Dear Trustees and Homeowners,
I have taken note of the content of the e-mails sent to all homeowners of TI by Brian Sears (Chairman) dated 21 November 2014 and dated 01 December 2014.
From the above letter from the Chairman dated the 21 Nov.2014, I was very surprised to read that the budget for the "Reserve Fund" (in the financial reports it's called Accumulated Surplus) is increased by only R 200 000 namely from R 5.3m to R 5.5m for the financial year of 2014/5, in spite of the fact that the "New Homeowners levy" of approx. R 450 000 and the "3% Levy" of R 270 000 combined already adds up to R 720 000 per year! A similar scenario happened in 2012 and 2013 although the R 720 000 income was less.
This abnormality concerned and persuaded me to look into the past financials. I herewith want to share my findings with you the homeowners of Thesen Island and hopefully I made it easy to understand!
At our AGM in 2010, we the TIHO decided in good faith to introduce a "New Homeowners Fund" and a "2% Levy" in order to prop up our reserves to R 10m (R 10 000 000) by 2021.
Our Treasury subsequently collected "New Homeowners Levy" and "Extra Levy of 2%" from date of inception up to the 31st of October 2014 just short of R 1,6m. If you add this R 1.6m to the existing reserves of R 4.94m we had in 2011 it would take us to R 6.54 by October 2014. Providing we feed the fund as envisaged, our "Reserve Fund" will be in the region of R 14m by the year 2021. (inflationary-escalation and interest after tax included).
But it did not happen!
Our "Reserve Fund" since inception in 2011 to October 2014 grew only by a meagre R 120 000 (from R 4.94 in 2011 to R 5.07 in Oct. 2014)
Our good intended collection of R 1.6m has been gobbled up with among others, new projects and considerable spending in excess of budgets. For some reason since 2011, our "budget overruns" were not considered in "our standard levy increases" and our "Reserve Fund income" had to come to the rescue.
In the financial year ending October 2014 alone, total expenses exceeded budget by close to R 1.3m.
For instance we exceeded the budget for Eden Telecom which does the security installations (not to be confused with our Security Contractor "Allsound Security" that mans our gate) in the last 3- years, by a hefty R 1.1m alone!
Our total Security budget which was in 2011 R1.6m, is for the year of 2015 a staggering R 3.36m, that is 33% or 1/3 of our total budget or R 5 900 per year for each Homeowner on Thesen Island in Knysna.
The Pezula Estate with 3-security gates manned for 24-hours and 25-cameras has a budget of R 1.4m for same period. Maintenance on the installation is seldom needed hence there is no contract required.
Is our security installation here on the island unreliable or too fragile that we need a maintenance contract of almost R 400 000 per annum in place?
Now we have only 2-options to solve the backlog;
Treasury prudently curtails spending, or increases the income!
My suggestion is to apply both options and to vote in the upcoming AGM for an average of R 300 per month special levy to make up the shortfall in our "Reserve Fund". This adds R 2m per year and would take us less than 2- years (providing spending is kept within budgets) to recover. In my view this is the cheapest way out and it comes with no further burden and luggage attached.
But only if;
a) Treasury adjusts the standard levy to cover budget needs without compromising the "New Homeowners Levy and the extra levy".
b) Treasury controls and adheres more strictly to budgets.In 2014 out of 71 itemised budgets, 49 were exceeded.
c) Possibly change the constitution to include that spending above a certain amount requires the approval of the homeowners. (quite common ruling)
d) Possibly change the constitution back to the original which says "any resolution of the trustees shall be carried by a simple majority of all votes cast".
e) Safeguard our wet-and parkland in the constitution.
Summary;
A shortage of money in the "Reserve Fund " was in my mind unnecessarily created. It has triggert a search for other income, causing questions and animosity.
Financially it make's no difference to our pockets. Provided spending was justified, we paid and still pay too little standard levy and we now have to make up for it.
And finally something to ponder about;
a) A once off levy is always more transparent to work with and saves tax. At today's tax rate, a R 10m saving in the Homeowners account attracts a payment of R 280 000 to SARS annually.
b) To irrigate 1-square meter of garden/lawn with 10-mm of water requires 10-litres of water. For 48 000 sqm you would require 480 000-litres ( 10x48000). That is 48 of the biggest tanks (10 000-litres) available on the market. So by watering only once with 10-mm the tanks will be empty and I now leave the rest to your imagination. (However your own harvesting at home for a small garden is probably worthwhile).
c) Coral Trees grow up to 90cm (3-foot) in Diameter. Look up on Google "coral trees" and familiarise yourselves with the characteristics.
Wish you all a happy festive season.
Max and Janneke Diethelm E-18
NB. figures are based on financials year ending 2010/1/2/3/4
Max Diethelm
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