- by Alana Ashby
● Keeping up with costs. A community’s operating budget needs to keep up with inflation and rising costs for the services and amenities provided by those dues.
Incrementally raising dues can help ensure there is sufficient flow of funds into the operating budget in anticipation of rising costs. Though associations save money in a separate reserve account, legally those funds can be used only for planned projects, not to cover operating budget shortfalls.
Maintaining artificially low dues might appease residents in the short-term but will catch up with the association. Board might be forced to hit homeowners with a large increase all at once, evaporating any goodwill that was built up while dues were kept low.
● Planning ahead. Reserve funds are set aside and used for proposed large-scale maintenance, replacements, repairs, and renovations or upgrades to enhance the appeal, value, and livability of the community. Budgeting for reserves requires foresight to realize that price estimates for a major project today will probably not be the same next month or next year.
Incrementally raising dues to allocate adequate contributions to the reserve account provides boards the fiscal maneuverability to turn expectations into realities in due time without the financial burden on homeowners that can come from imposing a special assessment.
● Striking the right balance. Homebuyers today are more knowledgeable about association finances than ever before. If a potential homebuyer learns of an association’s habit to levy special assessments, that could detract the homebuyer from wanting to join that community.
Board members have the task of striking a balance between containing costs to help maintain steady assessments and making investments to enhance the community. Association budgets are at their healthiest when associations can continue investing in their amenities and assets, including landscaping and capital projects, that positively impact property values and resident lifestyle.
Strategic investments such as these can only be achieved by boards that regularly and accurately evaluate the state of their association’s finances, including whether the level of homeowner dues is adequate to achieve short-term and long-term community objectives.
● Communicate the decision. Effectively communicating about raising dues can make the conversation significantly less painful. Transparency is critical when coming up with a realistic budget and conveying the necessity of an increase. Tangible community benefits must be clearly illustrated and supported with facts.
The Community Manager should share their plans and decisions with homeowners through all available communication channels frequently and with plenty of time to have conversations with homeowners.
When boards raise dues responsibly, HOAs can strengthen their financial standing and avoid alternatives that could have a greater financial impact on homeowners.
Contemplating raising dues is a fiduciary responsibility of the board that homeowners can accept with proper communication and understanding of the advantages to their community in the long run.
Alana Ashby, CMCA and owner of AMI, helped to establish and served as a Board Member for Community Associations Institute (CAI) Idaho Chapter. Alana has extensive experience in all aspects of financial management, real estate development and management, as well as negotiation.
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