By CASSIE MCKEE, Four Points News
A Steiner Ranch realtor and former HOA board member asks why residents have to continue to pay a $600 flat fee known as the working capital assessment upon purchasing a home in Steiner Ranch.
Brian Conroy has lived in Steiner since 2002, and has been helping buyers and sellers there since 2004. He was the first developer-appointed resident to the SRMA board several years ago. Conroy said the working capital assessment was added in the last 10 years as a closing cost fee upon transfer of ownership to a buyer.
“Initially, it was equal to three months of HOA regular assessments – a common formula followed by many HOA’s,” Conroy said. “It was designed to help with big picture development expenses, and not necessarily as part of the operating expenses budget.”
Conroy said many HOAs do away with the assessment once the developer has completed the infrastructure and has sold most of the lots.
“I understand that the formula was changed sometime in the last few years to a flat fee of $400, and it was recently raised again to $600,” Conroy said. “So a buyer in the SRMA (non-gated) would normally pay $197 for the assessment, but is now paying $600. This seems to be an extraordinarily high amount, and at this point in the development stage it seems like a sales tax.”
Conroy sent an email to Randy Schmaltz, the executive director of SRMA, asking for more information about the working capital fee. Schamltz responded through staff and sent a copy of the board minutes of the vote to increase the fee to $600 and a snippet of the rule describing the fee.
Board President Bill Menzies, who was elected to the board in 2014, did not respond to FPN’s request for comment. He referred the request to the HOA staff, who did provide some background on the fee.
According to Meredith Hamrick, communications coordinator for the Steiner Ranch Community Association, the collection of a working capital fee is meant to help reduce the necessity or amount of regular assessment increases and/or special assessments. It is customarily collected by the association at the transfer of the home from one owner to another and is a means to provide the association with an additional source of revenue for operations and capital expenses. Working capital funds are deposited into the association’s account and administered by the association’s board of directors.
According to Hamrick, on Nov. 1, 2006, Taylor Woodrow Communities and Steiner Ranch LTD adopted a working capital assessment in an amount equal to three months of regular assessments.
In February 2014, there was a resolution to amend the working capital assessment to an amount of $400. Of that amount, $180 was deposited into the annual operating fund of the association to assist in annual reserve contributions and help offset annual operating expenses, according to the board resolution. The remaining $220 was deposited into a separate account called the “Association Enhancement Fund.”
Association Enhancement Fund
“The Association Enhancement Fund will be utilized for improvements and enhancements in the community and will be separate to the reserve funds utilized for repairs and replacements of existing amenities and community features,” the resolution states. “Any and all expenditures from the Association Enhancement Fund will be recommended by the facilities committee and must be approved by the finance committee and board.
“The board has established an initial cap of $250,000 for the Association Enhancement Fund. Once this threshold has been met, all funds collected through working capital assessments will be deposited in the association’s operating fund to offset annual reserve contributions and operating expenses. The initial cap may be increased based on a goal recommended by the facilities committee and/or finance committee and approved by the board in order to fund a specific project or enhancement.
“Once the funds for the specific project or enhancement have been raised, and the funds have been utilized for the approved enhancement or improvement, the cap will revert to the originally established $250,000.”
Board increases fee to $600
During a board meeting on Oct. 27, 2015, a motion was made to approve an increase to the working capital fee by $200, with the entire $200 increase going toward funding the Association Enhancement Fund, according to Hamrick. The motion was passed and resolved by the board. With the additional $200 increase, the current Steiner Ranch working capital assessment is $600.
Conroy said he does not think it is fair for a person already living in Steiner to have to pay the fee if he or she decides to purchase a different home within the community.
“Many of these fees have been paid by people moving within Steiner Ranch, and I particularly don’t see how that make sense,” Conroy said. “A person moving within the neighborhood places no additional burden on the development, and that is why I think it is more like a tax than a fee. As a realtor, it is something I have to explain at every buyer closing.”
Equitable option suggestion
He said a more equitable option would be to spread the cost out among all homeowners. He said as of May 6, there had been 327 homes sold in Steiner over the past year per the MLS.
“If you simply use the $600 working capital fee, that revenue equals $196,200, and this does not include the additional revenue that would be added for gated home sales. If you spread that across the estimated total of 4,000 homes, that would be $49.05 per home.”
Conroy said he’d like to know how the $600 amount was decided upon. He said he thinks it should be much less and should be earmarked for capital reserves only.
“All of those decisions were made prior to the homeowners assuming full board control,” he said. “It still does not address the issue in my mind of why any new buyer has to pay such a high amount, as opposed to spreading it more evenly.”