SH 2019 Budget issues

Southern Highlands Community Association 2019 Budget Issues

I do not believe the approved 2019 budget actually represents the interests of the majority of owners. Owners are entitled to an open and transparent conversation on community priorities and how our assessments are spent-- something our developer controlled SHCA Board has failed to provide. Below are my issues with the SHCA 2019 budget.

Assessments were lower $2.00/month/door from the prior year. Good. However, they are still way too high, primarily, in my opinion, driven by #1, #3, and #5 below. I also believe we need a serious conversation on what we spend on "public" parks and the $1.2M SHCA spends on security.

#1- Park expenses and associated liabilities.*

Park project expenditures (from Reserves): 2019- $300K, 2020- $523K, 2021-$850K= 3-year total $1.67M
2019 park related operating expenses: $1.3M. ($540K just for park water)
When you remove $1.2M for security and $1.45M for management (see below) the operating cost of parks account for approximately 30% of our total operating assessments.
When you add in Reserve payments, about $1 in every $3 of assessments goes to parks.

*Numbers from SHCA’s 2019 budget and reserves. The Sports Park is not included.

I am a big supporter of parks, evident by my and other's long-running protests around the County’s and developer’s failure to live up to Sports Park delivery commitments. Who should pays the bill is my issue. With the Sports Park finally delivered, albeit 10 years late and short of what was first promised, the conversation needs to be around "should SHCA owners be solely responsible for operating the parks in our community?" Why isn't there more taxpayer funding for operations? We are paying twice.

Most of our parks are “public” parks, public tax funds were used, and they are open to everyone. As such, I have argued most SHCA parks should and could be operated using public money. I believe most SHCA owners agree public parks should be paid for using public money. But apparently, our Board does not agree and spends a huge portion of our assessments on maintaining what are essentially public parks.

First, how did we come by holding these “public” parks? SHCA owners never voted to accept these parks and the full cost of maintenance.

Second, it is inappropriate the HOA's shoulder the liability that comes with these "public" parks? I suggest it could be huge and our Board has refuses to address/explain.

Liability aside, the above park expenses average a little under $2,000,000/year- and are growing. It seems a lot for community owners to shoulder alone.

I believe, as with our neighboring communities, operating public parks should be the obligation of all Clark County taxpayers, not the just the owners in the community, certainly if a majority of SHCA owners have not voted to accept them.

#2- Reserve Funding

The reserves are primarily made up of capital replacement items such as roofing, fencing, mechanical equipment, etc.,that do not normally occur on an annual basis. The reserve fund is critical to the future of the association because it helps ensure that significant reserve projects can be completed on time with quality contractors. In this way deferred maintenance can be avoided as well as the lower property values that typically accompanies it.**

SHCA's reserve specialists recommended $720K for 2019 reserve funding. The Board elected to budget only $650K- $70K less.

SHCA is 73% Fully Funded. The 2019 funding shortfall will likely reduce our Fully Funded level going forward.

Here is what the reserve specialist** said " Because many variables affect the Fully Funded balance it is more important to maintain the recommended reserve contribution or “cash flow” moving forward rather than striving to attain a certain Fully Funded figure."

He went on to say "If the contribution falls below this rate, then the reserve fund may fall into a situation where special assessments, deferred maintenance, and lower property values are likely at some point in the future."

** Statements made by the reserve specialist and contained in the 9/7/18 SHCA reserve study.

#3- Management Fees

It is my opinion $1.45M (per the 2019 budget) is extraordinarily high. Are we really getting our money's worth? Our developer controlled board refuses to put out for bids on the contract now retained by our developer owned management company. Conflict of interest? If we do not bid out the contract, how do we compare? It is my experience as an HOA board member, good management companies are available for much less.

#4 Social event expense

I do not believe a home owner association should be a "social club". I also argue our CC&Rs do not authorize our board to spend our money in this manner. SHCA spends more on social events than on insurance and taxes combined. Do the majority of owners really want $155K spent on "social events"? My personal opinion is no but I may be wrong. If elected, I would look confirm the litigation of the expenditures and ensure a majority of owners want their money used in this manner before funding social events. But is anyone currently asking?

#5 Legal expenses

While down from the outrageous levels of prior years, the 2019 budget shows $390K for legal related expenses. It is up 45% from the 2018 forecast number published. Why?

General Counsel Expenses is more than double that of the 2018 forecast number. A general counsel is typically used as the chief lawyer of a legal department, usually in a large company or a governmental department. I'd like to know why SHCA even needs a separate General Counsel with the associated expense and who it is?

#6 Bad Debt Expense

2018 forecast exceeded Budget by 43%- $297K. Nonetheless, for 2019, the budget shows a reduction in bad debt expense. What makes our Board think this expense item will go down by almost 50% in 2019?