Dec
08
2023
From The Blog
Approved 2024 Budget Funds Key Priorities, Limits Impact to Members
Above, the staff at the Sandcastle. KICA’s payroll and employee benefits account for about 60% of the annual operating budget.
After several months of development and input from staff, community members, the Finance Committee and the board of directors, the community association’s 2024 budget was presented and approved by the board at their Dec. 4, 2023 meeting. (Watch the discussion here or get a detailed view of the budget in the community budget presentation.) Even with increasing costs associated with some of KICA’s primary responsibilities, the board was able to approve a budget that stabilizes a key driver of expenses and increases revenue for the island’s primary infrastructure. Members will see a minimal increase of $122 (4.4%) in the combined assessment (general, reserve and amenity).
Operating Budget
KICA operates with two separate budgets, the operating budget and the reserve budget. The operating budget covers the costs of administration, security and livability, land and lakes maintenance, recreation and amenity operations, and general maintenance. This budget is funded primarily by: the annual assessment paid for by all property owners (more than 80% of funds), commercial gate access fees (about 10% of funds), investment income, the amenity assessment and user fees and other miscellaneous income. Within the 2024 operating budget, the board and staff were focused on three primary drivers of cost increases: personnel, health benefits for personnel, and property insurance.
Personnel are critical to the effective, efficient operation of the island and delivery of service to KICA members, and it shows in the association’s budget. Personnel costs account for approximately 60% of the annual operating budget. In 2024, the budget will fund 1.5 new positions and associated benefits, higher H2B worker costs, and a 3-4% average increase in wages, amounting to an additional $600,000 wage commitment.
For health insurance and associated employee benefits, the goal was to maintain consistent and stable benefits while maintaining reasonable costs for KICA. To accomplish this, the board approved moving to a self-insured captive for providing health insurance benefits, which will minimize the impact on the employees while seeking to level costs to KICA and capping KICA’s risk through reinsurance. The budget year-over-year includes a $123,000 increase in overall benefits or 12.8%.
Outside of employee expenses, the Professional and Financial Services category comprises almost 8% of General and Administrative expenses in the 2024 draft budget. The substantial components are property and liability insurance ($1,005,765) and legal ($181,500). The 2024 budget includes increases of 30% for property and 10% for liability insurance. These rate increases are educated estimates, as KICA’s property insurance does not renew until May 1. The estimate is based on expert guidance and current market conditions.
Reserve Budget
The reserve budget covers the cost of major repair to or replacement of existing island infrastructure. The reserve budget takes into account Reserve Study projections, which forecast the lifespan of and maintenance costs for all infrastructure in the next 30 years. Repairs to and replacements of island infrastructure and assets with useful lives greater than seven years comprise approximately 94% of the reserve budget.
In 2024, road resurfacing and drainage work make up almost 60% of the expected expenditures. The board initiative to bring roadways rated as “fair” up to a standard of “good” or “excellent” is expected to cost approximately $2 million per year in 2024 and 2025. KICA typically budgets $1 million per year for the replacement of drainage infrastructure, which includes an ongoing effort to replace the island’s original metal piping, susceptible to corrosion, with concrete or plastic pipes. Other large projects include the replacement of the decking on the Falcon Point vehicular bridge and the replacement of a bulkhead in Inlet Cove.
Funding the Budget
The approved budget includes an increase in Commercial Gate Access Fees in 2024. Various categories of vehicles and fleets will increase at different rates, ranging from 5% to 33%. This increase will bring in an additional $622,727 which, except for a 15% administrative fee, will go into the reserve fund.
The board had a robust discussion on whether to utilize some of KICA’s cash on hand to reduce the 2024 member assessment amount, ultimately deciding to utilize approximately $500,000. This resulted in 5% increases in the General and Amenity assessments, amounting to a $122 (4.4%) increase in the combined assessment (General, Reserve and Amenity assessments) over 2023.
The total assessment for a member whose property is developed (an improved property) will be $2,876 in 2024, up from $2,754 in 2023.
View the 2024 Assessment Rates.
You can find KICA financial information, including the current and past years’ budgets, quarterly financial statements, and a look at the association’s two discrete budgets, on the web at kica.us/about/financials/.