News From Board of Directors

 

 

 

 

• Existing key fobs will continue to work with the new system.

 

Capital Reserve Strategy and Methods Workshop
Monday July 8th at 6:00 pm
Addison Village Club Meeting Room
 
Capital Reserve planning is one of the most critical things that a community does that impacts not only assessments, but even more importantly it significantly impacts property values.  Appropriately funded reserves is an asset to every individual property and inappropriately funded reserves is predictably a liability for each individual property.  Getting it right is consequential and understanding the basis and the methods is imperative for every homeowner in the community.
 
Because of this vital importance to every homeowner, the Valencia board is planning a single-subject board meeting to exclusively discuss this very topic and we hope that you will be able to join us in-person for this discussion.  The purpose will be to discuss the methods and the tools that we use to determine appropriate levels of reserves so that the reserve status of your community is a strong asset to your individual property value.  It is our hope that you will walk away from this meeting with:

 

• a complete understanding of how the analysis is carried out,
• what priorities guide decision-making,
• what guide-posts are established and why they’re important,
• what good looks like in terms of the overall picture,
• what warning signs to look for in a planning horizon that spans a very long time.

 
A simple agenda will follow with Zoom information, but it is our sincere hope that you’ll be able to make it to the meeting room in-person.  We will present a lot of information and there will be plenty of time for questions and comments.
 
We will look forward to seeing you there. 

 

The Florida legislature has enacted, and the Governor signed last week, new legislation that limits the authority of homeowner associations and protects the rights of homeowners in some important ways.  The legislation progressed through the legislature as HB 1203 and with the Governor’s signature, these new provisions will take effect on July 1, 2024.

 

These changes passed both the House and the Senate with unanimous votes in both chambers and a summary of the new provisions are:

 

• Associations with more than 100 parcels will be required to maintain a digital copy of specified official records for download on the association’s website or through an application on a mobile device.  Valencia has 74 and we are exempt from this requirement, but with the introduction of our new website we are in full compliance with this provision of the statute.  Since we already value access and transparency, we already comply if this requirement if extended to communities of our size in the future.
• Official records will be required to be maintained for at least seven years, unless the governing documents of the association require a longer period of time.  We already comply with this requirement also.
• There will be new and significant criminal penalties for board member misconduct.
• Homeowners will be empowered to make a written request for a detailed accounting of any amounts owed to the association, with response time requirements on the part of the association and penalties for not meeting those requirements.
• The education requirements for directors are revised to include specific curriculum that includes training relating to financial literacy and transparency, recordkeeping, levying of fines, and notice and meeting requirements.
• Directors will now also be required to complete at least four hours of continuing education annually.
• Associations (including Architectural or Modification Review Boards) will be required to provide written notice to the homeowner of the specific rule or covenant relied upon when denying a request for the construction of a structure or other improvement.  It will no longer be acceptable to just say ‘No’ with little or no citation of chapter and verse of the basis for that decision.
• Associations will be prohibited from placing limits on the interior of a structure or require review of HVAC, refrigeration, heating, or ventilating system not visible from a parcel’s frontage, an adjacent parcel, common area, or community golf course, if a substantially similar system has been previously approved.
• Associations will no longer be able to prevent a homeowner from installing or displaying vegetable gardens and clotheslines in areas not visible from the frontage or an adjacent parcel, an adjacent common area, or a community golf course.
• Fines or suspension are expressly prohibited for:

• • Leaving trash cans at the curb or end of the driveway less than 24 hours before or after the designated garbage collection day or time.

• • Leaving holiday decorations or lights up longer than indicated in the governing documents, unless such decorations or lights are left up for longer than one week after the association provides written notice of the violation to the parcel owner.

• Associations are legally prohibited from restricting a homeowner or others from parking:

• • A personal vehicle, including a pickup truck, in the property owner’s driveway or in any other area where they have a right to park.

• • A work vehicle, which is not a commercial motor vehicle, in the property owner’s driveway.

• • Their assigned first responder vehicle on public roads or rights-of-way within the homeowners’ association.

• Associations are prohibited from applying compound interest on unpaid assessments, allowing only simple interest.

Friends and Neighbors,

 

Your Board has added another significant win to the business restructuring effort that has been underway this year and this one relates to the Management Contract with Key’s Property Management Enterprise.

 

The previous contract cost the community $862/month and with some additional expense reimbursement provisions, the annual cost was $11,644.  The new contract costs the community $600/month and with significantly reduced expense reimbursement provisions, the new annual cost is $7,740, a 34% reduction.

 

The board noticed that the associations bylaws limited the term of any management contract to no more than 12 months and required that the contract provide for termination for any reason with no more than a 30-day notice.  Our contract was for 3 years and had a convoluted termination provision that required up to a 60-day notice.

 

We approached the management company with the conflicts with the governing documents and presented them with the opportunity renegotiate the terms of the contract (including the contract language, cost, and fees) or we could just void the contract and terminate the business relationship.

 

We negotiated aggressively on your behalf, including preparing a revised contract that was born from the management company’s own document that strikes all of the objectionable provisions, deletes most of the additional fees, and significantly reduces the monthly fee to a more appropriate level since many of the services included in the contract language we didn’t need or want.

 

The result is a new agreement that is a win-win for both sides, provides all of the services that we want and need, costs significantly less, and resolves the conflicts with our governing documents.

 

For those keeping score, this initiative brings the total value of restructuring efforts to $41,200.

 

Cash Management	$10,365
Insurance Policies	$5,205
Landscape Maintenance Contract	$21,726
Management Contract	$3,904
Total	$41,200

 

Capital reserve funding tools and strategies represents the final piece, and the board is expecting to hold a single topic, membership-wide meeting in July to discuss this very important topic.  We hope that you will be able to attend in-person and participate in this meeting.  Our reserve funding is in excellent shape and the purpose of this meeting is to convey all of the information and methodologies that form the basis for reserve planning and provide opportunity to ask questions and seek clarification.

 

Lastly, the new Valencia website will be launching this week and it represents a 2-month long effort to produce a tool that makes an enormous amount of information available to members, provides a means of much improved communication that we hope is significantly better than email, provides a means to get questions answered, and for those that are interested in volunteering their time and their talents, a means to make that known is also included.  

 

Invitations with the link will be sent via email (this very same email list) in the next few days.  We hope that you like what you see and suggestions for features that you would find useful would be greatly appreciated.  We hope that you and your family have a great Memorial Day weekend.

Friends and Neighbors,

We have had great success finding cost effective and responsible results with respect to the core financial
challenges of cash management, insurance coverage, and landscape maintenance services over the first four
months of this year. Those successes have been significant enough to permit an extraordinary event to take place;
an amendment to the adopted 2024 budget that reduces the forecast expenses for the full year, and a
corresponding reduction in the assessment that will be due for the second semi-annual assessment period.
All of these improvements are sustainable, year after year, and 2025 will be even better when a full year of these
efficiencies can be realized as well as additional opportunities that are still in front of us.

Attached, please find a copy of the amended 2024 budget that was adopted at the April 22, 2024 board meeting
and the revised assessment for the second half of 2024 of $743 as opposed to the $893 incurred in the first half of
the year. When the original 2024 budget was adopted back in November of 2023, the forecasts were reasonable
given the current costs incurred, the high inflation environment, and the cloudy picture that is always the case
when peering into the crystal ball for the coming year.

The new board has taken an aggressive approach to alternative solution development, and that approach has
yielded significant cost advantages that were not necessarily foreseeable six months ago. Today, those alternative
solutions are not only ideas and strategies, they are signed, sealed and in-place in a hard-fought, responsible, and
sustainable way.

Capital reserve planning is the next item in the cross-hairs and new analytical tools are under development to
provide a clear and consistent approach that is consistent with published Reserve Study Standards and also
produces guidance that are both financially and managerially responsible. We are planning a single-subject
workshop on the topic of reserve planning for the purpose of sharing the process details with every homeowner
and I hope you will be able to attend the workshop once it is scheduled.

 

We will keep you informed as we make progress on your behalf.

Friends and Neighbors,

Major initiative number three is now complete and we have secured landscape maintenance services for the 2024-
25 contract year at a contract rate of $36,680, which is a whopping $21,456 below the budgetary forecast of
$58,406. This result was accomplished by developing our own detailed bid specifications, developing our own
contract that required more favorable terms and protections for the association, and competitively bidding across a
large cross-section of the industry. We were looking for an opportunity to partner with a growth-focused company
that is fully capable of meeting our needs, but isn’t so big that we are just another account. We looked for
companies that Valencia would be their most important account, and as such we can expect to receive the
attention and responsiveness that companies provide to their largest and most important account. In business, the
exchange of value can take many forms and fees charged are only one of those forms of value. Other, nonmonetary
value in the form of a solid platform to grow a business resulted in an extremely competitive fee to go
along with the most important account status we will have with this supplier. Some members of the community
utilize Domex Lawn Care for their own property, myself included, and while my experience with them is over 2
years, other homeowners have an experience base with Domex that spans 8 or 9 years. The common themes of
those that use and continue to use this contractor is that they work very hard to go a good job, they take personal
pride in the quality of their work, and when adjustments need to be made to align expectation, they are very
responsive and take all feedback constructively. All exceptional qualities for us to have in an important business
partner.

The contract itself has several important features that serve Valencia better than the practice of signing the service
provider’s contract. As the old saying goes. ‘he who writes the contract wins’, the differences between the old
contract and the new contract illustrate this perfectly. Some of those features are:

• The new contract pays in arrears as opposed to in advance so we pay for services have received the
previous month as opposed to paying up-front for the coming month. An important difference that again
keeps the performance incentives where they should be.

 

• Provides for contractor responsibility for liability and workers compensation insurance coverage for their
employees and any subcontractors employees, including requiring that Valencia be added as a named
insured on the contractor’s liability and workers compensation policies. This is important so that we can
(and did) eliminate the need to buy a separate policy to cover a fear that our contractor will leave us
exposed.

 

• Required indemnification for any liabilities arising from the execution of services on our property.

 

• Specific waiver of subrogation to shield us from contractors’ insurance companies coming after the
association for any losses experienced as a result of their insured contractor.

 

• Requires contractors to avoid rolling mower tires directly over sprinkler heads and making them
responsible for any repair of any damage caused in this way. This drives significant repair cost for which
the contractor will now be responsible.

 

• Requires certification of compliance with all federal and state employment laws, including E-Verify.

With the first initiative improving the financial performance of the association by $10,365 per year, the second
delivering insurance policies at $5,205 favorable to budget, and now the third landscape maintenance services
secured at $21,726 favorable to budget, we were able to take the extraordinary action to do a mid-year
amendment to the adopted 2024 budget, and reduce the 2nd half of the 2024 assessment from $893 to $743.

 

You will receive hardcopies of the amended 2024 budget directly in the mail and it will be accompanied by a detailed explanation of how it was achieved. This was a very big win for Valencia and we still have opportunities before us. This action is only a down payment and budgets and assessments for 2025 will be even better.

Be on the lookout for a full-membership meeting that is intended to cover a single important topic – Reserve Planning and Analysis. This is a critically important topic that I hope you will be able to attend in-person.

 

This is our next major initiative and we will keep you informed as we make progress on your behalf.

Friends and Neighbors,

Building upon the cash management strategies that were recently implemented and communicated last month,
your Board of Directors worked on the second major initiative, which is to conduct detailed insurance coverage
reviews and rationalization to ensure that we purchase only the coverage we need, eliminate coverage overlap, and
shop widely for the best policy rates. As a result of that work we have been able to secure new insurance policies
that cover our major risk exposures in a significantly more cost effective way. Insurance costs last year were
$6,310.40 and the budget for this year is $9,688. Rather than accepting this as an unavoidable reality, your board
went to work to dissect all the details of the coverages we had, detailed the risks and exposures we have as an
organization and a community, and shopped reputable carriers for the coverage we need.

Initial quotes were in-line with the budget forecast and we even received some no-quotes from some providers,
which came as a bit of a surprise. It became clear that our specifying $50,000 of property casualty coverage that
included wind coverage meant that there was only one carrier that offers commercial property insurance in
amounts that small. Because of that we were trapped with just this one carrier for all other products in the
package, including some that were overpriced and some that we didn’t need. This is what was driving our policy
costs instead of our fundamental coverage needs. Since we have very little property exposure, we dropped the
wind requirement and will self-insure for wind risk. Doing that opened up the playing field for lots of other carriers
and premiums dropped significantly for the same, and in some cases even enhanced coverage. Since we were no
longer tied to the only carrier that offered small property coverage policies with wind, the field opened up for all
other coverages. We scaled back Directors and Officers coverage to only what we need and the cost fell by more
than half. General liability and Crime coverage levels are identical to previous policies and premiums dropped a
little compared to last year and significantly compared to 2024 budget. We dropped Employment Practices
Liability, Hired/Non-owned Vehicles, and Workers’ Compensation coverage since Valencia doesn’t not have
employees and we don’t rent vehicles. If this changes at some point in the future we can always purchase that
coverage at that time, but for now buying that coverage is like lighting fire to your money. These coverages are
standard elements of the package that are appropriate for some Associations, but definitely not ours. To protect
the community from being sued by contractors’ employees in instances where the contractor does not have a
workers’ compensation policy for their employees, we have developed our own contracts and require that any
company doing business on Valencia property is required to have Valencia Neighborhood Association added as a
named insured on their Workers’ Compensation policy. Without that we will not do business with that company.
That’s a lot of inside baseball, but the net result of all of that is we now have the appropriate and prudent
insurance coverage at a cost of $4,483 compared to a cost last year of $6,310 and a 2024 budget of $9,688. Rather
than accept the renewal expectation we went to work and reduced the cost to budget by $5,205 or 54%.

Coupled with the $10,365 annual cost improvements associated with the strategic cash management initiatives
previously communicated, the Associations net cost has been reduced by $15,570 each and every year. Every
dollar of this efficiency will have a direct and positive impact on assessments each year going forward (now almost
12%) … and we have more opportunities to capitalize upon. In a free market, an effective weapon against inflation
is hard work.

Landscaping contract costs is the next item in the cross-hairs and the bid specifications and contracts have been
developed and distributed to 22 companies.

 

We will keep you informed as we make progress on your behalf.

Friends and Neighbors,

 

2024 is a new year and your new Board of Directors is hard at work making substantive changes that you will be able to see in your neighborhood and feel in your semi-annual assessment … in a significant and positive way.

The first major initiative is now complete and involves two key financial strategies to improve the cash management effectiveness of Valencia resources.  The first strategy involved moving the capital reserve and excess operating funds from low performing financial vehicles at First Citizens Bank to high performing financial vehicles at Fidelity Investments.

The $185,000 balance of the capital reserve fund is now earning 4.98% invested in the safest investment available in the world, US Treasuries.  These funds are liquid within one business day, require no active management of maturity, and they were previously earning 0.35% at First Citizens Bank.  This represents an earnings rate that is 14 times better and actually even reduces risk.

Excess operating funds are now earning 2.69% invested in a Money Market account.  The funds are always liquid, FDIC insured, and they too were previously earning 0.35% at First Citizens Bank.  First Citizens does not offer a commercial Money Market product and this represents an earnings rate that is 7.7 times better with no change in risk.

The second financial strategy implemented is to make semi-annual contributions to the Capital Reserve as opposed to the monthly contributions made previously.  Since our assessments are semi-annual, this strategy gets significant resources ($38,651 in 2024) into the highest earning vehicle we have faster where they can grow faster, with no impact to our operating cash flow.  Funds will spend significantly less time in lower returning accounts and maximizes the investment earnings they generate.

The net impact of these completed strategic cash management initiatives is a cash earnings improvement of $10,365 each and every year compared to the previous strategy.  To put that into perspective that represents the equivalent of completely eliminating the cost of the management services and receiving those services free each year.  Every dollar of this efficiency will reduce assessment each year going forward (8%) … and we’re just getting started.

Your Board is aggressively working on several additional initiatives, some of which have the potential to offer a similar favorable impact on future assessments, in a sustainable way.  Initiatives such as:

• Landscape bid specifications and contract development to introduce broad competitive bidding and contract language that both protects our interests and improves our ability to hold the contractor accountable for results.
• Insurance coverage reviews and rationalization to ensure that we purchase only the coverage we need, eliminate coverage overlap, and shop widely for the best policy rates.
• Capital reserve analysis and methods that review and rationalize each reserve item and refines the estimates that drive assessments, both regular and special.
• Building a ‘coalition of the willing’ with similar neighborhoods in the area that have similar needs to pool and leverage a greater purchasing power and achieve economies of scale.
• Website development to improve bi-directional communication and transparency.
• Establishment of a Valencia Modification Review Board so that requests for approval of property changes can be reviewed and acted upon by our friends and neighbors that live in Valencia as opposed to others that do not.

 

It’s a privilege to serve on your Board and we will keep you informed as we make progress on your behalf.