Agenda - 11-05-2009 - 41 - Laserfiche WebLink

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4 ~ Financial Impact Please refer to ARI's 2009 budget, attached. • Please note that ARI used a projected 85% occupancy rate. This is a conservative projection. To have an occupancy rate as low at 85%, we would have two or three units vacant for the full year. Our history is much better, with few vacancies. The vacancies that do occur are filled within a month or two, depending upon what work is needed to refurbish the unit. Given the demand and the waiting list the property manager maintains, we would expect higher occupancy rates, but for budgeting purposes, we err on the conservative side. (Please recall that the property manager maintains a waiting list of eligible tenants, so units that become vacant are filled as soon as painting and repairs can be done.) • The audit is the highest administrative cost ARI incurs. Both ARI and EmPOWERment use the services of Koonce, Wooten and Haywood, LLC, CPAs. Our auditors agree that the cost to EmPOWERment will increase after merger, but will not be as high as the current combined costs of separate audits. • Bookkeeping is the second highest administrative cost. Because EmPOWERment has a Financial Manager and can perform these services in-house, this line item on ARI's budget will be eliminated. The property manager and financial manager work closely together. • ARI pays almost $1,000 a year for Directors and Officers Insurance. This cost will be eliminated after merger. • ARI currently pays EmPOWERment $50 per unit per month ($9,000 per year) for management services. This line item will be absorbed by EmPOWERment after merger. • ARI budgets $3,000 for "Miscellaneous" expenses. That title describes it well-this is a catch-all provision. In 2008, no expenses were recorded under that category. The $3,000 will be absorbed by EmPOWERment after merger. • Repairs and Maintenance present a challenge to budget writers. In 2007, ARI spent $6,240 on Repairs and Maintenance. In 2008, ARI spent $4,635. The 2009 budget shows a high amount for this line item, $16,240. ARI uses azero-based budget and since Repairs and Maintenance is always an unknown, any funds not otherwise accounted for on the budget are added to that category. We would expect actual expenses to be closer to the actual figures of recent years. Another look at the 2009 budget for ARI shows that fixed costs associated with the properties (HOA dues, assessments, insurance on properties, interest expense, taxes and utilities) total $41,524. Compare that figure to the projected gross rental income of $69,278. The difference of $27,754 suggests that with reduced administrative costs, several thousands of dollars will be available to EmPOWERment as net rental income. Please note: EmPOWERment's property manager is already performing all management services for ARI; thus merger will not put an additional burden on EMPOWERMENT staff.