By Jonathan Penrose
YLOA & YSPUC General Manager
On Tuesday night (2/26) we had another great Town Hall. We started the evening with a delicious pizza buffet fresh from our new pizza kitchen (we have another pizza buffet scheduled for March 7th and will be opening for regular business soon!).
Dinner was followed by a spirited discussion of our current reserves and a presentation of a 5 year plan to address deferred maintenance of our amenities and how to fund repaving our roads.
As General Manager for YLOA and YSPUC (and a fellow homeowner), my first priority when looking at our existing operations is to be ‘smart’ about our existing budget – I always want to get the best value we can from the dollars we already have. This is a philosophy that I call ‘Smart Spending’.
Smart Spending is based on 5 key ideas:
- Get the most value from our existing budget
- Spend a little more for better efficiency
- Do things right the first time
- Prioritize items that affect the most residents
- Plan for the future, not just the present
Our reserve study is an important financial tool that projects the future cost of replacing and updating our infrastructure. It identifies how much we should save for future repairs and how much we should be spending now to replace worn out infrastructure.
In reviewing our current reserve study, we have identified some major items that were missing from the existing plan and some that didn’t have accurate cost estimates for repair/replacement (like roads, vehicles and ADA updates).
During the Town Hall, I discussed the importance of addressing these items and how failing to do so wastes our money in the long run, reduces our property values and places us at risk of lawsuits (which is NOT Smart Spending).
Part of Smart Spending is setting aside a little bit of money every month for long term repairs. If we do this consistently, it is painless. For example, if we had increased dues just $2/month over the last 20 years, our existing budget would be $1,083,840 more each year, and we would have had $11,380,320 in additional income over that time to fund reserves and maintain our amenities.
Unfortunately, we do not have the funds in our existing budget or reserves to address the deferred maintenance that urgently needs to be done. We can continue, for a short time, to put this off, but our facilities and equipment are past due for repair and failing at an increasing rate. For example, the clubhouse roof leaks, AC units are failing (and inefficient), 3 refrigerators at the Heron have failed this year alone and ADA requirements need to be addressed.
The longer we wait to get started, the more expensive and more painful it will become.
At the Town Hall, I presented a 5 year plan that I called ‘Fix Our Stuff’ (or FOS) based on the philosophy of Smart Spending. The FOS plan prioritizes repairs by identifying the items that generate the best return on investment and reduce risk to the Association. It focuses on our primary amenities, while simultaneously setting aside funds to address our roads in year 6. It also increases our maintenance budget to help extend the life of our existing infrastructure.
With this plan, we would spend $300,000/year to repair/update our amenities over the next 5 years and retain sufficient funds to start paving our roads in year 6.
A detailed plan for the first year addresses major deficiencies at the clubhouse, including: fixing the AC (which will save an estimated $12,000/year in electric costs); replacing the leaking roof; installing ADA compliant bathroom, floors, thresholds, access ramp, compliant parking and walkways; updating the men’s bathroom; replacing old water heater and dishwasher; maintenance of the upstairs office to fix sagging/soft floors (before they fail and injure someone).
This would be followed by addressing issues at the Cafe/Golf Course in Year 2, Swimming Pool in Year 3, Equestrian and Rec Center in year 4, Clubhouse decks and misc in year 5, and repaving roads starting in year 6.
It will take $21.93/month/lot to fund the plan next year, with future dues increases planned primarily for inflation and labor costs driven by minimum wage increases – this is anticipated at approximately 5% for the next few years as minimum wage increases artificially increase inflation rates and business expenses.
We will also contract with a third party to conduct a revised, more detailed and more accurate reserve study and we will engage with a professional engineering firm for advice on a maintenance plan for extending the useful life of the existing roads..When we have this information we will fine tune the FOS plan for future years.
You can find a copy of the Town Hall slides on our website (or our office) along with a video recording of the presentation.
Our next Town Hall will be Tuesday, March 26th where we will dig more deeply into the budget proposal for FY 2019-2020. There will be a budget meeting, led by Board President Rebecca Brannon at the clubhouse on Saturday, March 30th beginning at 10 AM.