Letter to the board January 6, 2020

This went to management:

"Hello Dave & Rosemary

Please forward this to the board and include it in the January packet. I’m looking forward to a detailed response by the board.  It was stated by the board that email addresses would be in the newsletter. That did not happen.  Why not?

Thank you!

1     1. The board did not perform the following maintenance items in 2019. These were scheduled in 2018. I want to point out that once an association falls behind in maintenance it is difficult or impossible to catch up.  Here’s a few items the board decided not to do in 2019:

A.      Apply GSB-88 preservative to Lakecliffe Blvd after repairing it and preparation. A proposal was obtained in fall of 2018 but the board agreed to delay until 2019. This approach is used by nearby communities including Wheaton and it was recommended by the project engineer for the street replacement. This was discussed and the info was given to the entire board including Bailey, Scudder and Seery. In 2018 they all agreed to proceed.

B.      Replace 3 or more garage floors per survey with management in 2018. Some are in poor condition and 40+ years old. Damaged floors can be a hazard for residents.

C.      Replace at least 4 driveways in 2019 per survey with management in 2018. Poor driveways can be a hazard for residents and visitors.

D.      Resurface Plymouth including curb and basin repairs in 2019, per board and management.

E.       Resurface the remainder of Dover and curb and basin repairs in 2020.

F.       Etc.  Detailed lists were provided to the board including Bailey, Scudder and Seery in 2017, again in 2018. A summary was provided to owners in the August-September 2018 newsletter under “Guidance”.  See newsletter at www.blmh.org

 2. I received the 2020 Approved budget. I noticed that 1) there is an approximate 0% fee increase and 2) the projected year end 12/31/2019 indicates a budget surplus of $58,214 (Projected total year end income minus Total all expenses).  Such a surplus could justify a 0% fee increase.

 3.  Certain board members cannot comprehend my position about the October 2018 decision of the board to raise fees.  At that time President Sheryl Bailey insisted a fee increase was “absolutely necessary” and the entire board voted for an increase of 1.88%. However, at the time the projected budget surplus for 2018 was about $124,000. There was no justification for a fee increase, yet the board decided to arbitrarily and capriciously raise fees for no purpose. That’s a breach of fiduciary duty.  At the time Bailey, Scudder and Seery had a combined 40 to 50 years of board experience. Calvo also had board experience. A board should never raise fees simply because it can and has the power to do so.

4.   I suspect some board members don’t understand the role of a fiduciary. In fact, board members don’t represent or work for the benefit of the association. They are elected to represent all owners who they are to treat equally and fairly.  The board should treat owners as the shareholders of this not-for-profit corporation.  

5.      On the matter of budgeting the legal statutes for the board are clear.  Read the Illinois Condominium Act and governing documents. Board members should be intimately familiar with the governing documents and the Illinois Condominium Act. The board should act in accordance with these.

6.       Being on the association board is neither a hobby nor a power trip, where board members exercise dominion over other owners and residents.  Board members should not run their personal agendas. In view of the projected surplus  in 2018 the board members who voted to raise fees because they could each afford the fee increase were in breach of their fiduciary duty. Board members should not cater to the “squeaky wheels”. In other words, treat attendees of meetings courteously and with respect, answer their questions with honesty and integrity and the board should take responsibility for its actions.   All owners are to be treated equally, be they onsite, attend meetings, or remote owners; to do otherwise creates separate classes owners. That is forbidden by the Illinois Condominium Act .

7.      To keep all owners informed requires communications by the board. Doing so is the boards’ responsibility as fiduciaries. Owners may choose to be uninformed, but that does not relieve the board of this fiduciary duty.

8.   Here’s some financial history for the current board, which may explain my position, my caution about fee increases and concern about needlessly inflicting financial pain on our owners. Annual, continuous fee increases of the magnitude which occurred at BLMH for 20 years can financially stress owners. Some will be driven into foreclosure. I was on the board for eight years, 2010-2018.    I discovered that delinquencies were increasing and did reach nearly $80,000. The number of delinquent owners peaked at more than 21%. Each and every year year a few owners went into foreclosure. Some were evicted from their units by the association for lack of payment of fees.  A bad economy and a decade of fee increases averaging more than 7% each year did that. In fact, for 20 years the annual fee increases were about 5-1/2% each and every year.  

8.       Here’s a chart of the estimated surpluses as of the end of the 3^rd quarter from 2014 to 2018. This was from the budget worksheets used by boards in October/November planning sessions.  The projected surpluses were determined by subtracting expenses from income. I would say that it was a goal to achieve modest surplus each year.  Furthermore, it is pointless to budget” the worst case scenario.”  From 2010 to 2018 the budgets were the result of improved planning and financial controls. I enrolled a CPA who joined the board for several years. The treasurer, the maintenance director and I monitored this closely throughout the year and periodically discussed the status with the entire board  The board members who were the force to accomplish this are no longer on the board. This planning is why fee increases were reduced. Some board members didn’t see things this way, which is why President Bailey insisted that fees be raised, and the entire board agreed.  Why was that? Possibly because it has been the position of certain board members that small, annual fee increases are better than larger ones at infrequent intervals.   That’s an acceptable statement, but it should not be an excuse for raising fees each and every year, whether necessary or not.  Here are a few of the projected surpluses achieved as of the annual budget planning sessions during my board tenure. This is typical of the information that should be used by boards as part of their annual planning:

110.  Under my board involvement and leadership from 2010 to 2018 average annual fee increases were 1.56% per year. They could have been lower, but in 2010 with the completion of the first ever Reserve Study prepared by an outside firm a 7% fee increase occurred. This was proven to be unnecessary by the reserve study completed the following year.

11.    I really don’t know what the current board will do in 2020, be it fees or maintenance or water mains, etc. I’ll write about that in the coming weeks.

12.   The minutes are incomplete or missing. For example, the January 2019 meeting was never published on the official website www.blmh.org.  These were approved by the board on March 14, 2019. The June 13, July 11, August 8 and September 12, 2019 Minutes contain no information regarding the financial status of the association; nor is there any indication that finances were discussed.  There are no published minutes for October and November 2019 which should have been approved by the board as of the December 2019 meeting.   I doubt if the minutes meet any standards for a non-profit corporation supposedly run by a board of fiduciaries.  The board should provide a statement of each item that was approved. For example, if finances were approved, what was actually approved? How and when did CD  rollovers occur? This is not mentioned in the “official” Minutes. Owners are the “owners” here and the board serves as representatives and fiduciaries. Owners are entitled to know the financial amounts that are being approved by the board.

13.    I have noted some gross inaccuracies in the official Meeting Notes. I’m going to remind the board that I videotaped the meetings I attended including most from 2008-2018 and I kept copious notes. The  March 14, 2019 minutes state: “The prior Board President did not ask for a gate that is why one was not installed.” This is inaccurate. This was discussed with the entire board while I was Maintenance or architecture director and a directive was made to install a gate. A report was made to the board, which included to Bailey, Scudder and Seery. In fact, a verbal report by CCS at the end of that year stated that the gate was not installed because the weight of the design was too great, and it would be done in the following year. It wasn’t.

14.   The board should not ignore the issue of the lakes on our property (lakes 3 and 4). The city of Wheaton controls these retention ponds which periodically overtop and flood the community.  This too should be looked at and the association should be relieved of the burden of maintaining a city run facility. For more see these 22 posts: http://briarcliffelakes.blogspot.com/search/label/Briarcliffe%20Flood

Norman Retzke"

www.briarcliffelakes.blogspot.com

Original material:  https://briarcliffelakes.blogspot.com/