personalities. They’re empathetic. They’re diffusers and have the patience to listen to all sides when resolving an issue, whether it’s with a client or between co-workers. They want to invest the time into building relationships with clients and colleagues. They are self-aware. They are curious and want to continue learning and growing."   "Ultimately, people with EQ make for great leaders, which is why it’s important to have people with EQ in your leadership pipeline....." (Note 1)

So how does EQ show up in an individual? Here are 5 signs, according to the article:

1. They own failures.
2. They are reflective.
3. They are natural leaders.
4. They focus on the “how.”
5. They are great at resolving personnel issues.

It would seem to me that these are great traits for any board member. These traits or skills are worth developing in ourselves and in others. I would suggest they are 21st century skills.

I won't go into the details, and I would suggest the reader go to the article. Currently a subscription is not required and a link is at the end of this post.


Notes:
1. The link in "Note 2" provides the source of the quote. "How to Tell if a Potential Hire Has Emotional Intelligence" WSJ March 12, 2017, by Tom Gimbel (@TomGimbel).Mr. Gimbel is founder & CEO of LaSalle Network, a national staffing and recruiting firm headquartered in Chicago.

2.  Here is the link to the original article, which will open in a new window:
http://blogs.wsj.com/experts/2017/03/12/how-to-tell-if-a-potential-hire-has-emotional-intelligence/

How Long Should One Be On A HOA Board?

Volunteer: a person who freely offers to take part in an enterprise or undertake a task.

I've been an owner of a unit in the HOA for about 15 years. These are my observations during those 15 years of "observing HOA boards in action." This will be a diverse post.

Providing some perspective: (this link will open a new window).
http://briarcliffelakes.blogspot.com/2008/09/about-our-condominium.html

Unfortunately, the boards of 2002 and beyond had decided upon upscale architectural roof improvements. That decision would require at least twice the expenditure I predicted in 2008. Time was most certainly not on the side of the HOA.

About this post
This post cannot go into all of the planning and preparation required to be a successful HOA board member. But it can address the question posed in the title of this post.  The subtitle could be "Who should be on a HOA Board?" It's my opinion that only those who are willing to get the job done, have specific skills and are willing to work and to learn should be on a HOA board.

Some owners are of the opinion that the best years of BLMH lie ahead of us. That may be true, but it will not happen automatically. Our boards are aging. Our boards usually have one or more vacancies. We need capable replacements. We need a plan. Attracting new, responsible and capable board members is a necessity. Mentoring of new board members is a necessity. But this won't be easy and cannot and will not happen with the current structure, which includes the board in total. I am convinced that board members in recent years have not realized the seriousness of this situation, nor have they been willing to do anything about it. Just more of the "same old, same old." Denial is not a good mechanism for achieving results.

Our most recent board president decided not to run for re-election and departed. In tbe vacuum that was created I took his place. He was by several decades the youngest member of the board. Now, one would think that after 3 years of service that one should have a choice on how they spend their life, and he made that choice. Surprisingly, I heard Sean's departure explained as "He resigned." That's how quickly board members are dismissed here at BLMH. Apparently if you decide to move on and vacate that prized spot for another owner, you have abandoned your post.

I was unaware of any interest on the part of some board members as to why he left when he did. To the entrenched he was treated as an interloper, a "newbie." At least one was happy with the departure. It meant getting an opposing viewpoint out of the way. Shortly thereafter we returned to the "same old, same old" of "We need significantly higher fees,"  Really?

In some environments it is difficult to attract talent. There are barriers and turf wars, too. To overcome this gravity it usually requires a crises. That's what happened in 2008. But first the finger pointing begins. Only after the emotional stuff passes can the work begin. I suppose it may take another crises or two. I won't be here to clean up the next big mess,

Sean left after three years of service. I'm here for going on seven years. I took this on because I saw a serious crisis, a lack of foresight and the willingness of boards to take short term measures while failing to deal with the unpopular, uncomfortable, or long term issues. BTW, raising fees in the face of the lack of an independently prepared reserve study is questionable, in my opinion. This HOA didn't have such a prepared study for 30+ years. Was it stupidity or sadism?  Who knows? Ask the board members from the 1990s and 2000s. I can only provide true insights into the thinking of board members from 2010 and beyond. Prior to that it was behind the veil of "executive privilege" or hidden by backdoor machinations.

There is an underlying question to be asked. That is "How long should a HOA board member serve?" If there is a legitimate answer, it is determined by another question which is "What is required to serve successfully as a HOA board member?"

The foundation is a willingness and ability to serve as a fiduciary
This post won't delve into fiduciary duties and these obligations for a board member. I've published earlier posts on that subject. I will say this. I've heard board members describe being a fiduciary as "doing the right thing" or "being fair" or "being just."  I wish that was the case, but it isn't. The standards are higher. "Fairness" implies impartiality and owner equality. Some boards have had real difficulties achieving that.

The Illinois Condominium Act (ICA) does set some guidelines for HOA board members. However, those guidelines don't assure a successfully run association.

Our HOA has a "oath" that board members are to take. There are guidelines and minimum requirements that are circulated to all owners each year as part of the election cycle. Owners are made aware of the duties and obligations so they may choose to knowingly volunteer. However, these guidelines barely scratch the surface.

Another question to be answered is "What are the skills and tools required for a board member to successfully complete their tasks?" Yet another is "What are the time requirements?"

All of the above, if taken together, may provide some insights into the question posed in the title of this post. When we look at skills, tools and time requirements we will discover that the guidelines are very ambiguous and incomplete. I fact, at BLMH our board agreements are "open ended." Boards have been skewed toward attracting retirees or those who can expand the available task to fill the available time.

So some  board members may camp out at the Management office because they literally have nothing else to do. Some would prefer weekday meetings during normal business hours, and in fact, the only way to interact with management outside of the monthly HOA meeting is via email or during normal business hours. That doesn't work if a board member has any other obligations. It does, however, create an artificial barrier to participation. At times, I have concluded that is an intent of some boards and board members.  This too must change.

Communications and Spending
Interestingly, there is no communication requirement to be a board member. Simply come to the monthly meetings, prepared or not. So some board members seldom use email or don't have it. Over the years I've concluded that some either don't read the monthly management packet, or don't understand it.

We don't need to have email, period. Nor is a cell phone or the use text messaging a requirement, either. This led me to retort to a comment by a board member that "There was a time when we didn't have telephones."

But this is also the consequence of a board of volunteers. Having technology available is at a cost. Some board members are simply unwilling to make that donation to their HOA. Can you blame them? Yet, there is a problem and a paradox. We today have owners who expect near instant response to their communications and demands. Yet. they don't want to pay the fees for this. They expect boards to provide their own technology and cater to their every need, want and desire. This, when coupled with board members who have very limited communication ability creates an undermining situation.

In a large HOA which spends more than $1 million each year and with a 2 hour monthly meeting to make that decision, or at most 24 hours per year, wouldn't you think it be a requirement that board members have "up to date" communications abilities? Let me put it this way. For each hour of a board meeting the board is spending or collecting more than $42,000.

That spending is based upon a myriad of decisions. Some based on contracts, and some spur of the moment.

A lack of understanding
Some board members didn't understand the requirements when elected. A very few have thought that their duties and responsibilities were primarily to attend HOA meetings and to vote. Furthermore, if a board member is unsure then there is a real tendency to find a leader to follow. That is not the best way to spend $42,000 per hour and that is why I press board members to participate and be aware of all things that require their vote.

However, board members often forget that their decisions during each HOA meeting will spend $42,000 of fees. I sometime wonder if each owner knew that each and every HOA meeting literally determines how $250 of their money would be spent, would they attend it?

That's something I'll be putting in a newsletter.

Perceptions of being a board member
According to some owners, being a board members means one is to be "the boss" or "the bully." It may be an opportunity to be popular, or run a social group. In recent years some board members have brought these perceptions with them and have run their rackets. In fact, the real requirements of a board member is to make good business decisions, be fully informed of all of the goings ons of the HOA, ask good questions, treat all owners fairly and uniformly and follow the ICA guidelines. The monthly information packet is merely the wrapper.

Treating owners as the shareholders they are has apparently been beyond some.

Why Are Skills, Tools, and Time Important?
At BLMH our board is a working board. Management provides information and guidance. The board ultimately makes most of the decisions. In a HOA as large and built such as BLMH, this can be a difficult task. It is also about 40 years of age.

One thing that is an unstated requirement for board members is familiarity with the HOA. That includes the property, the business and how HOAs and boards work. This sets a high bar for a new board member. As I once explained to a newly elected Architecture & Maintenance Director "You will have to hit the ground running." He didn't fully comprehend what I was saying. This is in fact, true for all board members.

An Example
The first task our newly elected boards are faced with is determining the annual budget! In other words, determining owner fees and spending projections.  This immediately determined an issue for the "change" board of 2008.  That board couldn't reduce the fee increases when they had to confront the financial issues facing this HOA. So they took the bitter pill.

Boards are elected in September and in October the budget meeting is held. For a new board, that is actually a daunting task. With management's guidance even a new board can do this. But there are always unknowns in any budget. Board members must do their own preparatory research. They must study previous budgets. This isn't about providing a "rubber stamp" and there is historical evidence of just how financially dangerous that really is. I usually spend days preparing. A new board probably won't do that, and established boards may not do that. Setting fees must match spending requirements for the year and that includes long term reserve requirements. To accomplish this the previous year's budget must be scrutinized and compared to actual spending for the year. To make this even more difficult, at the time of the budget meeting the year is only 75% complete. It is possible for projection errors to occur.

Why is it so difficult?
For the above reasons, budgeting is more difficult than necessary. The explanation I've been given by our most experienced boards is "That's the way it has always been." It is implied this is the proper way and it is unchangeable. That's not necessarily so.

The current approach favors the most experienced board members and places newer board members at a severe disadvantage. This is because of the timing of the budget meeting(s), the difficulty involved and the need for "expert" knowledge. I have come to view our budgets as potential minefields. Even the board "experts" don't get it right all the time.

What is a newer board member to do? Well, as they lack "expert" knowledge gained by being a board member for a few years or a few decades, it is not unusual for board members to align into groups. Even experienced board members who are less aware of the intricacies of the finances will do this.

So we have factions on the board, and in the end, we really don't have six or seven board members. In fact, we may only have one or two. Board members may align behind the most vocal or most forceful board member. That completely short-circuits the decision making process. The result may be bad decisions and sometimes the promotion of simplistic arguments. One's "gut" may play a part as decisions become based upon emotions or beliefs.  This HOA went down a financial rabbit hole for several decades. It is only now seeing daylight.

What is really required to make good decisions is:

1. Ability to Act as a Fiduciary. 
2. Informed and Knowledgeable board members.
3. Factual and Complete Information.
4. Truly Open Dialog.
5. Ability and Willingness to Ask Responsible Questions. 
6. Ability and Willingness to Listen. 
7. Partnership with Professional Managers.
8. Ability to Use Critical Thinking Skills.
9. Personal Well-Being. 
10. Responsibly Involved Owners.

Working With New Boards

If a board functions with the above requirements satisfied, then it is possible that even with new board members successful results can be achieved. Not simply occasionally, but consistently. 

This post cannot go into all of the planning and preparation required to be a successful HOA board member. But it can address the question posed in the title of this post.  The subtitle could be "Who should be on a HOA Board?" It's my opinion that only those who are willing to get the job done, have specific skills and are willing to work and to learn should be on a HOA board. 

New board members need to be mentored. Mentoring required the transfer of  the "expert" knowledge gained by experienced board members to newer ones. It requires respectful and honest dialog. There is no shame in saying "I don't know." Of course, there is a lot we don't know. None of us, not one, has any secret knowledge of the future and there will always be uncertainty. 

Mentoring requires imparting a lot of knowledge in all areas to all board members, both new and experienced. 

Mentoring is also the most rapid way for a new board member to gain knowledge.

If boards are unwilling to mentor others and actively train their replacements, then the HOA has a problem. 

How Long Should One Be On A HOA Board?

This is actually two questions. 

1. How long does it take to become a successful board member?
2. When or why should a board member step down? 

The answer to the first question is dependent upon the other, more experienced board members as well as the board member himself or herself.  Suitable knowledge of the HOA, confidence and ability cannot be achieved in one or two years. 

There are exceptions to any rule. If a newly appointed or elected board member has actively served on Committees, studied the HOA in great detail for a period of years, and so on, then that experience will assist them in "getting fully up to speed" in the shortest possible time. 

However, most board members will not be aware of what truly is required of them until they are on the job. Even with experience, it will require one or more years to become reasonably proficient as a board member.  

Board Realities

It is useful to be aware that board members, as a group, make decisions in all areas of the HOA. This includes Finance, Maintenance, Projects, Landscaping, Rules and so on. A truly proficient board is comprised of members who have a good understanding of all of these areas. It is obvious this cannot occur in a year or two. In fact, some boards have members in which some members have very limited understanding of some of these areas. That does limit the effectiveness of the boards. It does not cripple boards unless they break into factions. By a faction I mean a group which aligns behind a person or persons and expects them to provide direction. It is a "follow the leader" approach which frequently has rubber stamped voting as a consequence. 

Boards in which there are factions frequently devolve into a couple of camps in which followers simply do as told, out of loyalty or whatever. Of course, a board may simply have a single powerful leader and everyone is bullied or agrees to "fall into line." Board members may simply give up and walk because they see the handwriting on the wall. This is in fact is how some HOAs are run into the ground. Less than good decisions are made, sometimes for years. Those who could make better decisions leave of their own volition or simply give up, or are driven off. The result can be higher fees, financial distress, maintenance issues and unhappy owners. 

The second question involves time duration on the board. There is no reason a person shouldn't serve on a board for decades. However, longevity has its problems. 

One problem with aging is our cognitive ability. As we age, we lose some of our mental faculties. Some will always point to the exception to the rule and say "It won't happen to me" but in fact, it happens to all of us. 

Another problem with aging is physical ability and stamina. As we age, we will experience physical maladies. True, some may experience this later in life than others. A very, very few may be physically able until the day of their death. Dying young may have some advantage, but at a price for the individual. We may kid ourselves. Yes medicines can alleviate some of the symptoms of aging. Many medicines also have serious side effects. Particularly if taken for longer periods of time.

In a HOA as large as this one, physical ability is necessary to view the grounds, monitor the fronts and rear of buildings, participate in physical surveys, interact with management on site while contracts are underway and so on. These are some of the things that reveal the "pulse" of the HOA, It is a fact that at BLMH certain efforts simply stopped. Stream repairs stopped, concrete patio repair and replacements stopped, garage floor replacements stopped, and so on. If boards won't or can't physically inspect and view all of these physical aspects and more, then maintenance will suffer. At some HOAs this is handled by owners. Boards simply wait for the complaints to come in and then deal with them as they occur. In this manner hall carpeting may be replaced when a condition complaint is filed by an owner or resident. Entries may be repaired when a complaint is filed, and so on. Meanwhile, the entire property is aging and not gracefully. At BLMH the approach of boards created a backlog of problems, including old roofs and failing streets. 

A third problem is interest and it's partner, willingness. Being a volunteer on the board of a HOA is not an easy task. Boards regularly deal with the problems the other owners won't. Boards also see the worst in HOA living. Bickering owners, owners or residents who are nasty, mean spirited and spiteful. Owners who are struggling financially for whatever reasons. Doggie poop, unhappy owners, owners who make poor decisions with serious consequences, etc. The list is long.  Fortunately, the majority of all owners do pay their fees and do keep the rules. But each year there will be a few who don't. Some boards fail to appreciate that the invisible shareholders are not the problem, nor are they represented by the problems. 

After a few years, dealing with the worst problems of a HOA will take a toll on any board member. If anyone thinks there were not some really serious and difficult problems as a consequence of the financial panic of 2008, they are really oblivious to reality. Many, many boards struggled for years to deal with the consequences and the fallout continues to this very day. Some may deal with the continuous onslaught of problems by building a mental wall to insulate themselves. That insulates one, but one consequence is an inability to observe and to listen. Getting to know 336 owners is impossible and may create other issues. As one board member once remarked about making a really difficult decision "But these are my friends." Another method may be to simply dismiss owners as a body which is represented by the worst of the HOA, which is to say, the problem owners become typical and representative of all owners in the HOA. After years, this can result in an intolerance for owners.

To be truly effective it may be impossible for a board member to participate in special groups, clubs and so on.  All owners are to be treated equally and fairly. Special groups may be a means to achieve special treatment and access to board members. This too may take a mental toll on board members who find that they truly have no friends in their HOA. Yes, owners may be cordial and respectful. But board members should not politic or assume that one person or a group is representative of all of the owners because they are not. Loneliness may take a toll on the board member.

Well-being should also be a factor. Personal well-being should not be taken for granted. 

Taken together, cognitive and physical ability, the mental wear and tear of making unpopular decisions with an uninvolved owner body, dealing with difficult owners,  mental fatigue and even loneliness will ultimately make a board member less effective.  These things will interfere with the ability of a board member to do their tasks. This is why board members may not walk the grounds, or have an intolerance for owners, or fail to mentor others, or fail to put in the necessary time.

Yes, board members can and do "burn out." It requires honest self assessment to determine if we truly are able to do our tasks. Personal well being should not be ignored. 

So the simple answer to the question "When should a board member move on" is when they are no longer able to perform their duties well. These duties are not about pencil, paper, using spreadsheets and so on. Yes, those things are really important. However, these are tools and methods. It is the foundation that makes a board member effective. 

That foundation is what allows board members to make good decisions and be a viable member of a team effort. I'll repeat the ten points earlier in this post:

1. Ability to Act as a Fiduciary.
2. Informed and Knowledgeable board members.
3. Factual and Complete Information.
4. Truly Open Dialog.
5. Ability and Willingness to Ask Responsible Questions. 
6. Ability and Willingness to Listen. 
7. Partnership with Professional Managers.
8. Ability to Use Critical Thinking Skills.
9. Personal Well-Being. 
10. Responsibly Involved Owners.

How Does This Apply To Me?

Of course, one of the requirements for a board member is to be an owner. However, I'll only be on a board in which I have determined there is a reasonable certainty of success.  I don't have any appreciation for turf wars or politics. These prevent success and ultimately that is what we are supposed to achieve.

It is a fact that I became actively involved at BLMH because I saw that it was in a downward spiral. It was in serious decline in some ways that I thought was detrimental to both short and long term success of the HOA. The "minefield" that the north section of Lakecliffe became was simply emblematic of the problem. The problems were far more substantial. That was my opinion in 2006. It is more than ten years later. There are those in the HOA including those who have served on various boards, who to this day are in complete denial about the problems and their causes.

I also am fully aware of the fact that this HOA has 336 owners. There are usually more than enough owners in HOAs to fulfill all of the board positions. At BLMH with 336 owners and seven board positions, there has been ample opportunity for more than half of the owners to have served in a board capacity.

This did not happen and under the current structure it will not. This is probably the greatest failure at BLMH. The apathy of the owners was and is not an accident. Boards worked very hard to create this condition of exclusivity and owners were more than willing to oblige. Working with several boards has been sufficiently difficult. At times, it was working "against" the boards. However, the owners do ultimately share full responsibility for what occurs at BLMH. Some pretend this isn't so. They are incorrect. 

I will stop being a volunteer when I decide that the objectives cannot be achieved, success is dubious, or I determine that the probable results don't warrant my personal efforts. A board position is not a hobby, nor is it for self aggrandizement. It is a serious job that may require 400 to 750 hours of work per year. It shouldn't. But that's what happens when boards are understaffed, make poor decisions, or play politics, have ineffective members and sufficient owners fail to responsibly participate in their HOA.  In a HOA of 336, what's the minimum standard for participation? How low is low? Believe me, we are near the bottom.

Some of this is simply due to recent successes. Owners tend to show up when things get really bad or they feel their personal lives are being interfered with. I think the highest owner turn out in 20 years occurred when someone posted a notice that the Board was voting on a special fee for dog owners. One must have their priorities!

My prediction? More likely than not there will be significant changes on the board in the near future. There will be setbacks in the HOA. Such setbacks may be necessary to get the attention of all of the owners and get them out of their state of automaticity.  If recent history is a guide there may be some ugliness and unhappiness. What ultimately occurs and what BLMH is like as it exits that tunnel will be determined by who has been in the engine compartment of good ship BLMH.   "Who" will be determined by owners. Some will choose to serve as volunteers and other owners will cast sufficient votes to elect them. If they are a new bunch as was our 2007 board, then it will be a rocky period. History does have a way of repeating itself. As the saying goes "Those who don't learn the lessons of history are doomed to repeat it." In HOAs which are struggling with owner apathy and noninvolvement, the owners really don't know what is going on or what it takes. Newsletters can be helpful. But 99% of the problems and decisions never make it to a newsletter.

We will be in that third domain of knowledge where "We don't know what we don't know."

Time for some needed site maintenance

It's time for some long overdue site maintenance. I'll be updating the social connections.

Is Complacency a New Normal in Your HOA?

On reading this you might think this post is also about the current state of affairs in the country. It isn't, although there are similarities.  "Complacency" is "a feeling of smug or uncritical satisfaction with oneself or one's achievements." Complacency may be accompanied by a tendency to sit back and assume that a certain outcome is assured.

While discussing current events (at a seminar on global affairs) one of the attendees couldn't resist moving into a discussion of the recent US election. I thought about the great uproar that has occurred when things did not turn out as expected. I commented that one candidate was apparently so smug and confident as to return home each night while on the campaign trail. (This was reported in the mainstream press). Now, after the rebellion the press seems to be attempting to explain how they missed all of this, and half the politicians are making excuses. As usual it is easier to come up with radical explanations. We didn't do anything wrong! We were robbed! It was foreign  influence, etc. This is similar to the oft used refrain "It was an accident."

During that discussion I reminded everyone present that that this is not the first "populist" rebellion or upset in recent years. It seems many of us have forgotten that only eight years ago we got "change."

Eight years ago "change" was such a wonderful idea that a small political group in our HOA used that platform too. Why not? If it works for getting the presidency of the US, why not also for a condominium board? It did work and they were elected. The old board had become complacent and somewhat arrogant. "Who else could run this HOA?" Who else, indeed. The issue isn't running a condominium association; any group can do that. The issue is running it well.

However, circumstances intervened for that new board. The euphoria quickly dissipated when the magnitude of the 2008 financial disaster gripping the country began to impact our association. Unknown to the owners the fee delinquencies skyrocketed and the foreclosures began. The new board discovered more grim news when they commissioned our HOA's first independently prepared outside reserve study.

This set the stage and by 2011 four of that board had departed. The next group of replacements were faced with the economic realities, the deepening financial problems, failing streets, aged roofs and a nascent roofing project. Earlier maintenance delays as a consequence of budget restrictions had created a large backlog.

I suggest that how this came to be was because of complacency on the part of multiple boards. Are we going down that rabbit hole yet again?

Optimism versus Complacency
Boards being the volunteers they are may tend to think in terms of doing as little as possible. Spend as little and of course, put in as little time as possible. If it isn't broken, then don't fix it. When a crisis occurs, and it will, then they may swing into action, albeit reluctantly. Or the board may look for someone to take on the challenges. Here is the bottom line: management does not make the big decisions. It is there to provide guidance and deal with the day to day stuff as directed by the board. So boards find themselves accountable and constantly grappling with unpopular and expensive issues. Rules violations, owner personal agendas and so on do take a toll.

Currently our HOA has completed some major projects. It took decades. For example, in 1998 or so with a new management team and maintenance contractor the board came up with some grand ideas. These included new streets and new roofs. The street project was completed very quickly and the roofing project was begun. But the coffers ("replacement fund") were drained and someone apparently realized that there would be financial issues because of these very large, very expensive projects. To deal with this owner fees were steadily ramped up with most of the increases going into reserves to save for and eventually pay for these large projects. But it couldn't be fast enough so other maintenance was curtailed and the projects stretched on. Boards didn't inform owners of the grand designs and the costs, either.

Early optimism faded and within 5 years owners were unhappy with the fee increases. Some were "mad as hornets" and bitter. To add to the pain, the new streets showed signs of failure and the potholes appeared. Our major thoroughfare came to be described as a "landmine" by upset owners. "Why don't you do something?" The change oriented, very optimistic board of 2008 had quickly departed.  One of the things they discovered is simply how very difficult it truly is. And with that comes a lack of popularity. There were difficult choices and the board chose popularity.

Were there reasons in 2010 to be optimistic, and are there reasons today? If one expects perfection, well  dear reader, it won't happen. In my first year on the board of a HOA I spent about 1,000 hours working through scenarios, solutions and alternatives. There is nothing to compare to a 20 hour weekly part time job as a volunteer, with sometimes really nasty owners expecting immediate results, and a board stuck generally in the past, or attempting to be popular. Nevertheless I was optimistic. In part because I'd done a lot of homework prior to 2008 and I had been simply waiting for the sword of Damocles to fall, and fall it did.  I'd been hunkering down about the economy since December 2006 and I had also studied the association as closely as I could as an owner since 2002. I really was not surprised by any of it. Except the extreme nastiness of some of the owners. And the willingness of so many board members to avoid responsibility and take action.

Part of the difficulty in a HOA is what I  would call structural, In other words, things that are inherent in the design of condominium associations and that includes the owners and the boards. Owners prefer to sit back and do nothing other than keep the rules and pay their fees. Boards are committees who prefer to take on simple tasks which will result in obvious success. Boards prefer to avoid very expensive, difficult, or unpopular tasks if at all possible. It is useful to remember that boards are elected from the peer group of owners. The difficult tasks require spending money in appropriate ways while truly maintaining a property and avoiding kicking the can down the road. Such an approach requires collecting fees, and fees are unpopular. Upholding rules which some owners find restrictive is also unpopular. Add to this the desire of most board members to spend as little time as possible on these fundamentally unpopular tasks. Ability can also play a part, as boards are comprised of skillful amateurs. It can and does get strange at times.

"If you can't dazzle them with brilliance, then dazzle them with BS" is an old refrain. For some boards or board members that means foregoing the difficult tasks and then taking on the simple ones. Then a board member can never be accused of failure.

Yet, even simple tasks can take months. For example, in 2013 the board was convinced it was really necessary to tackle the major street problem. Actually only half of it. It wasn't simple but after 4 years of "hemming and hawing" and board member departures. it was no longer avoidable. What followed in 2013  was months of "why and how" discussions and ultimately an agreement to perform some physical testing to determine just how bad the situation really was, The core samples and analysis painted a very dark picture.  Nothing really got done in 2013 while the board struggled to avoid the pill. It was going to be expensive unless the board kicked the can down the road and simply repeated past mistakes.

In HOAs with rapid turn over this is the preferred method; simply pass the difficult problems to future boards. However, further delay would set in place further disruption as this major street is the only way in and out of the complex. By 2014 and after 9 months of effort in that year with drawings, meetings, bids, reviews and many discussions that section of street was finally completed. The second section was completed in 2015. Ultimately, a serious problem reported and diagnosed in 2009 took another 5 years for a board to come up with a viable, long term solution.

This is emblematic of what I call "complacency" by boards and owners. Even in the face of problems there will always be someone to argue against dealing with the issues, and owners will prefer to step in line because passing it forward means someone else, some future board and owners will have to deal with it and pay for it. Meanwhile, we can all feel smug with doing a good job.

Today the association has moved beyond these recent difficult projects. Both portions of the major street is fixed, the water mains beneath it replaced and the roofing project is complete, with only some drainage work to do. Even a major landscaping restoration project has been "completed" or is it? (Probably needs one more pass). With 80% of the driveways replaced and even the fireplace removal/replacement project nearly over, it would seem we have some breathing room.

But do we?  Perhaps all we really have is an opportunity for some optimism.

What does complacency look like?
In our HOA it shows up in different ways. Some owners think the very low annual fee increases are the new normal. Some board members may be of the opinion that we can again relax a bit and deal with the kinds of problems we prefer to deal with. What does this look like? Looking for minor financial problems and some owners can now worry about the wildlife on the property, or request improvements to the landscaping near their units, or request park benches, etc.

We might be getting a bit too comfortable. While I don't like to be the party pooper, I do have to remain pragmatic.  That comes with the territory; board members are fiduciaries. This association really is about 40 years old. Our infrastructure is insured for about $90 million, which is about $268,000 per owner. And that doesn't include unit owner property (HVAC, appliances and so on). Some aspects of the infrastructure is in poor shape, and it is all aging. Boards have some difficult decisions ahead. Which is why I continue to emphasize the status and the issues in the newsletter.

In fact, we do have reason to be optimistic. However, if we allow complacency to take hold, we will quickly be back where we were only 9 years ago.

Those new roofs are aging and the association must accumulate the $millions to replace them. We have major stream issues. We need to deal with additional street repairs and even the most recent repairs are patches which have an anticipated life of 3-5 years. It is probable that future boards will have sufficient funds to deal with these issues and grow reserves by an additional $1 million in the next decade. However, there are infrastructure issues that will require hard choices. How to go about masonry building repairs? Make it a "mega dollar project" like the roofs, or a "maintenance project?" There are options and they will have serious financial consequences for owners, just as the 2002-2003 street and roof projects did.

Some owners and boards may feel that they have lots of time to decide how to proceed. Some owners think they will have moved on before the bill comes due and the are inclined to vote against long term maintenance. Boards can choose to take a few years to deal with the simple stuff and deal with the problems as they occur, while avoiding the big stuff. That approach didn't work well in the past and it won't work today. Remember, this association is aging. Things that we could and did ignore in the past didn't go away. This is true today and the association infrastructure can only decay, age ans get worse.

We don't live in La-La Land
Furthermore, we live in a state (Illinois) which has some serious problems. Illinois has been cutting funding to cities and communities for years because of the finances.  This has trickled down into those communities and is causing financial stress. Nearby Glen Ellyn is considering raising water fees to deal with fire fighting costs. Chicago raises water costs to the suburbs to deal with it's financial disasters. Wheaton wants to deal with the issues created by the 5 retention ponds (small lakes) which form the chain ending at our lakes 3 and 4. Yet, Wheaton has to go it alone with no assistance from Glen Ellyn which comprises about 1/3 of the watershed. Furthermore, the College of Dupage's new storm sewers discharge into its ponds which overflow into Wheaton's Lake 4. The funds available are shrinking while the problems grow.

I've discussed with recent boards some really far reaching opportunities with the City of Wheaton. However, these things won't happen if the boards prefer complacency and prioritize minor financial issues while the State is continuously tightening the financial screws on our city. And, it will take some commitment by boards over a period of years to move these initiatives forward. It is certainly easier for boards to deal with the hum drum day to day stuff and rubber stamp a board packet each month.  It is certainly easier to look for small billing errors. It is safer, too. "Nothing ventured, nothing gained" is another old expression, and it is no secret that boards have included members from time to time who have utter disdain for owners. I encountered this while attending my first HOA meeting in 2002.

In HOAs, it is difficult to argue with boards that aren't willing to take reasonable risks and won't publish insights into their decisions. I don't do that, which is why our newsletters are today what they are. However, it is also true that it takes an entire board to make an association work, and an entire board votes on each and every issue. Just like the engine in a car, associations operate best when all cylinders or board members are firing. Results are determined entirely by committee.

However, getting board members to contribute to the newsletter can be one more arm twisting act, which is why so many newsletters have so few authors. It is safer to avoid making a commitment and no one can  ever be held accountable if one doesn't make a printed statement.

While it is true that nearly 1/3 of our owners are new since 2009, we also have some who have been in our association for nearly 40 years. We aren't a retirement community, but some owners pretend their association is. However, boards must be aware of the financial well being of all of the owners. Boards should and do monitor delinquencies and foreclosures and that information provides some insights. We also know about changes in the economy and costs to owners. We all know that water rates have increased in recent years. We all know that fees have almost doubled since 1999. We also know that wages are stagnant, the economy is not humming along for all and that retirees aren't getting social security increases after considering Medicare cost increases, and we all face rising health care costs; Obamacare was a financial disaster for many in the dwindling middle class. Despite all of the rhetoric, "Obamacare" health insurance can and does cost some middle class families more than $900 monthly per person and requires sizeable deductibles (more than $3,000).  Furthermore, because of the financial crisis of 2008 it is probable that some owners remain financially trapped in their homes or condos. Some owners expected to sell at a nice price, take the proceeds and move elsewhere. But the collapse of the real estate market and sharp drop in home prices has made that impossible for many. Even today, prices in some communities in our area are off 19% or more from recent highs, as reported in the local press.

These things and the decisions of HOA boards all impact quality of life. They may make our units less affordable, which is why so many have abandoned the home market. Some can't get a loan for a variety of reasons, including bank unwillingness to deal with "small" home loans. Some can't afford to own a home and others have decided they don't want to bother. Condominiums based upon manor style homes offer an affordable alternative to single family dwellings and high rise condos. However, it would be imprudent to assume our units are "cheap." The ability of homeowners to afford a home is determined by sum of the mortgage (principal + interest), real estate taxes and HOA fees.

In an environment of rising interest rates, decreasing State assistance to communities and somewhat stagnant wages, it is probable that homes will become even less affordable in the near term.  I also suspect other costs will increase as communities have no choice but to make up lost income via a variety of taxes.

My point is, beng complacent is dangerous. 
My point is that assuming fees can be raised 3% each year is a financially dangerous choice by boards. As I pointed out during the most recent HOA annual meeting, should boards take the approach favored by some board members and return to annual fee increases of 3% or more each year, it won't be long and our monthly fees will reach $500 per month. IMHO that would crush the association and inflict real financial pain on some owners.

So what choices do we have? Remain vigilant and diligent. Don't allow things to get out of control; in other words, don't kick the can down the road and do maintain the property. But do so responsibly and continuously. Avoid the "mega project" choices and choose the prudent, realistic  ones. Do the necessary work before making the decisions. Make the difficult decisions and get creative. Don't sweat the small stuff and avoid worrying about the minutiae. Don't assume the worst, but also don't assume there is a bright new day around the corner, because there isn't. And finally, determine how to maintain a focus and establish priorities.

If we can't do these things, then we shouldn't be homeowners or board members. Better to get an apartment and let someone else make all of the decisions. However, for anyone trapped in their HOA there are few happy choices.

If boards fail in their tasks then it will get ugly again.


Notes:

1. Even simple home remodelling without a committee can take months. My first "home remodelling" project was impacted by contractor delays and something that was expected to take 3 months took about 9; I had two small boys living in a gutted house; for some weeks we slept in sleeping bags in the basement. After moving to BLMH, even a relatively simple kitchen remodelling project in my condo took about 3 months.  In both cases the projects were "fast tracked" because no committee was required; there were no votes, or six different opinions to consider. No serious modifications either. 

Creativity in Running a Homeowner's Association

One of the great impediments for boards is a failure to realize and identify "change." Board members may actually take the position "This is how we have always done it" or "If it isn't broken don't fix it."

Unfortunately, putting our heads in the sand doesn't prepare us for the future, nor does it empower us in addressing change when is occurs. Which is why board may also say "How could this happen?" when things occur. Of course, there will always be unforeseen events. However, a lack of planning and preparation is the greater problem.

One easy task is to take a budget from 10 years ago and compare it to a current one. One can quickly identify some significant events. However, with the short term service of many boards, turnover and even a sometimes lack of willingness on the part of boards to do the work, some HOAs may have great difficulty completing even this simple exercise. Nevertheless, there is real value in doing so.

Several months ago I told the board at our HOA that it wasn't so many years ago that this association spent about $6,000 annually on water for the grounds, streams, etc. Recent budgets have reached nearly $60,000 annually. Identifying these types of changes provides the opportunity to apply creative solutions. However, boards may be content to deal with $25 monthly charges and other minutiae. Furthermore, if boards members take the position "Our fees are not high enough" for proper maintenance, there may be personal agendas present which interfere with identifying budget areas which could benefit from creative solutions.

Questions weren't raised by all of the board members when I pointed out the change in water bills in recent years. Doesn't that seem odd?  Furthermore, in 2010 there was an interest on the part of some in our HOA to investigate fraud. That was the position of some owners and even a few board members. When I question this, it was stated that this was the only reasonable explanation for rising costs in the HOA.  That too smacked of personal agendas at work.

Are there other areas in your HOA where improved scrutiny could result in significant savings? Firstly, one has to give up their preconceived notions and positions. For a board this should be easy because we are "fiduciaries." But in practice it isn't. Secondly, it requires some diligence in the form of research, getting off our duffs and really investigating the property, and then having unbiased discussion with management and maintenance. After all, they are the real experts. So we have to ask open ended questions of them without wasting their time.

Here are several areas discussed in recent years, or currently under discussion, as examples.

1. The utility rooms in our garages are electrically heated in winter. Would improved insulation be beneficial?
2. To determine the condition of the heaters in the utility rooms, maintenance personnel frequently inspect by opening the doors. This releases all of the heat in the rooms. Would temperature monitoring be a better way?
3. Recent changes in water metering charges has apparently resulted in annual meter costs to the HOA of more than $20,000. Perhaps there should be changes made?
4. Recent changes in water billing rates has resulted in water usage bills to the HOA in excess of $40,000 per year. Should a board consider methods to reduce water usage?

Of course, any changes will likely cost money and that means that "cost benefit analysis" is a necessity. Furthermore, this will add to the tasks of any board. Our boards for years preferred to avoid making conditional studies and even avoided the preparation of an independent reserve study for more than 30 years. Long term planning was avoided to "keep fees as low as possible" and owners colluded with this. Limited owner involvement or desire, and at time board unwillingness to be forthright and transparent will restrict opportunities. Add the "Don't fix it if it isn't broken" mentality which is really an attempt to avoid preventative maintenance, and one can see that in HOAs there may be no desire to be creative. It is truly easier to "slap paint on the pig" than to do almost anything else. And boards do take the easiest route, or the one which favors their personal agenda.

Boards do know what is required. "Follow the money" was a favorite expression of our longest serving board president. But that isn't as easy as it seems, and too often it is used as a baseball bat rather than a research tool. But then again, we all want to hit something, and some want to be "a home run hero."  In fact, there are no quick solutions to really difficult problems and a large, aging HOA is a difficult problem.  Nevertheless, the simplest solution may be the best one. To find a solution to a problem one must first identify that a problem does exist.

Currently, one of the major discussions is how to save ducklings on the property. That has taken precedent over the difficult discussions in several HOA meetings. We each have our priorities. Mine is doing what must be done to avoid those 5%, 7% and higher annual fee increases while dealing with serious problems and maintaining the property. However, I am of the opinion that now that fees increases have moderated for several years that some owners think that "this is the new normal." It isn't. It would be far, far easier for boards to charge 3% to 5% annual increases to owners, and some would prefer to do that. However it would not take long for our fees to rise to $500 monthly. One must ask how "affordable" our units would be should that occur. But we do avoid the difficult discussions. 

Intentional Homicides - Chicago Murder Capital?

Chicago has gained some national notoriety in recent years, even being called "The murder capital of the US." Some of that might be a reaction to the violence against children as a consequence of gang shootings and so on.  Those deaths of the young are particularly disturbing and appalling. 24% of this crime occurs in only 5% of the city, it has been reported.

The numbers can be horrifying. However, it is also true that it is inaccurate to compare deaths without being aware of the size of the community. 5 murders in a city of 25,000 sounds like a low number while 100 murders in a city of 12 million sounds worse. But it is really? It is more realistic and less sensationalistic to consider the number of murders per 100,000 population.

In my earlier example, 5 murders per 25,000 is 20 per 100,000 population. 100 murders in a city of 12 million is actually fewer than 1 murder per 100,000! (0.8333 murders per 100,000). The homicide rate in the larger city is six times smaller that that of the small city.  This implies it is safer to live in the larger city, even though it does have more homicides. Think of it this way, fewer people are killed per city block in the larger city.

Yet, despite the hyperbola what is really true on the planet? According to the UN Office on Drugs and Crime's International Homicide Statistics database for 2014, in the world there were 5.3 homicide deaths per 100,000 population. There were 3.9 homicides per 100,000 overall in the US in 2013. Here are some statistics (homicides per 100,000 population) in countries or regions in which is was 10 or more per 100,000; I've added the statistics for Chicago:

Honduras 75
El Salvador 64
Venezuela 62
Jamaica 36
Belize 34
South Africa 33
Guatemala 31
Columbia 28
Caribbean small states  27
Trinidad and Tobago 26
Brazil 25
Latin America and Caribbean 23
Puerto Rico 19
Chicago, Illinois 18.5
Dominican Republic 17
Mexico 16
Uganda 12
Costa Rica 10
Philippines  10
Russian Federation 10

So how did certain cities in the US fare back in 2013 or 2014?

Flint Michigan 62 homicides per 100,000.
Detroit 54.6  per 100,000.
New Orleans 53.2 per 100,000.
Jackson, Miss., 35.8 per 100,000.
Another 17 cities with more than 18.5 homicides per 100,000.
Chicago,18.5 homicides per 100,000

A reported by the Pew Research Center in 2014. "...from 1985 through 2012 only six cities have held the anti-honor of having the nation’s highest murder rate: New Orleans (12 times, most recently in 2011); Washington, D.C. (eight times, most recently in 1999); Detroit (four times, most recently 2006), Flint, Mich. (twice, also in 2010); Richmond, Va. (once, in 1997) and Birmingham, Ala. (once, in 2005)." However, New Orleans did not bother to report statistics in 2005 after Katrina. Yes, it really was that bad!

Here is a quote from the Pew article: "Another thing that jumps out from looking at the murder-rate data: How the threshold for having the nation’s highest murder rate has fallen since the early 1990s, when the nation’s crack epidemic helped push violent-crime rates to record highs. In 1994, for instance, New Orleans led with 85.8 murders per 100,000; the next two cities, Richmond, Va., and Washington, D.C., had rates of 70 or more per 100,000. Even in terms of raw numbers, Chicago has come a long way: In 1994 the city had 928 murders."

Compare the numbers in the UN data, and you can see how really horrific the 1990s were in the US. Do you want to return to "the good old days?" Chicago certainly has serious problems and they should be addressed. But don't listen to the "talking heads" or the entertainment elites.


http://www.pewresearch.org/fact-tank/2014/07/14/despite-recent-shootings-chicago-nowhere-near-u-s-murder-capital/



Notes:
Reliable, recent global statistics are difficult to find. Which is why I used slightly dated information. In the spirit of completeness I'm adding the following. In 2016 it was reported that Chicago had more than 760 homicides and 4,300 shootings. There were about 4.9 homicides per 100,000. This is less than half during the peak of 10 per 100,000 in 1980. Chicago's mayor is calling for more money to deal with this.