Cohousing-L Mailing List: Re: Monthly assessments

[David L. Mandel (75407.2361]

I've actually already answered Monica of Chico's query directly when she 
called us by phone yesterday, but reading some of the other replies with our 
conversation fresh in my mind, I want to add a couple thoughts.

First to Rob: The importance of not crossing the bureaucrats:
        In California, anyway, the Department of Real Estate does scrutinize 
homeowners association budgets and assessment schedules before approving sales
of condominiums. Of course we could change our original schedule once 
approved; we have already, a little, and may eventually change it a lot more. 
But as one of the first cohousing projects we were running scared back then 
(the DRE got heavily on our case over our attempt to give members at least 
some legal rights to their future units in exchange for their financial 
investment; in Calif., consumers are protected from being sold pigs in pokes 
by unscrupulous developers who seek their money too early in the process -- a 
law that doesn't jibe with the fact that we were our own developers) ... so we
made our entire CC&Rs and the assessment schedule look as much as possible 
like a regular condo project's would. We were also being advised at the time 
that this would make it easier to find mortgages.

Sometimes, simplicity counts:
        So our basic assessments cover 1) Variable reserves -- saving up to 
replace the roofs, repaint the exteriors and perhaps someday replace the 
siding. These are allocated proportionately to unit size; 2) Fixed reserves --
saving to replace common house (and outdoor common area) fixtures, appliances,
tools, furnishings, floors, etc.). These are allocated equally per unit; 3) 
Fixed costs -- mainly insurance, allocated by unit size; 4) Operating expenses
-- common area utilities, minor repairs, administrative, committee budgets, 
activities. These are equal per unit. All this is pretty standard condo stuff,
fine-tuned by us to reflect the fact that we do our own management and 
maintenance to a much larger extent than typical condo associations. The 
result: 1-bedroom assessments of around $70, 4-bedroom around $100.
        (The spread is actually $90 to $130 because after we moved in, we 
found out that the city was billing us collectively for water, garbage and 
sewage. We allocated those expenses with a partial weighting for unit size, 
adding $20-$30 a month per unit.)
        During construction, I put forth a proposal to do something like the 
method described for Highline: a spreadsheet formula that would also take into
account number of residents and in addition, income, since we have a very wide
range in this category and have been very conscious about trying to maintain 
affordability after purchase as well. The decision then, however, was to defer
any such  system for at least a year after living here. I think mostly people 
didn't see that the end result would be that much different and our group 
mentality tends to try to avoid unnecessary complications. I was very willing 
to stand aside and go with the consensus on this, and while the egalitarian 
ideologues among us may bring it up again before long, I wouldn't be surprised
if the group decides to just stick with what we have.
        It has occurred to me that the poorer residents among us tend to have 
either smaller units or renter-housemates. Also, adjusting for number of 
occupants would in most cases tend to balance out  adjustments for income and 
unit size, since the lower-income people tend to inhabit smaller units than 
higher-income families of the same size. So I think the inclination here may 
be to spend our time having fun instead of debating assessment formulas.

Miscellany:
        @ We did adopt income level as the main factor in consensing -- after 
much debate, alas -- on a supplementary assessment to repay our reserves, from
which we're borrowing to make capital purchases that were supposed to be done 
with funds left over at the end of construction (another long, sad story). 
Members are paying between $1 and $9 a month to this fund, the amount 
determined partly by unit size and partly by self-defined income level. It's 
fairly small change, but it makes me feel good to have adopted in at least 
this instance the principle of using income as a factor. It may be a precedent
for the future.
        @  We have constructed a wall between our homeowner assessment, which 
still looks a lot like other condos, and the exchanges of money, mostly on 
paper, that occur around meals, laundry costs and some other more cohousing 
type things. This is mainly to steer clear of federal tax code problems that 
would occur if our HOA had "non-exempt function income" or unorthdox expenses.
We call our supper club SPUDS (Southside Park Urban Dining Society) and keep 
totally separate accounts. Thus we avoid any danger of being seen as a 
business and having to pay business or even sales taxes for our shared meals. 
        Please note, those of you who get off on this issue: All this followed
a long discussion and consultations with tax experts, and our conclusions were
very different from those drawn in an article on the subject in the last 
Cohousing magazine, in which the writers advised forming a for-profit 
subsidiary. That makes no sense to us.
        @ Another idea: we have also begun to invest some of our reserves in 
emergency loans to members, at prime rate interest (currently 9%) with 
flexible payment schedules. We're doing it on a very limited basis so far; it 
may expand if it runs smoothly and feels OK. It seems like a good deal to all;
lower interest than credit card debt; much less hassle than a bank loan; a 
good return for the HOA compared to other conservative investments; and 
considering the peer pressure, very little risk, we expect. Is anyone else 
doing this?

David Mandel, Southside Park Cohousing