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24 FOUR SEASONS BREEZE | AUGUST 2017 A FEW WORDS ABOUT THE BUDGET It's that time of year when the finance committee starts the planning process for building next year's budget. With this in mind, now is a good time to provide an overview of some of the challenges that come in to play in developing the budget and pointing out a few items about how our budget works. About 97 percent of our total revenue comes from homeowner assessments. In other words, as the budget for next year is developed, we have to keep in mind that our expenditure plan is basically limited to the assessment revenue that is projected to be collected. Budgeting for our projected revenue would seem to be a relatively simple process of multiplying the monthly homeowner assessment by the number of homes that are owned. However, this is somewhat complicated by the fact that new homes will be built and sold over the coming year, which will result in the collection of additional homeowner assessments. The accuracy of our projection of the rate at which new homes will be sold remains to be seen. The real challenge, however, falls on the expenditure side because a number of assumptions need to be made that are sometimes based on limited information. For example, our utilities budget is significant; it presently represents about 12 percent of the total budget. Included in the utilities budget is our expenditures for electricity, gas and water. The total annual cost for these three items is a function of usage and rates. We have to make assumptions about usage based partly on prior year trends and we have to make assumptions about next year's usage, which includes the added utility cost of three recreation centers that will be fully operational as well as the cost of maintaining the additional common area improvements that will be completed. And finally, we have to predict what rates will be for the next year; this relies on making assumptions based on current information. In the end, the utility budget may prove to be very accurate or, despite best efforts, it may be a bit off the mark. Similar challenges come into play for other areas of the budget. For example, landscape maintenance currently represents about 19 percent of the total budget and general maintenance is at about 13 percent. Determining how much to budget for these two areas also involves making a number of assumptions based on past expenditure trends and trying to determine, as accurately as possible, our needs for the coming year. As explained above, most of our revenue comes from homeowner assessments. Every member pays a basic monthly assessment of $210. Our Springdale homeowners pay an additional monthly amount, which pays for structure maintenance and for insurance. Also, there are over 550 other homes that have their front yard maintenance provided by the association. These homeowners pay an additional monthly amount for this service. It is important to note that these additional assessments must be sufficient to cover costs. Any shortfalls cannot be covered by diverting revenue from the operating fund. This is why, for example, the homeowners that get front yard maintenance were recently notified that their monthly assessment would be increased by $10 to cover the increased cost of maintenance. It is also important to understand that from the monthly $210 assessment that all members pay, a portion is set aside in a reserve that is used to pay for the replacement of major improvements that eventually wear out. Virtually every facility throughout or community has a useful life and will eventually need to be replaced. This includes the repaving of our streets, replacing recreation center roofs, replacing swimming pool heaters, replacing air conditioning and heating units; the list goes on and on. The association contracts with an outside firm that specializes in taking an inventory of every capital asset of the association and determining the useful life and cost of replacing each item. This study helps us determine how much to set aside every month in a reserve account. In other words when it is time to undergo a costly project such as a roof replacement, the money to pay for the replacement is already set aside, with no impact on the daily operations of the association. You may have noticed that the lodge buildings are being repainted. This is a good example of how our reserve account is used. This project was anticipated and planned. Painting is underway and is being paid for from the reserve fund. At the end of the day, it is the responsibility of the finance committee to develop a budget that addresses the needs of the community while at the same time helps ensure that we will remain fiscally solvent for years to come. On this note, we have been very fortunate to have a very effective finance committee through the years that has always emphasized keeping our community on a very sound financial footing. This has always involved developing sound budgets. Later this month we will be meeting with our various committees to learn more about their spending needs for the coming year. This is part of our process for developing the 2018 budget that we will eventually present to the board for adoption. ~ Jim Ayala Finance Committee

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