Things that owners need to know for 2021’s budget

On September 23rd we had a meeting to go through the 2021 budget but I didn’t have the impression that the members that went through it were prepared to discuss it. The purpose of this article is to do an assessment of it focusing on the most important expenses which are:

  • Water, Sewer and Trash 425407.50 + 3000 for extra pickups of trash which represent 43.47% of the annual budget.
  • GRS Management 81,866.46 + 41,200 or 123,066.46 USD which represent 12.49% of the annual budget.
  • Insurance 120,750.00 USD which represent 12.25% of the annual budget.
  • Building Repairs, Common Area Repairs and Common Area Supplies 30000 + 15000 + 5000 or 50k USD which represent 5.07% of the annual budget.
  • Common Area Landscape 40,000 + 8000 or 48k USD which represent 4.87% of the annual budget.
  • Legal Fees and Bad Debts 20000 + 15000 or 35k USD which represent 3.55% of the annual budget.
  • Pool Maintenance/Repair/Chemicals 10740 + 3000 or 13740 USD which represent 1.39% of the annual budget.
  • Gate Maintenance / Key Cards 11200 USD which represent 1.14% of the annual budget.

In these items we are covering 84.23% of the total budget presented for 2021.

1st. Looking at the biggest expense Water, Sewer and Trash 425407.50 and analyzing what we spent this year, we can appreciate the following:

This year, the month of February was the only month that we did not exceed the budget allocated for this expense. Here are the numbers:

As you can see, as of today we have a deficit of about 18.5k USD only in Water, Sewer and Trash. Please note that this does not include extra trash pickups because for some reason, its tracked on a separate registry. Looking at this expense in more details, we have the following:

For the last statement (September 2020), we can see that 22.79% of this expense was on water consumption from The Cove I, 21.24% of this statement was spent on Wastewater for The Cove I and 16.34% + 15.27% was spent respectively on the same categories for The Cove II.

On the last line we see the average spent this year which is 36,082.32 and if we multiply that average by 12 month, we get 432,987.84 as opposed to the 425407.50 presented during the meeting. Most-likely the forecast for next year might fall short which will allow the president reallocate funds without involving the board.

2nd Looking at the second expense we see that GRS will charge us 123,066.46 USD for 2021 and a proposal received by an alternative supplier brings the Management of the HOA using a supplier to 131,294 USD or 6.69% more than what GRS is charging us. As owner are not satisfied with the results of GRS, I proposed that we present the alternative during the budget meeting but if you joined the meeting, you saw that I was not allowed to talk and the items that I requested to be included were not even presented which is what I am showing in this post.

3rd Looking at the third expense, we see that in insurance we will now pay 120k/year as opposed to 105k quoted in 2020. I propose that we do the same thing that we did last year when Insurance increased from somewhere around 78k to 100k+, go out to the market and try to get insurance from another provider. From previous years, we can see that the insurance expense have increased about 54.81% over the last few years. This is due to the fact that there was a fire in one of the dumpster areas and the board decided to report it to the insurance (Which is why we are now spending drastically more in annual insurance costs). There was also an accident that the Master Association was supposed to cover in their insurance which involved the outer fence of the property but the board at that moment also submitted the claim to our insurance.

4th Looking at the fourth biggest expense or Building Repairs, Common Area Repairs and Common Area Supplies, we can see that we are allocating 50k to this but nobody cover what repairs are still pending and what repairs will be completed next year. This is another gray area that the board did not properly cover during our budget meeting.

5th Looking at the fifth biggest expense or Common Area Landscape, we can see that they are allocating 48k but we did not hear an update of what was done in 2020 with this budget and why is still needed for 2021. My expectation is that some of the maintenance to keep the HOA clean could be delegated to the current maintenance personnel or we can add an additional personnel so we can have the property cleaned in a better way.

6th Looking at Legal Fees and Bad Debts, this is an item of collecting dues from units not paying. This also cover the time that our president spend with the lawyers talking about things that the rest of the board is not fully aware. It is my understanding that collection should also include legal fees which are then reimbursed once the lean on the unit is put in place and/or when the unit is sold or re acquired by the bank. Owners should not have to pay for these expenses and instead, the budget should reuse the funds collected this year to avoid having the owner continue paying for legal services that they already paid and the HOA received the reimbursement of those expenses. This is an item that I understand should be minimized even further or removed completely from 2021’s budget.

7th Looking at the seventh biggest expense or Pool Maintenance/Repair/Chemicals, it seems like a licensed person should be taking care of this. I once saw what this company do and they only refill the chemicals and check that the levels are fine. I understand that we could require our maintenance personnel to obtain this license within the first 3 months of the year and increase their salary by 10 % (about 4.1k/year) so they do it as part of their responsibilities with the association. This is going to help us save about 6k in annual expense for pool maintenance for both pools.

8th Finally, looking at the eight biggest expense or Gate Maintenance / Key Cards, we see that this is misleading because there is no key card needed in the cove which makes me question this registry on every meeting. Assuming that this is to get the barcodes for owners to enter the property, the HOA is also charging owners 25 USD every time that they need the barcode. The 1200usd/year purchasing Key Cards must be removed because owners are already paying 25 usd/barcode. Owners should not have to spend this amount of money annually if we are charing owners for every request. In relationship to the Gate Maintenance, on 2020 we spent around 25k on Gate/Camera but cameras were never operational. I took the lead to fix them and that allowed us to reduce this expense by around 50% in 2020. The majority of Gate fixes was to replace the bar that people hit while entering the property. Some owners started replacing it to avoid the expense as well as our the maintenance personnel that we are also paying for. The company did not agree to let us document how to maintain this and I requested the termination of their contract but for some unknown reason, the president do not want to terminate their contract. The company in question is Gate Entry Solution. This is another expense that we should minimize or get rid of on 2021.

Does this information help you have a better perspective of 2021’s budget? Feel free to comment and let us know what can we do to help.

BONUS: In relationship to the pool, this year we allocated 40k to security, we revoked their contract around March 2020 because we could not appreciate the value added (Recognition for this savings goes to one of the director suspended during the Budget meeting on Wednesday) which left about 31k on 2020’s budget. I explained that the pool is the only amenity that the community has to offer to owners and with the money saved on security, we could’ve hired personnel to enforce the 6ft distance or 50% capacity. As the board represent the owners, it is their duty to do what they can to let owners enjoy our common areas/amenities and the fact that our President and the other board member (not suspended) decided not to do what the board can to open it even when owners are demanding it made me question even more what is the current board actually representing, the management company or owners of our community.