Sunday, June 01, 2008

THE RIGHT THING: THE PRICE IS RIGHT ... OR IS IT?

In a well-landscaped neighborhood in southern California, a new homeowner got involved with her homeowners association shortly after she moved in. Not long thereafter she became treasurer of the association's board.

As the new fiscal year approached and the association's budget was being updated, one of its service providers -- the landscaping service -- raised its rates by 67 percent compared to the previous year. The treasurer asked the board to entertain competitive bids to make sure that the rate increase was warranted, but the rest of the board refused.

Soon afterward the janitorial-service provider indicated that it was raising its rates by 20 percent. Again the treasurer asked the board to consider getting competitive bids to determine whether the increase would bring the service charges up to market rate or if they were exorbitantly out of whack. Once again the board refused.

"My frustration isn't that we're paying a lot," the treasurer writes. "It's that we don't know if we're paying a lot."

Perhaps the association was getting great deals in the past, she explains, and the service providers are merely bringing their charges up to established market levels. Then again, they may have raised their rates way above the current market.

"I just hate that we're making decisions out of ignorance or laziness," she says.

She asks if her board has an ethical responsibility to validate that it is spending the homeowners' money as efficiently as possible, rather than being carefree with expenses.

That's a loaded question, of course, since any board officer -- and I am myself on the boards of a couple of not-for-profit organizations -- knows that it's never ethical for any board to be reckless with its constituents' money.

My reader wonders, however, if she is being arrogant in insisting that her idea of getting competitive bids is correct, and can't decide whether her choice to be a thorn in the sides of the other board members by pushing them to live up to their responsibilities is worth it.

The information about the association's budget and its expenses is not hidden from the home owners. Most of the time, however, homeowners pay scant attention to specific details of the association's business. Only a quarter of the homeowners in my reader's neighborhood chose to attend the association's most recent annual meeting.

Still, their disinterest isn't a license to ignore their interests. The right thing for the board to do is to inform the homeowners about the sizable increases in the service providers' rates. It may be the members who decide how to proceed, or they may choose to leave that decision to the board. It doesn't matter -- what's important is that the issue should be raised.

My reader has a point, though. It may be that the homeowners like the service they're getting so much that they are willing to pay a premium for landscaping and janitorial work. Without knowing what others charge for comparable services, however, they have no way of knowing if they are paying above market rates.

It's the board's responsibility, as a steward for the families it represents, to see that they do know what the market rates are. The community members can't make an informed decision, one way or the other, unless the board does its job and alerts them to these significant increases and provides them with the information they need to understand the situation.

If they decide to stick with the current providers, well and good -- the board still will have done its job of protecting the interests of the homeowners it represents.

c.2008 The New York Times Syndicate (Distributed by The New York Times Syndicate)

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