Q3 Updates and 2024 Budget

As we approach the end of Q3, the board has some updates on a handful of things and a discussion of our priorities and the budget as we head into 2024.

The long, hot and dry summer has been especially hard on everyone’s landscaping including the Association. Continue to keep irrigation systems in good working order and water lawns according to the current City of Austin watering restrictions. Sod that has browned and goine dormant due to heat and drought should revive this fall if you’ve kept up with watering thoughout the summer. As a warning, if you are found in violation of current watering restrictions, the City of Austin can impose fines or even cut off your water service as many residents of Steiner Ranch have recently discovered.

Continue to care for your lawns and landscaping according to the standards published in the current Design Guidelines and other documents. Lawns are expected to be kept mowed and treated for weeds. Driveways, sidewalks and curbs are expected to be kept neatly edged and brush and limbs encroaching on the sidewalks are expected to be kept trimmed back. Dead or downed limbs and branches must be removed promptly. Bare dirt is not allowed; when cooler weather arrives, either re-sod or use mulch and other plantings to maintain a neat and tidy appearance. Nothing on your Lot should appear overgrown or unmaintained.

Right now, the board does not see the need to do a special assessment related to winter storm cleanup. We have been paying our vendors out of cash reserves as invoices come due and submitting to insurance for reimbursement. Right now, we have been reimbursed for some but not all of our expenses. It appears that we may need to get the Association attorney involved in order to ensure that our insurer pays all of the cleanup expenses it is obligated to pay under our policy. The currently outstanding amounts due for reimbursement are not significant enough to impact our operations but may cause us to temporarily delay or scale back some of the landscaping improvements we had planned for this year.

Earlier this week the board held the annual meeting to review and approve the budget and assessment amount for 2024. Most of the Association’s annual operating budget is allocated to paying our bills for services that keep the common areas mowed and irrigated, cleaning and upkeep on the pool and courts, insurance, management fees, etc. and keeping things in good working order by fixing things when they break. Our target operating metric is that the operating budget take up no more than 80% of the annual assessments with the remaining 20% allocated to our capital account to be spent on items identified in our triennial reserve study as in need of replacement or renovation or on “soft” projects such as large scale landscape refresh / renovations. Like many of you have experienced firsthand, inflationary pressures have increased our costs across the board as well. Of particular note, our property and casualty insurance costs increase by around 50%, going from around $14,000 to $21,000 in just one year. In years past, we have tried to shop around for alternative coverage but with only a small number of A rated issuers providing coverage for HOAs at the level that we require, our options here are limited. Management fees increased at the contracted 3% as did various other services.

The last two years have been especially hard on our irrigation system. The long, hot summers dry the soil which causes shifting and pressure on the irrigation water lines. This results in costly efforts to locate the source of the leaks and make repairs. In each of the last two years, we’ve spent upwards of $20,000 annually to keep the system in good working order. This amount is signifiantly higher that what was budgeted in each of those years. As a result, we’ve substantially increased the irrigation system repair budget for 2024 to be more reflective of recent historical costs.

The subject of wildfire risk is one that has been on the minds of the board for several years. With the recent fires in Maui resulting in significant loss of life and property, combined with damage from this winter’s ice storm adding to the fuel load in the greenbelt canyonlands, the board is approaching this matter with new urgency. We have recently begun working with a local firm called Environmental Survey Consulting with extensive experience in wildfire risk mitigation. This firm currently works with various departments in both the City of Austin and Travis County on land preservation and restoration projects including wildfire risk management. For 2024, the board has allocated $50,000 to develop a comprehensive, multi-year wildfire risk mitigation plan and pilot project with the goal of having a measurable impact on the community’s wildfire risk. We’ll be able to share more details on this effort as we get further into 2024 and better clarity on the elements of the plan and its approach to the problem. At a high level, we are looking to address three key elements: 1) improved canyonland access for first responders and firefighting equipment; 2) construction of fire breaks at key points; and 3) fuel reduction.

After accounting for this new effort and all of our other increased costs, at the current assessment level of $578 annually, we would be almost 9 percentage points above our target operating expense ratio of 80%. Accordingly, the board has unanimously approved an increase of $57 to $635 annually in 2024, payable in two installments, due Jan. 1 and July 1. This represents a 9.86% increase which is is just below the 10% threshold permitted by the Association’s governing documents. Even with this increase, the operating budget is still just a bit over the 80% target.

Canyon Creek Traffic and Safety Committee Newsletter – April 2023

Newsletter PDF

Announcements and 2023 Budget

A couple of announcements from the CCHOA as we head into the 4th quarter of the year:

If you missed bulk-item pickup earlier this month or are still hanging on to stuff you’d rather part with, hang on to it just a little longer for the neighborhood garage sale that will be held the weekend of Oct. 22. As usual, we have signs at the entrances to the neighborhood and will publicize the event through our normal channels. We do these twice a year and there is usually good traffic through the neighborhood by bargain hunters so if you plan to participate, you have a good chance of selling a fair bit of your unwanted stuff. You may feel free to put signs out directing visitors to your sale but you must collect them afterwards.

The pool will close for the season on October 31 and will reopen in generally in April of next year. Our master of amenities, Dave Marshall, has expressed a desire to make the pool patio/breezeway available for private reservation during the off season so this is something we would like to try. While we don’t have a firm operating plan to support this desire, we would like to work with Members interested in using this facility for private events during the off-season to help us define a sensible and workable set of processes and policies. Please do reach out if you have an event coming up and are interested in booking this facility.

The Board met on Monday, the 19th of September to approve the budget and set the regular assessment rate for 2023. The Board unanimously approved an increase of $52 to the annual assessment, going from $526 the prior two years to $578 for 2023. In addition to our normal 3-5% increases to our landscaping, management and a handful of other contracts, there were significant increases to a several other operating line items.

We saw substantial increases to our property & casualty and liability insurance rates. We had been expecting an increase in property damage insurance last year due to underwriters attempting to recover higher costs associated with winter storm damage but there were increases across the board for all types of insurance we carry. We use an insurance broker who shops multiple underwriters in order to build a complete package of the best bids for each type of coverage we carry. Given there are only a handful of A-rated underwriters who cover HOAs, it is very unlikely that we can lower this expense by bidding with another broker. We have tried this approach in years prior with little success and have no reason to believe things have changed since then.

After almost five years without an increase, our lifeguard contract will increase by over $13,000 annually due to higher expected wage costs. Since we have been with this vendor for several years, we are due to shop this business with other vendors to make sure this is inline with how the overall market is trending. Additionally, our pool chemical costs have increased substantially. The supply of chlorine for pool sanitization was constrained last year by a fire in a major manufacturing facility. This resulted in significantly higher costs for chlorine sanitizer. Even though chlorine sanitizer is once again readily available, it appears that these price increases are going to be the new normal so we have adjusted the budget to reflect the increase.

We have continued to chase down leaks and make repairs to our irrigation system in order to control our water expense. Aggressive management on this front has put us in a position to lower our water budget by around $18,000. For 2023, we have reduced the water budget from just over $90,000 to $72,000.

After accounting for higher operating and maintenance expenses and somewhat offset by a lower water budget, the Association’s budgeted operating margin for 2023 will drop to just over 21%. The board’s target operating margin is 20% or higher. What this means is that in order to stay above the 20% target operating margin, another increase will be likely in 2024 due to normal year-over-year cost increases .

The Association budget process begins in mid-summer with approval typically occurring in September or October. In prior years, the board often sought cost estimates on capital and large discretionary projects targeted for the coming year to assist with budgeting and planning. This often meant that it could be up to 15 or 16 months before a project got underway. For 2022, we had a long list of landscape refresh and renovation that we had to scale back or defer since by the time we were ready to get started, the executable bids bore little relation to the original, cost estimates provided. For 2023, we are altering our approach in that rather than identifying every project with a dollar amount for next year, we are allocating a pool of funds (with a contingency hold back) toward a list of projects that we’d like to address. A handful of these projects are high-priority “must do” based on our reserve study’s recommendations and include replacement of the shade canopy structures at the pool. The remainder are either high-priority maintenance, repairs and upgrades, or fall into the discretionary category of ongoing landscape refresh and renovation. Each board meeting from now through next year we’ll look at where we are, assess any new needs, discuss prioritization, and review bids. Presently, the major projects we’re looking at include:

• Pool canopy structures - total replacement;

• Addition of shading canopy at baby pool;

• Landscaping and solar lighting at the south entrance median;

• Repairs to south entrance median tree well stonework;

• Side-street median bed refresh throughout neighborhood;

• Pool area - drainage improvements, tree replacements and bed refresh;

• Pool / pool house - repairs to swim lane hooks, rust treatment, paint work;

• Courts area - Landscaping, walk path, and drainage improvements;

• Completion of Boulder Lane center island bed renovations;

• Completion of upper tennis court conversion to LED lighting;

We think this approach offers a little more flexibility to select projects based on evolving priorities given the current environment of unpredictable, escalating costs that make it difficult to plan and estimate.

Finally, our 2021 audit is completed but I need to make a correction to my last update when I stated that the steps we took earlier this year to clean up the books related to amenity key card deposits for “this year’s audit” would clear up the “qualified opinion.” It turns out that my timing is incorrect. The audit that was just completed this month is for fiscal year 2021. The board did not take steps to resolve the “qualified opinion” until earlier this year, 2022. Therefore, the 2021 audit has still resulted in a qualified opinion. The audit that will be done next calendar year, for fiscal year 2022 will have the adjustments necessary to resolve the qualified opinion. Aside from this minor issue resulting in the “qualified opinion” the audit uncovered no problems with the HOA finances.

As always, you can reach the full HOA board at board@canyoncreek.net with questions or concerns. Thanks again for the trust you have placed in us. On behalf of the board,

Brett Funderburg
President, CCHOA