An Analysis by Andy Kramek, August 7, 2021
Finally, The Result is In (Pretty Much As Expected)!
I just finished reading the FRATF presentation to the Board and the reports of questions and answers (wonderful work on that part, Cheryl, thank you). A number of things jumped out at me.
Before we begin, the Mission Statement is worth repeating:
“FRATF was given a task by the POA Board to analyze the past for lessons learned, our current budget, and most importantly, future financial requirements to sustain and maintain Hot Springs Village.”
First, FRATF stated that they used historical data to model projected growth rates for revenue and expenses. Given the past history of money wasted on fanciful senior positions with exorbitant salaries, pipe-dream projects, and inept cost and contract management was that really the best basis?
Second I noticed the phrase “The Southern Region Consumer Price Index (CPI) is used by the Board Directors to calculate a yearly increase. This increase does not keep pace with expense growth.”
So, surely the key question is, why not? Just why have expenses in the past (and currently for that matter) been increasing so much more than revenue? I don’t see anything that suggests anyone considered why expenses have increased so much faster than the CPI.
Third, they stated that:
“Expense reductions, fee increases, and other revenue ideas do not solve the problem. Without an assessment change, you cannot get there from here.”
I guess I just missed the part of the presentation where it was explained why expense reduction isn’t the answer. Especially since in the “Expense Reduction” item in the presentation the only things listed are:
- Employ multi-year procurement strategy
- Buy used/leased vehicles
- Employ pooled equipment acquisition strategy
If implemented these would, according to FRATF, generate just $25k per year in savings. Admittedly that won’t do much to fix a $6.7M shortfall. However given that the $18.6M compensation cost is the largest single item in the 2021 budget, and is up by $1M from 2020, why is this not even mentioned, let alone addressed, anywhere? After all, it consumes over half of the total revenue.
Furthermore, the ‘Acceptable Fee ideas’, if implemented as proposed would only generate a further $1.4M per year. That raises a question in and of itself! How were these increased revenues from amenities calculated? If based solely on historical data they are probably over-estimating the amounts from Golf, Tennis, and other direct amenity usage fees. Was any account taken of the fact that experience shows conclusively that if you increase fees, even slightly, demand is reduced? This is especially true in the case (as in HSV) where the majority of potential customers are on fixed incomes. They have little, or no, ability to increase the amount of their disposable income so increasing fees for things that are optional inexorably leads to reductions in demand.
Finally, the bottom line is summed up nicely in this sentence:
“The task force believes option 3 has the best chance of passing in a Property Owner vote.”
In other words, in their opinion, it is not necessarily the “best” option, nor is it necessarily the one most likely to resolve the issues, it is simply the one that they believe they can get approved in a property owner vote!
So, as expected, the recommendation is for an immediate assessment increase, over two and a half times greater than the current CPI, each year, for the next three years! Owners of improved property will see an increase of $10.00 per month (14.44% in 2022) and for unimproved properties, the increase is $2.50 per month (6.25% in 2022)!
The cynic in me wonders if getting it through a property owner vote is also the reason why the increase for unimproved (i.e. largely non-resident) lots is just one-quarter of that for improved (i.e. mainly resident) lots? I could find no explanation as to how this differential was arrived at. Given current rates, one might have expected unimproved lot rates to rise by something closer to half that of improved lots.
FRATF also had this warning for residents if their proposed increase is not approved:
“FRATF feels that without an assessment increase, our future is grim. We would be millions of dollars a year short of what is needed to keep the village what it is today.”
However, that is only the monthly assessment. In addition to this, a buy-in fee will be introduced for new property owners, Amenity Fees will be raised and Utility costs will be increased by $3.43 per month (i.e. $41.43 per year). Therefore, the real increase in fixed costs that is being proposed for improved property owners (i.e. mainly residents) would be $13.43 per month (or 19.39%). After all, calling an extra $3.43 a “utility” increase doesn’t alter the fact that it pushes up the amount that has to be paid out as a fixed cost every month!
Interestingly, in addition to the increases above the FRATF also proposed a number of other changes:
Declarations:
- Remove the requirement for a property owner vote for assessment increases over and above the Southern CPI.
- Give POA right to declare certain properties as “unserved” areas. Would remove the necessity to provide roads and utilities to areas where no-one lives.
AUTHOR NOTE: So the first means no more of this nonsense of needing property owner approval to hike assessments by anything the POA wants! Thankfully this one failed in 2020 and is unlikely to succeed in the future either but there’s no harm in trying is there?
The second gets the POA out from the need to provide services in anything but the current served areas. But aren’t we trying to “add rooftops”? Wouldn’t this just increase the cost of building in anything other than currently built-out areas enormously?
Luckily these cannot even be put to the Property Owners until 2027!
Policy:
- Establish policy for funding earmarks and priorities for budget preparation that would commit Board to apply funding to those things identified in the seven year O&M plan.
- Implement an annual review for Grade 12 and higher employees.
AUTHOR NOTE: Does this mean that neither of these exists today? Surely they do?
Management/Contracting:
- Consider implementing performance-based management of certain employees
- Consider hiring professional contract specialist to ensure that the village obtains the best value in any contract arrangement.
AUTHOR NOTE: Again, do these not exist today? Note that the recommendation is merely to “CONSIDER” these things, not to actually do them!
Revenue Generation
- Explore sales of water/wastewater to entities outside of the gates.
- Encourage remedying the lack of convention hosting facilities (lodging).
- Investigate an endowment fund/donation mechanism to support the POA.
AUTHOR NOTE: Hasn’t the first already been tried? The second is just a thinly disguised “build a lodge” proposal and the third is just another way of asking for yet more of your money.
Anyway, for what it is worth, here is my opinion.
Despite all the research, effort, and verbiage this comes down, exactly as expected, to a significant hike in the fixed cost (on the order of 20%) for those living in HSV. Of course, as a non-resident property owner, my costs will only go up by $2.50 a month so I don’t really care much. Except that I do!
I care because it does nothing to address the problems with cost management or the prioritization and control of spending that got us into this $6.7M hole to begin with. What they seem to have missed (and it was part of the Mission Statement) is how and why past policies and decisions created the “hole” in the first place. Was it just bad luck? Maybe it was poor management. Or was it attributable to specific individuals, actions, or projects? Without that knowledge, and the lessons learned from it, how do we know that we can avoid either enlarging the existing hole or creating a new one, in the future?
Upon reading this presentation it seems clear that FRATF was focused almost exclusively on justifying an assessment increase. Furthermore, in doing so they have clearly followed the time-honored pattern of all political proposals. They offer three options; two of these, when examined in detail, turn out to be totally unacceptable. So, in fact, they are really offering only one. In magic circles, this is called ‘forcing the card’!
Also, all of their ‘other proposed changes’ are mealy-mouthed at best (“consider implementing…”, “explore…”, “investigate…”, “encourage…”)! I, for one, had hoped that the FRATF would have been more direct in terms of making recommendations to address the way the POA manages both its revenue and expenses.
Am I surprised? No, not really. It was pretty clear from the outset that the real job of the FRATF was to justify a significant assessment increase to residents!
Am I disappointed that a golden opportunity to do a deep dive into the way the POA is managed itself has been missed? Emphatically yes.
* * *
Click here to read part one of Cheryl’s report.
Click here to read part two of Cheryl’s report.
Thank you for reading. If you like, please comment below. We love to hear your opinion, but comments must be made using your first and last real name, or they will not be accepted. If you would like to submit an article for publication, please contact us through this website. Be sure to bookmark this website. Click here to visit the Hot Springs Village People Facebook Group.
Al Lipson
08/07/2021 — 1:54 pm
Great analysis. Points to the FACT that HSV has been, and continues to be, mismanaged. I will not provide the POA with a blank check so that the “business as usual” attitude will continue to drain the pocketbooks of property owners.
Suzanne Kathro
08/07/2021 — 1:59 pm
I totally agree with your conclusion that cannot create a plan for how to create a secure future unless we understand what got us into our current situation. That was my #1 concern as I read the report. . For many years I have seen the attitude time and time again… yes, that problem happened, but we can’t dwell on it, just move forward.
Failed gate project – never examined, absolutely no accountability or examination, no conclusion, just push it aside and move forward.
Deferred maintenance- no time or money, let’s not look at it, just move forward.
Will it take time and a lot of effort to determine what has got us in this situation? Yes, but if we use the same attitude we will end up in the same hole. I totally disagree with the attitude that we should just raise fees and move on again.
Andy Kramek’s conclusions are spot on in mind and exactly what I was thinking as I read.
Suzanne Kathro
08/07/2021 — 2:20 pm
It’s also my opinion that they ignored the need for cost reduction measures because it’s a radioactive topic that will have great resistance at the POA. I think they will find equal or greater resistance to increased fees unless they do cost reduction first.
Andy Kramek
08/07/2021 — 2:54 pm
Suzanne, I think you have hit the nail squarely on the head. The last thing the powers that be want is a detailed look, with results available to property owners, into what the POA is actually doing and how much it all costs.
David L. Henderson
08/07/2021 — 4:37 pm
Spot on, Andy! The FRATF report produced no new ideas about how to buoy our sinking ship. Just more of the same old stop-gap remedies.
As I read your keen analysis, I wondered what a new leader would do to make our ship more seaworthy if we had someone as bright as Andy at the helm.
Care to share any thoughts?
Andy Kramek
08/07/2021 — 6:06 pm
Hmm, David, that is a tough one to answer because I am afraid that it is not really in my skill set. As an old friend of mine once told me, “Andy, you are just not the dreamer of dreams and seer of visions type” and he told me that I would never make a good CEO or GM. I have always been, by inclination and training, more of a “first lieutenant” type (of course, I actually was a First Lieutenant at one time – in the Royal Navy). I am definitely more of the Chief Operations Officer type. Once someone else comes up with the idea I am the guy you want to figure out how to make it happen and then drive the process to a successful conclusion. That is why, after leaving the Service, I went first into project management and later into database design and development. Analysis and insight are where I can be useful, a business turn around specialist I am not – and that is what we need now. In fact if the next GM is NOT someone with a solid track record in turning failing organizations around then I doubt that HSV can survive in a recognizable form.
Paul Bridges
08/07/2021 — 6:34 pm
I seldom engage in these community threads; but here we go …
I am always amazed that all of the criticism generally originates from those whose names have never appeared on the POA Board ballot. For 10+ years we have elected new Board Members to ‘fix our problems’. Yet we refuse to admit that the problem is ‘us’ — in not contributing what it takes to run a private community of our size and scope.
In 2008 I participated in a study of comparable communities — where it was confirmed that our assessment rates were dramatically lower than any comparable community in the country (generally by half or more). Even our sister community Tellico (with no private water/sewer, roads, police and fire, and very limited amenities) has a monthly assessment rate well over $100. Yet we continue to beat the ‘funds mismanagement’ drum. Does that mean we keep electing Villagers who can’t find the door; or is it just possible it takes more than we are paying to maintain 500+ miles of road, our own police and fire, 8 golf courses, 7 lakes, our own water and sewer treatment plants, and every amenity we take for granted?
I have closely watched everything the FRATF has generated for the last 8 months. And I also know the impact the FRATF’s final report had on the POA Board. So if anyone is suggesting this Taskforce has been ‘doing the bidding’ of the Board — against a pre-determined conclusion — they haven’t been attending the community forums, or reading their FRATF eblasts, or attending the Board presentations.
I read on Nextdoor a comment that Cooper instituted a failed financial model when he founded Cherokee Village, Bella Vista, and Hot Springs Village. This is our last opportunity to set things right. So I hope we start putting as much energy into passing whatever assessment increase proposal our elected Board puts in front of us — than we do in criticizing what this volunteer Taskforce has recommended.
Phil Lemler
08/08/2021 — 8:30 am
Mr. Bridges – I have to chime in and support Mr. Kramek’s analysis. He points out some glaring problems and introduces some important questions to the entire FRATF process.
Your comments suggesting his opinions are invalid because his name has never appeared on a “POA Board Ballot” are simply misplaced. There is no connection or relevance to the value of one’s opinions and their interest joining the board.
Andy Kramek
08/08/2021 — 9:05 am
Mr Bridges you obviously think that because someone has not run run for the Board they have no right to say anything – even if they are a non-resident property owner (as I am).
Let me ask you, when did your name appear on a ballot? Certainly not since I first acquired property in HSV more than 6 years ago! So by your logic, I should ignore you. Which is fine by me.
Kirk Denger
08/09/2021 — 1:47 pm
Mr. Bridges,
So 26,000 Property Owners should be denied their property rights to voice and vote their opinions? Only those who run for the BOD count? You have every right to make those statements. A very similar recommendation came out of the FARTF, suggesting a change to the Declarations eliminating Property Owners rights to vote for assessment increases, thereby leaving the decision up to a small handful of “volunteers”.
You mention that you have watched everything the FARTF has done in the last 8 months. The FARTF was announced to Property Owners only 6 months ago. Should you not fully disclose that you were 1 of the 5 original members of the FARTF and that it was you along with a small handful of volunteers including Hollansworth (who happens to have the exclusive to sell all CCI reserve properties in HSV) who started the assessment increase charade 8 months ago secretly at least 2 months before the FARTF was announced?
In your short ‘tenure’ you have known all along that the Board, spearheaded by the Developer affiliated Board member and 2 BODs appointed by the Developer affiliated board member, charge of the illegitimate task force was to pave the way for a fall 2021 assessment increase vote using all POA funds to do so. Adding a Psychologist in your small group to advise how to present delicate matters such as the assessment increase. Just the fact that the word “assessment” was banned from any of the vague communications speaks volumes on the Board’s promise of transparency.
This is not a criticism of the FART Force, just facts that Property Owners might care to know and it is coming from one whose name appeared on the ballot.
Rebecca Huber
08/09/2021 — 4:09 pm
I totally agree with you. Our current assessment rate is so low as to be laughable.
steve bylow
08/11/2021 — 7:28 pm
Paul
Thanks for sharing your perspective. Personally I appreciate and trust the work of the FRATF a heck of a lot more than any paid consultants.
Now we can debate what is our best option forward.
Personally we feel blessed to be in the Village and understand a significant increase in compensation costs are not a red flag but a simply realistic projection to retain and attract entry level folks.
Thanks
Steve
Mrs. Katherine Miller
08/07/2021 — 8:27 pm
All three of the graphs show income covering high priority expenses when improved lots are assessed $100 monthly. It would be simpler and more effective to just set it at that for 2022. After that, if applied annually, CPI increases will keep things above water because they will be applied to an amount that adequately covers high priority expenses to begin with. A graph of this would look very similar to graph #2 and include its advantages, but without its negative drop off in 2027 and beyond.
Larry Lewis
08/07/2021 — 9:07 pm
We need to start with Management. Until that problem is resolved, we will continue to be underwater. Throwing more money into the hole only encourages more bad spending. As soon as the assessments go up, POA will replace all the staff they just got rid of. I can not imagine rewarding management with more money to waste. In most businesses, senior staff would be fired for being so far off in expenses and revenue.
Vicki Walston
08/08/2021 — 12:03 am
Agreed! Before we can go forward, we need to resolve the issues that got us here, and how it was allowed to happen. No oversight? Perhaps the problem is how the governing body works! You have a CEO/GM, BOD, POA and a cast of managers and workers. When over half our revenue covers payroll, seems we are staff heavy. Yet we have residents saying we must pay more to employees. I’m baffled.
Dan Hitch
08/07/2021 — 10:15 pm
When Cooper sold as many lots as he could at Isabella, Granada, the lakes at the East end nobody noticed he was backing out of the East gate and our coffers were empty and he said goodbye , tore down his sales office, turned all his commercial land to a real estate office inside the gate and wished all of us good luck. The infrastructure from Ponce to west gate was in disrepair no money had been used here but all the money was invested in East end, I don’t blame CCI they needed to make the money, so adios amigos.
Larry Bauer
08/08/2021 — 12:37 pm
A friend who middle management a number of times voiced concern about the company and how the Gate system was to be implemented. After it became a total failure confirming his suspicions he was let go by the last GM. Couldn’t have him hanging around.
Suzanne Kathro
08/12/2021 — 10:47 am
It’s an eye opener if you read the gate fiasco lawsuit. I can’t believe there wasn’t an uproar over what went down. I’m sure your friend was fired when it was swept under the rug. He was affected and yet there was no accountability for anyone responsible for the failure.
Marc S Bayer
08/08/2021 — 12:48 pm
Paul Bridges, I completely agree with your observations and conclusions
Lorri Street
08/08/2021 — 1:46 pm
Bayer, Bridges, Sowers, Keck…all were tight cronies of the Nalley regime… so for me personally, their opinions are as void as Nally.
Monika Sylva
08/08/2021 — 2:38 pm
You are absolutely RIGHT! Old roots…..
Al Lipson
08/12/2021 — 7:34 pm
Exactly !
Gene Garner
08/08/2021 — 9:01 pm
Since 2016, when the POA started collecting the 2tier increase, the resident property owners have contributed over $13 million extra in assessments. Where did that money go?
It was supposed to go for deferred maintenance and future financial requirements, the same things the FRATF are asking for now. How many times can they use the same lame excuse to coerce us into paying more and receive nothing in return?
The first thing any good manager does when there’s a cash flow problem is to cut expenses. That’s what the FRATF should be doing.—Gene
Mrs. Katherine Miller
08/09/2021 — 2:08 am
WHERE OUR EXTRA ASSESSMENTS WENT –
2015 – 2021 = $28,500,000 wage increases due to minimum wage adjustments as follows:
2015 $1.25 = $1,875,000 wage increase
2016 $0.50 = $ 750,000 wage increase
+ 2015 $1.25 = $1,875,000
2016 higher than 2014 by $2,625,000
2017 $0.50 = $ 750,000 wage increase
+ 2016 $0.50 = $ 750,000
+ 2015 $1.25 = $1,875,000
2017 higher than 2014 by $3,375,000
2018 no increase, but labor costs higher by
+ 2017 $0.50 = $ 750,000
+ 2016 $0.50 = $ 750,000
+ 2015 $1.25 = $1,875,000
2018 higher than 2014 by $3,375,000
2019 $0.75 = $1,125,000 wage increase
+ 2017 $0.50 = $ 750,000
+ 2016 $0.50 = $ 750,000
+ 2015 $1.25 = $1,875,000
2019 higher than 2014 by $4,500,000
2020 $0.75 = $1,125,000 wage increase
+ 2019 $0.75 = $1,125,000
+ 2017 $0.50 = $ 750,000
+ 2016 $0.50 = $ 750,000
+ 2015 $1.25 = $1,875,000
2020 higher than 2014 by $5,625,000
2021 $1.00 = $1,500,000 wage increase
+ 2020 $0.75 = $1,125,000
+ 2019 $0.75 = $1,125,000
+ 2017 $0.50 = $ 750,000
+ 2016 $0.50 = $ 750,000
+ 2015 $1.25 = $1,875,000
2021 higher than 2014 by $7,125,000
2015 – 2021 = $28,500,000 wage increases due to minimum wage adjustments
Andy Kramek
08/09/2021 — 9:28 am
These numbers do not make sense! Are you counting the entire population of Arkansas?
The POA has around 500 employees in total and less than half are on minimum wage anyway.
Let’s assume that there are 300 minimum wage employees and they all work a 40-hour week. Of course, most do not work 40 hours, as they are part-time and work less than 32 hours – so as to avoid having to be given benefits.
Let us assume that they do however, so a $1.00 increase would equate to increasing cost by $624,000 (300 x 52 x 40 x 1.00) per year – NOT, as you state above $1,500,000!
For the years you show, the TOTAL increase in minimum wage has been $4.75 per hour.
So for our notional 300, 40 hour per week, minimum wage employees the total increase since 2015 would have been $2,964,000 (300 x 52 x 40 x 4.75) – which is nothing like $28.5Million!
As Gene Garner has pointed out property owners have paid more than $13Million in EXTRA fees since the inception of the two-tier assessment. So minimum wage increases could account for something in the region of $3Million. Where is the rest?
Mrs. Katherine Miller
08/09/2021 — 1:39 pm
CUMULATIVE EFFECTS OF PERCENTAGE LABOR COST INCREASES NECESSITATED BY MINIMUM WAGE INCREASES –
The FRATF pointed out that for each $1 increase in the minimum wage, our village labor costs rise by $1,500,000.
$1,500,000 x $1 = $1,500,000.
Bear in mind that a cumulative labor cost increase must include all labor cost increases for the years under consideration.
2015
$1.25 / $6.25 = 20% increase over 2014
$1,500,000 x $1.25 = increase of $1,875,000
2016
$0.50 / $7.50 = 6.66% increase over 2015
$1,500,000 x $0.50 = increase of $750,000
$1,500,000 x $1.75 for 2016 = $2,625,000
Cumulative increase of $1.75 / $6.25 = 28%
Cumulative increase since 2014 = $4,500,000
2017
$0.50 / $8.00 = 6.25% increase over 2016
$1,500,000 x $0.50 = increase of $750,000
$1,500,000 x $2.25 for 2017 = $3,375,000
Cumulative increase of $2.25 / $6.25 = 36%
Cumulative increase since 2014 = $7,875,000
2018
0% increase over 2017
$1,500,000 x $2.25 for 2018 = $3,375,000
Cumulative increase of $2.25 / $6.25 = 36%
Cumulative increase since 2014 = $11,250,000
2019
$0.75 / $8.50 = 8.82% increase over 2018
$1,500,000 x $0.75 = increase of $1,125,000
$1,500,000 x $3.00 for 2019 = $4,500,000
Cumulative increase of $3.00 / $6.25 = 48%
Cumulative increase since 2014 = $15,750,000
2020
$0.75 / $9.25 = 8.11% increase over 2019
$1,500,000 x $0.75 = increase of $1,125,000
$1,500,000 x $3.75 for 2020 = $5,625,000
Cumulative increase of $3.75 / $6.25 = 60%
Cumulative increase since 2014 = $21,375,000
2021
$1 / $10 = 10% increase over 2020
“$1 rise = $1,500,000 labor cost increase.”
NOTE: $1,500,000 is 10% more than $15,000,000
$1,500,000 x $4.75 for 2021 = $7,125,000
Cumulative increase of $4.75 / $6.25 = 76%
Cumulative increase since 2014 = $28,500,000
Mary Kennedy
08/09/2021 — 12:12 pm
Considering the exceptionally professional and detailed work done by FRATF, this post and some of the replies are shameless. The post was written by a lot owner who chose to move from HSV, but retains his right to criticize and denigrate those who work diligently to find solutions to improve our financial future. Comments by: 1) another non-resident who chimes in to support any criticism of how HSV is managed, 2) a resident who lost a lawsuit against the POA (property owners) which was costly to all concerned, 3) a resident who launched a divisive rebellion against the prior BOD and administration, successfully overthrew them and is trying to do the same against current leadership. This group’s “solution” is to look back and point fingers at those they believe “wasted” our money.
Before condoning the illogical demand for an accounting of every penny spent over past years, it would serve everyone better to review the months of hard work FRATF did for HSV. We live in a gated, low-crime, well maintained 26,000 acre community with more amenities than anywhere in the country. It’s worth much more than the reasonable assessment increase that may be brought to us for approval after BOD review. We need to support it and look to our future, not dwell on the past.
Tom Blakeman
08/09/2021 — 1:33 pm
Yeah, well, here’s another criticizing denigrator chiming in. Folks like you are what have caused the problems we have. Those folks you called out (and I include myself in that group) have worked and tried tirelessly to get plain old ordinary common sense management, accounting, logic and leadership, not to mention sound business principles, into this Village. We have offered countless solutions, asked pertinent and intelligent questions and been snubbed, ridiculed, ignored or censored at every turn. But, nobody in the good ole boy (and girl) clubs are listening. And absolutely YES. Millions of our assessment dollars have been pissed away and none of the ‘cadre’ (which includes you) seem to care, and worse, no one is now or has ever been held accountable.
As for FRATF. They did some great work. They did what was asked of them – develop a plan and provide ammunition so the board can push through an assessment increase. Of course we already knew we were 50 or so million dollars in the hole. What FRATF didn’t do was what actually needed to be done: Tell us where the money went and solve the management and governance problems that have brought us to where we are over the last 15-20 years.
If you don’t know where you have been or why you got where you are, how can you possibly know where you are going or ‘look to our future’?
Two Tier: Three Million Dollars per year. Where is it?
Mrs. Katherine Miller
08/09/2021 — 3:17 pm
CUMULATIVE EFFECTS OF PERCENTAGE LABOR COST INCREASES NECESSITATED BY MINIMUM WAGE INCREASES –
The FRATF pointed out that for each $1 increase in the minimum wage, our village labor costs rise by $1,500,000.
$1,500,000 x $1 = $1,500,000.
Bear in mind that a cumulative labor cost increase must include all labor cost increases for the years under consideration.
2015
$1.25 / $6.25 = 20% increase over 2014
$1,500,000 x $1.25 = increase of $1,875,000
*NOTE:
= almost 2/3 of our assessment hike.
2016
$0.50 / $7.50 = 6.66% increase over 2015
$1,500,000 x $0.50 = increase of $750,000
$1,500,000 x $1.75 for 2016 = $2,625,000
*NOTE:
This used most of our assessment hike.
Cumulative increase of $1.75 / $6.25 = 28%
Cumulative increase since 2014 = $4,500,000
2017
$0.50 / $8.00 = 6.25% increase over 2016
$1,500,000 x $0.50 = increase of $750,000
$1,500,000 x $2.25 for 2017 = $3,375,000
*NOTE:
This used up our prior assessment hike.
Cumulative increase of $2.25 / $6.25 = 36%
Cumulative increase since 2014 = $7,875,000
2018
0% increase over 2017
$1,500,000 x $2.25 for 2018 = $3,375,000
*NOTE:
This used up our prior assessment hike.
Cumulative increase of $2.25 / $6.25 = 36%
Cumulative increase since 2014 = $11,250,000
2019
$0.75 / $8.50 = 8.82% increase over 2018
$1,500,000 x $0.75 = increase of $1,125,000
$1,500,000 x $3.00 for 2019 = $4,500,000
*NOTE:
This is 150% of prior assessment hike.
Cumulative increase of $3.00 / $6.25 = 48%
Cumulative increase since 2014 = $15,750,000
2020
$0.75 / $9.25 = 8.11% increase over 2019
$1,500,000 x $0.75 = increase of $1,125,000
$1,500,000 x $3.75 for 2020 = $5,625,000
*NOTE:
Almost twice our prior assessment hike.
Cumulative increase of $3.75 / $6.25 = 60%
Cumulative increase since 2014 = $21,375,000
2021
$1 / $10 = 10% increase over 2020
“$1 rise = $1,500,000 labor cost increase.”
NOTE:
$1,500,000 is 10% more than $15,000,000
$1,500,000 x $4.75 for 2021 = $7,125,000
*NOTE:
Now over twice prior assessment hike.
Cumulative increase of $4.75 / $6.25 = 76%
Cumulative increase since 2014 = $28,500,000
Gene Garner
08/09/2021 — 6:30 pm
“Repeat a lie often enough and it becomes the truth”, is a law of propaganda often attributed to the Nazi Joseph Goebbels”.
Your entitled to your own opinion but not your own facts, no matter how many times you say it or how loud. Also you math needs a lot of work.—Gene
Mrs. Katherine Miller
08/09/2021 — 8:55 pm
Gene,
I am not a liar nor a Nazi, nor will I be quick to take offense. In my own defense, I was usually at the top of any math class I took, including college level. These numbers likely do make sense. I posted the first batch in response to your question about where $13 million in extra assessments went. Then, in response to Andy, I rechecked my math, adding the cumulative totals by year for clarity. Thirdly, in response to Tom’s question about where each year’s $3 million assessment increase went, I added NOTEs about how much of the assessment increase each year uses up. Please look at the third post of numbers/notes and tell me which part(s) to put differently for the sake of better communication.
Andy Kramek
08/10/2021 — 9:44 am
First, your starting assumption is the totally unproven, and unsupported, statement by FRATF that $1.00 increase in minimum wage costs $1.5M in increased labor costs. Their argument is that changes to minimum wage do not just affect the 38% of employees who are actually paid minimum wage, but because the minimum wage goes up other people’s wages must go up too (to maintain differentials!!!).
That is simply not the case. It is a matter of choice that people who do not get paid minimum wage have their wages raised when minimum wage is increased. I have never heard of a business “automatically” raising the wages of ALL its staff just because the required minimum wage was increased. In other words if they really do this, it is just their “policy” to do so and, so it is just yet another example of poor management practice.
Second, even accepting that the $1.5M number is true you still have the math wrong. The annual increments due to minimum wage, using the $1.5M per $1 factor:
2015 Raised by $1.25 Cost = $1,875,000 Cumulative Increase = $1,875,000
2016 Raised by $0.50 Cost = $750,000 Cumulative Increase = $2,625,000
2017 Raised by $0.50 Cost = $750,000 Cumulative Increase = $3,375,000
2018 Raised by $0.00 Cost = $0 Cumulative Increase = $3,375,000
2019 Raised by $0.75 Cost = $750,000 Cumulative Increase = $4,500,000
2020 Raised by $0.75 Cost = $750,000 Cumulative Increase = $5,625,000
2021 Raised by $1.00 Cost = $1,500,000 Cumulative Increase = $7,125,000
So the cumulative cost, from 2015 – 2021 would be $7,125,000!
But you are adding cumulative numbers! That is where you are going wrong because each increment is already included in the prior number. So you are counting the 2015 increment 6 times, the 2016 increment 5 times and so on. That is how you get from the actual cumulative total of $7.125M to your $28.5M.
Finally the fact that POA chooses to increase other people’s wages because the minimum wage increases is their decision. The mandated minimum wage does not define anything other than the minimum wage. So to say that the minimum wage rise is responsible for anything other than the impact on minimum wage employees is simply disingenuous and misleading.
As is often said you can prove anything with statistics, especially when they are completely unverified, unverifiable and the math is wrong.
Andy Kramek
08/09/2021 — 1:33 pm
Winston Churchill famously said that “Those who fail to learn from history are condemned to repeat it”. Hot Springs Village is a perfect example of the truth of this aphorism. The POA Management (in the broadest sense of the word) has demonstrated time and again that it has not learned from past mistakes.
As for the FRATF, it had this as its mission statement:
“FRATF was given a task by the POA Board to analyze the past for lessons learned, our current budget, and most importantly, future financial requirements to sustain and maintain Hot Springs Village.”
Yet the only occurrence of the word “lesson” in the entire report is in the Mission Statement. I, for one, would have more faith in the report if it had actually acknowledged that mistakes, and poor decisions, have been made in the past and suggested something concrete to prevent them from happening again. Alas all it does is repeat the same old song, – “Don’t criticize management, don’t demand answers to difficult questions and just open your wallets. We promise not to waste your money”.
Phil Lemler
08/09/2021 — 2:22 pm
Ms. Kennedy, I know this all is very confusing for you but Mr. Kramek’s piece is simply pointing out the issues surrounding a common sense approach to analyzing HSV’s needs. If you spend some time studying how businesses operate … it might make more sense to you.
Lorri Street
08/09/2021 — 1:45 pm
“a resident who launched a divisive rebellion against the prior BOD and administration, successfully overthrew them and is trying to do the same against current leadership.” Now, now Mrs. Kennedy–I’ll take some credit for organizing the launch of We the People (WTP) back in July 2018, but where you got the idea that I’m “trying to do the same against the current leadership”, is…well, clearly an unsubstantiated comment. But hey…thanks for the suggestion!
As far as your comment “We need to support it (FRATF’s report) and look to our future, not dwell on the past”, well that’s just ignorant thinking. The money the POA gained through the 2tier assessment increase was WASTEFULLY spent in an historically capricious manner starting with Twiggs and especially during the Nalley regime. I can think of nearly $5M the regime blew through just off the top of my head—overbudget DeSoto Club rehab $1M+, outdoor pool that initially was slated to cost $700K but ended up at $1.2M, $1M for a new state-of-the-art ladder fire truck, CMP costs over $1M++, and far too MANY inflated Director positions created with 6 figure salaries attached–just to name a few. Now that’s a lot of $$ that could have/should have gone to repairing infrastructure.
So…to be crystal clear, the real issue facing more divide in our Village is not just an assessment increase, but rather the continued distrust many property owners still have over how ‘our’ money has been managed over the past 7+years. The Nalley regime were like kid’s in a candy store running around wildly spending ‘our’ money! We have absolutely no guarantee that the same could/would/won’t happen again.
Monika Sylva
08/09/2021 — 4:15 pm
You nailed it again! Thank YOU.
Dan Fitzgerald
08/11/2021 — 4:15 pm
You are spot on! Only you are missing several hundred thousand dollar purchases that proved to be a colossal waste over the years. One was the 125k dollar lawn mower to mow the dams. It was going to give us a ROI in two years. Too bad it flipped over and burned beyond repair on its maiden voyage. The money we simply threw away on Hvac systems throughout the last ten years is a perfect example of poor or grossly mismanaged funds.
The problem that I see with the POA is that we continuously try to reinvent the wheel, over and over and over and over. Mistakes are going to be made. That we know. But the same mistakes over and over are becoming hard to swallow. With all of the mistakes made, how many were followed up with a year end bonus?
Yes, the minimum wage increase cost us a good amount each year that we were not expecting or prepared for. Those figures are raised for minimum wages not hourly wages. Big difference in calculating the end result. If it’s a raise that is not in our power, we should offset that expenditure with an increase to our POA dues. But not a blank check with absolutely no one being held accountable for the funds. Be it good or bad money making decisions, there should be accountability either way. And there is not.
Mary Kennedy
08/10/2021 — 7:55 am
The crew that would “right the ship” had their day in court. The board and corporate officers they aggressively recruited and promoted were seated April 15, 2020. While in search of a new GM and CFO, accounting records were thoroughly inspected with the expectation that their accusations of foul play could be proven. No mismanagement was found, and their primary target left HSV with a very nice bonus, compliments of the new crew. The same promoters and some of the old crew members are attempting to plant seeds of distrust and doubt again. There’s one big difference this time. Property owners witnessed the chaos and sinking of the new ship before it could sail, with all of the wanna-be captains abandoning their posts.
Where DID the money go? No mystery…..minimum wage increases certainly depleted our funds, but there are other well-documented, obvious factors that shouldn’t need to be rehashed and questioned by all of the self-proclaimed business gurus playing the blame game. I’ll mention only a couple – the effect of NRPI and the approximate 9,000 nonperforming lots constituted a loss of $5+M per year, accumulating from 2008 to the present. That, along with aging, neglected infrastructure Cooper left behind accounts for where our money has gone these past years.
Our current board, interim general manager, staff, and committees have worked well together to get HSV through more than one major crisis. FRATF, in partnership with F&P, took that “deep dive” everyone demanded. There’s no question that an assessment increase is needed. It’s time for property owners to do our part by supporting the board we elected and the place we (most of us) call home.
I’ll say no more – time for golf!
Phil Lemler
08/10/2021 — 10:15 am
Well, there you are boys and girls … Ms. Kennedy has spoken! All you complainers have already “had your day in court”. It is best that you stop opining and follow the rest of the sheep over the cliff.
Just imagine … if you had been following Ms. Kennedy’s recommendations all along, you would be well on your way to building the town center and the gates would be down.
Lloyd Sherman
08/10/2021 — 5:25 pm
I’m not going to argue with the uninformed but the books of the POA were NEVER thoroughly inspected. Staff insured that never happened.
Lesley Nalley
08/10/2021 — 9:13 pm
Mr. Sherman, please call me ASAP to discuss splitting the cost of a forensic audit. Surely others would join the effort, as well. Your ongoing accusations against POA staff deserve a thorough accounting and final resolution.
Lloyd Sherman
08/11/2021 — 8:12 am
Ms. Nalley,
I have no reason to call you, either ASAP or ever! Your assertion that I have requested a forensic audit is inaccurate. What I have said is that our entire organization needs an OPERATIONAL forensic audit, which relates to implementation, not accounting. You continue your narrative of when you were in charge that property owners (me included) had an issue with what you constantly referred to as STAFF. My issues always have been and continue to be with management staff. You always use selective posts in your strategy in your attempt to defer and detract from the problems the POA suffers.
Just to be clear, I don’t even blame the employees right below the top position. It is a leader’s responsibility to set the tone of an organization and to train management staff in best practices and to ensure that total and complete information has been provided to the board for their approval. That is what has been questionable for at least the last 10 years.
I don’t have your phone number. Never did, nor do I want it. As a property owner, you are entitled to your own opinions, but not your own facts.
Lesley Nalley
08/11/2021 — 10:52 am
Mr. Sherman, I’m well aware of what your accusations were previously as a Board member who had full “books” access and currently as a property owner who still has full access. One would expect you might be more careful with your words, especially where “staff” are concerned.
This entire post is about financial and operational matters and we are all smart enough to understand their interdependence in an assessment increase discussion. Your words here were “the books of the POA were never fully inspected. Staff insured that never happened”. You’ve again attempted to weave an unsubstantiated storyline, one that started as a battle cry over two years ago with several shiny postcards that carelessly suggested property owners should not trust POA staff or Board members, words that continue to be a distraction and sew seeds of doubt and division.
HSVs future is more important than these ghosts of the past though. Personally, I’ve never believed that large assessment increases were the ultimate answer but my opinions on that subject are irrelevant. My comments to you were merely an olive branch for achieving what you claim has yet to be accomplished.
Al Lipson
08/13/2021 — 4:14 pm
Wow….Nalley still owns property in the village. Now that would be an interesting trail to follow.
steve bylow
08/11/2021 — 7:41 pm
WOW is this sad – a past CEO and past board president communicating via a blog. Here’s a suggestion – go to linkedin and reach out to each other offline.
Your communicating via a blog just reinforces negative perceptions of your judgment.
Just a thought to consider.
Steve
Kevin Cook
08/12/2021 — 3:13 am
Now the HR Consultant who brought us King wants to moderate. Maybe all three of you could leave the tough decisions to us.
Gene Garner
08/10/2021 — 12:11 pm
Mrs. Katherine Miller, the lie I was posting about was the ” $1 raise in minimum wage = $1.5 million expense to HSV”. The FRATF should explain how they arrived at that figure.
I would never call you a liar or a Nazi but I do think you may want to take another look at Andy’s analysis and explanation.
If I offended you I’m sorry but I still believe the FRATF is manipulating numbers to convince us they need more money to waste on their pet projects- I’ve learned that from the past performance of the BOD and the results.—Gene
Mrs. Katherine Miller
08/10/2021 — 2:15 pm
Thank you, Gene, your explanation is very much appreciated! (Even better than my husband telling me that Nazis were good at math!)
Thank you, Andy, for studying my numbers and giving me the opportunity to better communicate them. I cannot argue your first and third points. My figures are based on that one quote and so they are theoretical figures. But it was a simple place to start. I understand your second point because I almost made the same mistake. What you labeled as cumulative increase each year is surprisingly only the total increase for that year alone. Each successive year has to pay not only its own hike, if any, but also the increases from prior years. For instance, in 2018 there was no hike, but as with other years, prior increases also had to be paid again that year.
Let me show things differently…
2015 $1.25 hike means
$1.25 more to pay than $6.25 = $7.50
$1.25 x $1,500,000 =
$1,875,000 extra paid in 2015 alone.
2016 $0.50 hike means
$1.75 more to pay than $6.25 = $8.00
$1.75 x $1,500,000 =
$2,625,000 extra paid in 2016 alone.
2017 $0.50 hike means
$2.25 more to pay than $6.25 = $8.50
$2.25 x $1,500,000 =
$3,375,000 extra paid in 2017 alone.
2018 no hike, but still
$2.25 more to pay than $6.25 = $8.50
$2.25 x $1,500,000 =
$3,375,000 extra paid in 2018 alone.
2019 $0.75 hike means
$3.00 more to pay than $6.25 = $9.25
$3.00 x $1,500,000 =
$4,500,000 extra paid in 2019 alone.
2020 $0.75 hike means
$3.75 more to pay than $6.25 = $10
$3.75 x $1,500,000 =
$5,625,000 extra paid in 2020 alone.
2021 $1.00 hike means
$4.75 more to pay than $6.25 = $11
$4.75 x $1,500,000 =
$7,125,000 extra paid in 2021 alone.
Add the extra paid each year for the total:
$1,875,000 extra paid in 2015 alone
$2,625,000 extra paid in 2016 alone
$3,375,000 extra paid in 2017 alone
$3,375,000 extra paid in 2018 alone
$4,500,000 extra paid in 2019 alone
$5,625,000 extra paid in 2020 alone
$7,125,000 extra paid in 2021 alone
= $28,500,000 extra paid 2015-2021
Lloyd Sherman
08/10/2021 — 5:27 pm
Where did you get the 1,500,000 number? From FRATF? We only have less than 500 employees so I too am having a little difficulty with your calculations.
Mrs. Katherine Miller
08/10/2021 — 6:38 pm
FRATF’s “Understanding the People Side of the Equation” publication includes these statements.
Second page, second paragraph, last sentence states “For every $1 we could increase pay, it would require an additional $1.5M/year.”
The last sentence in the “Why So Much?” paragraph states “roughly 75% of POA employees would be impacted if the minimum wage were increased by $1.”
Lloyd Sherman
08/11/2021 — 8:02 am
With all due respect, comments here say we must be data driven, so let’s take a look at a simple math calculation. First fact: The $1 increase in minimum wage last year resulted in an increase in that component of the compensation line by $560,000. NOT $1,500,000! We have less that 500 employees and in fact the report I recently received from the HR Department accounted for 436 employees (PT and FT). If you increased everyone by $1.00 that would equate to $436,000. I have seen varying reports on how many of our employees are minimum wage, but it seems to be in the high 270,s. Other positions up to Grade 5 are most likely also impacted by an increase, but not all of the employees. If we are going to be data driven, let’s make sure that the data backs up the verbiage. The Task Force did a fine job with the data they were given, but when you see figures like this one, you can’t help but scratch your head and wonder what else might have been misstated.
Dorothy M. Jones
08/10/2021 — 8:09 pm
Great Job!!! I agree with every thing you said!!!!!! They, without an audit, do not know where they came from and where they are today!!!!!!! We should not pay more until it is all clear for us all to understand……my opinion, way too many chiefs and not enough indians!!!! The upper bunch do nothing and get paid gigantic salaries and the ones that do all of the work do not get paid any where near what they deserve!!! It is so confusing and we are the ones that get hurt!
Keith Broach
08/11/2021 — 12:17 am
Hello Andy. I sincerely appreciate your article and the dialogue it has generated. There is plenty of emotion and genuine concern for the future of HSV. I think this is very positive and will lead to good discussion. We should all strive to be “data driven and evidence based” in our decisions. A few comments…
Firstly, when anyone takes cheap shots at the Task Force, you are attacking your neighbors and fellow property owners. This team of volunteers is talented, responsible, and thoughtful. None of the Task Force started this effort with conditions or predetermined outcomes. The mission was to “go where the data takes us.”
You call the Task Force report “pretty much as expected.” I have watched quietly while many (some on this comment string) have suggested the Task Force was going to recommend we “double” the assessment. One prolific commentator specifically forecasted a $60/month increase. I don’t know your expectations, but clearly many were WAY OFF on their predictions. It makes one wonder if sensationalism is part of their agenda.
You have asked – Why hasn’t Southern Region CPI been enough to cover to HSV operational increases? To answer this valid question the CPI is a useful benchmark but it will never precisely match our cost fluctuation for operating HSV. For a few examples, CPI doesn’t include wages, doesn’t include cost of energy, and doesn’t include things like culvert replacement, roadway maintenance, or wastewater plant upgrades.
You point out that compensation is “not even mentioned” in the Task Force report, so I’ll address that here. It is true that the largest single expense in HSV is compensation. For anyone familiar with large organizations similar to a municipality, this IS the norm. It is notable that there have been almost $1M in expense reductions in senior management roles over the past few years. On the other hand, the Arkansas minimum wage has increased from $8.50 to $11.00 over the last 3 years – nearly a 30% increase which is much greater than Southern Region CPI. The analysis of the Task Force shows HSV compensation is at present well within the range of comparable entities. However, this is an area that must be constantly monitored and should be a priority of the next GM.
Regarding fees, it seems you have a strong opinion but I didn’t see metrics to back it up. Of course there is a fine line between pricing amenities too high or too low. The data shows that pricing for HSV amenities is well below the average pricing at comparable venues. Golf is the easiest to compare and our fees – especially for annual members – are well below market price for comparable offerings.
Next, you were critical of the Task Force considering the likelihood of property owners approving a recommendation from the Task Force. It is interesting that you would ask the Task Force to ignore the fact that property owners have the right to vote on assessments. Would you prefer the Task Force ignore this and recommend options with no chance of passing a vote or property owners?
Lastly, you indicate the Task Force recommended changing the Declarations to allow the POA (BOD) to “hike assessments any way they want.” I don’t know if you were intentionally being deceptive or just made a mistake, but this is not at all what the Task Force recommended. Perhaps you could revisit?
There are a number of other debatable items in your article, but I appreciate your interest and emotion. It is quite likely you are the most interested Arizona resident. A good dialogue and healthy debate is good for HSV. Data driven, evidence based decisions will lead us to a promising future!
Gene Garner
08/11/2021 — 10:12 am
Keith Broach you stated “….the fact that property owners have the right to vote on assessments.” That’s true but in what country does the majority force the minority to pay all the increase?
When the BOD forced the 2tier assessment on us they encouraged the unimproved lot owners to vote on an increase for the improved lot owners only. They had no “skin in the game”, It’s unfair and it’s called “tyranny of the majority”. You only see this in countries that discriminate against it’s minorities like Russia, China, Syria etc.
But the BOD knew they couldn’t pass an assessment increase that affected both types of lot owners so they created the 2tier assessment scheme. Their rationale was “the residents use more of the amenities and should pay more”, They left out the fact that we pay for the use of the amenities when we use them, like green fees, natatorium, tennis courts etc. We also pay water, sewer and trash fees along with road fees (access cards and windshield stickers) the unimproved lot owners don,t pay.
If the FRATF wants to be fair to all property owners, they will ask for an equal increase from all property owners.—Gene
Keith Broach
08/11/2021 — 10:47 am
Gene I won’t argue history with you. There have surely been mistakes made. As the old proverb says “don’t let yesterday take up too much of today.”
The two tier premise is that residents (improved) will use more infrastructure than non-residents (unimproved). So I understand the logic and it has held in legal cases. Now that the two-tier has been done it is quite difficult to go back.
Unimproved property owners pay more than half of the currently collected assessments. An assessment increase for this group was recommended by FRATF, but there is some unknown point in an increase that you generate more delinquency – so it’s a balancing act. A difficult decision for the Board in my opinion.
You bring up a very good point I think with respect to amenities. If we have two tier assessments, then why not two-tier amenity fees? Essentially those with improved properties – typically residents could receive a favorable rate for amenities. I think this is reasonable as it brings a tangible benefit to those who have invested deeply in Hot Springs Village. The Task Force has suggested this model as an option.
Andy Kramek
08/11/2021 — 7:17 pm
Mr Broach, whether I am an Arizona resident or not is totally irrelevant and, I can conceive of no reason why you should even mention it. Unless you are implying that I should not be ‘poking my nose into HSV business’ which I resent. I lived in HSV for almost 6 years, built a house there, owned two others and still own property in the Village. As such I have as much right as any other property owner to question what my Board of Directors, and their appointed surrogates, are doing. I refuse to engage with people who insult me and so have nothing further to add.
Keith Broach
08/11/2021 — 11:26 pm
Sorry you felt insulted Andy. No offense was intended. It is just rare that a non-resident presents such an impassioned, lengthy argument. The resident (improved) vs non-resident (uninproved) matter is fully defined by the Declaration – each get one vote. So of course you have every right to present your position. No problem there.
But the challenges I have with your article are clearly noted in my response. Those represent the real matter in my opinion.
Mrs. Katherine Miller
08/11/2021 — 9:20 am
Lloyd,
At the time of FRATF’s publication:
“roughly 75% of POA employees would be impacted if the minimum wage were increased by $1.” (0.75 x 453 employees = 340)
Since each wage increase represents a percentage increase over the wage before it, affected tiers of the pay scale above minimum wage likely use that percentage. Also, for each wage increase, there are additional taxes that must be paid by the employer. Some benefits might require upward adjustment as well.
Mark Quinton
08/11/2021 — 11:19 am
Good analysis. You touch on deep dives into every department which is needed. Surely property owners that have expertise in areas can do this.
Managers must be incentive based.
Until we look to see where we are wasting money, we don’t need increases.
Kathleen Henderson Oram
08/11/2021 — 1:47 pm
We need to pay the top, say, Level 10 and above far less than they are currently paid, and the people below far more than they are currently being paid. The workers at the bottom should make far more than WalMart employees! There should be a wanting of people to work here. We should provide far more to the hard work done by those on or near the bottom of the pay scale. We need to once again, rise up!
Jess jackson
08/11/2021 — 5:10 pm
All these euphemism, and financial gymnastics makes me dizzy, not one word about cost cutting, what about getting rid of losers. Our level of play on our golf courses can only support 5 courses. We could close 2 or 3 sell off the equipment and probably balance the budget. What about an effective marketing plan like we had back in the day. What about bringing in some one who knows what they are doing to manage our food service, now we have an operator who is competing against himself. What about a commissioned golf pro, who is paid from merchandise sales and lessons, maybe one superintendent for all courses. Poor folks have poor ways, as a last resort we could start a go fund me account, makes about as much sense as any thing else I have heard. I am fundamentally opposed to an increase, and will vote no on my properties.
Mrs. Katherine Miller
08/12/2021 — 1:25 pm
Conservative Rough Estimate of Labor Cost Increases from the Bottom Up (without knowing the actual increases to those above minimum wage)
FRATF’s “Understanding the People Side of the Equation” publication, first paragraph states that we have 453 employees and the last sentence in the “Why So Much?” paragraph states “roughly 75% of POA employees would be impacted if the minimum wage were increased by $1.”
0.75 x 453 employees = 340 wage increases.
FRATF states that 38.4% are minimum wage.
0.384 x 453 = 174 at minimum wage.
340 wage increases – 174 at minimum wage
= 166 wage increases above minimum.
FRATF states that 85% [of 174] at minimum wage work part time and receive no benefits.
0.85 x 174 = 148 at minimum without benefits,
0.15 x 174 = 26 at minimum full time
A $1 increase is commonly held to cost an employer an average of $1.25 to $1.40 hourly, depending on employment taxes and benefits.
$1.25 / $1.00 = 125%
The 148 at minimum without benefits would represent the low cost factor to the employer of 125% per $1 increase.
The 26 at minimum wage full time would represent a medium cost factor to the employer somewhere between 125% and 140%, so conservatively estimating 130%.
The 166 wage increases above minimum could cost the employer more, so conservatively estimating 135% (although they might get less of an increase, so there may well be room for lowering these rough estimates based on this unknown factor).
__________________________________________________
2015 $1.25 hike
$1.25 hike x 125% low cost = $1.56 cost
148 no-benefit employees x $1.56 = $230.88
$230.88 x 30 hours estimate = $6,926.40
$6,926.40 x 52 weeks = $360,173.
$1.25 hike x 130% medium cost = $1.63 cost
26 minimum FT employees x $1.63 = $42.38
$42.38 x 40 hours (w/o OT) = $1,695.20
$1,695.20 x 52 weeks = $88,150.
$1.25 hike x 135% high cost = $1.69 cost
166 above minimum x $1.69 = $280.54
$280.54 x 40 hours (w/o OT) = $11,221.60
$11,221.60 x 52 weeks = $583,523.
$360,173 + $88,150 + $583,523
= $1,031,846 conservative rough estimate of extra paid in 2015
__________________________________________________
2016 $0.50 hike
$0.50 hike x 125% low cost = $0.63 cost
148 no-benefit employees x $0.63 = $93.24
$93.24 x 30 hours estimate = $2,797.20
$2,797.20 x 52 weeks = $145,454.
$0.50 hike x 130% medium cost = $0.65 cost
26 minimum FT employees x $0.65 = $69
$69 x 40 hours (w/o OT) = $676
$676 x 52 weeks = $35,152.
$0.50 hike x 135% high cost = $0.68 cost
166 above minimum x $0.68 = $112.88
$112.88 x 40 hours (w/o OT) = $4,515.20
$4,515.20 x 52 weeks = $234,790.
$145,454 + $35,152 + $234,790
= $415,396 conservative hike cost for 2016
+ $1,031,846 hike from 2015 paid again
= $1,447,242 conservative rough estimate of extra paid in 2016
__________________________________________________
2017 $0.50 hike (repeat)
$145,454 + $35,152 + $234,790
= $415,396 conservative hike cost for 2017
+ $415,396 hike from 2016 paid again
+ $1,031,846 hike from 2015 paid again
= $1,862,638 conservative rough estimate of extra paid in 2017
__________________________________________________
2018 no hike, but still
+ $415,396 hike from 2017 paid again
+ $415,396 hike from 2016 paid again
+ $1,031,846 hike from 2015 paid again
= $1,862,638 conservative rough estimate of extra paid in 2018
__________________________________________________
2019 $0.75 hike
$0.75 hike x 125% low cost = $0.94 cost
148 no-benefit employees x $0.94 = $139.12
$139.12 x 30 hours estimate = $4,173.60
$4,173.60 x 52 weeks = $217,027.
$0.75 hike x 130% medium cost = $0.98 cost
26 minimum FT employees x $0.98 = $25.48
$25.48 x 40 hours (without OT) = $1,019.20
$1,019.20 x 52 weeks = $52,998.
$0.75 hike x 135% high cost = $1.01 cost
166 above minimum x $1.01 = $167.66
$167.66 x 40 hours (without OT) = $6,706.40
$6,706.40 x 52 weeks = $348,733.
$217,027 + $52,998 + $348,733
= $618,758 conservative hike cost for 2019
+ $415,396 hike from 2017 paid again
+ $415,396 hike from 2016 paid again
+ $1,031,846 hike from 2015 paid again
= $2,481,396 conservative rough estimate of extra paid in 2019
__________________________________________________
2020 $0.75 hike (repeat)
$217,027 + $52,998 + $348,733
= $618,758 conservative hike cost for 2020
+ $618,758 hike from 2019 paid again
+ $415,396 hike from 2017 paid again
+ $415,396 hike from 2016 paid again
+ $1,031,846 hike from 2015 paid again
= $3,100,154 conservative rough estimate of extra paid in 2020
__________________________________________________
2021 $1.00 hike
$1.00 hike x 125% low cost = $1.25 cost
148 no-benefit employees x $1.25 = $185
$185 x 30 hours estimate = $5,550
$5,550 x 52 weeks = $288,600.
$1.00 hike x 130% medium cost = $1.30 cost
26 minimum FT employees x $1.30 = $33.80
$33.80 x 40 hours (w/o OT) = $1,352
$1,352 x 52 weeks = $70,304.
$1.00 hike x 135% high cost = $1.35 cost
166 above minimum x $1.35 = $224.10
$224.10 x 40 hours (w/o OT) = $8,964
$8,964 x 52 weeks = $466,128.
$288,600 + $70,304 + $466,128
= $825,032 conservative hike cost for 2021
+ $618,758 hike from 2020 paid again
+ $618,758 hike from 2019 paid again
+ $415,396 hike from 2017 paid again
+ $415,396 hike from 2016 paid again
+ $1,031,846 hike from 2015 paid again
= $3,925,186 conservative rough estimate of extra paid in 2021
__________________________________________________
$1,031,846 conservative rough estimate of extra paid in 2015
$1,447,242 conservative rough estimate of extra paid in 2016
$1,862,638 conservative rough estimate of extra paid in 2017
$1,862,638 conservative rough estimate of extra paid in 2018
$2,481,396 conservative rough estimate of extra paid in 2019
$3,100,154 conservative rough estimate of extra paid in 2020
$3,925,186 conservative rough estimate of extra paid in 2021
$15,711,100 conservative rough estimate of total extra paid 2015-2021
Mrs. Katherine Miller
08/12/2021 — 3:28 pm
Conservative Estimate of Labor Cost Increases from the Bottom Up (Basing the “above minimum” increases on Lloyd’s $560,000 figure for the increase in 2020.)
FRATF’s “Understanding the People Side of the Equation” publication, first paragraph states that we have 453 employees and the last sentence in the “Why So Much?” paragraph states “roughly 75% of POA employees would be impacted if the minimum wage were increased by $1.”
0.75 x 453 employees = 340 wage increases.
FRATF states that 38.4% are minimum wage.
0.384 x 453 = 174 at minimum wage.
340 wage increases – 174 at minimum wage
= 166 wage increases above minimum.
FRATF states that 85% [of 174] at minimum wage work part time and receive no benefits.
0.85 x 174 = 148 at minimum without benefits,
0.15 x 174 = 26 at minimum full time
A $1 increase is commonly held to cost an employer an average of $1.25 to $1.40 hourly, depending on employment taxes and benefits.
$1.25 / $1.00 = 125%
The 148 at minimum without benefits would represent the low cost factor to the employer of 125% per $1 increase.
The 26 at minimum wage full time would represent a medium cost factor to the employer somewhere between 125% and 140%, so conservatively estimating 130%.
Based on Lloyd’s figure for 2020, the 166 wage increases above minimum seem to have costed less, around roughly 112%.
__________________________________________________
2015 $1.25 hike
$1.25 hike x 125% low cost = $1.56 cost
148 no-benefit employees x $1.56 = $230.88
$230.88 x 30 hours estimate = $6,926.40
$6,926.40 x 52 weeks = $360,173.
$1.25 hike x 130% medium cost = $1.63 cost
26 minimum FT employees x $1.63 = $42.38
$42.38 x 40 hours (w/o OT) = $1,695.20
$1,695.20 x 52 weeks = $88,150.
$1.25 hike x 112% above minimum = $1.40 cost
166 above minimum x $1.40 = $232.40
$232.40 x 40 hours (w/o OT) = $9,296
$9,296 x 52 weeks = $483,392.
$360,173 + $88,150 + $483,392
= $931,715 conservative extra paid in 2015
__________________________________________________
2016 $0.50 hike
$0.50 hike x 125% low cost = $0.63 cost
148 no-benefit employees x $0.63 = $93.24
$93.24 x 30 hours estimate = $2,797.20
$2,797.20 x 52 weeks = $145,454.
$0.50 hike x 130% medium cost = $0.65 cost
26 minimum FT employees x $0.65 = $69
$69 x 40 hours (w/o OT) = $676
$676 x 52 weeks = $35,152.
$0.50 hike x 112% above minimum = $0.56 cost
166 above minimum x $0.56 = $92.96
$92.96 x 40 hours (w/o OT) = $3,718.40
$3,718.40 x 52 weeks = $193,357.
$145,454 + $35,152 + $193,357
= $373,963 conservative hike cost for 2016
+ $931,715 hike from 2015 paid again
= $1,305,678 conservative extra paid in 2016
__________________________________________________
2017 $0.50 hike (repeat)
$145,454 + $35,152 + $193,357
= $373,963 conservative hike cost for 2017
+ $373,963 hike from 2016 paid again
+ $931,715 hike from 2015 paid again
= $1,679,641 conservative extra paid in 2017
__________________________________________________
2018 no hike, but still
+ $373,963 hike from 2017 paid again
+ $373,963 hike from 2016 paid again
+ $931,715 hike from 2015 paid again
= $1,679,641 conservative extra paid in 2018
__________________________________________________
2019 $0.75 hike
$0.75 hike x 125% low cost = $0.94 cost
148 no-benefit employees x $0.94 = $139.12
$139.12 x 30 hours estimate = $4,173.60
$4,173.60 x 52 weeks = $217,027.
$0.75 hike x 130% medium cost = $0.98 cost
26 minimum FT employees x $0.98 = $25.48
$25.48 x 40 hours (without OT) = $1,019.20
$1,019.20 x 52 weeks = $52,998.
$0.75 hike x 112% above minimum = $0.84 cost
166 above minimum x $0.84 = $139.41
$139.41 x 40 hours (without OT) = $5,576.44
$5,576.44 x 52 weeks = $289,975.
$217,027 + $52,998 + $289,975
= $560,000 based on Lloyd’s figure for 2020
+ $373,963 hike from 2017 paid again
+ $373,963 hike from 2016 paid again
+ $931,715 hike from 2015 paid again
= $2,239,641 conservative extra paid in 2019
__________________________________________________
2020 $0.75 hike (repeat)
$217,027 + $52,998 + $289,975
= $560,000 based on Lloyd’s figure for 2020
+ $560,000 hike from 2019 paid again
+ $373,963 hike from 2017 paid again
+ $373,963 hike from 2016 paid again
+ $931,715 hike from 2015 paid again
= $2,799,641 conservative extra paid in 2020
__________________________________________________
2021 $1.00 hike
$1.00 hike x 125% low cost = $1.25 cost
148 no-benefit employees x $1.25 = $185
$185 x 30 hours estimate = $5,550
$5,550 x 52 weeks = $288,600.
$1.00 hike x 130% medium cost = $1.30 cost
26 minimum FT employees x $1.30 = $33.80
$33.80 x 40 hours (w/o OT) = $1,352
$1,352 x 52 weeks = $70,304.
$1.00 hike x 112% above minimum = $1.12 cost
166 above minimum x $1.12 = $185.92
$185.92 x 40 hours (w/o OT) = $7,436.80
$7,436.80 x 52 weeks = $386,714.
$288,600 + $70,304 + $386,714
= $745,618 conservative hike cost for 2021
+ $560,000 hike from 2020 paid again
+ $560,000 hike from 2019 paid again
+ $373,963 hike from 2017 paid again
+ $373,963 hike from 2016 paid again
+ $931,715 hike from 2015 paid again
= $3,545,259 conservative extra paid in 2021
__________________________________________________
$931,715 conservative extra paid in 2015
$1,305,678 conservative extra paid in 2016
$1,679,641 conservative extra paid in 2017
$1,679,641 conservative extra paid in 2018
$2,239,641 conservative extra paid in 2019
$2,799,641 conservative extra paid in 2020
$3,545,259 conservative extra paid in 2021
$14,181,216 conservative total extra paid 2015-2021 based on Lloyd’s figure for 2020
Mike Lane
08/12/2021 — 3:52 pm
Will someone please tell me again why we are paying extra for employees making more than minimum wage in this jumble of numbers.
These numbers are junk , (without knowing the actual increases to those above minimum wage) is what she said at the beginning. These are assumptions she has made from the fratf report and the fratf report did not cite where they got their figures. This whole fratf report looks more like the old O&M tables form the CMP to me.
What we are talking about here is the cost and impact of that cost of paying employees who are making less than the minimum wage required by law. If the BOD approved wage and salary increases to other employees then that is a different discussion than the $1 raise of minimum wage increase.
Mrs. Katherine Miller
08/13/2021 — 8:28 am
AR minimum wage has gone up $4.75 since 2015. A $1 increase is commonly held to cost an employer an average of $1.25 to $1.40 hourly. That is because costs to the employer increase with each wage increase due to –
– FICA (Social Security) adds 7.65%
– Federal Unemployment Tax – amount varies
– AR Unemployment Tax – amount varies
– State Workers’ Compensation
and for full time –
– 82% of the health insurance cost (cha-ching!)
Andy Kramek
08/13/2021 — 9:03 am
Thank you Mike, that is precisely the point I have been trying to make. There are two different issues that, these numbers conflate.
The first is the impact of a mandated minimum wage increase. This affects about 38% (less than 200) of POA Employees, most of whom are part-time (i.e. less than 32 hours per week).
The second is what the POA CHOOSES to do when the minimum wage changes.
The fact that FRATF claims that 75% of employees are affected is, to put it mildly, surprising. Furthermore the claim that a $1 increase in minimum wage, that directly affects less than 200 employees, accounts for 8% of the $18.6Million ($1.5/18.6 = 8.06%) 2021 total compensation budget is, frankly, unbelievable.
However, since FRATF did not cite the source for their numbers we have no way of knowing what the reality is.
Mrs. Katherine Miller
08/13/2021 — 12:11 pm
453 employees is stated in FRATF’s “Understanding the People Side of the Equation” publication, first paragraph.
340 impacted by minimum wage hikes is 75% of 453.
174 at minimum wage is 38.4% of 453.
166 above minimum affected is 174 less than the total 340 impacted.
Each time the minimum wage goes up, it at least immediately raises the employer’s costs for not only those employees at minimum wage, but also for those employees who were earning more than the old minimum but less than the new minimum.
Andy Kramek
08/13/2021 — 12:36 pm
Oh please stop trying to defend the indefensible. These numbers are meaningless without details of the actual wages paid and the number of individuals affected. Without that data it is just inference and guesswork. Maybe FRATF had the actual data, but since they have never published anything to support their numbers we simply don’t know.
Mrs. Katherine Miller
08/13/2021 — 3:23 pm
$18,446,595 2021 comp. budget
$18,446,595 / 52 weeks =
$354,742 budgeted weekly cost to employer
125% low average cost x $11 min.
= $13.75 low hourly cost
$13.75 low hourly cost
x 488 budgeted employees for 2021
= $6,710 low hourly cost for all 488
$6,710 low hourly cost x 52 weeks = $348,920 low weekly cost ALL at minimum
$354,742 budgeted weekly cost
-$348,920 low weekly cost ALL
= $5,822 weekly difference between minimum wage costs and above minimum wage costs
251 current full time employees is 55.4% of current total
453 employees…
$5,822 budgeted weekly cost for all
251 current full time employees
= $23.20 weekly average for each current full time employee to have healthcare insurance and anything above minimum wages.
This must be the result of the nearly $1 million in salary cuts that our staff has taken.
Lloyd Sherman
08/14/2021 — 11:17 am
Correct Mike. The reality is that when the minimum wage went from $10 to $11 an hour the impact to the 2021 compensation line was $560,000 as reported by the accounting department through the F & P Committee. The other reality is that by FLOATING numbers, one can influence thinking on a subject and to meet their narrative. The $1,500,000 number is not and cannot be accurate, especially when the ACTUAL numbers don’t match the number provided.
Mrs. Katherine Miller
08/13/2021 — 11:58 pm
Well, it was Friday the 13th and I made a mistake by multiplying by weeks rather than hours. For now, I think the best I could do with what I’ve been given were the numbers using the figure Lloyd provided for the 2020 labor cost increase.