By Melanee Cottrill, Civitas
Every district – whether it be property, business, or tourism – formed under California’s 1994 Law has a Management District Plan. That Plan is the guiding document… the constitution… some even say the bible… for your district.
But what’s really in that thing? After all, it is rather long. And a lot of it is legalese, written by the most verbose attorneys around. Who wants to read that?
We certainly don’t expect you to memorize it, but there are a few key things you should know about your Plan.
The Budget
Every Plan has a budget, usually broken down into 3-6 broad categories, like marketing or maintenance. The budget is typically shown in dollars and percent by category; for example, in a $100,000 budget, administration might be shown as 10% and $10,000. Most Plans acknowledge that the exact dollar amount is hard to predict, and base the budget on the actual percentages rather than the dollar amount.
You should know that most Plans allow for some flexibility in the budget, but it is limited. Typically, a certain percentage of the budget can be re-allocated between categories (usually 10-15%). For instance, in a $200,000 budget with a 10% re-allocation allowance, up to $20,000 could be moved between categories.
You should also know that some Plans restrict the amount that can be spent on a particular category. This is most commonly found in Administration and Collection Fee line items. Take a careful look at the budget and wording in your Plan to make sure you are in compliance.
The Assessment Rate
Most assessment administration is done by the City or County, so you probably haven’t had to spend too much time pondering the particulars of your assessment rate, outside formation and renewal efforts. But, your Plan includes all of the details on the rate. Who pays it, who doesn’t, and whether the rate can change are all hidden in the depths of your Plan.
You should know, that many Plans allow for an annual increase in the assessment rate. The increase is generally between 3 and 5 percent. Implementation methods vary, but are often as simple as a vote by the Board and a notation in the annual report. If your budget is lagging a little behind, or your service costs are increasing, be sure you know if and how you can increase your rates.
Services
Every Plan contains a broad description of the services to be provided. Descriptions create big buckets that give the Owner’s Association a lot of flexibility in actually implementing programs. Plans don’t often go into specific details, such as which magazine to advertise in or how often the sidewalk will be pressure washed, but on occasion they do.
You should know that the language in some Plans either mandates or prohibits certain services and improvements, or provides specific guidelines for their implementation. Read the service and improvement descriptions in your Plan carefully as you implement your activities.
Management
Every Plan has a governance section, wherein the nonprofit is named and basic guidelines for its structure are given. Typically, this will include requirements for the Brown Act, Public Records Act, and annual report. Although these requirements apply regardless of whether they are stated in the Plan, they are parroted in the Plan to help make you aware of your management responsibilities.
You should know that many Plans prescribe a specific composition for the board, or a specific procedure that must be followed to elect your board. Be wary when changing your board composition or Bylaws – make sure you are not violating your Plan.
