Amenities Subsidies

I'm chairing a subcommittee that has been asked by the HOA board to look into ways of reducing subsidies for amenities (Restaurants, golf courses, health club/recreation facilities). I'm hoping the group can point me toward any studies available online that attack the topic. Also, I would appreciate any input from anyone that has done a study on the subject. We're try to answer questions like:

1. Must amenities be subsidized? If yes, how much is reasonable?
2. What have been some proven ways to reduce subsidies for Restaurants? Golf courses?
3. How much do amenities contribute to housing values?
4. Do most HOAs make amenities open to the general/non-member public.

Thanks in advance for any assistance.

Are you talking about the amount of money the HOA must pay to keep these things running? Or are you attempting to reduce those costs overall no matter who pays for them?

For the first, the obvious solution is to charge usage fees. Many HOAs charge individual homeowners for things like renting the clubhouse for a private party. And you can make a good case that the people using the facilities should contribute more to their upkeep. And as Michael said, reduce the operating hours.

A heads up: opening facilities to the public has liability risks, and you're almost certainly not insured for that. Talk to your insurance agent. In addition, once your facilities are public, they must be ADA compliant - if they're currently not, you'll have to spend money to bring them up to snuff. Third, you may even need to hire a professional facilities manager to deal with all of the issues that may arise. Finally, there may be tax implications once you start earning money in this fashion, so talk to your tax accountant. (As you can probably tell, I'm not a fan of this option.)

Rick

Are these amenities for owners use only? If they are, considering opening them to non-owners, especially the golf course and restaurants.

Rick,

Check your governing documents to see what services/amenities the Association is required to provide.

Amenities contribute to housing values by making your development more desirable then others.
In doing so, homes should sell quicker.
If homes are selling quickly, then it's more likely that a buyer will pay close to (or higher than) asking price.
This is not a guarantee

If you make your amenities open to the general public, you must comply with ADA laws governing access.

I'd worry less about what other HOAs do (since you don't live there) and focus on what's best for YOUR community. For example, there's no precise answer to #3 - the value is subjective and while some may buy a house because a golf club member is included doesn't mean another bought the house for the same reason- or not. Perhaps the house didn't sell because the potential buyer didn't like the idea of subsidizing a business. Those are questions you may never be able to answer.

I'd start with a homeowner poll - who uses the amenities, which ones, how often, and would they care if, say, the restaurant bit the dust. Take along look at the numbers - which amenity comes closest to be self supporting. That may be the one to keep. What type of expenses are you paying and what, if anything, has been tried to bring down costs, such as reducing operating hours? What costs have increased the most over the last 3-5 years. Have the fees you charge the public increased and has that lead to an increase or decrease in revenue?

And what will you do to the land if the amenity (e.g. golf course) were to close ? Can you sell it? Consider the pros and cons of all the options then have a special homeowners meeting to discuss the findings.

Thinking out loud here ...

The first order of business is to question and verify any assumptions you're making. For instance:

I assume that a tax professional and a legal person were involved to start with since there are limits in the types of income a non-profit like an HOA can earn. Opening the facilities to the public also has implications (insurance, ADA compliance, and the like). Since it sounds like these facilities don't get much outside traffic, it may be worth questioning whether the cost associated with making them public justifies the benefits. Just because it was a good idea when the community was first established doesn't mean that it still is. So I'd start there, because the answer will determine where you go from there.

In general, depending on a funding source that you don't control (such as outside traffic) is not a good idea - if it dries up, you're immediately in financial trouble. If the community can't fully support these amenities without the outside source, IMHO they're not affordable - especially since any community will have some percentage of homeowners who aren't paying assessments.

You may want to figure out how far you can go to make these amenities self-supporting. To do this, you'll need a good idea of who uses them and how often. Presumably the homeowners who live in this HOA want them - those who would object to funding things that they don't use would presumably live elsewhere. But it's a good idea to verify that assumption.

Amenities can go in and out of fashion to some extent - for example, many communities have converted tennis courts to pickle ball courts. Even golf courses can fall out of favor (one of my employer's newer communities is built on a golf course that went out of business and was sold). Area demographics can change, and a formerly popular venue can end up with too few customers to make ends meet. (FWIW, eateries are a notoriously tough business everywhere, so you're fighting that reality as well. I also question whether a community association should be subsidizing people's food consumption.)

A good way to determine whether to keep a particular amenity is to figure out how much money it will take to run it properly, figure out how much assessments and/or usage fees will have to increase to provide the necessary funds, and then inform the membership. If a large percentage of owners howl, then that's a pretty big hint that they don't think the amenity is worth the money. (If some of them howl particularly loudly, I'd put them on a committee that has to figure out where the money will come from. This can be a good approach in general - too many have unrealistic ideas about HOA finances, and a good dose of reality can help cure that. It may also generate some useful ideas.)