SUN CITY – The Sun City Community Association is completing a lengthy period of transition. Pulte Homes has completed its 15-year build-out of the approximately 5,400 dwelling units in Sun City. A resident-controlled program of leadership has been in place for the past few years. In 2009, Wentworth Property Management Corp. was brought in by the board of directors to take over the management of Sun City activities and facilities.
Conversations and analyses over Sun City’s 2013 budget reveal that the association’s priorities for 2013, in a “big picture” perspective, are: cost-cutting on employee compensation and health insurance benefits, more spending on marketing and advertising in the face of increased competition from other publications and the termination of Pulte Homes’ sales efforts, completion of a renovation of the Prairie Lodge parking lot, more spending because of the tight insurance markets caused by the recession, and continued strong maintenance of reserve fund levels.
This year’s budget led to a $3 increase in the monthly assessment for residents – from $132 to $135. A total of $109 of this amount provides funds for the 2013 operating budget, and $26 is earmarked for reserves. The association actually has more reserve funds right now than its proposed 2013 expenses. The unaudited amount of reserves as of Dec. 31, 2012 was $9.3 million compared to the 2013 operating expense of about $8.5 million.
“The operating budget assessment for residents has gone up about $10 in the last 10 years, and the total assessment amount, including reserves, has increased [by] $20 in the same period,” Bill Pennock, executive director of Wentworth Management, said. “We believe those are positive trends in this period of constantly rising costs.”
The preparation of the 2013 budget sparked feedback from residents, some of it coming in the form of letters to the editor of the Sun Day. But significantly, some of it also came in the form of three “no” votes on the final budget proposal by three members of the seven-member association board. These were cast by Bonnie Bayser, the newly elected board president, and members Bob Beaupre and former president Jerry Kirschner.
Voting “yes” were Linda Davis, Ralph Bergstrom, Jim Van Fleet, and Harry Leopold. Bayser said, “There was not enough cost-cutting, including the area of employee compensation.”
William Ziletti, former board president, has been a member of the Finance Advisory Committee for several years. This seven-member group’s primary job is to review budget proposals annually and provide resident-based input to the board and Wentworth staff on budget priorities.
“There is considerable dialog among the staff, Wentworth administrators, department heads, and the committee on all line items, and we submit a long list of questions and comments back to the staff every fall,” he said. “Committee members are all experienced financial management people who spent years in corporate America doing this same thing. We provide a lot of valuable input into the process, and we make sure the final budget each year reflects a lot of member beliefs and priorities. Our philosophy in this process is to maintain the lifestyle and activities that we came here for when we bought homes.”
A few letters to the Sun Day questioned the incentive pay program for Wentworth employees.
“The best way to look at the incentive plan is like deferred compensation. A staff member’s compensation plan is established based on market comparisons, and then the employee is guaranteed to receive approximately 95 percent of that pay,” Pennock explained. “The additional 5 percent is the incentive, and they are evaluated on three criteria: the financial performance of the association, results of the resident survey, and the individual’s performance evaluated by his or her immediate supervisor. The amount of the incentive, paid out in a separate check in December, is based on a matrix of percentages.”
Pennock added that all staff members, full- and part-time, are eligible to receive an incentive.
“It is an effective management tool and is a widely used standard in the large-scale community management industry,” he said.
Pennock also said the budgets for employee incentives and the amount paid by the association for employee health insurance benefits are trending downward.
“This process started in 2008 and has continued since,” he said. “Even with merit increases, the average staff member is still making less now than in 2008.”
Here are a few other highlights to the 2013 budget:
Payroll costs are $3.358 million, up 0.9 percent from 2012. This represents about 40 percent of the operating budget, with general operating expenses totaling almost $4.6 million, or 60 percent.
Lifestyles magazine advertising revenue fell $51,500 last year, from $373,950 to $322,900. Advertising and marketing expenses are set at $70,000 compared to $27,900 last year, partly because of the drop in ad revenue and partly in anticipation of Pulte’s termination of its selling activities.
Fire, casualty, and liability insurance rates are up about $42,000 this year due primarily to the soft economy’s impact on the insurance industry’s return on its investments.
The association will spend about $969,000 on trash removal this year and $109,000 for snow removal from common areas. This last line item, of course, depends primarily on the weather.
The top capital improvement project this year is the parking lot renovation, expected to cost up to $1.1 million, to be paid out of reserves.
