Budgeting in a Changed Landscape Making Predictions for the Unpredictable

Each year, boards are tasked with figuring out the costs associated with all aspects of their community’s operations, including any capital repairs or improvements they plan to undertake in the coming fiscal year, and then making sure the revenue is there to cover said costs. Even in the best of times it’s a balancing act, involving predictions, assumptions, and fungible pools of income alongside hard historical data, face values, and built-in escalations. And at the end of the process often comes the unenviable task of informing residents how much more they will need to pay the association or corporation each month to cover all of it. 

In times of transition and upheaval (like now) the process takes on added complexity. Assumptions and predictions are thrown out the window. Reliable sources of revenue—like commercial rents or amenity fees, for example—are up in the air. Line items need to be added for expenses that didn’t exist even six months ago: personal protective equipment, digital body temperature gauges, and social distancing compliance monitors, for example. And those are just the ones that can be reasonably predicted four months into the COVID-19 crisis. If there is one word that seems to run parallel with coronavirus and its effects, it’s uncertainty. 

Educated Guesses

Upheaval aside, however, the basics of budgeting remain the same. Communities must still meet all of their financial obligations to operate and insure their facilities; pay vendors, contractors, and lenders; and provide a safe and secure home for residents. 

Many aspects of a budget are essentially fixed. Items like water and sewer costs, utility delivery, insurance premiums, payroll (especially where determined by collective bargaining agreements), and taxes not only are non-negotiable, they also tend to make up a large proportion of an association’s or corporation’s operating expenses. 

For other recurring costs that are discretionary or can be reduced with some effort, boards must balance maintaining or enhancing the services their communities expect with the costs of those services. Boards—usually with support from their managing agents and financial advisors—have to use their best judgement about what their communities will require for a given year and the costs anticipated for those goods and services. 


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