Underfunded!

PB (Maryland)
Posts: 4

Posted:

...and long term residents, including half the Board, don't care and don't want the needed condo fee increase of probably 8% for the next few years. Our operating budget was tens of thousands in deficit last year, our reserves are only 55% funded and the community is old and falling apart, with new repairs being brought up at our Board meetings every month. How do you get through to 'old guard' Board members and long-term residents who are choosing to be blind and making statement like, "Thirty years ago, my condo fee was $25.00 a month." One Board member mentioned money in savings, but doesn't want to acknowledge the LIABILITIES CURRENTLY OUTSTANDING against that money; and this Board member is an accountant. How do you get through to reality? The thinking around here is utterly magical; I must be in Wonderland with Alice.

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% ujnderfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% underfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% underfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% ujnderfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% underfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

I feel your pain and wish I had an answer, but as someone on this board once said it’s impossible to wake some people from a coma. On the other hand, I think your board and the members have a pretty good sense of what’s going on, but like many people will not acknowledge what’s in front of them. I guess they think if they ignore it, the problem will just go away like a puff of smoke or magically fix itself. Or maybe the older homeowners figure by the time the … ish hits the fan, they’ll be in a nursing home or pushing up daisies and lilies anyway, so it’ll be someone else’s problem. That’s another sorry trait of mankind – let someone, anyone else clean up the mess expect moi.

I assume you’re on the board, so you’ll need to keep speaking truth to power, hammer them with the facts and keep doing it – maybe they’ll finally wake up in only to keep you quiet! One thing that could help is to bring in news articles about underfunded reserves and communities who find they have to pay thousands of dollars in special assessments to fix the infrastructure because the homeowners refused to face the music years ago.

It’s a lot like today’s Baby Boomers– we spent most of our money…spending, and not saving for the future and now that we’re approaching retirement age, we find to our horror, we don’t have enough to retire and are either going to have to make some major changes in our lifestyle to make our savings work (if we have any) or plan to work longer.

In the same way, sooner or later (probably sooner than you think) your infrastructure will wear out and you’ll have no choice, but to fix it. If there’s no money in reserves, you’ll need a special assessment which has to be paid in addition to regular assessments and/or take out a loan. If you take out a loan, watch your assessments go to infinity and beyond because they will have be increased in order to pay the loan, the interest that comes with it, in addition to the routine expenses every month. If that old fart is whining about “the fee was $25 a month” back in the day, just wait until he/she sees what next year or the year after brings if this isn’t addressed TODAY.

You can also Google “inflation calculator” (here’s one from the Bureau of Labor Statistics - http://www.bls.gov/data/inflation_calculator.htm) and plug in some expenses from 30 years ago to get an idea of much that same expense runs in 2014. And as a practical matter, ask these people to name something, anything that costs the same in 2014 as it did in 1984 – if gasoline, food, health care, etc. have gone up and down (mostly up) like elevators, why in the hell do they think a roof repair or street repaving will cost the same?

Beyond that, if there’s no convincing them, you may have to make a tough decision about keeping your home – do you stay on a sinking ship or sell your home for whatever you can get and move on? Of course, with banks beginning to take a longer look at HOA finances to decide if they want to underwrite a mortgage there, being 55% underfunded might hurt you and ultimately everyone’s property values might suffer (hey, another factoid that may get your fellow homeowners out of their stupor.) I wish you luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

Dang it, I pressed the button one too many times - sorry!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

GlenL (Ohio)
Posts: 5,491

Posted:

Way to get that post count up Shelia.

Studies show that 5 out of 4 people have problems with fractions

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By PB on 07/29/2014 11:25 AM
...and long term residents, including half the Board, don't care and don't want the needed condo fee increase of probably 8% for the next few years. Our operating budget was tens of thousands in deficit last year, our reserves are only 55% funded and the community is old and falling apart, with new repairs being brought up at our Board meetings every month. How do you get through to 'old guard' Board members and long-term residents who are choosing to be blind and making statement like, "Thirty years ago, my condo fee was $25.00 a month." One Board member mentioned money in savings, but doesn't want to acknowledge the LIABILITIES CURRENTLY OUTSTANDING against that money; and this Board member is an accountant. How do you get through to reality? The thinking around here is utterly magical; I must be in Wonderland with Alice.

Common symptom of many struggling HOAs.

My advice - if you're a board member - is to begin crafting a small plan to replace the smallest property items that need attention. Show the dues payers that their payments are being spent to protect their property. Repeat the process and never fail if they give you the power to affect an improvement. It takes a long time to build trust.

Also, if you request dues increases (as they're needed), try to live within the inflation rate in setting the increase. Everyone understands inflation and only the negligent will choose to ignore its effects on the dollar.

TimB4 (Tennessee)
Posts: 21,061

Posted:

PB,

The best advice I can give is to start an educational campaign.

Go over finances, the reasons for savings (reserves), etc.

Relate the issues to something people understand. This thread on Reserve Studies can give some ideas on how to explain the issue to the membership.

PB (Maryland)
Posts: 4

Posted:

Thanks, all. I really appreciate your responses and the thread to reserves!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is ONLY funded by it's members FOR it's members. A motto you should repeat often and use as a educational point. Let people know that the formation of a HOA means that when you pay your dues, it splits the costs of running EQUALLY amongst the owners. You want flowers at the entrance? You want maintenance done to the pool? Then you all have to pay your fair share.

The developers of HOA's make their money up front. They buy (For example) 100 acres of land. They split that up to 100 separate lots selling them at $50K a piece. The builder then builds $100K homes. To attract buyers the developer will add amenities like clubhouse, pool, or other attractions. It only cost them like $20K to put in a pool. They use the money from the sales to install.

The REAL costs of the HOA is in the LONG term maintenance of running one. The Developer turns over the HOA to the owners to maintain those costs. Which one can pay $10K a year taking care of a pool or other assets. A cost that would be draining to the developer. They are living off their profit from selling out all the land/homes. There's no more investment for them.

It is cheaper for the say 100 owners to split 10K for pool care a year, than putting it on 1 or a few owners who uses it. However, a pool is an attractant to potential buyers. So it serves the best interest of the HOA as a whole to maintain and keep the pool in good working order to keep buyers showing up.

It is a fallacy that HOA's keep or maintain Home values. Home values are based on REAL numbers. Those being what similar homes sell for in a certain radius. (Foreclosures/short sales included). Paying dues means keeping the HOA ATTRACTIVE to potential buyers to purchase. A good looking well maintain property with amenities looks good to potential buyers who then will pay the prices of homes being offered in the area. That is NOT home value but willingness to pay asking prices.

Former HOA President