Kiawah Island Digest December 2019 - Page 2

FINANCES 2020 Budget Meets Future Challenges The process of stewarding millions of dollars annually to maintain Kiawah Island is lengthy and thoughtful. Although it’s an ongoing process, budget season officially launches with the creation of the first draft in early September and culminates with final approval by the board in early November. The 2020 budget was finalized at the Nov. 4 board meeting. (Note: amounts have been rounded. See the approved 2020 Budget at kica.us/finances for exact dollar amounts.) project when it’s beneficial. This allows more timely repair of systems and savings on mobilization costs. One specific project planned for 2020 is the dredging of a tidal channel that empty into the river to optimize drainage. The area of greatest need is the Trumpet Creeper inlet, which comes up to the roadway near the Vanderhorst mansion. The dredging, planned for early 2020, is intended to increase water flow off the island and should reduce flooding in that area. KICA’s budget is two discrete budgets: the operating and the reserve. The operating budget covers expenditures that are routine and predictable. It is funded primarily by the annual assessment paid for by all property owners, commercial access fees, investment income, the amenity assessment and user fees, and other miscellaneous income. The association is committed to a balanced operating budget. In 2020, both revenue and expenses for the operating budget are just over $12.6 million. Each year, landscape capital improvement projects refresh key areas of the island. $280,000 is budgeted for this work in 2020. In 2019, KICA’s Lakes department began a pond mitigation project focused increasing drainage and pond health. After a positive response, $100,000 was set aside for mitigation work on additional ponds. Another focus will be getting the island camera-ready ahead of the 2021 PGA. Plantings will go in around the island, particularly in high-traffic areas, with time to mature before the event. “We always want the island to look good but this is as good an opportunity as any to showcase Kiawah’s beauty,” Jimmy remarked. The reserve budget covers the cost of major repair to or replacement of existing island infrastructure, based on reserve study projections. This study forecasts the lifespan of and maintenance costs for all infrastructure in the next 40 years, and considers predicted revenues. The reserve budget is primarily funded by Contributions to Reserves (CTRs), which in 2020 are projected at $1.3 million. The remaining amount is funded through reserve assessments, commercial access fees and investment income. Each year, reserve budget costs vary due to the repair and replacement schedule for all assets, so this budget is designed to fluctuate between deficit and surplus. KICA’s 2020 reserve expenses are $4 million, leaving a deficit of about half a million dollars. This is consistent with the nature of a reserve fund. 2020 Reserve Budget One of the largest annual expenditures is the improvement and maintenance of island drainage. In 2020, the drainage allocation is $1.7 million. The switch to budgeting an annual allocation rather than budgeting for specific projects was made several years ago; the change enables staff to modify the scope of a 2 | KIAWAH ISLAND DIGEST Other noteworthy expenses in the reserve budget are: • $250,000 for resurfacing, retiling and filter replacement for the family pool at The Sandcastle. • $308,000 to redeck and reinforce the Eagle Point 2 bridge. This will be the fourth of the seven timber vehicular bridges to undergo this type of repair. • $250,000 to replace the walkbridge to the Marsh Island Tower, which has outlived its useful life. 2020 Operating Budget The operating budget covers expenditures that are routine and predictable. In 2020, payroll, employee benefits and technology investments are areas of focus. Close to 60% of KICA’s operating budget is payroll and employee benefits, which is in line with metrics from the Club Managers Association of America for clubs of similar size and service level. As in previous years, staffing has been a consistent challenge, with record low unemployment and increasing cost of living in the area.