The Wheels on the Bus

BY VICKI M acHALE, CCAM

In 1978, Proposition 13, The People’s Initiative to Limit Property Taxation, passed within the State of California.

This proposition limited the manner in which municipalities could assess property taxes. With the gravy train at an end, local governments began a frantic search to find new revenue streams to support city service. While it took them a while to figure it out, homeowners associations became pawns, and municipalities are now experts at shifting the financial burden of maintenance and ownership responsibility from the city to members living in deed-restricted communities.

Common interest developments are big business in California and without them, municipalities would crumble. In order to gain housing project approval, developers are required to upgrade roads, dedicate land for schools, install public trail systems and community parks. In some cases, associations are required to maintain off-site amenities such as bus stops and landscape for which their residents “may” derive benefit. It’s not blackmail at all!

Continued on page 16

The Wheels on the Bus …

■ WHILE HOMEOWNERS ARE BANKROLLING SYSTEMS AND AMENITIES THAT AT ONE TIME WOULD HAVE BEEN MAINTAINED THROUGH THE CITY, THEY RECEIVE NO TAX INCENTIVE TO OFFSET THESE INCREASED COSTS.

The Wheels on the Bus developer. In order to offset these Continued from page 15 costs, the developer increases the price

City requirements for private streets, recreation facilities, affordable housing, of the homes, reduces lot size and street trees, specialty drainage systems, water run-off grates, and … and … and, installs narrow streets so they can jam are the norm! Somewhere within the governing documents, or in other more more homes into less space. Property obscure agreements made prior to development, is verbiage that gives the city the taxes are based upon the value of right to control the level of maintenance within an association, as well as the right your home at the time of sale. Higher (but not the obligation) to address or not address just about anything they choose. cost homes jammed together within It is becoming common for city planning to approve CC&Rs prior to project limited space equals increased income approval. to the city. In addition to property tax

While homeowners are bankrolling systems and amenities that at one time income, they (the city) reduce their would have been maintained through the city, they receive no tax incentive to costs through redirecting support offset these increased costs. Some areas even have a mello roos tax on top of their services such as traffic enforcement, standard property tax and assessments. Taxation without representation? maintenance and administration to

One of the biggest burden shifts is the maintenance and long-term repair the HOA. The wheels on the bus go and replacement of privatized streets. Along with the maintenance costs for these round and round … streets, comes the burden of traffic control. Your While arguments are often local police department does not address made as to the superiority of HOAspeeding or parking on private streets. The fact remains maintained infrastructure and If your streets are private, then your streetlights, sidewalks and mailboxes fall that HOA landscape, the fact remains that HOA dwellers are subsidizing costs for under the obligation of the association. If you have private streets, there is a dwellers are services being provided to non-HOA dwellers. In addition, association good chance that your home sits behind subsidizing costs members also assume increased a beautiful entrance/exit gate. Have you ever received a phone call from an owner for services liability for the maintenance and governance within their community. wherein you suggested they call the police, and they responded with, “I did. being provided Now let’s tie this all up in a pretty bow, and put volunteer members They told me to call you!”? A Carlsbad to non-HOA in charge of multi-million dollar city employee told me they are trained to tell complainants to contact their dwellers. corporations, where the draconian requirement for election to the board HOA as a first course of action. Residents of directors is having a pulse (implied) scream about speeding, and are crushed and, perhaps, actually owning a home. Is it a wonder that tempers are flaring? when they learn the police will not enter As dissatisfaction increases, state legislators are attempting to placate the their gated community to provide traffic vocal opposition (which they basically created) through chaptering ill-conceived control. They are upset when they can’t legislation. Bandaid legislation is so much easier than actually telling constituents install speed bumps due to emergency the truth! Between local municipalities cramming people into deed-restricted response vehicles and are even more in communities and the legislature trying to fix the problems created by local shock at the price tag for a traffic study government, they’ve further added to this mess, and management is on the when they look into installing more stop receiving end of the hostility. Manage a community? Who has time? We’re too signs. Homeowners are at a loss as to how busy putting together document requests from the “cashews” pouring through to enforce traffic violations and reduce documents looking for the “smoking gun.” Ten years ago it took one-tenth of the liability. Those pretty gates do more to effort to manage a community. Rule adoptions, enforcement processes, annual shield city government than the wellmeetings – OH MY! Legislative initiatives make it through the assembly/senate meaning people living behind them. and are signed by the governor in less time than it takes for a board to adopt a

So let’s break this down: The city water noodle rule! places expensive demands on the In 2009, the City of Oceanside removed 132 of the 600-plus street lights

from the public streets within the Rancho del Oro (RDO) homeowners association, as they were rusted and in danger of falling down. The city refused to replace the fixtures even though they had maintained them for the past 20-plus years. The annual property tax bill reflected an annual fee for street lights. Homeowners were up in arms and a lawsuit ensued.

The city’s position was that the light poles were “special,” as they were decorative and made from metal instead of concrete. They contested that, even though tax revenue was being collected, the city really didn’t expend any funds towards standard light pole replacements since concrete poles had a life span of 50 years or more instead of the 20 years for those within RDO. It was pointed out to the City of Oceanside that the “decorative” light poles were a requirement of the developer, imposed by the city at the time the project was approved.

No brainer, right? Wrong! The courts sided with the City of Oceanside and the association is forced to build approximately $2.5 million dollars into their reserves.

Issues like this are becoming more common. Associations are receiving notices that require them to remove individual mailboxes and instead install association maintained gang boxes. Responsibility for the repair and maintenance of utility boxes, the installation of specialty irrigation systems and other improvements are becoming the norm.

Through all of this, we as an industry are not only blamed for the increase in costs, we can’t seem to get out of our own way in the passé, “If you didn’t like the rules, why did you buy here?” mentality. As discord increases, managers are walking away at a record rate. It is time, as an industry, for us to work together to begin an education process for our clients and their membership. It is time as an industry, for us to increase our lobby for the benefit of our industry and our clients. It is time, as an industry, for all of us to actually understand the world in which we exist.

Vicki MacHale is the Executive Director at ARK Management in San Diego.

For more information on the impact of Prop 13 go to www.californiacityfinance.com/AB8BailoutCM110105.pdf

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