2020 Future Fiscal Impacts - Overview

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. Over the course of 2018 and 2019, several regulatory and industry changes impacted Homeowners Associations throughout the state. These impacts include California minimum wage increases, Defensible Space standards enforced by the Orange County Fire Authority, water rate increases from Santa Margarita Water District, and landscape industry strain. The Board of Directors is committed to preserving SAMLARC’s quality of life, safety, and values; however, these challenges impacted SAMLARC’s 2019 Budget and will continue to impact the SAMLARC Budget in the coming years. This article the first in a series exploring the effects of these impacts on the Association. Minimum Wage California’s minimum wage schedule was enacted in 2016 and will carry through 2022. By that time, the minimum wage will be $15 per hour – a full 50% increase from the starting wage of $10.50. This impacts not only minimum wage workers in retail and manual labor forces, but also the vendors with whom Homeowners Associations contract. These professional service providers are forced to increase their contract rates to counter the effects of minimum wage and associated wage compression in order to comply with expected service levels, and the costs are passed on to clients such as SAMLARC. Defensible Space Standards of OCFA The Orange County Fire Authority (OCFA) is enforcing more stringent Defensible Space guidelines in Associations adjacent to wilderness areas. In late 2018, OCFA notified SAMLARC of seven (7) zones required to comply with these requirements. SAMLARC is on schedule to complete work in all of the zones by late 2019. While the unanticipated cost of the work was able to be absorbed in the 2019 Budget, it is anticipated that OCFA will continue its inspection efforts in 2020 and beyond, at considerable cost. SAMLARC has developed a Perimeter Defensible Space Master Plan to proactively address perimeter areas that may be required to comply with the standards, and working with representatives from master-planned communities to clarify and formalize the standards and approval processes. Water Rate Increases of SMWD Santa Margarita Water District (SMWD) anticipates that a rate increase will be implemented in January 2020. The increase is attributed to a combination of factors, including higher water costs from the Metropolitan Water District of Southern California, investment in developing local supply, SMWD Capital Projects, and general inflation. In spring of 2019, SMWD approved the implementation of previously-authorized, wholesale water pass-through and power surcharges. The SMWD Board of Directors will formally consider the water rate increase in late 2019; however, SAMLARC is preparing to accommodate the proposed increase in the 2020 Budget. ​ Landscape Industry SAMLARC’s property includes more than one hundred (100) acres of parks, trails, medians, and greenbelts. SAMLARC partners with professional landscape service providers to maintain the landscape. However, the combination of the community’s age and industry labor shortages have interrupted the efficiency and quality of landscape services. Many of the plants throughout SAMLARC were planted over thirty (30) years ago and require supplementary care, yet tensions in the landscape industry (created by minimum wage and wage compression) have led to a shortage of workers willing to perform the labor. As a result, the costs of landscape service providers and plant material replacement have substantially increased. A 15 Year Landscape Revitalization Plan is in development, with implementation deferred to a future year. ​ Looking Forward The combination of these external impacts are outside of SAMLARC’s control, and will continue to affect the Association in 2020 and beyond. The Board of Directors is committed to fulfilling SAMLARC’s purpose without compromising the quality of services that Members expect. This article is part of a series on anticipated external impacts and associated cost increases that will affect SAMLARC in 2019, 2020, and beyond. Additional information and updates on these impacts will be made available at SAMLARC.org/impacts as they develop.