December 20, 2016

In my last posting, I said I was moving on.  The reality of the situation is that it will likely be some time before I can place it on the market and sell.  In the meantime, I am still an owner in Aspen Circle and have to pay maintenance fees, etc., so I am going to continue comments on events as they impact the Circle.

The New Budget.

We all received the new budget thru the mails or personally delivered.  I've reviewed the budget and I see a couple of issues that could be corrected.  The new budget represents an increase of 6.3% over last year. Resource did this budget with assistance from our management team and I have to wonder if they have a clue regarding what is going on here at the Circle.  There are a few strange things included in this budget and they are as follows (with my comments).

Legal Fees:   This item has a budget of $4,500.  This is too much since we no longer have issues with foreclosure with the 2 units that weren't contributing maintenance fees.  While we had those issues, it was reasonable to expect to pay more money for legal assistance.  As you can see, the projected fees for 2016 ($4,045) do not quite approach this amount.  I would suggest that $2,500 would be just fine.

Bad Debt Expense:  We now have all 48 units paying their maintenance fees.  Bad Debt was put into the budget to make up, partially, for the maintenance fees that we didn't expect to get from the 2 units that were in foreclosure.  This was good when we had foreclosure issues but now we have a full complement of owners, happily paying their maintenance  fees.  This item ($5,100) should be removed.  It is possible that we may have an owner who stops paying fees but the budget is built with reasonable expectations and we have no reason at this time to expect a need for Bad Debt.

Reserves - Common Roof:  The amount budgeted is $41,000.  That would be sufficient to purchase a new roof and cover the costs of the maintenance contracts.  However, we don't require a new roof every year since each roof has a life span of 20 years - except for, of course, C Building which had a repair done that may require attention significantly earlier.  I would suggest this be lowered to $35,000 which is more than ample to build up reserves when the next roof needs replacement as well as cover maintenance costs.

Reserves - Deferred Maintenance:. Now this is an interesting one in that we have never had this reserve account before, so it was obviously invented by Resource and to what purpose?  Reserves are set aside for designated capitol expenditures. Since all of the expensive capitol expenditures are covered with the current reserves, it is sort of fun to imagine what this account is supposed to cover.  

We know that there are necessary expenditures for the rear stairs of each building that should be done expeditiously and cost us about $26,000.  Janet tells us that there are drainage contracts that cost us about $20,000 (although we haven't seen a contract so who knows) and this is an issue that we are told must happen soon.  This Deferred Maintenance can't possibly bring in enough money soon enough to cover the cost of both of these 2 items, let alone one.  So, you can take it to the bank, that we are going to have an assessment for about $46,000.

My guess is that this Deferred Maintenance is really a savings account designed to secure enough money so that the buildings can each be painted twice with caulking, which will cost us $66,000 (per Janet's cost estimate)?  Totally unnecessary!

Now, if you take out or reduce the items that I suggested, you save a bunch of money ($23,100).  All of a sudden you have a budget that does not increase maintenance fees.  After several years of escalating maintenance fees due to the large increases in flood insurance and the decrease in income due to the foreclosures, it would seem like a nice reward for our patient owners to enjoy lowered maintenance fees for a change.  Especially since we will be called upon for another assessment this year for repair of the stairs and the drainage issues.

Just my 2 cents on the budget,

Andy Johnson