Listening to Jack Troia, the new Chairman of the Finance Committee, I concluded that he is most anxious to keep our Association, as he puts the matter, from getting into a pickle over authorizing excessive spending. Jack was not reluctant to express his concern to those in attendance at this month’s committee meeting. I do not believe I would be exaggerating if I suggested that Jack would be extremely reticent for the committee to authorize few, if any additional funding requests—of which there are many pending and in the pipeline, unless those requests involved a real need akin to a safety or health related issue. Absent that, plan on your funding request to wait its turn and see what money will be available in CY 2006. Or, just perhaps there is some money available at the end of this year's budgetary tunnel.

            Mr. Troia is not merely reflecting a personal disposition to conserve, but, as I am able to gather, is motivated by what he perceives to be certain constraints related to this year’s CY 2005 budget. As forecasted by the FC, and adopted by the Board, and ratified by the residents last year, the CY 2005 budget is a tightly crafted budget. As shown by the figures below, there is very little wiggle room for unbudgeted capital expenditures, especially if much of that has already been expended or requested in the first five months of the year. The FC projected the following revenue and expenditure figures for CY 2005, based on figures contained in the FC's budget presentation:

Projected Revenue:                   $6,380,000  

Projected Expenditures:           ($6,296,000)

      Surplus/Equity                         $84,000

            To put this year’s projected surplus figure into some perspective, in the prior year’s budget, we managed to have a reported surplus of $775,000 in CY 2004. That was money that was available in 2004, but went unspent by year’s end. We were advised that that amount would have created certain unwanted tax consequences if carried over to CY 2005. As a result, $600,000 of that amount was transferred to the reserve fund.

Given the tight budgetary constraints Jack Troia was confronted with, there is little wonder that he is cautious and apprehensive about recommending any new spending to the Board, a Board that was now headed by Dave Weil, the former Chairman of the FC and the chief architect of the 2005 budget. We can assume that there is no one in Sun City who is more familiar with the 2005 budget than Dave Weil.            

So What’s the Pickle Problem?

A Matter of Extreme Uncertainty

            The FC appears to be conflicted and in a pickle over the budget, or more precisely, their uncertainty about where the Association stands on the very critical money issue. At the heart of the issue is whether there is any unbudgeted money available for spending, and if so, just how much. On the one hand, we have that very tightly crafted FC budget with little wiggle room to do much, if any, additional spending. On the other hand, we have the benefit of critical financial information from DW’s management company controller, Linda Lee Peterson, who provides the committee with her monthly controller’s report.[1]  If current and future spending actions of the FC are to be guided by the adopted budget, it becomes extremely important that the FC's budget accurately reflects our ongoing fiscal situation. In the event the budget does not reflect our current situation, the FC is in a quandary—a state of real uncertainty. The potential for such a predicament was brought forward by Linda Lee, our controller.

            According to Linda Lee, we are in good, no, very good shape five months into the year. While her report covered many financial matters, two elements stood out as particularly noteworthy: 

·        A surplus of about $500,000; and

·        $2 million in the bank to take care of expenses, an amount considered more than sufficient to meet ongoing obligations, estimated at an annualized rate of around $525,000/month.

While money in the bank is always welcome news, the disturbing "good news" was the reported surplus. Likely anticipating a projected surplus of no more than $100,000, Linda Lee’s report must have come as a total surprise. How, they must have wondered, could we be running a surplus of $500,000 five months into the year given what would appear to have been contrary information on which the CY2005 budget was based. That piece of information about the surplus must be wrong, the thinking goes, since given projected revenues and expenditures it would be impossible to achieve that level of a surplus with only 7 months remaining. That budget, by the way, had already factored in the additional costs anticipated for the new recreation center building. So, what's going on? Are we destined down the line to repeat the surpluses of the 2004 budget? Or is there some other explanation?

Members of the FC are currently in the process of attempting to gather needed information from the controller to determine what the correct figures are and hopefully by July’s meeting we will know more.

 

Ron Johnson

June 19, 2005

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                        Selected CY 2005 Budget Exhibits

               Board of Directors Meeting, November 2004