Raising Assessments: Doing What is Best for Your Board
Let’s be honest; while it’s a hot topic, there are often very good reasons to raise your assessments. Even if you’ve determined that you have a solid preventive maintenance program through an assessment, some unforeseen emergencies can throw a wrench into the best-laid plans. If you continue to keep assessments low despite maintenance needs that come up, you run the risk of letting your property values decline or causing your community’s relevance to suffer. Conversely, raising assessments can positively impact your property values and reputation.
Of course, we understand no one likes to spend money on unnecessary expenses. And for some, HOA fees may seem excessive. But they are an investment in your community that helps to keep it financially fit, safe and beautiful, all of which keeps your home’s value high.
On the other hand, no board wants to be the “bad guy” or consistently raise assessments because they are not able to cope with rising utilities, maintenance or staffing costs – in other words, poor planning or stewardship. So, before you raise assessments, take a look at these 3 strategies for adding value to your association and keeping assessments stable (e.g., maintaining or reducing expenses to make the most of your budget):
Value Opportunity #1: Energy
Across Texas, energy costs are rising. That’s why it’s crucial that you and your board partner with a great management company to look for ways to boost energy efficiency. You should be partnering with your community manager and management company to help answer the following questions:
- Are we still using standard lightbulbs?
- How much energy does our association really use in common areas?
- Do we keep lights on when no one is using a space?
- Is our pool or hot tub too warm?
- Is our air conditioning too cold?
- Are we using the most efficient pool heater for our property type and location?
- Are there areas that have excessive outdoor or landscape lighting?
By evaluating current energy costs in your market, you may find some easy changes that will create cost savings. For example, you may want to install light switches on motion detectors so that no lights can be left on when the room is unoccupied. Other updates, like changing from traditional to LED lighting, may require a larger upfront investment but will likely pay off in the long term.
That’s exactly what one high-rise association did. After recommendations from FirstService Residential and their general manager, the association installed a variable frequency drive, which saved the building 20% in energy costs. After an initial cost of $25,000 to install, the high-rise has recouped all costs.
Value Opportunity #2: Reserve Fund Investments
In a recent budget survey, 72% of board members said they weren’t fully confident in the returns they are getting on reserve and/or operating funds. Are you in the same boat? To find out, partner with your community manager and management company to answer the following questions:
- Where and how is your reserve fund invested?
- Do you know which investment vehicles you should choose?
- Are you working with an HOA-specific financial services firm to maximize returns?
- Do you review investments regularly?
- Do you have an HOA Investment Policy?
By taking a few simple steps, you can get the most out of your reserve funds and protect your HOA financials for years to come.
Value Opportunity #3: HOA Insurance
Association insurance is dynamic and complex. If you haven’t taken a close look at your coverage recently, you may be paying a higher price than needed (either in your premiums or deductibles). Working with a trusted insurance broker or agent with experience with community associations is crucial.
Kelly Lee, Vice President of Legal & Risk Management for FirstService Residential, said, “It’s always best to choose an insurance agent or broker with a successful track record in community association insurance—they can tailor a cost-effective program that ensures adequate coverage and meets your community’s needs.”
To evaluate whether you are in need of an insurance tune-up, ask these questions:
- When did you last have your insurance audited?
- Is your association covered correctly?
- Do you know what is covered in your property insurance?
- Do you have workers’ compensation coverage?
- Do you have building ordinance & law coverage?
- Are your vendors covered appropriately?
If your HOA has appropriate coverage (even if that means paying a little more upfront), you will be better covered in the event of a disaster. While more coverage may seem contradictory to cost savings, it may save you more in the long run. Additionally, lower premiums often mean higher deductibles, which can also cut into your budget.
Through FS Insurance Brokers, a subsidiary of FirstService Financial, FirstService Residential managed communities have access to unique programs and insurance offerings that can help reduce costs and enhance client coverage levels.
Other Opportunities – Investment Policy
Keep in mind that while these 3 cost-saving strategies are a good starting place, this is not an exhaustive list. You should be working with your management company to help you determine what other areas of spending you may be able to cut back on or modify to help you save more in the long run.
One of the ways you can do this is by developing an HOA Investment Policy. An HOA Investment Policy is a guide you can utilize to help you uncover better returns on your reserve funds and subsequently save money. To access a free guide on how to create an Investment Policy, read the article, HOA Reserve Funds: 6 Tips to Improve Your Returns.
There’s a lot that goes into creating an ideal community. But really, at the core of it all, the pursuit of perfection begins with something you can’t necessarily see from the outside: financial stability. And this means more than just maintaining operations. It includes positioning your community as an attractive investment, which at times means having to raise assessments. But ultimately, it’s important to remember that an association in good financial order can really affect a potential buyer’s decision-making.
Raising assessments within your association doesn’t have to be a challenge. FirstService Residential Texas can offer the right resources and information to ensure the longevity and financial well-being of both your association and community.
Contact us today for more information on how we can help strengthen your association financially.