There is an old Chinese saying, ‘May you live in Interesting Times’. This statement is interpreted to be more of a curse than a friendly greeting, as the interesting times refer to upcoming periods of chaos or uncertainty. Ask any investor or economic forecaster what they fear most, it is uncertainty. Unfortunately, this is the economic environment today’s condominium and HOA board members find themselves in as they develop their future reserve fund budgetary plans.

No matter what your political persuasions are, the continuing blur of economic headlines about fluctuating international trade tariffs; economic retaliations; the price of eggs and cars; soaring housing entry costs; massive government job cuts; stagflation warnings; etc., leave many of us with feelings of uncertainty. For years we have recommended to our Maine clients the need to update reserve fund plans every 4 to 5 years. This rule of thumb needs to be reconsidered in this present climate, as international tariffs will have a significant impact on condo communities.

One thing we can be certain about is a tariff war with our closest neighboring trading partners, as well as China and Europe, will have unintended consequences. Whether the imposition of tariffs is for negotiating perceived trade imbalances or a long-term protectionist policy, there will be a direct impact on the future cost of goods and a reversal of any recent gains on inflationary pressures. While this is a countrywide problem and we are all in the same pool together, some US regions and industries are more in the deep end than others. For this reason, let us consider how an international trade war will affect Maine and more specifically our condominium and HOA communities and what we can do about it.

Canada is Maine’s largest trading partner with over $6 billion crossing our shared 600-mile border. Maine exports $1.5 billion worth of goods to Canada. Maine is highly dependent of Canadian energy importing over 80% of our home heating fuels. One of Maine largest industries is timber but due to historical overharvesting practices a large portion of our lumber goes into Maine’s pulp and paper industry as most of our harvested logs are too narrow to produce structural lumber. Instead, Maine imports from Canada over 85% of our structural lumber needs ($200 million) such as 2×4’s, 2×6’s, etc. to construct our residential and commercial buildings.

On average, lumber costs account for about 10% of a Maine building. It is expected that a 25% tariff on Canadian lumber will raise our lumber import cost by $50 million or 5 to 10% of a new condo unit cost based on estimates from the Maine Association of Home Builders and Remodelers. Similarly, Maine’s construction industry sources much of its cabinets, roofing materials, insulation, and windows from Canadian manufacturers while drywall and appliances are coming out of Mexico. China of course is a source for many other building supplies and products.

Unfortunately, all of this comes at a time when Maine is desperate for new multifamily and condominium units. Instead, the National Association of Home Builders has predicted the tariffs will cause a dramatic slowdown in residential construction due to the expected prohibitive cost increases which appear to conflict with the government’s executive order to increase housing supply and affordability. So, the question arises, what is a condo board to do in the face of rising future costs when preparing the next reserve fund budget?

In the recent past your engineer or reserve fund specialist would prepare a budget based on ‘in-kind’ asset replacement/ repair for each reserve component line item and adjust with a standard inflation rate 3 to 4% as approved by the board. This practice should be revised in today’s environment of uncertainty. Whether it be the talking heads on the evening news or your condo accountant, nobody knows what the future holds. It is uncertain which tariffs will be implemented or how long the trade war will last or what is the impact on your community’s specific project costs and schedule?

For these reasons, a standard reserve fund study may not be the best choice. Instead, discussions with your reserve fund consultant about changing to a more comprehensive reserve fund study approach would be in order. An enhanced engineering analysis will go beyond ‘in-kind’ replacement but instead consider upgrades or alternative materials taking into consideration life-cycle savings; maintenance ease; or operational efficiencies. Objectively reviewing the available options for modernization, maintenance, and repair may produce sufficient cost savings to offset the surprises in the future.

As an example, an enhanced study could reveal your community roof surfaces are not wearing equally due to sun exposure or construction methods. This could suggest a more economical roof resurfacing plan based on roof resurfacing phasing allowing the extension of capital spending to later years to spread cash flow needs. Similarly, the planned HVAC replacement program could convert from oil to natural gas or from conventional systems to heat pump driven systems. Thinking outside the box may be the solution to facing interesting times.

Written by Jack Carr, P.E., R.S., LEED-AP, Senior Consultant Criterium Engineers
Published in Condo Media

Perhaps the most dreaded sound in an HOA or condo complex, other than a fire alarm or screaming siren, is repeated unit owners calls reporting a pest infestation.  Pests can come in many types of creatures, both large and small, including bats, seagulls, geese, rodents, mold spores, and wasps. For this brief article our focus on this unpleasant subject will be insects.

Infestations of Pests

The most familiar of these natural but unwanted creatures are ants, mosquitoes, and ticks because of the fear they breed regarding disease and physical damage.  Property managers and board members who have experienced a serious insect infestation in their community know unit owners can become very emotionally upset if insect problems develop in an apparent uncontrolled manner.  Some of the most important aspects to consider when this problem arises are:

1. Serious insect infestations cannot be swept under the rug. The word will get out beyond the community boundaries often becoming more of a problem than the infestation itself. It will affect the HOA’s and property manager’s reputation. It will linger after the problem is solved depressing market value of units and volume of prospective future buyers.
2. The cost of remediation will be more than the cost to prevent the problem in the first place.
3. Infestations of pests affect daily life leading to a decline in perceived quality of life and increased resentment by the unit owners.
4. Some infestations can cause widespread property damage to both common and unit controlled elements including structural wood deterioration; contaminated insulation; holes in the building envelope leading to additional damage; and expensive repairs to electrical and ventilation systems.
5. Disease spread and the potential of costly liability issues for the board and association.

Management of this problem requires the bylaws’ policy and procedures include preventive measures to ensure good communication between the unit owners and management to report problems and relay specific action instructions. This will include a well-defined step process of authorization and scheduling of needed pest control services to apply sprays, mists, traps, etc. recommended by professional pest management companies. Many of the suggested preventive measures are common for all insects but some actions are very specific to certain insect threats.

ANTS

The good news is termites cannot cross the Piscataqua River into Maine. Apparently Maine’s long, cold winters are tough on these creatures and those termites hitching a ride in firewood or other items from away do not make it to the breeding season. This good news may turn bad with future climate change.

This means our own hearty Maine black carpenter ants are the primary problem. Therefore, the community’s Property Committee should be trained in spotting telltale ant-sign such as the appearance of saw dust in odd places along the exterior walls and foundations. Even observing woodpecker activity in the form of holes in the wood siding and trim is a sign as these birds being drawn to the wood by hearing insect activity. This sign may be double jeopardy as it also may be sign of water infiltration into the building as wet wood attracts wood destroying insects.

MOSQUITOES

News reports of the northern spread of Eastern Equine Encephalitis; Zika; and West Nile Virus has got the attention of Mainers. There are many preventive steps that should be taken before authorizing a professional spray/ fogging application in the community. The Property Committee or landscape service company should be charged with eliminating any potential breeding habitat areas such as water ponding locations or open containers. Granular insecticides in drains and other water collecting property elements can be effective but should be strictly controlled by your pest service.

TICKS

These small insects are becoming a very serious health hazard in an increasing number of locations in Maine, particularly in southern coastal counties. Each year there is a reported increase in both Lyme and Powassan Disease. As with mosquito control, HOA communities often defend against ticks with chemical boundary sprays recommended by professional pest services.  An informed property management team may consider more environmentally safe pest treatment methods.

There are natural pesticides derived from organic materials such as oils gathered from plants.  Other pest control methods could including the HOA restricting bird feeders to the edge of the property to avoid attracting deer and rodents carrying ticks. When designing the community’s amenities such as walking trails; playgrounds; and landscaping consider using materials ticks do not enjoy. This could include a boundary of wood chips around the property borders or drip edge around the building foundations. Gravel and mulch also form a barrier ticks do not like to cross. Ask your landscaper about deer resistant plants; frequent trimming of tall grass areas; and to landscape some areas with Xericape techniques and materials.

Pest control does not have to be expensive with a little common sense. Inform the unit owners how they can help themselves. Direct them to the many websites with good information on personal protection from ticks, as well how to protect their pets. We should not be afraid of the natural world but respect it and not let those little pests bug us.

Article written by Jack Carr, P.E., R.S., LEED-AP, Criterium Engineers
Published in Condo Media April 2020 edition
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