By Tom Lang
Rancho Santa Fe Association presidentFiscal problems now seem to be commonplace, not only at the federal and state government level but at the small municipality level, as well. We have all read about communities loosing tax revenues in addition to having huge unfunded future pension liabilities. Because of this I believe it is extremely important to keep the Association members informed as to the status of our Association finances.
The bad news is that the whole country has been struggling with a tough economy. All indications are that getting the economy back on track will take several years. The Association is also impacted by the economy as for the first time since anyone can remember we are seeing a decrease in revenue from our assessment. In addition to decreasing property values (which in turn decrease revenue) we are seeing some assessments become uncollectible due to foreclosures.
The Association board and the Finance Committee will continue to keep a close eye on our revenues and a closer eye on our expenses. The good news is that projected expenses for this year’s budget represent a 4 percent decrease from our actual expenses for the 2009/2010 fiscal year. After four months of operation in the current fiscal year we are on track to meet our net income projections. This is the case even with the drop in assessment revenue.
One area that we have seen a significant reduction in costs has been in legal and litigation expenses. Over the last 10 years our legal and litigation expenses have averaged just over $350,000 per year. This year we are projecting a total expense of just under $100,000. This is a 72 percent decrease from the average. For the first time in over 25 years, the Association has only one pending lawsuit. This lawsuit is a “slip and fall” by a non-member visiting the Golf Club. The claim is 100 percent covered by insurance.
As far as unfunded future pension liabilities the Association has none. Employees of the Association have fair and competitive salaries and benefits. However, no employee has what is termed a defined pension benefit. Therefore when an employee retires from the Association they receive payments for any accrued benefits they have earned. In addition, they take control of their earned retirement account. Thereafter, the Association does not contribute to any type of medical or retirement benefits. Consequently we have no future pension liabilities.
As I mentioned in a previous article the Association remains in a strong financial condition with positive cash flow and fully funded reserves.