Um, you mentioned them in your list of expenses.
Anyway, good luck squeezing water out of lemons. I served my fair share on our HOA board, and it’s a thankless job.
Details help in cases like this 
But they do raise a big question:
You have a budget of ~$185,000, and 70 units, implying that yearly dues are ~$2650.
HOLY. SHIT. REALLY?
My dues are $800 a year, and that’s the most expensive HOA dues I’ve ever had, and it’s somewhat higher than our surrounding neighborhoods. What the hell are you spending all that money on? We have two pools, 4 tennis courts, two lakes, and a playground plus the clubhouse, and our dues are less than 1/3 what yours are. Granted, we have 350 houses, so it’s spread out more, but we also have many more amenities (and for what we pay, people have been getting antsy about not getting their money’s worth. We’re meeting to discuss enlarging the playground this weekend).
The only things I can think of offhand is needing road maintenance (which you may be able to deed the road back to the county and let them maintain it, unless you’re a gated community), but you mention the water bill is the highest. Is that the water bill for everyone in neighborhood? Like, not metered by house?
EDIT: What exactly do you think are ‘low’ reserves?
Deeding the road back to the city is a non-starter. We have 1 end of the road blocked off. If we gave it back to the city, they would open it back up to through traffic and our residents just wouldn’t stand for that.
As I mentioned elsewhere, yes, the association pays for the water for all residents. There is no individual water metering per unit. About $30,000 per year for water by 66 units is about $454 per unit per year, or ~$38 per month per unit.
We currently have about $95,000 in reserves. Fully funded reserves would be about $320,000, roughly 30% of what we should have.
That’s the difference. We’re all townhomes.
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You all are responsible for your yard maintenance, I assume? Everything outside of the buildings and patios in our complex is “common area” that must be maintained by the association.
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Your insurance costs may be much lower than ours because so much more of your land is private property, not common area.
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You may live in a lower-cost area than us. We are in a relatively expensive part of Arizona.
I think they would get over it, speaking as a guy that lives on a road that’s a cut-through, but we have plenty of bitching in neighborhood about that too. It would be interesting to lay out the road maintenance cost vs deeding back and see what everyone thinks though.
Even if you take out water (your biggest expense and 20% of your budget), you still have dues of $2200/year, which seems like a lot. I suppose if trash/electric/gas/etc is shared and unmetered, that will probably go down still, but the dues still seem high.
Fair enough
While true percentage-wise (most of our acreage will be private not communal), I think in communal acreage it can’t be that different. Unless you’re paying the homeowners insurance for everybody too.
I live in North Atlanta, which has similar COL to both Phoenix and Tucson, so I don’t think that’s it.
Overall I"m not sure I can offer much more advice because my situation is much different. But I think the key here will be to break out a budget, divided up by homeowner and service, so you can go to people and say “your dues pay $40 for water/month, $30 for trash/month, etc” and see if all those rates are similar to market rates for other townhomes (and you should be getting a discount on some of those for bulk rates, like trash).
You still haven’t mentioned why your reserves got so low in the first place, but if 30% of your budget is going to reserves, and the reason it’s low is because of maintenance that won’t happen for a while, you may actually be just fine. If you just replaced the roof for the entire complex, well of course your reserves will be low, you just used them for their exact purpose.
I did not read through the entire thread, so forgive me if I repeat anything that has already been said. I am on the board of one of the largest HOA’s in Maryland. We have almost 5000 parcels, 4200 of which have houses on them. I saw your ideas upthread, and I wanted to add a couple of things that we do. Do you charge renters a fee to use the amenities? Our by-laws state that the property owner pays a fee to use the amenities, but that does not cover renters. If a renter wants to use our amenities, they pay extra. Because we have so many properties, we can afford to have a small special assessment, because by spreading it over that many properties it can raise a lot of money quickly. I see how that would not work for you. This may be unpopular, but we raise our dues every year to account for inflation. We use the CPI for Washington DC, the nearest city. It is easy to justify this increase. As costs go up, dues go up. We also instituted an aggressive debt collection policy. “Normal” delinquency rates have been near 20%, but we have gotten them under 12%, and they continue to go down. Hope this helps, and I will try to think of other things.
Thanks for your reply. Our CC&Rs prohibit us from treating renters different than owners. All of the rights and responsibilities about usage are specified to “residents”, which are defined as owners or renters.
Raising the dues to account for inflation as per the CPI is a good idea. We might be able to swing that.
As for delinquencies, we really don’t have any. Only 1 unit fell a little behind, but they are making it up.
Thanks,
J.
I feel for you. My father was stupid enough to join the HOA board, and the need of residents - especially those on a fixed income - to keep their fees down, while simultaneously wanting to retain the same level of service - is maddening. And they moved into one of retirees - and the homes are all about 20 years old. Which means that the old pre-boomers who would fix their own sprinkler system when the HOA started - or put in mailboxes, plant their own trees, form gardening clubs to take care of the gardens - they’ve all gotten too old to do it - but haven’t yet moved out. The ones that have are being replaced by boomers who say “I’m not fixing a sprinkler, pay someone, that’s why I pay dues.”
I like the fee when a unit is sold or rented - if you can do that legally - ideally though you’d want to set it aside and not put it into the regular budget - some years a lot of units will turn over, and you don’t want to end up short the year no one moves.
It may be worthwhile to figure out how many residents you have who are renters and how many are owners - if you are majority owner occupied, your owners might be up for changing the by laws to allow more fees to renters - or a dues surchange for renting your unit. If your association is like my parents, a lot of the owners who rent turn out to be the kids of the original owners who see it as a cash generator - the owners who live there would rather see the kids of their former neighbors charge more for rent, and have their own dues remain stable. In a lot of areas rents have gone up a lot (they have around here), and if your dues haven’t, someone is pocketing the margin or your renters are getting a bargain.
I have heard this suggestion a few times and I wonder how it passes the ‘legal’ hurdle. I imagine if I was a landlord and the HOA decided they were going to charge me when renters moved in or out, my response would include directions to the nearest lake they could jump in, hopefully with some sand at the bottom they could pound. What do you guys have in your covenants that let you treat some lots differently based on who the occupant is?!
I was thinking the opposite. In my area, $400/month is about average, $2xx/month would be very low, and $800/year is unheard of and would make me think that you must have special assessments every other month in order to run the place.
To the OP, again I think infographs are your friend. A nice pie chart explaining where the money goes, a chart showing how much comes in v. how much goes out, etc. could be useful in explaining why you need more money to keep the place up. Make the choice very clear that either dues go up or you open up the road/leave people on their own for garbage/etc.
$800 a year? Wow. Looking online, the average HOA fee in the US right now is $331/month. We pay $500/mo for our condo.
Well I"ll be damned. My last HOA fee was $350 a year, although they raised it to $400/year the year I moved out. (I moved unrelated to the HOA). I thought that price was quite a bit overboard since we had neither swim nor tennis.
$500/month, yeesh.
Depending on the age of the HOA, the dues may well have been set artificially low to begin with; this is common with newer developments.
You presumably have to provide a budget every year, showing where the money is going. Obviously renegotiating contracts for services is one way to cut outflow, but one line item in the budget should absolutely be to build up reserves (and another line item should reflect expected interest income on those reserves). It’s not at all unreasonable for the monthly dues to go up a few dollars every year.
Look around to get an idea of what is considered a reasonable reserve amount. Ideally that would help reduce the need for special assessments: "500,000 to repave all the roads? Well, luckily we have 300,000 in reserve. We want to keep a minimum of 100,000 for other stuff, so we can spend 200,000 and assess for the other 200,000. "
Ooh - another way to raise a few dollars: Are there fees for bringing guests to the pool? Our HOA gives each household a few free passes every year, then after that it’s 2-3 bucks per guest or thereabouts. Similarly for other facilities (we have a fitness center).
Re getting rid of the pool: Yes, they’re expensive - but people buy into associations specifically because of things like that.
Price comparison: We live in a large subdivision in the DC area. Our dues are about 100 a month (for a detached house). That includes maintenance of private roads, but not of our individual property. It includes trash, snow, the community centers (including 2 pools). My in-lkaws live in a condo in Florida where the dues are 400 a month. That includes building maintenance as well as similar common amenities such as a local bus and the pools. My WAG is that condo fees are generally more than townhouse / detached house fees because of the need to maintain common structures, and of course they go up if the neighborhood has any kind of common facilities.s A friend who lives near me in a condo building is easily paying that much for hers.
That’s a bit high for around here, too, I think $200-$300 is more typical for a normal condo around here, but the high HOA is reflected in the property price (about $100K for a university area one-bedroom condo in Chicago.) As a rental, it’s fine, though. Apparently, if you get into the real fancy shmancy condos, you can hit $10K/month in HOA fees. Cite. Wow.
I have held various condo board offices including Treasurer. My thoughts.
This. 98+% of ours are the normal monthly or quarterly owner/member fees. Special assessments are rare but averaged over the long term are probably equal to 1% a year. Stuff like parking charges, clubhouse rentals, etc. are break-even at best vs the direct cost of provisioning the service.
And this.
But, just like homesteaded property taxes, you can get a bunch of long time residents who paid $100/year back in 1970 and don’t think they should pay more than about $150/yr now even though inflation since then means they ought to be paying $647 to have the same buying power as that $100 did. If your real problem is member’s unrealistic expectations for dues level you need to fix that, not hold a bake sale.
This. Your dues and costs must match the numbers for similar facilities in your area and your socioeconomic class. Places for working class retirees and places for Wall Street’s finest playboys have different costs and different expectations. You cannot have champagne tastes and a beer budget. Nor can you have beer tastes and a miser’s or homeless person’s budget.
The usual problem is the numbers, especially in a large complex, are so large and unfamiliar to residents’ daily lives that their brain shuts down. All they see is “One million dollars! That’s outrageous!!!” Even if it’s actually just $15/year/unit for whatever service.
So instead prepare a budget explanation on a per-household basis: You pay $30/mo for water, including both your in-home water use AND watering all the common area gardening. You pay $15/mo for gardening all the common areas. You pay $100/yr on property taxes on the common areas … etc., for all the categories in the budget.
Also, it’s useful to express the budget in two sections: the ones where you have essentialy zero choice on what to buy and how much it costs, and the other section which is the stuff you can at least influence if not fully control.
You don’t control the price of water. And the owners, not you, control how much they use. You don’t control the taxes or insurance. Not even a little bit. The proverbial *They *does that.
What’s left is the sorta optional stuff. Show the residents how much each item costs and tell them things like:[ul][li]Our pool service charges $100/visit which is the going rate in this county for our large pools. We can pay that to keep the pools nice or or we can let the pools go to hell and destroy your property values. Which do you prefer? [/li][li]Pot holes cost $100 each to repair and that’s the going rate in this county. We can pay that for each of the 100 new pot holes in our 15 miles of road each year or we can let the roads fall apart and destroy your property values. Which do you prefer?[/ul]etc.[/li]
Assuming of course you’re actually paying reasonable prices for services and are buying reasonable amounts and types of service. Over the years a lot of lazy and corrupt boards have signed bad deals that later boards just keep renewing out of sloth or ignorance. If that’s your board, fix it ASAP. Which is probably no more than one contractor change per month, if that. Due diligence to change a longstanding supplier is not a fast process. No matter how much impatient braying you get from the peanut gallery.
OTOH, in some cases well-meaning boards have been non-confrontational versus small cadres of aggressive owners who are willing to let the place fall apart because they fully intend to die before it matters. Not their problem they think. If this goes on for 10 or 15 years of negligible dues increases your dues can easily be 50% behind your legit costs for minimum upkeep to status quo condition.
If it took 10 years to dig this hole plan to spend another 10 years digging out. Dues have to start going up every year by about double the rate of inflation. First you’re just spending the extra on emergency repairs with maybe a bit left over to begin to address long deferred maintenance. Eventually you catch up on long deferred maintenance and you’re getting closer to even and can start to put the first few pennies towards reserves. Finally you get to a place where funding is adequate AND the dues expectations of the membership have been reset to something close to current economic reality.
Board members need to lead. That means actively dispelling wishful or lazy or fantastical thinking in the membership, actively combatting the disinformation spread by the jerks and whiners, and blanketing everything with calm and facts and hard truths plainly stated in simple words. Over and over and over and over. It’s a never-ending task.
If this sounds too difficult, the first alternative is to quit the board. But that’s really just sticking your head in the sand. The actual mature alternative is to sell your place and move. Some complexes are just too sick to fix. The combo of toxic internal politics, a fiscal disaster, and deteriorating facilities full of rapidly aging elderly or widespread BKs means you’ve got a mini Detroit on your hands. It’s doomed. Unlike the real Detroit that Michigan is stuck with, you have options; you don’t *have *to ride it in. Sell and move before your unit’s value takes another gigantic hit.
For non-HOA/COA folks who’re reading this and reacting in horror, wondering why anyone would ever voluntarily live in a HOA / COA, understand that 100% of what I just described is exactly what politics and budgeting is like in every town, city, and county in the land. Any of those entities can also get into a death spiral where the only choice is taking your loss and moving away before the loss gets bigger. HOA/COA don’t make this problem worse. If anything they make it better since they’re closer to the voters and both the voters and the problems tend to be more homogenous than you find in a city or county.
Wow. A lot of posts came in ahead of mine while I was away then typing. Sorry to repeat so many good ideas already said by others.
Based on how my condo’s HOA operated, the best way to raise your reserves is to neglect essential maintenance for years.
More seriously, what is the division of water between domestic use and grounds use? If you’re supporting lush greenery in a desert, it might be possible to reduce use through landscaping changes.
If domestic water use is large, then mandating some conservation measures may be necessary. Can you look at water use by building? If there is a building which is an outlier in usage, it would be worth specific investigation to find out what is happening.
You can probably talk to your water supplier about things you can do to decrease usage.
Also, it’s worth reviewing any contracted services the HOA pays for. You may be happy with your management company, but if somebody else can provide a similar service for 75% of the cost, that is something to take to a negotiation.
It also might be useful to limit services. My HOA dropped having a staffed office, which only seemed to provide a place for packages to be delivered. All the other stuff they did, like field maintenance requests, handle accounting, etc, are still done, but by a professional management company, who doesn’t have to (nepotistically) pay a full time salary to somebody to spend most of they day keeping a chair warm, because the complex didn’t need a full time employee to handle occasionally answering the phone.
We can’t tell what is personal and what is community water use. We have 5 meters for 66 units, with all of the meters serving about the same number of units, and with equivalent usage. We ARE in the desert, but all landscaping is xeriscaped using drip irrigation.
We have a management company that handles accounting and maintenance, etc. No staffed office. Combined management fees are about 18K.
It sounds like you are probably running pretty efficiently. The only choice may be to raise dues . Perhaps $10/month for three years or until the reserve hits a certain level, and then reduce them again.
I don’t know how expensive or practical it is to modify your water system to add individual meters to units. My HOA used to do shared gas billing as ($common/#total units) + ($building/#building units) because they had no way of getting finer usage than whole building. Building gas included domestic hot water (very low) and hot water for heating (high in the winter).
They installed flow meters on the hot water heating to each unit to get a measure of each unit’s gas use. Most people saw a drop in their gas cost, and a few saw a big increase. Of course the people who saw an increase had been making everybody else pay to keep their homes 80F in the winter, or whatever.
I recall it was a one time fee of $100-300 to get the flow meter installed, and they use a radio to report usage. It was also not a big deal to drain the pipes for easy installation in the summer when the heat is turned off, so I imagine it will be more expensive on a regular water line, which can’t be off for very long.
This^^. The demand for a “free” service will be near infinite for some people.
For the HOA s a whole, the way to improve the budget balance is to identify the expenses that are big enough to move the total needle and think hard on how they might be reduced.
Likewise get real on your charges. As a point of comparison … Our mid-rise condo facility has ~150 units in 2 buildings. We have no roads, but we do have parking lots, 1 pool, 1 gym, 1 clubhouse and boat docks. The membership pays ~$600 per month per unit on average in maintenance fees to run the place. We have 2 full time janitors/handymen and no other direct labor. At that fee level we keep up with all maintenance and drip feed money into reserves to pay for the big but long-life items like periodic roof replacement, parking lot resurface, etc.
In short: first find and fix any waste. That provides the political basis to say “The problem now is simply that you’re all trying make the association live beyond its means. Our dues must match our real costs or your investment here will be destroyed as the place rots into the ground.” Then start ramping dues at 2 or 3x inflation every year until you’re running well in the black. Plan to endure a lot of screaming from the membership.
Good luck.