KentlandsĀ® Town Crier logo

Post-wall reserve funds returning to good health

As detailed in the last two issues of the Town Crier, KCA’s two main reserve funds are expected to bounce back significantly over the next five years, after having been depleted by expenses related to the Quince Orchard retaining wall.  Those articles showed that year-end balances in the General Reserve are expected to grow from $689,213 to $736,468, and in the Recreational Facilities Reserve from $98,429 to $537,553.

In the immortal words of Paul Harvey, now here is “The Rest of the Story.”  The trend continues upward at a healthy pace, according to our most recent Reserve Study update.

That said, there will be down years from time to time, when large expenditures occur.  These are expected to include:

  • “Asphalt Pavement, Mill and Overlay, Partial (Incl. Catch Basin Repairs)”, over $200,000 each in 2017 and 2018;
  • “Asphalt Pavement, Total Replacement, Phased”, over $700,000 each in 2033, 2035, and 2037;
  • “Clubhouse Heating and Cooling System, Geothermal, Replacement”, $348,205 in 2043;
  • “Clubhouse Interior Renovation, Complete”, $335,102 in 2045.

But overall, it is encouraging to foresee total reserve balances growing to more than $4,000,000 by 2045.  Among other benefits, investment income can be expected to increase accordingly, thus reducing upward pressure on assessments.

Year-End Reserve Balances

KCA Current Financial Highlights

As of November 30, 2016, KCA had $1,559,514.44 in Total Cash & Investments.  This was up $34,699 (2%). since the previous month, down $89,089 (5%) since the start of the year, and up $25,866 (2%) since this time a year ago.  For an explanation of this cash outflow, see the paragraphs below about income and expenses.

Reserve fund balances as of November 30 were as follows:

  • General Reserves: $470,538, up $6,860 (1%) since last month and $529,163 since the start of the year.
  • Recreation Facilities Reserves: $93,115, up $4,984 (6%) since last month but down $543,674 (85%) since the start of the year.
  • Unappropriated Owners’ Equity: $176,214, unchanged since last month but down $195,041 (53%) since the start of the year.
  • Capital Reserves: $108,593, down $3,610 (3%) since last month and $1,050 (1%) since the start of the year.

Total Income for the year to date was $2,204,478; Assessment Income was $2,068,180; and Other Income was $136,098, mostly on budget (Total Income 0.6% over and Assessment Income 0.01% over.  Other Income was 10.26% over budget, mainly because of Titleholders Initial Contribution ($7,767 or 24% over) and Charges Assessed for Violations ($10,290 or 686% over).

Total Expenses YTD were $ 2,355,345, which was over budget by $155,756 (7%).  As has been true most of the year, nearly all categories of expense were below budget.  Noteworthy exceptions (more than $2,500 over budget) and the amounts by which they were over budget included:

  • Administrative – $5,232 (8%), mostly because of Office Supplies, Equipment & Expenses ($4,302 or 15% over) and Telephone service $1,540 or 13% over)                              
  • Maintenance & Services – $131,285 (37%), mostly because of Snow Removal costs $109,618 (250%) over budget but also General Repairs & Maintenance, $14,419 (44%) over and Grounds & Landscaping $7,091 (3%) over. Most of this overage is watering expense, which was an unexpected cost due to lack of rain this summer and fall.
  • Recreation Center Expenses – $7,660 (2%) over, mostly because of Clubhouse Staff $5,099 (19%) over, Community Center Utilities $2,617 (5%) over, and Recreation Center Supplies/Repair & Maintenance $2,312 (4%) over. The Clubhouse Staff overage is a “timing issue” in the sense that both the monthly budget and actual expenses for this line item vary considerably from month to month (highest in the summer months), resulting in fluctuations in year-to-date total variances.
  • Site Management Staff Payroll – $4,624 (1%) over. This was caused by an error in the 2016 budget, which inadvertently carried forward a too-low figure from the 2015 budget, which in turn was occasioned by a personnel change during preparation of the 2015 budget.
  • Other Expenses – $11,667 (496%), because of monthly Interest Payments on our two bank loans related to the retaining wall remediation.
  • Transfers to Reserve Funds – $7,765 (1%), due to greater than expected income for, and therefore transfers to, the TIC Fund.

Because of the year-to-date budget variances itemized above, KCA has experienced a YTD deficit (net loss) of $151,068, compared to the $7,772 anticipated in the budget for this time of year.  This represents a negative variance of $143,296 or 1,844%.  A full-year deficit of $144,025 is projected, compared to the $729 anticipated in the budget.

Sources of Information, and How to Get More

Information presented here was derived from the 2016 updated Reserve Study, KCA’s monthly Financial Reports, and monthly Variance Reports prepared by the General Manager and presented to the Board of Trustees at their monthly meeting.

As always, further details are available in the source documents, which interested Titleholders are welcome to review by dropping in at the KCA offices.

Be the first to comment

Leave a Reply