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

[Peter Orbeton (peter.orbeton]

Appreciate the information - so far NNF appears to be functioning in much
the same manner as the responses.

We have had a formal reserve study, are following its recommendations, and
a portion of the dues is for the reserve fund. We also established an
operating reserves account, which we cap at $15K, and which we have been
able to fund largely through what was left unspent in the prior year's
coffers. Operating reserves cover the unexpected expenses that we all know
arise, which is in addition to a nominal budget for the Maintenance Team
for less costly repairs.

Looking out five-years, we expect the reserve fund to have a sufficient
balance such that we can build an investment ladder of regularly maturing
financial instruments. At this month's open forum meeting, the Finance Team
will introduce the concept of the investment ladder to the community, as
well as beginning the discussion of risk tolerance.

NNF has grappled with categorizing expenses - Must Have/Essential, etc.,
though in the earlier budget sessions some residents took the minimalist
approach to defining essential. We also do appear to have reached the point
where team recurring expenses (e.g., Fun - a real budget category, or
Landscape - caring for our common lawn & majestic sugar maple trees) will
proceed without much back and forth.

Peter Orbeton
Treasurer, Nubanusit Neighborhood & Farm<http://www.peterboroughcohousing.org/>


On Sun, Feb 19, 2012 at 1:49 PM, Sharon Villines
<sharon [at] sharonvillines.com>wrote:

>
>
> 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
> ----
> Sharon Villines
> Takoma Village Cohousing, Washington DC
> http://www.takomavillage.org
>
>
>
>
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-- 
Nubanusit Neighborhood & Farm
http://www.peterboroughcohousing.org