Free or discounted services

Greeting Everyone,

We are discussing "out of the Box" opportunities to raise additional revenue without raising or levying fines for special projects.

One idea was to add language in our request for proposal that for every 10 homeowners that use their service the HOA receives a discount on services performed for the HOA up to and including free service. In exchange for this arrangement the winning contract would become the HOA's preferred service provider for that specific service. We would inform and encourage homeowners to utilize the services of this provider if it meets their needs. There would be full disclosure to all members of this arrangement obviously explaining the advantages to the HOA and disclaimers to protect the community.

Does anyone know of or have experience with this type of arrangement?

Thank you,

That is very interesting. We are just outside the service area for the major internet/cable providers and must use satellite for TV and either satellite or DSL for internet.
I'm curious if we could bundle the majority of homeowners to obtain better pricing on this as well.

Would your arrangement bring revenue to the HOA form the provider as well?

Would you provide the provider's contact information? I would like to contact them as well.

Thanks,

I am not sure I understand your reference to generating "revenue" for your HOA? Revenue for a HOA is done by collecting dues or special assessments. Fines are not even considered "revenue" nor are foreclosures, liens, or lawsuits.

You may have the wrong idea on your HOA budget handling. It is a non-profit corporation but not a charitable one. That means if you have a yard sale, bake sale, or other fundraising type activities those are subject to be taxable. A HOA budget is not to have a "Profit". It is to collect as much money in as it needs to meet it's expenses plus a reserve funds. It does not work like your home's budget.

It's a good idea to look for ways to save money. That way you can move money in the budget to meet other expenses. However, if cable is not part of your dues responsibility, then having a group plan is not doing much. You also have to be careful with multi-year contracts. You are then stuck with them for several years even if they do bad work. Also avoid "1 year free" type offers or at a reduced rate for the first few months/years. This really can hurt your HOA's budget in the long term. Your HOA may have a "profit" that one year for not paying but then have a deficit the next trying to meet the new bill expense.

So are you trying to save money or to get more money in your budget? Understand the difference and the overall effect of doin so.

Let us say that if you sign a contract that if you sign for 1 year the first 6 months are discounted $50. The regular price will be $100. 6 months paying $50 and last 6 months $100. The overall yearly contract expense is $900. You basically have to look at the year total than the individual months. Those 6 months of discounted fee does allow you to alot $50 to other projects. However, you lose that cushion in the last 6 months.

People are funny when they see that math. They think now that the HOA "saved" that discounted money that the service is now free or discounted and their dues are too high. Some states do not allow a HOAs to collect money for "free" services. so be careful with deals that give "free" trial periods. We had a poster sue over this without understanding the damage this would do. Forcing the HOA to reduce the dues or refund when that service would not be "free" any more after the trial period is over. The HOa would not have the funds.

So it is a bit tricky reducing costs or negotiating services. It can be viewed as profit in some circumstances. That is if your dues collected now are more than your expenses. Saving money in a HOa is different. You do not "save" in the traditional sense. You instead "contribute" to a reserve fund for larger capital or emergency repairs. This is a much better practice than sometime reorganizing money for a special project or additional expense.

Each HOa is different. Some people have no issue with their HOA saving money to spend on another project that is wanted. Some people do have issues and demand a refund or reduced dues. Just keep in mind your not really saving money but spending the money on the HOa needs for all.

Jeff,

Your discounts on service idea is very creative!

If your maintenance budget is suffering from a lack of funds, you really need to boost your core monthly dues while keeping an eye this value-added concept you described. A discount plan would be inherently unstable from a financial perspective but would provide benefits when your neighbors triggered the discounts for the HOA.