It’s that time of year again; time to prepare the annual budget for condominium and homeowner associations across the country. It’s also the time of year when one single question is uttered from the lips of many…Why are my dues higher than Building A down the street. As a finance committee volunteer where I live, I have heard this question year after year and oftentimes from the same individual(s). As a community association community manager, I have also heard the same question and conversation from other volunteers who help develop their community’s budget.
For this article I am assuming that a managing agent, community manager, or volunteer committee prepares the annual budget for presentation and approval by the board of directors. The body creating the budget also evaluates current trends, reviews previous budgets and actual income/expenditure history, reviews contracts for any price increases, and carefully considers each line item within the budget. The final recommendation is a 2% increase for the upcoming year. Someone comments: “Why is that? Building A down the street is not increasing assessments and they are less than ours!”
There are many factors that affect a community budget. It is not prudent for one to compare the assessments at Building A to Building B. Typically Building A’s community has different needs and desires than Building B’s community.
There are many unknowns regarding Building A:
Is there a Reserve Study?
Is the reserve fund contribution adequate?
What types of common areas do they have to maintain?
Are they maintaining the equipment and common areas appropriately?
Do they have the same staffing levels?
Do they offer their staff benefits such as insurance, 401K, etc.?
Are pay rates representative of each other?
Does their declaration define the areas of common maintenance responsibility the same as Building B?
Do they have the exact same amenity areas as Building B?
Are the amenity areas used at the same frequency?
Do they budget for community social events?
Is there a high efficiency automated building energy system installed?
Has there been or is there a planned special assessment?
How does common area square footage compare one to the other?
Are there equipment warranties at one and not the other?
What is the age/condition of the building equipment?
Do new owners contribute to a capital contribution fund when purchasing?
What is the delinquency rate?
As you can see, these unknowns affect the budgeting process and many more could be listed.
When building a budget for your community, you should only use the information relative to your building and not a building down the street.