It is that time of year where the Board has to approve the assessment fees and budgets for 2021. Building the budget for our Association is a long and involved process that kicked off in May with our General Manager, Accounting Manager, Board subcommittee, Cove Advisors, and Finance Committee, all working on forecasting operating expenses for next year and updating our thirty-year reserve plans.
These numbers dictate our quarterly assessment fees for the Common, Water Company, Water Quality, and Channels & Lagoons individual budgets and reserves along with the sixteen individual budgets and reserves for each of our separate townhomes and subdivisions.
This year is my first year jumping into the middle of this undertaking. I must compliment our Staff, Finance Committee members, and my predecessor, Jim Siegfried, for driving this process year-in, year-out.
On October 21st, during the Board of Directors Regular Board Meeting, the Board approved the 2021 budget.
The quarterly assessment fee for most members next year will be $735 versus $693 for this year. An increase of a little over 6% compared to the near 11% increase we saw from 2019 to 2020. The table below gives a breakdown of this fee, and the year-over-year (YoY) increase:
Over the last two years, our assessment fees have increased double-digits year-over-year, on top of the two Water Quality Special Assessment payments ($400 each) to date, with a third payment scheduled for 2021 of up to $600.
In running for election to the Board, one of my goals was to find ways to reduce costs and avoid another double-digit increase for the third year in a row. I will honestly say my results have been mixed.
We face several challenges going into 2021.
First and foremost, with Measure T coming into full effect, the number of active vacation home rentals (VHRs) will significantly decline throughout the next year. This decline means less income from VHR permits, along with less revenue from selling recreation passes to those VHR guests that wish to use our facilities. If we didn’t find ways to reduce costs somewhere, all homeowners would have to make up this shortfall through an even bigger increase in our assessment fees. And since there will be some vacation rental activity next year, we arguably can’t cut all incremental costs specific to VHRs until 2022.
Second, there have been numerous requests from homeowners that do not reside on our waterways to reinstate the 50% reduction in Water Quality fees that had been in place until 2017. After reviewing these requests, the Board felt that a subset of these homeowners (those that do not reside on our waterways or Lake Tallac and are not members of the Tahoe Keys Beach & Harbor Association) truly do not benefit as much as other homeowners from our water quality and weed harvesting efforts. To this end, the Board decided that 105 homeowners will receive a 50% reduction in their Water Quality fees for 2021. For these members, the quarterly assessment fee will be $677. The one four-plex and three duplex homeowners that are also considered landlocked will see a quarterly assessment fee of $925 and $770, respectively.
This reduction will be something that the Board will continue to reassess each year.
To partially address these reductions in income, the Board has approved limited services reductions. Mostly to those services closely tied to the costs incurred due to vacation rentals.
The first is a reduction in security patrol hours. Instead of starting at 8 am, our security patrols will commence at 10 am and run through to the usual 10 pm. These hours will be adjusted for peak holidays like July 4th and New Year’s, as we do today, to ensure we have extended coverage during those times.
The second reduction is to the front desk office hours at the weekends. With fewer VHR guests expected, front desk office hours will be reduced to four hours a day on Saturdays and Sundays, rather than eight hours a day. The front office will open as usual at 8:30 am but close at 12:30 pm during weekends.
The third reduction is to close our indoor pool on Tuesdays for thirty-two weeks of the year between September and May, major holidays excluded. It was debated whether we should close the pool early at 8 pm versus 10 pm or close one day a week. After hearing feedback from members during several Board meetings, the Board decided that closing one day a week would be less impactful to homeowners.
The fourth reduction is to eliminate the outdoor pool attendant Monday to Thursday during the summer months when this pool is open. We will still have an attendant on Fridays, Saturdays, and Sundays.
These reductions will help reduce our operating costs through next year, along with various smaller cost reductions identified by our Staff.
Unfortunately, these changes alone were not enough to bring the assessment down to an acceptable level for a majority of the Board. The Board was split as to whether we should be making further changes (or even if we should be making the reductions outlined above).
The subsequent reductions were hard to contemplate because they impact our Staff directly.
The fifth reduction is to implement a one-off wage freeze for all full-time, non-minimum wage employees for 2021. Minimum wage employees will receive the state-mandated increase from $13 per hour to $14 per hour. This action was against the Finance Committee’s recommendation but was supported by a majority of the Board.
The sixth reduction was to hold on hiring an Administrative Clerk, a position that has been unfilled since May this year. This effective reduction in Staff means that our General Manager and Operations Manager will continue to share this administrative burden next year. Again this action was not supported by all Board members but was supported by a majority.
These six changes, along with numerous smaller savings, resulted in the ninth draft of the 2021 budget that the Board approved on October 21st for a quarterly assessment fee of $735.
Along with this approval came the approval of the assessments and reserve plans for each of our separate townhomes and subdivisions. Their quarterly assessments will range from $735 to $2848. Unfortunately, a couple of our Coves face double-digit increases next year, mainly due to the funding needed for reserve projects.
The “Annual Budget Report” and “Annual Policy Statement” will be included in the Association’s Annual Disclosure that will be distributed by mail in November, unless you have given written consent that such documents and disclosures can be sent electronically—something I highly encourage to help us save some trees and money on printing and postage.
Next month, I’ll further break down the budget, looking at the increases related to our reserves versus increases due to the shortfall in income from operations.
The Board and Staff remain committed to finding additional efficiencies and savings from here on out; our efforts don’t stop just because the budget has been set. I want to encourage all homeowners to help us find ways to be smarter with your money. Feel free to email me if you have any suggestions.