Tips on building a better budget for 2014

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As summer turns into fall, community association boards and finance committees start working on their budgets for the year ahead. Their challenge is to balance the association's needs and responsibilities with owner resistance to assessment increases.

We asked a panel of industry pros for their best budget-saving tips for 2014. Before you plot numbers on your spreadsheet, consider their collective wisdom.

Bid out contracts annually. Service providers will perform consistently at top level if they think they might lose your business, said Thomas Skweres, regional vice president at ACM Community Management in Downers Grove.

If you want, "You can avoid going out (to bid) year after year if you can sign a two- or three-year contract that holds the price steady or has reasonable increases," he said.

Cut back services. Suggestions from Skweres: Hire window washers twice a year instead of quarterly, and make owners responsible for cleaning the glass on their decks and balconies. Reduce scavenger pickups, perhaps to four times a week instead of five times a week, and add extra trash containers for interim use. Vacuum the hallway carpeting three times a week instead of daily.

"Look at every line item, and ask where you can save while still maintaining the level of service you want to provide," he said.

Go after delinquencies early. If you wait until an owner's assessment account is several months in arrears, you lessen your chances of collecting, said attorney David Hartwell of Penland & Hartwell in Chicago.

"You do nobody any favors by letting the delinquency grow larger and larger," he said. "It's more difficult to pay a big amount than it is to pay a small amount. You may never collect."

Conserve professional time. When a major capital project is underway, weekly site visits by an architect or engineer may not be necessary, said architect Daniel Baigelman, principal at Full Circle Architects LLC in Northbrook.

"Typically, they are needed in a front-loaded fashion, when things are first getting done," he said. "Further into the project, they are really not needed as much, except when payouts are due so they can verify how much work has been done, or right before a board meeting."

"Perhaps you can turn a full-time management position into part time," Skweres said. "Then fill in the time the manager isn't there with a customer care representative, or have a full-time answering service."

Limit attorney contact. Designate one person as liaison between the board and the attorney. If all board members feel they have the right to call whenever they want, you could end up with a big bill, Hartwell said.

"Be careful what you ask for," he said. "When you say you want an opinion, in our world that means reviewing the facts, conducting research and writing a formal opinion. It takes a lot of time. Maybe all you wanted was some initial thoughts and a five-minute phone call."

Think green. When replacing major components such as roofs or furnaces, invest in energy-efficient products and equipment for long-term savings, Baigelman said.

Stay out of court. If your association is in a legal dispute, think carefully before litigating. You could be absolutely correct according to the letter of the law and still lose your case, Hartwell said.

"Many judges rule on the basis of equity, not necessarily what the law says," he said.

Even worse, if the lawsuit involves an owner who challenges the association, a loss could open the floodgates to more owners filing similar suits, he added.

Plan for income tax. A common myth is that community associations don't pay taxes, but it does happen. Associations are taxed on investment income, user fees and earned income such as negotiating a licensing agreement with a cellular company, said certified public accountant Steven Silberman of Frost Ruttenberg and Rothblatt P.C. in Deerfield.

Review your income now and get a tax estimate. You can add it to your budget so you don't get caught short, he said.

No credit cards. "We see more problems with association credit card activity because usually there are no internal controls," Silberman said. "Sometimes the purchases are valid, but other times people use them for personal items because they know no one is looking at them."

ctc-realestate@tribune.com

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