Understanding the Florida HOA Budget

Since most Florida retirement communities have HOA’s it’s important to understand the HOA budget. Below I have provided a sample Florida HOA budget for an imaginary community. I made up the figures, so don’t spend too much time wondering how I came up with some of them. The point was to simply let you see what a proposed budget might look like when you are looking at a community with an association, be it a homeowners’ association, or a condo association. A budget that you are given could have more expense categories or it could have less, depending on the level of services provided. Regardless of the budget format, there are three things that you will want to look for whenever an actual budget is placed in front of you.

First, look at the Developer’s Contribution. In the case of the sample budget provided, it is $105,000 in 2007. It’s important to know how much the developer is kicking in to keep the HOA in the black. By doing some quick and dirty math, you can determine how much your dues might increase after the HOA turns over to the residents. In this case, simply take $105,000 divided by 150 (current number of homes) and you are left with a $700 budget shortfall for each home. Divide $700 by 12 to get the monthly amount of $58.33. In theory (keep in mind these are all imaginary numbers), your dues would be $58.33 higher per month, post turnover than they actually are right now.

The next item to look at is the projected Loss at Buildout. In the example, this figure is $40,000. You can also use this figure to determine how your dues will be affected. Take $40,000 divided by total number of homes (200) and you come up with a $200 budget shortfall. This amounts to $16.66 extra per month that each homeowner would have to pay.

Last, but not least, take note of the “Reserves for Replacements”. In the sample budget, these reserves are grossly under funded. A good reserve fund should account for at least 10 to 20 percent of an association’s annual operating budget. If it takes $480,000 to run each year, then the reserve fund should be at least $48,000. The reserve for replacements fund is there to pay for things like the repair of streets (if they are private, usually in a gated community), a new roof for the clubhouse, the resurfacing of the swimming pool, and other items that will come up after a few years of wear and tear. It is very important that it be well funded and maintained.

Boomer Paradise HOA Proposed Budget

January 1, 2008 through December 31, 2008



2007 Proposed

Buildout (Completion)

INCOME (# of Homes)


150


200

Dues (@ $200/month)


360,000


480,000

Late fees


0


0

Initial Fees


0


0

Developer Contribution


105,000

0

TOTAL INCOME


465,000


480,000

EXPENSES





Homes





Lawn Care


55,000


62,000

Spray and Fertilizing


12,000


15,000

Pressure washing


8,000


11,000

Cable


60,000

70,000

TOTAL HOMES EXPENSE


135,000


158,000

Grounds





Labor


30,000


40,000

General Maintenance


15,000


20,000

Grounds Maintenance


65,000


75,000

Spray and Fertilizing Common Areas

7,000


9,000

Water & Irrigation


8,000


10,000

Electric Power


23,000


25,000

Lake Maintenance


15,000


15,000

Gate Maintenance/Repair


8,000

8,000

TOTAL GROUNDS


171,000


202,000

Clubhouse/Community Center




Lawn/Landscaping


25,000


25,000

Pool Service


30,000


30,000

Cleaning


6,000


7,000

Electricity


20,000


20,000

Water and Sewer


5,000


5,000

Irrigation


1,000


1,000

Repairs/Maintenance


3,000


3,000

Cable/Internet


1,500


1,500

Phone


500


500

Activities Director


30,500


30,500

Legal Expenses


1,500


1,500

Insurance Liability


10,000


10,000

Insurance Building


10,000

10,000

TOTAL CLUBHOUSE


144,000


145,000

Reserves for Replacements

15,000


15,000

TOTAL EXPENSES AND RESERVES

$465,000


$520,000

Profit/Loss


$0


($40,000)