Dec

12

2017

From The Blog

2018 Budget Approved With No Annual Assessment Increase

Following a presentation by COO Jimmy Bailey, KICA’s Board of Directors approved the 2018 budget at it’s Nov. 6 meeting. The process began many months ago with input from member-comprised committees as well as KICA staff. The end result was a balanced budget with revenue of $10,548,987 and expenses of $10,250,232.

Some key highlights from the budget include:

  • There will be no increase to members’ 2018 Annual (general) Assessment to fund operations.
  • The Annual Amenity Assessment will increase $3 on unimproved properties and $7 on improved.
  • The Joint Member Fee will increase by $50. The fee is charged for each additional member household, and is included in the statement sent to the primary member. Joint members may distribute this fee among themselves in any manner they prefer.
  • There is no increase to the Vanderhorst Gate segment assessment.
  • The Reserve Assessment (formerly known as the Supplemental Annual Assessment) will not increase for 2018, but should be expected for the foreseeable future, though there is cautious optimism about the stability of future funding due to the Reserve Assessment.
  • KICA’s ability to raise additional revenue has improved by widening the gap between the Annual Assessment and the Maximum Annual Assessment.
  • Longer-term challenges remain regarding cost of living and salary competitiveness for KICA staff.
  • The Sandcastle renovation project is being funded from a variety of existing sources.

“I want to commend everyone involved, especially KICA Finance Director Jane Ovenden and her staff, for developing a responsible and balanced budget,” said Bailey.

According to Bailey, the budget is broken down into two parts: the operating budget and the reserve budget.

“One of our goals this year was to help members better understand our budget information,” said Jimmy. “So as part of this process we essentially separated these two budgets apart to better explain them.”

The Operating Budget, i.e. KICA’s day-to-day expenses, is funded mainly from member assessments, commercial access and user fees, and other sources. This budget is typically very stable and highly predictable.

The Reserve Budget pays for the repair and replacement of KICA’s major infrastructure such as drainage, boardwalks, buildings, etc. Much of the funding for this budget comes from Contributions to Reserves, a percentage of property sales price paid by sellers, making revenues more difficult to predict. In recent years, other revenue sources such as commercial access fees and the Reserve Assessment have been added to help stabilize this budget. Expenses are somewhat more predictable thanks to the five-year Reserve Study that analyzes and forecasts these expenses.

2018 Operating Budget
In 2018, KICA is expecting no changes to operations that will materially impact expenses. The largest component of operating expenses continues to be personnel. In addition to continuing increases in health insurance costs, there are other challenges with personnel expenses, including the rising cost of living in the Charleston area.

Said Bailey, “Low unemployment reduces the pool of potential employees, and travel distance and a lack of affordable housing are growing problems across the Lowcountry. These are challenges we will have to continue to think about going forward. Still, the operating budget is stable, allowing us to hold the annual assessment at 2017’s level.”

2018 Reserve Budget
Major projects for 2018 including drainage repairs, street resurfacing, Sandcastle renovations, and more are expected to total approximately $4.1 million. Repairing the island’s 40-year old drainage system continues to be a major focus. New for 2018, there will be a $1 million allocation for unplanned repairs to drainage. This will allow for a more strategic approach in the field during planned repairs, as well as immediate attention for emergency repairs which can’t be anticipated.

The Sandcastle Renovations Project
Though this is a major project totaling approximately $4.5 million in expenses, only $600,000 is funded from the Reserves Budget. These funds are only being used for existing components, such as the roof, that need to be replaced or repaired regardless of renovations. The remaining $3.9 million is being funded from a variety of existing resources such as operating surpluses.

Bailey’s full presentation to the board, as well as the 2018 budget, can be viewed online at kica.us/finance. For questions or comments, email [email protected]