2014 Draft 2014 Draft BudgetBudget

October 15, 2013October 15, 2013

HRCA BudgetHRCA Budget

The annual budget for the Highlands Ranch Community Association is a financial and operational document that is designed to carry out the obligations of the HRCA.

The annual budget also follows the policies of the Board of Directors, which reflects the requests for services and facilities by the members.

AgendaAgenda

• Budget Process & Goals• HRCA Finance Committee• Budget Highlights / Assumptions• 2014 Budget Drafts

– Administrative– Recreation– Backcountry– HR Cultural Affairs Association– HR Scholarship Fund

• Questions

2014 Budget Process2014 Budget Process

• June - August - Draft Budget Development

• August - October - Finance Committee Review•Reviewed each aspect of the HRCA, HRCAA, & HRCSF

•Ten meetings and over 330 hours

• October 7 - Board Review with Finance Committee

• October 10 - Budget Draft mailed to Delegates

• October 15 - Presentation to Delegates•Post budget presentation on Website

• November 19 - Board Adoption

2014 Budget 2014 Budget GoalsGoals

• Guideline for revenues, expenses and funding

– Reverse the $30.00 assessment to Recreation (increased) and Administration (decreased) for prior year’s Backcountry transfer

• Funding available for:

– Administrative Operations• Quality Community Events

– Recreational facilities and programs

– Bond obligations

– Reserve and Capital Improvement funds• McKinstry Project

– Backcountry

2014 Budget 2014 Budget GoalsGoals

• Develop and promote new services & appropriate fees to generate revenue and recover costs

• Provide realistic operating budget which creates ongoing value to homeowners at a fair assessment fee

• Ensure that budget is aligned with all corporate initiatives– Directors Visionary Statements & Objectives

– Five Year Strategic Plan

– Community Survey

– Implementation of the Compensation Analysis results

• Consideration of McKinstry Project– Potential of $163,000 / year in utilities savings

– Investing $2.4 Million in Capital and Reserve Improvements

2014 Budget 2014 Budget GoalsGoals

• Enhance budget presentations

– Increase budget discussions by providing proposed budget information earlier and at open meetings

– Comprehensive income & expense statements

– Simplify presentation and show how member assessment dollars are allocated to various member services

– Comparison of Assessment increases to regional CPI

– Comparison with similar competitor organizations

2014 Finance 2014 Finance CommitteeCommittee

Thank you!For your time, commitment,

involvement and input into the development of the 2014 Budget!

2014 Finance 2014 Finance CommitteeCommittee

• Jeff Suntken Chair/Treasurer (Consulting)

• Chris Caro (Investment Institution)

• Lyle Daley (Federal Government Agencies)

• Sheela Damle (Management, Consulting)

• Scott Grimes (Public Accounting)

• Kirk Mooneyham (Captive Insurance)

• Shon Payne (IT Services Provider)

• Kay Schneider (Quality Improvement Non-Profit)

• Suma Shamasundar (Software / Web Development)

• Tom Waters (Corporate Finance)

• Stephanie Young (Telecommunications, CPA)

• 150 New Properties

• Architecture Submittal Requests estimated to generate $90,000

• New home and resale transfer fee increased $100 to $130

• Sub-Association Management fees increased by 3% or $13,000

• Introduction of Sub-Association Maintenance Services $23,400

• Interest Income of 0.4% on investments

• Increase in legal revenue fees consistent with new legal firm expense fees

2014 Administrative Fund 2014 Administrative Fund Revenue HighlightsRevenue Highlights

2014 Administrative Fund 2014 Administrative Fund Expense HighlightsExpense Highlights

Staff Compensation & Benefits

•All new staff justified by non-assessment revenue

•Limited overall staff salaries to 3% increase, consistent with MSEC and other consulting organization forecasts for 2014

•Health insurance costs budgeted at 5.1% increase

– CIGNA self-funded plan allows HRCA to maintain current level of benefits while reducing premium increase from 20% to 10%

– Implemented second year of increased health and dental insurance contributions paid by employees which will reduce the budgeted medical insurance expense by $93,000 / year

– Continue to motivate staff to move to HSA plan over PPO plan

2014 Administrative Fund2014 Administrative FundExpense HighlightsExpense Highlights

Administration Function Expenses

•Decreased bad debt provision 10% due to decreased write-offs from bankruptcies and foreclosures

•Decreased printing and postage cost by 10% due to new E-Bill, Newsletter and Activity Guide opt-out options

Sub-Association Management

•Increased sub-association staffing and operating expenses to support additional property management and maintenance services

2014 Recreation Fund2014 Recreation FundExpense HighlightsExpense Highlights

• Engaged McKinstry for Energy Savings Program at a total cost of $2,479,100. Partially funded by a $1,500,000 internal loan from the OSCA Fund.

• Created a Capital Improvement Fund to support the 5 Year Plan with an initial deposit of $250,000.

• Over $570,000 of expenditures form the 2013 budgeted Recreation Reserve were deferred

• Through the budgeting process, over $835,000 in Capital and Reserve expenditures were removed or deferred to future years in order to keep 2014 expenditures in line

2014 Admin / Recreation 2014 Admin / Recreation FundFundExpense HighlightsExpense Highlights

Capital and Reserve Expenditures eliminated or deferred to future•Administration Fund (Capital)

– New Accounting Software $40,000– Web Site Upgrade $20,000 $ 60,000

•Recreation Fund (Capital)– Web site Upgrade $20,000– Kiosks and Virtual Tour Website $11,200– Digital Displays $20,000– Tennis court divider nets and shade structure $24,000 $ 75,200

•Recreation Fund (Reserve)– NR Gym & Racquetball Court Flooring & walls $160,000– NR Lobby Remodel $400,000– Continuous lap pools $ 75,000– Reduction in emergency provision $ 65,000

$700,000

•Total $835,200

2014 Recreation Fund2014 Recreation FundExpense HighlightsExpense Highlights

Utilities

•Utility usage will decline due to implementation of McKinstry Energy Savings Program ($163,000 Guarantee).

•Utility rate increases are estimated to be:

– Natural gas prices to increase 5.0%

– Electricity costs to increase 5.0%

– Water costs to increase 3.0%

•Reduced some facility operating hours saving $55,000.

•Decreased general insurance rates by 3%

Administrative Administrative FundsFunds

• Administrative Operating Fund

• Administrative Reserve Fund

Administrative Administrative FunctionFunction

• Administration and Management Functions

• Community Improvement Services– Architecture and Covenant Compliance

• Accounting and Finance Reporting

– Billing and Collections

• Community Relations, Events & Communications

• Sub-Association Management– Serving 21 properties

2014 Administrative Fund 2014 Administrative Fund SummarySummary

Revenues $ 3,218,100

Expenses 3,192,210

Net Operating Revenues 25,890

Transfers 54,300

Due from Prior Years Surplus Operating Funds $ ( 28,410)

2014 Administrative Fund2014 Administrative FundRevenue SourcesRevenue Sources

2014 Sub-Association 2014 Sub-Association ManagementManagementRevenueRevenue

2014 Administrative Fund2014 Administrative FundSub-Association SummarySub-Association Summary

Sub-Association Services

RevenueContracted Management Fees $431,000Management Services $51,400

$482,400ExpensesStaff $432,980Office, Insurance, Legal, Other $25,950

$458,930

Total $23,470

2014 Administrative Fund 2014 Administrative Fund ExpensesExpenses

2014 Administrative Fund2014 Administrative FundTransfers Transfers (Capital / Reserves)(Capital / Reserves)

CapitalPortable credit card machines $ 3,000Web Site Requirements / Design

10,000Total $13,000

ReserveComputer/Software $33,300Telephone 5,500Furniture replacements 2,500

Total $41,300

Recreation Recreation FundsFunds

• Recreation Operating Fund

• Recreation Reserve Fund

• Backcountry Fund

Recreation Recreation FunctionsFunctions

• Facility Operations

• Recreation Programming

• Transfers

Recreation Recreation OperationsOperations

• HRCA manages 323,600sq. ft. / 7.4 acres of recreation facilities.

• 860 Employees– 110 Benefited Employees

• Avg. Operating Hours (M – F)17 Hours/Day, (Sat – Sun) 14 Hours/Day

• Closed 4 Days / Year

2014 Recreation Fund2014 Recreation FundSummarySummary

Revenues $19,612,575

Facility Operating Expenses $ 6,545,035Program Expenses $ 2,808,670Multi-Facility Expenses $ 4,706,630

Total Operating Expenses $14,060,335

Net Operating Revenues $ 5,552,240

Transfers $ 5,554,210

Net Operating Revenues after Transfers $ $ (1,970)(1,970)

Recreation Recreation ProgramsPrograms• 3 Planning periods

(Activity Guides) per year

• Diverse programming for all ages and interests

 • Fees cover direct

expenses

2014 Budgeted 2014 Budgeted Program RevenuesProgram Revenues

• $4,410,875 in revenues

• 22.5% of total revenues

• Projecting 3.1% revenue growth over 2013 Forecast

2014 Recreation Fund2014 Recreation FundProgram RevenueProgram Revenue

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Reve

nues

in m

illio

ns

Year

HRCA Program Revenue Growth

2014 Recreation Fund2014 Recreation FundRevenue SourcesRevenue Sources

2014 Recreation Fund2014 Recreation FundExpensesExpenses

2014 Recreation Fund2014 Recreation FundCapital ExpendituresCapital Expenditures

Cost

McKinstry Pool Pump Frequency Drives $ 99,870McKinstry Water Conservation $ 73,150McKinstry Thermal Equalizers $ 39,280ADA Pool Lifts $ 30,300 McKinstry Mechanical Insulation $ 23,210Website Requirements / Design $ 10,000 Slider Window / Fire Escape $ 8,900Mobile Web Trac $ 8,600Security Cameras $ 8,000Wireless Access $ 2,100

Total $303,410

2014 Recreation Fund2014 Recreation FundReserve Expenditure Reserve Expenditure SummarySummary

Computer/Software/Telephone $ 53,900

Northridge 114,800Southridge 432,900Eastridge 145,200Westridge 153,500

Design Improvement Plans 50,000McKinstry Project 2,243,590Emergency Reserve 100,000

Total Recreation Reserve $3,293,890

2014 Recreation Fund2014 Recreation FundMajor Reserve Major Reserve ExpendituresExpenditures

Cost

NR Pool Handling and Chiller (McKinstry) $777,410ER Pool Air Handling Units (McKinstry) $643,710 *Other McKinstry Upgrades $822,470SR Building Settling - Auditorium $185,000 *SR Compaction Grout - Pool $100,000 *5 Year Plan - Improvement Planning/Design $ 80,000

* Previously budgeted in 2013 and deferred to 2014

2014 Recreation Fund2014 Recreation FundTransfersTransfers

To Bond Requirements $3,590,800

To Recreation Reserve Fund $1,200,000

To Capital Improvement Fund $ 250,000

To Backcountry Fund $ 210,000

To Capital Equipment $ 303,410

Total Recreation Fund Transfers $5,554,210

Fund Balance Projections Fund Balance Projections (12/31/14)(12/31/14)• Administrative Operating Fund $ 272,200• Administrative Reserve Fund $

185,100

• Recreation Operating Fund $ 772,850• Recreation Reserve Fund $2,889,300

• Backcountry Operating Fund $ 209,400• Backcountry Reserve Fund $ 123,750

• OSCA Fund $ 795,000

• Bond Funds $3,501,050

Please refer to the Fund Balance Projections for more detail

Recreation Reserve Recreation Reserve FundFund

12/31/12 Balance $3,090,663

2013 Reserve Transfers 1,350,000

Interest Income 12,500

2013 Projected Expenditures (870,000)

Estimated 12/31/13 Balance $3,583,163

2014 Reserve Transfers 1,200,000

Loan from OSCA Fund 1,387,500

Interest Income 12,500

2014 Projected Expenditures (3,293,890)

Estimated 12/31/14 Balance $2,889,273

2014 Budget 2014 Budget SummarySummary

• $32 (or 6.3%) Increase in Assessments

• Total Revenues projected $22,830,675

• Maintain quality facilities and services

2013 Assessment2013 Assessment ChangesChanges

Actual Proposed 2012 2013 Increase % Inc Qtr Amt

AFCA $ 51.00 $ 21.00 $ (30.00) (58.82)% $ 5.25

RFCA $457.00 $487.00 $ 30.00 6.56% 121.75

Total $508.00 $508.00 $ 0 0.00% *$127.00

• *The CPI (Consumer Price Index) for years ending 6/30/11 (+3.46%) and 6/30/12 (+1.76%), US Department of Labor, Bureau of Labor Statistics, Denver/Boulder region.

• HRCA’s accumulated Recreation Assessments are still 12% below the accumulative CPI % increases since 1990.

2014 Proposed 2014 Proposed AssessmentsAssessments

  Actual Revised Proposed

FunctionActual 2013

Reverse 2013

AdjustmentBC

Adjustment

Revised 2013

Assessment 2014

Increase Assessment

Amount

       

AFCA $ 21.00 $ 30.00 $ (7.00) $ 44.00 $ 4.00 $ 48.00

RFCA $ 487.00 $ (30.00) $ 7.00 $ 464.00 $ 28.00 $ 492.00

Total $ 508.00 $ - $ - $ 508.00 $ 32.00 $ 540.00

* The CPI (Consumer Price Index) for years ending 6/30/12 (+1.76%) and 6/30/13 (2.77%), US Department of Labor, Bureau of Labor Statistics, Denver / Boulder Region

2014 Proposed 2014 Proposed AssessmentsAssessments

• What is the proposed $4.00 Administrative assessment increase for?

– Staff payroll increases (3%) $ 44,200– Increase in health insurance & benefits $ 22,600– Anticipated decline in re-sales (transfers) $ 19,000

– Marketing and Rebranding $ 30,000– Other $ 9,240

New Admin Expenditures $ 120,440

New Admin Expenses per home $ 4.00

HRCA Administration HRCA Administration Assessments Compared to Assessments Compared to CPICPI

-

10.00

20.00

30.00

40.00

50.00

60.00

HRCA

CPI

2014 Proposed 2014 Proposed AssessmentsAssessments

• What is the proposed $28.00 Recreation assessment increase for?

– Adjust back the $30 less $7 from prior year $ 585,000– Staff payroll increases (3%) $ 192,500– Increase in health insurance & benefits $ 77,500– Increase in Capital Expenditures $ 113,400– New Capital Improvement Fund Provision $ 250,000– Increase in Program Revenues ($ 131,300)– Reduction in Rec Reserve Provision ($ 150,000)– Reduction in Utilities (McKinstry ¾ year) ($ 122,500)– Other $ 1,400 New

Rec Expenditures $ 816,000

New Rec Expenses per home $ 28.00

HRCA Recreation HRCA Recreation Assessments Compared to Assessments Compared to CPICPI

-

100.00

200.00

300.00

400.00

500.00

600.00

HRCA

CPI

““Competitor” Competitor” ComparisonsComparisons

Recreation Provider Comparison

Recreation Square Outdoor Resident Annual Gov'tProvider   Facility   Footage   Pool     Fee     Subsidy *  Castle Rock Castle Rock Center 39,423 No Senior (1) $311 Subsidy

Adult (1) $467 UnknownHousehold $823

                           City of Golden Golden Community Center 62,500 No Senior (1) $300 $46/hhold

Adult (1) $420Household $932

                           HRCA Northridge 69,000 2 RFCA $540 0

Eastridge 85,000 2 Per Westridge 72,000 1 HouseholdSouthridge 72,000 1

Backcountry Wilderness Area Open Space (7300 acres) 11.3 miles of trails included

Foothills   The Ridge   83,000   No     Senior (1) $270   $218/hhold  Annual fee accesses Lilly Gulch 36,000 No Adult (1) $399 all centers Peak Wellness Center 30,000 No Household $639

Outdoor Pool Facilities 5                           Town of Parker Parker Rec Center 47,250 1 Senior (1) $276 52% Sales Tax $5m/yr

Adult (1) $420 2% Use Tax                  Household $660   46% User FeesSo. Suburban Family Sports 150,000 No Youth 2-17 $310 $46/hholdAnnual fee accesses Goodsen Center 80,000 No Adult 16-14 $455for all centers Buck Center 53,000 No Household $310

Lone Tree Center 54,000 NoOutdoor Pool Facilities 4

    84 miles of trails               included    

Worksheets/RAC/Rec Provider Comparison 2013 * Subsidy may be derived from mil levy or sales tax used to support operations

2013 Recreation Provider Comparison

(Household Rate) M

emb

ersh

ip C

os

ts C

ost

Recreation Centers

2014 Proposed Rollfoward of 2014 Proposed Rollfoward of the Primary Fundsthe Primary Funds

Administrative Recreation

Est. Fund Balance @ 12/31/12 $ 1,077,160 $ 429,490Estimated Net Revenue 2013 $ (776,445) 95,335

Estimated Fund Balances 12/31/13 $ 300,715 $ 524,825

Proposed 2014 Net Revenues ( 28,410) ( 1,970)

Estimated Fund Balances 12/31/14 $ 272,305* $ 522,855*

* Represents 1 month of Admin & 2/3 month of Recreation Operating Expenses

2014 Budgets2014 Budgets

Backcountry Fund

2014 Backcountry Fund2014 Backcountry FundMission StatementMission Statement

Provide visitors with unprecedented opportunities to enjoy nature near where they live, while protecting and conserving natural, archaeological, historical, and cultural resources for the enjoyment of future generations.

2014 Backcountry Fund2014 Backcountry FundHighlightsHighlights• Will add $70,000 in three miles of trails

• Programs: Youth Camps, Hayrides, Camping, Horseback Riding, Elk, Turkey, and Coyote Hunts, Nature Hikes and Education, Archery Range, – Will expand our youth camps this year to allow 200

more kids into the camps.– Turkey and coyote hunts new in 2014– Elk Banquet and hunting earn over $12,000

 • Noxious weed management, hunting, restoration,

volunteer projects

• Cattle grazing, historical site assessments on homesteads

2014 Backcountry Fund2014 Backcountry FundSummarySummary

Revenues $ 237,210

Less: Expenses $ 443,430

Net Operating Revenues (Deficit) ($206,220)

Transfer from Recreation Fund $ 210,000

Net Income after Transfers $ 3,780

Less: Capital Expenditures ($ 83,100)Reserve Transfer ($ 50,000)

Add: Transfer from OSCA Fund $ 77,500

Net Income (Deficit) after Transfers ($ 51,820)

2014 Backcountry Fund2014 Backcountry FundCapital & Reserve Capital & Reserve ExpendituresExpenditures

Capital• Trails $ 70,000• Signs 7,500• Tables, chairs, computer, saddle

5,600Total Capital Expenditures $

83,100

Reserve• Signs 7,500

Total Reserve Expenditures $ 7,500

• 37 Cultural Events• Event Revenues • SCFD Grant Funded• Community Partner funded

Separate 501(c)3 Cultural Organization

Highlands Ranch Cultural Affairs Association 2012

Highlands Ranch Highlands Ranch Cultural Affairs Cultural Affairs Association 2014Association 2014Revenue

SCFD Grants $ 85,000Community Partners 56,000HRCA & Other Donations 5,200Event Fees 86,825

$233,025

ExpensesDirect Event Expenses $172,650HRCA Staff & Facilities 48,600Other Expenses 11,775

$233,025

Net Revenues $ 0

HRCAA Revenue HRCAA Revenue SourcesSources

• 501(c)3 Organization

• Funded by

Sponsorships & Event Revenues

• $186,000 in Scholarships from 2004-2013

Highlands Ranch Community Scholarship Fund 2013

Highlands Ranch Highlands Ranch Community Scholarship Community Scholarship Fund 2014Fund 2014

Revenues $36,470

Operating Expenses 28,700(includes 25 scholarships @ $1,000)

Net Revenues $ 7,770

Notes: Estimated accumulated YE Fund Balance $32,470

QuestionQuestions? s?