A Message from the Maui Vista AOAO President
Summary of Maui Vista major expenses since 2014 and the reserve deficiency.
Prepared by Peggy Ann Shea, AOAO Board President, September 2022.
Several owners have inquired about the way Maui Vista reserves have been handled and what were the circumstances that led to the present situation requiring a special assessment to increase the reserves and possibly change to the 50% funded reserve option allowed by the state.
This document summarizes the present situation hoping it will be helpful, especially to new owners. It could be likened to the “Perfect Storm” analogy.
The state requires all condos to have a reserve fund for routine expenses that will be anticipated over the next 20 years. These routine expenses are large items such as building painting, roof replacement, tennis courts resurfacing, parking lot and walkways repaving, etc. right down to smaller items such as new mailboxes, replacement of security system cameras, hand railings, fire hoses, etc. There are three methods for handling the reserves: Hawaii Cash Flow (which the AOAO has used for many years); 50% Full Funded; and 100% Full Funded.
Under the Hawaii Cash Flow process, the AOAO should have enough in reserves to fully cover the anticipated costs for the next year based upon an estimated current year replacement cost. (The reserve study has traditionally been done every two years at which time the property is inspected by an outside firm and a new “reserve” study report is prepared. The Board has just voted to have this study done every year. The most recent study done in 2021 is available on the Maui Vista website. Hawaii Inspection Group, Inc. does the inspections and prepares the reserve documentation.) The 2022 study has just been completed for Board review.
What this means is that if the inspection company feels the need to have the buildings repainted every 10 years, there is enough money set aside in the reserves for this cost each year so that 10 years downstream the money is there to repaint the buildings. There is an inflation factor included in those numbers.
The Board or GM did not anticipate any of the following three major problems:
1. Excessive water leaks which necessitated the vertical drain pipe relining;
2. New lighting in the parking lots for security purposes which must be compliant with the Maui County “dark sky” policy.
3. Excessive termite damage on the fourth-floor wooden structures and the outside fascia boards.
Pipe Relining. In 2012 there was increased frequency in leaks due to drain pipe failures. An inspection program was initiated to check all units and repair pipes that were leaking. While initially an “inconvenience” back in 2012, the frequency of leaks increased, and in 2014 the Board recognized there was a major problem and more aggressive action was necessary. The problem was identified as poor construction techniques using cast iron pipes when the buildings were constructed in 1980. The insurance company threatened to cancel the AOAO general policy unless aggressive action was taken. The decision was to reline the vertical drain pipes. The reserves were exhausted after relining the pipes in Building 1 in 2017, and the Maui Vista ownership voted for a bank loan to reline the vertical drain pipes in the other two buildings. This was completed in 2018. The insurance company was informed of the proactive measures being undertaken, and our insurance rates did not appreciably increase. (Note that the bank loan will be fully paid by February 2026.)
Parking Lot Lights. Around 2006-2008, a new lighting arrangement for the lights in the parking lots were installed to provide better safety and security. Shortly thereafter, the Maui County Council voted for a “clear sky” policy giving owners 7 or 8 years to comply. In 2018 the AOAO was officially informed that the parking lot lights were not in compliance, and the additional fixtures, installed for security purposes ten years earlier, had to be removed. This made the parking lots extremely dark so it was decided to add additional lights in the parking lots to provide improved illumination and still be compliant with the Maui County Code Chapter 2033. These lights, to meet the requirements, are very expensive and must be shipped from the mainland. Since the parking lot was to be repaved in 2020, it was prudent to replace the lights prior to repaving. While there were some funds in the reserves for parking lot paving, a special assessment was necessary to cover the entire costs of excavating the driveway for power, purchase and install the new light fixtures, and then repave the entire parking lot instead of doing sections spread over three years. The capability of having EUV charging stations in the future was included. In addition to the parking lot, the walkways were repaved. The security committee had also requested better lighting, especially since the cameras they wanted installed needed to have good lighting during the night hours. The special assessment was for $600,000 which covered the costs.
Termite Situation. Over the years, as routine maintenance, the AOAO repaired termite damage as the problem areas were identified. The last major termite inspection and repair was in 2010. When inspecting the fourth-floor wood structures in early 2021 it became obvious that there were larger problems than the repairs that were done in 2010; those repairs did not include all the fascia boards. The Board felt it was essential to do these repairs as it would only get worse. Having to bring in cherry pickers for the extremely high areas was an additional expense, as well as repairs to the damaged landscape that occurred moving the equipment from building to building. The total cost for this project was $458,954.
Finally, in May 2022, the insurance company raised our annual insurance costs from $162,996 to $370,098. This increase was attributed to our excessive leak history, plus insurance losses nationwide related to incidents from the collapse of a condominium building in Florida to weather related disasters of fire and flood.
Because of the pandemic, the maintenance fees for 2021 were not increased. At the same time inflation started to rise with the costs of goods and services severely increasing over a short period of time. No additional revenue, in combination with high costs, depleted reserves faster than anticipated.
At this point the AOAO Treasurer, Jenny Copeland, took a long hard look at the three methods for reserves allowed by the state, and decided it would be best if the AOAO moved to a more manageable 50% level so that forthcoming reserve expenses would be 50% funded at the time they became due. While difficult to swallow at this time, especially with rising inflation, the Association needs to get the reserves in better shape and hope that there are no more unexpected expenses. Like all properties that are 40+ years old, they require more maintenance than a new building complex.
Many of these issues have been discussed in Board and Association meetings. The minutes of these meetings for the last few years are available on the Maui Vista AOAO website. The front office has a complete copy, in digital form, of all past minutes.
