The Great Outdoors & Townes of South Gate

Communities of Excellence Winners for Financial Innovation:

The Great Outdoors, Larger Community and Townes of South Gate, Smaller Community

The Well-Examined Budget: The Great Outdoors and Townes of South Gate

by Kathy Danforth

The winning Communities of Excellence in the Financial Innovation category for 2013 are The Great Outdoors, a community of 1,550 homes in Titusville and Townes of South Gate, Inc., a 164-condominium in Orlando. These communities share an ongoing involvement in garnering revenue and tackling areas of expense, enabling them to improve their properties while keeping maintenance fees in check.

Delinquent accounts have been the new hole in the budget, as most associations have encountered. For The Great Outdoors, manager Keith Lamb explains that this phenomenon prompted their community to develop a new policy, which starts with a reminder letter when payment is 10 days past due. “At 20 days, we send another letter and charge a late fee, and if there is no payment in 45 days, we will offer a payment plan and place a lien if necessary. Then, we decide whether it's to our advantage to foreclose, depending on if the unit's in good enough shape to rent, whether anyone is living there, whether the property is developed, etc. We've foreclosed on about seven properties and haven't had to evict anyone,” Lamb reports. “Since the banks aren't going to take them quickly, they're in better shape being rented than sitting there with no power. We've collected over $50,000 in rent annually, and in 2012 collected over $90,000 in late assessments, late fees, and interest owed.”

Manager Jessica O'Quinn at Townes of South Gate found that 40 percent of their community's properties were delinquent in paying fees when she came three years ago. Aggressive changes in policies have reduced delinquencies by 75 percent and resulted in the association foreclosing on seven properties thus far. “Our biggest change was switching to an attorney who would go forward with foreclosure,” O'Quinn states. “When we foreclosed and rented units out, people saw we were serious. We've collected $95,000 through this attorney in the last 18 months and are collecting $3,200 per month in rent.”

O'Quinn reports additional revenue through a cable agreement, which netted $29,000 initially with ongoing payments of over $1,000 per year. Rental of their clubhouse has also been promoted.

Lamb notes that they also have increased their auditorium rental, which with their Southern-style manor house can earn $1,600 for a wedding event. “We didn't have to advertise—we just quit restricting use in the summer months. From October to May, we don't rent it at all because the community has a lot of events.”

The Great Outdoors has also increased the advertising they sell in their bi-weekly newsletter. “At first, we didn't sell ads to anyone outside the community, but the newsletter didn't pay for itself. We do all the work in-house and it costs $45–50,000 per year, but now we're selling space to outside vendors and we take in $70,000 per year. We don't have to actively sell it; they call us.”

Opportunities for cutting expenses varies from community to community, but Lamb advises, “It's good practice to always look at expenses, especially the big ticket items, and think about how to do it differently.” Re-bidding or renegotiating contracts should not be bypassed, especially in a down economy.

Revising waste handling and introducing recycling at Townes of South Gate produced savings, according to O'Quinn. “We purchased our own bins for $1,600 and are now saving over $400 per month over our rental cost. Switching trash collection vendors has saved us over $1,000 a month more. And, while recycling doesn't produce a profit, it is beneficial and has reduced the amount of trash,” she reports.

Another big ticket item that the community pursued was being removed from flood insurance. “We learned from FEMA that we were zoned out of the floodplain,” O'Quinn explains, “so we had our insurance agent follow up, and we are saving $10,000 per year!”

Roof repair had been a steady expense at Townes of South Gate, running as much as $60,000 per year, and leaks and problems persisted. “We replaced all the roofs for $773,000” O'Quinn relates. “While an expense, this will save the association money in the long run and immediately improves cash flow.” Ongoing problems and costs were also encountered with the community's spa, but in this case, the decision to close the spa was put before the residents and approved.

The Great Outdoors switched communication companies and then have negotiated and received further savings. Switching contractors for lawn chemical applications has cut costs by $10–15,000 per year. For mosquito control, the community was able to stop the community efforts altogether and enlist the county's services. Lamb recalls, “At some point in the past, the association borrowed a sprayer from the county and started spraying. However, it is a line item on the property tax bill, so we contacted them and they realized they should be doing it. It saves us at least $10,000 in manpower, licensing, and chemicals, and we probably have better service now. They treat standing water with larvacide and do aerial spraying, where we were just doing the last step of spraying roadways and not preventing new hatches.”

The Great Outdoors offers health insurance for employees, but Lamb says, “Every year we have had to increase the deductible and co-pays or reduce benefits to keep the cost down. We decided we would buy a less-expensive plan with a higher deductible and reimburse employees for any difference in cost to them. We have a third-party administrator and the reimbursements last year were minimal—about $3,000. The employees end up with the same coverage, but we've saved close to $60,000 in 2012.”

The Great Outdoors has been able to save on seasonal landscaping labor costs by motivating personnel. “Once they get their required work done, they can take off for the day,” Lamb reports. “It sounds strange, but they're young guys and going home appeals more than an extra hour of pay. The concern is that if they go too fast there can be damage, but that hasn't increased. For us, if one-quarter of the 25-person lawn crew leaves early, the savings add up.”

The efficiency of their maintenance department has been enhanced by utilizing a computerized program to facilitate communication of incoming requests, property history, maintaining equipment, and managing inventory. “Now we can distribute calls live to mobile devices on the trucks and save travel time. It's saved money through the parts inventory, improved our preventive maintenance, and made our technicians quicker, so we estimate we're saving $60,000 per year in personnel costs,” according to Lamb.

The Great Outdoors has installed remote monitoring of the pump lift stations, which alerts staff to high amperage that might damage pumps. “Before we got this system, we burned up three pumps each year, but we haven't lost any since getting this system,” Lamb advises. “That's a net gain of $10,000 per year.”

Conservation of water and electricity are constantly reviewed, and Lamb relates, “We put in a new six-inch master water meter for the whole community several years ago that reduced our bill from $190,000 to $90,000 per year because the local water utility charges less per gallon for the larger meter. We've found ways to reduce consumption at the wastewater plant, and when we replace electrical fixtures, we go in with energy-saving models through the whole building.”

Both communities have continued with major improvement and maintenance projects since the goal is a prosperous property rather than just cutting of costs. Financial success requires a broad spectrum of pursuit of income, cost reduction, prudent investment, and foresight. Plus, O'Quinn comments, “It's hard work! Getting files transferred to a new attorney, going back and forth to vendors to get lower prices, and staying on top of everything doesn't happen on its own!”