Budget Meeting 2015

Last night was the annual budget meeting. This was an open meeting for all owners to attend. It is, in fact, one of two most important meetings for this HOA. The annual meeting is the other. The annual meeting can and did include various "State of the HOA" reports by board members. The budgeting meeting lays out the entire budgeting process with board discussion and owner observation. There is an opportunity for "Homeowner Comments." The board expects the shareholders of the HOA to provide constructive comments.

Why is this annual budgeting process so important? It will determine not only the fees this year, but also will impact future years. The board knows this and it and management has spent some weeks doing the preparatory work.

Last night, any owner who was present was made fully aware of the following budgeting plans, the projects and methods the board is considering in order to accomplish the next ten years here at BLMH. Details of the following were openly discussed. It was part of a 3-1/2 hour meeting. Now, how much of this do you think a board can compress into 3 pages of a newsletter, along with all of the other business? Answer: Not much. A letter will provide some additional explanation, but it is impossible to compress a 3-1/2 hour meeting into two pages. Here are the core budget discussion items:

1. Review of 2015 budgeting and costs; How well did the board do last year and what did they miss? What changed? 
2. Operations and Maintenance projections, by category for 2016.
3. Projected Total Reserve Expenses 2016-2025.
4. Projected expenditures for Streets, curbs, catch basins, 2016-2025. 
5. Projected expenditures for Unit Patios and Decks, 2016-2025.
6. Projected expenditures for Common Area Decks, Gazebo, Pedestrian Bridges , 2016-2025.
7. Projected expenditures for Concrete Ponds, Creeks, Walks, 2016-2025. 
8. Projected expenditures for Drainage, Landscaping and Trees, 2016-2025.
9. Projected expenditures for completing the Roofs, 2016-2025.
10. Projected expenditures for Exterior Lighting, 2016-2025. 
11. Projected expenditures for Water Mains and Related Replacements, 2016-2025.
12. Projected expenditures for Interior Carpeting, Intercoms, Lighting, Mailboxes, Entry Doors, 2016-2025.
13. Projected expenditures for Garage Floors, 2016-2025.

It is only after a thorough review of the actual and projected 2015 expenditures for the property that it is possible to discuss the budget for 2016. This is far more complex than anyone's home budget. Fees are determined by looking at real costs, determining the cause of any 2015 "misses", making adjustments for next year knowing what we know about water rate, electricity, contract and other costs. To this is added projections for capital expenditures. Sounds simple, doesn't it? Well, when one compresses weeks of work and a three hour meeting into three sentences, of course it will sound simple. However, this need not be more difficult than it actually is.

It has been a priority to see that the board is aware and informed. We have been thoroughly discussing the issues. We did consider the opinions and concerns of each board member last night. Owners will get a newsletter, but the articles are merely the tip of the iceberg. Many owners forget that board members are owners, too. Many owners also decide to ignore the knowledge and insights of the board. Here is a wake up call: Who is most aware of the situation in a HOA? An owner who lived here for decades and never attends a single meeting, or a board member? One would think the answer is obvious, but some of the oblivious think they are more informed than board members. I do wonder where they get their information so they can come to this conclusion. It certainly wasn't by poring over and reviewing about a thousand pages of reports ad studies in the past year, or building or reviewing tens of thousands of cells in multiple spreadsheets.

So how many owners actually attended the meeting? What would you think would be the answer to that question? Here is an HOA in which only a few years ago some (a very few) owners made complaints about transparency and so on. So the meetings which were announced, were moved to larger facilities to accommodate the alleged interested owners.

So, how many did, in fact, show up last night? Answer: Four. One owner, who came on a personal matter left a few minutes into the meeting. So Three owners remained to observe the budgeting discussions. That's fewer than 1% of the HOA shareholders. I guess the 99.1% had other things to deal with.

Will Owner Fees Increase? 
That's apparently all that owners in our HOA are interested in knowing. "Please, spare me the details or the issues, or the concerns."

When I am asked the critical question, I have a stock answer. Fees need to be adjusted for inflation. Inflation, as we all know is the cost of all goods and services. This HOA purchases electricity, water, and everything from snow removal to landscaping services. Reserves are also annually adjusted for projected inflation.

So, the simple answer is that from year to year, we can and should expect fee increases.

In the budgeting area, HOA boards attempt to predict, with expert opinion, the costs next year as well as for the next ten years, and beyond. Future costs require inflation adjustments when we are planning.

So, what do you think? Will costs increase? Should HOA budgets increase to cover costs which increase over time, just as occurs with our personal water bills, insurance and so on?