Annual budget

PROPOSED BUDGET FOR 2024  Is shown in pie chart below. Due to switching to a financial only management company we have a lot more budgeted savings this year which could be used to fund projects or even reduce dues.  As the chart shows the top 4 expenses make up the majority of the budget. Each owner is paying:   $25/year for our Management company to collect their dues, $16 for insurance, $22 for landscaping, $13 for inspections, and finally $63 would be going into our savings account, or could be used to reduce future dues. 

What are our dues used for?

Above is the actual budget for 2021 and the proposed budget for the 2022 year. As of  the end of May 2022, we have approximately $26,000 in our savings reserve account.  Annual dues are $180 per house. 

Historically  the annual budget has always been close to break even with a few thousand going towards our savings account every year. Since the community was created in 1995 there have been 2 big expenditures. Around 2005 the HOA purchased the picnic shelter for $20,000. Around 2019  the HOA purchased a playground system for $40,000.   

As of 5/27/2022 the current board has taken care of doing most grounds maintenance (aka planting flowers) , pine needles, irrigation system repairs leading to approximately $2400 in savings. The $3000 for common area improvements is for improving the front entrance to the neighborhood; however, the board has not come up with any concrete measures to implement.  As a result the HOA might have a savings account of approximately $33,000 by the end of 2022.

How should the HOA invest it's current savings?

The above article discusses 3 main ways HOA's can invest their money SAFELY.  Treasury Bonds, Money Market accounts (MMA), or CD's are the best ways. Approximate Current interest rates for these 3 are as follows:

US Treasury I bonds 9.26%, then feds change rate. long term about 2.5% average return. Must buy before October 2022 to lock in this rate for the next 6 months. Maximum of $10,000 invested  per year and individual board member must be responsible for opening the account. Beneficiary cannot be changed. 

MMA's are around 1% 

CD's depending on whether 1, 3 or 5 year investment are 2 to 2.8% interest rate. 

It doesn't make sense to have all this money sitting there getting  0.03% interest when we can get some return on our investment. 2.5% of $26,000 is $650 per year. 9.625% of $26K is $2407 per year. If inflation continues to rise might stay that way for longer. 

What is a reserve study?

A Reserve Study determines how much money the HOA should keep in savings for future capital maintenance and replacement of goods.

SBF HOA has the following items that fit into that category:  20x20 picnic shelter, playground equipment, front irrigation equipment, front SBF flagstone monument and 220' of sidewalk going to the picnic shelter (main entrance sidewalk is taken care of by city of Charlotte)

The difficulty with any reserve study is that the prices for vendors can vary over 200% and who knows how dedicated future boards will be to finding a competent vendor at a good price? The current board just replaced the picnic shelter roof and we got vendor quotes from $1500 to $3500.  Getting quotes to install a water line to the park also varied from $4000 to $8000. It's easy to find a vendor, but much harder to find a vendor that offers services at a very good value.   When equipment needs replaced also varies drastically depending on how well it is maintained and how frugal a future board is or is not.  As an example: Some people replace an item when it needs painted, others paint it.

The below reserve study was completed using this reserve calculator:

Using a 2% inflation index. 

Why don't we have a basketball court, swimming pool, tennis court, club house or other amenities?

Mainly because no one has put forth the effort to rally the community to get those amenities and put in the time and effort to raise funds. Lets take the basketball court as the first example. A basic half court is 30x50 feet or 1500 sq feet. 4" thick Concrete is about $6/sq ft installed so just the concrete is $9000 in May of 2022. A couple of budget goal posts will add $1000 to that and installing them easily another $500 to $1000 more. Total price tag over $10,000 for a half unmarked court with a volunteer acting as the general contractor who schedules the concrete vendor, goal post vendor, painter vendor for lines, checks with the city to see if any permits are needed, calls 811 to get underground utilities marked before digging,  etc. Alternatively a company that specializes in outdoor sport courts will take care of everything, but at a price tag that is $20K+ or more.

In ground swimming pools are even more expensive.  Probably $60,000 or more not including $8000-$10,000 to get water back there.  Dues could be raised, grants could be applied for, less expensive vendors could be used to potentially save money, etc. 

This is not to say that the board is for or against adding amenities to the HOA's property.  It is more to communicate that planning projects takes a lot of research time and effort and we need more help in order to achieve such goals. In general the board should help accomplish what the community wants, not what a handful of people want. 

It is very easy for a home owner to say the money should be used for this or that, or that the HOA is spending too much money on this/that, but what is needed is someone who follows up by researching the issue, finding solutions and communicating with the board to get something done. (Or better yet volunteering to be on the board) The board is run by volunteers and doesn't always have the time or expertise to do everything, which is why the board is always happy to get more volunteers. 

Why is the HOA paying thousands of dollars to a management company? 

The main reason is that the management company takes care of  all financials , violations and helps with vendor management. The volunteer board doesn't have time to do all of those duties so has to farm them out. 

This video  briefly describes what our current HOA management company does:

Why is the board paying thousands of dollars for landscaping , repairs, etc?

Every once in a while a resident will ask why a vendor is so expensive. In general vendors charge more to take care of commercial property than residential homes. A home owner might be able to get their next door neighbor's teenager to mow their lawn for cheap, but an HOA needs to hire professionals that are insured and licensed if the law requires it.    If you know of a company that is less expensive then please do some research and let the board know.  All to often though people complaint about the cost but never follow up with a lower cost solution.