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Subject: Subdivision not part of the city/road maintenance
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StacyH
(Georgia)

Posts:16


06/28/2019 12:11 PM  
Hi All,

New member here. I've lived in my subdivision (115 condo & town home units) for almost 20 years. Our Association was on the verge of bankruptcy about 7 years ago and, while that was avoided, our HOA has suffered under terrible mismanagement by past boards and property managers. I'm now president of the HOA and we have a good board in place and are trying to get things back on track. Dues have not increased commensurate with costs and we have one huge project in particular that has been punted for years. Our subdivision is not part of our city and they do not maintain our roads. They are in deplorable shape. You have to dodge huge potholes just to drive down the street (the HOA has already spent a fortune patching them over the years) and it makes our subdivision look very poorly maintained. The city refused to incorporate us many years ago (even before I purchased my home) after residents refused to allow a through street to be built connecting us to another neighborhood. We're now looking at an cost of $250-300k to repave. The Board is clear that this can't be put off any longer and are prepared to do a special assessment.

My question is: If you are or have been part of a board that has dealt with this issue, how did you manage the residents' response to it? Dues were raised this year (after we discovered they'd been miscalculated since our community was built in the early 80's) by $20-30 and people went nuts. They keep asking why not get incorporated into the city? The city has been approached a few times over the years and has, of course, refused to incorporate us. This makes perfect sense to me because why would they take on a neighborhood that is going to cost them hundreds of thousands of dollars out of the game when it currently costs them nothing? Plus, I'm not convinced that even IF they did that they wouldn't still require the Association to pay for the initial costs of getting the roads up to par. Thanks in advance for any insight!
TimM11


Posts:299


06/28/2019 12:20 PM  
Being incorporated into the city doesn't necessarily mean that the city would also take over the streets in your HOA. My HOA is within a city, and we have private streets, as do many others.
StacyH
(Georgia)

Posts:16


06/28/2019 12:22 PM  
Yes! I thought this might be a possibility as well.
JohnC46
(South Carolina)

Posts:8650


06/28/2019 12:47 PM  
Stacy

The first thing you need is a letter from the city promising to repair and upkeep your roads if you let them built the through road.

The 2nd thing you need is a proposal from a street paving company as to the cost to repair/pave your road plus a breakdown of what it would cost each owner.

Throw both on the table and let fellow owners decide.
StacyH
(Georgia)

Posts:16


06/28/2019 1:06 PM  
The offer of building the through street & maintaining the roads was many years ago & no longer needed or on the table. Sorry if my initial post was unclear! We are in the process of getting final bids for the work. We don't have enough in reserves so an assessment will definitely be necessary. Thank you!
JohnC46
(South Carolina)

Posts:8650


06/28/2019 2:53 PM  
Stacy

When you say you are not part of the city, who (what municipality) do you pay your real estate taxes to? I would first have a go at them taking over/repairing your roads. Explore this approach before going for an assessment.
StacyH
(Georgia)

Posts:16


06/28/2019 2:57 PM  
That inquiry has been made & denied. Unfortunately, our city & county are having financial issues of their own.
MelaniW
(Maryland)

Posts:8


06/28/2019 3:56 PM  
First, I want to congratulate you for attempting to solve this problem. It is unfortunate when associations aren't managed well, and it can be a real task to turn things around.

Regarding having the city take over your road, if they've already said no, they aren't likely to change their minds. However, if there were a possibility for it, you are correct- you would need to improve the condition of the road first. In fact, even the storm drains, curbs, road signs and other details would likely have to be improved up to current day, new construction standards.

Regarding the worry over how people will react- this is the same in every community. It is always difficult to raise dues or pass a Special Assessment, and it can feel awful to be on the receiving end of hearing your neighbors complain. I hope your manager and other Board members are all sticking together and being supportive. The best you can do is explain the facts as they are. When you send out the Special Meeting notices, include a page that explains the history of low funding, and how the city won't take the road over, and how this Special Assessment is what is required.

It may take a few Special Meetings to get your required quorum. Then, a Special Assessment of this size is typically spread out over a number of years. Is it possible to do spot repairs and crack fill, so that residents can drive on the road for a few years?

This is a big project, but if you plan out your steps, then you can reduce the amount of weight that you feel on your shoulders about it.
StacyH
(Georgia)

Posts:16


06/29/2019 4:04 AM  
Thanks, Melani! Great point that we might not only still have to fix the road, but that it would open us up to other expenses as well. The Board and the property manager are all definitely on the same page and we're planning a mid-year meeting soon to lay the groundwork.

I'm so glad I found this forum! So much great info!
KellyM3
(North Carolina)

Posts:1422


06/29/2019 7:37 AM  
Hi Stacy,

I've navigated a debt-ridden HOA operation where loans where the only thing that prevented special assessement aka financial insolvency. It will take years to dig out and restore finances but the fact you can make large adjustments to the regular dues rate is a positive.

To answer your question.

1. Please take time to understand and be able to clearly articulate where those large dues increases will be applied in the budget and pledge to use new revenue to bolster existing amenity (including road) funding... and not to increase or add amenities. Do this in an open meeting. If you're under-funded, reasonable people will begrudgingly see it. Everyone won't be reasonable so focus on community consensus of the situation.

2. Make an official request of your city to assume the street. Sure, they'll say "No" but that will make it fact and not an assumption of the HOA. (No, they don't want your road in that shape and residents won't want their neighborhood street used as a pass-through to another neighborhood).

3. I'd recommend creating a strategic plan for the road as the first step. A special assessment should not be the first approach, though it's the most effective. The main reason is a special assessment, in no way, solves the structural problems with your regular HOA budget and savings plans, which cannot care for the property.

4. If you can, patch more potholes but raise monthly dues to cover road maintenance in the budget. You may need to pull a loan, then raise monthly dues to cover the loan payment (or pay it early).

5. If you get the loan (which I don't like but like more than an assessment), then - when the loan is paid - you have higher, permanent, monthly dues to feed a "road maintenance account" or Reserve Fund.

6. Remember, where the pavement is functioning or in "good shape," it's in "good shape" and doesn't need replacing. It's just rock and tar. While ugly, I always try to preserve our residents' pocketbooks.

Sorry for being "wordy." But, if the community is uncomfortable with sudden dues increases, you may really cause financial hardship by assessing everyone $2,750 for pavement.

KimberlyW2
(Tennessee)

Posts:31


06/29/2019 9:14 AM  
I think you have to prepare yourself for the very real possibility you won't get the votes to pass a special assessment of $2500+ for each homeowner. Thoroughly read your governing documents about the percentage of votes you need for approval. The percentage is high. Probably higher than you even think.

Your best choice may be to attempt obtaining a loan. And, don't expect that to be an easy task or even a doable one. Even then, you would have to raise dues a large amount in order to pay an extended large loan payment...and would have to pass the dues increase BEFORE applying for the loan-with no guarantee you will be approved for the loan. And, don't expect membership to be on board for that either! You may have to do the road in stages...starting at the entrance and working around. It won't be a popular choice and you may not get the agreement for that, either.

What I find with my apathetic HOA - is the general mindset of " they " need to pay for it. Yet, I've never actually figured out who the elusive unicorn " they " is! Of course " they " is the membership, but it doesn't sink in no matter how many letters, meetings or face to face conversations I have- I still wind up blue in the face. Everything is someone else's responsibility.

People do not want to pay for much. Especially not the exuberant costs that come with repaving of a road. That is something that was likely never on their radar or in their mindset when they bought their home. Who would think road maintenance? Did you? I know I didn't! Wow, was I ever un informed. I also never stopped to think what happens to a roadway that becomes so neglected it must be completed dug up- down to the dirt, rebar and gravel and rebuilt. You don't even want to know the cost of that!

Your final question is how do you manage the residents' response? The votes will dictate where you are able to go with this. If by some miracle, you pass this huge assessment - you will have majority on your side and those that are vehemently opposed to it will just be out of luck. The assessment will have passed and ALL are required to pay it. Just make sure you squirrel away enough funds for the legal expenses to pursue those that ultimately refuse to pay. That's a whole other conversation.

I wish you the very best of luck, but I've walked in your shoes and don't envy you. You've taken on a monumental task for free. Don't let it consume you. And hey, we are in a booming real estate market...have you considered selling?? I'm only slightly joking.

K.

GenoS
(Florida)

Posts:3177


06/29/2019 9:46 AM  
I don't understand the preference of a loan over having a special assessment. A loan means more paperwork, a higher total cost, and keeps kicking the can down the road in the sense that the problem isn't really solved until it's paid for. A special assessment, on the other hand, fixes the problem quickly. Let the individual owners get their own loans if they must in order to cover it.
JohnC46
(South Carolina)

Posts:8650


06/29/2019 11:29 AM  
Geno

A loan can get the money needed in now allowing the work to commence now but more importantly allow owners to repay over time. One HOA I know of needed $25K per home. The loan share could be paid off by each individual for as long a term as 5 years. There was interest, but it was at the standard bank personal loan rate. 85% of owners agreed to the plan/assessment.

There was a joint lawsuit by two owners (out of 175) but the court dismissed it rather abruptly saying the association operated properly within the Covenants.

Individual loan payoffs became part of the sale negotiation when one went to sell their home.

KellyM3
(North Carolina)

Posts:1422


06/30/2019 8:26 AM  
Posted By GenoS on 06/29/2019 9:46 AM
I don't understand the preference of a loan over having a special assessment. A loan means more paperwork, a higher total cost, and keeps kicking the can down the road in the sense that the problem isn't really solved until it's paid for. A special assessment, on the other hand, fixes the problem quickly. Let the individual owners get their own loans if they must in order to cover it.




Hi Geno,

Loans = Special Assessment....both are "losers."

There is zero preference for a loan over a special assessment. In the technical sense, they both represent a structural budget or savings strategic flaw for the HOA. You are correct on every point regarding paperwork and higher total cost. That said, I would oppose, unless unavoidable, any situation where my board's strategy was premised on creating conditions for homeowners to be forced into consumer loans to pay assessments, thereby shifting the consequence of the HOA boards' prior maintenance negligence onto the the current homeowner. However, I understand your position.

For me, in this case, the problem isn't the road.

Strategically,

1. Obtain firm quotes on repaving
2. Obtain offers for a 5-year loan (if allowed by the HOA documents)
3. Craft a monthly dues increase that's equal (or slightly greater) than the annual costs of the monthly payments
4. Be frugal and retire the loan a bit early, if possible, by holding the budget in check
5. At loan retirement, maintain the dues rate and push the "newly found" revenue into Reserve Funds or "Road Fund" or other transparent fund for capital improvement.
6. Make a transparent board statement to not add optional amenities that increase the monthly maintenance commitments of the HOA (as the HOA is not self-sustaining as-is)

A community cannot dodge the expense of catching up on deferred maintenance but, if a long-term view is maintained, can use debt management strategies to better align the regular budget w/ the costs of property maintenance.
MelaniW
(Maryland)

Posts:8


07/03/2019 8:48 AM  
Stacy, I own my management company and would like to write a blog post about this situation, and quoting some of your original post. Would you be agreeable to that?
JohnT38
(South Carolina)

Posts:107


07/03/2019 1:17 PM  
MelaniW,

My community is facing almost the exact same situation. Can you post your blog address here so I can follow it?
StacyH
(Georgia)

Posts:16


07/03/2019 3:29 PM  
I'm fine with that if you will send the address for your blog.
StacyH
(Georgia)

Posts:16


07/03/2019 3:30 PM  
It's so difficult! I'd love to know the details of your situation.
MelaniW
(Maryland)

Posts:8


07/12/2019 9:19 AM  
Stacy, thank you. Here is the link to my post:

https://www.susqmgmt.com/blog/needing-a-special-assessment

CjC


Posts:197


07/12/2019 9:35 AM  
Our development is the same way. City won't take over roads until they are up to par. We took out a loan and then the residents are paying it back over 30 years.
PestY
(South Carolina)

Posts:119


07/12/2019 10:31 AM  
Posted By CjC on 07/12/2019 9:35 AM
Our development is the same way. City won't take over roads until they are up to par. We took out a loan and then the residents are paying it back over 30 years.





Owner(s) / Member(s)



StacyH
(Georgia)

Posts:16


07/12/2019 12:05 PM  
Thank you! I'm going to check out your other blog posts as well.
StacyH
(Georgia)

Posts:16


07/12/2019 12:15 PM  
That definitely seems to be the norm from what info I've been able to find. Are you paying the city back over 39 years?
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