2019 SIPOA Budget, Additional Information

SIPOA Banner June 2018

Dear Members of the Seabrook Island Community:

Recently, some members of our community have expressed their concern with the manner in which the 2019 SIPOA budget was presented. As we all know, numbers and percentages can be presented in various ways; everyone does not prefer the same manner of presentation. Said another way, one form of presentation does not work for everyone. In an effort to be as clear and transparent as possible, please note the following:

1. The 2019 budget was developed by SIPOA staff, Board members and their committees, and the Finance Committee and is comprised of the financial resources necessary to deliver those programs and services for which SIPOA is responsible. This includes maintaining and improving our facilities, programs and infrastructure, keeping our island looking well-cared for, and paying our very hard-working staff. In turn, this helps to maintain or improve our property values and quality of life.

2. The 2019 budget submitted by the Finance Committee was approved by the Board of Directors. The Board believes that the proposed 2019 Budget is based on and will meet the financial needs of SIPOA. The Board recommends that the property owners vote favorably on the budget at the 2019 Annual Meeting. In voting, Property Owners are, in effect, authorizing SIPOA to make the denoted expenditures or collect the denoted reserves. The manner in which the items comprising the 2019 budget are presented to Property Owners is legally satisfactory. In addition, SIPOA retains an outside, independent auditor to conduct a financial audit annually and SIPOA is consistently found to be in compliance with generally accepted accounting principles.

3. There is an operating budget which accounts for ongoing items such as maintenance of facilities, payroll, insurance, landscaping, legal services, accounting services and security services. There is a capital budget which includes items such as reserve funding for future road maintenance, storm pipe relining and future relocation of Cap’n Sams inlet as well as replacement of furnishings and other assets. It should be noted that there is absolutely no funding in the 2019 budget for repayment of the loan on the Lake House as it was paid off in 2018; the loan payoff amount was $319,071 and the 2018 interest payment was $2,943.08.

4. In the past, Property Owners requested that SIPOA show the percentage increase in the dollar amount of the annual assessment year over year. This figure comparing the amount of the annual assessment in 2018 with the amount of the annual assessment in 2019, is shown in the materials which accompany the Annual Meeting mailing. However, this in no way means that two budgets include the exact same items.

5. At the January 2019 SIPOA Board of Directors meeting, a property owner raised the question as to whether a ‘credit’ of the component of previous annual assessments allocated to the Lake House loan should appear in the budget. As noted above, no funds are being collected for nor will any payments be made against the Lake House loan. A budget is not a static process or document; the SIPOA budget is developed annually based upon financial requirements. In addition, we reviewed historical documents and find no reference to such a credit.

6. It has been suggested that, alternatively, the increase in the annual assessment should be expressed after ‘backing out’ monies associated with the Lake House loan. Comparing budgets from different years is, to some degree, always comparing apples with oranges. Budgets from different years include different capital projects, different staffing levels, different collection of revenue, etc. Rather than attempt to boil it all down to one percentage number which does not reflect these differences, your Board seeks to help you understand the rationale underlying the expenditures actually included in each budget. We think the more important question is how do significant expenditures included in the 2019 budget differ from prior year budgets? The information below and found in the Treasurer’s Letter accompanying the Annual Meeting materials provide you with information pertinent to this question.

KEY FACTORS – 2019 Budget:

The recommended 2019 budget addresses the major priorities and concerns of the Island. Throughout, the recommended budget recognizes that Seabrook Island turns 45 years old in 2019 and what that means in terms of the Island’s infrastructure and other needs.

Human Resources and Security: An increase of $137,270 in Human Resources and an increase of $52,050 in Security. These budget items include payroll and payroll taxes, benefits, insurance, training and other related expenses for full-time, part-time and seasonal employees, interns as well as our Security staff. This increase reflects the addition of a full-time SIPOA employee to handle a range of administrative and ARC functions and office coverage as well as for staff cross-training. Also included are four additional Security officers for eight hour shifts during 14 high traffic weekends throughout the year. The remainder of the increase is primarily for payroll costs associated with improving the market competitiveness of our staff and Security officer compensation. Independent benchmarking studies show some of our staff salary positions are below market rates. Given the very low local unemployment rate, the specialized skills of our small full-time staff, and our location in Charleston County, we need to increase compensation in order to retain and attract a talented staff. In order to retain and attract security officers to our community, we found it necessary to increase their hourly rate. Security staff wages were increased half way through 2018 and the 2019 budget reflects the annual costs of this addition. Additional costs associated with the volume of visitor passes are also included in the Security budget.

Infrastructure: An increase of $175,500 in the Capital budget bringing the total for “Boardwalks/Beach” to $374,000. Three items account for the increase: a project to repair and reopen a damaged boardwalk that was closed for most of 2018, a project to repair a boardwalk damaged by a storm in 2018 and a project to improve and expand the kayak/boat access near the Creek Watch Villas.

Drainage: An increase of $327,500 in the Capital budget bringing the 2019 total for “Road/Drainage” to $1,237,500. While our regular annual funding of $600,000 is included in capital reserves for our ongoing storm-water pipe relining efforts, additional funds are budgeted to dredge a number of SIPOA’s forty-nine storm-water outfalls. Maintenance of outfalls is needed for continued proper drainage in times of heavy rainfalls or storm surges. This line item also includes funds associated with SIPOA’s portion of an independent, comprehensive Islandwide drainage study.

Future Capital Projects: An increase of $60,000 bringing the 2019 capital budget reserves for Future Projects to $360,000. The current Replacement Reserve Plan projects expenditures of $6,000,000 in 2028 for road replacement and $2,000,000 in 2029 for the Cap’n Sams Inlet relocation. Setting aside funds on a continuing basis for these projects and others, which we know will have to be undertaken, reflects solid and responsible fiscal management and best practices and helps to moderate future amounts needed to build reserves in out years to fund these necessary projects.

2018 Budget Surplus: Preliminary 2018 total expenses project that SIPOA may have an operating budget surplus in 2018; we will not know this definitively until March or April of 2019. A budget surplus, if any, would be the result of four factors. Higher than expected contributions to capital from real estate transactions and higher than expected annual contractor access fees are, as a matter of ongoing practice, transferred to capital reserves. For 2019, any surplus resulting from better-than-expected debt collection and higher interest income will be similarly transferred to capital reserves. Setting aside any budget surplus funds in the Replacement Reserve Plan to help fund future projects may also help reduce the size of potential increases in future assessments. Alternatively, budget surplus funds may be retained to help provide a cushion should unbudgeted needs arise in 2019.

Should you have additional questions regarding the proposed 2019 budget, please send an email topubliccomment@sipoa.org. This is important so that your management and Board members can view and respond to your concerns. We continuously strive to keep our eyes and ears open to the sentiments of the community. Your concerns and questions can be addressed to your best satisfaction by sending them to us directly.

In conclusion, your Board of Directors urges you to support and vote in favor of the 2019 Budget. We look forward to greeting you at our February 16 Annual Meeting.

-Submitted by SIPOA Board of Directors