How HOA fees are determined is usually one of the main points of disagreement in communities. Homeowners insist on knowing how their money is being spent, and boards often struggle to decide how much each resident needs to contribute to make sure the community has sufficient funds. While it’s easy to compare your community with others, don’t fall into that trap. No two associations, or their governing documents, are the same! Which means assessments and dues will vary from community to community.
To help your board gain better insight into determining HOA dues, here are two common forms of budgeting that dues are based off of:
- Historic Trend Budging. Just like it sounds, historic budgeting means looking back on what your HOA spent previous years and laying a budget foundation based on those numbers. This is the best way to approximate an upcoming year’s budget. But remember, this approach only takes into consideration the same set expenses.
- Zero Sum Budgeting. This approach looks beyond previous spending habits and instead asks board members to look forward to anticipate expenses or needs in the future. Zero sum budgeting is extremely helpful because it requires board members to plan strategically about what the community needs, and it forces them to make mindful choices about how to invest or spend HOA dues.
While either of these approaches can yield a successful budget, most financially stable HOAs are the ones who approach their budget through both lenses. These boards lay the budget foundation based on previous years because it gives them a solid idea of expected costs. Then the board sits down and examines their budget though a strategic “zero sum” lens. Once a budget is set, HOA dues can be set; so don’t delay in planning the upcoming year’s budget. Proper budget planning takes time and attention to detail.
If your board is struggling to agree on a budget, give Spectrum a call – we’d be happy to work with your community to identify budget and dues!
