Kingston Student Housing Co-operative: Budgeting and Governance in a Global Crisis^*

Source: Statement of operations: KSHC (2020). Balance sheet: Created by the authors (2023).

Notes:

Accommodation fees and half-year fees: KSHC operates on an 8-month standard schedule following the school's September–April timeline (the year). During the summer, spaces can be rented on a month-by-month basis. Potential renters join KSHC by becoming members and sign 4-month (half-year) or 8-month (full-year) leases, which cost $3,474 and $5,545, respectively. The difference in cost for a one-semester rental is called the “half-year fee” and is imposed to cover the risk that a room rented for a 4-month term will be vacant in the other term.

At the time the original budget was created, Brent was confident that KSHC would be able to fill 168 of its 171 rooms. It was projected that all but 15 of these would be full-year leases, and that all 15 half-year rooms could be rented in both semesters.

Differential fees: There is also a fee differential applied to rooms of different categories. Room sizes vary from Extra Small through to Jumbo, with smaller rooms receiving a discounted fee, while members staying in larger rooms pay a premium. There are also 43 rooms considered Regular, which apply no differential. In addition to the size categorization, five of the Regular rooms are Unlocked, giving a $400 discount. This year, all unfilled rooms are Regular, and none are Unlocked. The room rate differentials are as follows:

Premium fees: KSHC owns two buildings with apartment-style housing. The 14 rooms in these apartments are always 8-month rentals and command premium fees of $800 per year. The budget draft assumes that all 14 of these rooms will be rented, for $11,200.

[2] Green energy fees are fees charged per member ($40 per member in each of the two semesters, with no fee in summer) to help support the organization's sustainability efforts.

[3] Meal plan revenue: The KSHC meal plan is the heart of the organization's social scene. Enrollment in the meal plan entitles a member to 16 meals per week (breakfast, lunch, and dinner Monday–Thursday; breakfast and lunch on Friday; brunch on Saturday and Sunday) as well as weekly food staples provided by KSHC (lentils, pasta, peanut butter, bread, tea, etc.). Members living in meal plan houses pay $1,440 per semester and agree to work 3 h per week to support the meal plan. This work includes cleaning the dining hall, cooking food under the supervision of KSHC's professional cooks, serving food, washing dishes, repairing and distributing weekly food allotments, and cleaning the dining hall.

Not all houses are meal plan houses. In the original budget, Brent had estimated that in the coming year 43 of the 168 members would live in non−meal plan houses. This is in keeping with the standard mix of meal versus non−meal plan members. Rather than the meal plan fee, non-plan members pay $170 per term and are entitled to 10 meals per term at the dining hall. This revenue is also considered part of meal plan revenue. Meal card and door fees are charged to nonmembers who wanted a multi-meal card or a single meal, respectively.

Meal plan expenses: The meal plan is intended to be a self-sustaining activity, either breaking even or earning a small excess of revenues over expenditures each year.

Food at KSHC is sourced from local sellers whenever possible. Meals are always cooked with members' dietary restrictions and preferences in mind, and each meal offers meat, vegetarian, vegan, and gluten-free options. Food for meal plan members is projected to cost about $75,000 per semester, based on 125 meal plan members (approximately $600 each), and about $2,500 per semester for non−meal plan members, based on 43 non−meal plan members (approximately $60 each).

The KSHC kitchen is commercial grade and complies with the same health standards as a restaurant. Supplies expenses, projected at $9,800 in the draft budget, include short-lived items that wear out relatively quickly (cups, plates, washcloths, cutlery). The estimate given is for a typical year with full usage of the facilities.

Approximately $150,000 of the organization's salaries relate to the kitchen. A team consisting of a kitchen coordinator and three kitchen assistants works in the kitchen, staggering their shifts to allow them to provide full service during the organization's busiest times. Salaries in this category also include managerial and administrative positions to oversee the kitchen.

The $3,600 cost of kitchen equipment relates to the commercial-grade equipment purchased or rented during the year. The organization has multiyear operating leases for its heavy-duty dishwasher, coffee machines, and juice dispensers, which are set with suppliers.

[4] Summer rentals: During the summer months, when most members are away, KSHC rents rooms on a per-month basis. Members staying during summer pay $300 per month, while nonmembers pay $350. There are no room premiums or discounts during the summer. Members living away for the summer can also store their possessions in their room over the summer for $150/month. The draft budget projects that there will be 25 members and 25 nonmembers living in KSHC, with another 15 members using their rooms for storage.

[5] Parking revenue: Several KSHC properties have parking spaces, which the organization rents throughout the school year and summer months. The organization charges $140 per term for members, $200 per term for nonmembers who are students, and $280 per term for nonmembers who are not students. There are 30 spots in total, with the groups using 10, 5, and 15 spots, respectively, each term. Brent is not sure what the demand will be because of the COVID-19 pandemic.

[6] Laundry and wi-fi revenue: KSHC has a thriving laundry program to benefit members. There are a total of 12 sets of washers and dryers located in the basements of designated KSHC houses. All residents pay a laundry fee of $50/term (including in summer), which gives them unlimited access to these high-efficiency machines as well as use of the scent-free, environmentally friendly, hypoallergenic detergent that KSHC purchases in 5-gallon recyclable drums. The organization is very proud of the environmental impact and savings to members that come from this program, which has been running for the past 7 years.

More recently, the organization decided to take steps to provide affordable and reliable wi-fi to members. KSHC bought several industrial-grade receivers and transmitters and made a deal with a local Internet company to provide its fastest Internet package to KSHC. Like the laundry program, those staying in KSHC in each of the terms, including summer, pay $50 for usage of the system. The system has been working well so far, providing a strong signal and preventing the conflicts that sometimes arose from each house trying to organize its own Internet usage.

The wi-fi equipment was purchased in the prior year at a cost of approximately $17,000 and was being depreciated straight-line based on a 3-year useful life and $0 residual value. Wi-fi expenses are the direct costs for the license to use the equipment and for the Internet service. KSHC has 10 “nodes,” each of which costs about $895 per year when in active use. If the organization does not have members at some houses and cuts Internet there, it can possibly cut one or two nodes, paying only a standby fee of $350 for these.

[7] Policy fines and meal plan fines: Members of KSHC agree to abide by its policies, and those enrolled in the meal plan further agree to work 3 h per week in the kitchen. Violation of these policies results in fines of $50 for a first offense, $100 for a second, and $150 for a third and beyond. Each year, the organization budgets for the likelihood that some people will incur fines.

[8] Property insurance cost: KSHC pays insurance on each of its properties to protect against loss in case of fire, theft, and so forth. The organization pays a rate of about $2,000 per house each year for occupied houses and $3,000 for the kitchen. If a house were to be left unoccupied during the year, Brent is confident that its insurance could be negotiated down to about $1,350 for the year. The kitchen might be insured for $2,000 if only professional staff cooked there, or $1,000 if no activity occurred.

[9] Mortgage interest: The organization pays interest on its outstanding mortgage balance of about $768,000, projecting $30,500 for the coming year. After speaking with the bankers, Brent believes that they would be willing to defer about $10,000 of interest payments during the year.

[10] Municipal taxes: KSHC pays taxes on each of its properties, with separate taxes charged for the kitchen, normally totaling about $175,000 per year. Brent thinks that there might be up to a 40% reduction in taxes as COVID-19 relief.

[11] Power/heat/water: Although KSHC has worked hard to reduce its footprint, there is still a minimum cost associated with operating the houses. There is a base charge of about $3,000 per year for each active house, plus $400 per member throughout the school year and $100 per resident in summer. If a house were left unoccupied, there would be a base cost of about $1,400 per year, mostly to keep the house from getting damp and the pipes from freezing during the winter.

[12] Depreciation: KSHC owns 21 houses in downtown Kingston, including both the land and buildings. In addition, the company owns significant equipment, furniture, and fixtures and vehicles that are used in the normal course of business. The costs of these capital assets were as follows:

Many properties owned by KSHC were purchased in the 1970s or 1980s, when the Kingston housing market was much cheaper than it is today. Brent estimates that the properties have a fair market value closer to $30 million than to the $3 million cost. As depreciation for the organization is straight-line, Brent does not think any depreciation could be deferred or mitigated.

[13] Housing supplies for the year have a house component and a member component. Each house costs about $105 in basic supplies (dish soap, cleaning supplies), and each member costs about $20 in additional supplies like toiletries and additional cleaning supplies.

[14] Professional services refers to the annual statutory audit as well as periodic legal costs for review of contracts and by-law compliance. Brent anticipates only the audit costs of $12,500 for the current year.

[15] Furniture, maintenance reserves, maintenance supplies, and contractors: These are expenses paid to replace furniture as it becomes damaged or worn, keep KSHC buildings in proper running order, and perform major renovations to properties.

Furniture: The draft budget includes funds to replace fire safety equipment set to expire in the year, as well as to replace furniture throughout the houses, with costs estimated as follows:

To try to save money, Brent is now forecasting that the company will purchase one set of new fire equipment, five bed sets, and a replacement bathroom cabinet and kitchen chairs. KSHC will no longer purchase any dressers, desk chairs, or desks. All items purchased will have the same cost as in the forecast.

Major maintenance includes significant work to replace existing KSHC systems and pieces of equipment as they became due. In the draft budget, Brent had planned to replace two furnaces ($5,500 each), install new flooring in several houses (totaling approximately $30,000), change out older doors and windows in several houses (costing approximately $7,000), and install new eavestroughs (costing approximately $12,000). An additional $35,000 is allocated for unexpected major maintenance projects that may emerge during the year.

Even with the lower residency in mind, Brent would like to install at least one of the new furnaces since they will replace older models that are less efficient and run on gas rather than electricity. After assessing the houses, it was decided that only one of the sets of flooring (totaling $5,500) needs to be replaced in the current year, while others can wait. Likewise, the doors and windows are in good enough shape to endure one more year of use. Finally, the eavestroughs are in good enough condition to remain in place until the 2021/2022 year.

Maintenance supplies include the purchase of 110 gallons of exterior paint at $50/gallon; incidental paint supplies of $1,000; replacement door locks, handles, and keys, costing $1,000; and general maintenance supplies of $16,000. Based on the reduced activity due to the pandemic, Brent believes that KSHC will need to purchase only 10 gallons of paint and no new paint supplies. Replacement of door locks, handles, and keys will be less during the year, totaling $400. Finally, general maintenance supplies should cost about $5,000 for the year.

Although KSHC's maintenance team has considerable ability, they rely on contractors who are either experts in their field or possess specialized equipment or inventory that the organization does not have. These services include duct cleaning, replacing carpet runners in common areas, and snow clearing for KSHC properties and parking spots. Brent believes that services like snow clearing ($14,000), waste removal ($8,000), and fire escape maintenance ($2,500) are essential and will need to be continued. He believes that the remaining expenses of $30,500 could be cut in half during the year due to lower demand.

[16] Van expense: The organization has two vans that are used to support maintenance work and move staff and supplies. An insurance policy covers both vans and costs $2,600. Licensing the vans costs $165 per vehicle. Fuel for the vehicles is expected to cost approximately $800 for one van and $500 for the other. Brent had planned to paint one van with the KSHC logo at a cost of $2,100, and basic repairs and maintenance are budgeted at $500 per vehicle. He now thinks that they will forgo the logo work and utilize only one of the vans in the year.

[17] Salaries: The organization's expenses include kitchen, maintenance, member services, finance and administration, and management, and total $455,000. Benefits are 16.5% of salaries.

[18] Board member expenses: These expenses typically include stipends and other compensation for board members (about $7,500 for the year), two member appreciation dinners ($550 each), and social events, including KSHC-sponsored house parties, end-of-term functions, and other events ($5,100). The board has also spent $3,500 each year to send several members to a national conference in past years and allocated $500 each for green initiatives and board marketing. Brent thinks that, based on current health advisories, most of these events will be canceled this year.

To: Brent Bellamy, General Manager

From: Maggie Liu, Bookkeeper

Subject: Retirement

Hi Brent,

I'm writing this letter to give you good notice of my plans to retire at the end of October of 2020. I wanted to give you plenty of notice so that you can find someone to take over my duties.

I am very proud of my time with KSHC. It feels like 10 years have just flown by. My husband and I have finally talked and decided that the time is right for us to retire and build our dream home. I will miss you, all the staff, and the members who have made my time here feel so special. I hope to be able to drop by and visit sometimes once the pandemic is over with.

I know that you've been considering redistributing some tasks between staff members, and now might be a good time to decide if some of my duties can go to others. You may have to contract for someone to do some of the core bookkeeping functions, or take over my responsibilities entirely.

Thank you so much for many great years at KSHC, and I wish you and Co-op all the best going forward.

Best,

Maggie

[Signed Maggie Liu]

Source: North American Students for Cooperation (n.d.).

Source: KSHC, Internal Board Package (2019).