FOUNTAIN HILLS COMMUNITY ASSOCIATION FISCAL YEAR 2017 BUDGET NOTES May 6, 2016 GENERAL ASSOCIATION BUDGET

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1 FOUNTAIN HILLS COMMUNITY ASSOCIATION FISCAL YEAR 2017 BUDGET NOTES May 6, 2016 GENERAL ASSOCIATION BUDGET I. INCOME 1. Assessment Income The total income generated from the monthly assessment charged to all homeowners pursuant to the Declaration of Covenants, Conditions and Restrictions (Declaration). Each neighborhood is billed based on the following number of homes: Village single family homes 163 homes All other single family homes 15 homes Townhomes/piggyback condominiums 472 homes Condominiums 222 homes The assessment charged to Fountain Hill Condominium covers the same expenses as the assessment charged to all other homeowners, less the amount for trash collection. For FY 2017, the estimated trash collection cost is $5.01 per unit. 2. Late Fee Income - Income derived from fees charged to homeowners for late assessment payments. 3. Certified NOI/Admin. Income - When Certified Notices of Intent (NOI s) are mailed or administrative fees such as NSF fees are incurred, the attorney and/or IKO charges the Association and this charge is reflected as an expense (see Miscellaneous Homeowner Administrative Fees). The charge is also applied to the homeowner s account and shown as accrued income. Note, the budget reflects accrued income, and not actual cash received. Note: this line item was consolidated into the Legal Fees Reimbursement for Lien Income When a lien is filed, IKO charges the Association and this charge is reflected as an expense (see Miscellaneous Homeowner Administrative Fees). The charge is also applied to the homeowner s account and is shown as accrued income. Note, the budget reflects accrued income, and not actual cash received. Note: this line item was consolidated into the Legal Fees Reimbursement for Legal Fees Reimbursement - If a homeowner s account is forwarded to the Association s attorney for collection, the legal fees incurred are applied to the homeowner s account and shown as accrued income. Note, the budget reflects accrued income, and not actual cash received. Posting Income When a Certified NOI cannot be delivered by mail, it is served by a process server. The fee to do so of $135 is billed to the Association and is reflected as an expense (see Miscellaneous Homeowner Administrative Fees). The charge is also applied to the homeowner s account and shown as accrued income. Note, the budget reflects accrued income, and not actual cash received. Note: this line item was consolidated into the Legal Fees Reimbursement for Pool Income The income received from the sale of guest passes and the replacement of lost or stolen passes. 1

2 6. Resale Package Income Each time a resale package is prepared, $15 of the fee is directed to the Association. We have assumed the sale of 44 homes in FY Note: this line item was removed for the 2017 budget. IKO outsources these packages and there is no revenue to the Association. 7. Interest Income Operating - Interest generated on operating funds deposited in interest bearing accounts. Note, this does not include interest earned on reserve funds. II. EXPENSES - RESERVE CONTRIBUTION 1. Reserve Contribution The reserve study was updated in 2012, and the Association has elected to use the cash flow method of funding. The budget reflects 100% of the funding level recommended by the engineers per the 2012 reserve study. 2. Reserve Fund Payback The carry-over balance due to this line item at the end of FY 2016 was $19, Due to excessive snow removal expenses early 2016 (January / February), we were unable to find the contributions for the months of February, Marcy and April 2016 so this was built into the fund payback for FY 2017 per discussion by the Board at its May 5 th Meeting. 3. Reserve Interest No funds have been budgeted for reserve interest for FY The FY 2017 budget assumed that the interest earned on the reserve funds would net against the gross reserve contribution recommended per the reserve study. Per the reserve study, The calculations in this Replacement Reserve Analysis do not account for interest earned on Replacement Reserves, the effects of inflation on the costs of Projected Replacements, or a constant annual increase in Annual Funding of Replacement Reserves. Usually, the interest earned on the reserve accounts is used to offset the increase in the replacement cost of the asset due to inflation. Because the Association has not been accounting for inflation when funding reserves, the amount available for capital repairs may be underfunded. III. EXPENSES - GENERAL AND ADMINISTRATIVE 1. Management Fees The annual fee for a professional management company. 2. Audit- The cost to audit the Association s financial records and prepare the tax returns. As of the initial preparation of the budget, a contract to audit the FY 2016 statements had not been awarded; therefore, the budget reflects an estimated amount. 3. Legal Fees - General Legal expenses incurred to address non-delinquency related issues which may arise, such as legal document interpretation and violation enforcement. 4. Legal Fees Collections The legal fees incurred to collect delinquent accounts. See Legal Fees Reimbursement Income above. We have separated out this expense from Legal Fees General so that the Board has a clear breakdown of the legal costs incurred to collect delinquent accounts. 5. Litigation Expense The legal fees incurred in relation to two CCOC cases filed by community members. As of the initial preparation of this budget, one legal bill was still pending; therefore, the year-end projections assume that additional expenses will be incurred prior to the end of the fiscal year. 2

3 6. Postage and Mail The postage cost for mailings and miscellaneous correspondence. We have assumed 6 community-wide mailings in FY 2016, coupon booklets at $4.00 per unit and the cost for processing mailings (envelopes, labels, handling). 7. Mailing Handling Fees Included in Postage and Mail line item for FY Insurance - This item represents the cost to maintain general liability, umbrella and Directors and Officers insurance. 9. Bad Debt This line item represents an allowance for uncollectible amounts due to homeowner bankruptcies, foreclosures and/or other extraordinary circumstances that may make it impossible to collect amounts due. The funding for this expense recognizes those accounts that, pursuant to the standards of the American Institute of Certified Public Accountants (AICPA), may be deemed uncollectible by your auditors. 10. Coupon Printing Included in Postage and Mail line item for FY Printing and Reproduction Included in Postage and Mail line item for FY Taxes The Association pays federal and state income tax on reserve fund interest and other non-member income that may be earned. The amount budgeted is based on the actual taxes paid in Property Taxes/Water Quality Protection Charges- The Association pays Water Quality Protection Charges (WQPC) to Montgomery County. The WQPC charge is determined by the Montgomery County Council each year. 14. Social and Recreation The amount budgeted is based on the estimate provided by the Social Committee to host 4 community events per year. 15. Record Storage The fee charged by IKO to store the Association s books and records, including those for prior years. 16. Meeting Expense The cost to rent the meeting room at the Upcounty Government Services Center a rate of $40/meeting. 17. Website The cost for web hosting services and domain name registration. 18. Water & Sewer The water and sewer costs associated with the fountains at Cub Run Way and Lake Geneva Way. The Association does not receive a separate bill for the fountain at Fountain Club Drive. 19. Electricity The electricity costs associated with the fountains at Cub Run Way and Lake Geneva Way. The Association does not receive a separate bill for the fountain at Fountain Club Drive. 20. Recording Secretary The cost to transcribe the meeting minutes at a rate of $140/month. 21. Miscellaneous Homeowner Admin. Fees - See the Income section above. 3

4 22. Miscellaneous General and Administrative - This line item sets aside funds for miscellaneous expenses which may arise. 23. Commission on Common Ownership - The budget assumes that the Commission fees will increase by 50% (i.e. to $4.50 per unit per year). This fee is not paid for the 222 units in Fountain Hills Condominium. As of the initial preparation of the budget, the County Council has not yet determined the fees for the upcoming fiscal year but, based on the passage of Bill 45-14, an increase is likely. 24. Operating Contingency Funding has been included in the budget for unanticipated expenses. IV. POOL 1. Pool Contract The cost for a professional, full service pool management company to provide staff and supplies for the turn-key operation of the swimming pool facility. The budget reflects the actual contract cost with Community Pool Service. 2. Pool Repairs - The cost for non-reserve related repairs such as skimmer replacement, minor caulking, minor plumbing repairs and miscellaneous other repairs. 3. Pool Supplies - The cost for miscellaneous pool supplies that are not included in the pool management contract, such as office supplies, janitorial supplies and pool equipment. 4. Pool Telephone The bundled cost for telephone and internet service (needed for the pool pass system) is $99.99/month. 5. Pool Electricity The cost for electricity related to the pool. 6. Pool Water and Sewer The cost for all water and sewer expenses related to the pool. The yearend projections are based on the amount billed for August 17, 2013 to August 30, Pool Gas The cost for gas service to the pool. 8. Pool Pass Administration The cost for to prepare and process pool passes and administer the computerized pool pass system. This line item also covers supplies and hardware needed to operate system. V. SITE IMPROVEMENTS 1. Landscaping Improvements/Misc. Improvements/Site Improvements Funds set aside for maintenance or beautification of the common areas. VI. GENERAL MAINTENANCE AND REPAIRS 1. Tree Maintenance The cost to prune, remove or replace common area trees. 2. Site Maintenance and Repair The cost to address needed repairs to the common elements (e.g. repairing fences and signs, picking up trash, minor tot lot repairs and removing graffiti). 3. Cyclical Repairs The cost for non-reserve cyclical repairs such as rechipping the tot lots, pointing up the stone work, cleaning the vinyl fences and painting the poolhouse. 4

5 4. Fountain Repairs The cost for non-reserve repairs to the fountains. 5. Electrical Maintenance and Repairs The cost for electrical repairs needed to the fountains at Cub Run Way, Fountain Club Drive and Lake Geneva Way. 6. Townes at Chestnut Oaks Fee Allocation for the payment of a contract fee to the Townes at Chestnut Oaks Homeowners Association (TACO) for shared maintenance expenses (e.g. snow plowing, street lighting and reserves for future resurfacing of the roadway) for that portion of Harmony Woods Lane owned by TACO and over which the Fountain Hills residents of Harmony Woods Lane must travel as access in and out of the Fountain Hills owned portion of Harmony Woods Lane. VII. CONTRACT SERVICES 1. Lawn Maintenance 2016 represents the first year of a three year contract with D & A Dunlevy. The budget assumes a 3% increase in this contract upon renewal. Note: the contract cost is split between the general budget and the townhome cluster budget. The amount allocated to the general budget is $100,300 (59% of total contract cost, including the spring clean-up cost). 2. Trash Removal The budget reflects the actual cost charged by Potomac Disposal of $3,254 per month. 3. Pet Station Maintenance This service has been discontinued in 2016 / Fountain Maintenance The cost for Community Pool Service to maintain the three fountains. 5. Snow Removal Funding allocated for the clearing and sanding of walkways that, per Montgomery County law, are the responsibility of the Association to clear (35% of all expenses incurred in the FY). 5