RA Treasurer Dannielle LaRosa presented some of the financial realities to board members at their regular meeting Thursday. The board spends September and October looking at next year’s budget needs before setting next year’s assessment in November.
LaRosa reminded board members that RA members paid $657 in 2016, however, that amount was offset by a $1 million surplus moved over from operating fund reserves. RA members have been getting a service level as if they paid $705 in 2016, she said.
LaRosa warned last fall that the $1 million would not be available in 2017, so the board needed to be prepared to possibly set a large jump in the 2017 assessment amount.
“Our members are used to paying $657,” she said. “I personally wouldn’t feel right having a $712 starting point [for 2017 assessments].”
LaRosa also said assessments rose at a $25-a-year rate from 2008 to 2014, which added to both the cash surplus as well as a marked increase in the Reserve, Repair and Replacement Fund.
From 2011 to 2013, the RRRF was about $4 million, she showed the directors in a graph. That was an amount recommended by a reserve study that looked at RA’s needs for an aging infrastructure.
There is now $6 million in there — heading for $7 million in 2017. At the same time, RA has been spending a little more than $2 million annually on those RRRF projects.
“In the big picture, we have a line going straight up where we should be spending, said LaRosa. “The organization needs to put someone in charge of capital who can manage and execute. These projects are not getting done.”
RA CEO Cate Fulkerson agrees.
“It is unacceptable to me that there are carry forwards year after year,” she said. “It is nice to see [reserves] growing, but we are not getting stuff done.”
Assessments have also grown since 2014 (when they were $634) because of operating costs, LaRosa said. RA is now spending $2.6 million more annually than it did five years ago, she said.
Among the big ticket items: The move to RA’s new headquarters in 2010 is now costing the association $500,000 a year more in rent; and a rise of $1.5 million in salaries (including 3-percent merit raises, a rise in the cost of benefits and the addition of 12 new staff members).
Fulkerson explained some of the expenses. She said staying at the old space on Isaac Newton Square was not possible because the building owner was not going to upgrade to high-speed fiber optics and the organization had outgrown the space.
She also said implementation of the Affordable Care Act two years ago cost RA money, as did IT upgrades and necessary hires, such as in covenants administration.
“We have more 21,000 homes that need to be inspected,” she said. “We need staff to do that.”
At-Large Director Ray Wedell said RA needs to take a step back and assess the situation. With $7 million in reserves, everyone with a pet project can and will want money, he said.
He also said RA needs to take a hard look at its spending at what it is asking for from its members.
“Social Security is not giving a 3-percent raise,” he said. “Private companies are cutting back. This is common sense. I cannot sell a $705 assessment to members and I am not going to try. We cannot keep doing this.
“We have to figure out a way to make this organization the proper size,” he said. “If we need three new people, fine. But what about attrition? Do we really need eight people in a department when six would be fine?”
The board will continue budget talks and have a draft budget the first week in October.
In other RA news, the board voted to hire Mediaworld Ventures to conduct an independent review of the process used by RA to purchase and renovate The Lake House (formerly the Tetra property) last year.
Mediworld will look at how renovating the property resulted in a $430,000 cost overrun.
Mediaworld, headed by Reston Citizens Association President Sridhar Ganesan, will charge RA $1 for the review, which is expected to be finished in October.
See the entire financial presentation in the document below.