Inflation: Thief of POA incorporation windfall
Posted on Wednesday, April 30, 2008
URL: http://www.nwanews.com/bvwv/Editorial/6257/
It seems the purchasing power of our household income becomes less and less, and we feel somewhat helpless as we watch the disparity between our expenses and income become greater. Several of us have halfheartedly joked that our 401 K plans or other deferred savings will be enough to sustain us only if we die within the next 10 years; otherwise we are in for a “ world of hurt. ”
For retirees, you may say we should have planned better, but we were raising kids and trying to make ends meet. For our working members, trying to keep up with increasing daily cost has prohibited many from saving for the future. Our saving-for-a-rainy-day fund is not what we had hoped, and besides, we didn’t know it was going to rain this hard. In a lot of ways the POA’s history parallels our personal life histories.
If you will be so kind as to indulge me, I would like to take a rather simplistic look at our POA’s assessment history and financial picture. From 1965 through 1974 the monthly assessment was $ 5. In 1975, the assessments were raised to $ 7. In 1978, the amount was again increased to $ 9. 50, where it stayed for the next five years. In 1983, the assessment was increased to $ 10. 50. In 1984, there was another increase to $ 13. In 1985, it increased to $ 14. The $ 14 amount stayed in effect for the next 15 years, as members repeatedly voted down assessment increases. In 2001, POA members passed the two-tier system that increased the monthly assessment to $ 24 for an improved property – a lot with a water meter – and $ 16 for an unimproved property – a lot without a water meter. It has now been seven years since an assessment increase, a fact that has been forgotten, in the never-ending discussion about the appropriate assessment amount.
Granted, there have been fee increases along the way to attempt to compensate for the lack of adequate assessment funding but these fee increases were never enough to keep up with inflation throughout those many years. In many instances fee increases only served to reduce participation, which resulted in even less revenue.
The repeated message from the membership has been to tighten the POA’s belt, get rid of the waste, reduce cost and don’t raise fees. Yet gas prices, insurance costs and prices of goods and services have continued to increase for the association, just as they have in private households. Can you imagine living a 43 year stretch with only seven pay increases or, at least, some inflationary adjustment ? You certainly would not have saved for a rainy day and there would have been many areas of your life that suffered from lack of attention and money. That is where the POA is today.
Fuel cost alone is hurting us all. Inflation on just this one item is staggering. In 2001, the cost of unleaded gas was $ 1. 14 a gallon; it’s now $ 3. 26. In 2001, the cost of diesel fuel was $ 1. 32 a gallon; it’s now at $ 4. 04. In 2001, propane cost 0. 83 cents a gallon; it now costs $ 2. 16. The POA, like your own households, are seeing these increases everywhere we look. Just since December the cost of fertilizer and chemicals, which we use for our golf course maintenance, has gone up in price 30 percent. This is no small budget item.
These increases come at a time when golf rounds are continuing to decline. We’re seeing a decrease in revenue and no indication of a reversal of this trend in the near future.
Everywhere I go members talk about all of the money the POA now has with municipal services transferred to the city. Many feel the POA has won the lottery with incorporation.
I have always heard that when someone wins the lottery, new friends and relatives come “ out of the woodwork ” in hope of receiving part of the good fortune. POA members have mirrored this behavior as numerous and varied suggestions have been made on how the Board should spend or not spend your POA “ incorporation lottery winnings. ” The most frequent request is to give members back their assessment dollars through a reduction in assessments, as these dollars are no longer needed.
All of the years that assessment increases were voted down we were taking a gamble on our future. Inflation and delayed maintenance have drained the “ lottery windfall. ” No the coffers are not empty but there isn’t this big pot of unobligated revenue sitting out there to bail us all out. The purpose of this column is to try to get us a little closer in our understanding of the revenue picture for the POA, so that members will have a context for future budget decisions and discussions.
We also hope this serves as a starting place to understand the ongoing impact that inflation has on the POA.
Throughout the summer months, the Board will be looking at the inflationary impact on the 2009 budget. We will be evaluating assessment levels, looking at needed changes in the Declaration and reviewing all of the long-range plans for the amenities.
The Board will try to set a long-term course for stabilizing, managing and improving Bella Vista’s amenities. Inflation – the thief of our “ lottery winnings ” – will be a driving force behind these discussions.
Dale is the chairwoman of the Property Owners Associatio Board of Directors.