Economizing in these times

AlexL...Our Board has never informed our HO's about anything in the three years we have had control. Last year we ran out of money because of misuse. The Board just took from the Reserves and stopped funding the Reserves. That was an extra $9000. from Reserve funding, that was spent for ??? In stead of tighten the belt, they hired a MC that charges us double what we were paying. How's that for looking out for the best interest of the HO's and the community. Now we are being told that there must be a increase, an increase HO's can't afford. Some of the HO's have said that if the dues goes up, then they will most likely follow on the foreclosure list that we already have.

Irene...these TH's are not high end properties. These are people who have a low Budget and everything has gone up. Gas back and forth to work is eating up an additional big chunk of their income...The dues are already $818. a year ($409. semi annual)...add 10%/15% on top of that, thats a lot of money for them.....Everyone doesn't live in expensive homes and can afford these increases....This is how it can cause someone into foreclosure. And we did raise the dues in 2007.

$260. a month, sounds like you live in a high end community w/amenities (which we have none of, except basics)...The very most any unit has sold for was $124,000. and that was during the inflated boom, now worth less than they paid. None are worth anywhere close to that now....we even have a few short sales (a couple more headed in the same direction), that are listed in the $80,000. range making them below builder cost before take over.

These are hard working people that don't earn a lot of money but worked hard to get into the first small place of their own...

"Increasing HOA dues to the extent of making someone foreclose?" I think the above answers that question for you.

UGH! Sounds like you need a complete housecleaning of the board and to get out of that MC contract if you can. They are violating their fiduciary duty by taking from the reserves and stopping further funding. This will only come back to bite your members down the road with a special assessment(s) when those reserves will be needed. If they are concerned now about losing their home over a fee increase, what will they do with a special assessment?

I read the comments but you have all missed the point of MY original question

Hey Alex! I don’t think you’ll find that HOA boards are doing a whole lot to economize. They may take a second look at a new expense that come up but if they’ve done their job right the periodic expenses are going to keep coming and payments for the expenses are going to continue.

The fiduciary actions of the board member must continue and the HOA must continue functioning. The grass still needs to be cut, the pool needs to be maintained and light bulbs need to be replaced. The BOD needs to keep meeting and they need to make sure that its members keep paying their monthly/quarterly/yearly (as is the case) fees. If a member stops paying their fees the board has a fiduciary responsibility to the membership take action(s) to cause the member to pay up even if it means eventually leaning the property!

It would be great if as a board member you could work with someone whose back is up against the wall but your fiduciary responsibility remains to the membership. If the board determines that dues ‘really’ need to go up, they will go up as bad as that will be seen by anyone who is already pushing their limits. It’s not necessarily pleasant but it’s reality.

GlenL...."However the fact that increasing the monthly dues from $68.17 ($818 divided by 12) would cause someone to go into foreclosure is IMO silly.".....Glen, it sounds as if you never had hard times, to some people even an extra $1.00 can hurt. Sounds like you have read all my post (and everything I have said about my Board is fact)and if you have, you have read that my husband and I did just that, between the two of us, when we were young and had 6 babies to feed, we worked four jobs between us plus take care of household duties..but you know what sometimes we still had to look under the couch cushions hoping to fine some change....

Our dues are paid semi-annual $450. at one time is hard. Sometimes saving is not an option...In case you hadn't noticed everything has gone up.

SidneyP, I've been reading all these replies and posts. I think I understand where you're coming from. You were simply asking for suggestions for help. We, too, are a small 46-unit condo in Florida. Not all condo associations in Florida are high-rises on the beach, and it's all us middle-class, hard-working, and retired people who are suffering the most. We have people here in their 70's working part-time to make ends meet. We have middle-aged people working two or three jobs for the same goal.

Our association has always budgeted for yearly palm tree trimming. At our meeting tomorrow night we're going to discuss forgoing this service this year and instead having our part-time maintenance man remove as many of the dead fronds as possible and wait for Mother Nature to remove the rest. That's one way to use about $1600.00 this year to cover the rising costs of other services. But of course we expect to get blasted by that decision, if that is the way we vote. We can never win.

Has your association ever considered paying your maintenance fees on a monthly basis, rather than semi-annually? It's the same amount, but (for me anyway) paying in smaller amounts would sting a lot less than having to come up with a big chunk all at once.

Wow, that is a big question. Given that your association is a legal entity, it is like asking "How can our company save money?" There are numerous ways and lots of opinions on this one. Probably the best answer is that you have to have someone focus on every aspect of your spending and not just the obvious ones such as grass cutting. A tried and proven approach is to identify the top 5 budget spending categories and then devote resources to do what ever you can to bring the costs down.

As the current president of a small condo association, I will offer you the following suggestions on what we did.

1. One of the most important things that we initially did was to establish the management control infrastructure. This defined how the Board would make decisions, what core business process would be used, how member input would be gathered, and finally, how information would be processed. Besides your direct spending accounts this can be a huge financial and time drain if you have an ineffective or inefficient management. If you are interested in more detail on all the things we did during this inaugural year, it can be found at www.*******.com under the Contents section.

2. Your BoD should develop a written budget philosophy to help it decide what should be included in the budget and to also provide a stable and consistent approach for managing the association's funds. Once established, you can now test it against all of your budget items to determine if there are any opportunities for cost savings. Here is an excerpt from our Budget Philosophy that describes the policies we follow:
A)Manage the association’s money as if it were our own
B)Only budget for those items that meet the following criteria:
1) Is this a non-discretionary expense to the association that
a) Is an obligation spelled out in the bylaws
b) Is necessary for the association to function
2) Is this a discretionary expense to the association that:
a)Is needed for the safety and security of the association or its property
b)Increases the overall value of the association property
c)Prevents a larger future expense to the association
d)Provides a desirable benefit to the overwhelming majority of members
C) Target the reserve fund balance at a ___% fully-funded level for maintenance/replacement of long-term capital assets
D)Whenever possible, offer optional participation for expenses that are discretionary in nature
E)Obtain two to three competing bids whenever possible for contracted services
F)Maintain a small contingency fund to respond to unforeseen conditions/opportunities
G)Use Co-Owner expertise or volunteer labor to defray expenses whenever possible.
H)Strategically use special assessments to cover the cost of non-reoccurring expenses rather than increasing association monthly dues.

If you follow these steps, you should have a solid foundation for assuring that your hard earned association dues are getting the biggest bang for the buck.

Finally, here are a couple of "quick hitters" that we used
1. Increased the insurance deductable amount
2. Fully-utilized an association website and the use of emails for communication purposes
3. Shift repair/maintenance responsibilities to individual owners for items that that could be considered "personal" versus "common"
4. Funded our reserve plan at the 70% level versus the 100% level, which still keeps it in the "strong" position
5. Self manage our association saving a considerable MC cost
6. Established a preventative maintenance program to eliminate costly repairs
7. Utilized volunteers to do work formally done by contractors
8. Paid for professional tax preparation the first year and then had the association Treasure prepare it for subsequent years

Good Luck.

JoeK

Don't worry about Glenn. Joe gave some GREAT advise above. If people in your community are not willing to attend a meeting to hear FIRST HAND exactly what the financial health of your association is, then someone needs to lay it all out in black and white for them and deliver a copy of it to each and every person. Show everyone how critical the situation is. At that time, ask them to get involved, and ask for suggestions.

JoeK,

Great post, not that the others didn't have value. I can cut and paste this to a file, and send a copy to who I think is the most likely to be serious about the subject. All of us have to adjust our life style and we move down or up life's road. As a family group we do this constantly. However when it comes to many many HOA's we really don't know enough about our income or our output. We have some figures but they have been tweaked over time or by those in control that actually tracking down a good or a bad deal in your Regime budget is impossible. So many of us allow the management to be held unaccountable and many Boards can not really pass close scrutiny. We really should all have an ad hoc committee that looks at nothing but ways to improve economic actions.
I would suggest that none of us that are governed by closed door politics is ever going to make a cchange. The change has to be made in bad management, then we can look at budget tightening. IMHP