Saturday, August 11, 2012
I THINK I'M GETTING CLEARER . . .
There are budget items that can be predicted fairly accurately. Some of these would come under Operating Expenses and some would come under Reserves. Electric, Water, Buses and Security are examples of the first. You know enough ahead of time to factor in for inflation, and contracts control the cost of some items.
Even in Reserves, where money is set aside for expenses that don’t occur every year, some expenses are fairly predictable. Painting might be an example.
The problem comes with the unpredictable items, whether in a Reserve category or an Operating Expense category. How much do you set aside for unexpected legal costs, for hurricane-related expenses, for a 100-year drought, for a natural disaster that causes electric rates to triple, for two sinkholes to appear in one year, etc.?
Unless you are a multi-millionaire, you can’t set aside enough money to cover all catastrophes that might happen. You can’t have a sufficient cushion in every category of the budget. So you set aside money to cover a couple of major contingencies (how much is a judgment call, of course) and hope that by the Law of Averages you won’t have to deal with three or four disasters at the same time. To put it in terms of a family budget, let’s say they have set aside money to someday buy a small summer cottage on a lake. But they have a very sick child with medical expenses. They use the summer cottage money to pay for the child’s care. It’s not anathema to transfer the funds.
UCO gets its money from the 309 associations but ultimately from each one of us, the owners of units. We aren’t in the “multi-millionaire” class. I don’t think we can cover ALL the bases when it comes to having a sufficient cushion in ALL possible disaster categories occurring at the same time. A balance must be struck between planning ahead, setting aside some monies, and keeping things affordable for 8000 owners who are NOT wealthy people.