With a masterful plan in place, based on a broad community consensus, we will have the foundation for consistent, supportable improvement. The next question is, “How do we pay for it?”
Let’s take a quick look at our current financial policies to see if they actually help or hinder our ability to properly maintain our amenities and fund future improvements.
Following is a list of projects currently under consideration:
- Raze and replace the Clubhouse and related facilities – $5 million to $6 million.
- Golf course updates / replace irrigation systems – $1.5 to $2.0 million.
- Meadow Park upgrades – $363,000.
- Build a home for Pickleball – $91,000.
- Upgrade the Tennis clubhouse. – $75,000.
- Exercise equipment for the Community Center – $20,000.
- Various equipment additions / park improvements – $56,000.
This $8 million to $9 million in capital improvements must be funded from two primary sources: capital improvement funds, which are part of our regular assessment, and special assessments. C.I. funding is limited to 1.5% of the prior year’s gross expense – about $111,000 this year – and must be spent by year’s end. Consequently, it may not be used as a long-term development fund and use it or lose it pressures sometimes lead to expenditures on low-priority projects that add little value.
Special assessments – $370,000 this year – must be allocated to specific approved improvements and are limited to 5% of the gross budgeted expenses unless the members approve a greater amount. With $481,000 normally available from C.I. and S/A funds, 18+ years would be required to fund the current improvement wish list.
But wait a minute: What about our reserves? Can’t they be used to fund some of these renovations or improvements?
The short answer is: “very little.” For example, all new amenities or improvements to existing amenities that increase replacement cost through the addition or enhancement of design or use features may not be funded by replacement reserves. And, by law, reserves may be spent only on renovations for which the fund was established.
These restrictions create a problem because Association RULE R-4.10.30 specifically excludes the following common elements from reserve funding:
- The dam.
- The golf course and related greenbelts.
- All building foundations, walls, plumbing and electrical, and structural building elements.
- The swimming pool shell.
- Public works components related to roads, walkways, ditches, swales.
That means we have not saved enough money to renovate or replace the Clubhouse structure and that our Board will have to ask members to approve either large, multi-year special assessments or loans to accomplish repairs and upgrades to these amenities. Whether the membership will approve funding in either case is an unanswered question. That’s one of the big risks that result from inadequate reserves.
In an effort to define and quantify the need to update aging amenities, the Board hired a replacement reserve specialist to assess their condition. The news was not good. As a result, the Board then hired MWA Architecture and Engineering to conduct a follow-up structural assessment of the Clubhouse. The disturbing results from these two reports make clear that our Clubhouse is nearing the end of its useful life and should be renovated or replaced to improve safety, accessibility, and efficiency.
So, given these substantial needs, why do our financial policies exclude major portions of our valuable amenities from reserve funding? And why must we continue to live with the wasteful and ineffective 1.5% C.I. funding restrictions established by the developer more than 40 years ago? Wouldn’t it really be better to step back from these and other dated financial policies and adopt funding mechanisms that enable us to implement improvements in a way that reflects the priorities and capabilities of our community?
As with Master Plan projects and priorities, these questions should be answered through a process that molds consensus among our members. This will require commitment, patience, and an understanding that the consensus process takes more time than Board-centered decision making. The outcome, however, will almost always be more favorable since consensus empowers the Board to move confidently forward on planned improvements with an assurance that the community will support them.
If you are one who no longer participates in community affairs, I hope you will ask yourself, “Would I be willing to become part of the change process if I thought it would really make a difference?”
If so, stay tuned for the next article in this series, “You Can Make a Difference.”