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Subject: Observer for assessment voting in Texas
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HenryW1
(Texas)

Posts:10


12/30/2019 2:36 PM  
In Texas, can HOA member be an observer to special voting on assessment increase?

HOA Board wants to increase annual assessment dues to build reserve. Property Management company has vocally supported the increase for building reserve.

Some HOA members are against it as we noticed that by eliminating certain unnecessary expenses, we can build reserves without increase. Hence the voting on the assessment increase.

Until now, only Property Management company has been acting as de-facto "inspector of elections" as none has been defined in CCRs. They have not allowed members access to votes stating privacy. But now with their known vocal stance of supporting the increase, how do we verify that tabulation of votes will be impartial? Can a member become an observer to ensure fairness? What can observer do with regards to mail in ballots and proxies?
KerryL1
(California)

Posts:6817


12/30/2019 2:55 PM  
Welcome to the forum, Henry. If your documents, probably your bylaws and not your CC&Rs, say nothing about inspectors of election, you need to turn to Texas statues. Here you might find requirements for inspectors of election, how Owners may observe the tabulation of ballots, and whether you can examine the ballots yourself. I'd think you could if they are secret ballots.

But I don't know what the statutes might say. There's a lot of differences among states. We do have some really helpful posters from Texas, so I hope they check in and they offer you some advice. At least one, maybe two are property managers.
GeorgeS21
(Florida)

Posts:1877


12/30/2019 2:59 PM  
How much is the annual assessment increase?

What percentage of your annual budget?
HenryW1
(Texas)

Posts:10


12/30/2019 3:13 PM  
Increase is 20%.
GeorgeS21
(Florida)

Posts:1877


12/30/2019 3:17 PM  
How much is the base amount the 20% applies to?

Does 100% go to the Reserve Fund?

How underfunded is the Reserve Fund?

How long will it take to reach 100% Reserve Fund level with and without the 20% given the no increase side wins?
GeorgeS21
(Florida)

Posts:1877


12/30/2019 3:18 PM  
Sorry - forgot to ask when your last Reserve Study was done? Did that study point out more funds were needed?

Related - how long has the HOA (not COA?) been discussing the need for the increase?
HenryW1
(Texas)

Posts:10


12/30/2019 3:23 PM  
Thanks KerryL1.

The CC&Rs and ByLaws does not state anything about inspector of elections or observers or who will tabulate, etc.

I am trying to find out what Texas state laws/statues say about this, but the only thing I found was in chapter 209 of the property laws.
209.00594 states that only a person qualified to tabulate votes in a property owners’ association election may be given access to the ballots.

[QUOTE]
(a) Notwithstanding any other provision of this chapter or any other law, a person who is a candidate in a property owners' association election or who is otherwise the subject of an association vote, or a person related to that person within the third degree by consanguinity or affinity, as determined under Chapter 573, Government Code, may not tabulate or otherwise be given access to the ballots cast in that election or vote except as provided by this section.

(b) A person other than a person described by Subsection (a) may tabulate votes in an association election or vote.

(b-1) A person who tabulates votes under Subsection (b) or who performs a recount under Section 209.0057(c) may not disclose to any other person how an individual voted.

(c) Notwithstanding any other provision of this chapter or any other law, only a person who tabulates votes under Subsection (b) or who performs a recount under Section 209.0057(c) may be given access to the ballots cast in the election or vote.

(d) This section may not be construed to affect a person's obligation to comply with a court order for the release of ballots or other voting records.
[/QUOTE]

That sounds more like members who vote cannot tabulate those votes. That part is understandable. But what about being observer to ensure fairness? Or spouse of member who votes?
HenryW1
(Texas)

Posts:10


12/30/2019 3:27 PM  
The 20% equates to the amount that will go into reserve fund.
Presently there is zero reserve fund.

If we eliminate certain expenses like replacing flower plants multiple times a year, we will save more than that 20%. So our take is to eliminate those expenses and use those funds for reserve funds. This way, we will not need any increase and yet build our reser funds.

HenryW1
(Texas)

Posts:10


12/30/2019 3:28 PM  
Posted By GeorgeS21 on 12/30/2019 3:17 PM
How much is the base amount the 20% applies to?

Does 100% go to the Reserve Fund?

How underfunded is the Reserve Fund?

How long will it take to reach 100% Reserve Fund level with and without the 20% given the no increase side wins?




The 20% equates to the amount that will go into reserve fund.
Presently there is zero reserve fund.

If we eliminate certain expenses like replacing flower plants multiple times a year, we will save more than that 20%. So our take is to eliminate those expenses and use those funds for reserve funds. This way, we will not need any increase and yet build our reser funds.
HenryW1
(Texas)

Posts:10


12/30/2019 3:30 PM  
Posted By GeorgeS21 on 12/30/2019 3:18 PM
Sorry - forgot to ask when your last Reserve Study was done? Did that study point out more funds were needed?

Related - how long has the HOA (not COA?) been discussing the need for the increase?





Again, our point is that by eliminating some expenses like replacnig flowering plants multiple times a year, we will save money for reserve fund - in fact more than what they projected in budget.
So we are calling for review of expenses and elimination of such unnecessary expenses instead of increasing the assessment dues.
JohnT38
(South Carolina)

Posts:179


12/30/2019 3:34 PM  
The question is, are you just applying a band aid fix? Without a Reserve Study to work with will your proposal work for the next 5-10 years?
MarkW18
(Florida)

Posts:382


12/30/2019 3:41 PM  
I found this online:

https://www.txcommunityassociationadvocates.org/assets/docs/2015%20legislativesummarywithnotpassing.pdf

Should an observer be allowed to observe, YES. Afterall, in all fairness, it is YOUR money.

The question asked wasn't whether they should have a reserve study, or how much of the increase is actually going to a reserve, but rather was the process conducted fairly.

Maybe George, you could contact their PM or Board to get their side of the story.
MelissaP1
(Alabama)

Posts:8922


12/30/2019 3:43 PM  
Hold your horses. You may think that replacing flowers is "unnecessary" but maybe not. The HOA's responsibility to keep the HOA property ATTRACTIVE to potential buyers. So fresh and lively flowers at an entrance/common area makes the HOA look good.

Now why the need for a reserve fund all of a sudden? Is there some capital equipment that needs funded/maintained? Is your HOA responsible for let's say roof replacements? Do you have a clubhouse, a pool, or other amenity?

A HOA doesn't necessarily need a "reserve" account. It's a Non-profit corporation but not a charitable one. A Reserve account is different than a "savings" account. They could have different tax ramifications. A savings account could be for emergency expenses but not long term capital replacement/maintenance.

Don't want to see you all raise 20% of dues just because you think you need a reserve/savings account. It may be a special assessment situation instead. Many HOA boards can raise dues around 5% each year. Anything above that is subject to a majority of owners vote.

Former HOA President
KerryL1
(California)

Posts:6817


12/30/2019 3:49 PM  
I know you're not actually asking about reserves. Your citation suggests the anyone can tabulate the ballots except if on it or related, etc.

I can't go any further with election rules, which IS what you're asking about. If your property manager works in your promise, go ask him/her where to find statutes or codes about elections in HOAs (Or POAs or whatever you might be called.)

By the way, what size is your Community? How old? What kind of items is your community reprosbile for replacing or repairing, for ex., swimming pools, roofs? fencing?

If you right now just want to know about the election, I don't think you should feel like you need to answers questions about reserves. But it is true that saving money on a little bit of landscaping will not go very far in funding them if you have n reserve fund now.
MarkM19
(Texas)

Posts:506


12/30/2019 7:48 PM  
If I had to make some assumptions here is what they would be.

1) This is a newer Development that may or may not be still under developer control.
2) If the first is true then your initial board has very little power as the declarant gets most of the voting power.
3) Usually new developments have more money in operating accounts if they are not setting up a reserve account.
4) Got to get the Study done so that a reserve number is not just a guess.

Regarding the Election being from Ca. we always had people that wanted to be able to supervise the opening of the ballots. They were never in charge of counting but could watch the process. I have only been around 2 elections in Tx and had very little interest or hot topics on ballots. I was actually shocked that I got elected when I was a total newby with lots of experience.

Most HOAs have limits on how much dues can be increased without a vote of the majority. A 20% increase is a tuff pill to swallow. Usually boards tend to take the easier route and go with 9.5% per year so that they can do it without getting votes from people that only care about tomorrow. Reserves are very important and should always be a serious concern.
HenryW1
(Texas)

Posts:10


12/31/2019 5:53 AM  
Posted By JohnT38 on 12/30/2019 3:34 PM
The question is, are you just applying a band aid fix? Without a Reserve Study to work with will your proposal work for the next 5-10 years?




My question in OP is not about the reserve funds. It is about the fairness of voting in HOA. The vote in question is about reserve funds, but that is not main point of the question.

And to answer your point, HOA has not yet conducted any study on where expenses can be saved instead of increasing dues. But people see that yes expenses can be eliminated to an extent where the increase will not be needed. So the goal of HOA members is to stop the increase and ask BOard to conduct a detailed study of expenses and provide report on where the money is going and where we can save money AND after that if an increase is warranted, justify the increase.
HenryW1
(Texas)

Posts:10


12/31/2019 6:07 AM  
Posted By MelissaP1 on 12/30/2019 3:43 PM
Hold your horses. You may think that replacing flowers is "unnecessary" but maybe not. The HOA's responsibility to keep the HOA property ATTRACTIVE to potential buyers. So fresh and lively flowers at an entrance/common area makes the HOA look good.

Now why the need for a reserve fund all of a sudden? Is there some capital equipment that needs funded/maintained? Is your HOA responsible for let's say roof replacements? Do you have a clubhouse, a pool, or other amenity?

A HOA doesn't necessarily need a "reserve" account. It's a Non-profit corporation but not a charitable one. A Reserve account is different than a "savings" account. They could have different tax ramifications. A savings account could be for emergency expenses but not long term capital replacement/maintenance.

Don't want to see you all raise 20% of dues just because you think you need a reserve/savings account. It may be a special assessment situation instead. Many HOA boards can raise dues around 5% each year. Anything above that is subject to a majority of owners vote.





Very true, 5% is a reasonable increase. We do have some reserve funds already in account, its not that we ran out of reserve funds.

It is also true that making common areas attractive is necessary, but question is, to what extent? Has there been a study conducted to see where we can save money? According to Board, answer is "No, that has not been done yet". So vote is to force Board to first stop the increase, then study the expenses and justify what expenses are really needed and if it can be eliminated or reduced. After the study and exchange of ideas with members, it might very well result in yes increase is warranted. Our take is, do not increase blindly.

Our community does not have any ammenities other than a small playground for small kids. The boundary fence (its not gated community) around the community perimeter along with landscape maintanencehas been mutually agreed (by all members) to be maintained by HOA. By increasing dues, we will be one of the few communities with high HOA dues and other communities with lower dues have more common ammenities. Vote is only to ensure there will be a study to reduce expenses before we think of increasing dues.

Again, we are deviating from focus of question - having observer for vote tabulation.
HenryW1
(Texas)

Posts:10


12/31/2019 6:15 AM  
Posted By MarkW18 on 12/30/2019 3:41 PM
I found this online:

https://www.txcommunityassociationadvocates.org/assets/docs/2015%20legislativesummarywithnotpassing.pdf

Should an observer be allowed to observe, YES. Afterall, in all fairness, it is YOUR money.

The question asked wasn't whether they should have a reserve study, or how much of the increase is actually going to a reserve, but rather was the process conducted fairly.

Maybe George, you could contact their PM or Board to get their side of the story.




Thanks Mark. I guess I will ask for observer to be allowed.
It seems to be a grey area as there is nothing "stated in law" on whether to allow observer or not.

HenryW1
(Texas)

Posts:10


12/31/2019 6:23 AM  
Posted By MarkM19 on 12/30/2019 7:48 PM
If I had to make some assumptions here is what they would be.

1) This is a newer Development that may or may not be still under developer control.
2) If the first is true then your initial board has very little power as the declarant gets most of the voting power.
3) Usually new developments have more money in operating accounts if they are not setting up a reserve account.
4) Got to get the Study done so that a reserve number is not just a guess.

Regarding the Election being from Ca. we always had people that wanted to be able to supervise the opening of the ballots. They were never in charge of counting but could watch the process. I have only been around 2 elections in Tx and had very little interest or hot topics on ballots. I was actually shocked that I got elected when I was a total newby with lots of experience.

Most HOAs have limits on how much dues can be increased without a vote of the majority. A 20% increase is a tuff pill to swallow. Usually boards tend to take the easier route and go with 9.5% per year so that they can do it without getting votes from people that only care about tomorrow. Reserves are very important and should always be a serious concern.




Thanks Mark. Good valid points. Our position is point #4 you state. Board has already told us that they have not conducted any study on where expenses could be curtailed. Hence we want them to stop increase, analyze the expenses and have a HOA meeting to discuss where expenses can be reduced. Then look at the question of if increase is warranted and then if yes, up to what extent.

Right now it is a blind increase to "build reserve" with no defined limit of what the ideal reserve limit should be, where are we with regards to that goal and justification for that reserve limit.
JohnC46
(South Carolina)

Posts:9053


12/31/2019 8:24 AM  
Henry

Are you saying owners get to vote on the increase? Hire a local Minister to observe the count.
KerryL1
(California)

Posts:6817


12/31/2019 9:01 AM  
MarkM, Henry, in #4 is advising that your HOA have a "reserve study" done. This is conducted by a certified reserve analyst.

Meanwhile, I feel that there must be mire TX statutes concerning elections, vote counting, etc. Maybe MarkM knows something about them?
GeorgeS21
(Florida)

Posts:1877


12/31/2019 10:55 AM  
Reserve Studies typically do not review whether an association can save money on their OP’s costs. This is not their purpose.

It does sound like you need a professional Reserve Study - do this first, then you can fight about how you can reduce the annual budget to shake loose money to put into the Reserve Fund.
MarkW18
(Florida)

Posts:382


12/31/2019 11:16 AM  
George

W=Have any words of wisdom on getting a reserve study authorized if you're NOT on the Board? Again, as the OP stated on a couple of occasion, the RS is not the topic.
MarkM19
(Texas)

Posts:506


12/31/2019 11:20 AM  
As a Homeowner who sits across the table from the Board members all you can do is Suggest Changes. In order to Make Changes you have to be on the Board.

He needs to run for a Board Seat and use his concerns as his platform for other HOs to get behind.
SheliaH
(Indiana)

Posts:2882


12/31/2019 12:14 PM  
It makes sense to have an observer, and I don't see why the board would object to that. I find nothing brings out homeowners more than the news of a fee increase - and a 20% jump does seem high. Funny business with the voting on this type of issue usually doesn't end well, so I really don't think that will be the problem. If anything, the board should want to have an independent observer (or two or three) to ensure the voting is fair.

All of that said, I also agree that the real issue is whether your community has a reserve fund that's being funded properly. If some of you really think this increase isn't necessary or hasn't been completely thought out, it's best to show up at that meeting and make your case as strongly as you can. At the very least, push for the 5% increase (you'll probably need it just to keep inflation at bay), but you should also be pushing for a reserve study so the board can make educated decisions instead of tossing out a 10% or 20% jump in the budget.

You and the other homeowners also need to read the study because I'm not sure that not planting flowers and things like that will be enough to avoid an increase. Especially since you haven't said what areas the association is responsible for, how old the community is, when was your last assessment increase, if you've ever had a reserve study or when was the last time that was done, etc., etc. I understand and agree with your concern for a fair vote, but don't get so caught up in that area that you don't look for the story behind the vote in the first place. Get out and walk around your community and encourage everyone to show up - if you win the day, fine.
KellyM3
(North Carolina)

Posts:1452


01/01/2020 9:47 AM  
Henry,

You nor a spouse are eligible to participate as an election observer based on the text you've shared w/ us. The same goes for HOA board directors in this election. The property manager is a legitimate third-party that is authorized to manage the election. From a business perspective, any property manager would support funding a Reserve Fund when an HOA possesses zero dollars in reserves. They represent the operations of your community. Your HOA is not very solvent without savings.

This may be the wrong forum on which to seek advice or confirmation that a property manager is corrupted by supporting the creation and dedicated funding of a Reserve Fund. Many of us are long-standing HOA officers & directors w some of us having experience w/ underfunded Reserve Funds and HOA financial calamity as a result.

The election will be fine. If you don't like the policy decision, please seek election to your HOA board. If you sincerely believe that cutting the flower budget will adequately fund a Reserve Fund, please do not seek election to the HOA board until you better understand HOA operations. This forum can be an excellent resource if this interests you.
JohnC46
(South Carolina)

Posts:9053


01/01/2020 1:32 PM  
Henry

To clarify. Typically owners do not get to vote on a Yearly Assessment (Dues) increase. The BOD can do such on their own. Some have limits to the amount of increase, some do not.

Typically owners vote for and must approve a one time Special Assessment and generally it must be a lager % (typically 2/3rds) of all members approving.

Many BOD's appoint their PM to oversee the vote counting along with a Member of the BOD. I have seen a BOD randomly pick an owner to also oversee the voting.

Above varies, but typically this is the way it happens.

I have seen a local Minister oversee vote counting for a donation to his church's building fund..




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