If you haven’t been reading the Board meeting minutes the last few years or been deciphering the financial reports, both difficult tasks, you may have been blind sided by all the dues increases. In an effort to be more transparent, this post is meant to explain the reasons for the increases and what’s being done to replenish the reserves which have been severely depleted.
The reserve studies for the past couple of years estimate the HOA shortfall to be around 10k per unit. When the current Board took over, the HOA was already experiencing a three million dollar (approximate) deficit in the reserves. In 2017, the percent funded to reserves was at 112%. When the new Board took over this year, the percent funded was at 28%. If the percent funded gets too low, the state will take over the HOA. In addition, a shortage in reserves can lead to a lack of funds needed to attend to some maintenance projects. The only way to replenish the reserves is to save money and increase the dues.
When the current Board took over in July, the wood siding reserve line item was already at a negative 1.2 million dollars. The painting reserve line item was a negative $241,000. The plumbing reserves were at a negative $373,000. In addition, the state has mandated balcony renovations which came out of the blue, could not be planned for, and will cost the HOA over one million dollars. Another state mandate that could not be planned for is the removal of all unusable turf which will be replaced by drought tolerant plants. The Board is working on getting 600k in rebates for the project. Also coming down the pipeline is the roof replacement project which will be a very substantial cost.
Steps have already been taken to save money.
1, The Board has mandated that all maintenance costs, no matter how small, be approved by the maintenance committee to avoid any unnecessary projects.
2. The hiring of Verifix will save the HOA tens of thousands of dollars a year, and so far, they are doing a much better job than OC Patrol.
3. The Board negotiated with PCW to lower the change order cap on the balcony repairs down to 15% from 25%, resulting in a potential savings of tens of thousands of dollars. 900k was transferred to the one million dollar deck project. The $18 dues increase will go towards additional deck repair costs that the Board is currently negotiating with PCW.
4. All lights in the community were switched over to LEDs. This will save the HOA substantial money in bulb replacements and service calls.
5. Although the turf removal was mandated by the state, the planting of drought resistant plants and a new misting irrigation system should save the HOA a considerable amount of money pertaining to water usage.
6. A couple of Board members interviewed a new property management company to look into their fees and services provided. As a result, Cardinal agreed to lower some of their management costs and miscellaneous fees. In addition, they agreed to switch us from a yearly contract to month to month, so we wouldn’t be locked in for another year.
7. Thousands are also being saved due to a Board member completing several minor repairs, saving the cost of service calls.
8. Work is underway to add advertising to the website to generate additional revenue.
9. New rules are being put into place to limit the damage caused by residents using nails to attach items to the wood. The goal is to save on wood replacement costs in the future.
10. The HOA has switched numerous vendors over the past year to save money and receive better service. The vendors include the pool company, cleaning company, street sweeping company, patrol company, and the service company for the automated gates.
To put things in perspective, every dollar in dues amounts to $5,940 of income for the budget. That being said, the recent dues increase of $18 will result in an additional $106,920 in revenue. An indication of just how much work has to be done to replenish the three million dollars in reserves.
Cost saving measures will continue to kick in as the Board continues to focus on cutting costs,
negotiating contracts and getting multiple bids, avoiding unnecessary projects, and spending money responsibly.
