Monday, January 5, 2009

A Reader Views the Future of His Community

Jack Denman is a reader and our occasional correspondent and President of his homeowners association. Taking our concerns to heart, Jack has worked hard to stave off the financial obsolescence troubling many associations and of which we have so often written. Here is his account of the success he achieved in convincing members to raise assessments to stay even with the true cost of ownership. But the most interesting part of his letter is his discussion of future redevelopment and how to achieve a positive financial return while greatly improving the project. This is not fantasy--it is a glimpse into the future.  TPB


I became president of the board this year and had discussions with the other members on a monthly dues increase. Over the last nine years I alone made recommendations (and received support) to raise the dues from $186 in 1999 to $250 today. I'm still on the board. Who says that miracles don't happen nowadays!?

Since I knew it could be a "land mine" with the membership, I was able to convince the other members of the board to write a lengthy explanation to the membership to justify the increase. I wrote the original draft and the other members contributed to the final version.


One member scratched off or scribbled something unintelligible on the first installment of the increase.

I prepared the latest budget because I have the most financial experience on the board. I took the last 8 years of data and did a linear regression analysis on each item and made a calculation, not an estimation on this most recent budget. On a few items I did an average where the correlation coefficient was low.

I have included the letter of notification and justification and the latest budget.

It's "all your fault" that we are aging gracefully as a 40 year old association. Soon I will begin to lay the plans for redevelopment when we someday become obsolete. It's a long ways off, and I won't be here, but we should, if future residents are to maintain their equity. My idea for redevelopment is to rebuild from two stories to three, increase the living space by 50% in area, provide subterranean parking to reclaim lost space now consumed by carports, and finally to use all steel and aluminum construction and finally to sell new additional 40 units for enough to cover the cost of construction to the current 40 residents so that they pay nothing. I might look to the city of Fullerton for a bond issue to cover the cash gap until the new 40 units are sold. When the real estate market improves the city might look favorably on a bond because of the future tax revenue from the additional units.

My nephew, who owns a escrow company, and lives in San Diego, said "But where will the people go during the reconstruction?" I told him that they will leave one way or another because of obsolescence. It's only a case of coming back to something better than what they left when it's all over.

Happy New year,


Jack C Denman

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