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Subject: Has anyone successfully reduced assessment $$?
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Author Messages
AdamL1
(Idaho)

Posts:117


09/22/2021 1:19 PM  
Genuinely wondering about this. If an HOA doesn't really 'do anything' for years on end, except collect checks and pay a lawn company, what real value is there? Wondering if anyone has gone through the process of auditing, calculating, and eventually deciding that the annual dues doesn't really need to be 'that much'. I know the standard response is "the HOA needs all the money it can get, in order to preserve and enhance the beauty and value of the neighborhood," but honestly, looking around and looking at the financials, there's a lot of fat to trim.
JohnC46
(South Carolina)

Posts:11539


09/22/2021 1:44 PM  
Adam

What about the Reserves? Are they fully funded?
HenryS6
(Arizona)

Posts:80


09/22/2021 1:45 PM  
Posted By AdamL1 on 09/22/2021 1:19 PM
Genuinely wondering about this. If an HOA doesn't really 'do anything' for years on end, except collect checks and pay a lawn company, what real value is there? Wondering if anyone has gone through the process of auditing, calculating, and eventually deciding that the annual dues doesn't really need to be 'that much'. I know the standard response is "the HOA needs all the money it can get, in order to preserve and enhance the beauty and value of the neighborhood," but honestly, looking around and looking at the financials, there's a lot of fat to trim.




Adam, I joined the board because I thought that assessments were too high and money could be saved. I haven't been successful, yet, but am getting closer to that goal. I closed out a storage unit that was full of unneeded junk from years ago ($700/year savings), found a different landscaper ($17,000/year savings), and have implemented policies to solicit multiple bids on every bigger project, much to the dismay of the contractors who used to be sole source.

The problem is I learned that our parks had been neglected for many years and there is a heap of work to be done. So rather than cutting dues, we've simply accomplished more work each year than prior to me being on the board. Eventually, someday, the capital improvement work will end and then we can focus on minimizing dues, so someday I hope to be successful.
BarbaraT1
(Texas)

Posts:571


09/22/2021 1:51 PM  
Assessments are the annual operating budget divided by the number of lots.

If you want to reduce the assessment, reduce the annual operating budget. You can do that by deferring maintenance, eliminating or reducing services, engaging volunteers to take over for paid services, lowering reserve contributions, or disposing of assets.

Whether those are good or viable ideas for your association, I don't know.

LetA
(Nevada)

Posts:1429


09/22/2021 1:52 PM  
Since many municipalities have passed laws from the early 1990's to insist all new housing developments must be in an HOA. local governments are essentially putting the monkey on the backs of the HOA's.
Aside from police and fire protection, I see little to no difference in property tax collections by the county. HOA's are essentially quasi micro governments. One of the Largest expenses an HOA faces is Landscaping if you have large amounts of common area and the other large financial expense is D&O insurance. There is really no escaping HOA assessments or lowering them. Personally I am suspect of HOA's with very low assessments without looking at what the reserves look like. To answer the question, No I have not seen HOA assessments decrease per se, only after the Declarant relinquishes control to the owners, but that is only temporary, maybe one or two years max before assessments are raised. A good HOA BOD will look at their financial and not raise assessments for the next budget year, they will likely use that overage next year to keep the reserves healthy and above 91% funded.
KellyM3
(North Carolina)

Posts:1789


09/22/2021 3:22 PM  
I think Henry is largely exercising the correct strategy. Simply saving money as a strategy is not wise nor is lowering assessments unless you're fully funded for today's monthly bills and every future, expected capital project for the next 20 years.

Set aside the "feelings" about what's expensive and not and, at best, hold the line on monthly dues. Don't go backwards unless you can prove you're fully funded for today and about 20 years from now per your capital replacement schedule.

Shaking up vendors is also a good thing unless you're firing vendor simply for being under contract when you become the new president.
MelissaP1
(Alabama)

Posts:10534


09/22/2021 4:19 PM  
There are many hidden costs you are not seeing. Who collects these checks? Is the HOA insured? Is there utilities? How much is the lawncare? What about reserves in case of an emergency?

Just because you don't think your HOA is doing anything is most likely because they can't afford to do anything. Plus a HOA is a non-profit. It is to spend what it collects on it's expenses. So if lawncare cost 5K a year then the HOA must collect and spend 5K a year.

Now our HOA did indeed reduce it's assessments once. We went from $75 a month to $50. That is because we went to separate water meters and no longer paid for water. However, there was a special assessment of $500 to make that happen. It was a $20K bill from the water company to do it. Plus we had to make our roads "public" no private. Which then triggered a re-write of our documents. Which that cost another $2500 + to do.

So I would volunteer to see what need to do to make things happen in your HOA instead of taking it's funding away to do them.

Former HOA President
BenA2
(Texas)

Posts:1040


09/22/2021 4:49 PM  
We have never lowered our assessments but our CC&Rs restrict raising them enough to even keep up with the cost of living, effectively reducing our spending power each year.

In an ideal situation, the HOA would charge what is needed for the budget and to fund reserves and reduce the assessments if they have excess. Because the cost of living continues to rise most years, that would be unusual. The reality is that if your HOA were able to lower your assessments this year they would just have to raise them more next year or the year after. Prices may drop one year but they will always go back up.

They could cut fat but, my guess is, that many homeowners probably like the fat. All you can do is try to vote for directors who feel the way you do.
DouglasK1
(Florida)

Posts:1681


09/22/2021 4:56 PM  
My last association lowered assessments when the reserves were fully funded.

My daughter just bought a house in a neighborhood that used to have an HOA, but it was legally dissolved and the common areas deeded to the county (with the county's permission, of course).

Escaped former treasurer and director of a self managed association.
LoriM15
(Florida)

Posts:36


09/22/2021 5:33 PM  
Our HOA had a board for a few years that was dedicated to lowering the monthly assessment. You can always look at rebidding contracts and cutting expenses, so that's a good thing. However, it's not a good thing if you are spending down cash on hand in the bank every month and also spending down the reserves. Our HOA, unlike a condo association, is not required to have the reserves restricted, so they were able to touch the funds. Luckily they were voted out after the treasurer revealed that we were using reserve money every month to artificially lower the monthly fees. Spend now and pay later is not a good thing for an HOA.

You may feel like you get very little for your monthly fee. But as others have pointed out, there is liablity and D&O insurance, reserves for future replacement, management fees, audit fees, utilities, etc.

Does your HOA do a detailed budget each year so you can see where the money is going?
CathyA3
(Ohio)

Posts:2475


09/22/2021 6:14 PM  
If anything many HOA/COA budgets and assessments are too low since boards try to set them at some arbitrary number rather than at the true cost of necessary spending. Barbara summarized the kinds of things that can get cut (and the condo collapse in Surfside FL shows what can happen after many years of refusing to perform necessary maintenance).

What really happens when budgets are cut to the bone is that the association is living beyond its means. Deferred or neglected maintenance means that it will burn through the useful life of the physical structures at a faster rate, meaning that they will need to be replaced sooner which will involve major expenses (and likely a large special assessment or a loan since the association probably hasn't been funding their reserves properly either).

Even boards that try to budget accurately will have unexpected expenses that must be paid for. There is no Magic HOA Money Printing Machine - the money must come from assessments.
AdamL1
(Idaho)

Posts:117


09/22/2021 6:37 PM  
Posted By LoriM15 on 09/22/2021 5:33 PM

Does your HOA do a detailed budget each year so you can see where the money is going?




this is the crux of the problem. There's been no budget nor operating statement for years and years. I've been able to strong-arm the PMC to print out a current expense report, showing potentially a lot of "fat" in many of the line items, like $35k going to maintaining a small amount of greenspace, $12k going to "other maintenance" with no explanation, $9k going to some account called "other"....as well as a well funded Reserve account already (the HOA has been around since the 90's). ... just seems like we're collecting $100k/yr in assessments and then the money is just disappearing....
LoriM15
(Florida)

Posts:36


09/23/2021 6:55 AM  
Posted By AdamL1 on 09/22/2021 6:37 PM
Posted By LoriM15 on 09/22/2021 5:33 PM

Does your HOA do a detailed budget each year so you can see where the money is going?




this is the crux of the problem. There's been no budget nor operating statement for years and years. I've been able to strong-arm the PMC to print out a current expense report, showing potentially a lot of "fat" in many of the line items, like $35k going to maintaining a small amount of greenspace, $12k going to "other maintenance" with no explanation, $9k going to some account called "other"....as well as a well funded Reserve account already (the HOA has been around since the 90's). ... just seems like we're collecting $100k/yr in assessments and then the money is just disappearing....




Does your community have any amenities? It takes a surprising amount of money to maintain those. Is your neighborhood being properly maintained? Are things running smoothly?

My point is that $100k is not a lot of money to maintain a community, especially one where you have to pay a property manager. So unless things look bad or aren't maintained, you are implying that the money is "disappearing". And how do you know the reserve account is well-funded? Have you seen a reserve study showing how much replacement costs are?

The only way you are going to find out where that money is going is if someone (board member, property manager) is willing to give you a better breakdown of the yearly expenses.

I'm not saying you are wrong. Many HOAs are poorly managed. But the bottom line is are you trying to save a few bucks every year from your HOA fees or are you trying to say that the money is being mishandled?
CathyA3
(Ohio)

Posts:2475


09/23/2021 7:17 AM  
I'm in a smaller condo community, 74 units with no amenities. Our annual budget is just under $200,000.

Of this, $55,000 goes to reserves, and the rest is current operating costs. Our community manager charges just under $11,000 per year, or about $147 per unit. Our single largest expense is water and sewer (around $42,000), followed by landscaping and snow removal ($32,000) and insurance ($19,500).

The landscaping budget is very lean since our current board is trying to stretch our dollars with volunteers (that's a rant for another time).

One thing that will vary by community, and which seldom gets discussed, is bad debt expense. Putting it bluntly, a certain percentage of homeowners will not pay their assessments, and the association may or may not be able to recoup these lost dollars. They can add up to a significant chunk of change, depending on a community's demographics and the state of the larger economy.

As Melissa said, there are many HOA expenses that homeowners don't see: legal, accounting (including tax prep and audit), electric (street lights), postage/printing/supplies (correspondence, welcome packet, coupon books, materials for the annual meeting) and the cost of doing periodic reserve studies. Some HOAs also maintain websites, which can be bare bones or more involved and the price will vary.

HOAs are a business, and there are costs associated with keeping the business running - they aren't optional, but they can be invisible to people who've never been involved in keeping a business going.

This is not to say that the OP's board is doing a good job. Rolling several expense categories into a large bucket can make it harder to track and manage them. Yes, it's possible that there is some "fat" in there, but it's also possible that the board has no experience with budgeting and are fumbling around.
MichaelH34
(North Carolina)

Posts:43


10/07/2021 4:21 PM  
"there are many HOA expenses that homeowners don't see"

Um, what expenses aren't in regular reports from the treasurer?

I understand there will always be owners that ignore the reports but IMO those expenses should never be "invisible."
JohnT38
(South Carolina)

Posts:768


10/07/2021 4:28 PM  
Posted By MichaelH34 on 10/07/2021 4:21 PM
"there are many HOA expenses that homeowners don't see"

Um, what expenses aren't in regular reports from the treasurer?

I understand there will always be owners that ignore the reports but IMO those expenses should never be "invisible."




I think what the person meant is that most homeowners don't realize how money is spent on things that they don't pay attention to. These same people, at least in my community, are the first one's to complain and the last ones to actually look at the budget/expenses. For example, we spent a ton of money on flood issues that were impacting some condo owners. Another example is the money we spent repairing neglected 40 year old siding. The list goes on and on. The only thing most people here pay attention to is landscape and yard work.
MelissaP1
(Alabama)

Posts:10534


10/08/2021 4:15 AM  
When it is mentioned expenses "don't see" it's not literal. It is reported but no one looks that closely at the price of stamps. Who cares when you see $1000 being paid out for some other expense? Stamps still cost money and come out of the same budget. Has to be factored in.

It's like when you buy a car. You see the car sales price and the estimated gas mileage. Do you actually "See" the expense of car insurance? Gas fill-ups? Oil Changes? Tire rotations? You budget in your car payments but do you budget in the small stuff?

The HOA's expenses are listed. It worries me when people "budget" and toss out consideration of the smaller routine operational expenses. It's no joke one has to factor in the price of stamps. It's illegal to put anything in a mailbox without a stamp on it. How then does your HOA send out notifications in the mail without that money in the budget?

Former HOA President
SheliaH
(Indiana)

Posts:4239


10/08/2021 5:19 AM  
Good comments from everyone.

To say assessments are "too high" is subjective - what's too much to you may be just fine to someone else, so when I served as board treasurer, I never make recommendations based on that. Instead, I look at the quality of the work provided by our vendors - if there was someone who could bring the same level of services for a more competitive price, we'd consider them, perhaps giving them a one-year contract to see how things went. Reserves are also a factor - as Cathy noted, a lot of HOAs (including mine) are underfunded. You get the reserve study and try to find as close as possible to the recommendations - and pray nothing crazy like a fire or a tornado comes through to throw the whole damned thing out of whack.

You and a lot of other homeowners tend to forget about inflation as well. What a dollar bought five years ago is likely to cost more today, and some things cost more than others. Take postage - it's going up yet again this month. Your documents may require some things to be sent via snail mail so you have to think about that. The cost of materials used for maintenance and repairs continues to go up, along with labor.

Barbara noted you could reduce or drop services or defer maintenance. Or skip funding reserves - I think Florida law gave HOAs that option if the homeowners approved it. Surfside and Hurricane Ida should demonstrate that might not be a good idea in the long run. You may not think you'll be in that community 10 years from now and don't have to care about this, but life (and shit) happen when you least expect it.

Delinquencies also play a factor. I can testify that if you have too many, you end up spending more money chasing that - money that could be used for maintenance. The bills continue to go up and those who do pay end up indirectly subsidizing those who don't. That's not fair and that's why I take a dim view of deadbeats. Note I'm referring to homeowners who refuse to pay, not the ones who've had financial hardship like job loss. As long as they're honest and come to the board, we would work with them.

LetA
(Nevada)

Posts:1429


10/08/2021 9:07 AM  
Good Response Sheila. We just ate a delinquency. We only recouped nine months of arrears. We were stymied last year from any lawful actions because of CV restrictions.

I would stop short of calling them hidden cost. Just the cost of doing business.
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