CFO Ed Plasha has shared with members of the Resident Finance Communication Committee (including me) the recently-developed five-year plan for capital expenditures. He does not want the entire plan shared broadly, but he agreed that I could publish some of the highlights here.

Why is this plan important? To understand the importance of the capital plan, you have to understand the distinction between the capital plan and the operational plan. The operational plan consists of recurring expenses, mostly salaries and benefits, utilities, real estate taxes, interest expense, food, and supplies of various kinds. These are items that are fairly easy to predict based on past history. Most of them recur from one year to the next, and they don’t change greatly. Each department requests an operational budget every year and, apart from inflation, they aren’t likely to get a lot more than the previous year.

Capital expenses, on the other hand, tend to be large projects that are different from year to year. Examples include re-roofing of the Kendal cottages and repaving at Crosslands. They generally amount to $3.5-$4.5 million per year each for Kendal and Crosslands, and $250-$400,000 per year each for Coniston and Cartmel. Taken together, they are over $8 million, or around 12% of KCC’s total budget.

As a rule of thumb, capital expenses are generally close to the total amount received from entrance fees, while operational expenses are roughly equivalent to the revenue from monthly fees. 

Why are the plan’s details important? If you have an interest in a larger project (say $50,000 or more) you will want to start by asking whether it is already part of the planned capital budget. If it is not, you’ll need a strong argument in support of including it.

And if you are a resident who wants to see budget cuts where possible, the capital budget may be a tempting target. It may seem easier to make significant cuts to the capital budget than to the operational budget.

Note that the construction aspect of the Kendal Health Center expansion project is not part of the regular budgeting process and does not appear in the capital plan. It has its own, separate source of funding.

Ed emphasizes that the five-year plan is subject to review and revision each year. Priorities may change, causing some items to be postponed and others to be expedited.

The big items for Kendal. This is a five-year plan. Work done during apartment turnovers is expected to cost around $1.2 million in 2024, gradually increasing to $1.4 million by 2028. Kendal is looking at replacing two transformers (the big green boxes surrounded by bushes that you see around campus) for about $245,000 each year through 2028 (only $130,000 this year, presumably because only one is being replaced). The transformers take the high-voltage electricity received from the grid and reduce it to the level needed for the outlets in our walls. Another ongoing upgrade is replacing the Simplex panels (the units that handle fire alarms, in the shed attached to one cottage in each row). That will cost $228,000 per year. Roof replacements will cost $625,000 this year and $735,000 in 2025 and 2026, after which we’re done with that for a while. In future years, there will be substantial investment in plumbing, ($855,000 over three years), driveway repaving ($240,000 over two years), and boiler replacement ($800,000 over two years).

The plan lists several dozen more projects with lower dollar amounts for the five years. There are also two lines in the budget with no amounts in them, representing the investments that may arise from the energy audits of the two Centers.

The big items for Crosslands. Apartment turnovers at Crosslands are estimated at $1,230,000 this year, growing to $1,450,000 by 2028. Adding patio enclosures is expected to cost $300,000/year for the next five years. Paving will cost $325,000 in 2024, but that’s the end of that project. Crosslands has the same budget for transformer replacement and Simplex panel replacement as Kendal.

Coniston and Cartmel. Cartmel and Coniston have no entrance fees, so their capital budget is funded entirely from monthly fees. For Cartmel, the big item in the five-year plan is $140,000 to $180,000 each year for turnover work. For Coniston, roof replacement is the big item, at $183,500 this year and again next year.

Possible future Projects. The five-year plan also includes a list of projects that are possibilities but that have not been assigned to any of the next five years. They are categorized as “expected”, “under consideration”, or “raised for discussion”. The costliest ones are listed below.

In the “expected” category are the rebuilding of the waste treatment plant ($5,000,000) and the expansion of Crosslands’ William Penn Room (auditorium) for $2,600,000. The latter project will be funded, at least in large part, by previously-received gifts.

In the “under consideration” category are replacement generators for both campuses ($3,000,000 each) and re-roofing Cumberland ($727,000).

In the “raised for discussion” category are renovation of the Kendal Barn and adding a storage building for the items currently stored in the Barn ($1,550,000) and a ground-mount solar installation at the waste-treatment plant ($500,000). For now, none of these “raised for discussion” projects is actively being planned.

This summary has only scratched the surface of the hundreds of items in the five-year capital plan. Ed has been willing to share the full details of the plan with those of us on the related committee. He doesn’t share the detailed plans broadly, since he finds that often leads to more questions than answers. But if you are a resident who is interested in learning more about a particular area, Ed will be glad to discuss it with you.