Special Agenda Item #2, as described in EXHIBIT A, is a vote on a proposed amendment to the Declaration and Bylaws for the Association. The proposed amendment, if adopted, would change the maximum annual assessment increase amount allowed without conducting a vote of the membership.
Inflation (and thus CPI) is currently running higher than normal. Historically, the CPI maximum assessment increase allowance has been only an average of 2.8% over the last 10 years, and 2.6% over the last 20 years. These rates of increase are insufficient for maintaining our aging infrastructure. Currently our Reserve Fund is far below what it needs to be to fund projected major repair expenses over the next ten years. This amendment, in combination with special agenda item #1 above, should allow the Board to continue with some major repairs and to build the reserve fund to accommodate most future major repair projects (such as new roofs which will likely be required as soon as 2028) and to start the process of building a healthier financial position to present to potential mortgage lenders.
Unfortunately when this amendment was proposed in prior years it was NOT approved. This, combined with higher than normal inflation, has caused the Board to stop spending on window replacements and to slow down other important repairs.
If this amendment is not approved, then it is likely that for the next several years, 67% of unit owners would need to vote to approve a projected 10% or higher increase in the annual assessment. This adds considerable overhead to the funding process and risks leaving us with inadequate funds for timely action on necessary major repairs and degradation of our financial health.
You can also think about it this way. Although this amendment would allow the Board additional flexibility to increase annual assessments, it would also allow the Board to be less hesitant to DECREASE annual assessments. If financial circumstances or assumptions change after a decrease, the additional flexibility also allows for quicker recovery back to a healthier financial position. Please also keep in mind that this proposed amendment does not prevent the membership from vetoing (by 67% vote) any Board decision to increase the annual assessment.
Absent unanticipated problems that may bring with them a major negative financial impact, the Board feels that approval of this amendment will reduce the need for higher increases in future years while allowing the Association the funding and flexibility to operate effectively over the next 10 years (2025-2034 -- our current financial planning horizon) and likely beyond.
The proposed amendment will require 75% of the membership to approve (27 FOR votes). If approved, along with approval of the 2025 annual assessment increase, the amendment would allow the Board the additional annual assessment flexibility beginning with the 2026 budget and assessment process. Your Board of Directors highly recommends a vote in favor of approval of this amendment.
Exhibit A
Special Agenda Item #2
Proposed Amendment To Declaration and Bylaws
Currently, Article VII, Section 2 (a) of the Bylaws provides for the process to increase the annual assessment for any year after 1985 without a vote of the membership by a percentage which may not exceed the percentage increase reflected in the Consumer Price Index (“CPI”) for the twelve month period ending the immediately preceding October 1. Since the limited flexibility associated with the CPI increase has not shown the ability to keep up with the necessary costs to repair our aging Condominium, the Board recommends a combination of CPI and a set percentage to instead serve as the maximum assessment increase amount allowed without requiring a vote of the membership. The Board has determined based on the operation of similar communities and best practices, that it is appropriate to change the maximum annual assessment increase amount to up to the greater of ten percent (10%) or the CPI increase from the previous year. This change in no way requires the Board to raise assessments by the maximum allowed amount each year, yet it does grant the Board the flexibility and ability to raise assessments for the following year, without a vote of the membership, up to the greater of ten percent (10%) or the CPI if necessary to meet the financial needs of the Association. At the same time, allowing this additional flexibility for annual increases would also allow the Board to be less hesitant to consider a decrease in annual assessments when appropriate since future changes in funding needs can be more easily accommodated.
Original Article VII, Section 2 (a) of the Bylaws:
“(a) Increase by the Board of Directors: The annual assessment effective for any year after 1985 may be increased for each succeeding year by the Board of Directors, without a vote of the membership by a percentage which may not exceed the percentage increase reflected in the U. S. City Average Consumer Price Index - United States and selected areas for urban wage earners and clerical workers, all items most recent index and percentage changes from selected dates, (as determined by the U. S. Bureau of Labor Statistics, Washington, D.C.), or such other Index as may supersede the Consumer Price Index, for the twelve month period ending the immediately preceding October 1. The membership may veto the Board’s decision to increase the annual assessment by an affirmative vote of the voting members representing 67% of the total number of Units at a meeting duly called for such purpose, written notice of which has been given pursuant to (b) below.”
The proposed amendment’s language is as follows:
“(a) Increase by the Board of Directors: The annual assessment effective for any year after 1985 may be increased for each succeeding year by the Board of Directors, without a vote of the membership, by a percentage which may not exceed the percentage increase reflected in the U. S. City Average Consumer Price Index - United States and selected areas for urban wage earners and clerical workers, all items most recent index and percentage changes from selected dates (“CPI”), (as determined by the U. S. Bureau of Labor Statistics, Washington, D.C.), or such other Index as may supersede the Consumer Price Index, for the twelve month period ending the immediately preceding October 1.
The annual assessment effective for the years 2026 through 2035 may be increased for each succeeding year by the Board of Directors, without a vote of the membership, by an amount no more than the percentage increase reflected in the CPI or ten percent (10%), whichever is greater. This additional assessment authority granted to the Board may be extended for additional periods of 10 or fewer years by an affirmative vote of the voting members representing a majority of the total number of Units at a meeting duly called for such purpose, written notice of which has been given pursuant to (b) below.
The membership may veto the Board’s decision to increase the annual assessment by an affirmative vote of the voting members representing 67% of the total number of Units at a meeting duly called for such purpose, written notice of which has been given pursuant to (b) below.”