Getting on “Board” with the Inevitable Budget Increase
The beginning of Fall – and corresponding beauty of the changing leaves – generally kicks off the budget process. Our observation is that usually a draft is presented before a Board meeting, at which time a Board decision is expected swiftly, impacting the financial situation of each and every unit owner for the next year. The budget seems to arrive a few days before this decision-making meeting, giving you little time to review it. You find yourself sitting at the Board meeting with next year’s budget and an expectation of approval, and then you turn from informed leader to politician.
Let’s face it, this is the most important unit owner project because it determines how much more people need to pay. Money is tight, aspects of the population that live within the building may or may not be better suited to deal with an increase, plus no one wishes to pay more. You took on the role of leader when you submitted your name for nomination, and we want to assist you in properly serving on the board.
Let’s put aside any personal preferences and focus on reality here. As a Board member, you have a fiduciary duty to do what is right. If you need more time, you need more time. Try not to be driven by the process or making decisions without a full understanding of the costs, changes and expected revenues. We understand that you are a volunteer, but your neighbors are counting on you and asked you to serve. The budget is a most important tool for you as a Board member for numerous financial matters. These include long term planning and monitoring; not only costs but also the financial records the managing agent maintains, and a platform to see how you did on costs as a board after the year is out. In a separate blog we offer insight into that aspect of Board performance.
Come on, we all know that for unit owners, they are most interested each year in what that monthly charge increase is going to be. And for many, it comes down to their (the unit owners’) evaluation, to their own expectation, without knowledge or appropriate information. How can the uninformed make reasonable decisions? So, which is more important to you as Board member, unit owner endorsement or reality?
Thorough understanding of the budget and the changes from year to year are key to appropriate Board review. Contrary to the standard, “the budget shows this” and then the answer is, “we can’t increase charges that much” response, along with a negotiated increase someplace between hopefulness and realty, do something different. Avoid making the decision on pre-conceived levels or expectations as we see so many people who tend to shoot from the hip on this one. Let’s face it, other than certain non-recurring changes in costs (i.e. loan refinancing or something like the recent global energy producer rebalance due to America becoming great again in energy production), this year’s costs should be higher than the last budget should always be expected.
As much as we’d like to be more than we can be, inflation is outside the control of the Board and your property manager. By all means, watch each and every dollar you can, pay the best possible price for superior service and the best contractors, but don’t let yourself be swayed by political considerations within the building. Even when there is a large faction in your community who say “no” to paying more, your role is to explain reality and do the right thing. Be sure that you thoroughly understand the changes from year to year and endeavor to have confidence in your final decision, regardless of the opinions of others.
The reality in America is that over time, costs do rise. This has been a built-in plan by politicians and the Federal Reserve Board long before any of us evolved into leaders. We ask you to stand tall against the waves of politics, annual increases have been averaging 3-5% over time. Due to the global reposition of the energy marketplace with America becoming an exporter of resources, the last few years have ranged from 1-3%. We ask you to be reminded that your role is to set monthly charges at what is needed for this property, not anywhere else! In the interest of your community, it is vital that we all be adults and understand that there should be an expected increase each and every year. Otherwise, the result of not making necessary increases tends to create the need for a future Board to increase monthly charges much more than they should or put through an assessment to clear up the inevitable drain on financial resources.
Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at email@example.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.