During 2015, the Board employed Association Reserves, a company that since 1986 has done over 30,000 Reserve studies, to fully assess all our common area assets, their maintenance history to date, and the projected costs to maintain or replace over the next 30 years. This study included the Board members and our CPA providing all the historical data and Board members accompanying Association Reserves representatives during onsite visits.
The primary goal of having the Reserve Study was to use the experience of 30,000 such studies to have better financial planning for the foreseeable future and to avoid sudden large assessments. Once an HOA resorts to assessments, that is a giant red flag for institutions dealing in mortgages and it lowers home values by reducing the number of potential buyers. Also large assessments are a hardship to residents on fixed incomes and the dues are a fairer method of sharing the costs among the residents over time.
The Comprehensive Reserve Study was completed at the end of August 2015 and is available on the website for those who would like to read it. Among the important conclusions that the SMVEHOA Board must deal with:
- The Association reserves are only 24% of the recommended current reserve balance.
- We must complete replacing our 3.2 miles of roads within the next 11 years and the total projected cost of replacing and maintaining our roads over that time is $897,250.00. This dues raise allows for the replacement and maintenance to be done in sections as the roads require.
It was immediately evident to the Board that we have been too conservative in our shorter range estimates of what the dues should be to cover the long range expenses.
On Monday October 19, 2015 the SMVE HOA Board of Directors voted unanimously to raise the Association annual dues by $300.00, effective on January 1, 2016. Additionally the motion eliminated the $50 rebate for paying the entire years dues in January. The goal is to immediately begin to remedy both of the findings listed above.
To date, SMVE HOA has always maintained a positive balance in our Capital Reserve Fund for unexpected occurrences and known future needs. This fund is expected to be $214,039 by December 31, 2015.
If you divide the $897,250 by 10, the Board must raise an additional $89,725/year for ten years to have the roads fully paid for. Divide $89,725 by 238 (the number of homes in SMVE) and the answer is $377/home/year must be added to the Capital Reserve Fund to pay for the roads.
Since this increase will be saved in interest bearing accounts to eventually be used to replace and maintain our roads, this means that there should not be a need for future dues increases to pay for the roads for quite a while. Since the Board is currently completing a multi-year major overhaul of the common elements (necessary after being installed 25-30 years ago) it may also be possible to begin to raise our “Ready Reserve” to a “healthier” level with savings from the completion of the recent large projects.
While none of us like to see the dues increased, if we are to maintain the quality our community infrastructure, and avoid the need to ever have assessments, the dues are the proper way to accomplish this. With attractive and up-to-date infrastructure and sound Association financing, we continue working to keep up our home values.
by Bill Page, President, SMVE HOA
Related articles: 2016 Dues — Q & A, 2015 Reserve Study