By Deborah Goonan, Independent American Communities
Today, an ironic revelation: common interest developments have not solved the pervasive problem of deferred infrastructure maintenance, one of the main reasons local governments have been promoting and requiring HOAs and Special Districts for the past several decades.
In fact, misguided political policy of shifting responsibility for constructing and maintaining millions of square miles of roads, storm water basins and ponds, and manmade lakes, canals, and dams, from local governments to profit-driven developers, volunteer homeowner association boards, and unaccountable special district boards seems to have only multiplied the cost of rebuilding what is now crumbling infrastructure.
A little known fact is that, when many of these common interest developments were approved, builders were permitted to adhere to relaxed construction standards. Roads could be a bit narrower and their underlayment a bit thinner than municipal or County building codes required at the time. Storm water system components were supposed to meet minimal requirements for preventing floods and environmental standards, but components and construction methods were not necessarily equivalent to building codes required on public property.
Therefore, infrastructure that could have been built to last 30 to 50 years was often built to last 15-25 years instead. And in some cases, poor design and construction became apparent soon after the developer sold the last home.
All of this cost-shifting and deal-cutting with developers was arranged so that your local government could keep a lid on property tax increases.
But even though, theoretically, property owners were spared an inordinate increase in property taxes (a debatable assumption), revenue for necessary repairs is simply created through additional channels, as you will see in the examples that follow.
To use some round numbers for the sake of illustration, let’s say that, in order to construct new roads, your local government would have been required to raise your share of property taxes from $110 to $125 annually. Of course, no one likes tax increases, and in some states local tax increases are capped by law.
So the policy decision has been made to make only the people buying homes on the new roads to pay for their construction, rather than spreading out the cost amongst all property owners in the City or County.
It’s a piecemeal way of funding public services, and not particularly cost effective. It results in some level of double taxation for millions of US homeowners who own property in a homeowners association and/or special district.
So, instead of paying $125 on your tax bill for municipal or county services, you have been $100 in municipal taxes for limited services, plus another $100 to your HOA or Special District for “local” or “private” services.
In the end, you have most likely been paying more of your hard-earned money for decades of inferior or non-existent maintenance services provided by your HOA, Special District, or local government.
US Association Governed residential communities are maturing
Based upon 2014 statistics provided by Community Associations Institute (CAI), two-thirds of common interest developments are at least 15 years old, and 40% are at least 25 years old. Right now, hundreds of thousands of communities and millions of homeowners are facing expensive repair or rebuilding of road and storm water infrastructure.
Over the next decade or two, the problem is likely to reach critical mass, because most of these so-called “planned” communities will lack sufficient cash flow to repair crumbling infrastructure.
Here are just three examples.
In Ohio, Woodmoor Terrace HOA has been faced with the prospect of bankruptcy, unable to afford costly repairs to a storm drain. The small community – only 68 properties – simply does not have financial or human resources to acquire engineering design and reconstruction that will involve heavy equipment.
So homeowners have petitioned Butler County commission to take over their storm water repairs and maintenance. It appears the County agrees to do so, but homeowners will face an assessment increase on their property tax bills for the at least the next six years.
Liberty Twp. subdivision HOA petitions county for ditch maintenance
To cover the county’s maintenance costs, 68 property owners will be assessed $105.62 annually for the next six years to build up a maintenance fund, according to Wilkens.
The total cost of the drainage system is listed at $215,668 and the maintenance fund is capped at 20 percent of the system’s value.
Once the reserve fund reaches $43,133 in six years, the assessments will stop. It will resume when the fund needs replenished, according to Addison.
In Florida, Special Districts for subdivisions are called Community Development Districts (CDDs). CDDs tend to be established for large scale subdivisions, and the Board of Supervisors is appointed by the developer for the first 7 years during construction. However, developer control can be extended for another 3 years if additional parcels of land are added to enlarge the district, a common occurrence. Furthermore, the Board of a CDD has authority to issue bonds for construction, obligating District residents to repay debt for construction of infrastructure over 30 years, regardless of whether or not the CDD is ever completed as originally planned.
Homeowners are also obligated to repay bond debt even if the quality of infrastructure is less than optimal or downright abysmal.
And as infrastructure ages or defects become apparent over time, homeowners in the CDDs accumulate more bond debt to do necessary repairs. In this case, several storm water ponds in The Villages have been running dry due to sinkholes.
Repairing these manmade ponds is costly and not always practical. But if the owners of the golf course and country club still heavily influence or control the CDD Board, eliminating an ornamental pond within view of the fairways probably won’t be an option, even if it would be more cost-effective and more environmentally responsible.
Residents of CDDs 5 through 10 paying $14,300 for sinkhole repairs
CDD 10 Supervisor Don Wiley questioned why PWAC [Project Wide Advisory Committe] was picking up the tab for the sinkhole at Cane Garden Championship Golf Course, which is owned by the Developer.
The Developer allowed the District to construct the ponds on his property, said District Manager Janet Tutt. The ponds are a critical part of the District’s overall stormwater management system.
Read more here: https://www.villages-news.com/residents-cdds-5-10-paying-14300-sinkhole-repairs
In Colorado, an appellate court recently ruled that Boulder County is within its rights to assess financial responsibility for repaving roads to hundreds of homeowners in 100 subdivisions, even though those subdivisions are unincorporated and their roads have never been assigned to or maintained by an HOA. In fact, Boulder County has been providing normal maintenance of roads for decades, but now contends that property tax dollars were never intended for actually repaving worn out roads.
Therefore, the County proposed establishment of a Local Improvement District to allocate the costs of repaving only to homeowners in unincorporated subdivisions. That was defeated in an earlier legal challenge. Read on for details.
Do homeowners have any other legal options? Or will they be required to pay higher taxes to receive road maintenance services they thought they have been paying for all along?
Boulder County shouldn’t be forced to repave subdivision roads, appellate court rules
By John Fryar
POSTED: 06/30/2016 08:11:48 PM MDT | UPDATED: 11 DAYS AGO
The Colorado Court of Appeals on Thursday morning upheld the dismissal of a lawsuit brought by a group of homeowners seeking to force Boulder County to fund the repaving of roads in unincorporated residential subdivisions.
A three-judge Court of Appeals panel agreed with an April 2015 decision by a Boulder District Court judge that held that the homeowners suing the county did not have the legal standing necessary to pursue their claims.
About 300 individuals and families — in an effort led by the organization Boulder County Fairness in Road Maintenance — had sued Boulder County’s commissioners in an attempt to get the court to order the county to budget more money for repaving about 150 miles of roads in more than 100 residential subdivisions.
Fairness in Road Maintenance (FIRM) co-chairman Chuck Wibby, who also was the lead plaintiff in the lawsuit against the county, said in a statement on behalf of that organization that with its ruling, the Court of Appeals “becomes an unwitting accomplice in the county commissioners’ ongoing plan to hold our roads hostage until we agree to pay even more taxes.”
In a prior lawsuit against Boulder County, FIRM was able to stop the county from creating a Local Improvement District (LID) that would impose additional property taxes on homeowners for repaving their roads.
STOP THE LID LAWSUIT SUMMARY – START TO FINISH
Boulder County FIRM’s attorney Madeline Meacham of Halpern Meacham LLP, filed suit in Boulder County District Court on November 23, 2013, to halt the imposition of the Subdivision Paving LID.
On July 27, 2014, the court issued its ruling that the Subdivision Paving LID was illegal and that all taxes collected had to be returned to the citizens of Boulder County. As a result all Boulder County taxpayers were spared having to spend $72,000,000 on the County’s ill conceived plan to fix subdivision roads. The County’s “plan” was an ill conceived effort that had as its main goal generating more tax dollars out of the taxpayers of Boulder County. This marked the completion of the second step in our plan to get our roads fixed without new taxes.