Silver Sands Facing Budget Challenges - Please Read

Note to owners: This is the first in a series of articles planned for the summer to help all owners understand how our HOA finances work and the budget challenges we are facing. This edition explains the Operating Fund while the next one will explain the Reserve Fund. Future topics will explain the Board’s options for setting us on a long-term path of financial stability.

We encourage you to read this information carefully and send in questions or comments. We’ll respond to your feedback in later editions of this series. A survey of all owners will take place in early fall to obtain your opinions about options to ensure a strong and stable financial future.

Sincerely,

Your Board of Directors

Operating Fund Explained

The Operating Fund is the annual budget that covers operations. Think of this as your household budget that pays for utilities, gardening, groceries, etc.

When the Silver Sands Board abruptly decided to end staffing of the front gate in late April, it highlighted the effect of current economic conditions on the financial condition of the HOA’s Operating Fund. While the board later decided to leave in place gate staffing and undertake a homeowner budget information program, future decisions will have significant impact on the budget.

Where Operating Funds Come From ...

Income to fund operations comes from the monthly assessment everyone pays, currently set at $806 per month. The total operating budget this year is $2.482 million.

Where the Money Goes ...

Expenses to operate Silver Sands this fiscal year are expected to total $2.482 million. Here is a breakdown of the major cost areas with a few notes to help understand what is included.

Administrative Costs - $134,700

This category includes committee expenses, office supplies, insurance, postage & printing, permits & licenses, and clubhouse expenses.

Of this amount, $95,600 is for insurance.

Professional Services - $96,600

This category includes audit tax and reserve services, legal services, management fees and tennis/pickleball professionals.

Of the total, approx. $80,000 goes for the HOA management firm and Tennis/Pickleball professionals.

Utilities - $495,000

This category includes electricity, gas, water, trash collection, cable service, and telephone.

Of the total, $283,000 goes for gas & electric.

Landscaping - $698,500

This category includes landscape contract, grass seed, landscape extras, irrigation parts and reclaimed water.

Of the total, $627,000 goes for the landscaping contract and reclaimed water.

Maintenance & Repair - $265,300

This category includes gate staffing, pest control, janitorial, court repairs/maintenance, etc.

Of the total, $152,000 is for two shifts of gate staffing.

Pools & Spas Expenses - $143,700

This category includes the pool service contract, pool supplies, general repair and maintenance.

Of this total, roughly $100,000 is for the pool service contract.

Taxes - $500

Reserve Contribution Expense - $618,100

This is the amount transferred to the Reserve Fund for major repairs and replacement of assets. It includes a planned contribution of $532,000 and a one-time contribution of $86,000 to pay back funds borrowed from the Reserve Fund for operations spending last year. Repayment within one year is required by law.

Prior Year “Deficit” - $29,900

Some years the HOA budget ends the year with a surplus and sometimes a deficit, based on how actual costs compare to the adopted budget. These differences are accumulated and are stated in the financial reports as "Homeowner Equity." When the current budget was approved, homeowner equity was minus $52,273. The budget includes paying $29,909 towards eliminating this deficit.

Total Expenses $2.482 million

All Finance Documents Available on the Silver Sands Website

The information above is a summary of the budget. Detailed information is available at the Silver Sands website: https://ssrchoa.com. Owners must log in and then can access the Financial Documents category, including Annual Budget Reports, Annual Financial Statements, Financial Policies & Guidelines, and Reserve Studies.

It Looks Like the Budget is Okay ... What is the Problem?

The budget has a few issues which must be addressed, including:

Budget Questions & Answers

Why does an HOA have to “repay” its Reserve Fund when it uses those dollars for operations?

This is required by the State law that governs HOA operations, called the Davis-Sterling Act. The purpose is to protect funds needed for future major repairs and replacements of assets, like roofs and roads.

Was a $100 per month dues increase necessary? Why do we have huge increases in some years but no increase at all in other years?

Smaller regular increases over time that would reflect yearly inflation could have precluded most of the recent larger increases. Almost $38 of this year’s increase was necessary to cover both the one-time repayment to reserves and a contribution towards the Homeowners Equity deficit.

Would the transfer fee on the purchase of a home in Silver Sands, which did not get enough homeowner support to pass, have helped the operating budget?

No, the proposed Reserve Replenishment Fee was for deposit directly to the Reserve Fund.

Please Submit Your Budget Questions

If you have questions about the information in this article or other finance-related questions, please send via email to feedback@ssrchoa.com.

What's Next

The second in this series of three articles scheduled for this summer will explain the Reserve Fund. The third article will touch on options the Board is considering to balance future budgets. Finally, a community survey will be conducted in late summer or early fall that will guide the Board’s future decisions.