Budget and Assessment Frequently Asked Questions

A.   The main source of funds to pay all expenses, repairs, replacements, improvements, services, communication efforts, landscaping, etc comes from the annual assessment to co-owners.  The assessments must be set to an amount that covers everything the association must pay to maintain the community on a day-to-day basis.  When expenses increase due to increasing costs, inflation, and added features or community service expectations, the increased contribution from each co-owner must be raised to cover those costs.

 

A.   Condo fees pay for everything that the association must spend to serve and maintain the community.  When purchasing a unit in a condo association you agree to not only pay for your own unit but the upkeep, maintenance, replacement, and care of the community as a whole.  You agree to pay a portion of your neighbor’s roof, painting and landscaping just as your neighbor agrees to pay for part of yours.  For more details on how much of your individual condo fee goes to each line item in the budget see the 2022 Budget Breakdown by Unit Type located in the Budget section of the Sequoyah Website.

 

A.   Extra fees or repairs can be assessed to individual co-owners for many reasons depending on the fee or repair.  Some may be required by our governing documents and others set by the board to help defer costs to individuals to keep the community from sharing the cost burden.  Remember everything Sequoyah does, provides, or pays for is paid for by you, the co-owner.  The only difference is if that cost is covered by your condo fee or paid by you individually.  Sometimes those decisions are made as a method of budget control.

 

A.   Yes, the Board does understand and sympathize.  Unfortunately, they have understood and prioritized that too often over the years.  In an effort to keep assessments artificially low, past boards have taken several measures. They have done various combinations of: 1) underfunding the reserve accounts 2) used cheap contractors and vendors which may not provide the best quality or customer service 3) unrealistically cut line items in the budget that cannot be sustain in reality 4) deferred maintenance of systems that would have prolonged their useful life.  These are some of the examples of tactics used to look out for the co-owner’s ability to afford their condo fees.  After decades of employing that methodology, we often still had to increase assessments at an uncomfortable level to the co-owner.  Despite the consideration of the co-owner’s financial status, the Budget Committee and Board of Governors has a required duty, called a Fiduciary Duty, to put the needs of the Association above all else.  This includes the needs of individual community members.  Volunteer leaders are required to ensure the association is viable and survives regardless who the individual owners are.  Remember the Budget Committee and Board members are paying the same assessments as every other co-owner and they do not like the increase any more than anyone else.

 

A.   Yes we can.  We must be careful, however, because cheaper often comes with lower quality work product and poorer quality of customer service.  In the past, the cheapest bid was regularly accepted.  This brought complaints of quality and service.  In recent years, the board has worked to try and balance cost with quality.  Sometimes quality lasts longer which in the long run costs less and it definitely looks better making our community a nicer place to live.  The Board regularly competes contracts using three (3) competing vendors to ensure we are not overpaying and getting the best quality and service possible.

 

A.   When all the expenses, financial obligations, and amount to be contributed to the Replacement Reserves are added together, that determines the revenues we need to collect.  We have a small amount of other income from sources like the pool, party room, resale packets etc that are subtracted from the total expense amount.  The remaining amount needed must be collected from co-owners in the form of assessments.  Each unit owner is required to pay the portion of the total assessments that equals their ownership in Sequoyah as determined by the Master Deed based on their unit size and type.

 

A.   Every year the Budget Committee holds two (2) Budget Hearings specifically designed for the community at large to provide ideas and input on the budget.  In addition, the budget is set by a committee of co-owners consisting of Board and non-board members.  All co-owners are welcome to observe the Budget Committee Meetings and Board of Governor Meetings which the budget is discussed. 

 

A.   An initial proposed budget is put together analyzing historic trends, current contracts, estimated needs and projects, known future factors, and any other information that would be relevant to estimate what the costs needed to run and maintain Sequoyah in the upcoming year.  This information is sent to the Budget Committee which consists of five (5) co-owners and the General Manager.  The Budget Committee looks at this initial proposed budget and discusses the analysis.  They look at areas that they feel need to be cut or have been underestimated.  They use that information and come up with a budget to bring to the community for comment.  Two Budget Hearings are held, one in the evening and one on a Saturday.  In the Budget Hearings, the proposed budget is shown to the community and discussed.  Input and ideas from the community are considered.  If after the Budget Hearings the Budget Committee feels more discussion is needed they will meet for another review of the proposed budget.  If they feel that after the community input no significant changes needed, they will not schedule an additional Budget Committee meeting.  The Budget Committee sends the Proposed Budget to the Board.  The Board would either approve it or send it back to the Budget Committee for re-submission.  This would continue until the Board approves the budget.  

 

A. No, it does not.  While very high condo fees can be a sign of mismanagement, it is not the only reason for high condo fees.  In some cases, it is the amount of expenses needed to run the association.  Sequoyah has a sizable staff and other expenses due to the size and components of the property.  This costs more to maintain than a small single building property, as an example.  The types of elements that are included in the common areas will affect the condo fee.  In some associations, the roof replacement is the individual owner’s responsibility.  At Sequoyah we share the costs of the roof repairs and replacements as outlined in our Master Deed.  This makes the assessments higher.  The age of our property increases the expenses that need to be covered.  Since we were built in the 1970’s our components are aging and in need of replacement.  Newer communities do not need to replace so many key and expensive components which will drive up the assessment costs.  The only area that could possibly be a large negative contribution that could possibly be considered mismanagement is the systematic underfunding of our Replacement Reserves going back decades.  The past, long term artificially low assessments to keep condo fees down have created the need for the larger than usual increases from year to year.

 

A.  A special assessment is an extra assessment in addition to the annual assessment needed to cover current expenses.  A special assessment is tool to cover unforeseen expenses,  replacement reserve, or capital expenditures that cannot be covered by the regular budgeting and assessment process.  Special assessments are required contribution that the co-owners must pay if determined vital to maintain or preserve the property.  Special assessments should only be considered as a last resort due to the negative impact to the co-owners and the negative reaction by auditors and lenders.  Special assessments are due as a one-time payment however the board can allow payment plans if it so chooses and that option makes sense with the time sensitive nature of the needed funds.

 

A.  The condo fees are set based upon the financial resources needed to sustain the expenses and maintenance of the community.  Because prices for needed services and materials go up every year and as the community ages more upkeep is needed, it is likely that they will always go up.  That is not a guarantee, however.  If less money is needed to maintain the property, the condo fees could go down.  While this is a possibility, co-owners should always prepare for an increase.  The amount of the increase depends on the amount of funds the association must raise to maintain the community.

 

A.  This is possible but not likely.  The condo fees are set based upon the financial resources needed to maintain the community.  Since those needs rarely stay the same, keeping the condo fees the same is not likely.  The assessments are set based on the amount of money needed to maintain the community physical property, provide services our co-owners expect, and fund the replacement reserve requirements for the continued upkeep of Sequoyah.  Given these financial needs, it is rare that they will stay the same for a couple years.

 

A. Because they were kept artificially lower than they should have been for many years by underfunding the replacement reserve account, a significant and sustainable decrease is not likely.  We must now concentrate on funding the reserve account and paying for the replacement of components in phases over years that we should have been saving for over the last almost 50 years.  Since we do not have the reserves saved to do this, our replacement costs will increase due to inflation and repairs that must be made to components which are failing and we do not have the reserve funds to replace.  An occasional small decrease is possible if we continue to fully fund the reserve account.  We can also possibly find decreases if we reduce the services provided that are covered in our assessments.  Those costs would have to be covered by the individual co-owner instead of our shared expenses covered by our assessments.

 

A.  A comparison of other associations condo fees cannot be made on dollar amounts alone.  The age of the property and the required upkeep must be considered.  Other considerations are the services that are included in the fees.  Amenities require upkeep which is covered by the condo fees.  The size of the community that must be maintained is another factor that must be considered.  The larger the community the more expensive it is to maintain and manage.  The breakdown of responsibilities of the co-owner versus the association is also a big part of the condo fee.  In some associations, roofs, siding, patios, and other physical structures are the homeowner’s responsibility to repair or replace.  At Sequoyah, a lot of those components are Sequoyah’s responsibility.  General common areas such as this are the shared responsibility of each co-owner.  The more shared financial responsibility we have the higher the condo fees.

     Be sure that you are comparing condo fees with other condo fees and not HOA fees.  The make up of a condo association like Sequoyah and an HOA or Home Owners Association is that a condo association common areas are all owned by the individual owners.  The portion of ownership in the general common areas are based on the size of the unit.  In a HOA, the common areas are owned by the HOA and not the individuals who own the units.  More often the entire building structure is the responsibility of the individual owner so when the roof leaks, for example, the repair, replacement, and all other costs are the sole responsibility of the unit owner. 

Are their replacement reserve funds being fully funded?  If they have not been fully funding the replacement reserves, then their fees are artificially low.  This will put them in the same position in a few years that Sequoyah is currently in.  They will have to make significant increases at some point in order to maintain their physical structure as they age and systems start failing and need replaced.  Make sure you are comparing the same services, structures and reserve status before you decide that a lower dollar amount is a less expensive choice.

 

A.    The systematic underfunding of our replacement reserves has made upkeep of our amenities challenging.  Replacement of this component or repair has taken lower priority to other expenses that have taken precedence.  When roofs are leaking, the Board of Governors has had to divert assessment revenue to repairing and replacing roofs over resurfacing the tennis courts or replacing pool furniture.  Because we have limited funds the Board of Governors has had to make difficult choices.  We always prioritize health and safety items first.  Our next priority it items that if not repaired or replaced will cost the most money to the association. After those priorities we look at the things that will make the community more appealing.  Amenities fall into the last category.

 

A.  The approved budget is posted on the website for all co-owners to review.  It is found in the Co-Owners section of the Website under Budget.  All co-owners are welcome and encouraged to observe the Board Meetings that are currently held via Zoom each month.  They are typically held the fourth Tuesday of the month except for December which is held on the third Tuesday.