30 year old POA with no capital reserve and aging assets

LoganM (Virginia)
Posts: 8

Posted:

I decided to start a new thread to ask about how people suggest handling a 30 year old POA that is just now being transfer from the developer. This means that there is no reserve fund or any real money to speak of. To read more about the background of this situation you can see my previous thread http://www.hoatalk.com/Forum/tabid/55/view/post/forumid/1/postid/125486/replyid/125611/Default.aspx.

Let me give you a bit more background on the neighborhood.
- We are around 210 properties
- About 20 percent are duplexes
- I would guess around 15-25% are rentals.
- We have a good mix of demographics from working professionals to young families to retired
- We are also a mixed income neighborhood
- The dues are set in the original bylaws from the 1970s. This amount will need to be raised ~40% just to cover costs and meet the minimum capital reserve contribution. This is not adding anything extra to accelerate the growth of the capital reserve.
- Most of the members did not know they lived in a POA and are resistant to the whole idea of the POA to begin with.

We have 2 playgrounds:
- neither is up to current code
- both are very close to end of life according to the capital reserve study
What would you do with the playgrounds? Ideas that have been tossed around are:
1) try to maintain what is currently there with the idea that that can only do so much
2) remove both playgrounds and wait for our capital reserve fund to grow to the point that we can replace them
3) remove one of the playgrounds and focus on the better of the two
4) do a special assessment to repair or replace the playgrounds. remembering that we are already dealing with an annoyed membership and increasing the dues by 40%
5) ask for a donation from members who use the playgrounds

Tree maintenance:
We also have ~50 acres of community land. The land is a combination of large pieces on the outside of the development as well as "trails" that are ~5' wide paths of land between a lot of the lots. This means we have a lot of trees that are close to houses, roads and driveways.
1) Does anyone have any suggestions on how we should handle tree care in this situation?
2) Should we try to be proactive and search out trees to remove, or should we react to members request?

Any other suggestions or advice would be greatly appreciated

Thanks so much for all of the advice!

TimB4 (Tennessee)
Posts: 21,047

Posted:

Quote:

Posted By LoganM on 12/06/2011 4:26 PM

We have 2 playgrounds:
- neither is up to current code
- both are very close to end of life according to the capital reserve study
What would you do with the playgrounds? Ideas that have been tossed around are:
1) try to maintain what is currently there with the idea that that can only do so much
2) remove both playgrounds and wait for our capital reserve fund to grow to the point that we can replace them
3) remove one of the playgrounds and focus on the better of the two
4) do a special assessment to repair or replace the playgrounds. remembering that we are already dealing with an annoyed membership and increasing the dues by 40%
5) ask for a donation from members who use the playgrounds

Removing the playgrounds could result in litigation due to removing amenities. I doubt that you will get donations because they are not tax deductible. The leaves with with the options of:
1) doing what you can with what you have.
2) Special Assessment
3) Combination of Both

We are in a similar situation with our playgrounds - little reserves and aging equipment. We chose to replace specific items as needed from the Reserves as funds are available. This required that some equipment was to last longer than needed. Some equipment was removed for safety reasons and replaced when funds became avail.

We just spent 8K on having engineered mulch installed to a depth of 8 inches and 2 spring toys out of 3 replaced.

Our membership seems ok with this.

Quote:

Posted By LoganM on 12/06/2011 4:26 PM

Tree maintenance:
We also have ~50 acres of community land. The land is a combination of large pieces on the outside of the development as well as "trails" that are ~5' wide paths of land between a lot of the lots. This means we have a lot of trees that are close to houses, roads and driveways.
1) Does anyone have any suggestions on how we should handle tree care in this situation?
2) Should we try to be proactive and search out trees to remove, or should we react to members request?

Although not as many trees or acreage as you, we do have many mature trees. Our tree budget ($5K per year) is only enough to cover fallen trees or respond to members concerns (which were evaluated prior to spending money). We supplemented this by allowing residents to trim, at their expense, any tree in the common area without permission. Removals required prior approval. This year we hired an Arborist to review the property, evaluate and give us a plan of attack. The Board plans to use this report to help establish future assessment needs.

Note: we do not include landscaping in our Reserves - so all of it must come from the operating budget or contingency fund.

From a liability stand point, typically if the a tree falls in a storm and damages another property, your insurance pays for your damage and the other homeowners insurance pays for their damage. However, if the Association is aware of trees that should be removed and doesn't remove them and this tree falls and causes damage, the Association is fully responsible for the repairs since there would be negligence in not removing the tree once they were aware of it.

My suggestion, get the association established first. Establish a reasonable line item for trees (perhaps $10K for your size of property). Then, after things settle in and you have your Reserves fully funded - look to getting a detailed plan together for the trees. Right now, I think you have other issues to worry about.

Hopefully your Board has the authority to raise the Assessments by 40%. It took us 3 or 4 years to get a 20% increase passed by the membership in order to fund the Reserves. This was because our board is limited to a maximum of 5% increase to annual assessments each year without membership approval.