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.

Commentary

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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!

Appendix – the raw data

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10 Comments

  1. Lance Wallace on February 8, 2024 at 1:32 pm

    Bruce–Very well done analysis

    Have you or the group come to any early conclusions about worthy persons running for the Board?

  2. Lyn Cramer on February 8, 2024 at 3:40 pm

    Hmm, what to say other than you hit the ball far out of the ball park. Thanks. I will keep this for reference purposes. Long-term, of course, dues cannot outstrip member income without unwanted consequences. Discretionary improvements are often desirable but merit added consideration and should require a higher level of member support.

    This election, for me, is in part a judgement on whether the 2030 Project adequately and accurately measured member preferences on potentially large scale projects. The answer is no.

    • Bruce Bon on February 8, 2024 at 4:16 pm

      Agree completely. In particular, with how inadequate the 2030 Project is for gauging member support for any project. It was good for brainstorming, i.e. to come up with innovative ideas, but it will take a survey or membership vote to tell whether or not a particular proposal has the support of the membership — and the current Board will never allow it!

  3. Norbert Tenenbaum on February 9, 2024 at 10:47 am

    Voting in Oakmont is out of wack. There is one vote per household. Yet, dues are paid for each member of the household. A clear case of taxation without representation.

    • Bruce Bon on February 11, 2024 at 11:34 pm

      Not everyone agrees. The 2018-2019 Bylaws Revision Committee wrote proposals for amending that section of the Bylaws for both one vote per property and one per member (up to two per property), to allow the Board decide which to present to the membership for approval. This is in limbo until the Board takes up Bylaws amendments again, along with all other amendments suggested by the BRC. See https://oakmontobserver.com/why-ova-bylaws-have-not-been-updated/ .

  4. Ken Smith on February 16, 2024 at 6:55 am

    Bruce, I appreciate your industry for comparing OVA Member’s Dues increases to the CA CPI, but I question the validity of your premise. It appears the conclusion your post comes to is that the past and current OVA BODs have not set dues increases in an equitable manner. You haven’t taken into consideration the extraneous but predictable increase in maintenance costs for an aging infrastructure and neither does the CPI. It is a bit disingenuous to create or reinforce the idea that the current board is a group of spendthrifts who take no care or concern about those members who might be in the lower percentile of economic ability to keep up with the inevitable increases in the cost of living… anywhere in the region. It also does not take into consideration the historic under funding of the reserves which incurred a large assessment for the CAC remodel and upgrade.

    • Bruce Bon on February 16, 2024 at 8:58 am

      Your assertion that “It also does not take into consideration the historic under funding of the reserves” is obviously incorrect, if you read the article. I identified 5 factors responsible for the large increases in dues in the last couple of decades, including under funding or reserves in the second bullet point. I am not as familiar with the CAC history, so the point was made wrt the East and West Rec remodels. In any case, I did not write the article to cast blame on Boards of the past, but in the hope of influencing Boards of the future to attempt to control dues inflation, rather than only considering the expense side of the HOA budget equation.

      I don’t accept that using the California CPI as a standard of comparison is unfair. The CA CPI includes housing costs, and maintenance of private housing should be expected to rise similarly to HOA building maintenance. A fairer complaint, which may or may not have more validity, is that the bucket of goods and services included in the CPI is very different from the bucket of expenses faced by an HOA — I don’t know whether a price index based on California HOA expenses would increase faster or more slowly than the CA CPI.

      In any case, your critique misses the point, because it assumes that “fair” means matching dues increases with cost increases to OVA. My point is that Oakmont retirees on inflation-indexed pensions (much less those whose income is more fixed or who are living on savings) should be a major concern for Boards when they decide on a budget and, therefrom, on the following year’s dues. If the mandatory costs of living, such as insurance premiums and OVA dues, go up faster than their pension income, then they must cut back in discretionary spending. Why shouldn’t the OVA Board take a similar approach, rather than just jacking up dues at 2 or 3 times the inflation rate?

  5. Ken Smith on February 22, 2024 at 9:17 am

    Bruce, I didn’t assess your premise as “fair” or not. I said it was invalid, which you seem to agree with when your state the CPI “bucket” “is very different from the bucket of expenses faced by and HOA” which is my point. I think your false equivalence, or apples to oranges comparison is misleading to encourage the assumption that the OVA BOD does not take economically challenged members into consideration when proposing dues increases. The fiduciary responsibilities of an HOA BOD are clear and proscribed by CA state law. It is a mind-bending and torturous process to predict budgets a year in advance which requires assessment of assets and requirements of Capital Improvements, Asset Replacement and Expense Reserves, staff and management costs, Insurance, etc. and usually involves a dozen or more member volunteers and the HOA management teams as well as an outside paid reserves budget professional/s.

    • Bruce Bon on February 22, 2024 at 9:47 am

      Ken, I think it is useful to point out the complexities, as you have. As you say, I pointed out the distinction between the mix of goods and services represented by the CPI, and the mix of expenses borne by OVA, so I don’t think I promoted any “equivalence”, false or otherwise. But inflation, which is perhaps a fuzzy concept but is fairly well represented by CPI, is what all of us face in our living expenses, and is often used to index pensions, so I think CPI is highly relevant to the discussion.

      While I see evidence, or claims at least, that the Board does not frivolously add to the OVA budget, I have seen no evidence that they either take inflation into account or actually search for ways to reduce waste and save money when expenses increase (which is what you or I would have to do when our expenses increase). Fiduciary responsibilities may be clear, but they are not very specific; i.e. you could never show a dereliction of fiduciary responsibility for not being frugal to avoid unnecessary dues increases. I haven’t thought about it much, but one thing that might show concern about undue increases would be if the Board were to, at the time of determining the next year’s budget, specifically request the Finance Committee or Treasurer to look for ways to cut back in order to keep dues inflation down closer to general inflation, as represented by the CPI.

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