Our great neighborhood founded in 1986 is over 30 years old. This means most of its most expensive community-owned property, unless recently replaced or upgraded, is showing some age.
For reasons beyond the scope of this analysis, the annual dues charged to neighbors to maintain our neighborhood remained relatively static prior to 2013. In fact, the 4 or 5 increases over approximately 25 years did not keep pace with the rate of inflation.
Still costs went up. Increasing expenses to operate and maintain our community resulted in less and less cash to reserve (save) for future repair/replace costs as property aged. See chart below—Per Household Financial Analysis which shares some typical results on a per household basis from 2013 thru 2015.
While a more exact number is under review, the current market value (replacement cost) of our community-owned property will likely fall between $350,000 to $500,000. As recently as 2015, there was approximately $10,000 in cash reserves to deal with our aging community assets.
A Change in Approach
Beginning in late 2015, the board began to get a sense of the risk to the neighborhood of being under-reserved. So began a series of steps to address the issue:
- Discussions opened up with some board members and concerned neighbors about the lack of savings. These were not easy conversations at times.
- The board agreed to form a 5-Year Planning Committee composed of 5 Bridge Pointe neighbors. Over several months the committee developed a rudimentary plan for dealing with easily predictable asset repair/replace decisions. The plan included 5 years of 15% dues increases to meet both impending repair/replace decisions and add significantly to reserves. No doubt accomplishing both (repair/replace and building reserves) creates some financial pressure for all but it is commonly believed that steady and small dues increases are preferable to emergency assessments to deal with an inadequate financial plan.
- In 2017, board members felt that an outside professional review of the Bridge Pointe 5-Year Plan would make sense. A reserve specializing company was retained and feedback was encouraging but generally pointed the board in the direction of a much more detailed plan: A 30-year plan that ties each specific asset’s usable life to an annual reserving practice that funds the asset’s replacement when the eventuality is at hand. For example, if the pool pump costs $3000 and it is believed that it will last 10 years then each year, we should be reserving $300+ to be prepared for replacement and some repairs along the way. The board did not stay with the recommendation of the 5-Year Plan and opted for an 8% dues increase in 2017 taking dues from $370 to $400 (instead of what the 5-Year plan suggested—15% or $426). Of course, it is a significant positive that our reserve account could be as high as $35,000 by December 31, 2018.
- The decision was made earlier this year (2018) to retain another firm to create the 30-year plan. Several proposals are under consideration.
Which ever company is selected, they will send a representative to Bridge Pointe to walk and drive our neighborhood in order to create a detailed asset listing. An age for each asset will be established as well as a predicted life cycle and repair needs until replacement. From that point multiple reports will be created that prepare us to discuss funding of all of the plan’s recommendations.
It is expected that we would be ready to share and discuss this new 30-year plan in late July or early August.