Breaking Budget Bad News

Happy Budget Season! For most, budgeting is the same each year: apply your contractual annual costs, monitor utilities and don’t forget to add in extras like the mid-summer dumpster fees. For some, it’s not so simple: the inevitable large increase in assessments is here. How are you going to break that news to your homeowners? Those who attend board meetings or read meeting minutes regularly know how the year is going. They’re not the audience you need to address carefully. The majority of homeowners may not be aware of the financial situation in the association; those who aren’t tuned in need communication from the board so they aren’t blindsided by a significant increase in assessment fees.

How can you prepare your residents for an increase?

Hold budget meetings or discussions in open sessions. Note: This does not mean the budget is up for audience discussion. This is ideally a working session of the board or finance committee to go through the budget line-item-by-line-item and discuss them.

Be candid from the start. A negative response from homeowners in the room is better than lack of transparency.

If the future increase is due to under-budgeting in a prior year or anticipated increases, these meetings will make that clear when year-to-date actuals and year-to-date budgets are discussed side-by-side.

Is the assessment increase due to a specific project? Getting resident buy-in on the project itself can go a long way toward making the extra fees more palatable. Town halls are a great way to make that happen! Fully explain the project:

  • What is it?
  • What’s the timeframe for its completion?
  • Why is it needed?
  • Who is affected?
  • What is the complete funding plan?

There is no such thing as too much information.

After everyone understands the reasons for an increase, ease them into the specifics of the increase. Be empathetic! It never hurts to remind homeowners that increases affect you as board members, too (sometimes homeowners forget that.) But, no matter how empathetic you are, at the end of the day, it’s your fiduciary responsibility to do what’s best for the association.

When you send out the budget mailing to your homeowners, include a message from the board with the financials. Break down any line items that had big increases – and big decreases, too!  “Legal increased $10,000 due to bad debt collections” or “Trash contract decreased by $2,500 due to switching to ABCD Trash Haulers.” Good news makes bad news easier to take and shows how hard you as a board are working for your residents.

If needed, summarize the outcome of the town hall and resident feedback on any projects that have a significant impact on the budget, as well as the benefits of the project.

The key to breaking tough budget news is to start preparing everyone early. “We found this issue. This is what’s being recommended, and this is how much it will cost each of us.”

Be transparent, be prepared to answer questions, and be human. It’s a complex job, but it can be done with planning and empathy.

By Katie Halfhill, CMCA, AMS

Katie is a portfolio manager for FirstService Residential. She’s been in the community management business for over fifteen years, serving clients as general manager and portfolio manager over condominium associations, homeowners associations and LLCs.

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