How would implement a capital improvemnts plan?

How does your development deal with long term capital expenditures?

For instance if you live in a community of detached homes, how does the community pay for roads? I'm talking replacement (repaving) not repair. If you live in a condo then your roof and parking areas would be your big one time layouts.

I live in a 12yo community with almost 400 homes. We have no amenities (no playgrounds, pools, parks ect) and little common area (about 5 acre but all grass). Our community has some long inclines and no sidewalks. This can create drainage/ erosion issues over time. But for the most part our expenditures are low (not including large capital expenditures). Their are roughly 3 miles of roadway in the development. We have been able to operate on a yearly budget of less than $50,000 per year, that breaks down to an average or $120 per year per lot or $10 a month. We have less than $10,000 in reserve.

I would guess that the roads will need resurfacing in the next 5-7 years at a cost of approx $50,000-$80,000 per mile. We also have drainage, sidewalks (in a very small portion of townhomes), and a few other repairs that occur every 5-10 years that cost in the $20,000 range.

Here is the challenge in my community......

We are in the process of amending our bylaws and we want to include something that sets aside money that is protected that will go towards long term capital improvements like road repair and other repairs that will need to be done in 3-5 year cycles. I need to stress that the fund will ONLY be used to replace or repair items on a long term pre defined basis. The money won't be used for ANYTHING outside the original plan for the years that it covers. This ensures that it won't be used to fund new projects or used for unseen maintenance (we have another fund for that). Some examples include, roads, drainage, parking lots, sidewalks, lighting, common areas....ect

My suggestion is that we bring in a 'professional' to estimate our costs over time (say 5-10 years) and update that estimate as needed to adjust for inflation, or unforeseen circumstances (something is damaged beyond the original estimate for repair). That will be the BOD's job.....

My thought is that for the board to have any idea what to set our dues at they have to know how much money will be needed beyond just the normal operating budget each year. We can’t wait till our community is 15-20yo and find out that THIS year we will need $200,000 extra to repair our roads. If we know what our long term costs are, we have a better chance of setting our dues accordingly to avoid messy special assessments.

The idea is to set the communities dues a little higher than needed and take a portion of the surplus and put it in a CIP and the rest to a general 'emergency fund'.

One of the things we have to deal with is our dues are around $10 a month and can only be raised 10% per year. So to avoid a special assessment we may need to raise dues as aggressively as possible as it would take 7 years for us to push our dues past the $20 a month mark.

The community met and everyone agreed that a CIP is needed, but 1/2 of the people didn't want to pay a 'qualified" person to come in and estimate our long term costs. They just want us to start saving money with no goal in mind.

MY QUESTION IS......

How do communities estimate their long term costs? Who is qualified to make that decision, and MOST IMPORTANLY, how much does something like that cost?

My feeling is that the community is a business and should be run like one. If it costs $3000-8000 to have this done than that’s what it costs. I call it 'the cost of doing business. I'm in the minority in my community. People get pissed when the community spends $200 to have a summer picnic, or Halloween activities.

I need to convince my community that no one on the board is qualified to take a guess at what road repair will cost. The BOD doesn’t want to make that decision without some help....

Has anyone faced this problem? Has anyone instituted a long term plan? If so who estimated your costs? How much did it cost (plz include a general description on your community)...

Thank you in advance....

Roger,

Thanks for the reply...

Unfortunatly we cannot amend the deleration because the developer had it written into the original Articles of Incorporation that the Deleration cannot be amended until 2013. The lawyer says that the only way to circumvent that would be to get a vote of 100% to include every lot in the community. I doubt you could offer everyone a free car and get 100% of the people to agree.

So far as roads, were taling about more than roads, we need long term forcasts for roads, sidewalks, drainage areas and whatever else might need infrequent but costly repiars...

Roger,

I need you to operate on the premise that the AoI CANNOT and will not be amended till 2013.

If you can answer the questions from the opening post I would appreciate it.

How do communities estimate large infrequent costs over time?

What kind of life do you anticipate for road resurfacing?

The bottom line is this....We need someone to estimate our costs over time so that the BoD can responsibly calculate our dues. The problem is, who makes the decision on what 5, 10 or even 20years worth of repairs is going to cost?

Are thier 3rd party companies that do this kind of work (estimating costs over time)? The BoD says that have no idea whatsover on long term costs over time and are reluctant to blindly pulling a number down out of the sky.

If we simply get estimates for what it cost to replace or repair items, we still have no real idea how long things will last, what, if any, potential cost saving can be realized by spending money up front or by using more expensive material ect...