Covenants: Your Input Needed

Thank you to all of those who attended our Covenant Info Sessions in May and to those who provided us thoughts and feedback.

The Walnut Grove Homes Association (WGHA) Board is in the process of revising the Covenants that govern use and maintenance of lots and the assessment of annual dues for Walnut Grove homeowners. Our goal is to bring the covenants of the eight separate plats of Walnut Grove into unity and to ensure the financial stability of our neighborhood, particularly in regard to our neighborhood owned greenways.

Amending the covenants is a laborious process. First off, we want to ensure we are thoroughly reviewing all aspects of our governing documents and being especially thoughtful in any changes or clarifications we look to make. Along with implementing feedback, we’ve reviewed surveys conducted by prior Boards to ensure we are keeping neighbors’ interest at heart.

Secondly, we want to ensure the amendment provides long term financial stability for the neighborhood. The Original Covenants included a $40.00 cap requiring a 50% neighborhood vote to increase. In 2005, this vote was conducted, raising the dues cap to $75.00 per year. At that time, the board acknowledged that dues would need to be increased to $129 per year to maintain the purchasing power of the original $40 cap based upon the US Bureau of Labor Statistics Consumer Price Index (CPI). Now, in 2020 per the CPI $40 in 1968 is equivalent to $295 today.

The majority (about 80%) of the WGHA fees that are assessed annually to homeowners are used to maintain the common areas of Walnut Grove including the four greenways, their paved paths, and the lighting along the path.  The current annual fees of $75 per homeowner per year are not adequate to maintain these areas and pay the other expenses of the Association.  We have been able to maintain the Greenways over the past several years under the $75 cap by drawing down the reserves of the Association, and deferring needed maintenance of the common areas, including Greenways. You can find our 2020 Annual Meeting Presentation, including a high level budget proposal here.

After reviewing other neighborhood associations Covenants, Bylaws and annual dues, we’ve found that other neighborhood’s dues are substantially higher than current WGHA dues. This makes sense considering WGHA has been operating under a deficit. We also found that many neighborhoods do not have a dues cap. Rather, they vote on their budget and annual dues at their annual meeting and feel secure in this process. Our sister neighborhood, Wexford, operates in this exact fashion. Wexford dues started at $40 in the mid to late 70s. They were increased to $65 in the mid 80’s, $75 in early 2000s, and now are at $110 for single family homes, with the intention to increase in increments in future years. 

The Covenants & Bylaws Sub-Committee currently favors removal of any cap on annual fee assessments, preferring to put the annual fees to a majority vote at the annual meeting of the Association at which every lot will be entitled to vote on the amount of the fees for the ensuing year.  This approach will avoid having to continually amend the Covenants in regard to the cap (a laborious process as it requires soliciting signatures from over 50% of homeowners of each of the eight plats of Walnut Grove). 

In on-line video listening sessions late last month some participants expressed reservations with eliminating the cap on fees. Personal communications between Board members and other homeowners have found homeowners both for and against elimination of the cap. (You can watch one of the Zoom listening sessions here with follow up Q&A’s summarized here.)

We want to make sure all voices are heard.

We will be asking all homeowners to execute (personally sign) amendments for their individual plats in the coming months. In order to accomplish this in an efficient manner we want to finalize the amendments in a form acceptable to the majority of homeowners.  Therefore, the Board needs will be seeking your input on the following issues by means of a survey issued by email Tuesday, June 23rd from Qualtrics Survey via David Polet:

  1. Simple Vote: Do you favor the elimination of any cap on annual homeowner fees in the covenants with the protection against excessive annual fees being the approval of the annual budget and annual fees by majority vote taken at the annual homeowners’ meeting? This method prevents our association from being in difficult financial straits in the future as it eliminates the fluctuation caused by inflation and changes in home value, allows us to vote democratically at the annual meeting, and would help us create a reserve for upkeep. It would allow us to raise dues if needed and agreed upon, but also lower the dues without risk of financial hardship.
  2. Hard Cap: Do you favor retaining a set cap on fees in the covenants? If so, what do you believe the cap should be? Keep in mind in that the proposed new covenants shall still require the annual budget and thus the dues assessed against each homeowner to be put to a majority vote of all homeowners at the Annual meeting each year. Thus, the dues may fall below but not above the cap. This method would provide a hard cap that would require a large-scale neighborhood vote, similar to that conducting in 2005, to amend the cap. The downside is that it could limit financial flexibility for the neighborhood.  
  3. Indexed Cap: Do you favor retaining a cap on fees in the covenants that is subject to increase annually by some percentage a year, or by indexing the fee to an inflation standard like the Bureau of Labor Statistics Consumer Price Index? If so, what should the cap be, and how should it be indexed? Keep in mind in that the proposed new covenants shall still require the annual budget and thus the dues assessed against each homeowner to be put to a majority vote of all homeowners at the Annual meeting each year. This method would provide a cap for the year 2021 that would automatically change by a set percentage each year. The annual dues may sometimes be at the cap threshold, whereas other years it may stay well below. This provides slightly more flexibility than a set cap, but not as much flexibility as a no cap option.  

The most up-to-date copy of the proposed amendment can be found here. It contains all three dues proposals as examples. Once we have the results from the survey, if a clear majority opinion presents itself, we will modify in accordance with the neighborhood’s preference. 
Please note this is the draft for the Farmington Addition. While all amendments will be uniform, the paragraph references may be different.