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.