Financial Help

First question: does the 10 year shortfall refect 5% yearly dues increases or was the study done using the current dues and no increases?

If no increases were used in the study, then I would start increasing dues by 5% per year for three or four years and see were that will put you. I know it's not the "popular choice" but if it's explained and presented properly most people will go along. I'm a BIG fan of reserve funds and believe HOA's are playing with fire not to have a healthy reserve fund.

If the 5% yearly increases were used in the study, then I would think about really "biting the bullet" with a one time "large" increase. Changes to the by laws can be made to accomadate this. It's extremely unpopular, but sometimes it's the only way to avoid finacial disaster. Fund raisers and other such events will only carry you so far and then people get tired of them. It's not a long term solution. You can play with the figures and see what kind of increase is needed and be sure to include a budget line item for "reserves" and, if possible, "capitol improvements". This, over time, will take away the need for yearly assessments.

I have served as Treasurer for a small Townhome complex in Michigan and I'm currently on a Rules and Regulation committee here in Florida.

When you say a $500,000 shortfall, are you saying these are mandatory repairs that must be made in 10 years? Or were they repairs they expect to be needed in 10 years, but may not be mandatory or even needed at all if properly maintained?

Basically, what are you repairing or needing the $500,000 for?

$500,000 seems excessive to me and it seems odd how it suddenly becomes debt in 10 years. Major repairs are not always set in stone and they are only debt when the repairs are actually done and you have to pay for them, so you may have room to wiggle and get things to a more comfortable spot within the next 10 years without additional assessments. Just make sure you are doing your part now.

I too believe in having a healthy reserve fund, however I am cautious before increasing the standard assessment, let alone adding an additional temporary assessment on top of that.

If they had a reserve study done 2 years ago, it should have spelled out what needed to happen each year from the time of the study to the expected time the repairs will be needed, etc. Even if they did increase dues by 5% every year, just 2 years ago, I seriously question whether that would have made up for the $500,000 short fall. It may have lessened it some, but probably not that much.

I'd be more mad at the board members from back in the 70's who never started a reserve fund. You would be sitting pretty most likely if they had. However at this point, since that study is only 2 years old, find out what the recommendations were at that point and act in a similar fashion. In addition, so that not all the load bears on the current homeowners, consider having an update done on that study and ask if there are areas that you can push repairs on to a later date in order to reduce the expected cost of upcoming repairs, etc. Perhaps it is a matter of better maintenance or or at worst judging which is the lesser of two eyesores, etc.

Don't dump everything on the current homeowners. Make sure money is set aside and as much as reasoably possible without placing the full brunt on their shoulders.