Dues Increase for 2010
Posted on Nov 15th, 2009
HOA Reserves at Unacceptable Levels: Action Must Be Taken Now
The Board of Directors has a fiduciary responsibility to protect the appearance, value, and safety of the common property of the neighborhood not only now, but into the future. This is, of course, in addition to ensuring that the properties within the neighborhood are maintained to community standards. If the common areas are not maintained or if individual homeowners fail to maintain their homes to community standards, all of our property values will fall.
To that end, in 2007, the Avensong Board of Directors approved for our first-ever reserve study to be conducted by Miller-Dodson Associates. The reserve study inventoried all items owned by the Association, assessed the condition of those items, and determined the 30-year financial plan needed to ensure the appearance, value, and safety of the property. The results of the reserve study showed that in order for Avensong to meet its long term replacement, maintenance, and financial needs over the next 30 years, the HOA would need to contribute approximately $40,869 per year to reserves.
Prior to the completion of the reserve study, the HOA had been operating in the blind without having any basis for knowing how much money was needed over the long haul. Budgets were primarily set based on the upcoming year’s operational needs plus any imminent repairs that needed to be made based on a visual inspection of the property. With little to no long term planning, dues have been artificially low.
In fact, the net dues (including all sub-association and master association dues) for Village and Avencroft homeowners have remained the same for at least the last five years, and the dues have only increased $30 in the past five years for Carriage homeowners. Holding the dues at these levels, for this long, would be considered unrealistic even under the best of economic circumstances and inflation rates.
Vandalism costs over the years have been hard to project. Increases in vandalism have contributed to lower reserve contributions. This year has been no exception.
The economic downturn in 2009 has had a devastating effect on many of our families. Unemployment and higher consumer costs have made it difficult for many families to pay their bills. This has resulted in foreclosures, bankruptcies, bad debt, and increased delinquencies. Our attorney firm is actively pursuing past due accounts to minimize the financial impact on the HOA and our members in good standing.
In 2009, to provide a reprieve to our members, the Boards of Directors made a decision to hold dues for all three associations at 2008 levels. This was, of course, in spite of the need to raise dues to make up for years of artificially low dues and have enough money to meet our future financial obligations. This meant that in 2009 we were only able to contribute approximately $4,100 to reserves.
Based on our 30-year financial plan, we are approximately $65,000 behind where we need to be in funding our reserves. We understand that economic conditions continue to be poor and unemployment and cutbacks in pay are still a challenge for many of our homeowners. The HOA must nevertheless ensure the health of the overall financial condition of the neighborhood. Throughout the year, the Board alerted HOA members in our newsletters that we would have to raise dues in 2010.
2010 Budget and Dues Increase for the Master Association
The Avensong master dues will increase $70 in 2010. Please plan for this increase now.
To cover projected operational costs in 2010 and to contribute fully to our reserves (i.e. at the recommended level of $40,869), the Avensong Master will need an additional $38,159. A decision has been made to raise the yearly master association dues from $330 to $400 (which is a net increase of $35 in the semi-annual dues or an average monthly personal budget increase of $5.83). At 564 homes, a $70 increase in dues will increase HOA revenues by $39,480.
Fortunately, this increase will allow us to take care of our annual needs and will prevent us from falling further behind on reserve contributions. In addition, we can proceed with repairing, seal coating, and striping our clubhouse parking lot and
Considerations will have to be made in the future to bring the master reserve funds current with the 30-year financial plan. For instance, changing our covenants to impose an initiation fee equal to the amount of the annual master dues for all new homeowners will greatly assist with the reserve fund deficit. For instance, in 2007, 65 homes were sold in Avensong. In 2008, 34 homes sold. That would have resulted in an additional annual reserve contribution of $21,450 and $11,220 for each respective year.