Proposed 2019 Budget Letter

Dear Innis Arden HOA Members,

Please click HERE to view the proposed 2019 budget.  It has a side by side comparison to the 2018 budget that was confirmed back in January.  It also shows 2018 actual expenses (January through November) for some additional context.  Keep in mind December 2018 expenses are not reflected here and are currently estimated to be ~$35k.

I invite you to look it over and come to the next monthly Board Meeting (January 8th) with any questions, concerns, or comments.

This budget, and the unchanged annual dues, will be voted on by the community at the Annual Board Meeting, to be held on January 16th.

Some things of note:

  • For 2019, the annual dues are remaining the same at $735.  We can afford to remain at this level, but I believe the dues may require an increase in the following year if we are unable to recoup some of the legal fees we incur defending ourselves from suits and upholding the covenants.  There also may be significant expenses in 2019 and beyond related to view preservation efforts throughout the Natural Reserves.  The amount of these are still unclear, but as that process unfolds, it may require more funds than our current dues allow.
  • $20k has been earmarked for the Natural Reserves view restoration initiative that may go into effect in 2019.  An exploratory committee will soon be appointed whose purpose will be to advise the Board regarding view impacting vegetation in the Natural Reserves;  including process, prioritization, and estimated financial impact.
  • Legal expenses, and our ability to recoup them, are difficult to predict.  There are a few active or pending lawsuits related to the Club defending itself from challenges to the covenants or in effort to uphold the covenants for those that refuse to comply.  The 2019 Budget could be overstated, but it could also be heavily understated should all active matters go through to trials.  Hopefully compliance can be reached with minimal legal involvement and the Club’s continued precedent of successfully enforcing covenants will serve as a deterrent, reducing future Legal expenses.
  • Our cash situation is healthy.  I intend on making a $51k contribution to our Asset Reserve before the end of the year, and after doing that, we’ll still have ~$87k of cash to get us through January, at which point our cash will begin increasing significantly from members paying their 2019 dues.  This $87k is in addition to what will then be a $277k Asset Reserve.  Typically, January expenses amount to ~$30k, so we’ll have over 2.5x cash than we should need (not counting the Asset Reserve).
  • The 2019 plan shows expenses exceeding revenues by $29,458 – putting us in the red.  It’s worth pointing out here that most categories of expenses (e.g. Clubhouse, Grounds, Natural Reserves) have historically come in under budget.  Further, there is reason to believe we could have some substantial reimbursements of legal fees and other miscellaneous and unforeseen fines that will make that number get closer to zero (maybe even move into the black) – though we shouldn’t count on it.  All to say, should we operate at a deficit in 2019, a dues increase in 2020 may be in order.

Thanks for your consideration of this matter.

Best Regards,
Jeff Gough
Innis Arden Treasurer