Reserves: Do concrete pools wear out?

We have an outdoor in-ground pool that was built ca. 1990. The shell is concrete/gunite. Looking back at old board meeting minutes I see that in 1997 the board estimated it would cost about $40,000 to completely replace the pool and deck, and figured the useful lifetime was 20-25 years.

So this year rolls around and the pool is 25 years old. Last year the people resurfacing the pool found a crack in the shell and the HOA authorized a $16,000 repair that utilized some sort of staples. We have no component line item in our reserves for the pool, so the board invented one at the end of last year and assigned it a year-end fund balance of -$16,000. We're scheduled to pay that off this year, which is depriving our reserves contributions for 2015 of that money that's needed elsewhere. The ex-president mentioned that someone had expressed to him last year that we should have had a special assessment for the $16k.

Do gunite pools have a useful lifetime after which the entire pool needs to be replaced? Despite the 1997 board estimating a 25 year useful life, recent research suggests that a gunite (gun-sprayed concrete) pool is a lifetime product; I've seen several people in different internet forums express that opinion. With regular resurfacing, they say, there's no reason to expect such a pool to "wear out" and need complete replacement. But ours clearly did.

Going forward I'm wondering if we need to start funding a complete pool replacement reserve account. If the staples don't hold, or another crack develops (the reason for why last year's crack developed in the first place was never addressed) is it going to be worth another stopgap $16,000 band-aid? I've also looked at half a dozen reserve studies done for other associations and none of them provide for complete replacement, they're all for resurfacing, decking, tiles, furniture, hand rails, etc.

Assuming we're able to come up with $80,000 or so for a complete replacement, should that be reserved for again in another 25 years, or should it be considered a lifetime asset?

Geno

From your post I have inferred your association has capital assets besides the pool. Are you having reserve studies conducted every few years. If yes, why was the pool not included? Everything associated with the pool--interior surface refinishing, deck, pumps, heater if you have one, lights, gates, fence,and other features or equipment should be included in the reserve study.

If you do not have a reserve study on the pool, besides consulting with a pool expert, I strongly suggest you have a reserve study completed. I will warn you up front, since your association apparently has not been accruing reserve funds for the pool, you will likely be facing an assessment increase or special assessment, or both.

You need to consult multiple pool companies. I don't think concrete wears out* but it could happen that the cost and frequency of repairs eventually make it economic to do a full replacement.

Whether you do a special assessment for a large unexpected expense is a judgement call.

* There IS a degradation mechanism for concrete in the presence of salt and/or sodium-containing aggregate.

Geno, why is there such resistance to a reserve study? It is not an exorbitant expense and it will tell your association what it will face in coming years. If nothing else, it will be a good planning tool.

Having the study done does not mean the Board must implement it, our most recent study was completed late last year and recommended a modest increase in the assessment. We (the Board) chose to pass on raising the assessment at this time as our income and expenses are about equal and our reserve fund is almost 400% funded. (At one time the association was gated, which meant we had to accrue funds to maintain the streets, alleys, sidewalks, etc. A decision was made to remove the gates and turn the infrastructure over to the city, which left us with quite a large surplus in the reserve fund.)

The head of our finance committee thinks it would be a waste of money since, according to him, we are quite able to figure these things out ourselves without paying $3,000 for it. He's a CPA and has been on the board for a few years, so the rest of the board usually goes along with his recommendations.

The monthly assessment charges here were $255 in 2013, went up to $265 in 2014, and this year they are $290. Owners have been screaming bloody murder. If a reserve study, or even our own internal analysis, suggested that next year's dues should be $325 that would be dismissed as impractical.

The reserve funds here were almost non-existent until 11 years ago and the Year of Two Hurricanes. When all was said and done there was a nice chunk of change left over from the insurance settlement and that was used to jump-start the reserves. Since then various boards have tapped into it like an ATM machine without ever really giving serious thought as to what our reserve accounts really should cover. Thus, caught with our pants down last year on the pool repairs. The year before that there was $20k unanticipated repairs on the clubhouse. There was also a $30,000 shortfall on the painting project that year. There is a reserve for painting, it just wasn't enough.

Our streetlights all need straightening. There are multiple 5-ton heat pumps that serve the clubhouse. The pool's gas heater is held together with band-aids as is the front entrance gate. The tennis courts need new fencing. Our CCRs put the responsibility for all of the common areas on the HOA. We have numerous trees with roots beginning to cause damage to driveways. The driveways themselves are the responsibility of the HOA and about half of them need to be replacemd. The biggest concern here every year is whether we're paying too much for sprinkler heads, never mind that the entire irrigation system is 25 years old. We have zero reserve funds for any of those items. We do have reserves for other things, but the list is far from what I think is prudent.

Long story short, I think people here have been living a charmed life with absurdly low reserve contributions for many years. Getting people to change their minds about that and accept significant increases in their assessments is a problem, even as the chickens are coming home to roost.

I get depressed just typing that out, sheesh.

Geno

I don't necessarily disagree with your CPA board member; as you have learned by now a reserve study is not a first water mystery and most people with exposure to financial concepts can create one. For most of us, its the time required to do so, the research to determine cost to replace today, the remaining life, and the inflation factors to determine what it will cost X years from now. It was worth the $20.00 each of our 110 property owners paid (figuratively) last year to have it done.

You know in your heart this is going to come down to one of two paths forward: 1) assessment increases or (perhaps and) 2) a special assessment--a whopping special assessment based on your recitation of the assets which need attention unless you have a lot of money in your reserve fund.

Fortunately, our association, and the master association, are run by people who believe accruing funds over time is easier on everyone than a few thousand (or more) in a special assessment.

Another consideration for you is whether or not a special assessment requires approval of the property owners. That can, in and of itself, be a significant (and costly) challenge.

Good luck.

Not only does your Board need to rethink how they fund Reserves, they also need a cultural change. A Reserve Fund is NOT a piggy bank for pet projects or other things. A designated amount of the annual budget needs to be placed into the Reserves. The fact that your HOA had to use an insurance payout from a natural disaster to kick start a Reserve Fund is alarming.

If owners need to pay more in assessments then it needs to be explained to them. The options are to start dong without certain amenities and services to create a budget that is in alignment with the needs. It is something I worry about for my own neighborhood. Everyone gets all happy and excited when the Board President "adds" something new. What the owners fail to factor in is that there are ongoing maintenance costs and that ultimately, the Reserve Fund should be increased to pay for those "extras". It is short-sighted.