From the Board: Responses to Concerns Regarding the 2024 Proposed Budget
Posted on Nov 17th, 2023
The board did not want to raise dues. None of us want our dues to increase, especially when we are all experiencing increased costs in almost every part of our lives. Our decisions on the proposed budget reflect our understanding of the financial realities of our Association. We hope the information below will help make that clearer.
Concern: The increase is not affordable, and the Board should consider affordability as a major factor in the proposed budget.
- We would have been delighted to frame the budget around that idea and it was a major factor in our thinking.
- The reality is our By-laws clearly state the board’s responsibility in Section 6.1. of the Declaration. “In establishing a reserve fund for replacements, the Board shall take into account the number and nature of replaceable assets, the expected life of each asset, and the expected repair or replacement cost. The Board shall then set the required contribution in an amount sufficient to permit meeting by equal installments over the applicable period the projected capital needs of the Association with respect to both amount and timing.”
- As you can see, the Board is required to create a budget that protects our community assets and maintains the values of our condominiums.
Concern: Current residents should not have to pay for future repairs; these costs should be paid by the owners present at that time.
- The budget does not do this, nor does this budget meet Section 6.1 if it implies full funding of the Reserve Funds.
- Pursuing full funding of the Giles Flythe engineering study would be far too costly.
- Since the Reserve Fund is currently underfunded, we have been doing the opposite.
- Unit owners living in the Villas in the future will face larger increases as repairs have to be done with fewer reserve funds.
Concern: The goal should not be a fully funded Reserve Fund.
- Agreed. This budget does not come close to that.
- The goal is to have a minimum amount in the Reserve Fund that will meet anticipated expenses in the next 10 years.
- There is some risk in having a minimum amount in reserve; due to inflation and other factors, projected costs are often less than actual costs.
- The plan is to have a minimum ‘floor” of $300,000 in the Reserve Fund so that if we have large, unexpected expenses, current owners will not face an assessment. Assessments suggest to banks and potential condo buyers that the Villas does not adequately manage or fund itself financially. This can decrease property values.
*Note: Giles Flythe is a professional engineering firm with expertise in assessing long-term maintenance needs and related costs for HOAs/COAs like the Villas. The original 2016 Reserve study was updated in 2021. This revised document is posted on the Villas website
and the York website.
How do we know how much is needed in the Reserve Fund according to the Giles Flythe Reserve Fund 2021 study?
- The 2021 document, in Funding Alternative 2 on page nine of Appendix A, calls for a contribution to the Reserve Fund in 2023 of $168,950.
- The recommendation is that this amount needs to be increased by 9% each year.
- Our actual contribution in 2023 will be $137,982.
- The study expects the amount in the Reserve Fund on December 31, 2023to be $772,499. The actual amount is projected to be $435,000; a shortage of $317,499.
- In 2024 the study calls for a contribution of $184,156, not the $137,982 in the current budget.
- Our Reserve Fund annual contribution and the amount in the Fund are both too low and falling further behind each year.
- Please remember, the study was done in 2021, before high inflation.
But the Giles Flythe study is not a law we must abide by, right? That is correct. According to the 2021 study, the Reserve Fund has not been adequately funded so Barney Ford, Norm Bell and Carolyn Coordes met with Keith Flythe, principal of Giles Flythe. The goal was to fully understand the implications of that study.
Did the Board use the recommended annual contribution from Giles Flythe the study in the 2024 approved proposed budget? No. The proposed budget pursues a minimally adequate level of funding while attempting to avoid assessments.
How was the Reserve contribution amount in the 2024 proposed budget determined? The Board formed a subcommittee with Norm Bell as chair, and Dan Becker, Dick Webb, and Al Zack as members. Their work included:
What was the result of the committee’s work?
- Understanding the Giles Flythe Reserve study.
- Using current replacement costs where hard data was available.
- Determining the Reserve Fund costs near-term and for six-to-ten years out.
They narrowed the maintenance categories from more than 35 in the Giles Flythe study to 12 major areas. This decision:
- Imposed much clearer limits on what Reserve Funds could be used for.
- Significantly increased the accuracy of cost projections.
- Focused on spending funds from the Annual Budget to do more minor repairs and replacements at the time they are actually needed.
- The Board’s recommended contribution to the Reserve Fund in the 2024 Budget is as low as possible, while keeping a base of Reserve Funds and maintaining the Villas appropriately.
As a Board, we would prefer to not increase the budget and dues. It is our responsibility to give you the most accurate information we can and make our recommendations so that funds are fairly assessed and sufficient. We encourage you to vote for the 2024 Villas Budget as presented.
Your Villas of Wake Forest Board, November 17, 2023
Pam Alig, Norm Bell, Carolyn Coordes, Barney Ford, Becky Tucci.