Much debate has taken place in Oakmont over the issue of rising dues over the years. This article will look at the objective history of Oakmont dues over the past 21 years and, in the final Commentary section, will offer my opinions on how this history should inform Oakmont Village Association (OVA) members and Board of Directors actions going forward.
The Appendix consists of a 1-page spreadsheet showing the level of dues in each of the years covered, the California Consumer Price Index (CA CPI) for each year (as a measure of underlying inflation), and the percentage change of each of these from the previous year. Two pairs of columns are shown for dues. The first represents the total monthly cost of OVA assessments, including the special assessment imposed during the 2008-2016 period for repayment of the Central Activity Center (CAC) construction loan and the major dues increase voted in 2019, which took effect in 2020. The second represents the net per person monthly cost of OVA assessments excluding these additions. I consider the latter to be the “baseline” dues cost and will refer to it as such.
Dues inflation from 2003 through 2024 (21 years)
Over this time period, gross dues cost increased 358.7%, which means that our dues cost us over four and a half times in 2024 what they cost us in 2003. The California cost of living increased 78.8% over the same period. This means that the general cost of goods and services, and pensions which rise with inflation, went up by about 1.8 times over this period. Another way of looking at this is that OVA dues increased four and a half times as fast as inflation between 2003 and 2024.
If we look at baseline dues rather than gross dues, the picture is a bit better. Baseline dues cost increased 296.3%, which means that our dues cost us about four times in 2024 what they cost us in 2003. Thus baseline OVA dues increased about 3.8 times as fast as inflation between 2003 and 2024.
Comparison of current OVA Board era (6 years) with preceding 15 years
In 2018, a new slate of directors was elected to the OVA Board, representing a vision of Oakmont that has been fairly consistent since then. In order to compare dues inflation in this “era” of OVA Board management with preceding years, the rates of increase were computed for the periods 2003 – 2018 vs 2018 – 2024 (see Appendix).
During the earlier 15-year period, gross dues assessments rose by 145.9%, or 9.7% per year, vs 41% or 2.7% per year for the CA CPI. Thus gross dues rose at a rate 3.6 times that of general inflation. During the later 6-year period, which includes and is still impacted by the member-voted 2020 dues increase for purchasing and subsidizing the golf courses, gross dues assessments rose by 86.6%, or 14.4% per year, vs 26.8% total or 4.5% per year for the CA CPI. Thus gross dues rose at a rate 3.2 times that of general inflation.
If, instead of looking at gross dues assessments, we look at the lower baseline assessments, then during the earlier 15-year period, dues rose by the same 145.9%, or 9.7% per year, because the effects of the CAC loan assessment ended before 2018, the last year of the earlier period. During the later 6-year period, which includes and is still impacted by the member-voted 2020 dues increase for purchasing and subsidizing the golf courses, baseline dues increased by 61.2% or 10.2% per year, vs 26.8% total or 4.5% per year for the CA CPI. Thus baseline dues rose at a rate 2.3 times that of general inflation.
One mildly surprising conclusion I draw from the preceding section is that the recent OVA Board era, i.e. the most recent 6 years, have actually enjoyed similar baseline dues inflation (averaging 10.2% per year) to the preceding 15 years (averaging 9.7% per year). Thanks primarily to the golf course acquisition and subsidy, however, gross dues inflation in this period is much higher (averaging 14.4% per year), and the 2024 dues increase (10.6%) is the second highest of the period, after the voter-approved 30.7% increase in 2020.
Over the full 21-year period of time, dues have risen about 3.8 times as fast as inflation. This seems outrageous, but remember a number of factors that have had an impact over this time period:
- At the beginning of the period, in 2003, dues were extremely low, $27.25 per person per month, even when taking into account inflation that would make that the equivalent of $48.72 in today’s dollars. I have heard the assertions made that (1) facilities were allowed to degrade over many years to keep dues low and (2) income from developers, e.g. of the Orchard, was used for operational expenses, rather than adding to reserves. I find these reasons credible, at least.
- Because reserves were not maintained at an adequate level to support refurbishment of East and West Recreation Centers, and Berger Auditorium, the Board was force to borrow money for the East Rec remodel. Loan service added to OVA costs, which could only be paid by increasing dues.
- The member-approved dues increase between 2019 and 2020, to purchase and subsidize the golf course property, resulted in a 30.7% dues increase in a single year, enough to significantly affect our dues for years to come.
- In recent years, the OVA Board has undertaken services which were never provided before the 2017 fires, namely mitigating fire danger to the community by imposing more fire-safe standards, making changes to common area landscaping to reduce fire risk, and trying to find additional routes for emergency egress from Oakmont. Costs for these services are probably not huge, but are certainly not zero either.
- Also because of the wildfires of recent years, insurance rates for OVA have gone up dramatically more than the general inflation rate.
Regardless of the causes, the net result of 21 years of dues increases is that the dues cost for a couple living in Oakmont is now $250/month for owner-maintained properties or around $500 to $600/month for people living in sub-HOAs. The assertion that OVA dues are “cheap” is no longer as easy to defend as it once was. Furthermore, heavy expenses, such as the golf course acquisition and rec center facilities refurbishments, have been completed in recent years and should not be a heavy burden for some years to come (although contributions to our maintenance reserves should certainly be continued, to avoid future short-falls like the ones experienced in the 2010’s).
What the Board should do to control dues inflation: With the assistance of the Treasurer and the Finance Committee, the Board decides on the details of the coming year’s budget and the dues that are needed to support it. I do not understand all of the details of this process, but if I were controlling it (i.e. on the Board), I would:
- First compute a draft budget to support the necessary activities of the OVA staff and contractors, plus any new initiatives that are priorities of the Board. This will give an initial dues estimate.
- If the dues estimate requires a dues increase that is below or just a little above the preceding year’s CA CPI percentage increase, then we are almost done – complete the necessary details, vote on the budget, publish the budget and dues for the next year, and move on to the next task.
- If the draft dues increase exceeds twice the rate of increase of the CA CPI, then scrub the budget to reduce the increase below that level. First to go should be new initiatives that are not essential maintenance and that are, in fact, discretionary. If that is not enough, then consider reducing contributions to the Capital Improvement Fund for the year.
- If the draft budget includes a new capital improvement project that would drive the dues increase rate above 10% or three times the previous year’s increase in the CA CPI, whichever is greater, then either cancel or delay the capital improvement project, or submit a proposal for the needed large dues increase to a vote of the membership. [NOTE: I know this is below the 20% threshold from Davis-Stirling law that requires a membership vote, but I have seen nothing in the law that would either prohibit the Board voluntarily holding such a dues increase election, or amending the Bylaws to require such an election. Too often, directors have claimed that the minimum of democratic member involvement required by the state is the maximum democratic member involvement allowed by the state, but I do not believe that to be the case. It is true that the Board is not allowed to submit to a membership vote any issue whose resolution might violate their fiduciary duty to the association, e.g. replacing the roof on the Berger. But I don’t believe that any new capital improvement project would meet that criteria, unless required by state law, e.g. making a building ADA compliant.]
While dues cannot be absolutely locked to the general inflation rate, I believe that it should be the fiduciary duty of OVA directors to use the general inflation rate as a target for dues increases. My reasoning is simply that a typical Oakmont resident, when considering his housing choices prior to purchase, naturally expects that OVA dues will be relatively stable, at least enough that he will be able to remain in his home for decades to come, and he should have a right to that expectation. Dues increases as high as this year’s 10.6% increase, above an all-time-high 2023 dues level and compounded over the years, are not stable and threaten many Oakmont homeowners’ financial ability to remain here. At best, such dues increases erode the standard of living of all of us who need to be concerned about whether or not we will outlive our retirement savings.
What we should do to control dues inflation: We need to elect directors who promise to at least try to keep dues increase rates closer to that of general inflation – we cannot indefinitely sustain dues increases that outstrip inflation by factors of 3 or 4. To assert that they are fiscally responsible or even fiscally conservative is motherhood and apple pie; i.e. it can be construed to mean almost anything the board candidate wants it to mean. I want to hear more specific assurances that a candidate will either keep dues increases less than, say, twice the rate of inflation of the preceding year, or will follow procedures such as the four suggestions presented above, in order to protect the OVA membership from expensive dues increases. We need directors who are willing to make hard decisions in order to keep our dues under control.
For too long, OVA Boards have treated dues levels as easily and painlessly increased, as though the OVA membership have deep pockets enough to provide whatever funds the Board feels that they need. This attitude needs to stop!