News From Board of Directors

Friends and Neighbors,

Building upon the cash management strategies that were recently implemented and communicated last month,
your Board of Directors worked on the second major initiative, which is to conduct detailed insurance coverage
reviews and rationalization to ensure that we purchase only the coverage we need, eliminate coverage overlap, and
shop widely for the best policy rates. As a result of that work we have been able to secure new insurance policies
that cover our major risk exposures in a significantly more cost effective way. Insurance costs last year were
$6,310.40 and the budget for this year is $9,688. Rather than accepting this as an unavoidable reality, your board
went to work to dissect all the details of the coverages we had, detailed the risks and exposures we have as an
organization and a community, and shopped reputable carriers for the coverage we need.

Initial quotes were in-line with the budget forecast and we even received some no-quotes from some providers,
which came as a bit of a surprise. It became clear that our specifying $50,000 of property casualty coverage that
included wind coverage meant that there was only one carrier that offers commercial property insurance in
amounts that small. Because of that we were trapped with just this one carrier for all other products in the
package, including some that were overpriced and some that we didn’t need. This is what was driving our policy
costs instead of our fundamental coverage needs. Since we have very little property exposure, we dropped the
wind requirement and will self-insure for wind risk. Doing that opened up the playing field for lots of other carriers
and premiums dropped significantly for the same, and in some cases even enhanced coverage. Since we were no
longer tied to the only carrier that offered small property coverage policies with wind, the field opened up for all
other coverages. We scaled back Directors and Officers coverage to only what we need and the cost fell by more
than half. General liability and Crime coverage levels are identical to previous policies and premiums dropped a
little compared to last year and significantly compared to 2024 budget. We dropped Employment Practices
Liability, Hired/Non-owned Vehicles, and Workers’ Compensation coverage since Valencia doesn’t not have
employees and we don’t rent vehicles. If this changes at some point in the future we can always purchase that
coverage at that time, but for now buying that coverage is like lighting fire to your money. These coverages are
standard elements of the package that are appropriate for some Associations, but definitely not ours. To protect
the community from being sued by contractors’ employees in instances where the contractor does not have a
workers’ compensation policy for their employees, we have developed our own contracts and require that any
company doing business on Valencia property is required to have Valencia Neighborhood Association added as a
named insured on their Workers’ Compensation policy. Without that we will not do business with that company.
That’s a lot of inside baseball, but the net result of all of that is we now have the appropriate and prudent
insurance coverage at a cost of $4,483 compared to a cost last year of $6,310 and a 2024 budget of $9,688. Rather
than accept the renewal expectation we went to work and reduced the cost to budget by $5,205 or 54%.

Coupled with the $10,365 annual cost improvements associated with the strategic cash management initiatives
previously communicated, the Associations net cost has been reduced by $15,570 each and every year. Every
dollar of this efficiency will have a direct and positive impact on assessments each year going forward (now almost
12%) … and we have more opportunities to capitalize upon. In a free market, an effective weapon against inflation
is hard work.

Landscaping contract costs is the next item in the cross-hairs and the bid specifications and contracts have been
developed and distributed to 22 companies.

 

We will keep you informed as we make progress on your behalf.