HOA fee and deficit budget 2020

Based on a 3 year contract with our lawn are company we told our residents in the summer that the HOA fee will increase by $31 per quarter in the new fiscal year that starts on 12/1. Our lawn care company decided to not return for next season and we informed the residents of this but the $31 would still go into effect. The board then decided to over budget for lawn care since we will not know the figure for lawn care until after 12/1. So the situation is we have told everyone to expect the $31 increase, but since we over budgeted in that category, we would need to increase the HOA another $20 a quarter to have a balanced budget and we would have to announce that at a general meeting of the residents on this coming Wednesday. So here is the thing, the association is in very good fiscal condition and as President I Would prefer to just go with the $31 increase and run a deficit budget of about $8700, and look to a new lawn care bid to come within that figure. If it comes in higher than that then the deficit increases and the HOA fee goes even higher in 2021.

The back story is that this community has not had an HOA increase in 9 years due to very low lawn care costs. I would prefer to increase it gradually and basically keep our word. The board will meet on Tuesday to decide.

It will be a vote and if I can read the board members they will likely go for the extra $20. I am not comfortable at all with that outcome and don’t know how to present that at the meeting with the residents except to say it was a split vote.

Any suggestions or ways to present it would be helpful.

Robert

A budget, at best, is a best guess. That said, if the best guess requires a higher increase than originally thought, explain why and go for it. Any overage can be put in Reserves so no one loses money.

Don't know what NY law says, but in my state, it's illegal to tap the reserves for non-reserve spending. If we have an emergency, we still need to put the money back before the end of the fiscal year. In addition, if an association wants to under-fund the reserves (as defined in the latest reserve study), we must have 100% approval from the membership for each year that we under-fund. In other words, we can be irresponsible, but we have to go on record that we know we're being irresponsible.

Long story short, no deficit spending here. As Sheila noted, small deficits can turn into large monsters pretty quickly.

Someone else once told me that it's better to bite the bullet and do a large assessment increase in one year rather than doing small increases each year. I guess it's the psychology of the thing. Raise it once and after that, people tend to remember that the fees are stable. If you increase it every year, people seem to remember the constant increases. So they're happier with the second scenario, even though they may end up in exactly the same place financially.

John,
In Ca. it was limited to a 12 month loan from Reserves. I would think vague language would be a real issue. Can't you see a rogue board making a 10 year or longer plan?