How Do We Ensure Predictability in Our Annual Budget?

Q. We know lots of ways to streamline our budgeting process but what measure do we use to plan increases? Consumer Price Index? A set percentage? How can we predict better?

A. At Takoma Village, aside from increases in utility rates and the like, we haven't had unexpected increases since we emerged from the grossly underestimated monthly fees of the pre-move-in phase. Other increases come when a team wants to initiate a new program or make a major capital improvement, but these not surprises. They are worked into the budget as we go. The reason for this is our reserve study.

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 by far your largest expense so the degree to which you can predict these is the degree to which you can predict your costs.

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. This allows us to 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 more 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.

Having a good reserve fund balance will also give you a cushion so you can work your way through emergencies.

As much time as I've spent looking at all the items in our study, explaining them in workshops and in emails, and listening to our contractors talk about repairs, etc., we still find things missing or undervalued --- but they are small. 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 most likely 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.

This kind of predictability also ensures affordability. Unexpected cash calls will rarely if ever happen. We do both Maintenance and Replacement Reserve Studies. It has made budgeting and sleeping at night much more comfortable, and predictable.