Stop! Before Raising Assessment Fees, Check Out these Cost Containment Strategies
Your strata council is working on next year’s budget. You know how important the budget is, what it means to the future of your strata. You know that your fiduciary responsibility is the most important commitment you make to your fellow homeowners. And you’ve planned, and figured, and followed all the budgeting steps, but you’re still staring at the one thing NO strata council wants to do: an increase in strata fees. Before finalizing that increase, take a long, hard look at cost containment strategies that can save your strata money and help optimize your operating budget.
What do we mean by cost containment? Cost containment is maintaining or reducing expense levels to make the most of your strata’s budget so you can get the most for your money and hopefully reduce the need for strata increases. You may be able to save money in budget lines you never considered. What are some of those areas?
How much energy does your strata use in common areas? Are you using traditional lightbulbs? Are the lights kept on when no one is using a space? Is your pool or hot tub a few degrees too warm? Are you using the most efficient pool heater for your location and type of property? Is the air conditioning a few degrees too cool? Do your parking garage fans stay on when not needed? Are there areas of your community with excessive outdoor or landscape lighting? All of these are potential places to cut costs.
Some, like changing from traditional lighting to LED lighting, require an upfront investment but pay off that investment very quickly, resulting in long-term savings on energy, maintenance and staffing. Others, like putting light switches on motion detectors so that the lights can’t be left on with no one in the room or changing the temperature of the swimming pool, don’t require much investment to start to see savings.
Insurance and Investments
Where and how is your reserve fund invested? IS your reserve fund invested? “Through our extensive banking relationships, we are able to offer our stratas best in class rates of return on bank accounts and GIC purchases with significantly reduced fees” says Jordan Muchnick, Vice President at FirstService Financial, the financial services affiliate of FirstService Residential. “We understand how important it is for stratas to have investments that take into account their short and long term capital spending needs, while assuring principal and fraud protection on all accounts and generating the highest return possible. Proper allocation of funds can generate thousands of dollars of additional interest return each year.”
When did you last have your insurance audited? Are you covered correctly? Having the right insurance doesn’t just mean getting the lowest premium. Low premiums often come with high deductibles. It may be in your best interest to pay a little more each month and be better covered in the event of a disaster, or maybe not. Don’t set your policies to auto-renew – every year, work with your broker or agent to assess your coverage and make sure that it is up to date and adequate.
Pat Schettino, Director of National Property Programs, asserts the depth of resources of FirstService Financial can help clients get the most for their insurance dollars. “Many people think that saving on insurance means getting the lowest premium, but a lot more goes into it than that,” he says. “It’s important to take the time every year to make sure you have the right coverage and limits. If something happens, an inadequately structured policy will cost you more than you bargained for.”
Value Engineering and Benchmarking
Do you review your vendor contracts on a regular basis or just let them renew automatically? Does your management company? Reviewing your contracts may reveal places you can save money. Or it may show opportunities for your strata to get more for the same dollars, perhaps saving elsewhere.
Benchmarking, or comparing what communities of similar size and type spend on a number of services, is a powerful tool that tells communities where they stand relative to their peers. It is the second important piece of value engineering, and can only be accomplished by a professional management company of the size to have access to numerous communities to track that data.
So what does the combination of value engineering and benchmarking look like? Imagine your Strata Manager sitting down and looking at your landscaping contract in the context of other BC communities. She realizes that, compared to other properties of your size and type, you are paying 15% more for your landscaping. She then looks more closely at your landscaping contract. Are you paying for higher-end services? For unnecessary services? Or just being overcharged? That information gives your strata the leverage to go to that contractor and negotiate better pricing or to find a new contractor who will work within your budgetary requirements.
“It’s amazing how a strata can get used to paying for something. Sometimes, all it takes is a phone call to a vendor to see what pricing models they offer to get a better deal,” explains Peter Chan, senior regional director at FirstService Residential. “Contracts need to be evaluated annually so you don’t pay more than you need to.”
All of these things can help your strata cut costs and avoid, or at least reduce, the amount of assessment increase you need to implement to meet your stratas budget needs. “It can be better to raise fees, if they need to, by 1% per year,” says Chan. “It’s a small enough amount to be absorbed and far easier on owners than waiting several years and passing a larger increase all at once. Little by little is better.”
We know you don’t want to increase assessment fees for your homeowners. Taking a look at where you can contain costs is a good step toward not having to.
For more information on how a professional property management company can help your strata save money on insurance, financial services, energy and more, contact us today!