Vista del Canon

2022-2023 BUDGET OVERVIEW

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• This year, it was extremely difficult to develop a budget because our insurance premiums went up 235.68% per year. As well, utilities and some services fees were trending upward.  We had no choice but to accept these higher rates and the board has made a difficult decision to raise association dues for FY 2022-2023, which begins June 1st. 

• Below, the Board will cover the reasons why and how we came up with the dues increase amount.    

 

Reasons for the increase:

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•  The past two years (FY 2020-2021 & FY 2021-2022) were plagued by the pandemic, record inflation & gas prices, supply chain issues, and the shutdown of our economy.  Your board did not raise dues during this time.  Our delinquent accounts have been the lowest since FY 2014-2015.  Because of this, we were able to utilize funds that were allocated for legal services, attorney’s fees, and liens, as well as deferring repair/replacement projects, which helped the association through the pandemic and economic shutdown. 

•   Although we have had to increase the dues, our dues are lower compared to other associations. We have not raised dues consistent with COL increases and the rising price of services and goods.  Since FY 2014-2015, which is eight budget cycles, we have raised our dues by only $74.00.  Of the $74, we raised the dues by $57 FY 2018-2019 for the sole purpose of retrofitting the chimneys and asphalt replacement.  Therefore, the dues have increased by only $17 since FY 2014-2015.  (NOTE:  In 2014-2015 our dues were $276, 2017-2018 raised dues $9 for COL to $285, 2018-2019 raised dues $57 to $342, and 2019-2020 raised dues $8 for COL to $350.) 

•   The increase in dues is a result of the insurance premiums, water, utilities, and Landscaping.  None of the other association suppliers (vendors) have increased their fees.

 

 

Rationale for the dollar amount of the increase: 

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•   Our insurance premiums since FY 2014-2015, have been between $122,000 - $138,000.  (The average cost has been approximately $ 125,785).  FY 2021-2022, the cost for our insurance was $128,750. 

•   First scenario:  The cost of our new insurance rate equates to a 235.68% increase or $99.49 per Unit per month to pay the entire insurance premium of $432,188 for the year.  This is not feasible because we can only raise the dues by 20% in a FY (which would be $70, which would make our dues $449.49). 

•   Second scenario:  The rate increase is an additional $303,438 per year which is an $838.23 per Unit increase, per year, which equates to an increase of $69.85 per Unit just to pay the increase in our insurance.  This is feasible because it is only a 19.96% dues increase. (This would make our dues $419.85).

•   The Board has decided to offset some of the dues increase by temporarily utilizing the asphalt replacement funds for the FY 2022-2023 budget.  This allocates $247,608 toward the insurance increase and those funds will be re-directed into the primary reserves ($57 per month, per Unit, equals $20,634 per month times 12 months = $247,608).

•   Although the asphalt replacement project will temporarily be on hold, the first and second phase asphalt replacement areas will have a slurry coat applied and areas with significant holes needing repair will be addressed. 

•   Additionally, the Board discovered that insurance premiums shall be taken out of the Reserves (section 9.5 of the CC&Rs).  We are not sure how the insurance premiums became a part of the operating budget, but this benefits us because we did not have to raise the dues by 20% and overrun our operating budget.  This would have resulted in a reduction of goods and services.  

•   Please understand, that next year (FY 2023-2024), the Board will have to reassess another potential increase in dues because we cannot continue to utilize reserves from the asphalt project (this is temporary), nor can we afford to deposit less than our normal monthly reserve allocation of at least $25,500.  As it is now, although we are depositing $68,000 into our reserves this FY budget, only $11,000 is being saved due to the insurance premium increase.     

•   The reserve study that was conducted on May 5, 2021, had our reserve fund strength at 45.5%, up from 26.7% for FY 2018-2019.  Reserves should be at least 70% funded.  We are slowly making our way toward that goal.  We foresee in the next several years, that the State of California may implement a bill in which association’s reserve funds shall be at least 70% funded in the wake of the Champlain Towers collapse in Florida.  Therefore, dues must be increased so that we are not faced with a huge special assessment like the residents at Champlain Towers were faced with.  We can only offset repair and replacement in our aging community for so long.  Dues increases are unpopular, but the duty of board members is to ensure the health and prosperity of our community for years to come. 
   

Reasons for the insurance rate increase:
 

• 2017 Fire Season “almost completely wiped out” the insurance industry’s profits in CA from 2001-2016. 

• Our insurance broker was surprised that Traveler’s did not drop us in April 2021. 

• Although we are not located in the fire hazard severity zone (refer to the map) and have enough defensible space (no dead, dying, dried out vegetation within one hundred feet of residences, we are close enough to deplete resources from the brush fire and embers can travel up to a half-mile or more.

• Our insurance broker advised that the astronomical increase in property insurance is occurring all over the state of CA and underwriters paint an area with a broad brush and lump otherwise “no brush fire zones” or “concrete jungles” like our community into adjacent areas that are brush fire zones. 

• Travelers conducted a potential loss survey at VDC on 2-12-2021 and did not list any mitigation other than sprinkler systems.

• We have no control over this.  The only thing we can do as residents, is contact the insurance commissioner. 
   

With that being said, the dues are going to be increased by $45.00 which will bring the dues to $395 per month beginning June 1st.  A copy of the FY 2022-2023 budget, copy of the master insurance policy, and a letter from the board explaining the reasons for the increase will be sent out by May 1st.