Monthly Association Fees – Are They Comparable?
By Walt Williamsen, PCAM and Past President of CAI-CT

A frequently asked question by owners and officials of community associations is “how do our fees compare to other condominiums of our size?” Based on my experiences as a cost accountant, association manager, and consultant for associations and management companies – my answer is that fees are not comparable in any meaningful way.

Furthermore, I predict that this question is going to be asked more and more as associations attempt to make up for years of deferred maintenance and insufficient capital reserves. These are issues that are going to cause much angst for unit owners and board officials in the future. However, these are topics for another time.

Besides the amenities that may be similar such as pools, tennis courts, and clubhouses, there are many other factors which prevent “apples to apples” comparisons. Some of the obvious, and not so obvious, are listed below:

• Other sources of revenue such as antenna rentals, rebates, or service fees;
• Differences in the demographic makeup of owners and income levels;
• Differences in geographic location;
• Differences in capital reserve funding policies….some reserve for 100%, some for 50% and assess or borrow the rest….some don’t reserve anything;
• Differences in fiscal management and controls, i.e., collections, write-offs, etc.;
• Differences in construction and past maintenance practices;
• Differences in insurance costs due to location, condition, and past claims history;
• Differences in management and board competency; and
• Differences in the current levels of capital reserves.

The list could go on and on, but the point is made.
It has been my recent experience from working with associations and managers on long range strategic plans and reserve policies that every association and property is different for myriad reasons. It seems that “one size fits all” programs and approaches do not work.

Although this article is not about budgeting and fiscal management, there are two activities that association members, officials, and managers can practice that will be more productive than wondering what other associations are charging for monthly fees.
I suggest that each association revert to (1) good old fashioned “zero based budgeting;” and (2) set a reserve funding policy that is consistent and that a majority of owners support.

“Zero base budgeting” simply means that each operating line item is reviewed in detail and developed for each budget cycle. Avoid the easy way out of taking prior year budgets or expenses and just inflating them for the new budget. Here are three examples of costly miscues which could have been caught sooner by using the budget as a control tool.

• A municipal trash rebate exceeding $20,000 was nearly missed because of a change in management companies and inattention to the budget revenue section.
• A small hole in an underground water supply pipe caused water bills to rise dramatically for months until someone finally figured out that something was amiss.
• An electric meter put on a temporary support by the builder ran for years before someone checked the electric usage, meter by meter, while preparing the electricity line item for the new budget from scratch.

On the subject of capital reserve funding policies, each association should decide on a suitable policy that is supported by a majority of owners. Wealthier communities often prefer to have basic reserves and use special assessments to make up shortfalls. Others should decide on what levels they want to fund and then MAKE SURE THAT EVERYONE IS AWARE OF THE POLICY. This includes current unit owners and potential buyers.
In a nutshell, forget comparing fees; instead focus on running a tight ship at your own complex.

The CAI has excellent resources available on the topics of financial management, reserves, and budgeting. Contact the CAI-CT office or the National website at: www.caionline.org for details.

Walt Williamsen has vast experience as a property manager. He has been active with CAI-CT for many years, serving as President from 2001-2003. Walt is currently the owner of Condominium Consulting Services, LLC.