Summer closes and budget season opens. Now is the time when community association boards and finance committees start figuring out how much money they spent this year, which projects they’ll take on next year and how high the assessments will go.
Everyone’s cost-conscious these days, and associations, which have been hit hard with delinquencies and foreclosures, are no exception. We asked a panel of industry pros for their best dollar-stretching tips for 2012. Here are their recommendations.
Fine-tune your projections. Don’t simply add a couple of percentage points to last year’s budget. Review every line item and bid it out, especially if you haven’t checked prices in a while, said Alicia Snyder-Poulos, an agent with Re/Max Partners in Berwyn.
She also advises comparing last year’s budget to the actual dollars spent. You might find you can lower some of the categories.
“Labor costs, in many cases, are flat, unless you’re subject to union contracts,” said Jim Stoller, president of The Building Group management company in Chicago. “There are many good craftspeople who are looking for work. We’re seeing labor prices not increase, and even decrease, through aggressive bidding.”
“The worst way to budget is to decide on how much of an increase is acceptable and then work on the expense projections until they fit,” said certified public accountant Brad Schneider, president of CondoCPA in Elmhurst.
Recalculate bad debt. If 10 percent of your units are behind in paying their assessments, it’s a mistake to write off 10 percent of the association’s total annual assessment income as bad debt. The loss could be less than you think, said Schneider.
“If you have units that are getting close to a foreclosure sale, they will bring in a lump sum of six months of past-due assessments upon closing as well as a new paying owner occupying the unit,” he said. “The key is to project unit by unit.”
Treat your reserve study as a guide, not a mandate. Don’t execute a project just because the reserve study says it has to be done next year.
“If a fence is still standing and strong, don’t replace it prematurely,” said Robert Nordlund, a professional engineer and president of Association Reserves in Calabasas, Calif. “Extending the useful life of your reserve components generally translates to a lower reserve contribution.”
Spend money on preventive maintenance. You’ll save money over time.
Nordlund gave this example: Suppose a repainting project has a useful life of five years and costs $20,000. The value of its deterioration is $4,000 a year. If a $500 or id=mce_marker,000 touch-up job extends the useful life another year, the annual deterioration is reduced to about $3,500.
“The same principle can be applied to other components,” he said.
Phase your projects. If you can’t afford to do an entire project, do it in phases. Cleaning out your reserve account or passing a special assessment will hurt your property values, said Snyder-Poulos.
Use two suppliers instead of one. No one retailer or contractor will have the lowest prices on everything all the time, said Schneider.
“Some items will be less at Home Depot and some will be less at Lowe’s,” he said. “Find out which one has the best price for the specific items you need.”
Streamline your services. If your association provides services such as cable television or Internet connection that are enjoyed by only a few residents, it might be time to pull back, said Stoller.
“People who are intensive users know they are getting a great deal, but it may not be good for the majority of people in the building,” he said.
Add a moisture monitor to your sprinklers. Underground monitoring technology tells irrigation systems how much to water and when to do it. Buried sensors measure the moisture content of the soil. When predetermined levels are reached, the monitor allows for full, partial or no watering. You can save up to 60 percent of your landscape watering bill, depending on prior usage, said Sherm Fields, regional vice president of Acres Group landscaping company in Plainfield.
“You’re not wasting water when you don’t need it,” he said. “It can also be programmed so that different zones are treated differently.”
This article was first published on August 12, 2011 in the Chicago Tribune.