Should we Add Amenities?

Started by ND • 33 replies • 5432 views

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ND (PA)
Posts: 792

Posted:

I am an HOA Board Member and my 140-house single-family home HOA has some extra money that we're trying to use wisely.

We have some surplus that has built up over a few years (which I know we shouldn't technically have), and per our docs and lawyer input, that money either needs to be given back to homeowners or put into capital improvements that benefit all homeowners (more or less). Giving it all back is one solution, but we're exploring the idea of adding amenities to the 'hood in the hopes that it increases existing homeowners' satisfaction as well as make us more interesting to home buyers (increase resale value/interest). Currently we have a playground, some paved/unpaved walking trails, a couple pergolas, a gazebo, and a lot of open space . . . but that's it in the way of amenities.

Amenities we're considering are: b-ball court, tennis court, combined activity hard court (single court for b-ball and tennis), grass athletic fields (soccer, baseball, etc.), a pavilion w/ picnic tables & BBQ stations, common area landscape additions/improvements, additional equipment in the playground, overflow parking lot.

I know there are tons of pros and cons to each of these and lots of things to consider when adding/removing amenities. We're considering immediate, near-term, and long-term costs. And our goal is to put things in place but not require much (if any) increase in monthly dues to maintain it all (so limited regular maintenance costs).

All that said, my main question for the group is sort of a philosophical one . . . Do you think (and possibly have proof) that adding amenities REALLY DOES increase existing homeowner satisfaction, increase property values, increase homebuyer interest, increase neighborhood marketability?

With addition of amenities being a large immediate and long-term financial investment, I'm trying to make sure we invest wisely (if we choose to invest at all). Thanks for your input.

TimB4 (Tennessee)
Posts: 21,059

Posted:

ND,

My initial question would be do you truly have a surplus or do you only think you have a surplus.

If you have a current reserve study and your Reserves are fully funded based on that study, then yes you have a surplus.

If you don't have a reserve study or if the study isn't current (say within the last 5 years) then you only think you have a surplus.

If you do have a surplus, I would suggest looking at the cost for all the options, along with their upkeep (i.e. what increase in assessments will be needed to fund the reserves for this additional amenity), and then decide what the Association can or can't afford.

Once the board has narrowed down the choices, take a poll of the membership asking for them to identify the top three or simply place all the options in order of precedence.

Once you have narrowed down the choices, call a special membership meeting and let the members vote for option A, B or C (the poll should give you an idea if you can have three choices or only the top two).

ND (PA)
Posts: 792

Posted:

Tim,

Thanks for the feedback.

Yes, I guarantee that we have a surplus . . . reserve study performed a few years back; reserve fund is fully/properly funded according to reserve study (likely overfunded because a low interest rate and high inflation rate was used in calculations); getting ready to do another reserve study this year to recalibrate and confirm.

And we're currently in the process of doing something similar to what you recommended for actually deciding which amenities to add.

I know I said a lot in my initial post, but the only real question I asked was . . . do you think (and possibly have proof) that adding amenities REALLY DOES increase existing homeowner satisfaction, increase property values, increase homebuyer interest, increase neighborhood marketability?

Thanks again.

DaveD3 (Michigan)
Posts: 796

Posted:

Difficult question, so I'll ask one of my own.

How much are your current amenities utilized?

ND (PA)
Posts: 792

Posted:

I'd say that the only amenity we have where use could accurately/appropriately be measured is the playground. But for what it's worth . . . on a scale of 1-5 where 1 represents little to no use and 5 represents significant use, I'd rate the things I listed as follows:

playground - 3
some paved/unpaved walking trails - 2
pergolas & gazebo - 1
open space (played in by kids, dogs walked, sports played) - 3

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

No other common areas? Roads, ponds, sidewalks, signs, etc?

ND (PA)
Posts: 792

Posted:

Steve,
. . . not sure I follow. We have lots of open space (grassy common area), roads, sidewalks, signs, monuments, detention basins. But where are you going with that?
- Mike

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ND on 08/30/2013 8:25 AM

but the only real question I asked was . . . do you think (and possibly have proof) that adding amenities REALLY DOES increase existing homeowner satisfaction, increase property values, increase homebuyer interest, increase neighborhood marketability?

That will depend on the individual tastes, wants and desires of the each homeowner and potential buyer.

If you put in a basketball court, those who wanted the court will be happy. Those who didn't want it, won't be. Those who live by it may complain of the noise and trash generated by it's use.

If a buyer is looking for a community that has basketball courts, it may tip the scale if they put in an offer or not. If a buyer doesn't care, it may not make a difference at all. If the property for sale is near the basketball court, it may discourage some buyers due to the potential noise issues.

Therefore, I don't think there is any real proof. As a contractor once told me. Renovate your house to the way you want it. However, don't expect to get your money back for the doing the renovation as that may or may not happen.

DavidW5 (North Carolina)
Posts: 565

Posted:

One way to ascertain whether a new amenity would enhance resale values would be to talk to a few local real estate agents. They have the most insight into what local buyers are looking for and how they react to the amenities you currently have.

We also have established a Capital Improvement Fund with surplus operating funds accumulated over several years. We have chartered a Long Range Planning Committee (LRPC) to study and recommend things that we should consider adding to the community as its population ages (we are a 55 & over community). We are developing marketing materials to make available to local real estate agents and as part of that effort we are seeking their input as to what prospective buyers are looking for.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Posted By ND on 08/30/2013 8:51 AM
Steve,
. . . not sure I follow. We have lots of open space (grassy common area), roads, sidewalks, signs, monuments, detention basins. But where are you going with that?
- Mike

If you have very, very expensive items such as roads, sidewalks and detention basins, I question if you actually have "enough" money in your reserves. Not too much. Do you have a reserve study? This will show how much it will cost to repave the road, the date it will need to be paved and if your putting enough money into a reserve (savings) account to meet that goal. Typically HOA's never have enough money in reserves, to actually fix things when they need to be fixed, so I'm very skeptical when someone says they have too much.

ND (PA)
Posts: 792

Posted:

Steve,
Thanks for explaining your thoughts. I answered Tim's questions previously on reserves and reserve study.
We hired reputable professionals to do the study previously (less than 5 years ago) and will do so again in the near future . . . and our reserves are indeed fully funded.
It's my understanding that reserves can only be funded to their indicated maximum . . . it isn't an account that we can simply add more to "just in case" if we have extra cash remaining at the end of the year.
So since we have money leftover in addition to fully-funded reserves . . . it is surplus.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

We hired reputable professionals to do the study previously (less than 5 years ago) and will do so again in the near future . . . and our reserves are indeed fully funded.

I'd wait until the next reserve study to change anything. Costs of goods and labor have gone up dramatically in 5 years. Especially asphalt.

TimB4 (Tennessee)
Posts: 21,059

Posted:

ND,

Does your Association have a contingency fund in addition to the Reserves?

You might want to consider creating one if you do not.

A contingency fund is money set aside to make up budget short falls (like heavy snow removal), pay for unexpected repairs (like storm damage), or to cover normal expenses while waiting for assessment payments to be made.

Some Associations who are in areas that may have major storms even have a fund to cover the insurance deductible if ever needed.

KevinK7 (Florida)
Posts: 1,343

Posted:

Yu essentially state that the current amenities are not being utilized to their fullest. Taking that into consideration I would recommend against new amenities. While the thought is nice, why buy something new and create future costs when it may hardly be used?

DaveD3 (Michigan)
Posts: 796

Posted:

Quote:

Posted By ND on 08/30/2013 8:49 AM
I'd say that the only amenity we have where use could accurately/appropriately be measured is the playground. But for what it's worth . . . on a scale of 1-5 where 1 represents little to no use and 5 represents significant use, I'd rate the things I listed as follows:

playground - 3
some paved/unpaved walking trails - 2
pergolas & gazebo - 1
open space (played in by kids, dogs walked, sports played) - 3

It sure doesn't look like a high demand for any of them.

As Tim pointed out, active items are likely to polarize those who use it and those who don't, relating also to their proximity to the amenity.

Rather than add NEW amenities, is there anything you can do to help the current amenities be utilized more? What does the gazebo need in order to bring it up from a 1 to a 3 for use? Will beautifying the walking trails make a difference in their use? Can things be done with the open space to foster its use?

JeffT2 (Iowa)
Posts: 880

Posted:

You (and your attorney) may have missed the obvious: namely that you can use the surplus to reduce your monthly dues. This may not have been your main question, but your homeowners may want a reduction more than extra amenities, especially if they are not fully utilizing the existing amenities. Reducing the dues will definitely "increase existing homeowner satisfaction". Giving the surplus back in some other way is a mess, and the proposed amenities don't sound like they would win a direct vote against reducing dues.

FrankS10 (Kansas)
Posts: 276

Posted:

I agree with Jeff. The survey should definitely ask the members if they would rather have it returned or add amenities before doing anything, IMO. If amenities win, ask for feedback on what are some improvements people would like to see happen.

TimB4 (Tennessee)
Posts: 21,059

Posted:

The problem with having the funds returned is what if the person who overpaid sold and moved. You can't return that money to them and you can't just give it to someone who hasn't overpaid.

The best options are to put the money into reserves, improve existing amenities or add new amenities as this does the most for everyone.

FrankS10 (Kansas)
Posts: 276

Posted:

Tim,

If there is no rule against returning the money I believe you can. This is no different IMO than someone whose dues through the years goes to the reserve fund to someday pay for a pool replacement that occurs after they move out.

Money just sitting there is too tempting to just use, but we need to remember additional amenities usually require more than the original purchase price, they also need maintenance. Be cautious on adding something that may necessitate higher dues in the future just because extra money exists today. Maybe consider lowering the dues and allowing the extra money to be spent down naturally?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By FrankS10 on 08/31/2013 5:37 AM

If there is no rule against returning the money I believe you can.

Frank,

Certainly you can return the money. However, you must return the money to those who actually overpaid. This may include individuals who have sold and moved.

Typically, if the surplus was identified each year, then returning the money shouldn't be an issue.
However, what happens if this is over 5 or 10 years of collecting surplus? How do you identify where everyone who overpaid lives?

My impression is that the OP's Association has collected surplus over several years.

Ideally, if budgets are done correctly, there should be little if any surplus funds.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I would wait for the new reserve study. Quite possible costs have increased and you will be right on target.

If a surplus still exists then I would reduce dues. Now I would not reduce them more then the BOD could raise them without owner permission. In our HOA that would be 5%. I say this in case in the future you need to raise them.

FrankS10 (Kansas)
Posts: 276

Posted:

Tim,

I think any action can be taken if the By-Laws allow for it, or are amended to allow for it. Unless there has been a lot of turnover in the community and the refund is significant per household, I doubt past residents would care.

On large issues such as these with the potential for conflict, Boards ought to begin with putting this on the agenda that is sent out in advance of the next meeting. Let residents know it will be discussed and solicit their input BEFORE any Board action. What path may make sense to the Board today may become less obvious as other options are introduced.

Boards being perceived as over-stepping their authority seems to be a common thread among many who are dis-satisfied with the HOA life-style. And it seems like such an easy thing to fix-communicate, solicit input no matter how tedious it is. JMHO.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By FrankS10 on 08/31/2013 8:17 AM
Tim,
Unless there has been a lot of turnover in the community and the refund is significant per household, I doubt past residents would care.

Perhaps. But all it takes is one person who had moved away, finds out and want whatever overpayment there was to be returned to them.

Granted, the probability of that happening may be minimal. However, it could happen as often people who have moved remain friends with their neighbors and the subject might come up. Since the Association doesn't know who is friends with whom and likely doesn't know the mailing addresses of everyone who moved (the post office will only forward for one year), it's a possibility that the Board needs to consider.

DavidW5 (North Carolina)
Posts: 565

Posted:

The funds can be "returned" to the members by applying them to the following year's operating budget. The presence of that "income" from prior year surpluses allows the budget to be balanced with a lower monthly assessment rate. By lowering the assessments each current member benefits. You do not have to deal with cutting checks to current and/or prior members. This method is perfectly legitimate and is in conformance with IRS revenue ruling 70-604.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Refunding dues is a bad idea. To eliminate "excess," simply let inflation do its jobs by holding the dues rates and reassessing annually. Many HOAs are bound by rules in terms of how they can raise dues to track inflation. To reverse the dues rate, you not only lose the 1.8% inflation inherent in the national economy but the literal percentage of the newly-restricted HOA income stream.

Example: An HOA that cuts monthly dues by 10% in one cut due to over-collection - if restricted to inflation rate-only dues increases - could find itself requiring a decade to restore its buying power IF it's needed.

With operating expense excess collections, I'd increase the maintenance and tweak the existing amenities - especially the playground since it's a "3." No amenity will be a "5" because communities have diverse tastes and activity levels. Since this community seems to use its open space and playground space, a well-built and sensible shelter with BBQ station and high-quality picnic table will pay dividends as it adds to outdoor use with minimal insurance hit. Basketball is a fairly high-risk, insurance matter.

Sending out polls and questionnaires isn't effective leading in my opinion. Solicit input and discuss proposals very liberally in open meetings but make a decision. If you asked 80% of homeowners whether they'd like lower dues or a Reserve Fund, they'd tell you to ditch the Reserves. People live under HOAs because of amenities and property protections. Just don't go crazy on amenities that require substantial increases in monthly operating costs.

FrankS10 (Kansas)
Posts: 276

Posted:

Kelly,

We are subjected to polls all the time by politicians, marketers etc. They are effective, especially in smaller subs like I reside in. Boards need to be responsive to the people, whether or not they think they have more wisdom.

While I might agree to just lower the dues, our division only allows for so much carry forward.

We live in communities, we really are not wanting "leaders" per se, just people who carry out what the majority want, conforming of course to regs and CCRs. I think it is a huge misnomer to think people are looking for leadership. We have enough of that already. In fact, that seems to be a common irritant IMO to many of the complaints registered here...Boards running amok taking actions they really do not have the authority for.

'WE THE PEOPLE... let's never forget our roots!

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By FrankS10 on 08/31/2013 12:00 PM
Kelly,

We are subjected to polls all the time by politicians, marketers etc. They are effective, especially in smaller subs like I reside in. Boards need to be responsive to the people, whether or not they think they have more wisdom.

While I might agree to just lower the dues, our division only allows for so much carry forward.

We live in communities, we really are not wanting "leaders" per se, just people who carry out what the majority want, conforming of course to regs and CCRs. I think it is a huge misnomer to think people are looking for leadership. We have enough of that already. In fact, that seems to be a common irritant IMO to many of the complaints registered here...Boards running amok taking actions they really do not have the authority for.

'WE THE PEOPLE... let's never forget our roots!

Frank,

We're not discussing the issue of responsiveness. We're talking leadership and vision. Board members need to be - and often are - more attuned to the community; in some ways, it's an elected board member's duty. "WE THE PEOPLE" refers to representative government - not direct democracy when it comes to policy implementation. Boards running amok refers to boards where dues payers don't get access and don't get service. In relation to this thread, all appearances are that this community is very healthy and well-managed.

It appears the community we're referencing from afar has been excellently managed and can, with legitimacy, gauge the need and want of a new amenity using EXISTING cash - not future cash. With the park-like aspects rating 3 on a 5 scale, my two-cents opinion is people would like a picnic area that fits within the budget. Its maintenance goes to the operating budget, but since there is a large over-collection, allegedly, the costs - which are long-term and not labor intensive - goes into the budget and rates can held or lowered AND the community earns a benefit.

Of course, communities need leaders. A bunch of followers in a room will be rendered intellectually immobile and incapable of decision-making. Communities that "don't want leaders" are the ones that pay double for service contracts, hire bad vendors who milk them dry and feign "surprise" when the deferred maintenance finally yields to emergency. In fairness, my community's style would not fit with yours. We're spending one US dollar more per month in dues (per our pending 2014 budget) to run our operating budget than we did in 2004. One buck - .0055% per year. We've refurbished our own picnic shelter with commercial grill and table, re-roofed the clubhouse (leaks) and are installing wi-fi accessible property management software for pool and clubhouse access. That's how much our board has "run amok."

The property described above can create a win-win situation with better value, service and dues that don't grow for now. That's a tremendous job!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Here is the thing about adding amenities... Here today... gone to pot tomorrow... You have to keep up with the maintenance and care for whatever element you put in. If it's a playground, then you have to keep putting mulch down, painting, repair/replacing, and increase in insurance maybe. You put in a garden, then a sprinkler system has to be installed or water/electric source... There are always some kind of ramifications. So it's best to decide what will be produce the best pay back.

My opinion is to go spend the money on upgrades and maintenance items you have NOW. Do NOT add anything. Just improve upon what you have. Just freshen up the place by maybe doing a pressure washing/painting/general maintenance. Do you have a nice sign for the neighborhood entrance? I would also suggest maybe using the money to update/upgrade your documentation. That could cost a few thousand dollars to do. However, it is the backbone of your HOA and should be done every 7 -10 years due to tastes/living conditions.

Maybe concentrate on getting things in order by making sure the latest paperwork is in everyone's hands, creating a website, or making a brochure to hand out to potential buyers/realtors. It may not be amenities you need as much as paperwork and those type of improvements.

Former HOA President

FrankS10 (Kansas)
Posts: 276

Posted:

Kelly,

I agree with much of Melissa' post regarding upkeep of current amenities versus adding new ones. I was not trying to insult your community and what they have done. Yet, there are plenty of examples where HOAs have run amok.

We will have to agree to disagree on this. I am not looking for leadership in my community. I want to keep it simple. The fact is most communities do not use their amenities as much as we might like to think. Just as parks are used only regularly by a small group usually. Let's not duplicate in our own community something that is available just a few miles away. For example, we have 5 miles of horse trails. I jog them about everyday and in 11 plus years here have maybe bumped into someone on a dozen occasions at the most. Most people walk the streets or use the state park 5 miles away if they are serious hikers. The vast majority of residents have never even been on our trails.

Yet, the Board tries, in vane, to organize help to cut brush back on the trails and make other improvements when only 5 or 6 people own horses in the community. I would rather see what I call leadership by instituting user fees when possible. Again, making improvements with spare cash today and not realizing on-going costs for the future will be necessary should encourage caution. We are still coming out of a major economic upheaval, why add to the uncertainty of future financial obligations just because of some spare cash today? One thing missing here, I don't think the residents are making a lot of noise about more amenities, it sounds like this is being generated from the Board?

Listen to the people, the Board represents them, or should.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

What you say is true, Frank. My community lost two amenities to disrepair early last decade due to a board that, obviously, existed for the sake of holding meetings and enforcement power. They didn't care for the property and it left a cleanup. I don't think anything would've ever changed without a modest turnover of board members and someone to propose ideas for converting sow's ears into silk purses; there are still long-term members on the board and we work well together.

What we're discussing is a full-funding situation that most HOAs don't enjoy - and a situation where an experienced HOA volunteer would certainly be skeptical, even in the case listed above. As my board's president, I actually preach your position - don't add anything new until everything else is pristine and restored with full Reserve Funds. Then adjust dues if you ever desire other amenities not "core" to the development (large lake water fountains were our money pit until they failed and were removed. Mechanically, they failed often and the monthly electric bill jumped our cost over $100/month). Dues payers can "see" the effect of the property enhancement on the bottom line.

I think our debate ranges over a few narrow points but not the overall philosophy. I could bite on a modest investment that didn't hike operating expenses (with recurring monthly bills) as the money is already in house but would certainly examine cash flow against my Reserve Fund because you can't stem the flow of Reserve Fund deposits without great difficulty in re-starting those deposits if the property hits a snag. My HOA could be fully funded in 2018, and if I could drop monthly dues $10/month for the year in which we don't require the excess, I'd do it in a heartbeat. My fear would be that I couldn't recapture the rate reduction quickly if disaster hit my property and we needed to recover financially because I can't raise dues more than the CPI-U subset of the US annual inflation rate. That's what sits in my budgetary mind. I read about Murphy's Law....but also don't want a non-profit organization getting a dime more than can be justified.

FrankS10 (Kansas)
Posts: 276

Posted:

Kelly,

Got it, and we are in agreement. We don't have anything like fountains and such. (wish we did actually!) Our lake is starting to be a problem though and will take thousands each year to keep the algae in line. I don't recommend lakes unless they are constructed properly from the get go.

Thanks again and it sounds like your HOA is well managed!

GnomeX (Washington)
Posts: 253

Posted:

For the original poster ND,

Do you have private or public roads?

GnomeX (Washington)
Posts: 253

Posted:

Quote:

Posted By SteveM9 on 08/30/2013 10:05 AM

We hired reputable professionals to do the study previously (less than 5 years ago) and will do so again in the near future . . . and our reserves are indeed fully funded.

I'd wait until the next reserve study to change anything. Costs of goods and labor have gone up dramatically in 5 years. Especially asphalt.

I would also add be careful about the reserve study if it includes asphalt roads. I noticed on ours the reserve study company uses the same inflation rate (2.5%) for our roads.

That is an absolutely unrealistically low inflation rate for asphalt. Federal govt excludes energy costs from their inflation figures and asphalt is directly tied to oil prices.

For us a bid in 1997 for complete road re-pavement was $250,000. In 2010 same job was bid at $670,000. On an annualized basis, that is an average 8% inflation rate. This is so bad a problem many towns and county governments across the country are ripping up asphalt roads.

Roads to Ruin

TimB4 (Tennessee)
Posts: 21,059

Posted:

Gnome,

Interesting article. Thanks for sharing it.

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