The 2025 Budget - A Halloween Story

Started by CathyA3 • 29 replies • 333 views

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CathyA3 (Ohio)
Posts: 6,299

Posted:

(A little humor for the day.)

This happens so often that it's almost a cliche.

Boards keep assessments too low to properly care for their communities. Everybody loves them! They're heroes! They look like financial geniuses.

Then the predictable happens. Neglected maintenance translates into more frequent and more expensive repairs, capped by early replacement of the items. The community starts to look shabby and begins to lurch from one unplanned expense to the next. Not only did the heroes not save any money, they've dug a financial hole that the community may not be able to climb back out of.
Cue the spooky music.

Then new boards are elected to deal with problems they didn't make. They raise assessments - maybe even the Dreaded Specter of the Special Assessment. Everybody hates them! They're idiots! They have to give their communities a cold dose of reality, and nobody likes a dose of reality after they've been living in fantasy land.

(Yes, I'm now the board treasurer in my community, and yes it's budget season. How did you guess? We've been living in fantasy land for several years. Now it's time to face the [spooky] music and the spreadsheet with holes where numbers should be.)

Moral of the story:

Low assessments are not a good thing. They're a lie that will come back to bite you. The sooner home owners see these creatures for the blood-suckers that they are, the better off they'll be.

MarshallT (New York)
Posts: 414

Posted:

Good luck, Cathy!

You are absolutely right. Low assessments are a problem and it's unfair to the next set of board members who have to come in and clean up the mess that the last group made. Those board members should keep in mind that they will have to pay large special assessments too. They are putting financial strain on themselves as well as the other members.

SheliaH (Indiana)
Posts: 6,964

Posted:

What do you suppose would be the Halloween (or science fiction) themed movie in your situation?? Aliens? World War Z? I am Legend? Last Voyage of the Dementer? It didn't do squat at the box office, but it's an interesting take on a small chapter in Bram Stoker's original novel about a ship that sails into London without any crew. Spoiler alert - this was the ship where Dracula had his coffin and a few extras for his trip to London and it didn't end well.

I haven't watched it yet, but I'm wondering about the fall of the House of Usher on Netflix (I hope it's still there!)

You lit a fire under your community when it nearly became board member-less, so I think you'll do a great job. All you can do is tell them the truth - some of the homeowners in my community HATED what I had to say about delinquencies and how they impacted our community and (especially) reserves), but I don't think that happens as much anymore. Two years ago, our board said fees would be increasing at the max every year from now on to try and address our reserves. Two weeks ago, we got a flyer with photos of the latest amount of illegal trash in and around our dumpsters. The board warned that if this didn't stop, homeowners could expect a fee increase of $7 net year to help cover the costs of the vendors we have to hire to clean out the dumpsters because the city won't empty them if they're stuffed with couches, old TVs, mattressess up the yingyang, etc. We'll see what happens.

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

CathyA3 (Ohio)
Posts: 6,299

Posted:

I'm thinking zombies or vampires.

I'm feeling better after our budget meeting. Our insurance quote was not bad at all - higher, but nowhere near what I'd feared. We've always been proactive about managing our insurance. We raise deductibles when appropriate, minimize claims (ie, pay out of pocket if the claim would be close to the deductible, etc.) By the by, our manager told us that a $25,000 deductible for condos is becoming pretty common.

Our major issue is roofs. Ours are going to need to be replaced sooner than expected. The damage we're seeing does not correlate with the age of the buildings and is due to a variety of causes. New reserve study is in the works.

Could be worse, that's for sure. We'll give the membership some straight talk, not sugar coated, but emphasizing what we're doing to manage costs. They won't be cheering, but I think most will understand that the board is spending wisely.

As an aside that's related to insurance: I'd mentioned to our manager that past boards had used volunteers to handle physical work, and that I was concerned that we're not insured for that. She aid, "You're not. It's a liability. You need to stop." She also mentioned all of the points in my usual posts about why condo associations should not rely on volunteer labor: not free, not professional work, no warranties or guarantees, not sustainable, and misleads the membership about the true cost of ownership. I felt vindicated. :-)

DeanJ
Posts: 1,786

Posted:

Don’t forget the living dead. The living dead are the people who buy into the community who could not afford to live there of the fees where honest. When judgement day comes, and it always does, the living dead they want to be keep staggering around by delays, payment plans they can’t afford or the HOA taking out a loan and sharing the interest payments with the living,

GregoryT1
Posts: 315

Posted:

Everyone please don't say these things. I am living the nightmare. Meeting coming up. First time the condo will start reserves. We will see how it goes.

SheliaH (Indiana)
Posts: 6,964

Posted:

Hopefully your community won't make the same mistakes as nearly everyone else has done. Read some old conversations on this website (and a few recent ones) and take notes 9n some of the ins outs and general approaches (lots of stuff comes up over and over). Bring your notes to the meeting and ask a few questions- ideally some issues have already occurred to the board, but if not, you might be able to guide them in a sensible direction.

Start with insisting on a reserve study to see where the community is at financially, then have the reserve specialist attend a special homeowners meeting to make a presentation, followed by a Q and A session.

Or have the presentation, post the report on your community website so people can read it for themselves and then submit questions. The board reserve specialist can work together in responding to the most popular ones. Good luck!

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

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By GregoryT1 on 09/13/2024 6:54 PM
Everyone please don't say these things. I am living the nightmare. Meeting coming up. First time the condo will start reserves. We will see how it goes.

What does your state law say about reserves, if anything? It can help if you point out that it's a requirement and the board has no choice but to obey the law. It's also easier to save a little each month than it is to cough up a large chunk of money on short notice for a special assessment. Or the association would have to take out a loan (assuming it would even be approved) - and a loan is just reserves with interest and fees tacked on top.

Steadily contributing to the reserves really is the easiest and least painful way to deal with funding future replacement costs.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By CathyA3 on 09/14/2024 12:28 PM

Posted By GregoryT1 on 09/13/2024 6:54 PM
Everyone please don't say these things. I am living the nightmare. Meeting coming up. First time the condo will start reserves. We will see how it goes.

Sound advice

LetA (Nevada)
Posts: 2,679

Posted:

What people find hard to grasp is what is actually behind HOA boards raising assessments.
Inflation. Prices have skyrocketed since 2020. Our last reserve study came out earlier this year. That's after
we slightly raised assessments last year. At our last board meeting we went over the 2025 budget and looking ahead
to the communities needs, we had to raise assessments yet again. I would like to see it put to a community vote to amend
the CC&R's to make front yard landscape maintenance the homeowners responsibility. Ballpark, it would shave $10.00 per month
off assessments. A few naysayers state. front yards would look unkept. My reply is, the HOA would then fine the owner. Just like any
other covenant violation.

SheliaH (Indiana)
Posts: 6,964

Posted:

I'm always amazed at how people forget simple things like inflation - why do they think housing maintenance will stay the same as they were at the time of purchase and that was 5, 10 or 20 years ago. Prices can and do change in a year.

You do bring up an interesting point about landscaping for an owner's front yard becoming their responsibility (assuming they approve amending the documents accordingly). People tend to want the HOA assessments to pay every bloody thing, but then scream to high heaven when assessments have to be increased to pay for all this stuff. Not to mention the extra costs to cover the dog (and sometimes cat) poop that's killing the lawns because people will not clean up after their pets. For that matter, include the goose poop (because people look at the little goslings in the spring, exclaim "how cute!" and then feed them - assuming mama and papa geese don't attack because they think you're trying to do something nasty to their young).

In my community's never-ending story about illegal trash in our dumpsters and litter everywhere else, I once asked everyone at an annual meeting - how much time and money do you think it would cost if the association got rid of all the dumpsters and you'd have to figure out how to get rid of those mattresses, sofas, water heaters and - toilets - that have appeared in and around the dumpsters? You might not be able to stop all litter, but has it ever occurred to you that maybe we could save some money if people would just clean up after themselves? Is it too much to ask that when you walk your dog you bring a few plastic bags so you can pick up the poop? If you don't have a pooper scooper, get them at the pet store - which is about 10 minutes away from the community??? Do you think board members are walking around tossing all this ish everywhere so association money can be spent on this????

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

LetA (Nevada)
Posts: 2,679

Posted:

It's funny you mention illegal dumping. We have a different situation. We have a group of about 15-20 smokers that live in an
age qualified apartment complex across the street from our development on a side street. They bring their lawn chairs, beverages
and smoke their brains out for hours. They toss their butts in our landscaping and often leave trash behind. Their apartment community
forbids smoking anywhere on their property. What gets me is, they don't congregate on the public sidewalk to their community and trash
their landscaping, they have to trash ours. Our landscapers have to tend to this area more often and cost us money. Since the sidewalk is public
we are at whits end at how to stop them from dumping their cigarette buts in our landscaping.

SheliaH (Indiana)
Posts: 6,964

Posted:

It might be fun to hire a company that could fly a drone over the area that's armed with a camera that could photograph this bunch and send a time and date stamped copy to the management with a request that they talk to these people to persuade them to smoke elsewhere. Of course, you'll have to deal with the legalities of a drone flying in the area - and some nut might try to shoot it down.

A stationary camera might also work, but you may need a sign in the area warning people they're being watched and the camera or cameras should be installed in a way tgat makes it very difficult to tamper with. Several may be necessary to capture different angles.

If this works and you sue, ask that the surveillance costs be reimbursed with the cleanup costs, attorney's fees and court costs.

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

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By CathyA3 on 09/12/2024 5:55 AM
(A little humor for the day.)

This happens so often that it's almost a cliche.

Boards keep assessments too low to properly care for their communities. Everybody loves them! They're heroes! They look like financial geniuses.

Then the predictable happens. Neglected maintenance translates into more frequent and more expensive repairs, capped by early replacement of the items. The community starts to look shabby and begins to lurch from one unplanned expense to the next. Not only did the heroes not save any money, they've dug a financial hole that the community may not be able to climb back out of.
Cue the spooky music.

Then new boards are elected to deal with problems they didn't make. They raise assessments - maybe even the Dreaded Specter of the Special Assessment. Everybody hates them! They're idiots! They have to give their communities a cold dose of reality, and nobody likes a dose of reality after they've been living in fantasy land.

(Yes, I'm now the board treasurer in my community, and yes it's budget season. How did you guess? We've been living in fantasy land for several years. Now it's time to face the [spooky] music and the spreadsheet with holes where numbers should be.)

Moral of the story:

Low assessments are not a good thing. They're a lie that will come back to bite you. The sooner home owners see these creatures for the blood-suckers that they are, the better off they'll be.

Cathy, we have the same situation except same old board but they are catching up for decades underfunded. The challenge to which I'd like an answer is: in this situation, how does a board implement fairness, especially in view of the fact many long-time residents haven't been paying enough and all the new neighbors are getting socked with higher assessments every year? Thanks.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 09/17/2024 5:10 PM
The challenge to which I'd like an answer is: in this situation, how does a board implement fairness, especially in view of the fact many long-time residents haven't been paying enough and all the new neighbors are getting socked with higher assessments every year? Thanks.

Life isn't fair.

A board has to do what is required of it and, typically, assessments are equal for each owner (condominiums might be based on square footage).

I've had people admit to me that they will vote for or against assessment increases based on how long they think they will be living in the community.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TimB4 on 09/18/2024 3:38 AM

Life isn't fair.

A board has to do what is required of it and, typically, assessments are equal for each owner (condominiums might be based on square footage).

I've had people admit to me that they will vote for or against assessment increases based on how long they think they will be living in the community.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Not even 7:30 AM, and my first posting mess up of the day - sheesh ....

Anyway, the part in bold reflects a complete lack of understanding of how this works. It's the same level of understanding shown by people who think they shouldn't have to pay into the reserves because they're not going to be living there in 10 or 20 years. This kind of thinking is unfortunately common in condo communities, since they attract buyers with a shorter time horizon (first time buyers, retirees).

This is also why I have some problems with owners being allowed to vote down assessment increases. Boards have a fiduciary duty to the association, while owners can and do act in their own self-interest - even if that self-interest is contrary to the welfare of the community. It's no good putting people with a fiduciary duty in charge if they're not calling the shots. One of the reasons behind the Surfsiide condo collapse was that special assessments kept being voted down, so the essential maintenance can got kicked down the road until they ran out of road.

Even if the board does call the shots on assessment increases, disgruntled owners can remove the board members and replace them with more compliant directors. This is no way to run a financially healthy corporation. It's why I refer to the so-called consumer protection provisions in state laws as "enough rope to hang themselves".

(Yes, our condo assessments are based on something called par value, which is essentially that unit owner's share of the total condominium property.)

TerriS6 (California)
Posts: 3,284

Posted:

I wasn't suggesting charging different amounts but when many residents are elderly, fire insurance has increased up to ten times what it was 6 years ago and electricity has increased 2.5 times in 2 years. Our board has increased assessments 20% every year for past 5 years without even doing a reserve study with a site visit. Our only amenity is roads - and a green belt.

TerriS6 (California)
Posts: 3,284

Posted:

Another factor is the board has been misspending funds and has done no road maintenance for 4 years. So what is fair when it comes to raising assessments?

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By TimB4 on 09/18/2024 3:38 AM

I am honestly trying to figure this out. It's easy to spend other people's money and it's not fiscally responsible to pay for things on a credit card if you can't afford something on your regular income. So how is that different from imposing a substantially higher assessment on a membership with a limited income? Without a "diligent visual inspection" in the reserve study, how can a board justify increases even if they are needed...especially when you know association funds are being misspent?

CathyA3 (Ohio)
Posts: 6,299

Posted:

People on fixed or low incomes *will* spend a substantially higher proportion of their income on housing. This has nothing to do with community associations - it's true for renters as well. This is economic reality. "To him that hath, more shall be given unto him. Yet he that hath not, even that shall be taken from him. Be ye therefore among them that hath."

It's not the board's job to solve social ills. Given that I can't point to a single society that has solved the issues of the poor in any meaningful way, I'm certain that a community association board would not be able to solve them even if it were their job.

The board needs to make ends meet in accordance with state laws and the CC&Rs. One of the great benefits of community association governing documents is that they apply to everyone equally - none of it is personal in any way. Trying to make things "fair" puts the interests of those who feel wronged ahead of those of the community as a whole - a breach of fiduciary duty, in other words.

TerriS6 (California)
Posts: 3,284

Posted:

If you want a BMW but can only afford a subcompact Chevy, the responsible thing would be to buy the latter. I've just learned that for decades, our roads were chip sealed. Out of the blue a few years ago, the board decided it had to have the most expensive surface, asphalt. Given that knowledge, I think fairness lets the members decide which surface they want and are willing to pay for. Thanks for your input.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 09/18/2024 6:11 AM

I am honestly trying to figure this out. It's easy to spend other people's money and it's not fiscally responsible to pay for things on a credit card if you can't afford something on your regular income. So how is that different from imposing a substantially higher assessment on a membership with a limited income? Without a "diligent visual inspection" in the reserve study, how can a board justify increases even if they are needed...especially when you know association funds are being misspent?

Regarding reserve studies: Depending on the common elements, a site visit is not always required. It really depends on what elements the Association has. In many cases, pictures and the last study can be enough. Keep in mind that site visits often cost more money.

Regarding fixed income - I'm one on a fixed income. One hopes that they put enough away for retirement to cover inflation and do their homework on what they will actually need to live in a style they prefer. If one did not, then options need to be considered to lower expenses (including moving). Example: I moved from a high cost of living area to a lower cost of living area to stretch my income.

Any increase in assessments should be justified and fully explained to the membership.

TerriS6 (California)
Posts: 3,284

Posted:

In California, a “diligent visual inspection” is required every 3 years.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I wish we'd increased our assessments by 20% every year for the past five years. Home prices have pretty much doubled around here during that time, especially new construction. Associations compete directly with the construction industry for building supplies. And from what I've seen locally, the higher interest rates barely slowed anyone down. It's crazy.

And we've discovered that we'll have to replace roofs ahead of schedule (as defined in our last reserve study). And my area really hasn't seen much of the extreme weather that many parts of the country have, so this finding has been a bit of a mystery.

The community is also 20 years old now, so random unplanned repairs keep popping up - mostly of the type that can't be put off. Running a tight budget may be realistic during a community['s early years, but trying to do so as the community ages means the board will either ignore things they shouldn't ignore, tap the reserves to pay for things that shouldn't come out of the reserves - or they're looking at loans or special assessments.

Communities that run a tight ship are the equivalent of people who live paycheck to paycheck: one surprise expense puts them into a hole that may or may not be able to get themselves back out of (depending on how much they have in savings, which is probably zilch given that they're living paycheck to paycheck). It's what keeps the working poor, poor.

Community associations are not immune from this economic reality.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 09/18/2024 8:24 AM
If you want a BMW but can only afford a subcompact Chevy, the responsible thing would be to buy the latter. I've just learned that for decades, our roads were chip sealed. Out of the blue a few years ago, the board decided it had to have the most expensive surface, asphalt. Given that knowledge, I think fairness lets the members decide which surface they want and are willing to pay for. Thanks for your input.

It's not the members decision.
It is the boards decision.

As I understand it, chip sealing and resurfacing (adding a layer on top of existing) only kicks the can down the road a few years.
At some point, a full re-pavement will have to be done.

see:

Sealcoating vs. Resurfacing vs. Repaving: Which is right for you?

What Is Chip Seal Paving?

Which is Better: Chip Seal vs. Asphalt

SheliaH (Indiana)
Posts: 6,964

Posted:

Could it be they opted for the asphalt because it would last longer (thus giving them more time to build reserves that also need to be spent on other parts of the community, as well as the roads)? Have you asked – or is it easier for you to continue on your usual “the board is irresponsible” kick? I’m not saying mistakes haven’t been made – people are human and none of us, including you, know everything.

You didn’t say how long you’ve lived in the community – how often did the chip sealed road have to be repaired vs. the asphalt? Did you read any board meeting minutes when the pros and cons were discussed? It would make sense for the board to explain why they were going with a different option, but as you know and as Cathy has pointed out, the board has to make decisions that are in the best interest of the entire community.

You’ve seen too many conversations on this website where the board either ignored the problem for years because they figured they’d also be gone by the time the shit hit the fan or the community raised so much hell about “fixed incomes” that they decided to drop the whole thing – and then prayed this decision wouldn’t come back to haunt them. That’s exactly what happened with Surfside (along with some other stuff). People can do whatever they want with their own money in their own home, but HOA boards have to think short AND long term.

Here's a link to an op-ed piece that highlights individualism vs. the common good, which I think is a huge underlying problem with HOAs today - https://time.com/6269091/individualism-ahead-of-the-common-good-for-too-long/

I hope to retire someday myself, and certainly don’t want to be in a situation when I have to choose between diabetes medication and my light bill. My mother spent over 30 years in retirement before she passed away and always said when you get to the point where your only income in Social Security and a pension, you have to make that last for the entire month because you’re not getting paid every two weeks the way you did when you were working full time. It’s not easy, but you have to identify your wants vs. your needs and recognize that the wants have to take priority.
You said many of your neighbors have limited incomes and since they know their wallets better than you and the board, they know or should know what they can and can’t do. I’m learning that as I get older, I need to start right now to eliminate debt and change my spending habits (something else my mother emphasized). Unfortunately, people tend to have unrealistic expectations as to how things will evolve as they get older, forgetting prices were going up during the years they were working full time and perhaps raising a family. If you’re like me and don’t have a spouse or kids (and even if you do), you may have to make some hard decisions about your lifestyle.

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

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By TimB4 on 09/18/2024 8:47 AM

It was never asphalt. In the past few years they have started doing small sections in asphalt. All paving has to be replaced at some point. And it is the members' decision because they would have to approve a special assessment. This all started because one board member wanted new asphalt on all our roads. More than half of homeowners don't even have paved driveways.

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By SheliaH on 09/18/2024 9:02 AM
Could it be they opted for the asphalt because it would last longer (thus giving them more time to build reserves that also need to be spent on other parts of the community, as well as the roads)? Have you asked – or is it easier for you to continue on your usual “the board is irresponsible” kick? I’m not saying mistakes haven’t been made – people are human and none of us, including you, know everything.

You didn’t say how long you’ve lived in the community – how often did the chip sealed road have to be repaired vs. the asphalt? Did you read any board meeting minutes when the pros and cons were discussed? It would make sense for the board to explain why they were going with a different option, but as you know and as Cathy has pointed out, the board has to make decisions that are in the best interest of the entire community.

You’ve seen too many conversations on this website where the board either ignored the problem for years because they figured they’d also be gone by the time the shit hit the fan or the community raised so much hell about “fixed incomes” that they decided to drop the whole thing – and then prayed this decision wouldn’t come back to haunt them. That’s exactly what happened with Surfside (along with some other stuff). People can do whatever they want with their own money in their own home, but HOA boards have to think short AND long term.

Here's a link to an op-ed piece that highlights individualism vs. the common good, which I think is a huge underlying problem with HOAs today - https://time.com/6269091/individualism-ahead-of-the-common-good-for-too-long/

I hope to retire someday myself, and certainly don’t want to be in a situation when I have to choose between diabetes medication and my light bill. My mother spent over 30 years in retirement before she passed away and always said when you get to the point where your only income in Social Security and a pension, you have to make that last for the entire month because you’re not getting paid every two weeks the way you did when you were working full time. It’s not easy, but you have to identify your wants vs. your needs and recognize that the wants have to take priority.
You said many of your neighbors have limited incomes and since they know their wallets better than you and the board, they know or should know what they can and can’t do. I’m learning that as I get older, I need to start right now to eliminate debt and change my spending habits (something else my mother emphasized). Unfortunately, people tend to have unrealistic expectations as to how things will evolve as they get older, forgetting prices were going up during the years they were working full time and perhaps raising a family. If you’re like me and don’t have a spouse or kids (and even if you do), you may have to make some hard decisions about your lifestyle.

Well, our board doesn't take minutes but I have been to every meeting in 6 years. Chip seal is about 7 years; asphalt about 30. But the cost equivalency is almost double for asphalt or $100K for 7 years vs $700K for 30 years.

TerriS6 (California)
Posts: 3,284

Posted:

The article's philosophy is a little too "Big Brother" for me but I understand a board must decide what's best for the association as a whole. I wish ours was better at it.

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