The Annual GEMA Budget (for 2008) Meeting Minutes
I wanted to briefly provide you with the meeting minutes from Monday's (Sept. 10) annual GEMA budget meeting. This is the annual meeting to discuss our budget for the following year (in this case 2008) and is open to all homeowners. For clarity, this meeting was not the monthly GEMA association meeting. The monthly GEMA meeting for September will be held on Monday, September 17th at 6:30PM at the WVA offices. The monthly meeting is also open to all homeowners. In Attendance. 4 of the 5 board members were present with Larry Chapman out of town on business. There were 8 homeowners also present. Hans Wildschutte (President) opened the meeting by reviewing the GEMA Annual Reserve study. The reserve study looks at the life of our physical assets, the cost to replace those assets, and at what percentage we are funding our reserves. At the end of 2006, our reserves were 48% funded. At the end of 2007, our reserves will be 34% funded. The change in our reserves financial position is due to the expenses associated with termite control, roof repairs, and to insufficient replenishing of the Reserves during prior years. In general, any time an association's reserves fall below 50%, it's time to start worrying about being able to pay for unforeseen and costly repairs such as termites, roofs, and gas/water/electricity lines into the buildings. It should be noted that we are doubling the amount going into reserves (over the 2007 budget) even though we are cutting out the additional $60,554.00. To double this amount is significant as it puts us on the road to stabilize our reserve fund. The proposed budget for 2008 was discussed. The proposed budget contains a 20% increase ($50.00). Even with this increase, the proposed 2008 budget will be underfunded by $50.00 per month per home. To address this shortage, all Board members present agreed that the amount of money to be put into the reserve fund should be reduced by $60,554.00 for the year. With the 20% increase, dues will be $299.00 a month, per home effective January 1, 2008. At the risk of being redundant, it should be noted that we are doubling the amount going to reserves (over the 2007 budget) even though we are cutting out the additional $60,554.00. To double this amount is important as it helps to stabilize our reserve fund. Richard Baron, our newly-elected Treasurer, offered these cost-saving proposals: - Water consumption is a major budget item. Richard questioned if the association should not consider addressing the irrigation system sooner rather than later? Steve Corea and Hans Wildschutte pointed out that this issue was discussed at length in several previous Board meetings. They agreed that the association surely would like to correct our irrigation system and at the same time install weather controlled irrigation timers. However, when the board investigated this suggestion previously, the cost at that time was around $200K. It was felt that GEMA should live with the irrigation system we have for now, work to stabilize our reserves (in light of the continuing termite work), and then consider addressing the irrigation system in the future. - The installation of synthetic grass. Richard proposed that GEMA should replace our natural turf with synthetic grass to save on our irrigation costs. Steve and Hans pointed out that, although the ROI on this project is only about 7 years, upon previous
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investigation, Woodbridge Village Association (WVA) does not allow for synthetic grass in the common areas of the association. - Richard suggested that GEMA consider revising the termite treatment policy such that the home owner would share some of the burden of the termite repairs. Steve and Hans noted that Richard had already made this suggestion earlier in the year and that it had to be voted down at that time because the CC&Rs don't allow it. The CC&Rs clearly state that the association is responsible for the maintenance of the structure including the framing. Since the termites are "feasting" on the framing, the treatment and repair is the responsibility of the association. - Richard suggested that for basic association repairs (electrical, gas, painting, etc.) each homeowner would hire their own repair person and submit the bills for reimbursement to the association. The thought process here was that a homeowner might be able to hire their own repair person at a cheaper rate than the association currently does. Steve and Hans pointed out that our CC&Rs dictate that the association is responsible for the repair of the common areas and infrastructure. GEMA must comply with its liability-insurance policies, which require the association to ensure that all repairs being done are by a licensed, insured, and bonded professional in that field. GEMA's liability insurance would not cover the Board if this proposal were to be implemented and homeowners sued for damages resulting from repairs made by unlicensed, unbonded, and uninsured persons. Besides, the Board has the fiduciary duty to ensure that all repairs are done to the association's quality standards, not just as cheaply as possible. The association would not want to relinquish control of the quality of workmanship to ensure that no homeowner might be injured due to a possible unlicensed repair. - Richard questioned specific funding allocations in the reserve study. He pointed out a couple of places in the study where he questioned asset life expectancy.....meaning that the study indicated one number for asset life expectancy and he thought that actually an asset might have a longer life (therefore delaying the replacement expense). Hans recalled that Richard and he (Hans) spent more than two hours with the Reserves Data Analysis (RDA) team last year (2006). In that meeting, the RDA team explained that the computer model calculates reserve status and recommended reserves contributions based on actual average physical lifetimes of the various types of assets. A particular GEMA asset may either last longer or shorter than the number used in the study, but the statistical averages used in the computer model are highly accurate over the 20-year span of the reserves-requirement forecast. The computer model being used by RDA has been approved by the State of California and is continuously being improved. To reinforce the board's policy, no reserve funds will ever be spent unless absolutely required.
Before closing the special budget meeting, all Board members present, again agreed that the 20% dues increase is necessary for 2008. This dues increase will be officially voted on in the regular Board meeting on Monday, September 17. The budget meeting was then adjourned.
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