The Hot Springs Village Property Owners’ Association Board of Directors has the authority every year to raise monthly assessments according to data put out by the federal government in the form of the Southern Consumer Price Index (CPI).
This is what the HSVPOA Declarations Say
“Section 3. Basis and Maximum of Annual Assessments. From and after January 1, 2014, the annual assessment may be increased each year above the annual assessment for the previous year by a two-thirds (2/3) majority vote of the Board of Directors of the Association, provided, however, that such increase may be no greater than the consumer price index for the twelve-month period ending June 30 of the preceding year using the “Consumer Price Index, South Region All Items as promulgated by the Bureau of Labor Statistics of the U.S. Department of Labor or, if such is not available, any other reliable governmental or other non-partisan publication evaluating similar information. Unless the annual assessment shall be increased as aforesaid, it shall remain at the rate prevailing for the previous year. Amended effective April 20, 2013.”
5.8 % Inflation 12 Months Ending in June 2021
According to a news release from The Bureau of Labor Statistics, “all items CPI-U for the South advanced 5.8 percent for the 12 months ending in June.” As stated in the Declarations, June is the month used by the Board to calculate our assessment increase for the next year.
The news release says, “the CPI is based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors’ and dentists’ services, drugs, and the other goods and services that people buy for day-to-day living. Each month, prices are collected in 75 urban areas across the country from about 6,000 housing units and approximately 22,000 retail establishments—department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments. All taxes directly associated with the purchase and use of items are included in the index.”
Will HSVPOA BOD Vote For 2 Increases in 2022?
The Board can vote for a monthly assessment increase based on the Southern CPI and ALSO ask for property owners to vote for an additional monthly assessment increase.
The Future Revenue Analysis Task Force has been accumulating data and presenting its findings to property owners. They will be sharing their findings and recommendations with the Board of Directors on August 4, 2021. Will the property owners be faced with two assessment increases next year? As I always say, I do not have a crystal ball.
Consumer Price Index, South Region – June 2021
Prices in the South up 0.9 percent over the month and 5.8 percent over the past year
Southern-CPI-Index-South-Region-June-2021The Good News
Many Villagers collect Social Security and we are on track to get the biggest cost-of-living raise since 1983. According to CBS, one advocacy group projects the increase will be a 6.1% increase due to an inflationary surge.
The Bad News
Even though Social Security recipients (and everyone else) are suffering through spiraling inflation, they will have to wait for the increase. The Social Security Administration adjusts its payments only once a year and the increase should come starting January 2022. Meanwhile, the prices Villagers pay for goods and services are on the rise.
By Cheryl Dowden, July 14, 2021
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Anne Shears
07/14/2021 — 10:36 am
We’ve been seeing the increase in food prices for several months now. Meat has skyrocketed in price and packaging for some products has gotten smaller as manufacturers try to hold the line on prices. This will be affecting restaurant prices very soon. Also, gasoline prices are creeping up.
Andy Kramek
07/14/2021 — 1:59 pm
Given that the CPI is +5.8% and assuming that the assessment increase will be the full amount possible (and it usually is!):
** For improved lots the current $69.26 will rise by $4.01 to $73.28.
** For unimproved lots the current $39.27 will rise by $2.31 to $42.29
Assuming the numbers from the April 2021 Financial Report remain the same (or at least similar) we will have:
Unimproved Lots in Good Standing (i.e. paying assessments) 13,510
Improved Lots in Good Standing (i.e. paying assessments) 8,892
So given the increase above, the predicted revenue, per month, for next year would be:
Unimproved lots: 13,510 x 42.29 = 571,337.90
Improved lots: 8,892 x 73.28 = 651,605.76
So the total expected assessment revenue, after the increase would be, $1,222,943.66 per month, or $14,675,323.92 for the full year.
To put that in perspective, the approved budget for Compensation, for 2021 was $18,602,458 so the CPI increase next year would still leave us just under $4 Million short on current year compensation costs alone, never mind anything else.
Does anyone else see a problem here?
Mrs. Katherine Miller
07/14/2021 — 7:47 pm
Our amenity memberships, permitting, and restaurant patronage also contribute to compensation.
SHIRLEY SMITH
08/01/2021 — 10:29 am
I am so disappointed in HSV. I had been looking for the “right” home and environment for my retirement and attempting to live on my social security. Of course, it would be hard, but I was told by my real estate agent the lot assessments had only risen a minimal amount and are limited in how much it can increase once a year. With the expenses of just living here and not doing extras, it is getting beyond my financial capabilities. I just bought the place in June and may have to turn round and sell it if things continue to go up. It appears that HSV only wants the wealthy to live here. I’m not sure what you will do with all the modest homes. Surely, year-round rental isn’t that good an option for so many houses.
I have read about the recent history and know that HSV has suffered financially, but I think people like me should be considered in your financial planning.
Gene Garner
07/14/2021 — 4:43 pm
$18.6 million compensation for a small town of 14,000+ seems extremely high. We need to look at the number of salaried v. hourly personnel, comparing them to the city of Hot Springs and make some adjustments. I’m sure some of these salaried positions were created during the “empire building” of the Twiggs/Nalley regimes.
This is where the FRATF committee should be looking to cut costs instead of raising new money from the resident Property Owners.—Gene
Lloyd E Sherman
07/16/2021 — 7:28 am
Gene,
In addition to no process improvement processes or analysis being done on any of the departments or amenities, compensation remains our largest ticket item that has not been given adequate attention (if any at all). Our compensation line (salaries and benefits) are 130% of net assessments received. So while we bill $18 million in assessments every year, we also now have a annual bad debt expense of well over $4 million.
130% of net assessments received. Let that sink in.
I sent a compensation strategy to both the FRATF as well as the board that I have previously used effectively, but I think we all know neither will do anything with it, BECAUSE STAFF WON’T SUPPORT IT. We seem to exist for the benefit of the employees and not the property owners whose pockets they have their hands into.
scott rosson
07/16/2021 — 7:30 am
If the POA will apply the increase where there are needs for improvement.
Salary increases for hourly employees, start at the bottom first, they deserve decent compensation.
Roads and some POA owned buildings.
Mrs. Katherine Miller
07/16/2021 — 11:27 am
As compared to the current federal minimum wage of $7.25, minimum wage in AR was $6.25 for 2014, $7.50 for 2015, $8 for 2016, $8.50 for 2017 and 2018, $9.25 for 2019, $10 for 2020, now $11 for 2021 and there is and has been talk of raising the federal minimum to $15 by 2025. So in the last 7 years, while the federal minimum wage has increased 0%, the AR minimum wage has increased by 43% and it may increase by 53% over 10. Raising the minimum wage also has a trickle-up effect when it causes non-minimum wage workers to expect fair adjustment of their compensation. This must, at least partially, explain why our compensation seems comparatively high.
Now, since our homes are expected to financially support amenity use by lots as well as by outsiders, and to charge more for our amenities might be counter-productive, it would seem fair for our homes to at least receive a discount on amenities proportionate to their assessments.
Marc Bayer
07/16/2021 — 12:24 pm
It’s time to assess what are our costs are, not a rejected pipedream for a lower service level by a disgruntled former Director and establish an assessment that will enable the Village to flourish rather than disintegrate.
Tom Blakeman
07/16/2021 — 3:42 pm
The most problematic costs were just assessed by Mr Sherman above and they are total compensation at 130% of assessments. In case you haven’t been keeping track that’s about $18,000,000+ per year now. HSV has been paying more every year for less while the property owners have seen fees increase by as much as 30% or more for amenities over the last few years. The problem is now and has always been a lack of competent management throughout the POA. What we need is a higher “service level” from management staff. Throwing good money after bad will not promote anything to “flourish” except certain employees.
Lloyd E Sherman
07/19/2021 — 12:43 pm
And here is so more not so good news. Our bad debt issue is heading in the wrong direction. We budgeted for $4 Million in bad debt for 2021. As of today, that number is tracking at $4.7 Million. So the situation has worsened in six months from where it was at the end of 2020. Additionally, we have another minimum wage increase in Arkansas coming in 2022 to $12 an hour which will add another almost $600K to the compensation line. Want to guess where net assessments as a percent of compensation will be then?
Lloyd E Sherman
07/19/2021 — 12:38 pm
Just out of curiosity, who has proposed a lower service level? As a previous Director all I have ever asked for is accountability of management and more competive wages for the rank and file. We currently have a staffing level of over 400 employees who get the same pay regardless of the job they do. There are zero repercussions for management who fail to deliver. We pay what appears to be high base salaries to management personnel, but no goals and objectives are set. Compensation driven by goas and objectives engages management and supervisory staff to improve our revenue stream or reduce costs, or both. We have neither. So while few of us argue that some kind of an assessment increase might be warranted, why would we not want to first ensure our processes, procedures, and compensation were the best they could be before we go asking property owners to subsidize previous mistakes and mismanagement? Instead of spending money on our current structure, we keep adding new features and functions, and then wind up doing those in a half-baked approach and then have to almost immediately have to start repairing them. While all of that is water under the bridge, you would think we would want to learn from our past mistakes. We have literally spent millions over the last five to ten years that could have been directed to roads, culverts, old worn out pipes, etc. Let’s first fix the problem we just provide more money to be misused.
Wes Smith
07/18/2021 — 7:45 am
As Mr Sherman pointed out the 130% salary & benefits gap above assessments needs serious examination.
Therefore, the prudent path to address these gaps lies in a salary realignment based on across the board flat rate reduction of 30% then add bonus & incentives for achieving specific job related goals with potential to write your own paycheck. Everyone should be MOTIVATED to change their mindsets & bring ENERGY into the workplace !!! Those who are not then frankly they are part of the problem not the solution.
Furthermore, I would ask all department heads to submit a written report within 60 days outlining justification for every position along with mandatory 6 month performance reviews to measure progress. If under performance then provide guidance supervision & training to increase productivity. Give warning of termination or demotion if goals are not met by set timeframe !
Recommend analysis of every positions roles, responsibilities & duties to see if there can be consolidations or eliminations of positions.
Human Resources should establish Internships with all accredited Universities & Community Colleges to provide a funnel of talent with fresh intellectual ideas & innovation !
Finally I would seek outsourcing across the board to eliminate staff salaries that could be preformed more efficiently by third party.
The definition of insanity is doing the same thing over and over again and expecting different results.
See tomorrow, today !