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6303 S. Rural Rd., Tempe, Arizona 85283  
News, Updates, and Information from Kinney Management Services From the President—Trish Kinney, President & Owner 
In February, I attended the national Community Association Institute (CAI) Annual Legal Seminar in
Washington DC. I arrived two days early to be part of a delegation of association professionals
representing our respective states on Capital Hill. We spent a day and a half with the CAI Legislative
Action Committee as they carefully briefed us on legislation that would adversely affect homeowner
associations. After many guest speakers from the “Hill” wowed us with their fascinating political war
stories and coached us on how best to present our point of view to our lawmakers, we set out on our
mission. I was joined by a master planned community manager from Tucson as we visited the offices of
Representative Matt Salmon and Senators Jon Kyl and John McCain. It was great timing as Senator McCain
was just making his amazing run at the presidential nomination and things were really buzzing in his
office. We were given a tour of the offices by a very nice staffer and he introduced us to the many
Arizona transplants who work there, equally divided between loyalty to U of A and ASU. Success was ours
as our lawmakers' offices called CAI following our visits to offer their support for our position on
the legislative issues.
The Legal Seminar was, as always, filled with the study and evaluation of many interesting association cases which had occurred since we convened last year. For the most part, the courts have continued to uphold the sanctity of the community documents. For example, rules made by the Board of Directors have been upheld as long as the documents clearly give the Board the authority to make rules. In one of the more interesting cases, a court found that the keeping of a Vietnamese potbellied pig did not violate a restrictive covenant forbidding “livestock”. An expert witness testified that livestock is an animal bred for consumption, and since livestock was the standard specifically set forth in the documents, the court determined that the pig was not livestock and therefore an acceptable household pet. The month of March kept us very busy with association taxes, spring landscape challenges, and a computer conversion. We are already benefiting from the amazing time efficiencies created by our new programming in all departments if we can just survive the transition! On behalf of the staff of Kinney Management Services, we invite you to call on us if we may be of assistance to you in any way. As this newsletter was going to press, the story broke about the shooting at the Ventana Lakes Yacht Club during the Association's monthly Board meeting. We were the original management and landscape maintenance company at Ventana until the homeowners took control and chose to self-manage a few years ago. We know Richard Glassel and remember very well his anger, his confrontational style, and his inability to live peacefully in his community. As the management agent, we were constantly in the position of dealing with his complaints and his aggressive and sometimes frightening behavior. While it is always shocking to hear news like this, he was certainly well known for taking out his hostility on others. You simply never know how far a person is willing to go. We have also been disturbed lately at the amount of press the Arizona Republic has been giving to a small faction of disgruntled members of various homeowner associations. Their platform rallies against obeying rules that they agreed to upon the purchase of their homes. It seems to have the effect of stirring up the small percentage of the population that chooses not to comply with the association documents or cooperate with fellow Association members. Our concern is that it will empower those who already have difficulty processing the fact that they voluntarily chose a community where the greater good of the whole occasionally supercedes individual desires. Imagine if the newspaper gave that type of coverage to the people who live in our country yet do no want to follow its laws! This is particularly disturbing in that a vast majority of homeowners who live in associations do so respectfully and peacefully, thereby protecting property values and building a strong sense of community. I have been in the homeowner association management business for seventeen years and can tell you from experience that it is a very tough job. It would be hard to find a way to describe the manner in which our managers are sometimes treated by the “Richard Glassels” of the world. It takes a very special person to be able to constantly extract the positive from an industry that sometimes seems to thrive on negativity. We teach our managers to treat all homeowners with courtesy, respect and kindness and urge them to find a fair and reasonable resolution to the challenging problems which confront them on a regular basis. I sincerely hope that this recent turn of events will not compromise anyone's faith in the concept of communities governed for themselves by themselves. If we work together in a positive and productive way, our communities will only continue to get stronger.
It is that time of year again and all homeowner associations must file their annual federal and state income taxes. Unlike individual taxes, corporate federal returns are due in March rather than April. The IRS deadline for corporate taxes is “the 15th day of the 3rd month after the end of the tax year”. State taxes are still due on April 15th and for homeowner associations which are incorporated, the Corporation Commission reports are also due during the same month. Many of our clients are unaware that their association even carries tax liability due to their status as “nonprofit” corporations. While ordinary assessment income is not taxable, interest earned on association funds is subject to taxation. Net losses from assessment income cannot be used to offset interest income but a portion of the cost of professional management is eligible for offset. At present, net interest is taxed at 30% federally and 8% by the State of Arizona. In July 1999, the Arizona Legislature passed a new law allowing homeowner associations to reduce their common area valuation to a maximum of $500.00. With proper documentation, this same law allows the combination of all area parcels within the association to become one with a total value for tax purposes to be $500.00 or less. We submitted hundreds of applications to the Maricopa County Assessor in the month of December on behalf of our clients and are pleased to announce that all applications have been reviewed and accepted and the appropriate changes will be reflected in the year 2000 tax billing.
Kinney Management Services, Inc. has recently secured a commercial landscape installation contractor's license. This allows us to install new landscaping as well as redesign and refurbish existing landscape features. Please let us know if we may assist your community with any landscape installation needs. We have also initiated residential front and rear yard landscape maintenance service. This division provides recurring landscape maintenance to individual homes including the redesign of landscape features when desired as well as repair and maintenance of irrigation systems. It is our continuing goal to find new ways to improve and expand service to our clients. Please call me if I may be of service in any way as it relates to your community's landscape needs.
Whether you have a small association with just a few common assets or a larger community with multiple common area maintenance items, establishing a reserve fund is a must for Boards of Directors. A reserve fund is essentially a separate association account, which is funded with a portion of assessment income for the purposes of future maintenance, repair, and replacement of common area asset components. These components are typically identified as private streets, gates, pools, fountains, walls/fencing, entry monuments, sport courts, play equipment, irrigation clocks, pumps, roofs etc. The association must have ownership or the assigned responsibility of maintenance in order for it to be considered an association reserve component. There are several key reasons why a Board should enact and maintain a separate reserve fund.
Most Boards retain an independent professional company specializing in reserve analysis and funding recommendations to produce their reserve study. The typical reserve study will outline a 30 year plan projecting adequate fund levels each year, accounting for inflation, for the long term maintenance and replacement of common area assets. Costs naturally vary for each reserve study depending on the extent and age of the community. Prices range from $500 for a small community with few components to $5,000 for a large master planned community with extensive assets that requires an initial full scale study with site inspection and individual photographs of the common area facilities. It is equally important to perform periodic updates, annually in most cases, to stay in line with adequate funding requirements. Properly implementing a reserve study can be the association's most important and valuable investment. 
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Landscape Update
John Acker, Director of Landscape| Site by M5Systems.net | Copyright © 2004 Kinney Management Services |