KICA Annual Reports 2013 - Page 17

17 Year in Review - KICA Finances On Jan. 1, 2012, KICA found itself in a big hole with respect to the annual budget. A multi-year decline in Contributions to Reserves (a 0.5% transfer fee, hereafter referred to as CTRs) coupled with rising major repair expenses resulted in a budgeted deficit of $882,600. While KICA’s balance sheet included adequate reserves to absorb this deficit, it served as the continuation of a disturbing trend over the last few years where expenses have outpaced revenue. In fact, KICA finished in the red five of the previous six years. What ultimately occurred in 2012 was nothing short of remarkable. Early in the year a very large road resurfacing project finished $125,000 ahead of budget. This was the result of the PGA buying our milled asphalt to construct bus parking for the PGA Championship. Our good fortune continued throughout the year as emergency repairs tracked well below historical averages ($148,000 positive variance). On the personnel front, a budgeted increase in employee benefits did not materialize, resulting in a positive variance of $82,000. Combined, these savings totaled $355,000. We had good news on the revenue side as well. Commercial access fees exceeded budget by $79,000, and CTRs significantly outperformed our projections by $405,000. One could argue that commercial user fees and CTRs are a decent economic indicator in our micro-economy here on the island, and we certainly hope they point to continued economic recovery. However, even with the positive variance on CTRs, 2012 still represents the fourth lowest total for CTRs over the past decade, and were $365,000 below the 10-year average. Ultimately, 2012 became a year where nearly everything went in KICA’s favor. Most years we’d welcome positive variances on either the income or expense side of the ledger, yet in 2012 we were fortunate to have both and still just barely broke even. The result was a $375,000 year end surplus, which represents a $1.26 million swing from a budgeted defecit of $882,600. While we have plenty of reason to celebrate the success in 2012, we can’t count on good fortune as an ongoing budget strategy. Our 2012 results don’t represent the norm since 2006, the year we began a trend of deficit spending. In fact, KICA’s current financial models indicate that we face more than $10 million in deficits over the next 10 years. While KICA’s existing cash reserves provide financial security today, prudent planning dictates the need to get ahead of this looming issue. Financial stewardship is a key component of the Kiawah brand, which is why the board recently cast a unanimous vote to issue a supplemental annual assessment (SAA) of $150 per improved property in 2013, $75 per unimproved lot. Current models suggest an SAA of approximately $300 in 2014 and beyond, though projections will be updated annually to confirm the necessary amount. The revenue will ensure that KICA continues to have the resources to maintain the community in a manner that our membership expects, and to build on Kiawah’s outstanding reputation for sound financial planning. For more information on the SAA, visit (News). ** The figures represented above are preliminary estimates as of time of publication.