Planning is the key to maintaining a balanced budget for co-op and condo associations. Knowing your budget, predicting expenses, even predicting the unpredictable are all vital components to having a sound bottom line and keeping your shared community financially healthy.
When unforeseen circumstances throw things off balance, a history of sound budget planning can help a well-prepared association regain its footing. For example, the September 11th attacks drove regional insurance rates sky high, leaving boards reeling as they tried to cover rate increases up to 100 or 150 percent or more of projected costs. "No matter how much we thought we were prepared, we could not have predicted that kind of increase," says Denise Fallon of Panther Valley Property Owners Association (POA) in Allamuchy.
On a smaller scale, events as seemingly negligible as snowstorms or ice storms can push a budget into the red. A huge storm means a community may need to pay for unexpected snow removal—in a large HOA or condo community, those costs could be significant. Situations such as ice damming can damage roofs and gutters, too, meaning additional unexpected repairs. "There are things that just can't be controlled," Fallon says.
Trim the Fat
If a budget is overburdened with ancillary expenses and extras to the detriment of real financial readiness, the first step, according to managing agent Chuck Graziano of Management Pros in Ramsey, is to assess the budget as a whole and determine where spending can be curbed with minimal impact on services. Both Graziano and Fallon suggest examining landscaping first. "Things like shrubbery and landscaping usually have the least impact on homeowners," Fallon says. "If you have to cut back on plantings, nobody's going to miss an extra bush or two."
"Landscaping is a big ticket item," Graziano agrees. "And when money is tight, it makes sense to examine the lawn service schedule—how much difference will it make to residents if the grass is cut twice a month versus once a week?" Many homeowners likely will choose longer grass over increased dues.