Pretty much every owner in every community wants to “save” money. “The lower the monthly dues the better” would seem to be the near universal mantra at every owners meeting. All board members feel the pressure to keep that annual budget as low as possible. Most all of them agree after all because they are owners too. They might have even run and gotten elected to the board on a platform of keeping costs under control. But what exactly does “saving” money mean?
Does it mean spending the fewest dollars you possible can next year? Or, hiring the “low cost bidder” for every project? Or, does it mean deferring maintenance on your long-term common elements? Does it mean waiting for something to break down or wear out before you spend money to fix or replace it? Does it mean underfunding your reserve, or using unrealistic financial assumptions about inflation, replacement values, and “end-of-useful-life” estimates?
You can keep next year’s budget low by doing all those things—and many communities do. But are they saving money? Is spending less dollars really “saving” you money, or is it costing you more money when the true long-term cost is due and paying the bill can no longer be avoided? Check out this webinar by Kipcon on how being green can mean green Money growing on trees
Maybe the way to really save money for the community is to spend whatever it costs to do the right thing this year. Maybe the mantra for saving money should be “steady as you go, pay as you go.” If you run a tight ship, and pay whatever is necessary to keep your community in excellent condition, over the long-term you will indeed “save” money even if it costs a few more dollars today. Falcon Engineering captures this on their article on reserve studies and the importance of them. Importance of Reserve Studies
Deferring this year’s costs to future years is a mistake that every community owner should be on the lookout for. Many of the boards that make this mistake, and their owners, don’t even realize it until the damage becomes impossible to ignore. When the bill comes due to correct the damage, the “savings” they enjoyed reveals itself. Long-term budgeting, based on a thoroughly comprehensive Reserve Study with your reserves properly funded each year is the only way for a community to truly “save” money.