From The Blog
2023 Budget Overview
After several months of development and input from community members, the Finance Committee and the Board of Directors, the community association’s 2023 budget was approved by the board at their Dec. 5, 2022 meeting.
Two Budgets and How They are Funded
KICA operates under two primary budgets, the operating and the reserve budgets. Principally, the operating budget covers the daily operation of association amenities (The Sandcastle and three boating facilities), and our recreation, administrative services (accounting, IT, communications, member services, HR), security (gate access, patrols), livability (covenant compliance and encroachment permitting) and island maintenance (landscape and general infrastructure/facility maintenance) services. The operating budget is funded by the members’ annual general and amenity assessments (about 85% of funds), investment income, Sandcastle user fees and other miscellaneous income.
The reserve budget covers the cost of major infrastructure repair or replacement projects, which vary year-to-year based on the lifespan (predicted by a 29-year reserve study) of KICA’s infrastructure. The association owns and maintains 60 miles of roads, 19 miles of leisure trails, 43 miles of drainage pipe, 26 boardwalks and several docks. The reserve budget is funded primarily by a 0.5% transfer fee on all Kiawah Island real estate transactions (about 40% of funds), the members’ annual reserve assessment (about 30% of funds) and commercial access fees (about 30% of funds).
For 2023, there are two income streams that will be allocated to fund the reserve budget instead of the operating budget: bike tag fees from commercial bicycle rental companies operating on the island and gate access fees from the Cassique neighborhood property owners. Since bicycle and vehicular traffic result in wear and tear of the leisure trails and roads, these fees will help fund the reserve budget infrastructure repairs. A small percentage of these fees (15%) will be allocated to the operating fund to cover the cost of administering these activities.
Operating Expenses of Note for 2023
As a service organization, payroll expenses account for 60% of the operating budget. The 2023 budget anticipates an increase to the cost of employee benefits. It also accounts for the continued impact of a summer 2022 payroll increase for hourly positions. The payroll increase was an adjustment to keep pace with cost of living increases. KICA also plans to add two new positions to the team of just over 100 employees: a security patrol employee and a Sandcastle member services employee.
The operating budget also plans for the expansion of social opportunities offered at The Sandcastle and a projected increase to the cost of KICA’s insurance program.
Reserve Expenses of Note for 2023
The Amenities Task Force brought forth some major improvements to infrastructure which were supported by the Finance Committee and Board of Directors, including raising the standard of maintenance for the leisure trails resulting in a trail repaving project, smoothing transition points between trails and roadways in East Beach, widening the leisure trail at the Allee of Oaks (along Flyway Drive), and adding showers/rinse stations to some boardwalks.
Ongoing projects that impact the reserve budget include the replacement of deteriorated metal pipes with concrete or plastic pipes, leisure trail and boardwalk maintenance, wooden bridge replacements, and the multi-year pond-edge pruning and line-of-sight pruning efforts.
2023 Budget Financials
The 2023 operating budget includes approximately $14.1 million in revenue and $14.96 million in expenses resulting in an approximate $840,000 net deficit which will be absorbed by KICA’s fund balance.
Assessment revenue accounts for about $12 million or 85% of operating revenues while payroll related expenses ($8.8 million) account for about 60% of the operating expenses.
The 2023 Major Repairs and Replacement (“MRR”) budget includes just below $7.5 million in revenue offset by approximately $5.85 million in expenses resulting in a net surplus of $1.6 million. That surplus is dedicated to the MRR budget and will be added to the existing fund balance.
Real estate transaction fees (Contributions to Reserve) account for just over 40% ($3.05 million), Commercial Access Fees account for almost 29% ($2.16 million) while member assessments comprise approximately 26% ($1.98 million) of MRR revenue.
Landscape improvements ($420,000) and planned infrastructure projects ($4.65 million) account for the majority of MRR expenses. The MRR budgeted General and Administrative expense consists of the 15% administrative fee ($781,381) paid to the Operating Budget for administration of the real estate and island access activities.
Member Annual Assessment Impact
The Board decided that it was prudent, based on the draft budget net deficit of just over one million dollars and the desire to maintain reasonable resources for future operations, to increase the member assessment to 10% ($250 for an improved property) with KICA absorbing $840,000 of net deficit for 2023 from its existing fund balance.
Historically, except for outlier years, assessment increases have approximated 4-5% per year. The past 2 years’ increases (2021 = 0%; 2022 = 2.8%) when combined with this final 2023 increase produces a 3-year average annual increase of 4.27%.
– The Amenity Assessment was increased by 5% in order to support social & fitness programming at the Sandcastle as well as to begin some recommended Amenities Task Force work.
– In an attempt to better match the assessment revenue with costs incurred over the past several years, the V-Gate assessment for 2023 was reduced by utilizing KICA’s accumulated fund balance.