Item 1A: POA Long-Term Financials Overview — original pdf

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POA Long-Term Financials Overview Mueller Commission May 10, 2022 1 Agenda • About the Overall Budget • About the Build-Out Budget • About Reserves • About the Pavilion Pro Forma Mueller Commission, May 10, 2022 | 2 A POA Budget Introduction • A fundamental task of a POA/HOA is to produce an annual budget, based on previous expenses, anticipated revenues, committee input, a reserve study and more. • A budget committee reviews the annual budget before the master board approves it. • The budget is then shared at the annual meeting, posted online and assessment notices are conveyed by newsletter and mail. • Over the years, the budget has become more detailed: o First, by breaking the budget into special service areas like garden homes and pools o Second, by adding line items within sub- categories (for example, specialty mulch used at playscapes is separated by mulch used everywhere else) o Today, there are more than 200 line items Mueller Commission, May 10, 2022 | 3 The Build-Out Budget • With transition from developer to property owners on the horizon, the POA board and staff charted out the draft budget for 2022 through 2026 This is well after the MDA is set to expire in December 2024 o o Main purpose: to show the Budget, Transition committees the financial health of the POA upon build out • It is purposely financially conservative o Many expenses increased annually by 5-6% instead of 3%, due to inflation Hard-to-predict items, such as irrigation utilities, are estimated higher If revenue exceeds expenses, any overage goes to reserves for future larger expenses o o • Currently includes small annual assessment increase (5%) to keep up with increased expenses • Future items are incorporated, such as ballpark figures for future parks maintenance and anticipated additional staff • This “build-out” budget is a working draft that will be updated many times, but it will be published for any Mueller property owners to view online by end of this week Mueller Commission, May 10, 2022 | 4 About the Reserve Study • Is a long-range planning tool that helps POA staffs and boards anticipate and prepare for the cost of repairing and/or replacing a community’s common assets • Presents a prioritized and potential schedule of capital projects and a reserve funding plan to offset future costs associated with repairing and replacing the common assets • We asked the study authors to use a 5% inflation rate, rather than 2% they originally used • Many POAs/HOAs do not fund their reserves at 100% of reserve study recommendations • City staff is looking at the study; will be published on Town Square after their review, along with a Q&A Mueller Commission, May 10, 2022 | 5 Master Reserves Overview Master, Row Home Reserves • Master reserves can be used for larger-scale repairs, such as: Lake circulation pumps or large-scale irrigation repair Significant repairs of playscapes, public art, drinking fountains Tree or landscape replacement o o o Row Home reserves can be used for larger-scale repairs, such as: o o o Exterior painting Large-scale exterior repairs Roof replacement not covered by insurance Historically, the Mueller POA has made repairs to common areas and row homes using available operating funds The master reserve fund is predicted to have a surplus of ≈$760,000 by the end of 2022 The row home reserve fund is predicted to have a deficit of ≈$460,000 by the end of 2022 Row home assessments have been kept relatively low since 40% of row home owners are part of the affordable homes program; also, some money that could have gone to reserve account went to preventative maintenance The POA Board is exploring options with the City to utilize project funds to cover the row home reserve deficit • • • • • • Mueller Commission, May 10, 2022 | 6 About the Pavilion • The Branch Park Pavilion opened mid-2021 during the pandemic with many event inquiries but hardly any bookings. until it is sustainably profitable. the end of 2022. • As a result, the Mueller Team chose not to transfer the ownership of the Pavilion to the POA • We conservatively anticipate the Pavilion’s revenue and expenses will generally break even at • We anticipate keeping the Pavilion a project expense for the next 6-12 months. • Based on the number of inquiries and bookings we are receiving post-pandemic, we anticipate the POA can receive a net profit of more than $100,000 in 2023 and beyond. Mueller Commission, May 10, 2022 | 7 Suggested Declarant Contribution Next Steps • 2021 financials have been sent to POA auditor; audit available to POA members when completed • Publish draft build-out budget this week; Reserve Study with Q&A and Pavilion pro forma published to POA members in the coming weeks • In process of getting new community manager up to speed on financials • Use draft build-out budget to establish 2023 budget • Transfer Pavilion ownership to POA Mueller Commission, May 10, 2022 | 8