Where Our Assessments Will Go in 2009

This is based upon the budget mailed by our association to unit owners on October 23, subsequently discussed, voted upon and approved at the November 2008 meeting. What I have done is to calculate monthly fees and percentages, using the information we, the unit owners, received in the mail. That information is provided each year to unit owners as part of the annual budget process, the financial statements and the approved budget.

I have my comments, and any replies to reader comments will be at the end of this post.

First, our monthly assessments have increase, but by an amount less than the COLA projections for 2009 by the Federal government. This is as predicted by our managers, who said they expected the rate of increases to abate as we build up the reserves for the forthcoming roofing and street projects.

The assessment is split into two components. One is to fund day to day operations. That includes energy, maintenance, the green spaces, the trees and snow removal, administrative expenses and fees, insurance and taxes, among other things. The second part of the assessment is for funding General Reserves, which are sometimes called "capital expenses" or "capital projects". These are larger, predictable and scheduled replacement items such as roof replacement, street paving, concrete work including curbs and so on.

The budget for my "B" unit for 2009 includes a monthly fee of $86.68 for funding the General Reserves, or "capital expenses". All other fees collected go to funding the day to day costs of operation.

There are, I have been told, 15 different assessment tables, which vary by size, location and view of the unit. So your assessments will probably not match mine. [The previous statement added December 5].

The following are based on the assessment fees for my "B" unit. I include dollar figures and percentages. For other "A", "B", "C" and "D" units, the percentages are the same, but the monthly fees will be different. [it is my understanding that units are in 15 different assessment groups] [comment added 12/12/08] To calculate for your unit, take your monthly assessment and multiply it by the percentage, to determine your actual monthly cost for each item. For example, if my monthly assessment was $299.30, then my share of the cost for utilities would be $299.30 x 6.10%/100 = $18.26 per month. (Note that because we are dealing with percentages, they have to be divided by 100 to do the arithmetic properly. In the example, 6.10% = 6.1/100 = .061. To calculate the amount for utilities in a $299.30 monthly assessment, after dividing the percentage by 100, the arithmetic is .061 x $299.30 = $18.26).

Major Budget Categories

These are the major assessment distribution categories for [my] "B" unit, according to the budget, with percentages:

Taxes = 0.51%

Utilities = 6.10%

Maintenance and Repair/Janitorial = 1.73%

Common Area Maintenance = 20.59%

Waterfall/Creek Maintenance = 0.17%

Building Maintenance = 28.98%

Administrative Expense/Insurance = 13.98%

General Reserves = 27.95%

Sub-Categories

The budget is further distributed into the following sub-categories, and the percentages and monthly dollar amounts for [my] "B" unit are:

Taxes

Taxes = 0.51%, $1.58

Utilities

Electric = 4.66%, $14.45

Water = 1.19%, $3.68

Pest Control = 0.25%, $0.79

Maintenance and Repair

Janitorial Contract = 1.73%, $5.36

Common Area Maintenance

Grounds Contract = 8.04%, $24.93

Grounds Maintenance = 4.23%, $13.13

Drainage Restoration = 0.85%, $2.63

Tree Maintenance = 2.96%, $9.19

Seal coating = 0.59%, $1.84

Snow Removal = 3.91%, $12.14

Waterfall/Creek Maintenance

Aerators/Lakes/Streams = 0.17%, $0.53

Building Maintenance

Maintenance Contract = 12.81%, $39.72

Panel/Trim Replacements = 1.86%, $5.58

Lighting = 0.76%, $2.36

Miscellaneous Repairs = 4.23%, $13.13

Painting = 7.20%, $22.33

Roof Repairs and Maintenance = 0.42%, $1.31

Administrative Expense/Insurance

Petty Cash = 0.03%, $0.08

Postage = 0.24%, $0.74

Printing and Duplicating = 0.34%, $1.05

Management Fees = 5.05%, $15.67

Legal Collections = 0.10%, $0.32

Accounting = 0.25%, $0.79

Miscellaneous Administration = 0.17%, $0.53

General Reserves

Paving = 7.79%, $15.76

Lake Restoration = 1.56%, $3.94

Carpet = 0.52%, $1.31

Roof = 12.46%, $47.28

Concrete = 3.11%, $10.51

Masonry = 1.96%, $7.88


My Comments, and Replies to Reader Comments:
General Comments

This is the lowest assessment increase since 1998, and it is less than the government projected COLA for 2009 (as based on the Social Security increase in benefits, which is 5.8% for 2009)! The assessment increase of 5% will raise the assessment of my "B" unit by $14.68 per month. The majority of the increase will go to fund the "General Reserves" and the projects listed above.

In 2009, the assessment fees include a 10% increase in the amount allocated to reserves. The budget for day to day costs is only about 1.42% higher for 2009 than the actual, projected costs for 2008. This would imply that the board and our professional managers are doing a good job of controlling costs. The board and our managers discussed the budget during a closed meeting in October. At that time, inflation was projected to be over 4% for 2009! I don't know what went on in that meeting, but this budget does lend credibility to our manager's statement during the November open meeting that "assessments are stabilizing and reaching equilibrium".

Our monthly assessment fees will be allocated as follows: 72.05% to cover day to day expenses and 27.95% for funding general reserves.

How Can I, a Unit Owner, Use This Information?

I originally did this exercise several years ago, and calculated the allocation of the budget as it applied to my personal assessment fee. This was for my own use, but I did send the results to our managers and I received a written reply from the board.

I did it because I wanted to know where the money was going. If you tell me that we spend $57,000 a year on something, I am somewhat overwhelmed by the large number. So I like to break the numbers down to something I can better relate to. This also lets me compare the association costs for certain items to my personal costs, such as utilities. It also makes the entire budget much more personal. I can see exactly how much I am paying for "printing and duplicating" each month, for example. Of course, I can't decide to spend or not to spend the money on a day to day basis; that has been decided by the board and this budget is pretty well fixed in stone, as they say.

However, it does give me a few things to think about. For example, in 2008 we had several water line breaks. I understand one of these cost about $17,000. There is no such item in the budget and so that money had to come from somewhere else in the budget. How much did that cost me last year? In looking at the budget, I can see an item for $15,000 and that costs me $3.94 a month. Using a little arithmetic, a water line break costs about $4.47 each month out of my pocket, or about $53.58 for the year.

Each of these items adds up. The board is discussing hiring consultants and engineers to do reserve studies and other consulting work. If that costs us $30,000 in 2009, I'll be paying $7.88 each month for that study. If we were to spend $60,000 on engineers and consultants, that would cost me $15.76 each month, or $189.12 next year for my share of the cost of the study. Is it worth it to me to divert that money from the General Reserves? Is it worth it to you? I would like to have some assurance by the board of the tangible benefits, examples of what they might be, and the actual costs before I am asked to fund things like that. Even though it is not budgeted, our management advised us in the "state of the association" letter that this is under discussion by the board. The board will decide because the board has the authority to do so and just about anything else they vote as a group as "necessary", even if it is not in the budget. This is essential to fund unexpected events or emergencies. Otherwise how to fund repairs due to water line breaks? However, that discretionary power can also be exercised by the board to change direction on long term projects. They can stop projects and create new projects at any time, and for any reason. So bear in mind that while this is the approved budget, the actual expenditures for 2009 will vary from it, and as we have no specific, agreed upon timetable for the projects in the General Reserves budget, those too may change.

If you have questions or concerns about assessment fees or where and how our General Reserves will be spent, I suggest you begin looking at proposals from the board from the perspective of "Is it included in the existing, approved budget?", How much will this cost me each month?", "Has the board adequately explained the tangible benefits?" and "Did the board present this for discussion?" The ROC won seats on the board with a promise of "improved communications". I think getting more advance information and the opportunity for more input into this process of spending money would be a part of such communications. However, I am convinced of the necessity of the plan for new roofs. What I do not know is 1) What is the timetable and specific schedule? and 2) Is our new board committed to replacement of the roofs? I don't think the new board has recommitted to the program and it is currently discussing "reserve studies" which can be construed as meaning the new board intends to alter the program.

I suggest that if you are a unit owner and you have any questions or concerns, then attend the monthly meetings, listen intently, and ask questions. I assure you, that is what I am doing. I also suggest you check this blog every week.

I realize that it is difficult or impossible to reduce the cost of some of the "built in" amenities at BLMH. These were designed and installed many years in the past. Another example of how decisions made today, will influence the distant future.

We do have to maintain the grounds and trees, and pay for electric lighting. But we can manage the planning of future expenditures. Each time our board "votes" on something, they are deciding on spending (or not spending) our assessment fees and they are voting to save or not to save for General Reserves. Today’s board will determine our future assessments. If our board does not adequately save then they will mortgage our future. However, that choice is ultimately determined by each of us, as unit owners. We exercise that choice when we vote, which determines who we place on the board, which in turn hires our management company. The decisions our board makes this year will determine the financial well-being of our association for many years in the future.