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

[Sharon Villines (sharon]

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

>  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 set increases on the demand. If we want more, we pay more. If a team wants 
to initiate a new program or make a major capital improvement, these rarely 
come as a surprise. They are worked into the budget as we go.

The best assurance of predictability is a good and through reserve study 
complete with a site visit every 3-5 years and a financial update annually. 
Facilities and facilities maintenance will be your largest expense so the 
degree to which you can predict these is the degree to which you can predict 
your costs.

Having a good reserve fund balance will also give you a cushion so you can work 
your way through emergencies.

We have our reserve study figures delivered in a spreadsheet so we can sort it 
by year of expected expense and update the figures as we go along. We can also 
be more relaxed about painting the interior of the CH this year, for example 
because our painter said the exterior will last at least one year and possibly 
two years longer than expected.

We have a new study every 3 years and have not done financial updates in 
between because we pretty much know what the figures are. The study includes 
every element of the facilities from kitchen countertops to electrical wiring 
to HVACs to the parking lot surface. The figures are calculated long term — 100 
yrs, though 50 would cover all the major items — like the roof.

As much time as I've spent looking at all the items and listening to the FT 
people talk about repairs, etc., we still find things missing or undervalued. 
This week it was $3,000 for a new UPS (Uninterrupted-Power Supply) unit for our 
emergency lighting. The lighting was included for about $1,000 but not the 
battery and actual UPS. 

But since we have such a complete study and fund it at the rate our reserve 
study company says we need to have the cash to meet demands, the oversight is 
not a problem. Otherwise we would waste money by just replacing the $1,000 
battery in a unit that would just drain it faster — spending less now but in 
the long term significantly increasing costs.

We do both Maintenance and Replacement Reserve Studies. It has made budgeting 
and sleeping at night much more comfortable, and predictable.

This kind of predictability also ensures affordability. Unexpected cash calls 
will rarely if ever happen.

Sharon
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Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org