President Blog v.7 - Professional HOA Management

Kingsgate!

Now that Julyuarary is nearly over, we can get to trying to absorb as much vitamin D as possible between now and the end of September!

Changes are ahead for Kingsgate 3&4. In February, at the annual membership meeting I mentioned that I felt strongly about our community having a comprehensive plan for our future. The Board had a reserve study done, which is intended to indicate how much money we need in savings to be able to support future capital improvements and to sustain our facilities. This number is not trivial. There are differing opinions on the percentage of funding required to absorb capital costs, and several methods by which that funding can be secured. That conversation is for another day, however.

The result of our reserve study left several Board members concerned that while our facilities have been adequately maintained, many of them are in need of material upgrades and/or overhauls that have not been done since the community’s inception in the late 1960s. Generally, some members Board were further concerned about the prospect of having an all-volunteer Board, that’s members have busy families, jobs, and other commitments attempt to navigate planning and execution of large-scale capital upgrades in the park and common areas. This kind of planning and project execution requires professional assistance.

I agreed with this assessment and personally believe that the right professional project management would ensure for the most efficient use of the community’s resources. Early in the year, I began to do some cursory research on this type of project management service and realized that this is something that professional HOA management companies offer, in addition to financial or full-service management. Further investigation into HOA management companies gave me the understanding that nearly all large and medium sized HOAs (Kingsgate being an exception) utilize professional community management services. I have to be honest, I did not even know that professional HOA management was a thing until I began this process in February and while I can’t say for certain, I’m pretty sure a large portion of the Board didn’t know this either.

I brought the idea of professional HOA management for Kingsgate 3 & 4 back to the Board and in the May, 2020 meeting the Board voted unanimously to authorize an Exploratory Committee to study professional HOA management. Since that time, the Committee chaired by Chris Dwyer and staffed by myself, Derek Tucci, and Chris Adams has been hard at work evaluating professional HOA management. To date, the Committee has interviewed (10) separate HOA management companies, received proposals from (8) companies, invited (6) companies to participate in an RFP, and is now down-selecting (3) companies to give presentations to the complete Board. Following these presentations that Board will vote in the August 18, 2020 meeting to select one of these firms for financial management, full-management, or to continue without the assistance of a professional HOA management company.

Before this vote, the Board needs your feedback! We will be hosting a series of virtual Town Halls via WebEx the week of August 3rd to explain the details behind this concept to you and solicit your feedback. We want to understand your questions and comments. Please go to the website and comment on this post so we can gather as much feedback as possible. Talking directly to a Board member or sending an email to KG34.Board@gmail.com is ok, but commenting on the website works even better.

Please see below for a schedule of events, FAQ’s, and a topical summary of HOA management.

Best,

Mike

Professional HOA Management Topical Summary

COST AND ECONOMICS: The community’s bookkeeper has recently announced their resignation. Graciously, they have agreed to stay with us until October 1st so we can find a replacement. Professional management companies provide full bookkeeping as part of their services. This can be part of a “full-management” contract or part of a “financial only” contract. Currently the Board pays our Bookkeeper $1,330 monthly. Financial management from a HOA management firm has been quoted to the Board for between $800 and $1500 monthly. In addition to the services we currently get from our bookkeeper, a management company includes services we do not get today or non-value added things that our Treasurer does such as financial statement creation, online dues payment, matching receipts, etc. In addition to likely being able to replace our bookkeeping for an amount comparable to what we spend today, full management services have been quoted to the Board for between $2300 and $3000 monthly. This goes beyond financial help and includes services that I believe would allow the Board to provide much better service to the community. Additionally, I think that we can do this without raising dues since a professional HOA management company should help us avoid certain costs. See below.

BOARD RESPONSIBILITY: The Board needs to be strategic in nature, setting the tone for the refurbishment of our assets and common areas while establishing a plan to keep Kingsgate 3 & 4 viable in the future. Unfortunately, the Board is completely task-saturated solving the immediate problems in our community and maintaining what we have. Often our Board members spend tremendous amounts of time searching for bids from vendors, researching HOA laws, and performing other non-value-added tasks. Our neighborhood suffers because of this model. Boards with great intentions, limited time, and moderate motivation is acceptable, but it is not the best we can do. Allowing a professional manager with vendor relationships and deep HOA expertise handle the day-to-day will allow the Board to plan strategically to ensure great facilities, proper maintenance, and expanded opportunities for our community.

HOA BEST PRACTICES DECLARATIONS, and BY-LAWS:

Our Declarations and By-laws were written in the mid to late 1960s and ratified when the HOA came into existence in 1968. They were written with a template that was acceptable at the time. There have been small amendments and changes over the years – but they have not been continually evaluated for legality and compliance with HOA best practices. While they serve us currently – they do not do it very well. Similarly, much of how the HOA and the Board operates is dictated by tradition (sometimes not even in writing) and unfortunately, often only changes to respond to a problem that has arisen. HOA management is a professional field with third party accreditation to its members and required continuing education. The right HOA management company will help guide the Board using current best practices adopted by the industry. Additionally, they can help the Board bring Declarations and By-Laws into alignment with best practices while respecting the rules for modification of the Declarations and By-Laws written in the documents themselves.

ENFORCEMENT:

A majority of the community feedback that I get concerns Covenant and By-Law enforcement. The complaints range from poor and/or non-existent yard maintenance, to incomplete home projects, to parking issues to name a few. Frankly, this is just the tip of the iceberg – I could fill 10 pages with the amount of enforcement related complaints the Board gets. Sadly, our enforcement has become complaint based in the last 10 to 15 years. This means that enforcement activity only happens when neighbors complain. This type of code enforcement is inconsistent and puts the HOA on a downward slope towards more and more properties out of compliance. Frankly, given the time that maintaining the community takes and a lack of volunteers, this is the best we can currently do. I will also mention that I believe that enforcement is the worst part about being on the Board. No one wants to do it because put puts neighbors in direct conflict with each other. Professional HOA management companies have enforcement personnel who will provide consistent enforcement of our rules on a monthly basis. Should an HOA management company be selected, the Board will aggressively monitor implementation in this area to avoid upsetting the community. The Board is not interested in sending our mass amounts of violations about frivolous things. We simply wish to enforce the rules fairly and maintain the value of our community.

Frequently Asked Questions:

I have been asking members of the community over the last few weeks what they think about professional management and have logged the most common questions. I will do my best to answer them here.

Q: How much will this raise my Dues? A: It will not. Hiring of an HOA Management Company will become a budget line item and the HOA takes in enough to cover the cost without too much negative effect after all savings are factored in.

Q: I do not want a bunch of jack-booted thugs measuring my grass and creating a bunch of conflict. A: The Board will have strict control over enforcement activities including how we enforce rules. We definitely want to take the kinder, gentler approach when it comes to enforcement. However, we need to change from reactive to proactive enforcement. The Board will take as much time and care as necessary to make this as painless as possible.

Q: I like the nature and the culture of our neighborhood – I do not want that to change – how do we preserve that? A: Our people drive the culture of our neighborhood. Our people are generally open and accepting. Professional HOA management will not increase exclusivity, but it will introduce more consistency. In general, I believe you will see an improvement in our facilities and our common areas. I believe you will see an increase in community involvement because the day-to-day, non-value-added minutia that most community members try to avoid of will be managed by a professional organization. This will allow room for people who have great ideas to participate without undue burdens on their time.

Q: Will I still be able to get answers from the Board? A: Yes. The Board serves at the behest of the community – It is not the goal of the Board to isolate themselves and serve in a vacuum. It is the goal of the Board to increase opportunities for our community to improve. The company hired will work directly for the Board to accomplish its tasks.

Q: Is this too expensive? A: Based on the leading responses to our RFP, I believe we are looking at roughly $2500 per month for a total of $30,000 per year for full professional management. This year’s budget has $16,000 for bookkeeping, $10,000 for non-reoccurring audit and tax lapses that will not be in the budget next year, and approximately $4,500 general maintenance that I believe could be avoided by switching to a professional management company. If you do the math, we have more than enough room to absorb this into our 2021 budget From a very conservative viewpoint, without looking at the reduction in general maintenance and accounting for non-reoccurring penalties the cost above bookkeeping would be roughly $3.88 per home per month($14,000 per year) . Again, this is a moderate line item in our annual budget, easily absorbed by the HOA. The benefit to our community will be dramatic.

Process and Community Feedback:

The implantation of a Professional HOA Management Company is a Board of Trustees vote. After we have heard community feedback on the subject, The Board members will vote for one of three things:

1) Implement Full Management, or:

2) Implement Financial Only Management, or:

3) Do nothing.

Timeline of Events:

August 3 to 6: Overview Presentations to community members. Same 15 to 20 minute presentation on professional management and question and answer period. Done (3) or (4) times to allow for community attendance. Please watch your email and the website for an invite to these events!

August 18th: Final discussion, community feedback and Board vote on motions.

Feedback:

Again the Board needs your feedback on this!Please plan to attend one of the overview presentations if possible.As shared earlier, please go to the website and comment on this post so we can gather as much feedback as possible. Talking directly to a Board member or sending an email to KG34.Board@gmail.comis ok but commenting on the website works even better.