08.31.23

The Community Association Dollars & $ense Checklist

• The Dollars & $ense checklist compliments our budget checklist and much more.

Community associations are unlike any other enterprise: they’re a complex mashup of governments and nonprofit corporations that involve bookkeeping, community relations, human resources, insurance, investing and forecasting, property maintenance, repair and replacement and so much more.  If you feel like you’re drowning, you’re not alone.  Think of this newsletter like your life-jacket. 

Embezzlement x4

• Our ongoing coverage of fraud and embezzlement continues.  View our prior coverage here, here and here and follow-up with Why Accountability Matters.

…Mai Houa Xiong, 47, of Fresno, California, is charged with five counts of wire fraud, one count of aggravated identity theft, four counts of making and subscribing a false return, and one count of failure to file an individual return…According to the federal indictment, Xiong, who lived in Minnesota from May 2013-October 2021, worked for an unnamed management company in Minneapolis that managed properties for homeowners associations in the Twin Cities. Her duties included management and maintenance of residential properties; managing associations' funds and bookkeeping; and providing financial services for her company's clients.

"She had nearly unfettered access to the victim homeowner’s associations’ financials, bank accounts, vendor and contractor payments, and bookkeeping systems," the U.S. Attorney's Office news release said.

Between February 2015 and February 2022, Xiong is accused of devising and executing a fraud scheme to embezzle money – the HOA fees collected from residents – directly from accounts to which she had access. The money was intended to pay for maintenance, construction and other costs incurred by the homeowners associations….

California woman embezzled $1M from Twin Cities homeowners associations: charges — FOX 9 Staff | FOX 9 KMSP | September 26, 2022

DOJ: California Woman Indicted for Embezzling More Than $1 Million + Order

Fighting for Attorneys’ Fees

• This case began with a $150 fine related to a service animal.  There are separate charges here, but in short the law firm in this case (Porter McGuire Kiakona) was found to be a debt collector in violation of the Fair Debt Collection Practices Act because of deceptive practices.

As the complaint against Porter McGuire describes it, the firm’s debt collection attempts eventually took on a life of their own, as the firm racked up even more fees against Warta related to collections.

“It became about attorney’s fees,” Warta’s attorney Justin Brackett said in an interview…

The matter provides a window into how law firms can rake in big bucks by suing condo owners, then charging the owners themselves for the cost of the litigation.

This means the more the condo owner pushes back against the association, the more the bills increase, said Jim Wright, a Honolulu lawyer who has represented condo owners as well as associations.

“In a case where the owner’s wrong, it’s appropriate,” Wright said. “But it encourages owners not to raise credible concerns until there’s a conflagration.”  Meanwhile, the ability of the associations to place liens on a condo owner’s property to cover fees tips the scale even further against the owners.

…The fight over fees can end up becoming more important than the dispute that led the lawyers to get involved.  “It’s sort of like the legal fees swallow up the original legal issues,” O’Meara said.

In Warta’s case, for instance, Porter McGuire Kiakona kept running up bills to collect fees for two years after Warta had gotten rid of the offending dog, Warta’s lawyers said…

Here's What Happened When Lawyers For A Condo Association Tried To Collect Their Fees — Stewart Yerton | Honolulu Civil Beat | October 30, 2022

Warta v. Porter, McGuire, & Kiakona, LLP, Civ. 21-00100 LEK-WRP

The Good Fight

• Even attorneys agree that homeowners need superior remedies to proactively prevent their association from going sideways. 

For many homeowners, living in a homeowner association (HOA) provides a sense of community and protection of property values. But in some cases, homeowners find themselves at the mercy of corrupt boards of directors who misuse homeowner funds and engage in unethical behavior. When homeowners try to fight back, they often find that they are unable to afford legal representation, leaving them with few options for recourse. As a result, it is crucial that laws are established to empower homeowners and enable them to investigate and take action against boards of directors who engage in corrupt practices.

The recent case of the Hammocks Community Association highlights the severity of the problem. In this community, several board members were arrested for stealing homeowner funds. But for years before the arrests, homeowners tried to remove the board of directors, only to face retaliation in the form of bogus fees, the suspension of owner rights and meritless lawsuits. When it finally reached a judge that acted, assessments had been raised 400%, millions of dollars had been stolen, and countless owners had been victimized. The situation was so extreme that the entire board was removed, and a receiver was appointed to take over immediately. We need to act now to ensure that the catastrophic level of corruption reached at the Hammocks is not necessary to get a court’s attention in the future…

Homeowners need more legal resources to combat corrupt HOA boards — Jesmany Jomarrón | South Florida Sun Sentinel | March 12, 2023

Segregation

• We strive to provide the best explainer on community associations (AKA common interest communities) on the planet with dozens of links to resource material (some of the best of which was written three decades ago).

Sadly, community associations are rooted in segregation.

The Man Who Made the Suburbs White — Mark Dent | Slate | August 16, 2023

Convenience vs. Yield

• Why does your association need a brokerage account?  The math adds up

  • Business savings accounts at banks like Washington Trust pay 2.34%

  • CDARs are pay up to 3.3% APY for a 26-week duration

  • Fidelity brokerage premium money market funds are paying 5.07%

  • Brokered CDs and Treasuries are paying up to 5.5% for sub-1yr durations

Bottom line: CDARS and other similar products are designed to trade yield for convenience. Banks make more money. Your association earns significantly less yield. Don't trade convenience for yield!

Receivership Expen$e

• The following article identifies five community association red flags.

“It’s like we exchanged one dictator for another,” said Carlos Villalobos, a longtime Hammocks resident who is serving on the new board. “The Hammocks is a big cow to milk. Our concern is that the receiver is eating up the money he hopes to win back. He’s been given a blank check with no deadline. “We’d like to see a reduction in some exorbitant expenditures and a release of more power to the board.”

Receiver David M. Gersten has billed $2.03 million in expenses in seven months on the job. Gersten, the retired chief judge in Florida’s Third District Court of Appeal, was chosen by Miami-Dade Circuit Court Judge Beatrice Butchko to oversee the Hammocks and the new board that was elected March 30.

Gersten is investigating some 55 bank accounts the old board is accused of using in a scheme to shuttle money into their own pockets. He is examining hundreds of documents previous board members had hidden. He is trying to recover missing funds paid for no-show maintenance work and legal fees paid to lawyers defending the previous board members — all from the HOA’s coffers.

“According to the invoices, we’re paying for 14-15 lawyers, plus paralegals, and lots of lawsuits. We paid $300 for one lawyer to take a Google photograph of the clubhouse. Mr. Gersten told me he’s magnanimously reduced his hourly fee from $800 to $671, and we appreciate him taking on this complicated situation. “But if he is the Rolls-Royce of legal fees, maybe it would make more sense for us to get to our destination in a Ford Explorer.”

Florida's largest HOA is unraveling the mess caused by its ex board. It's costing millions — Linda Robertson | Miami Herald | August 21, 2023

Big Bill$ for a Retaining Wall

• Has your association retained the appropriate reserve posture?

…The Parkridge Owners Association, which governs a complex of 43 1970s-era condominiums off 29th Avenue Drive SW, last month assessed condo owners between $10,000 to $18,000, depending on the size of their unit, to pay for replacing a crumbling retaining wall. The initial cost of the project was $600,000.

The board last week lowered the special assessment, with owners of the largest condos asked to pay $12,300 after a lower estimate for a block wall rather than poured concrete one to replace decades-old railroad ties.

“The railroad ties that were used to build the original wall are rotting away, causing the portion of the wall that is holding up the garages to fail,” according to a May 22 letter from the volunteer board to condo owners. “If this is not replaced soon, the association will be liable for damages caused to the neighboring properties, which could amount to more than it would cost to repair the wall.”

The group looked into getting a loan for the work, but “we were denied or asked to come up with a large down payment as well as proof of monthly payments,” the letter states…

Cedar Rapids condo owners given short time to pay big bills — Erin Jordan | The Gazette | August 27, 2023

Sticker Shock

• Deferred maintenance = deferred financial pain.

$10,000+ special assessment fee — u/dirtyrick133 | r/HOA | August 29, 2023

Revealing Audit

• Does your association have sufficient financial controls in place?  Florida’s HB919 addresses some of the conflict of interest concerns from these audits.

A 2021 audit of Nautica, a gated Boynton Beach community of 336 single-family homes, has found “significant deficiencies” in its financial controls that could leave its homeowners association vulnerable to mismanagement and fraud.

The audits, conducted in 2020 and 2021 by the accounting firm Hafer, noted that the HOA did not have a conflict-of-interest policy or “a fraud response plan.” The two audits included the following disclaimer: “We have not been able to obtain sufficient appropriate evidence to provide a basis for an audit opinion on the financial statements.”

There was no finding that fraudulent activity actually occurred at the 28-year-old development off Lawrence Road, but the audit did discover “material weaknesses” serious enough that “there is a reasonable possibility” that a misstatement of the HOA’s finances would neither be detected or discovered in a timely fashion…

Audits from 2018, 2019 and 2020 also found problems. The 2018 audit reported: "The president of the Board of Directors of the Association is the owner of a landscaping company which is one of the Association's vendors. Amounts paid to the vendor for the year ended Dec. 31, 2018, were $49,046." Audits in 2019 and 2020 arrived at similar conclusions. During the three-year period ending 2020, the landscaping company received nearly $160,000…

"The potential loss of confidence from members and the contract’s susceptibility to challenge are good enough reasons to search for another vendor. One final concern to consider is what happens if the vendor does not perform and needs to be sued. That would put the board in the position of suing its president."

Audits at Boynton Beach HOA question its finances; board president awarded contracts — Linda Robertson |Palm Beach Post | August 21, 2023

If you See Something, Say Something

• Is there something wrong?  In the neighborhood?  Who you gonna call?

How long should I wait to start pointing out errors to the board as a new board member? — u/Questions67n68 | r/HOA | August 18, 2023

Stay in Your Lane!

• Does your association understand the limits of its authority?

In a July newsletter distributed to members of the Owners Association of Westfield, the HOA announced it would begin “strictly” enforcing vehicle and parking violations, including by towing vehicles off the city-owned streets in the neighborhood’s three enclaves off of Prue Road...

…But unlike a gated neighborhood with private roads, it does not appear Westfield’s HOA has the authority on that plan. In response to KSAT’s questions about the legality of its plan, the San Antonio City Attorney’s Office said the following in an emailed statement:

“The City does not have a role in the development or enforcement of HOA rules and is not familiar with the rules of the Westfield HOA. However, the streets are public right-of-ways of the City of San Antonio and parking is permitted. Parking regulations are governed by state law and city ordinances. Traffic and parking violations enforcement is the responsibility of the San Antonio Police Department and Code Compliance, which includes requests to tow. If anyone has parking issues, you may call 311 or Non- Emergency 210-207-SAPD (7273) to report traffic parking and/or moving violations.”

North Side HOA threatened to tow vehicles for parking on public streets — Garret Brnger | KSAT | August 29, 2023

View past coverage:  1,  2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17.

Energy

• Rusting and unrusting our way to more affordable and sustainable storage.

How iron-air batteries could fill gaps in renewable energy — Alissa Greenberg | NOVA & PBS | August 22, 2023

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At Polar Night Energy’s facilities in the city of Tampere and the nearby town of Kankaanpää, hulking steel vats hold heaps of sand, heated to around 1,000 degrees Fahrenheit. That stored energy helps to smooth out power grid spikes and back up district heating networks, keeping homes, offices, saunas and swimming pools warm. The heat keeps flowing, even in remote areas, even as Russian fossil fuel supplies dwindle.

“Sand has almost no limits,” said Ville Kivioja, Polar Night Energy’s lead scientist, speaking over the whirring sound of the substance circulating. “And it’s everywhere.”

This start-up is storing clean energy in sand. — Shira Rubin | The Washington Post | August 24, 2023

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Sand has nothing on carbon: …"The final advantage of the extreme temperature stability of carbon is related to heat transfer," wrote Ponec. "Radiative heat transfer is proportional to the temperature of the source object raised to the fourth power (T⁴), so if you double the temperature you increase the radiative heat transfer by 16 times. That’s a powerful scaling factor! The upshot is that at temperatures above 1,500 °C, heat transfer works completely differently than we’re used to at room temperature. Radiation dominates over conduction and convection. For example, at 2,000 °C, over 99% of heat transfer occurs through light, not conduction and convection."...

Ultra-hot carbon batteries promise super-cheap heat and energy storage — Loz Blain | New Atlas | August 29, 2023

The Cost of Net Zero

• You can save up to ~60% of your dryer energy use with one of these…

Heat Pump Dryers Come to Town — Naomi Cole and Joe Wachunas | CleanTechnica | August 21, 2023

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Electric vehicle owners are overall not satisfied with the reliability of the charging infrastructure available in the US, according to a new survey conducted by JD Power. In some cases, things are looking even worse than last year.

The survey finds that 20 percent of survey takers have, at least once, arrived and departed a charging station without gaining any range on their EV. This is attributable not only to broken charging equipment, but also due to long queues of people waiting to charge.

Using a 1,000-point scale, overall satisfaction with DC fast charging experiences has dropped from 674 down to 654. And for Level 2 charging stations, satisfaction has also decreased this year, from 633 down to 617. These are the lowest scores recorded since JD Power started the survey in 2021.

EV charging in the US is still a no good, very bad time — and somehow it’s getting worse — Umar Shakir | The Verge | August 16, 2023

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Convincing everyone to adopt a new technology can be a slog at first. The humble microwave oven, for example, took two decades of lukewarm sales to reach just a tenth of US households. But then came the 1980s, and quicker than you could say “Hot Pockets,” microwaves had spread to nearly every kitchen.

That fast part of the technology adoption curve is happening now with electric vehicles, according to a Bloomberg Green analysis of adoption rates around the world. When we first completed this analysis a year ago, 19 countries had passed what’s become a critical EV tipping point: 5% of new car sales powered only by electricity. This threshold signals the start of mass adoption, when technological preferences rapidly flip. Since then, five more countries have made the leap…

Most successful new technologies — televisions, mobile phones, LED lightbulbs — follow an S-shaped adoption curve. Sales move at a crawl in the early-adopter phase, then quickly once things go mainstream. In the case of fully electric vehicles, 5% seems to be the inflection point. The time it takes to get to that level varies widely by country, but once the universal challenges of car costs, charger availability and driver skepticism are solved for the few, the masses soon follow…

Electric Cars Pass a Crucial Tipping Point in 23 Countries — Tom Randall | Bloomberg | August 27, 2023

Environment

• You’re doing it wrong!

A slim majority of Americans think their individual actions can reduce the effects of climate change, according to a Washington Post-University of Maryland poll.

But do they know which actions are the most effective? Not quite.

The poll finds most people believe recycling has a lot or some impact on climate change. About three-quarters say not eating meat or dairy would have a little or no effect on climate change.

Climate experts say they’re wrong on those and other counts…These incorrect assumptions pose a problem for those trying to cut their emissions. Though a single person’s carbon footprint may be small, taken together, these decisions can add up and prevent gigatons of emissions from entering the atmosphere.

“People are interested in taking action,” said Ann Bostrom, an environmental policy professor at the University of Washington. “But if they don’t know what’s most effective, then they don’t know what they’re accomplishing.”

Recycling and other myths about tackling climate change — Kate Selig and Emily Guskin | The Washington Post | August 28, 2023

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Cigarette smoking and other uses of tobacco shave an average of 2.2 years off lifespans globally. But merely breathing—if the air is polluted—is more damaging to human health.

That is the conclusion of a report published Tuesday by the University of Chicago’s Energy Policy Institute, which identified air pollution as the world’s top threat to public health, responsible for reducing average life expectancy by 2.3 years worldwide…

…If India were to meet World Health Organization guidelines for particulate pollution, the life expectancy for residents of capital city New Delhi would increase by 12 years…

Polluted Air Shortens Human Lifespans More Than Tobacco, Study Finds — Sha Hua | WSJ | August 29, 2023

University of Chicago Reports | Air Quality Life Index — University of Chicago

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Disturbing, but not surprising:

About 90% of water samples taken over the last 10 years from the Great Lakes contain microplastic levels that are unsafe for wildlife, a new peer-reviewed paper from the University of Toronto finds.  About 20% of those samples are at the highest level of risk, but the study’s authors say the damage can be reversed if the US and Canada quickly act.

“Ninety per cent is a lot,” said Eden Hataley, a University of Toronto researcher and study co-author. “We need to answer some basic questions by monitoring … so we can quantify risks to wildlife and humans.”

The Great Lakes provide drinking water to over 40 million people in the US and Canada, hold about 90% of the US’s freshwater, and are home to 3,500 species of plants and animals.

90% of Great Lakes water samples have unsafe microplastic levels – report — Tom Perkins | The Guardian | August 17, 2023

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In this patch of Southern Oregon forest, young stands of Ponderosa and lodgepole pine once pulled carbon dioxide out of the air, storing this greenhouse gas in their trunks, branches and roots.  Today, these trees are charred black snags that bake in the summer sun. Most stand erect, a few so bowed that their tops curl down to touch the ground.

They were killed by the fierce heat of the Bootleg Fire, which raged through here in July 2021, sending up huge pyrocumulus clouds of smoke and ash some 30,000 feet into the earth’s atmosphere, generating their own thunderstorms.

This was supposed to be a showcase for Seattle-based Green Diamond’s forestry strategy for a warming world. The company had committed to century-long plans to slow the pace of logging on some 570,000 acres. In exchange, the company received millions of dollars in payments from Microsoft and other companies seeking to offset their carbon dioxide pollution from fossil fuels by paying to grow more wood on this land…

A giant Oregon fire shows the limits of carbon offsets in fighting climate change — Hal Bernton | The Seattle Times | August 16, 2023

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Bummer!: The researchers sampled 39 brands of straws made of paper, bamboo, glass, stainless steel and plastic. Of those, 27 were found to contain PFAS, though the concentrations were low.

PFAS, an acronym for per- and polyfluoroalkyl substances, are often referred to as “forever chemicals” because they linger almost permanently in air, water and soil. They are frequently detected in food wrappers, cosmetics, carpet, furniture and textiles such as raincoats or workout clothes.

Of the straws tested in the study, those made of paper were the most likely to contain PFAS: The chemicals were detected in 18 out of 20 brands. Four out of five bamboo straws sampled contained PFAS, compared to three out of four plastic straws and two out of five glass straws. All five stainless steel straws analyzed were PFAS-free.

Paper and bamboo straws contain PFAS chemicals, study finds — Aria Bendix | NBC News | August 24, 2023

Housing Affordability & Homelessness

• What could possibly go wrong with Tenancy In Common (TIC) ownership?!

…the idea is to get somebody a piece of the ownership pie for less. It's an idea that seemed to resonate with many of the people who came to visit the home.

"The barrier to entry for a lot of people in this market is just the straight-up cost of buying property," Hayworth said.

…you would technically own a private room and bathroom for $200,000, and then across the hallway on the same floor, somebody else would own the home's other bedroom and bathroom for $200,000. You would have to be okay with sharing the whole downstairs, which comes furnished with the other occupant.

Would you pay $200k to own 25% of this Seattle home? — Maggie Eastland | KING5 | August 22, 2023

Condo Connection's financial coverage is indexed to our Dollar$ and $ense page dedicated to all things CIC finance.

The prime years for making smart financial decisions are, on average, 53 and 54.

At around that age, people have accumulated knowledge and experience about money, spending and saving, but haven’t begun losing key analytic cognitive skills. It’s also roughly the age when adults make the fewest financial mistakes, related to things like credit-card use, interest rates and fees…

“As we get older, we seem to rely more on past experience, rules of thumb, and intuitive knowledge about which products or strategies are better,” says Rafal Chomik, an economist in Australia at the ARC Centre of Excellence in Population Ageing Research.

Chomik led a 2022 study that looked at financial literacy, which is the ability to understand financial information and apply it to managing personal finances. Financial literacy typically peaks at age 54 and then declines, according to the study.

The study gauged financial literacy using questions about inflation, interest rates and diversification. One question: If in five years, your income has doubled and prices have doubled, will you be able to buy (A) less, (B) the same, (C) more than today. (Answer: B)...

The Exact Age When You Make Your Best Financial Decisions — Clare Ansberry | WSJ | August 26, 2023

Inflation and Monetary Policy

• Higher rates are here to stay — that’s the message from monetary policymakers across the globe as they gathered at Jackson Hole over the weekend. Federal Reserve Chair Jerome Powell said the US central bank is “prepared to raise rates further if appropriate,” while the European Central Bank President Christine Lagarde vowed to set borrowing costs as high as needed and leave them there until inflation is back to its goal. Following the comments, two-year Treasury yields — the most sensitive to policy expectations — hit the highest level in seven weeks.

— Kristine Aquino | Bloomberg 5 Things to Start Your Day | August 25, 2023

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Federal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in a speech Friday at the US central bank’s annual conference in Jackson Hole, Wyoming. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

Powell Signals Fed Will Raise Rates If Needed, Keep Them High — Catarina Saraiva and Craig Torres | Bloomberg | August 25, 2023

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This week, Jerome Powell made no bones about the unwavering pursuit of his ultimate objective: 2%. The Federal Reserve chair reaffirmed yet again his singular focus on restoring price stability in the US. And if that means even higher interest rates to get back to that 2% target, then so be it. That was the takeaway on what Powell intended to convey with his eagerly anticipated remarks at the central bank’s annual conference in Jackson Hole, Wyoming. With US inflation much cooler than its pandemic highs, policymakers are signaling they may be close to declaring victory—even if rates must remain higher for longer just to make sure. In this new phase, risk-management is “critical,” Powell says. Still, record low unemployment, strong business investment and resilient American consumers continue to burnish the reputations of soft-landing prognosticators while singing those of Team Recession.

Powell Tells the World He’s Staying the Course — Victoria Cavaliere | Bloomberg Weekend Reading | August 26, 2023

The US bond-market selloff resumed Monday, driving 10-year yields to a 16-year high, as the persistently resilient economy has investors positioning for interest rates to remain elevated even after the Federal Reserve winds up its hikes…

The yield on 10-year inflation-protected Treasuries on Monday pushed over 2% for the first time since 2009, extending its ascent from year-to-date lows near 1%. Not long after, the yield on 10-year Treasuries without that protection surpassed October’s peak, climbing nearly 10 basis points to as much as 4.35%, a level last seen in late 2007, before slightly paring the gain.

The policy-sensitive two-year yield also briefly pushed over 5% late in the New York trading day, leaving it shy of the 2023 peaks notched early last month and in March…

Treasury Yields Hit Highest Since 2007 on Elevated Rate Fears — Michael Mackenzie and Liz Capo McCormick | Bloomberg | August 21, 2023

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Convinced a recession in the US was near, some of the world’s most prominent money managers loaded up on government bonds this year in a bold bet that would atone for the punishing losses suffered in 2022.

That strategy is now misfiring once again, saddling them with subpar returns and testing their resolve as the selloff deepens week after week.

The past week was especially painful. The annual return on US government bonds fell into the red as Treasury yields flirt with a 15-year high, reflecting the view that interest rates may be elevated for years to come — and that the economy will be able to sustain it…

Bond Bulls at JPMorgan, Allianz Double Down on a Bet Gone Bad — Anchalee Worrachate and Liz Capo McCormick | Bloomberg | August 20, 2023

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American politicians are keener than ever to juice the economy with government cash, a shift that’s already helping to drive up borrowing costs and looks likely to keep them high long after the inflation emergency is over.

The outlook for the federal budget right now is essentially unprecedented—crisis-size deficits as far as the eye can see, even though the economy appears to be in good health. That prospect is making investors uneasy, as demonstrated by yields on benchmark 10-year Treasuries climbing above 4.3% this week, their highest levels since 2007. Other borrowing costs are rising in tandem: The average rate on a 30-year fixed mortgage has surged above 7% for the first time in more than two decades.

Investors worry that sustained fiscal shortfalls on the scale projected by the Congressional Budget Office could push rates higher still—which only puts more pressure on public finances by adding to the government’s ballooning interest bills. Concerns intensified this month after a one-two punch: The US Treasury ramped up debt issuance, heralding a supply deluge that’s likely to last several quarters, and Fitch Ratings unexpectedly downgraded America’s sovereign credit rating.

Bond Market Flashes Warning as US Budget Deficit Surges

— Liz Capo McCormick, Erik Wasson, Christopher Condon, and Alexandre Tanzi | Bloomberg | August 24, 2023

Cashing In

• Go long.  We’re approaching the 5% world.  Consider how 5 and 10-year brokered CDs and US Treasuries fit into your association’s investment landscape.  Don’t let short-term planning (or a lack of planning altogether) drive long-term requirements!

Bank of America Warns of '5% World' as Global Bond Yields Rise — Michael Mackenzie and Liz Capo McCormick | Bloomberg | August 17, 2023

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A fantastic article about what you should expect from products advertising rates that far exceed US Treasuries:.

Browsing for attractive CD rates can be a bit like scrolling for partners on Tinder. There are new, exciting options every day, but tread carefully... CD specials are all about creating a buzz.

“Such remarkable rates often serve a dual purpose: to entice new clientele and to stand out in the crowded financial market”...Another rule of thumb: the higher the rate, the lower the maximum deposit, and the more hurdles people will need to clear in order to qualify…”These exceptional offers, while attention-grabbing, typically come with terms and conditions that necessitate careful examination.”

The 7% CD — don’t believe the hype — Quentin Fottrell | MarketWatch | August 21, 2023

Cashing Out

• A majority of Americans cannot afford $400 surprise bills and now this:

An increasing share of low-income Americans are behind on rent and struggling to afford food, adding to signs of growing financial distress in the economy.

Among households using the Supplemental Nutrition Assistance Program’s boosted pandemic benefits, 42% skipped meals in August and 55% ate less because they couldn’t afford food, more than double last year’s share, according to a Wednesday report from Propel Inc., a benefits software developer…

The US economy “is fairing really well, but there’s a lot of hardship being experienced by people with lower incomes right now,” said Justin King, policy director of Propel. “We’ve seen a lot of cutbacks in safety net benefits this year and we’re seeing the impact” of those cutbacks now, he said.

Poor Americans Tap Debt, Buy Less Food as Consumer Cracks Widen — Jarrell DIllard | Bloomberg | August 29, 2023

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• Not all minis are created equal.  Conduit issues account for 1% of outstanding muni-bond debt, but 14% of muni-bond debt in default.

[Conduits] sell bonds and then immediately turn over the proceeds to the nonprofits. Unlike a city or town that issues muni bonds, the conduit bears no responsibility for repaying the debt. It does generally collect a fee along the way.

…The shortcomings of the conduit structure are longstanding and no secret on Wall Street, but they have been exacerbated by the rise of U.S. interest rates. Higher rates mean borrowers pay more to kick debt payments down the road by refinancing. Investors are also less likely to buy any investments they consider risky when high rates make yield so easy to find.

Many conduit issuers stick to selling bonds for longstanding, well-funded institutions like hospitals and universities that rarely, if ever, fail to make payments. They say they fulfill an important role providing lower-cost financing to community-oriented projects.

Still, conduit-related defaults are piling up. Officials in several states have attempted to rein in conduit projects with limited success. The case of the Arizona sports park raises questions about whether the conduit setup, in addition to often being complicated and risky for investors, is vulnerable to abuse…

How Did Things Go So Wrong at This Arizona Park Built With Muni Bonds? — Heather Gillers | WSJ | August 28, 2023

Go Colorblind when Swinging for the Fences 

• The color of a swingset doesn’t amount to irreparable harm worthy of a permanent injunction.

A Missouri judge has ruled that a suburban Kansas City family's purple swingset won't need to have its color changed after a homeowners' association threatened the family with fines or jail time.

"We got very frustrated," Stout said. "There’s somewhere between 2,000 and 3,000 homes in our community. There’s all kinds of colors. There’s people with bright purple doors. There’s trees that are the color of this swing set."

Judge rules Missouri family's purple swingset can stay — Fox News | August 31, 2015

Plaintiff Raintree Lake failed to present evidence as to the element of irreparable harm. There was no evidence presented to this Court that Plaintiff Raintree Lake will or has suffered irreparable harm as a result of the erection and/or color of the swing set.

Although, as stated previously, irreparable harm may be found when pecuniary remedies fail to provide adequate reimbursement for the improper behavior, the evidence before the Court was that Defendants were initially fined in regards to the swing set but that fine was then set aside by Plaintiff Raintree Lake’s own Appeals Board.  Plaintiff Raintree Lake failed to meet the first element required under Missouri law for permanent injunctive relief and therefore is not entitled to the relief requested in its Petition for Mandatory Injunction and Associated Relief. 

As the Court has found that Plaintiff Raintree Lake failed to prove the element of irreparable harm, the Court finds that it is unnecessary to address the second element, that there is no adequate remedy at law.

RAINTREE LAKE PROPERTY OWNERS ASSOCIATION v. STOUT — Case No.1416-CV29713 | Division 12

Prohibiting Outdoor Recreation

• These kinds of prohibitions violate Fair Housing laws when they apply specifically to a subset of residents such as children.  Likewise, if the municipality is responsible for the streets then the association has limited enforcement in those cases.

P.S.  They forgot to prohibit roller skates, scooters, and toy cars.

A Wadsworth mother of three said her homeowner's association banned bikes, skateboards, and even playing ball. Now, some frustrated families feel unwelcome in their own neighborhood.

Wadsworth mother says no biking, skateboarding, rollerblading, ball playing allowed in her neighborhood

— Tessa DiTirro | News 5 Cleveland | August 17, 2023