Fiscal Impacts to SAMLARC: Contract Increases


The SAMLARC community includes thirteen (13) parks, four (4) Junior Olympic sized pools, the 31 million gallon Lago Santa Margarita, and the Lago Santa Margarita Beach Club. Additionally, SAMLARC owns and maintains more than three hundred sixteen (316) acres of community landscaping, which includes medians, parkways, greenbelts, and parks. The parks have features such as picnic shelters, restrooms, barbecues, athletic courts, and sports fields. SAMLARC was designed with community relationships in mind, and these important spaces offer families and friends the opportunity to gather together.

To ensure that SAMLARC’s amenities and landscape meets community standards and expectations, SAMLARC contracts with professional service providers. These vendors perform services year-round, such as janitorial and security services, as well as landscape, sports field, and pool maintenance. However, minimum wage increases and rising costs of business have impacted these providers’ ability to operate at current contract rates.

Many professional service providers employ a labor force of hourly, minimum wage workers. In 2016, the state of California implemented a law to raise minimum wage. Historically, wages have risen from 1% to 3% annually. However, the recent wage increase schedule will create a 50% increase over the span of six years – an unprecedented increase. The Wage Schedule will bring wages up from $10 per hour in 2016 to $15 per hour in 2022. Roughly one-third of California employees are compensated at minimum wage, and the increases are affecting all industries, from retail to food service to homeowners associations.

Minimum wage increases directly affect businesses’ ability to retain and fairly compensate a consistent pool of workers. First, as national unemployment rates decline, fewer individuals elect to fill minimum-wage jobs in labor-intensive fields. Companies are then forced to compete for a diminishing pool of workers, offering higher rates of pay than mandated by the state. That tension contributes to wage compression, caused when employees are compensated at different rates due to external forces, regardless of skill or tenure. Not only is the employer required to increase their minimum wage workers’ pay, but the compensation of tenured employees may also need to be readjusted to create a more equitable pay scale. Readjusting the pay scale affects the company’s operating budget, which in turn necessitates an increase in contract pricing. Those increased costs are then passed on to clients such as SAMLARC.

Though SAMLARC’s professional service providers strive to perform efficiently, they are not able to sustain expected service levels when factoring in the impacts of minimum wage, rise in business costs, and existing budget constraints. As long as possible, vendors endeavor to forestall the impact of wage/industry costs on their relationships with clients. However, after weathering three out of the six consecutive years of wage increases, contract increases have become unavoidable for most of these companies.


As part of SAMLARC’s annual budgeting process, the Board of Directors prepares for potential contract increases wherever possible. Exclusive of landscape services, the Board anticipates that in 2020, the anticipated total contract increases to be $144,406. This amount is not only necessary to sustain essential services, but to realign service levels with the expectations of the Board and SAMLARC community. By maintaining successful relationships with professional service providers, the Board seeks to uphold SAMLARC’s commitment to providing Members with a safe and beautiful community.


SAMLARC’s specific and primary purpose is to provide community services and facilities for the benefit of homeowners within the community and preserve the value, desirability, and attractiveness of all properties within SAMLARC. The Board of Directors is committed to upholding this purpose and appropriately balancing the Association’s needs and resources. This article is part of a series on anticipated external impacts that will affect SAMLARC in 2019 and beyond. Additional information and updates on these impacts is available at SAMLARC.org/impacts


#futurefiscalimpacts

22342A Avenida Empresa, Suite 102A, Rancho Santa Margarita, CA 92688

(949) 709-0010

© 2018 Santa Margarita Landscape and Recreation Corporation