Most Associations have a traditional calendar fiscal year (January-December), which means soon we will be entering budget season for 2023.
Back to basics, your operating budget is what sets the “dues” amount that people will pay each month/quarter/year. Each Association is different in what they are responsible for funding, but operating budgets should account for all contracted services (lawn/snow, landscaping, pools, elevators, garbage, management, etc.), utility services (electricity, water/sewer, gas), maintenance issues (exterior or interior repairs), discretionary items (administrative costs, community parties, etc.), insurance, and contributing to the Reserve Fund.
Looking back on 2022, there’s no doubt that there were a number of budget busters. Material costs have risen sharply due to raw material shortages over the past two years. For example, paint costs alone have gone up 30% since 2021. Your “touch up” paint job just got more expensive. Labor shortages in many of the trades has caused increased pricing for many service areas. For example, lawn/snow providers have had a hard time staffing and have begun cutting non-profitable clients or making significant adjustments to cover their increased costs in fuel, wage increases to get people to work, increased fertilizer costs, etc.
And speaking of fuel costs, check your garbage hauler invoices, you may have been getting surcharges for fuel prices being over $4 per gallon. The insurance market for the multi-family/associations continues to be volatile as Minnesota remains in the top 3 in the nation for claims paid out over the past few years. Experts continue to predict a 15-30% increases for your renewals.
The economy and inflation have been all over the news this summer. It’s no surprise to anyone that everything has increased in price. So, keep this in consideration when budgeting for 2023. An even more careful look at your Budget vs Actuals report is imperative as you project your 2022 year-end numbers. A detailed look at your General Ledger should help as you begin realistically budgeting for your 2023 needs to reflect the current economic realities.
No one likes to hear it, but the truth is every year dues should go up. Inflation is real. Things don’t get cheaper. To stay fiscally healthy, dues should, at a minimum, go up to reflect inflation. Looking into 2023, you may want to be even more aggressive, considering our current economic climate.