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Budgeting, history and a multi-year plan


Introduction

We understand that the machinations of the HOA don’t truly concern you until something directly affects you, like receiving a violation letter, receiving an invoice, getting fed up with your neighbor’s yard, dogs barking, vehicles parking, awaiting approval for a project or you’d like to rent the clubhouse.


We understand that most people are 5 times more likely to raise a complaint than a compliment.


We understand that typically you don’t think of the HOA at all. Why should you? We totally get that.


For those of us on the Board however, we wake up thinking about the neighborhood, about our neighbors, about or facilities, our community spirit, our costs and our volunteer roles. How to perform them in the time we have, how to make them more effective at the same time as simplifying them. How to make them doable by not just us, but people who will replace us and sit in these roles in the future. How to attract more people to do them from within the community. How to protect and enhance our home values and quality of life. We spend parts of each day working on these things and at the end of the day we go to bed thinking about them.


Mostly, we understand that with 406 homes in the community, whatever decisions we make will almost always leave some people unhappy. That’s very true of the budget decisions we have to make each year.


The Board votes on the budget – not the homeowner

The Board members get to vote on the budget once a year, and on expenditure from the budget at each Board meeting. Non-Board members do not. If you wish to make an actual difference to budget planning and expenditure, the only way to do so is to be on the Board.


If you want to make budget decisions for the community, please join the Board, take on a role, fulfill all of the tasks of that role, serve your community and earn the right to make educated, financial decisions for the community.


Thinking on behalf of 406 homes each day, rather than just the ones we live in, gives us a much different perspective.


Budget planning process

As of today our By-Laws have us at a 9 person Board. 9 people, plus their committee members (when we have sufficient volunteers) determine what needs spending on each month, each year and across the years. They prepare a wish list of things that need financial attention for their department and that list gets prioritized and pared down. Quotes are received from vendors for the upcoming year, estimations are made based on prior expenditures, cost areas are shuffled as modernization takes hold and alignments are made with the goals of the Board. Eventually a proposed budget is in a finalized presentable format. The Treasurer will present that budget to the Board for their acceptance, with a motion, followed by a second and a vote, once approved it becomes the approved budget against which all expenditure is conducted for the following fiscal year.


Last year’s budget

The proposed budget will be delivered and debated in much the same spreadsheet format, as shown below. This image is from the spreadsheet of last year's approved budget. You can see how the line items, add up in each category.

Table above: Approved budget for 2023 fiscal year ending September 30, 2024.


For this year, new items requiring funding next year (not shown) might be added to existing Chart of Accounts (COA - the numbers in the left columns line items) while other items, not previously identified or newly requiring their own COA, will get one and a corresponding proposed budgetary expense amount allocation will be applied.


Each subsection will be totaled and each subtotal added together to create a final operating expense for the year. The same will be done for the reserves allocation, which is the amount we must put away each month to take care of our assets. Both operating expense and reserves allocations will be summed and that number will be divided by 406 to produce a per home number, - your dues for the next fiscal year, which will be invoiced on October 1st and due by October 31st.


A brief history

As has been spoken about at practically every Board meeting since April of 2022, this HOA and the Board needs to modernize. The demographics of our neighborhood have changed. We are made up of more working families, non-retirees, younger and busier people. Availability to join a Board, do the work and attend the meetings is considerably different than when the HOA started.


In 2016 this shift was already underway and so it was agreed by the Board at that time that the help of a professional property management company was required to assist with the running of the HOA. In 2019, the Board at that time changed the property management company with a desire for a bigger firm with greater resources available to help us out. As of writing, we still have that firm, Sentry as our partner. There's a reason that more and more HOA's are appointing property management firms. The old ways are dying out and help is required with the new ways.


2020-2022 were the Covid years. We'd never seen the like before. Work from home was the only option; Stimulus money, web meetings, low interest rates and zero commutes combined to create a red hot housing market. Home prices increased by over 18% and population in Florida increased by 1.4% in just 2 years. Home values in Fairway Springs shot up and turnover in our neighborhood reached nearly 50% over those 2 years, with some selling a year after they'd purchased and still making great profits.


We all became more insular though, stayed in our bubble's and didn't venture out much. The Board shrank to just 5 people at times, doing their best with online meetings but a paper based system. We'd phased out the old monthly newsletter prior to all this so communication to homeowner's was scarce. Continuity from one Board to the next and Board member to Board Member was greatly impacted.


Inevitably, with all the changes to the Board, Board members, property managers, processes, homeowners and simply the progress of time itself, things get lost, go missing, age out and need attention.


Assets and Costs of our Deed Restricted Community

The Board that I have the pleasure to lead, are volunteers, like every Board member before them; Selfless homeowners and neighbors who would probably love to just stay home and live their lives, insult and hate-mail free, but give their time to the community nonetheless. Each one of them has their own mind and their own ideas as to what they'd like this community to be. Each one of them has their own financial situation. None of them like price increases and the effects of inflation. Collectively however, we agree that we want to live in a nice, tidy, safe, appealing neighborhood. We want our property values to increase. We also recognize the upsides and downsides of living in a Deed Restricted community governed by a homeowners association.


In Fairway Springs, our biggest asset is our clubhouse and pool.


Short term, narrow, "it's just about me" thinking would have you believe that to cut costs we simply do away with them. Flatten the clubhouse and pool and build a couple more homes. That's easy right? But let's look at it from another perspective. Having a pool is why some people look to move here. It's why they'll buy your home and not one in a neighborhood that doesn't.


Of course, the schools, infrastructure, outside amenities, restaurants, hospital and access to main road arteries all factor in, but that's even more reason that we should recognize how desirable where we live is.


Say we don't flatten it. Who is going to want to use it if it falls into disrepair? This is where things get contentious. Many of us have homes with our own personal swimming pools. I've heard from some of you that you don't need the pool at the clubhouse and you question why you should pay for it.


The answer is dead simple. This neighborhood was built with a pool and a clubhouse. It was built for all to use. Homeowners over the 40+ years have made personal choices to add pools to their personal properties or to only buy homes that already had pools in their lots. It doesn't change the fact that 406 homeowners must pay for the pool and clubhouse equally amongst them, whether you use it or not. Using it or not is always your choice. It's no different than choosing to live somewhere that only has a personal pool but doesn't have a community pool, except that your costs will be different. You get to choose, but as in all things in life, your choices have implications.


New pool installations are increasing in cost also. HomeGuide has the average as between $35,000 and $60,00 depending on size and material. This sum might prove prohibitive and drive more, younger families, to buy in here simply because of the community pool.


So what about the clubhouse? Well, the HOA uses it for meetings, homeowners in good standing can rent it for personal use, member clubs can use it, we host events there and we're lucky enough to not have to go out on 54 to vote when that time comes. I'll agree that it does not get used anywhere near as much as it could though. We are always asking for ideas and clubs/groups that would like to use it.


There are also costs every year, like there are for your own homes, to maintain our "curb appeal". It is a fact that a well kept, aesthetically pleasing neighborhood attracts more people than a run down one.


Add to that, insurances which are increasing between 25% and 40% over the last couple of years, professional fees, taxes, administrative costs and the amounts we have to put aside for reserves and you get our budget.


Multi-Year thinking requires a multi-year plan.

As we look at rising costs in each category each year, including paying resources to perform tasks once carried out by volunteers, we need a way to stop the costs to homeowners spiraling upwards. Then we find ourselves countering that argument with a desire to invest, such that our neighborhood maintains it's attractiveness and our home prices continue to rise, and not fall.


There is a way, but it will take a little bit of time, an ounce of understanding, an element of patience and the desire and ability to see it through.


This following diagram, shared with the Board and attendees at the Board Training & Budget Planning Workshop held in May 2023 shows indicatively, that we need to figure out what it costs to run our neighborhood, optimally. It shows that it might take a couple of years of dues increases to get to that level (remember the 115% cap on operating expense increases?)

Costs increase until the true cost of the neighborhood operations are met, simultaneously revenue from clubhouse rental helps drive down total HOA dues per home.

It also shows that, we should be capitalizing on our clubhouse, and using it to generate income for us, not solely have it be an asset and a cost.


This suggests that we should be investing to improve the facilities at the clubhouse, including the bathrooms and the kitchen, such that it becomes a desirable alternative to other facilities out there. We should be marketing it in order to attract groups, parties and businesses that wish to rent it for their events.


Fairway Springs Homeowners Association, Inc. is a not-for-profit organization. That does not mean that we should not be thinking of generating revenues and making profits. We do need to think and act more like a business. With this thinking we should see an increase in revenues from outside our gates, capitalize on our assets and drive down the overall costs to live here with the maximum safety, maximum beauty and maximum quality facilities. There's every chance you won't agree with everything you've read, assuming you've made it this far, but you'll see that we are not dreaming up costs or raising dues without deep consideration for all of us both today and into the future. Thanks for reading.


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Unknown member
Aug 08, 2023

Nice article. Covering a lot of different aspects of what dues are used for. I hope you do not forget that we do still have seniors in here. I am 90 years old and my wife is 78. I did my time. I served on the board as treasurer and collected the dues and paid the bills for about five years in the early 2000s. However I am not convinced that the management company is worth what we pay them.

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Unknown member
Aug 08, 2023
Replying to

Chuck, Thank you for your response, it is greatly appreciated. I would like to assure you that we have not forgotten that we have seniors in our neighborhood. We are acutely aware that we have a number of low and fixed income (for whatever reasons, age included) homeowners in our community also. Some of our seniors are in the founding homeowners group and we are grateful to them and to those who have served on previous iterations of our HOA Board for their contributions to the rules and policies we apply today. We thank you for your service. The management company value question will, I believe, always prevail, irrespective of which management company we use. I was hopeful that by joining…

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