MCA Meeting Recap

Meeting Overview

The last MCA meeting leading up to the annual meeting, which will be held on December 15, 2021, detailed the community’s operating budget, which is nearly ten million per year. While dues will remain unchanged for a fifth year in a row, holding fast at $43 per month, a reserve study will be completed in 2022 to formally assess the requisite savings to maintain and or repair Central Park’s substantial infrastructure.

As the current Community Delegate for the District 11, the North End neighborhood, I encourage everyone, regardless of their respective district, to review the financials, particularly the "2022 Budget Book Full Version,” and submit questions to their delegates. Note the budget information is readily available on the MCA’s website, and offers insight into the community workings, from parks to pools to everything in-between.

Reserves Explained

In covenant controlled communities such as ours, where residents abide by a common set of rules and regulations outlined in governing documents (bylaws) and pay homeowner dues (assessments) and or tax(s) (mill levy), savings (reserves) are crucial. While Central Park is a well maintained community, it is nevertheless subject to upkeep, and given the scope of the 12 combined neighborhoods the costs can be extraordinary, which is why it is essential to prepare for them.

For example, during the last MCA meeting, Keven Burnett, the MCA’s Executive Director, explained that the current cost to resurface all the alleyways across the community is approximately $55,000,000, a substantial sum considering the community currently has approximately 2% of that amount in reserves. Granted, the community was built in phases, and some pavement was laid mere months ago, there is nevertheless a need to thoroughly examine Central Park’s long-term savings plan.

Reserve Study Explained

A reserve study is a formal assessment performed by an outside agency, a professionally licensed third-party entity that professionally evaluates the community, taking an objective view of all the items for which the MCA is responsible, e.g., pools and the structures that are affiliated with them, etc. When complete, the study will show how much the MCA should set aside each year to ensure it has sufficient resources to cover the cost of repairing and or replacing infrastructure as it ages.

Special Assessments Explained

In addition to collecting monthly dues, the MCA has the authority to levy special assessments to ensure the community’s financial obligations are met. While the cost of special assessments and the length of time residents have to repay them can vary, the requirement to do so in non-negotiable. While special assessments are sometimes needed, they are best avoided for they place a heavy burden on property owners, e.g., several hundred to several thousand dollars or more, often payable within a matter of months, and can hinder property values, i.e., there is often a stigma associated with the financial burden in the eyes of potential buyers and their respective agents.

Putting Special Things in Perspective

Central Park is an exceptionally large community, and is unique from other smaller developments, e.g., condominium complexes that may have a sub and master HOA, as part of the funding for the parks we enjoy, the roads we travel on, etc, comes from the City of Denver. That said, budgeting for the MCA is no different than budgeting for a condo community, or even a household, in the sense that every entity, like every family or individual, needs to have sufficient savings in order to remain financially solvent.

Using a Reserve Study to Avoid Special Assessments

Part of what a reserve study shows is a community’s risk of a special assessment, which is why it is so impactful, i.e., not only does a reserve study lay out a step-by-step approach for building an appropriate level of savings, removing most if not all of the guesswork from the budgeting process, but it offers a gauge, a risk assessment, at varying intervals. For instance, at “X” amount of dollars in reserves the risk of a special assessment is 15%, and at “Y” amount of dollars in reserves the risk of a special assessment is 25%, etc.

Understanding the Budget

The MCA’s budget is vast, and there is much to evaluate, however, there are a number of visual aids that make the process of understanding it easier. For instance, on Page 5 of the 2022 Budget Book Full Version you will find a chart titled “MCA Revenue & Expense History,” which graphically shows how expenses and the revenue to meet them have grown in time with the addition of new facilities, from parks to pools to everything in between, as described in the document’s introduction.

Another valuable visual aid, found on Page 18 of the 2022 Budget Book Full Version (Example A), shows a macro level pie chart wherein the categories “Parks” and “Pools” make up a combined 41% of the overall budget. When this is compared with Page 10 of the 2022 Budget Book Full Version (Example B) it becomes clear why a reserve study is so important for, as you can see, the true cost (actuals) for 2021 outpaced the expected amount (budget) in both the “Parks” and “Pool” categories.

What’s important to note is that while the actuals appear relatively close to the budget in the graph below, they are, as noted in the pie chart above, 41% of the total budget, so small differences can add up to large dollar amounts. That said, it is common across every community I work with, every HOA for which I am a board member, to see such differences, and this is in no way a rebuke of the MCA, which is well run, simply a case for the reserve study, which the MCA voted to order.

The Art & Science of Budgeting

Creating a budget for a large-scale community such as ours is both an art and a science, for it takes skill and data to create a working document, a functional framework that effectively balances the desire to keep dues relatively low while maintaining a high standard of care for the facilities we all value and enjoy. Of course, with inflation at the highest level in 31 years, it is safe to say that the pending reserve study is well timed for as prices increase so must the budget adjust to meet the changing demands of our nation’s dynamic economy.

John B. HoltNovember 21, 2021