2004 July

HOW TO PREPARE A STRATEGIC  LONG RANGE PLAN
by
Walt Williamsen, PCAM

This is the final article in a series of three on the merits of long range planning for community associations.

The first article suggested that a long range facility plan would be helpful for community associations that are dealing with problems of scheduling, prioritizing, and funding major repairs and replacements.

The second article discussed the characteristics and major differences between the two reserve planning methods.  It also highlighted certain advantages of long range planning for properties that are now 15 to 20 years of age. 

This discussion is about how to prepare a long range strategic plan for a community association.

At the outset, it is recommended that knowledgeable professionals be used to prepare the data and estimates on remaining useful life of various common elements such as roofs and pavement.

However, for those situations where an association’s budget cannot include a several thousand dollar investment in a professional plan preparation, or there is just an unwillingness to make the investment in the association’s future direction and capital funding needs, a basic plan can still be developed.  The fundamental tools and skills needed are (1) access to common spreadsheet software such as Excel; (2) a history of repairs and replacements; and (3) access to replacement cost data for the various common elements. 

Listed below are the basic steps involved in preparing a Long Term Strategic Plan.

VIEW THE PROPERTY FROM THE VIEWPOINT OF AN OWNER, RESIDENT, VISITOR, POTENTIAL BUYER, MANAGER, AND BOARD MEMBER
Unlike a Capital Reserve Study, a plan can include landscape improvements, new 
features, etc.  It is important to have a “big picture” view of the property from
different vantage points.

DETERMINE WHICH ELEMENTS THE ASSOciATION IS RESPONSIBLE FOR MAINTAINING, REPLAciNG, OR ENHANciNG
Most of this information can be found in the Declaration or Public Offering
Statement.  It is suggested that the association’s attorney check the list for
completeness.

(Watch for windows, doors, and decks …..Oftentimes it is unclear if repair or
replacement of a common element is the responsibility of the owner or the
association.)

QUANTIFY THE COMMON ELEMENTS (SQUARE YARDS OR PAVEMENT, AREA TO PAINT, SQUARES OF ROOFING, ETC.)
Some elements such as windows, doors, and decks can be counted.  Areas of
pavement can be measured with wheels, tapes, or even by steps.  Areas of roofing can be either measured or provided by a roofing contractor.  Take each common element on a case-by-case basis.  Most can be approximated with basic arithmetic and geometry.

ESTIMATE REPAIR OR REPLACEMENT COSTS
Although there are resources available for estimating current replacement costs for
major elements such as asphalt pavement or roofing, they generally require some basic understanding of construction methods and language.  A simple way is to ask
contractors for this information.  Perhaps a small fee for his or her time would be
appropriate.  However, if this is not possible, there are professional estimators who do this for a living. 

ESTABLISH SUGGESTED TIME FRAMES FOR MAJOR PROJECTS
As with steps 3 and 4, contractors could provide most information.  There are
resources available which give basic useful life estimates for various construction
materials.  Manufacturers of materials for elements such as decking, windows, doors, paint, roofing, and fencing can often provide valuable information on expected useful life as well as proper maintenance activities to prolong the useful life for as long as possible.

EVALUATE FUNDING NEEDS AND RESERVES
Once the quantities, expected useful lives, and estimated replacement costs have been determined, this information can be placed into a spreadsheet format that can be projected out for five, ten, or twenty years.  Modern spreadsheet software makes it very easy to change assumptions on inflation, update estimates, or reprioritize projects.

At this point, the total cash outlays could be projected for each year.  Combine the
annual cash flow out with the expected reserve funding in, and the result will show
adequate or inadequate funding.

Policy decisions could be made on how to fund shortfalls if necessary. (i.e., borrow, raise fees, special assessments, or a combination of all three methods)

REVIEW FINAL PLAN WITH UNIT OWNERS
It is crucial for the Plan to be presented and explained to the membership.  Once they see that there is a well thought out and documented program in place, it will make it much easier to pass reserve budgets, assessments or loan authorizations.

It is highly recommended that once the initial plan is “accepted” by the owners, that
provisions be made so that no major alteration or change in priorities can be substituted without notice to them.

UPDATE PLAN EVERY TWO YEARS OR AS NECESSARY
Things change!  Any plan must be flexible.  Elements might wear out sooner than
expected or inflation may become a factor.  Most of the effort in gathering initial data does not have to be repeated.  A few key stokes on the spreadsheet can update the plan as necessary.

Also, an annual or biannual review of the plan is an effective way to bring new board
members and managers up to speed.

As mentioned before, it is best to have professionals prepare the initial plan so that the foundation of the program starts off on a solid footing.  Updates are another story since most of the static data such as squares of shingles or yards of asphalt doesn’t change unless the property is expanded.

In any event, whether done by professionals or capable volunteers from financially challenged associations, all community associations should have a documented program in place to demonstrate to owners, buyers, insurers, and any other third parties that there is an up to date long range plan in place to keep the property well maintained and in good repair.