September 2017
Budget Process Begins for 2018
Vivian Timian, General Manager he budget process for 2018 has started. There are three different parts to the community budget. Those are the: operational department budgets, Replacement Reserve Fund (RRF) and Capital Improvement Fund (CIF).
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Operational Department Budgets The operational budgets include costs for labor, materials, insurance and taxes for each department. Last year, the minimum wage increase in Arizona was approved in November, and the Management team was faced with re-working the budget in order to reflect the additional labor costs. For 2018, the minimum wage rate increases to $10.50 per hour, a 5% increase over 2017. Replacement Reserve Fund (RRF) The Replacement Reserve Schedule identifies the majority of the assets owned by the Association. Its purpose is to plan, financially, for the eventual replacement of each asset over a period of time (in our case, 20-years). A capital asset is a single item (or group of similar items that are all purchased at the same time) that normally exceed $1,000 in cost and last for more than one year. Our current Replacement Reserve Schedule lists close to 1,600 various assets (equipment, amenities, roads, components within each building, vehicles, furniture, etc.). All items identified on the schedule, while listed individually, are grouped by department or amenity. For each asset, the following is tracked: • description of the item, • the year of purchase, • an assigned useful life (based on manufacturers' estimate, industry standards, and/or the Association's own historical experience), • years in service and estimated remaining useful life, • current estimated cost to replace, • annual funding requirement (e.g. if an asset costs $10,000 and has a useful life of ten years, the annual funding contribution would be $1,000), • a column that shows how much (on a cumulative basis) should have been set aside given the age of the asset (using the prior example, if the asset was five years old, the Association should have put aside $5,000 to be fully-funded), and • years the asset will be replaced over the next twenty years (2017 – 2037). Continued on Page 3
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