2017 Sierra Canyon Association Budget – Draft As of October 11,2016 For Discussion Purposes Only
Disclaimer This 2017 budget presentation is being made prior to Sierra Canyon Board approval and is subject to possible revisions. The approved 2017 budget documents will be mailed to homeowners after Board approval. Ratification of the budget and assessment rates occurs at the Annual Sierra Canyon homeowner meeting in mid-November 2016. A majority of all eligible homeowners must vote “No”, otherwise, the 2017 budget will be adapted. Financial projections may vary. The opinions expressed by the presenter are his own and may not represent those of the entire Board nor other individual Board members. 2
What’s happened since the beginning of 2016 • 5 new SCA board members in place – Loren Farell; Steve Guderian; Ray Lee; Maryann McKinley; and Amy Berns • Landscaping contract awarded to new company, Reno Green. • Aspen Lodge roof and insulation repairs. Paid by Pulte. • Attempt to acquire Pulte / Del Webb sales office fails. Disappointed! • Revised Maintenance Easement Agreement with Somersett. • Villages 13 and 15 turned over by Pulte. Welcome to all the new residents! • Sierra Canyon operating metrics captured and analyzed. 3
2016 Operating Metrics Aspen Lodge Visits and Activities Total Visits by Activity Category Total Visits Visits Events Fitness Clubs* Other 4,900 4,804 4,795 4,800 4,667 4,804 202 838 2,324 1,440 4,653 4,700 Jan 4,600 4,347 369 832 2,519 627 4,500 Feb 4,347 4,400 4,280 4,300 4,653 210 830 3,052 561 Mar 4,200 4,100 4,795 665 853 2,728 549 Apr 4,000 JAN FEB MAR APR MAY JUN 4,280 394 830 2,932 124 May Aspen Lodge Resident Visits 4,667 960 726 2,794 187 Jun 3,500 3,802 190 692 2,902 18 Jul 3,000 4,096 220 919 2,891 66 Aug 2,500 Sep - - - - - 2,000 Oct - - - - - 1,500 1,000 Nov - - - - - 500 Dec - - - - - - Total 35,444 3,210 6,520 22,142 3,572 1 2 3 4 5 6 Events Fitness Clubs * Other * Most Popular Clubs = Billiards; Bridge; Community Social 4
2016 Operating Metrics Other Management Data • # of ARC applications: 204 applications submitted thru August; 300 annualized with a first time 80% approval rate. • # of Customer Service Calls: 400 to date; 600 annualized. Most calls are about balance inquires (27%); community inquires (15%); to contact on-site management (11%); and misc. (47%). • # of Non-Compliance Matters : 565 to date; 850 annualized. Landscaping issues (50%); Fence issues (7%); put away Garbage / Recycle bins (6%); misc. (37%). 5
First, Let’s look at 2016 Budget YE Est. Var. Budget YE Est. Var. # of Units 1,134 1,138 4 $’s per unit per month Assessments $ 1,061,424 $ 1,065,090 $ 3,666 $ 78.00 $ 78.00 $ - Fitness & Events Fees 64,000 77,074 13,074 $ 4.70 $ 5.64 $ 0.94 Misc. - advertising, etc. 17,866 22,722 4,856 $ 1.31 $ 1.66 $ 0.35 Transfer to Reserves (212,477) (212,477) - $ (15.61) $ (15.56) $ 0.05 Total Revenues 930,813 952,409 21,596 $ 68.40 $ 69.75 $ 1.35 Staff Salaries & Benefits 276,000 332,000 (56,000) $ 20.28 $ 24.31 $ (4.03) Landscaping & Utilities 260,520 245,000 15,520 $ 19.14 $ 17.94 $ 1.20 Repairs & Maintenance 182,700 180,000 2,700 $ 13.43 $ 13.18 $ 0.24 Outside Fitness & Events 66,000 62,500 3,500 $ 4.85 $ 4.58 $ 0.27 Other Admin - mgt, taxes, ins, etc. 156,078 132,909 23,169 $ 11.47 $ 9.73 $ 1.74 Total Cost 941,298 952,409 (11,111) $ 69.17 $ 69.75 $ (0.58) - Operating Gain (Loss) $ (10,485) $ - $ (10,485) $ (0.77) $ - $ 0.77 6
2017 Budgeting Objectives and Goals • Set a reasonable 2017 monthly assessment rate with a look to the future to minimize future assessment fluctuations. • Take steps to get a more accurate reserve study and updates. Improve the funding % for reserve components. • Include special project expenditures for prioritized amenities and service enhancements. Examples may include wildfire fuel reduction; recreational projects; web site improvements; water conservation projects; rock wall maintenance; office space acquisition; etc. 7
Now, Let’s look at the draft 2017 budget Budget Assumptions • As we build out to 1,210 homes from a 2016 weighted average of 1,138 homes our Assessment Revenues will increase. +$67k @ $78/month . • Events and Fitness subsidies to remain constant before administrative allocation of Lifestyle and Athletic salaries and benefits. +$2k • Increase reserve contribution rate to improve funding % and follow a consistent funding approach. +$7k • and Other Key areas of focus: Staffing / Customer Service; Wildfire fuel reduction; web site; community leadership training and development. See next slide . 8
Key Areas of Focus for 2017 and beyond • Staffing – Dept. of Labor regulations involving staff eligibility for overtime pay; improve customer service support; improve maintenance support; and improve web site support. +$71k • Develop fuel reduction plan and start its implementation. Continue each year subsequently. +$30k • Enhance the Sierra Canyon web site experience. +$14k not including staffing change to support. • Provide funding for community leadership education and training. +$2k 9
Opportunity to Recapture SOA’s Transfer Fee Credit and Provide funding for additional Special Projects • In 2017, it is likely that the SOA will release $595k that has accumulated since 2011 as a credit to the SOA Common cost center thus creating a net $11 per unit per month reduction in their assessment rate from $80 to $69 per unit per month. • This is being done because there are no current SOA Common projects that are likely to be developed and the Special Projects funding needs are in the Sierra Canyon sub-association and the non-Sierra Canyon areas of Somersett . • Sierra Canyon has a needs for possible parking modifications, storage space addition, Aspen Lodge renovations, etc. • non-Sierra Canyon Somersett has a need for TCTC modifications and pool area expansion projects. 10
Opportunity to “recapture” in Sierra Canyon Somersett’s Transfer Fee • What is it? How is it allowed? • How has it accumulated? • How much is generated each year? • How Sierra Canyon can benefit from it? 11
What is it? How is it Allowed? Somersett CC&R’s Article III; Section 15; Transfer Fees “The imposition of such transfer fees is intended for the purpose of providing a continual source of capital to the Association for the purpose of enhancing the Association’s financial capacity in meeting its obligations in maintaining and improving Common Areas in a manner in keeping with the first-class nature of the subdivision over time ” 12
How has it accumulated? • Prior to 2011, the transfer fee was a revenue source in the SOA Common Area cost center “in meeting its obligations in maintaining and improving Common Areas”. Monthly assessment rates were moderated by the transfer fee revenues generated. • Beginning 2011, after recovery from the depression of 2008- 2009, more stable collection of assessments and recoveries from construction defect claims, the SOA board decided to allow the transfer fees to accumulate for the purpose of “improving Common Areas in a manner in keeping with the first-class nature of the subdivision over time”. 13
How much is generated each year? Somersett’s Transfer Fee Slump Creates Lack of Mobility for Americans New York Times By SAM ROBERTS APRIL 22, 2009 “Generally speaking, people move based on the economy,” Dr. Smith said, “and obviously the economy in 2008 was mediocre to bad. That would tend to have a negative impact on people’s desire, ability or need to move.” In its report Wednesday, the Census Bureau said that Americans’ mobility rate, which has been declining for decades, fell to 11.9 percent in 2008, down from 13.2 percent the year before and setting a post-World War II record low. Moves between states dropped the most, to half the rate recorded at the beginning of this decade. 14
How much is generated each year? Somersett’s Transfer Fee The initial transfer fee is $400 per unit and then .1% of the sales value of unit sales price. Example: 3,000 units in Somersett; 10% of the population moves or 300 units * .1% of the sales price = $125k to $150k per year in transfer fees generated or approx. $4.00 per unit credited to the SOA Common cost center per year. 15
How can Sierra Canyon benefit from it? Possible Uses for a “recaptured” Transfer Fee • Use to offset cost increases such as salaries and benefits; fuel reduction efforts, etc. in 2017 and beyond. • Use to make SCA improvements such as lodge parking expansion; storage and other amenity uses generally classified as special projects. • Make a supplemental reserve fund contribution to further increase % funded above 84% anticipated at end of 2017. 16
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