A handy chart on 2018 Budget Highlights, or, how to spend homeowners money behind their backs.  Click here to read

October 23rd, 2017

SUBJECT – 2018 Operating Budget, Member comment
TO - Finance Committee – Saw Creek Estates

GENERAL COMMENTS – First, special thanks to all the members of the Finance Committee as well as everyone who contributed to the development of the Budget.  Too many members fail to realize the commitment, effort and time that goes into accomplishing the final budget.  We thank you all.  We are providing comment on the budget in accordance with SCECA policy.

DUES & FEES & EXPENSES – We are very pleased that the total combined assessment has not increased. However, it is disappointing that in reality, our total assessments have increased on the back end of the budget Reserve Charge and in the moving around of money while using a long-running annual Surplus to lay the foundation for future increases.  We have several comments on the proposed Budget expenses and we deal with each one on an individual basis, the purpose of which is to provide scalable recommendations that create a suite of potential budget savings.  In specific we note the following:

1.  First, it is clear that our Budget was derived by review of past financial results and the desires of various SCECA Departments. While it is too late for 2018, the Finance Committee, Board and SECA Management need to implement a “Should Cost” cost modeling approach instead of repeating past budgeting mistakes on an annual basis. We need point out no more proof of this than the fact SCECA has overstated our last 2 Operating Budgets by a combined $402,000.   

2.  The “Draft 5 Proposed Budget Approved by the Finance Committee” should really be called the “Draft 6 Proposed Budget Approved by the Finance Committee”. In the Draft 5 Proposed Budget, the “Total Expenses” line at the bottom of page 9 were $5,000 less than the Draft 5 Budget Approved by the Finance Committee. The Approved draft added $5,000 without indicating the new draft changed. It is misleading to insinuate that the previously released budget is the same as the one that was just approved by the Finance Committee.  We would like this increase eliminated from the Budget or provide for another finance committee meeting during which this $5,000 increase could be discussed as a Proposed Budget Draft 6.

3.  The 2018 Operating Budget has increased over the 2017 Budget by $45,400 as can be found in the “Total Expenses” line at the bottom of page 9.  This equates to an additional $17.80 per year in Dues.  Being as we have run back to back years of 6 figure surplus’s, as can be seen on Page 2 line item 6100. we would like this increase cut from the budget and for our proposed dues to be reduced by $17.80 for 2018.

4. The Reserve charge shown at the top right hand of Page 10 has increased by $18 per member for a total annual SCECA revenue increase of $45,504, which is an increase of 32% since 2015.  We find it concerning that SECA would freeze the Dues but increase the Reserve Fund when the Reserve Fund cannot be refunded against our dues as surplus.  We would like SECA to come up with a better spending plan and remove the $18 increase in the Reserve Fund.

5. The 2018 Budget has added a $225,400 income Surplus on line 6100 on Page 2 that came from underspending in 2017. SCECA has a running history of 6 figure annual surplus’s feeding the following years income stream. Despite this, the 2018 Budget has yet again increased.  The surplus last year cost dues-paying members $89.16 and there is no reason to believe that the “Total Expenses” line on page 9 is not over budgeted once again.  We would like for the 2018 Budget to recognize the $402,000 in underspending over the last two years, reduce the 2018 Operating budget by $100,000 and provide a corresponding reduction in our 2018 Dues of $39.55

6. The Citation income is projected to increase by $7,000 to $25,000.  The Projected income and increase is nothing more than arbitrary and demonstrates that the Board and Management have no intention of implementing real and meaningful enforcement that is so desperately needed. I’ve run some projected numbers on the potential revenue stream that show Citation income should be at least $125,000 which would reduce everyone’s dues by $49.44.  If the Board and Management got serious about enforcement and Citation income it would go a long way towards improving our community, property values and quality of life.  In the short term, SCECA could increase income while reducing dues. In the long term, our community would improve while Citation income slides back down to normal levels.  We would like the Citation income line to be increased to $80,000 with a corresponding reduction in dues of $21.75 for 2018.  And most importantly, we would like SCECA Management to recognize and address the importance of enforcing our rules and by-laws and collecting this important revenue stream.

7. Our collection rate is an inexcusable 87% which will cost those of us who pay our dues an additional $216.53 in 2018. This is the single largest and unattended Budget problem membership faces. On Page 4, line 7130 the 2018 Budget calls for spending $25,000 on collection costs to collect an anticipated revenue income of $2,000 as shown on Page 2 line 6060.  So, for every $1,000 SCECA spends on collection, SCECA only collects $12.50.  In 2013 the Budget called for spending $50,237 to collect $11,001 which was $4.56 for every $1,000 SCECA spent. To be fair, we would at least like the projected income on Page 2 line 6060 to at least equal the $25,000 being spent and our Dues reduced by a corresponding $9.09 for 2018.  As a preemptive retort to any excuses that may be put forth, Hemlock Farms has a 97% collection rate.

8. On the petty side, the 2018 projected “Annual Dues” stated on Page 2 line 6010 is understated by $556. Based on 2,528 assessments times $1,452 per assessment this lines should be $3,670,656 but is stated in the Approved Draft as $3.670,100. We would like this corrected.

9. Rental Registration (short-term renter) income stated on Page 2 line 6320 is projected to increase by $15,000 to $45,000 in 2018.  The back end of this number means the budget projects roughly 34 rentals per week.  We have counted approximately 350 short-term rental properties located in Saw Creek advertised on various For Rent By Owner type websites. One way of looking at the budget projection is it means that less than 1% of these homes get routinely rented. We know this is not the case from watching the websites booking function.  If these homes rented just 1x per month Rental Registration income would be $105,000 for 2018.  We would like to see SCECA do a better job getting short-term renters registered and that the Final Budget increase the Rental Registration income to $75,000 with a corresponding decrease in member dues of $11.86.

10. Our research has shown that on any given weekend somewhere between 400 to 1000 short-term renters enter the community and use our amenities. This is a result of short-term rental properties being occupied by as many as 27 people as was the case where the deck collapsed injuring numerous renters. The increase of Badge fees does little to collect the income needed to cover the added expense the community endures, as a result of nonmember short-term renters.  We believe the badge fee should be eliminated and replaced with a $15 fee per person collected from each individual either entering the community as a short-term renter or entering the community as a guest of a short-term renter.  Although only a projection, our estimate is that SCECA could collect over $300,000 per year of a very modest per person fee.  It would cost an estimated $87,300 to implement and manage this process but the payback would be substantial with little to no negative impact on the investors.  We would ask that any final budget approved give serious consideration implementing this and reducing our Dues.

11. The plan to add an FTE to the TOW is out of alignment with the projected decrease in revenue, thus what need have we to hire another FTE.  We would like to see the budget eliminate this extra employee and provide a corresponding decrease to our dues for 2018.

12. The marketing/advertising budget on Page 4 line 7145 was increased from $30,000 in 2017 to $160,000 in 2018 costing each member an additional $51.42 in dues for 2018.  Our property values are not going to improve because we actively market the community when any incoming visitor’s first impression entering the gate is going to be forged by poorly maintained homes, abandoned homes, trash lining the shoulders of our roads and cat colonies at the dumpsters to name just a few problems.  We would like to see contract canceled even if there is a penalty for early cancellation.  Rather than reducing our dues in connection with this cancellation, we would like to see this money spread into Budget Expenses in areas that can actually make a difference.  This money is better spent on rules enforcement, collections and improvements to TOW and the Recreation program whose income contribution to the community is declining.  We would add Maintenance to this list but the 2018 Budget already includes increases adding staff.

13. The 2018 Budget for the Community Management and Administrative Expenses found on Page 4 “Administrative” and “General and Professional” in combination with the Payroll costs found on Page 6 lines 8005, 8015, 8020 adds yet more employees than 2017 and totals $1,358,000 against a total operating budget of $5,069,800. The amount of this expense is clearly unjustified as it indicates that 27% of the entire community income is needed to just to man and operate Resident Services. We would like to see the cost of adding the additional employees eliminated from the Budget and redirected on rules enforcement, collections, and improvements to TOW and the Recreation program.

14. Public Safety Payroll Expenses found on Page 6 lines 8080 thru 8095 combined with Public Safety General Expenses found on Page 7 line 8305 thru 8340 total $888,200 for 2018 and consumes 18% of the entire community income. Public Safety costs $351.34 in Dues which is just under 25% of our total Dues payment.  In reality, Public Safety’s only mission is to provide security of Saw Creek assets, traffic regulations, and manning gates.  Public Safety has no other jurisdiction within the community, yet we deploy a staff that supports and responds to homeowner calls.  Recently it has come to light that Public Safety has no jurisdiction or impact on homeowner safety or criminal activity perpetrated upon homeowners and that only the State Police can investigate and arrest. Public Safety is here only to protect Saw Creek assets and property.  Accordingly, it is time to cut the false umbilical cord and reduce the manpower assigned to Public Safety as well as other relevant expenses as they are powerless to help a homeowner in need. We would like to see the Public Safety budget cut by 6% and a corresponding reduction in Dues of $21.08 for 2018.

CAPITAL PROPOSED BUDGET – We find this portion of the Budget to very disappointing and overly ambitious to the point of serious question.  We will address this at the Board Meeting.  The 2018 plan found on page 10 is alarming in that it calls for:

  1. Spending $623,501 more than last year
  2. Spending $533,000 on 6 improvements not in our capital spending plan
  3. Digging into the community piggy bank savings to the tune of $245,196 (remember this money BELONGS to the members, not the Board and Management)
  4. All while spending $265,000 on a storage building we have been doing fine without

While we understand that the storage building did pass a vote, we would suggest that a turnout of fewer than 400 voters out of 2,528 available votes is not representative of how the larger community wants to see THEIR money spent. Complaints about the storage building in the community abound.  

We want to give the Board and Management a reasonable opportunity to publicly justify this plan to a larger audience at the Board Meeting.  To that end we will specifically want answers to the questions on the below chart and why this is all necessary during 2018 instead of spreading it out over the next few years.   

NOTE: this chart is best viewed on a computer.  To review this chart on a mobile device, click here.
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Take Back SawCreek, LLC 2017