Focusing on Value

by Kathy Danforth

0811 Village Walk 1 

VillageWalk Homeowners Association in Sarasota, a community of 1177 homes, was selected to receive the Financial Innovation award for larger communities in the 2011 Communities of Excellence contest. Though financial management can become a nebulous term, the board and town manager at VillageWalk have concretely demonstrated many facets of it by examining and controlling all aspects of their budget. They have brought functions in-house, renegotiated contracts, and consistently stayed on top of details to make the most of their money.

After encountering frequent turnover of management company staff, the board hired on-site manager, Bob Malan, five years ago. Malan says, "They wanted someone in-house to care more and be dedicated to this property. The goal was to break even, but they felt they would get better service and save money over time." The association now has a staff of 25, and in the past three years has had a budget cut one year and no increases the other two, demonstrating their plan was a success.

"One of the first things I did, because I believe you can do much better with your own staff and oversight, is bring in the gatehouse service," Malan states. "We get better service, and the staff all know the residents so it's easier to solve any problems. We added a roving night guard, and people in the community know the person so it gives them more of a sense of security. I feel we can do that very competitively compared to contract labor," Malan comments. "With contract labor they also have to make a profit, where all I need to do is provide the service, which is most important."

The community's cafe was also brought in-house, resulting in a 50 percent savings in costs and increased popularity. The community newspaper is prepared by staff, and a resident volunteer further helps support it by soliciting advertising. "We're almost at a break-even point because he's getting $20,000 in ads per year," Malan notes, "and all we pay for is the printing and mailing."

With 516 acres, grounds maintenance is a large part of the budget and Malan approached their landscaping contractor to renegotiate more favorable terms. "They thought it was crazy that we wanted to pay less and get more service, but we got what we wanted," Malan reports. "We were able to save $210,000 over the 2009–2012 period. Part of the reason this was possible was the bad economy, plus, we're probably their largest contract in the nation so they can't afford to lose us. They have to keep us happy and where we need to be. It's working because they just hired a professional photographer to take pictures of the property for a nationwide award for landscape contractors. They feel this is the best-kept property in their whole fleet nationwide, which we're pretty proud of."

Malan also utilizes his degree in horticultural and landscape design to economize on keeping the grounds looking good for less. "Instead of a contractor installing plants and charging a premium price for the plants and the labor, I buy the plants wholesale and have my staff install them," he explains. "We can do more and get the same quality of plant material. That's saved us money over the last five years and given us the ability to do more planting than we would have been able to budget for."

Their contract with the cable company was renegotiated mid-contract, as Malan had recently secured a long-term contract at a nearby community in his previous position and knew there was room for negotiation. "We went to them six years prior to the end of a 15-year contract and said, 'We're either going to bid this out or negotiate it down. They knew there was an issue and they're smart enough to know to keep the customer happy if they hope to get a renewal. We saved a considerable amount, $590,000 from 2009–2012, and now all our Internet in our office is free and phone service is half the cost. They put in cameras at the gate and town center with the fiber optics installed for free. The increase rate was reduced from eight percent to three precent per year."

Geothermal heating and cooling have been installed, with savings resulting from both. Geothermal heating of two pools has paid for the equipment in 18 months, with savings of $65,000 per year realized after that. The cafe is now being cooled with a geothermal system using water from the lake. The cafe kitchen was in need of a 15-ton unit instead of the 10-ton unit it was originally outfitted with, and Malan found, "The bids were comparable for geothermal or other equipment after factoring in the government discount, so we put in an 18-ton geothermal unit. Even with that 80 percent increase in cooling, we still save 10 percent in energy costs! Now I can keep the cafe at 73 degrees, where it needed to be in the kitchen. Before, we could barely keep it at 80 degrees in the front, so it's made a substantial difference in comfort in addition to saving money.”

They are well satisfied with the geothermal cooling and plan to replace other units in the Town Center with geothermal cooling as needed. "When we put the system in to pull water from the lake, we put in the piping to do the rest of the Town Center," Malan explains, "so it will be ready to go."

There are additional energy-saving measures that may be implemented in the future, but for now Malan feels they have not quite arrived technologically. "We passed on solar lighting because you can't get the same quality of lighting yet, but it may be ready in three to five years," he estimates. Another proposal they are passing on for the time being is a measure to reduce wattage 20 percent with a corresponding savings.

Malan is aware that his community is fortunate to have been completed before the housing market turmoil began. Nevertheless, they have developed their strategies for dealing with the relatively low level of foreclosures they have encountered, and Malan believes their consistency in dealing with delinquent accounts has helped minimize their losses. "After a 10-day grace period, a late fee is added. The association will waive this one time if the owner signs up for automatic debit and stays in the program. On day 30 accounts go to the attorney, and costs start to go up for the owners. We are consistent and they know that. The board feels strongly that we have an obligation to keep up the property and that means keeping up with the debt that we have."

"We have had to foreclose on one property, which is unfortunate, but we have to protect the association's interest," Malan explains. "For the rest we've let the banks foreclose because we get more money that way."

Malan has observed, "Each case is very different. In some cases where we thought we would only get one percent of the home value or 12 months of fees, the bank sold it to someone else at the courthouse desk, so we have gotten the full payment of $13,000 instead of $3000. It's important to stay on top of the process, even when the bank takes over, because there may be a chance to request the full amount owed."

Persistence is required, and Malan says, "It's constant because you have to look at them at least every two weeks and you have to push the banks. We've gone to court with six or seven cases and said, 'This foreclosure has been inactive for three months, and in process for nine.' We ask the courts to either push the issue or tell the bank to start paying us directly. You have to do that."

"We have tried to work with owners who wanted to get caught up, and three or four have kept up with a payment plan," Malan recalls. On the other hand, Malan notes, "It's frustrating when owners are taking advantage of using the amenities. If maintenance fees are 90 days late, residents are not allowed to use the Town Center. Tactfully trying to stop that is one of the hardest things to do!" Once again, consistency is essential. "First, we send a notification, which some have ignored. Then it goes to the attorney, which is worth it because then they realize you're serious," Malan states. "A few ignore that, and one I had to pull aside and say, 'You're going to be embarrassed when the police come because officially you're trespassing.'" Fortunately, the message got across and no police action has been required. Malan says, "The board wants rules enforced, but it's been a learning curve. If you threaten and don't carry through, it's useless."

Malan credits the board with thinking of the big picture financially as well as dealing with the daily details. With over 200 items in the financial statement he reports, "The Financial Committee religiously looks over everything line by line and if anything is askew they ask me about it. The board also knows that you have to keep improving and enhancing the property, because if you don't, you're already moving backwards. For example, the Gifts and Bequests Committee raised over $13,000 for a fountain to not only aerate the lake but beautify the community. It took them a year, but people were willing to come to dinners and such to raise the money."

"A reserve study and insurance appraisal were done within the past year to make sure our reserves in the future will be sufficient. The board is very forward-thinking and realizes that costs are lower now while we are a newer property, but we will need to have the money in the future to do what we need to do to keep the property up," he explains.

Residents have the opportunity to provide feedback and suggestions on how the community is operating. "We do a survey every two years," Malan says, "and over 90 percent of the responses rated overall satisfaction as good, very good, or excellent. Sometimes you get good suggestions from the surveys, and it's always good to get the pulse of the community and see what different things they would like or how they would like to enhance services or the property. One suggestion we're looking at is lighting at least one pool at night, since it's heated anyway. And either myself or the board president answered 80–90 questions turned in on the surveys—everyone who gave an e-mail address got an answer if they had a question."

Shrewd money management can minimize stress in a community and give residents the most bang for their buck, but the heart of a community will always be the people. "The strength of VillageWalk is our residents and the way they come together," Malan shares. "It's become neighbor helping neighbor. That's something you want to foster so it will continue to grow." VillageWalk is also the winner of the Civic Volunteerism Communities of Excellence award, so their willingness to donate time and resources will be highlighted later in the year. VillageWalk is bringing together financial efficiency with generosity, a complementary blend to enjoy!