MCA Spending has outpaced Revenue Over the past five years!

NOTE: This post was created by Joe Moore during his 2023 MCA Board member campaign.

Most homeowners don’t pay attention to the assessments (taxes) that are charged or how those assessments are spent. We can normally trust the records because they are reviewed by an independent accounting firm and we follow rules called Generally Accepted Accounting Practices (GAAP).

We have seen our assessments go up year after year since 2017 as shown in the attached chart. They also went up 10% in 2022 and are increasing another 10% in January, 2023.

The following chart shows Revenue and Expenses (frequently called the sales and income statement in for-profit businesses). Following is a normalized statement of Revenue and Expenses so it is possible to compare information from year to year.

When you look at a Revenue and Expense statement there are a few items we should focus on to help understand how the organization is performing.

Common questions that should be asked.

Question: How have assessments changed over the past 5 years? In year ending 2018, our total MCA assessment was $1,795,000. It has increased 118.4% in only 5 years. In other words, for every dollar we paid in 2018, we now pay two dollars and 18 cents..

Question: Have operating expenses caused this dramatic increase? A good rule of thumb is “when revenue increases 100%, operating expenses can be expected to go up 10%. Our expenses without interest and depreciation are up 7.9% so it appears most of the increase in operating expenses is caused by increases in interest and depreciation.

Question: What are the non-operating expenditures? Beginning with the purchase of nearly all TMCC assets in 2018, we have engaged in a program called the Renaissance Plan. This plan included engaging in the following projects:

+ Upgrade the 17th street entrance

+ Revitalize the Meadows golf course

+ Remodel the Regency room at TMCC

+ Construct a new Community/fitness center

+ Revitalize TMCC pool and construct new outdoor dining area

+ Pay TMCC $600,000 per year for Renaissance cards (issued to all interested homeowners)

As a result, these expenditures have caused our assessments to increase and caused our debt to jump from zero in year fiscal year ending 2018 to a debt of $5,900,000 by fiscal year ending 2022.

Question: Will our assessment go up for year ending 2024? In all probability, our assessment will go up again. How much? We don’t know at this time. With the debt that we are carrying we should develop a 5 year plan similar to the attached historical plan and discussed in another blog. Such a plan should be developed, published, discussed, and voted on by the homeowners we can feel secure about our financial future. This plan should be able to lower our growing debt while reducing our assessments.

In Summary, every homeowner should take the time to look at budgets for the following:

+ Is our interest expense increasing or decreasing from the previous year?

+ Are we paying our debt down or are we simply making interest payments? If we are not making principle payments, what is our principle payment schedule over the next 10 years. That will have a big impact on future assessments.

+ What capital projects are being planned over the next 5 years?

+ Do we have a 5 year plan that shows forecasted revenue, expenses, and capital projects?