From The Blog
Financial Update from KICA’s Treasurer
At KICA’s July 13 Board of Directors meeting, treasurer Dave Morley gave a report on the financial status of the association. KICA always provides monthly financial reports to members but in this case, it’s important to highlight how the association is performing in this unusual year. Dave’s report looked at KICA’s finances through the end of May 2020 in comparison to the annual budget.
As a reminder, KICA froze hiring and department heads cut a minimum of 10% from their approved budgets in anticipation of a possible shortfall related to COVID-19. The total savings for the plan, put in place in March, was $1,562,189 for the year.
Almost halfway through the year, KICA is seeing a $1.4 million total positive variance. Of that, about $736,000 can be attributed directly to the budget reduction. Those variances are from these expense categories:
Common area: $186,000
Building repairs and Maintenance: $224,000
The remaining $673,000 of the variance is timing differences and deferrals on projects that are still expected to be completed.
Dave reported that KICA’s operating revenue is 1.3% below budget as of May. The majority of that shortfall is from collecting less in vehicle access fees ($85,000 below budget) and losses in Castle Grille, events and shuttle revenue ($83k behind budget). Looking at total revenue, which includes investments, KICA is about 2.6% down, with investment revenues coming in $200,000 under budget. This constitutes a big rebound for investment income, which was down $500,000 in March.
The complete picture looks rosier than previously expected. Despite early concerns, assessments are on budget for 2020. Contributions to Reserves (CTRs – real estate transaction fees) are on-budget through May. Once June’s financials are finalized, CTRs will be $150,000 above budget due to a large real estate transaction. Vehicle Access Fees are currently down by $85,000 but by the end of June will only be down $22,000 or 2% below budget. Investment revenue also improved in June compared to the budget, though a shortfall of $150,000 is expected.
At this point, the financials are stronger than anticipated. Dave noted, “we had no way to forecast what COVID-19 would do to our revenue sources but right now, it doesn’t look like it has had a material impact.”
Recommendations from the Finance Committee
Dave brought two motions before the board from KICA’s member-led Finance Committee. These motions were discussed at the committee’s Friday, July 10 public meeting.
- KICA received an offer to refinance the mortgage on Beachwalker Center (23 Beachwalker Drive). KICA’s current mortgage has a balance of around $400,000 at an interest rate of 3.6%, while the proposed rate would be 2.9%. After noting that they had sought comparative offers from other companies, Dave characterized the rate as ‘very competitive.’ The offer is an unsecured loan rather than a real estate loan and there are no closing costs. This loan also has no prepayment penalty. Making this switch would allow a cash savings of $18,500 from paying off the loan two months earlier. After hearing all the details, KICA’s board voted unanimously to refinance as recommended by the committee.
- As a part of KICA’s 10% COVID-19 reduction, a hiring freeze was put into place. However, one thing that wasn’t anticipated at the time was a severe personnel shortage in the Security Department. At the time of the board meeting, the department had nine unstaffed positions that, due to the hiring freeze, it was not able to fill. The Finance Committee recommended that the board relax the hiring freeze for the Security Department, with the understanding that the total budget impact through the end of the year would be not more than $50,000. The board voted unanimously to lift the freeze for that department.
Upcoming Financial Items
While discussing the hiring freeze in place for the association, Dave detailed some additional information requested by the Finance Committee for a meeting in the latter half of August. This information will include a high confidence forecast for the full year in regards to expenses and revenue.
Additionally, KICA staff will provide a prioritized list of areas money could be spent in the most beneficial way if the board were to lift some of the COVID-19 spending restrictions. These two pieces of information will help the committee make a recommendation on how the association should move forward. When the finance committee meeting is scheduled, a notification will be included in KICA’s weekly email newsletters. As always, all community members are welcome to attend these meetings.
Other upcoming budget items to look forward to are fall road repairs and the completion of the Eagle Point 2 bridge repairs. Water management projects are underway, including the Pond 30 outfall structure and dredging of the Trumpet Creeper inlet. Accepted bids for both projects came in under budget and should be complete in 2020. Engineering is underway for the remaining projects, which will be completed by 2022.
To see Dave’s treasurer’s report in its entirety, visit kica.us/livestream and view the July 13 Board of Directors meeting.