Many Panama City Beach condominium associations are likely to see budgetary shortfalls in the near future. Some already have. In the overall scope of things, Panama City Beach should be in relatively good shape compared to other areas of the state. The most common reasons for our budgetary shortfalls are:

An increase in costs to run and maintain the condominium
Improper budgeting and funding of reserves
The percentage of owners not paying their association fees

It is important to understand that budgetary shortfalls are relatively minor. It is only when the association looses its ability to raise capital from owners (thru increased association fees or assessments) that they get into trouble.

Each building is going to have a different budget to operate from. The price of condominium insurance seems to be every association's favorite explanation for an increase in association fees. Upon closer review one may find condominium insurance has gone up marginally. It should have very little impact on the fee increases. While flood insurance has gone up, each association gets rebates back at the end of the year for their flood insurance policies. When the rebates are deducted from the total premiums paid, the increase is a very small part of the overall increase in fees. If one compares the budget and makes sure that the rebates are properly applied in the budget, the increase in cost may be found elsewhere. *

The reserve balances have not been managed properly in some associations. We have already seen several associations across the beach raise the association fees significantly to make up for a reserve shortfall. In several cases the fees were increased to make up for the shortfall over a 4-8 year period. If you are in the market to purchase a condominium in a building that has done this, it is easy to figure out how much extra you can expect to be paying.

For example: if the budget was increased on a particular unit $500 per quarter for an estimated 5 year period to cover the shortfall, then:

the annual cost is $500 x 12 months ($6,000).
$6,000 X the 5 year period is $36,000.

Out of the price you agree to pay for the condominium, you need to understand that you will be paying an additional $36,000 in association fees to cover the shortfall that occurred before you purchased the condo.

Finally, let's discuss the percentage of owners not paying their association fees. Many associations have to increase quarterly fees or charge assessments to make up for a budgeting shortfall. In some cases this is very minor. In other cases it is a substantial number of owners. If this continues without a timely resolution, it can turn a significant problem. For a more detailed explanation of this topic you can read my article "Condo Foreclosures, Short Sales, and owners who aren't paying association fees".

Overall, the Panama City Beach areas impact by troubled associations should be minor. Most of the condominiums we have are very desirable. This allows us to work our way thru the foreclosures, short sales and owners who have fallen behind on their association fees without seeing systemic failures in condominium associations. If you are in the market to purchase a condominium, make sure you understand the health of the condominium association that you are buying into. It can be very easy to compare the budgets for the past few years and see any changes. You can also ask the association for the current number of owners behind on their fees. Your buyer's agent should also be able to help you gather this information. Keep in mind that the current association fees and assessments could be part of the reason you are seeing the prices being offered.

* I am in now way implying that rebates are not being handled properly by associations or applied to the budget at the end of the year. There are occasions which do not apply these rebates to the current years' operating budget because the association does not feel comfortable in assuming those rebates will be in the same ballpark as the prior year. This can lead to a misleading budget that temporarily shows a larger increase in insurance costs than the end of year reconciliation will actually show.