Living in The Glen
Board Meeting Minutes
REPORT of the 2004-5
RESERVE AND OPERATING BUDGET COMMITTEE
JUNE 15, 2004
Committee Members: Roger
Axt, Glen Grossman, Jim Ray, Jack Rutherford
Chair: Rick Busman
The committee was tasked
with reviewing the Associationís Reserves and developing the 2004/5 Operating
Budget. Our findings and recommendations are as follows:
- The Glenís Reserve
currently funded at approximately 32%. The best practice is to have a Reserve
Account funding level of at least 70%. This is also the level being considered in
pending legislation which would force associations to maintain adequate
The Committee considered various alternatives to correct this situation
including special assessments, delayed spending, and phased-in dues
Our recommendation - increase that portion of dues which goes into the Reserve
Account each year for the next 5 years.
- The Glen has run an
average Operating Account deficit of close to $3,200 per year over the last 9 years. This has contributed to an ongoing cash-flow problem which has been
temporarily addressed by borrowing from funds in the Reserve Account. As of April 30, 2004,
the amount due from the Operating Account to the Reserve Account is reported on the financial
statement as $24,887.
By law, such borrowing needs to be repaid within 1 year unless the Board makes a
documented finding that there should be an extension. The Board may
levy a special assessment to repay the Reserve Account for the borrowed
funds. Such an assessment would equate to approximately $35 per unit for 12
Since The Glen is facing an uphill battle to meet our Reserve Account cash needs
(particularly for the upcoming roof replacement), this additional cash shortage
must be addressed. The committee recommends instituting a repayment program
- There is relatively good
news in the budget for the Operating Account. Few increases are expected for
next year in services (landscaping, management, etc.) and insurance. We project slight increases in utilities but maintenance and administrative
costs should remain at levels similar to our actual 2003/4 expenses.
However, due to unanticipated extra expenditures for Legal, Maintenance, and
Landscaping (brush clearance and increase in contractorís fee), our projected
actual expenses for 2003/4 will exceed the 2003/4 budget, resulting in an
additional shortfall in the Operating Account of up to $15,000 by the end of this
fiscal year, 8/31/04. Therefore, the budget for the 2004-2005 fiscal year
for the Operating Account will increase compared to the 2003/4
budget, but will remain flat compared with the 2003/4 actual expenses.
In summary, the committee
recommends increasing the Operating Dues from $163.65 to $185 (13%) and the
Reserve Dues from $81.35 to $109 (34%) for a total dues amount of $294 (20%
increase). In addition, the committee recommends implementing a Reserve
assessment of $35 per month for 12 months.
How did we get into this situation?
1. Failure to raise dues: Past boards
may have been too concerned about avoiding dues increases and may have chosen to
minimize them. This has been compounded each year, now resulting in the need for
several large increases in a row to make up for increases that should have been
made in years past. The July 2001 Reserve Study by Sunstone expected the balance
in our Reserve Account in 2004 to be $446,000. We are currently at $291,000.
Reserve Account contributions stayed flat at $61 for 7 years (1996 Ė 2002) until
it was raised to $81 in 2002/3.
2. Inconsistent estimates on prior
Reserve Studies: The 1997 study estimated $275,000 for the roofs; the 2001 study
estimated $390,000. $390,000 is consistent with our most current bids.
The current shortfall should not be a major surprise to anyone. At last yearís
annual meeting, Rick Busman and Jim Ray gave a presentation indicating the need
for large increases in the Reserve Account contributions in the next few years.
Members should keep in mind that the values of our homes have far outpaced even
the proposed dues increases.
Chart: Reserve Account -
Chart: Reserve Account - Balance
Reserve Account - Items, Useful Life, & Expenditures
Graph: Reserve Income & Spending