In April, the Fiscal Year 2025-26 budget will be submitted to the Club Board for approval. An increase in Club Dues is expected due to rising costs, regulatory requirements, and necessary financial adjustments in both the Operating and Capital accounts. Leading up to the final budget presentation, we will hold two open member budget meetings to discuss key factors, gather input, and walk through the details. It is important that we communicate to Villages Club members the considerations that have shaped the recommendation and Board review. Along with inflation and regulatory impacts, we have also addressed past accounting errors, process improvements and best practices identified through the most recent annual audit.
Our responsibility is to operate, maintain and improve Club facilities in the most cost-effective manner possible. We know that maintaining the value of members’ homes depends on the quality of Club facilities and services. As we plan for next year and the future, the Club Board commits to spending no more than is necessary and not less than is needed.
After a detailed review of the conditions of our buildings and finances, we now know that we must increase next year’s Club Dues for both Operation and Capital accounts to address increased operating costs and long-term capital needs. The recently completed Strategic Plan for 2025-2028, and last year’s audit, highlighted weakness in our current financial practices and we recommend addressing them this year.
Issues addressed in next year’s budget include:
The Cost of Operations. Like every business, our cost of operations has increased. Contributors include inflation and major increases for insurance, water, electricity, and waste disposal.
Regulation and Code Compliance. Requirements from city, county, and state government including turf reduction, wildfire safety, and modifications to meet building and health codes, i.e., Wildland Urban Interface (WUI).
Staff Compensation and Benefits. We expect a salary increase in wages that addresses the cost-of-living and persistent labor market pressures, especially in high-cost regions like the Bay Area. Our wages increasingly fall short of what is required to remain competitive in recruitment and retention. We anticipate an increase in health benefit costs this coming year driven by rising medical costs and structural pressures on health plans.
Repair and Maintenance. We will begin to correct the allocation of routine repair and maintenance of Club facilities to the operating budget, not the Capital Replacement account, as has been done in previous years. This correction may be a one-time correction, or with a better understanding of the impact to the budget, it may need to be implemented over multiple years.
Inter-Company Transfers. With the implementation of our ERP system(s) and true separation of accounts, we now have real-time analytics and dashboards providing a clearer view of operational data. This enhanced visibility allows for better separation of financial accounts, ensuring allocations are more accurate and transparent. By separating previously co-mingled Club, Association, and Homeowners’ Corp. monies, we have improved our sightline into The Villages’ day-to-day operations, enabling more precise tracking of expenses and cost-sharing between the Club, the Association, and the Homeowners’ Corp. This data-driven approach strengthens financial accountability and supports more informed decision-making.
For example, Public Safety, Communications, and The Villager were not included in inter-company transfers, leaving the Club to cover 100% of these costs. With this data, we can now adjust and fairly distribute expenses, improving financial accountability and transparency.
Underfunding Capital Needs. The current annual Capital Replacement Dues revenue of $2.7 million does not cover the $3.9 million required annually to maintain existing facilities. There is a need to increase the Capital Replacement Dues to at least match the depreciation rate. At the current rate, the Capital Replacement Fund will be exhausted in approximately four years. Our buildings, roads, and underground utilities require significant ongoing repair and enhancement to maintain the quality of our environment. In effect, our capital “burn rate” to maintain these services exceeds the available revenue.
Capital Improvement Fund. The Club needs to sustain a Capital Improvement Fund by collecting Dues dedicated to improvements and/or new amenities requested by the Club Members. Currently, we collect nothing for this purpose.
Additionally, an increase in Club Dues is warranted due to constraints imposed by Club policies and bylaws that limit our ability to invest Club Capital Funds to keep pace with inflation. For years, interest earnings from investing in these funds have fallen behind inflation rates, eroding the real value of our Capital Replacement Fund. Also, the decline in purchasing power is estimated to have reduced the fund’s value by over $1 million. Additional revenue and flexibility are required, and the Board intends to revise bylaws and policies in FY2025-26. An additional source of revenue to raise Capital Funds could assist in lowering our monthly dues.
As Board President, I can attest that the budgeting process of this year is the most thorough and professional we have experienced in the last four years.
