Budgeting: Your Game Plan Needs to Change

Upended. Typically, boards look to the past as a guide, but COVID changed all that. Things were tough in 2021, but this year has been even tougher. I’m sorry to say that the majority of boards probably underestimated their expenses for 2022 and have gotten hit pretty hard. We have buildings that are really struggling this year, especially those that were in the habit of doing annual maintenance increases of 2% or 3%. 

Digging out from under. We have one co-op that has done minimal maintenance increases, and the board’s current game plan is unfortunately one that people don’t want to hear about — a combination of a maintenance increase and an assessment. We’ve been keeping a close eye on the building’s expenses for the second half of the year, and it looks like that will probably have to happen. At the same time, the co-op is planning to refinance its mortgage to generate more income. Some of it may be for operating costs, but we are hoping we’ll be able to keep most of it, if not all, for capital projects. We want to minimize the financial impact on residents as much as possible.

What lies ahead. It’s very unusual to see costs rolled back, and I doubt that will happen now. Going forward, it’s always better to overestimate when it comes to budget planning. Annual maintenance increases should become the norm, even if it seems your building doesn’t need them, just to keep up with inflation. People need to accept that these increased expenses are here to stay. You’ve got to look at the numbers for all of your line expenses and factor in those increases in order to balance your budget.