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Sharper Management

Most Associations have a traditional calendar fiscal year (January-December), which means soon we will be entering budget season for 2025. It’s going to be a tricky one to navigate and, for many, a tough one to swallow.

Back to basics, your operating budget is what sets the “dues” amount that people will pay each month/quarter/annual. Technically, it’s the “assessment” amount, but no one likes to use that word. Each Association is different in what they are responsible for funding; but operating budgets typically account for

  • Contracted Services (perhaps lawn/snow, landscaping, pools, elevators, garbage, management, etc.)
  • Utility Services (perhaps electricity, water/sewer, gas)
  • Maintenance Issues (perhaps exterior or interior repairs)
  • Discretionary Items (perhaps administrative costs, community parties, etc.)
  • Master Insurance
  • Reserve Fund Contributions

Looking back on 2024, there’s no doubt that there were a number of budget busters. Material costs continue to rise sharply, making your maintenance projects more expensive. Labor in all trades continues to be an issue, causing increased operating costs to match the increased wages to get workers. The lawn/snow/landscape industry has taken a particularly hard hit with labor and fuel prices. Utility costs are up 9% for electricity, 10% for natural gas, between 5-15% for water/sewer depending on the municipality, and garbage service is up, on average, 15-20% since 2023.

And the biggest of them all – insurance.. The insurance market for the multi-family/associations continues to be volatile, to say the least. Renewals going in to 2024 we averaging a 50-70% increase.  And that’s if you had a clear claim history. Those with claims, policies were up 200-300% and a trend of carriers dropping/non-renewing clients began. This slope has continued throughout 2024 and the early 2025 picture doesn’t look much better. Carriers are holding their renewal premium until 30-days before renewal – and associations are informed of either non-renewal or double or triple rate increases with little to no time.  So how does one budget for insurance in 2025?  If you didn’t experience a significant increase this year, doubling your current premium might be wise. Be prepared to special assess if your renewal busts your budget.  There was an excellent news story on Kare11 discussing this particular issue.

https://www.kare11.com/article/news/local/hail-storms-in-minnesota-lead-to-huge-insurance-price-increases/89-fc714fa1-56dc-42b9-aad8-472ec2ff84a3

So back to budgeting…..  No one likes to hear it, but the truth is every year dues should go up. Inflation is real. Things don’t get cheaper. Never truer than today. To stay fiscally health, dues should, at a minimum, go up to reflect national inflation. Looking into 2025; however, you may want to be even more aggressive when considering our current economic climate and state of the insurance market. Perhaps the increases listed above can be a guide as you look at each line item of your budget.