Association Draft Operating Budget Presentation - FY 09/10

1. Association Draft Operating Budget Presentation - FY 09/10 Final Draft - April 25, 2009

2. The Process To Date

4. The Big Picture

5. Utilities Water (+12%) Trash (+3.5%) Electric (+3%) Landscape Extras (-5%) Day-to-Day Plantings Irrigation Tree Maintenance Fertilization and Pest Control Landscape Contract (-14.3%) Revenue Laundry Contract Washer Rebate Labor Transfer G&A Increased Deductibles Increase Premiums – Workers’ Comp. Increase Premiums for Health Insurance Total Salaries Flat Operating Budget Drivers Behind Change

8. The Districts at a Glance

10. The Districts in Detail

12. Cribari Assessment History

14. Montgomery Assessment History

16. Heights Assessment History

18. Hermosa Assessment History

20. Verano Assessment History

22. Del Lago Assessment History

24. Highland Assessment History

26. Glen Arden Assessment History

28. Olivas Assessment History

30. Fairways Assessment History

32. Sonata Assessment History

34. Valle Vista Assessment History

35. The Reserve Fund

36. From a Consolidated View • Spending plan equals $6,051,800 • Year ending balance equals $6,099,440 • This year’s funding adjustment equals 7.7 percent • The ending balance and associated funding adjustment for the next five-year period are as follows:

37. Five Years at a Glance

38. Background and Factors • Staff met with all 12 DACs and worked through the reserve funding and work schedules line by line • There was a heightened awareness this year to bring the lowest (responsible) assessment to members due to the economic pressure and conditions • The expense and interest-income rate factors are 3% • Maintain as much a straight line funding level as can be reasonably maintained

39. The Districts

40. Cribari

41. DAC Comments • District Operating - DAC requested addition of the landscape maintenance to the North and West Fence line to be included in the Operating Landscape Budget to insure proper upkeep of these areas. • Action Taken: This landscape maintenance work is included in the new landscape contract specifications. • There were no additional requests regarding the proposed Operating Budget draft. • The DAC wishes to keep the percentage of increase of assessment to the residents at the rate stated in the budget, this would eliminate a spike in assessments at a later date. • Action Taken: Achieved total budget change at 2.8% better than originally expected at 4.7%. • District Reserve –After reviewing first draft of the Operating and Reserve Budgets, the DAC requested to put a hold the Second Phase of the Cribari Landscape Restoration Project until the year 2012. • Action Taken: Modified 2010 Reserve Plan by reducing Landscape Restoration $30,000 per year starting 2010 for the next three years – the final phase of the landscape restoration plan to be completed in 2013.

42. Cribari Reserve Fund Notables • Next year’s spending plan = $897,000 • Deck coating ($47,500), grounds restoration ($195,500) and building repairs prior to paint ($423,500) • Reserve minimum balance target = $720,600 • Actual fund balance falls below minimum target in 2011 • Funding levels are as follows: • 2009/2010 - $827,175 – 19.1% adjustment • 2010/2011 - $707,375 – 4.5% adjustment • 2011/2012 - $739,075 – 4.5% adjustment • 2012/2013 - $1,428,175 – 4.5% adjustment…(4.5 to 5% through 2028)

43. Montgomery

44. DAC Comments • District Operating - No DAC comments after reviewing the first draft of the proposed Operating Budget. • District Reserve – DAC requested to keep assessments from climbing any higher than necessary, proposed that the following items be eliminated or at least spread out over a couple years: • No Landscape Restoration projects at this time. • Action Taken: The Board has indicated a fairly strong position with regard to this district moving forward with their landscape restoration program. • General comments regarding flat roof and gutter and spout replacement. • Action Taken: Informed DAC that both items are a carryover from FY 09-10. • DAC concerned regarding “over estimated” Building Components. • Action Taken: After meeting with Ken Brady and Rick Casey, the Reserve Fund was adjusted, Montgomery Reserve assumes $1,000,000 of loan payback. DAC request was accomplished without modifying Facility Department personnel recommendations.

45. Montgomery Reserve Fund Notables • Next year’s spending plan = $1,162,200 • Roofs ($300,0000, driveways (TE) and parking ($159,000), landscape and water feature ($207,800), building components ($321,200) • Target minimum balance = $722,400 • Actual year ending balance and funding adjustments (%) for the next fours years as follows: • 2009/2010 - $723,420 – 2.9% adjustment • 2010/2011 - $1,118,590 – 3.5% adjustment • 2011/2012 - $1,548,560 – 3.5% adjustment • 2012/2013 - $1,900,030 – 3.5% adjustment…(3.5% through 2028)

46. Heights

47. DAC Comments • Operating Fund • After reviewing the draft of the FY 2010 Budget the DAC was pleased with the 3.1% proposed increase in the operating budget. • Action Taken: After updating the water rate to the actual cost the proposed 3.1% increase was reduced to a 2.2% change. • Reserve Fund • The 6.6% increase in the reserve fund presented to the Heights DAC was acceptable – the DAC acknowledges that there might be a chance that the ABOD will not approve a deficit in reserves this year. • DAC concerned regarding the funding for Building Components allocation, requested that the painting project scheduled for FY 2010 to be moved to FY 2011. • Action Taken: Building Components funding based on Facility Department personnel recommendation and future deck coat project and paint project in 2011 was spread between two years – also the fund balance was reduced to help achieve the objective.

48. Heights Reserve Fund Notables • Next year’s spending plan = $493,200 • Deck coating ($100,000), building components prior to painting ($317,800) • Target minimum balance = $197,700 • Actual fund balance falls below minimum for three years (including % adjustment) • Actual year ending balance and funding adjustments (%) for the next fours years as follows: • 2009/2010 - $1,665 – 5.4% adjustment • 2010/2011 - $14,065 – 5% adjustment • 2011/2012 - $66,365 – 5% adjustment • 2012/2013 - $197,965 – 5% adjustment…(5% through next 30 years)

49. Hermosa

50. DAC Comments • Operating Fund • No comments in regard to operating budget. • Reserve Fund • After reviewing reserve funding plan, the DAC expressed concern regarding the landscape restoration plan – requesting the plan be put on hold for one year. • Action Taken: No change; staff’s recommendation is to keep the funding as originally presented at 8.3% and to keep funding level as predicted last year at this time, even though the end result will produce a negative ending balance in the reserve fund at year’s end – playing catch up will only transfer the burden to future years.