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Subject: Unspent hoarding of last board
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JohnH57
(Texas)

Posts:36


11/11/2018 11:28 PM  
So I am part of a board were everyone is basically new after cutting out the cancer. They never did anything except table items for months as well as fought each other as children do for all to see. It was a giant waste of money plus peoples time while the neighborhood was going downhill. New management comes in and after years of people not being properly managed they start getting proper fines which they complain about now cause they had it so easy. We are a non profit board as I am sure most are but the last people hoarded 100k not spent which technically should have them all in the hot seat. The new board has been working its rear off to make this place better and add in amenities with the unspent cash so we are even. Another problem is dues have not been raised in 8 years so the talk of raising them just a little has people along with renters(though their opinion does not matter) in a uproar. Has anyone else had to deal with this? Another sad thing is the attendance at our meetings which people tend to get online and get mad yet with 1200 homes maybe 8 might be sitting in the chairs looking at us.
MelissaP1
(Alabama)

Posts:8080


11/11/2018 11:54 PM  
Sounds like a "normal" HOA. Did you think it was something different? Singing "Cue By Ya" around a campfire while holding hands? It's more like screaming "Clean up your $hit" and hands around the neck...

#1 do NOT add amenities. They just add more long term costs/expenses. Amenities need replacement/repairs and maintenance. I would not assume that spending that 100K "extra" is doing you any favors. Especially if you don't know what it was saved for. Like is your HOA responsible for roof replacements? Roads?

It's going to be hard to raise dues. Depending on how high you need to raise them. Is there a reason raising dues considering you have that extra 100K? Seems if you have that, then your HOA is meeting it's bills and then some. Maybe I am missing the math here? Raising dues because why?

Former HOA President
JohnH57
(Texas)

Posts:36


11/12/2018 1:23 AM  
I dont really appreciate the first portion of your response. Being part owner of a decent sized company I do know what it takes to be part of a BOD. We have more then enough funds for the amenities to be covered as the math has been done a few times. What I want to know is why if the old HOA knew they could get into trouble would they hold onto a large portion of cash not doing something for the community?

Raising the dues would go towards the extras that people have been asking for such as statements sent out instead of coupons quarterly. The extra would also go to directly fund the cost of water for one new amenity as well as upkeep for both. What we do not wish to do is hoard a massive extra amount of cash with hopes of having nice things done for the neighborhood only to withhold it all. For 14 years nothing has changed while we hold the lowest dues by 3 cities over for all neighborhoods while not being to offer anything more then 2 pools and a playground for 1200 homes. Is it so wrong we wish to do a little more then the outstanding community get together events for the people that live in our neighborhood? I see you have many posts and tend to answer alot of people with advice. Just asking as one human being to another as we both have shared the BOD experience some advice from you or others.
JenniferG11
(Texas)

Posts:548


11/12/2018 1:36 AM  
How much money do you have in reserves?
ArtL1
(Florida)

Posts:133


11/12/2018 3:07 AM  
For a 1200 home HOA with 2 pools and a playground to maintain (and perhaps a bunch of common areas, or is it non-gated, and all the land is either homeowner owned or the pools and playground?), $100k is not a lot of money. How many months worth of operating money is in your checking account? HOAs are generally designed with certain amenities, and the assessments are really to support maintenance, not expansion. I wouldn't assume that because the previous board didn't spend, that it's time to start building stuff. From my own experience with a board that didn't spend, I suspect you have a lot of common area maintenance/repairs to catch up on.
CathyA3
(Ohio)

Posts:243


11/12/2018 4:24 AM  
Your first order of business is to create a reasonable budget for annual expenses and to do a reserve study to make sure that there are sufficient funds set aside for future capital expenses (for example: roads, lighting, structures on common areas like a clubhouse and pool). Don't assume the previous board was "hording". Associations are legally required to set aside reserves, and failure to do so can result in the need for special assessments or loans to pay for necessary maintenance. In addition, lenders often refuse to approve mortgages for buyers in communities without sufficient reserve funding, limiting the pool of buyers to those who can pay cash.

As was mentioned previously, $100,000 is not much money. If I were in the OP's position, I'd be asking hard questions before I made any plans to spend any of it. The previous board may have been as dysfunctional as described, but that doesn't mean that they did nothing right.
TimB4
(Virginia)

Posts:16291


11/12/2018 6:39 AM  
John,

When was your last Reserve Study and is it fully funded?

If it's not fully funded, your board should consider putting the funds into the reserves vs. adding new amenities.
RoyalP
(South Carolina)

Posts:701


11/12/2018 6:41 AM  
Posted By TimB4 on 11/12/2018 6:39 AM
John,

When was your last Reserve Study and is it fully funded?

If it's not fully funded, your board should consider putting the funds into the reserves vs. adding new amenities.





PERFECT

else taxable income @ 30% as per IRS
MelissaP1
(Alabama)

Posts:8080


11/12/2018 6:45 AM  
The other posters are also posting my concerns as well. I don't see a 100K as a "Hoard". Plus do not think the HOA needs to expand amenities. Especially when your trying to "clean up a mess" or ask for more money. Guess what? You add a new amenity, people are going to think the HOA has enough money to add something why do I need my dues raised?

A HOA budget does NOT work like your home budget. It's to collect dues to cover it's routine expenses plus savings (Reserves). Raising dues because you want to buy new pool chairs isn't a reason. Raising dues to cover the expense of hiring new MC, lawncare, or amenity expenses is a reason. Reserve funds are set aside for those bigger long term items like roof replacements, road care, or end of life amenity replacements.

Your comments are kind of raising a red flag on how you are handling the new budget responsibilities. That is what we are saying here.

My new board took over when I left. They saw that we had 5 K in our budget and maybe 2K in savings. What did they do? Well spent it of course on things they thought the HOA needed. Like 1 board member took some of it to repaint the clubhouse. Others wanted to spend it on other items. All of course things I had told them "NO" on. Guess what? That 5 K sitting in the bank was our ENTIRE budget to pay our bills!!! Our bills were 5K a month. Money at the beginning of the month isn't there at the end of it after you pay the bills...


So don't jump the gun so fast to start spending and improving the neighborhood because you think the previous board sucked. Guess what? Your now the "sucky board" who does what they want... So think about what your actions shows the rest of the members. Does spending extra money on a new amenity look right when you got your hand out saying budget is tight?

Former HOA President
MarkM19
(Texas)

Posts:297


11/12/2018 7:37 AM  
JohnH,
What are your monthly dues? How much is in your Reserves? How much is in your operating account?

All important questions because 100k is a lot of money if it was in your personal account. It is not a lot of money for an association with 1200 homes. It is only $83.33 per home.
SteveM9
(Massachusetts)

Posts:3231


11/12/2018 9:18 AM  
By not raising dues in 8 years and building up reserves, you may or may not be at a break even point. you need a reserve study to see what you own, how long estimated life span and maitenance each asset needs in year xx. Even with 100k you might be way behind especially since everything is getting old. dont underestimate pool refurbishing costs. it can be big money.
KerryL1
(California)

Posts:6350


11/12/2018 9:24 AM  
As with others, it's impossible to advise you until we know something about your reserves and how well they're funded. They aren't required in all states, as Cathy insisted, but your HOA really needs to have a reserves study done by a certified reserves analyst, who'll make a reserves funding plan for your HOA.

You write, John, that the "math has been done," but does that math include reserves??

Sometimes her Melissaisms make reading her "advice" fun.
JohnC46
(South Carolina)

Posts:8267


11/12/2018 9:26 AM  
JohnH

I will add my voice to those saying you need a Reserve Study before you consider spending on any new amenities or for that matter, before any large expenditure.
MelissaP1
(Alabama)

Posts:8080


11/12/2018 10:13 AM  
Can you also clarify the 50/50 scenario in your post? Stated something about getting it down 50 percent? What down exactly and for what?

There are ways to improve your HOA other than adding new "goodies". Basic cleaning, planting flowers etc... Most HOA's do NOT pay for social gatherings and certainly NEVER a Neighborhood watch. Most social functions are pot-luck dinners. Maybe the HOA may supply the "big item" but it has to be agreed on by the members that social events are something they want their money spent on. Our HOA, we didn't even have cookies or coffee at the meetings unless a neighbor brought them.

Remember this is NOT your money! It is EVERYONE's Money!!! So have to be responsible and consider the needs of the majority. That is who you represent as a board member.

Former HOA President
RichardP13
(California)

Posts:3512


11/12/2018 11:13 AM  
Posted By RoyalP on 11/12/2018 6:41 AM
Posted By TimB4 on 11/12/2018 6:39 AM
John,

When was your last Reserve Study and is it fully funded?

If it's not fully funded, your board should consider putting the funds into the reserves vs. adding new amenities.





PERFECT

else taxable income @ 30% as per IRS



I am pretty sure with an HOA of 1200 homes they ain't filing a 1120-H, something that will tax them at a considerable lower rate.

Just saying.

Been there, Done that
KerryL1
(California)

Posts:6350


11/12/2018 11:46 AM  
Please ignore Melissa's remark that most HOAs don't fund for social events. She has no evidence for that assertion. Anyway, that is the least of your issues at the moment.

Btw, JohnH, your board is not a "Non-proft," but your HOA probably is a nonprofit (like many in CA) or a not for profit corp. Check your articles of incorporation to make sure your HOA's status.
JanetB2
(Colorado)

Posts:4168


11/13/2018 11:26 AM  
As others have noted ... Do you have a reserve??? ... Or did you spend the HOA’s potential $100K reserve account??? If you did then the current BOD could be violating their fiduciary duty. More and more states are “requiring” reserve studies to be performed for HOA’s. While TX does not at this time to my knowledge it could start requiring in the near future, so you potentially should start getting in that habit now. Here is what one link states regarding TX: http://www.reservestudyusa.com/2-reserve-laws/115-state-of-texas

The reason for having a reserve account is to not cause a future undue hardship for all the homeowner’s you represent. If for instance you had to all of a sudden replace a swimming pool, do you have the money saved to take care of that possibility or would you have to implement a “special assessment” to pay for fixing? Reserves are in place to avoid Special Assessments and the undue hardship it causes homeowners to all of a sudden have to come up with thousands of dollars just because their HOA was improperly ran with no funds to cover contingencies. For some owners who live paycheck to paycheck they cannot afford such assessments.

Also, homeowner’s in HOA’s are assessed to pay for Common Area’s as noted in their CCR’s. Therefore, if you are adding new amenities have you already solicited and received the votes necessary to Amend your CCR’s to reflect those new amenities??? If my dues had been paying the the amenities noted in the CCR’s and had enough to establish a $100K reserve account I would definately be in an uproar if you wanted to raise my dues. When your HOA has the lowest dues of many other HOA’s that is potentially a good thing because it makes your neighborhood more desirable for buyers. HOA’s with high assessments are less desirable to buyers who are looking to purchase homes. My current HOA is one of the least expensive HOA’s in my area and contains higher dollar homes; however, these homes sell extremely quick when they come on the market. For our CCR’s the only Common Area noted is our Irrigation Water system and homebuyers like that we do not have excessive amenities to maintain. If you raise dues and add amenities you potentially do not have in your CCR’s you will possibly have owner’s in an uproar to recall and replace the new BOD. You do not want to be “even” with regards to your cash on hand ... you want to have some in a reserve account to make future repairs and properly maintain your noted Common Areas.
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