Cohousing-L Mailing List: Re: Annual budget increases & capital improvements

[David Clements and Evan Richardson (evdavwes]

Re how to make decisions about the budget.  At Westwood Cohousing, we have much 
less owner control of the budget and spending than I see referred to in Coho-L 
about other communities.  So far as I know we may be unique among cohousing 
communities.     Our bylaws say that the Board prepares the budget and the 
owners vote on the budget.  For many years we had a consensus-like process for 
the budget, but not in regular meetings, and poorly defined overall.  We have 
recently been clarifying the process, so that certain parts of the budget are 
developed by consensus (Team budgets and new projects mainly) and other numbers 
are proposed by the Board (with input and comments from the members at a member 
meeting).  The proposed budget is approved by vote of 75% of owners.  It used 
to be that we called the final budget approval "consensus," but it wasn't 
really, and at times we took a vote ("How many in favor of consensus?").   Our 
new process (technically still a "proposed process") is much clearer, but is 
not consensus.   I think it suits us OK.  
I am imagining that we will have other financial decisions operate by proposal 
of the Board and 75% vote of owners.  For example,  we almost always run a 
yearly surplus amounting to 10-20%  of the operating budget.  The bylaws say 
the board decides whether to put this in the Reserve Fund or in a General 
operating reserve or  refund to owners.     For the first years of the 
community the surplus was always refunded.   Recently it has been kept in 
reserve.  The Board has often made these decisions without  input from members 
or a decision of members.  Our finance committee has been looking into ways of 
standardizing the process and giving owners part of the authority to make these 
decisions, either by a more explicit policy in the bylaws for the Board to 
follow (when to refund to owners, for example), or by having these decisions 
made by proposal of the Board and vote of owners.  
We currently do not have a CI fund.   We had a proposal for one, which was 
controversial and not approved because it was linked to one particular way of 
funding, namely a transfer fee when houses were sold.   I am aware of other 
communities that regularly put  some of any budget surplus in a CI fund.  I 
like this idea.  I suspect if were do something like this we might want to have 
dispersals from this fund to be by a vote of  the owners, like the other budget 
decisions.  I appreciated the comment about  the difficulty of coming to 
consensus about spending from a CI fund, with the result that the fund cannot 
be effectively used.   
There was a recent situation where the Board used money from the General 
Operating Reserve for a CI-type project (new construction), without any 
decision by owners or discussion in a member meeting.  It seemed to me that the 
Board was overstepping its authority, as it is stated explicitly in the bylaws 
that Capital expenditures need to be approved by the Board and a majority of 
owners (The bylaws assume that a Capital expense will be funded by an 
assessment, which was not necessary in this case).   However, in our community 
we tend to defer to the Board's authority on such financial matters.  This 
points out what can happen if reserves accumulate without a clear plan for how 
much to accumulate and under what conditions to use it.  
I would be happy to hear from other communities where financial decisions are 
made by vote rather than consensus, and from those who have given to their 
Board the amount of authority over financial matters that we have given.   One 
key question we have asked off and on is "how much authority do we want the 
members to have" (as opposed to the Board), and "how can we be clear and 
explicit about how things work?"    The Bylaws currently say that the Board has 
complete authority over preparing the budget and spending from the budget.  But 
I suspect many of us here are assuming that that is not the way things actually 
are intended to work here.   We intend members to have more authority.  But how 
to define this?  We are still working on it.  
David Clements

Message: 1
Date: Sat, 18 Feb 2012 10:30:46 -0500
From: R Philip Dowds <rpdowds [at] comcast.net>
Subject: Re: [C-L]_ Annual budget increases & capital improvements
To: Cohousing-L <cohousing-l [at] cohousing.org>
Cc: Cornerstone Residents <residents [at] cscoho.org>
Message-ID: <680A4A06-557D-41DF-A6DF-03E37ADD8EA5 [at] comcast.net>
Content-Type: text/plain;       charset=windows-1252

Peter ?

Phil Dowds from Cornerstone in Cambrige, MA.  (Perhaps we met during the Green 
Haven Sociocracy symposium.)

Your community expenses will divide, more or less, into three categories ...
NECESSARY / INESCAPABLE.  You have to pay for property insurance, property 
taxes, public utilities, etc.  Maybe you can bargain for better terms ...but 
very few cohos would go without some kind of insurance, and ducking your 
municipal taxes and fees is not an an option.
TRADITIONAL:  The history and values of your community establish traditional 
budget components.  For instance, do you usually rely on a management company 
and outside auditor for keeping your books squared aware?  You are not 
OBLIGATED 
to do this, but you may have a history of CHOOSING to do this.  In general, 
your 
budget traditions need not be re-debated every year.
SPECIFIC, INTENTIONAL.  We live in intentional community; what do we intend?  
Do 
we want to add a sauna or a movie room to our Common House?  Is it time to buy 
new dining room furniture?  Should we pay more for a day care room and child 
care support, such that our parenting households are liberated for more 
participation?  Should we purchase a second tractor?  I sure don't have the 
answers, but I will note these kinds of questions are important to the annual 
budgeting process.

For the necessary and traditional, we (our Managing Board) investigates each 
line item one by one; we do not rely on a hypothetical inflation factor.

My advice would be:  During your budget cycle, try to push onto the sidelines 
the necessary and traditional, and save your energy for good debates about the 
intentional.

At Cornerstone, we've pushed our repair / replacement budgeting into a five 
year 
cycle, such that our annual assessments are pre-consensed for five years.  
Accordingly, in most years, we do not re-discuss and re-consense repair / 
replacement assessments.  So far, this has worked well.  The second five year 
cycle will need consensus in 2013,

Cornerstone is more or less acclimated to the idea that we must pay money to 
maintain that which have.  But, is it ever appropriate to buy anything new and 
different?  Thus far, we've not committed to any kind of CI (Capital 
Improvement 
account or assessment) ? and all purchases of something new and different are 
regarded with great wariness.

Thanks for raising topics of broad significance for coho.

R Philip Dowds AIA
Cornerstone Cohousing
175 Harvey Street, Unit 5
Cambridge, MA 02140
617.354.6094

On Feb 17, 2012, at 4:46 PM, Peter Orbeton wrote:

> 
> Nubanusit Neighborhood & Farm is a relatively young cohousing community,
> and is looking to tweak the budget process. We've heard first-hand from
> residents of other coho communities who have passed through about less
> meeting-intensive processes than we have now, pre-determined annual budget
> increases (tied to the CPI), and capital improvement funding not
> necessarily earmarked to a project. The number of meetings (and time) spent
> with our current process is probably, we've learned, directly related to
> our newness. And because we still have development projects, we've
> experienced annual budget increases that are not sustainable.
> 
> As the Treasurer, I've volunteered to gather information on other
> communities, and have plumbed the C-L archives. While suggestions on how to
> achieve a short and painless budget process are certainly welcome, I'd like
> to hear how annual budget increases are determined so we can model ours for
> more predictability. Do you base it on the Consumer Price Index, establish
> a fixed dollar figure ceiling annually, or by some other means?
> 
> We have operating reserves and a reserve fund (replacement/replenishment),
> and would like to also establish a capital improvement (CI) 'account.' Our
> budgets to date have been line-item specific, and up until 2012, were for
> the most part not funding multi-year projects. We've heard of other
> communities with CI accounts that are tapped when a team/committee brings a
> proposal forward, and are funded annually based on a pre-determined amount.
> So, my questions on this topic are do you have a CI account, how is that
> account funded, what is the process for withdrawing from it.
> 
> I'll take responses directly if you would prefer. Based on the responses, I
> may post a summary as well.
> 
> Thanks in advance.
> 
> Regards,
> Peter Orbeton
> Treasurer, Nubanusit Neighborhood & Farm
> http://www.peterboroughcohousing.org
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