CFO outlines inflation, wage pressures and reserve projections as Sun City West budget review continues

Cliff Swan, the association’s finance lead, told the governing board on April 11 that “two of the biggest things that impact our expense structure are inflation and what happens at the state in terms of minimum wage.”

Swan walked the board through several budget drivers: industry-specific inflation for recreation and leisure, market wage competition and the association’s reserve-study mechanics. He said Sun City West’s fully funded reserve-balance projection at the end of the year is approximately $63,000,000 against total asset costs the presentation listed at about $115,000,000.

Key figures presented: Swan said membership revenue totals about $16.4 million in the budget packet (the presenter noted that a separate $1.2 million item was already excluded from that roll-up), owner members number approximately 26,000 with a total membership roster quoted at about 29,000, and that the association’s operating inflow is projected to provide roughly $8.1 million cash to fund capital projects and reserves.

Wages and benefits: The draft budget contains a 4% pool for payroll (to accommodate pay adjustments across positions), plus a budgeted 50-cent increase for minimum wage (described as an estimate), an estimated 20% increase for workers’ compensation costs and an 8% budget increase for health insurance. Swan said the association’s pay levels are “12% below the average in our latest labor study,” and that the market is competing for similar positions with higher pay at some large employers.

Pools, golf and operating costs: Swan provided amenity-level operating-cost context, saying pool-related operating costs (pumping, filtering and heating) amount to roughly $400,000 annually, while the golf operation was shown as an operating cash outflow of about $1,098,000. He emphasized that both categories are subsidized by dues and that pools are expensive to operate across the association’s rec centers.

Reserve implications: Swan explained how new assets and enhancements affect the fully funded balance: new items not on the reserve study are a dollar-for-dollar draw on reserves when funded and later must be added into the fully funded balance (increasing the fully funded balance denominator). He noted the board's policy target is a fully funded reserve threshold of 40 percent and said that, on balance, the five-year projection in the packet showed the reserve balance holding near policy levels while funding multiple irrigation projects and other work.

Board concerns and clarifications: Directors asked for more specificity about the COLA and merit components, and several directors emphasized that the 4% pool creates a fund that management will allocate by performance and position. Director Novello and the Budget & Finance Committee said they had reviewed the wage-pool assumptions across multiple committee sessions.

Why it matters: The reserve balance, wage decisions and inflation assumptions affect dues modeling and long-term capital funding. Several directors urged residents to review the budget packet’s assumptions page during upcoming budget forums.

Ending: Swan said staff will carry forward the assumptions, continue committee review and return proposed specifics (including procurement steps and wage distribution recommendations) for board approval in later meetings.