Budgeting is never easy, not for a family of four and certainly not for a co-op or condo community of hundreds. That fact is made all the more difficult by the lingering effects of the recession, which continues to wreak havoc with our confidence as well as the bottom line. For many boards, trying to balance a budget these days requires making difficult choices. If the budget is falling short, what is the solution? Raise more revenue by raising fees? Or reduce costs by cutting back on services and amenities? For residents, neither option is likely to win a popularity contest.
So how does a board determine the best ways to keep their bottom lines in the black? And if unpopular choices must be made, what is the best way to break the news to residents?
What’s Flexible, What’s Not
For co-op and condo communities of all sizes, a budget is not necessarily a highly flexible entity.
“Workman’s compensation, elevator contracts, government fees, inspections fees are not at all flexible,” says Larry Silverman, president of Atlantic Management based in Union City, New Jersey. “Or if you do a mortgage for five years, 10 years, you have no room to play with that during that time frame.” For the most part, those prices are fixed from year to year with very little room for maneuvering unless it’s a new contract year for staff. Otherwise, the prices that are locked in at the beginning of the year will still be the same at the end and likely for several years after that.
Jeff Stillman, CPA and vice president of Stillman Management Inc., based in Mamaroneck agrees, defining the major pieces of most budgets as “inflexible.”