TheBoard of Directors is considering a new method of budgeting funds to pay for improvements on existing facilities and organize capital for new projects.
At a meeting last week, RA Vice President Andy Sigle presented directors with an outline of the new process. In the current structure, assessment revenue and investment income are placed into the operating fund. Meanwhile, only investment income funds the reserve and replacement (R & R) pool.
Under the new proposal, all income will go to three pools — an R & R fund, an operating fund and a new capital projects fund. A set amount would be moved to the R & R Fund annually based on a 10-year forecast; the R & R fund would also have a set minimum balance, and the board would vote on discretionary allocation to the new projects fund.
Sigle projects the annual amount put into the R & R fund should be $2.1 million a year, but also says the number can change each two-year budget cycle based on the association's anticipated needs and existing capital assets.
RA's budget for 2012-13 is $14,374,012. Of that money, $1,137,934 is set to go into the operating fund and $1,666,650 will go into the capital improvement fund. About $269,000 from assessments and interest income will go towards R & R.
"During the 2012-13 cycle, several directors said they had the desire to see a longer-term view," said Sigle. "This way asks, 'How does two years fit into a longer time frame?' It also better ties together and explains operating expenses separate from capital funding or repair and replacement."
Sigle said the new plan "emphasizes repair and replacement funding in the biannual budget process, utilizes R & R funding for capital project expenses and carries forward from one year to the next so we are not bleeding into the operating fund."
"It creates a new capital projects fund for the wish list for new things," he said. "Money spent from this fund as we move forward makes the operating fund easier to understand by limiting its use to operating expenses."
RA treasurer John Higgins, who worked on the proposal with Sigle, says "our method of putting aside R & R has not been satisfactory."
"We are going to have that one year where we need $6 million and we only have $4 million," he said. "Looking down the road 10 years, and we have all those assets, and we assess how much we have to put aside to meet needs and adjust accordingly. Had wiser boards done this 15-20 years ago, we wouldn't have been talking about this today. That didn't happen. I'm not going to cry about it, but going forward, would hope this board will be the one people will look at years from now and say, 'They were wise.'"
The board will review the proposal and discuss and make a recommendation at its next meeting on July 26. The board will also consider forming a Special Committee on New Capital Projects List to make recommendations on new capital projects.
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