Thursday, March 19, 2009

Private New Towns--A promising new concept saddled with an old problem?

The City of Hercules, once known for The Hercules Powder Company, a manufacturer of dynamite, is redeveloping its old industrial properties into what has become one of the most explosive new ideas in housing and one of the finest communities of its type on the West coast. Call it the anti-suburb plan; Hercules has employed smart growth and green planning concepts to create commuter and retail-friendly spaces among new housing, commercial and office space. A whole new downtown--"Market Town" will rise from this once industrial area on San Francisco Bay. Various environmental groups, including The Greenbelt Alliance, have supported this new mid-density development.

As a way to counter the suburban sprawl that has consumed our farm and pasture lands at a dizzying pace (some of the fringes of which now lie half built or abandoned) incorporating housing with commercial spaces in a re-vitalized downtown can't be beat. You can add many times the density in a much smaller area. But more than that, bringing goods, services, and transportation within walking distance of residences cuts reliance on automobiles in a way unseen anywhere outside of a few big California cities in recent years.

The Problem with Privately Owned Public Spaces

But like all new ideas, there might be a dark side, one that we have seen and written about many times. While many of these new “transit villages” appear like traditional towns, in most cases, multiple private owners own them, just like in the more traditional residential condominium. Mixed-use common interest properties in high-density buildings require a way to manage and maintain them and the means to fund those repairs. Normally, a building owner who leases space in buildings in a typical downtown area pays for building maintenance from rental proceeds. The established municipality pays for street and utility maintenance from property taxes...

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Monday, March 9, 2009

Is Reserve Funding Mandatory?

Can an Association Legally Defer Funding Reserves Necessary for Repairs and Renovations?

There is a continuing debate in community associations over how much cash an association must set aside to adequately fund its operations and reserve accounts, and at what level the assessments must be set to obtain that cash from the members. Boards of directors frequently face the dilemma of whether to raise monthly assessments in the face of member resistance, or to defer funding certain budget line items--typically reserve funds--to a later time.

California has a mandatory funding statute for community associations. Civil Code Section 1366 says: “Except as provided in this section, the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title.”[1] It uses the term “shall” and that means assessments adequate to do the job are mandatory up to the limits of the board’s authority. In California, the board has the authority to increase regular assessments up to 20% over the prior year and can impose a special assessment of up to 5% of the gross budget, all without a vote of the members.[2] So the authority is there. But does the board have to use it?

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[1] California Civil Code Section 1366(a)

[2] California Civil Code Section 1366(b)