Strata Budgets: Mapping Out Your Strategic Plan

Posted on Wednesday October 04, 2017 |

In the previous article (Things to Consider When Creating Your Strata's Budget) we introduced our high-level process which helps set the framework for strata councils to create an annual budget. In this article we get into the details of creating a strategic plan for your strata corporation.
 
The purpose.
It is important that everyone has the same long-term vision for the community. A strategic plan pushes the strata to establish a clear set of goals and objectives for the community and assists the strata council in determining how to spend their time and when and where to allocate money. But the benefits don’t stop there, strategic plans also:
  • Force the strata to look beyond the next 12 months
  • Drive more consistent action from the council
  • Identify ways to allocate resources – such as volunteers or committees
  • Forge a strong partnership and understanding between the strata council and management team
Keep in mind strategic plans are meant to be modified from time-to-time based on the community’s needs and local economy.
 
In our experience, the single-most common goal is for a strata is to maintain, or better yet, increase property values and enhance the quality of life in the community. Once the goals are established, the strategic plan becomes the platform for mapping out the next 1, 3 and 5 years. To begin, ask yourself the following two questions:
 
1.) What are the communities’ mandatory needs? In other words, define the necessary maintenance requirements to maintain or enhance the value of the property. An example would be regular preventative maintenance on a major infrastructure element such as an HVAC system in a condominium building or a private road in a townhome community. Your repairs and maintenance budget should provide sufficient funds for routine and preventative maintenance to prevent deterioration and allow the infrastructure to meet or exceed the element’s expected lifespan and push out the need to dip into reserve funds
 
2.) What are the communities’ discretionary needs? These items are required to maintain the current lifestyle and level of service for the members and are added benefits above and beyond the mandatory needs. An example would be replacing basic landscaping with an unusually extensive assortment of lush flowers at the main entrance; it’s more of desire than a necessity. Even though many people believe as much as 20 percent of property values are determined by cosmetic items that one sees in the first five minutes of visiting a property (ex: curb appeal, entrance , amenities, hallways, elevators, etc.), maintaining an aging infrastructure should take priority over new landscapes.
 
Create a master projects list based on the above for a detailed discussion to estimate the financial impact of each item and determine the order of importance based on priority drivers and a point system as shown below:

Order of Importance Priority Driver Weighting
1 SAFETY 20
2 COST 18
3 CURB APPEAL (AGING LANDSCAPE OR DESIGN ELEMENTS 16
4 REQUIRED ANNUAL MAINTENANCE 14
5 REQUIRED SCHEDULED PROJECT 12
6 REQUIRED UNSCHEDULED MAINTENANCE 10
7 REQUIRED UNSCHEDULED PROJECT 8
8 UNREQUIRED UNSCHEDULED MAINTENANCE 6
9 UNREQUIRED UNSCHEDULED PROJECT 4

After prioritizing the strata’s projects, evaluate current services and define which are required vs. those that can be eliminated. Account for your available resources when defining services that must be outsourced vs. those that can be effectively absorbed by your management company, sited-staff (if available) or resident volunteers.
 
The final stage is implementation. Incorporate the plan with your reserve study and also into your operating budget for the next 1, 3 and 5 years.
 
Remember, a strategic plan will assist the strata in fulfilling its fiduciary duties to the community. By going through the strategic planning process you identify the community’s goals that can help keep the big picture in sight while examining the details. Failing to properly plan your budget could put you at risk for reduced services, decreased property values, special assessments and having an underfunded replacement reserve plan. 
 


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