Motivation for saving HOA money

After a year on the board, I realize that there really is no incentive to try to save the HOA money. i.e., if it takes 1 hour of personal time per bid on a project, getting 3 bids requires 3x the amount of volunteer hours. Getting multiple bids might save the association money, but there is no "reward" or "incentive" to the board member to contribute 3x the amount of personal time needed to accomplish a project.

Just wanted to ask it here in case I am missing something.

The only reward that I can see if that stretching dollars and getting multiple bids allows the association to accomplish more with the same amount of annual dues. And it makes for a nice bullet point on the powerpoint slide for the annual meeting.

I think you pretty much nailed it.

Many boards have the (paid) manager solicit the three or so bids. But then, exactly as you say, the time the manager expends on this costs the HOA maybe as much as any cost savings occurs via competitive bidding.

I think the rule of thumb should be: Three bids minimum for any project that the board in its best judgment believes will exceed $10,000. This is regardless of whether the HOA either has a paid manager or is using volunteers to solicit the bids.

I do not want board directors to burn out. Somehow the labor that is involved should be brought to members' attention often. Especially members who are complaining that a $1000 or so job was not bid out to at least three vendors. Ask such members to serve on a "Bids Committee."

BillH10, I trust your post was intended to reinforce my post with outstanding, concrete factual anecdotes. You (manager) and I (former HOA director and professionally, a 'practical numbers' type) agree, as far as I can tell.

Disclosure: With a former board I served on, I had to experience a few rounds of frustration from a HOA manager before I got it. Now I do.

I think burning out good vendors (such that working for the HOA is not worth it to them) is another excellent point.

This is stretching things a bit, but there are or could be incentives:
- By saving the HOA money, you could also be saving yourself money. In theory, if you can drive HOA expenses down, then assessments could/should potentially go down as well, meaning you and everyone else will owe less each month/year. Maybe your 3 hours of time will result in a decent savings for you individually and add up to a lot of savings for the collective HOA.
- You get the feeling of accomplishment and helping to do the right thing even though most neighbors will never know or appreciate what you have done on their behalf.
- You being involved as an active, interested, dedicated Board Member, prevents someone else from being on the Board who may not care at all, act unethically, and/or do things and make decisions that result in increased costs for everyone.
- You are developing working relationships with whatever vendors you meet with and end up contracting with. In the event you ever need similar services in/around your own home (electrical, plumbing, landscaping, etc.), then you already know of some good vendors who may even be willing to give you a better deal because they know you too. While you obviously don't want to enter the realm of being unethical (e.g., helping a certain landscaper get the HOA contract in exchange for kickbacks and/or free cutting of your own grass), maybe you could at least get a better deal than you normally would if you hired the same contractor off the street without knowing them first.

Various approaches with various communities and locations yield various experiences.

My last neighborhood - was on the board, then president for a year and a half. I aggressively addressed issues, identified and planned projects, met vendors and contractors, put bid packages together for the community, etc. The board was very pleased, the property manager was OK. It did burn me out - there was zero offer of assistance, when specifically asked for assistance there were stacks of excuses - the net I got from the experience (not my first, but same net) was that the community was very happy with a benign, home owner being the president - and especially happy with a president who would put in 40 hours a week working for them.

So, after I negotiate resignation as president over a few months, and no one volunteers, I resigned - at this point there was no president and no Vice President. Finally someone stepped forward and I assisted in their integration. We decided the community needed to turn almost everything over to the property manager. So, this has occurred.

Project after project - almost no one interested in bidding - building boom going on even in northwest Florida. So, to get things done, we are basically defaulting to the property manager hiring his maintenance contractors to do everything - no subterfuge, just no one else wanting to bid. We can't even get bids of road resurfacing right now.

Maybe it's just me, but I didn't need a specific incentive when I was on the board. If I helped pick a contractor that provided high-quality work at a competitive price, that benefited the community because the work got done right the first time and we wouldn't have to scream or spend even more money to fix it.

When I reviewed the income/expense statements and found line items way off the budget, I'd find out why and suggest ways we might reduce costs in those areas. That benefitted the community because we could use the money for something else, like fund reserves, and maybe reduce the assessment increase for next year or even keep it at the same level.

Sometimes the work itself is its own reward - your efforts to get the most out of the association's dollars IS important, although most people won't notice or appreciate it. If you're on the board expecting a cookie for all your hard work, it's not gonna happen.

I can't remember if it was TimB4, but someone on this website once said HOA board members should think of themselves as servant leaders - you see a problem or something that needs to be done and so you do it. It can be a thankless job, and you won't always get a cookie or credit for the work you do, so you have to keep your original motivation in mind.

In your case, you may want to step back and consider (or reconsider) what prompted you to serve in the first place. You're not going to get everything done your way, your board members may not have the same sense of urgency - and maybe you're doing far too much on a project and need to ask board members for help. One thing I learned the hard way from my 10 years on the board is that everyone needs to chip in to help - makes the work go faster and everyone learns something.

Think you have to get out of the mindset your HOA is to save money. As crazy as it sounds, saving money isn't necessarily something it should be doing. This isn't your personal bank account. This is a non-profit corporation. It doesn't hurt to save on expenses where you can, but you may need to move that extra money to another project.

A HOA is set up to collect as much as it spends. Now you can include a reserves account that is for BIG capital improvements down the road. (Roofs, major repairs etc...) A reserve account is more tax friendly than a straight out separate savings account with no purpose other than savings.

Extra money in a HOA doesn't necessarily equal good spending/budget habits. It means your probably charging too much in dues. If the HOA needs more money, then special assessments or raise in dues can handle that. You never raise money by "bake sales" or garage sales etc... It is by dues only.

So I am always on the look out for a good deal but also know that saving money isn't the end goal. That savings would be applied to another project somewhere else.

John

The Board is not happy with it.They have been a client since September 1, 2019. The reasons for the increase were described to the Board during a Zoom call.

Our bid for monthly services was 11.5% less than the previous company was charging, which of course we did not know until after the contract was awarded. Therefore, the 23% increase in reality is an effective 11.5% increase compared to what they were paying previously.

This association, a 12 unit condominium built in 1984, had two management companies between 2017 and 2019. The association was 'fired' by both, a fact we also did not know until the previous property manager told the us during the transition that her boss, the owner of her company, fired the association as had the owner of the previous management company.

The bid situation is not the only reason the monthly charge was increased. For example: the community manager received 2,347 email messages from the three members of the board between September 2019 and November 1st of this year--that is approximately 156 messages a month from the Board alone. She received more messages from that Board than from her other portfolio clients, including owners and vendors, combined. One member of the Board sends as many as a dozen messages at a time. We asked almost from Day 1 they address present day matters and not rehash old issues and who said what to who about XYZ on August 3, 2014, with only limited success.

There is no incentive to "save" money by volunteering physical labor on the HOA's behalf in terms of landscaping, repairs, etc.

As an HOA director - if you possess the high level project management skills - it's definitely worth it to your community to lend your expertise in managing (from a high level) the contract-level discussions with vendors and service companies.

So, after one year as a board director:

1. You've got enough experience to recognize that you're investing/wasting too much time on certain projects.
2. You're not quite sure, experience-wise, how to best invest your talent and time for HOA board volunteerism
3. If you're otherwise still interested in service, stick around and you'll find better balance in Year Two.
4. Experienced boards will rely on the "young energy" of new directors to do heavy lifting.

Therefore, on projects where serious money is saved by your presence, get involved. I find that companies submit better pricing when there's a community leaders on-site with them on job assessments. A property manager will do a competent job but I find pricing is higher from all bidders if the board of directors is hands-off. The ultimate payoff is an annual HOA budget and annual dues increases that are scoped and kept to a minimum.

Do not get involved in light repairs, bulb swaps, leave removal, painting, power washing and other physical tasks that basically save hundreds of dollars per project. You'll burn out on those activities and your neighbors won't care because they don't know better.

Your experience trajectory, in my opinion, is quite perfect at the present time. You're closing in on whether you want to lead a "thankless" activity or not. However, if you keep improving, you'll develop an appreciation for "quiet" dues payers who trust your leadership. Remember, 99% of all HOA feedback will be a service issue or a complaint. Silence, followed by positive feedback on repair requests that you'll easily handle, will result in a smooth running community.

Kelly said it better than I did!

7 years ago my HOA undertook a project to paint 100 buildings, mostly SFR but also a clubhouse, maintenance building and mail house. One director had an idea that the HOA could buy the paint directly and avoid the markup that a contractor would charge if he was left to purchase it himself. Which would have worked except for the fact that the director underestimated the amount of paint needed by about $35,000 worth. And HE was a former contractor. Some expert. We're still paying, after a fashion, for that screwup.