Dear Homeplace III Owners,

We are writing to you before our November 19 community meeting to encourage you to attend this important meeting where we will be setting our budget and assessments for 2021. The goal of this email is to help you understand the basics of your HOA's budget and how your dues are spent so you can come to the meeting informed and prepared.

The 2021 budget is shaping up to be one of the most difficult budgets your HOA Board has had to make in some time. Our infrastructure is over 30 years old, and every passing year reveals needed repairs and increased maintenance not faced by boards of the past. COVID-19 and its economic fallout also make it tricky to predict what 2021 will bring. 

As we have been preparing next year’s budget, we have wrestled with difficult choices about funding much-needed maintenance while being sensitive to the added financial pressure and uncertainty many of us are facing. To help us make these choices, we want your input at our November 19 meeting. Our list of items that currently need or will soon need maintenance and repair keeps growing, so it is not a question of IF we will pay for them, but WHEN and HOW. 

Delaying repairs also has its own cost, both in extra expense when we make them after further deterioration has occurred, and in the frustration and inconvenience of living with under-maintained buildings, grounds, and infrastructure in the meantime. Which of our needed maintenance projects should we proceed with next year, and what assessment increases are we as a community willing to accept to make those projects happen?

The information below will orient you to our “budget basics” so you can come to the November 19th meeting ready to contribute, with an understanding of the nuts and bolts of your HOA’s income and budget, so please keep reading!

Sincerely,

Kat Moran
on behalf of the HOA Board of Homeplace III
HOA Budget Basics
Here’s What You Need to Know
What is our infrastructure?
You probably know that the HOA is responsible for parts of our buildings--such as roofs and siding. The HOA is also responsible for most of the work and expense of landscaping in the community. You may not be aware that the HOA owns and is responsible for all the sidewalks, parking lots, roads, storm drains, water system, and sewer system in Homeplace III. There are a lot of pipes underneath our feet! There are sections that connect what each Homeowner owns to the main lines that the city owns. These are the responsibility and expense of the HOA. And trees! We love our trees in Homeplace III, and your HOA is responsible for taking care of (and removing) trees when needed. 
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Where does our money come from?
HOA dues are currently $160 a month, which is an annual contribution of $1,920 per unit. This adds up to $285,000 in total annual income from regular assessments. However, of each unit’s annual contribution, $235 is paid out to the Woodcroft Community Association (WCA) to maintain the common grounds of the larger neighborhood. Your HOA pays this as a convenience to you, the owners. Most sub-HOAs in Woodcroft leave that responsibility up to the individual owners. Because we do not automatically raise our dues whenever Woodcroft raises theirs, the portion of our budget that goes to Woodcroft has increased over the years. After WCA dues are subtracted, that leaves approximately $250,000 for the year in regular assessments. It sounds like a lot, right? Read on!
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What do our dues pay for?
A considerable portion is spent each year on regular and (somewhat) predictable maintenance--gutter cleaning, mowing, termite inspections, and administrative costs. A portion of our income also goes toward periodic "capital"1 expenses, some of which are extremely expensive. These are usually big projects like replacing all the roofs or painting all the buildings. 

Part of the job of your board, with the help of Grandchester Meadows (our property management team) is to anticipate, plan, and budget for both these regular and capital expenses. We have a list of upcoming infrastructure items (such as collapsing drains and severely compromised pavement) that will require funding in 2021 or in the next few years, as well as a study that plans out the next 30 years’ worth of maintenance cycles for major items.

In addition, some of our income has to be put into “reserve”2 for those unexpected expenses that we are all familiar with as homeowners. 

We are continually looking for ways to squeeze savings out of our predictable annual expenses in order to prioritize or gap-cover periodic expenses we know are coming and fund our reserves against those unexpected must-fix-now expenses. 
HOA Budget Basics: Definitions
1 Capital
Money spent to acquire, replace, or improve an asset.

2 Reserves
Reserve funds are for two purposes: 1) store money for future capital expenses 2) pay for unforeseen expenses in a given year.
How are we looking next year?
We currently have a projected (but expected) deficit of $97,000 in 2020. This planned deficit resulted from finishing our three-year roofing project and beginning our painting project. Owners have consistently indicated that these projects are high priority, and accordingly we have found ways to fund them by a combination of trimming expenses where we could, passing a special assessment and using money from our reserves.

However, even with careful budgeting, and knowing that painting is a high priority project for our owners, we have had to reduce our planned spending for painting in 2020 by $50,000 to accommodate several expensive but necessary repairs ($38,000 for tree removal in 2019 and 2020 and $15,000 for emergency paving repairs in 2020).

While spending money from reserves is expected when paying for capital projects, we also have to keep our reserve account funded at an adequate level to meet any other unexpected costs. At our current level of funding and predictable expenses, it could take 3 to 4 years for us to accumulate the money needed to complete the painting that has been started. It should also be noted that the $97,000 we used from reserves is more than half of our reserves, and we currently don’t have the income to build our reserves for future projects faster than we are spending from our reserves for current needs.
Those are our budget basics. We'll present our plan for 2021 at next Thursday's meeting, and we hope you will join us. We welcome your questions and input, either before or at the meeting. You can email: ourhomeplace3@gmail.com.
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