6/30/6
Personal Opinion of Dan Baldwin, Tuscany Hills Homeowner
Please note that while I have a bachelors of business administration degree I am not an accountant and have no experience as a financial analyst. The following is simply my analysis and opinion as an individual Tuscany Hills homeowner offered for review to other individual Tuscany Hills homeowners. Feel free to discuss this information with your neighbors. You may forward questions and opinions regarding this information to me at dan@baldwin.net and I will forward them to Avalon management so they can address all homeowner questions and properly process the homeowner opinions and ideas before officially presenting the information to the board in an open & official board meeting. You may also address your questions to Avalon directly at the clubhouse during normal business hours.
Based on my review of the May 2006 Tuscany Hills HOA financials, I submit the following observations & suggestions:
Fix the Monthly Budget for the Second Half of 2006
1. If over the first half of the year the HOA is only averaging $158,000 a month in revenue then we should adjust the budget accordingly.
2. The $23,5000 budgeted monthly "set aside" for the HOA reserve needs to be physically transferred out of the operating budget every month and into a separate checking account set up for reserve expenses.
3. Transferring the $23k reserve out of the HOA's monthly $158k revenue provides a net monthly HOA revenue figure of $135K
4. As the total monthly net HOA expenditures are $144k (after the monthly reserve accrual is transferred out), at mid-year it appears that the HOA is budgeted to spend $9k more per month than the HOA takes in so $9k in monthly expenses must be cut out of the budget to break even. The following $9,000 in monthly budget cuts are recommended & seem to be affordable from the account surpluses or projected changes in spending in each category:
A. Lower the patrol budget (E054) $1,000 per month from $6,520 to $5,520. This should more than cover the PRSS lock/unlock contract plus extra pool services for the summer to be provided by Securitas.
B. Lower pool monitor budget (E024) $2,300 per month from $2,300 to $0. Pay for the pool monitor/patrol out of the patrol budget (E054).
C. Lower tree maintenance budget (E032) $2,350 per month from $2,350 to $0. Pay for tree trimming out of open space budget as that job is usually done by city.
D. Lower legal expense budget (E072) $1,000 per month from $6,660 to $5,660. This seems doable since there's a $6k surplus in this category.
E. Don't replace Candace (E100?). This should save at least $2,500 per month
5. Zero out all budget accounts so no one will feel the need to ask to spend account "surpluses" from the first half of the year in the second half of the year.
Fix the Operating Account Deficit of $38,600
1. Pay back operating account the $25k tree maintenance deficit (E032) from the $29k surplus in the open space account as tree trimming is usually done by the city.
2. Pay back operating account the $94k landscape extras (E028) out of the $143k to be gained when cashing the last two reserve account CDs at the end of August since the "landscape extras" purchased were supposed to be paid for out of the reserves. Transfer $49k balance to new reserve checking account.
3. Adding these two amounts (($25k + $94k) back into the operating account turns the $38K deficit into a $82k surplus. Add that surplus to the $158k gross monthly revenues and the HOA is back to having 150% of monthly expenses on hand in cash in the operating account.
Properly Fund the Reserve Account & Pay for Pending Reserve Expenses
1. Set up separate reserve checking account for reserve fund expenses. Transfer the $23,500 reserve "set aside" from the operating account checking account to the reserve account checking account every month. Seven months (June thru December) will fund this account to $164k through the end of 2006. Adding the $49k leftover cash from the reserve CDs at the end of August increases this account to $213k by the end of 2006.
2. From this $213k reserve account pay for the $27k pool fence, the $9k electric & $67k for Bel Fiore. These three reserve expenses still leave $110k in the reserve account at the end of 2006.
3, Pay for $180k Tesoro work in stages throughout 2007.
Respectfully submitted to Avalon Management by Dan Baldwin as an individual homeowner.
Dan Baldwin
dan@baldwin.net
951-251-5155