The first 50 years of Lake Viking was celebrated this summer in grand fashion. The first 50 years includes the lake’s initial construction, filling with water sooner than predicted, new home additions every year and decades of rest, relaxation and great family fun. We are truly blessed with a wonderful place to live and recreate.

Just like our own personal journey of growing up, it is wise to plan for our golden years. Most people would agree that the earlier you plan the better results you will achieve! Unfortunately, we, as a lake community, have not done a great job planning for our future. We have, as many people do, tended to operate more on a year-to-year basis, trying to get by with as little increase in dues/assessment as possible, and at the same time expect our lake manager and his staff to accomplish great things in our community. It is time for change. We need to act our age and start planning more effectively for our future.

Rome was not built in a day, nor will a new financial plan year-one resolve all of our issues. We need a well thought out five year plan that is transparent, accountable and flexible to meet the ever changing needs of the community. The plan must carefully balance short term operational needs with longer term sustainability concerns. This is never an easy task.

Plan Formation, the Finance Committee

In April of 2017, a slightly larger Finance Committee began looking into concerns shared at the March 2017 annual meeting. Each month, the committee would spend several hours discussing concerns and potential ideas. Each meeting concluded with homework assigned and research to be gathered by various committee members for the next meeting.

The first six months were slow going as we considered all the issues from the perspective of the various property owners at the lake. Understanding what was at stake, and caring deeply about the future of our lake, the committee dug in and decided to meet twice each month until we were properly prepared for the next annual meeting scheduled for March 2018. During the past nine months, the entire committee spent untold hours in meetings, researching and gathering data to try to find solutions to some very long-term financial concerns expressed at the annual meetings.

As a result of the committee’s hard work, we are pleased to propose a Five-Year Financial plan for our community. While each committee member has varied opinions on what should and should not be done, we are in 100% agreement that this consensus plan will help move us forward to enjoy the next 50 years at Lake Viking.

Five-Year Goals

The plan begins with specific goals we hope to achieve over a five-year period.

Goal 1:
Utilize our annual revenue and expense budget to maintain the current state of the lake.
Goal 2:
Increase annual dues/assessments by 4% each year and cap expense increases to 2% each year to properly fund rising costs and create an annual surplus.
Goal 3:
Use the annual surplus to add to our cash reserves for longer term stability.
Goal 4:
Create a new fund for deferred maintenance/capital projects and fund it with surpluses from the budget and a set of new user fees.

Rationale:

Goal 1 – Utilize our annual revenue and expense budget to maintain the current state of the lake.
The annual budget has been viewed by many as the cure-all for not only maintaining the existing property, but also handling major repairs and new capital projects. No city, school, church or any other annually funded membership organization can afford to fully fund capital projects and deferred maintenance, and yet that is what we have asked our lake staff to do.
Historically, when increases in dues/assessments are asked for, the community rightfully asks why. A lack of understanding of the complexities of lake operations plays a role, and so does poor communication and a lack of planning. To clarify goal 1, the purpose of the annual dues/assessments is to only maintain the current state of the lake, not to handle larger deferred maintenance issues that arise or fund capital projects. With this goal understood, the next three goals make more sense.

Goal 2 – Increase annual dues/assessments by 4% each year and cap expense increases to 2% each year to properly fund rising costs and create an annual surplus.
Large increases once every three to four years is causing systemic issues operationally and financially, not to mention making our annual meetings challenging and sometimes unproductive. We simply cannot get by each year “hoping” we break even and not erode our ever shrinking surplus.
This plan proposes a five-year horizon from which to make single year decisions. While NO increase is included in this plan for 2018, it does include a 4% increase in each of the next four years. For 2019, that would equate to $2.25 increase per month, per lot.
On the expense side, we are budgeting an annual increase in expenses of 2% to do a better job of keeping up with inflation and take care of our staff.
Bottom line: Each year we will attempt to manage the income and expenses in such a way as to generate enough surplus to add money to the unrestricted surplus. In years where the weather cooperates, large equipment doesn’t break and things go well enough to generate a surplus beyond the stated targets, that money will be moved to a separate deferred maintenance/capital projects account.
Important note: The annual budget and dues/assessments would still come before the association and require approval each year.

Goal 3 – Use the annual surplus to add to our cash reserves for longer term stability.
Over the past 10 years, the cash surplus, aka operating reserves/security blanket or emergency fund has ranged from a low of $25 thousand to a high of $331 thousand, and averaging $266 thousand. Considering the potential financial liabilities of managing a community of this size, the level of cash reserves places the association at unnecessary risk.
We want to avoid potentially dramatic changes in dues/assessments at the point of a crisis by starting to save in smaller increments now, and over the next five years.
A threat to the dam or other threats to the lake water can cause catastrophic damage to the community and its financial viability, not to mention significantly reduce property values. We are 50 years old — we are not getting any younger! We need to start saving now.

Goal 4 – Create a new fund for deferred maintenance/capital projects and fund it with surpluses from the budget and a set of new user fees.
As noted earlier, no city, school, church or any other annually funded membership organization can afford to fully fund capital projects and deferred maintenance out of the annual budget.
When deferred maintenance or capital projects must happen, organizations like Lake Viking either raises taxes, sell bonds, start a fundraising campaign, or borrow money and hopefully pay it back over time. These options do not seem to fit our lake environment, and yet we must begin a more proactive method for dealing with these unfunded items of deferred maintenance and or capital projects.

Part I Funding:

New user fees, 100% of fees collected will be placed into the deferred maintenance/capital projects account. In researching other lake communities, it was discovered that it is common to charge user fees for vehicles on the lake, vehicles on the roads and docks floating on the lake. We are proposing:

  • Dock fee $50.00 per dock per year Approx. 500 docks
  • Watercraft, boats $50.00 per boat, first boat free Approx. 400 boats
  • ATV/UTV $25.00 per vehicle Approx. 150 ATV/UTV

We estimate that these user fees will garner approximately $50,000 per year.
The reason for these fees relates to the privilege of using these three categories of items and the corresponding costs associated with maintaining areas affected by that use. It is the concept of “pay to play.” A couple of examples include:

  • If a person owns a dock, they likely will use the lake more than someone who doesn’t have a dock thus the dock owners get more value from the lake and should pay more of the maintenance.
  • If a person owns more than one boat, they use more of the lake’s resources and thus should help cover more of the costs of the lake items.

Part II Funding:

Budget surpluses (above the annual reserves target) get placed into the deferred maintenance/capital projects account.
As mentioned earlier, in the event of a good year, after the reserves target is hit, any excess funds generated from the revenue and expense budget will be moved to the special deferred maintenance/capital needs account.
A complete annual accounting of this will be given at the annual meeting each year prior to voting on the annual revenue and expense budget.

Summary of Plan Specifics

2018

  • Vote to support overall financial planning document and the five-year financial plan.
  • Vote to approve the current year revenue and expense budget.
  • No increase in dues/assessments.
  • Implement new user fees.

An engineering company will be hired to provide an in-depth study and corresponding plan for silt placement and dredging operations. The study will be paid for out of the current year budget, approximately $70 thousand to $90 thousand, replacing the dredging expenses because no dredging is scheduled for 2018 due to silt placement issues. Long arm cleaning will continue as needed.
Begin assessing future dam and road costs to begin to assess timing and affordability and financial planning.

2019

  • Review and assess five year plan, surplus, deferred maintenance, adjust accordingly.
  • Vote to increase dues/assessment (4%) & approve the expense budget (2%).
  • Depending on costs and deferred maintenance funds fees collected, begin implementing the new engineered dredging plan.

2020

  • Review and assess five year plan, surplus, deferred maintenance, adjust accordingly.
  • Vote to increase dues/assessment (4%) & approve the expense budget (2%).
  • Depending on costs and deferred maintenance funds fees collected, begin implementing the new engineered dredging plan.

Conclusion

We are 50 years old; we need to begin planning for our golden years. There are no silver bullets, quick fixes or easy solutions. If we live, play at or enjoy the lake, and we want to enjoy the lake for the next 50 years, we need to fund it properly. If we want to see our property values continue to rise over time, then we need to protect our investment.