Condo Media - June 2011 - 30

COVER STORY

were hungry and that prices were at record lows.” Now, he says, the factors that had favored associations are shifting quickly against them. Community associations may feel the impact of rising gas prices indirectly in other ways. For example, the Department of Energy estimates that the average household will pay $700 more for gasoline this year than last. That’s $700 less they will have available for other expenditures — such as vacations. The sudden spike in gas prices three years ago produced a new term — “staycation” — as many families chose to vacation at home rather than incur the expense of flying or driving to a vacation destination. Resort condominiums and those with rental components felt the pinch then and will feel it again, Garrett predicts. Some of the petroleum-related increases industry executives are predicting, in construction costs and energy prices, for example, are predictable, but

others may come as a surprise. Garrett found a provision in a waste management contract that says simply “a fuel and environmental cost recovery charge will be added” to the service charge. The contract itself doesn’t specify what that charge will be, but an asterisk identifies a Web page, where a bit of searching will find that the company is adding a 7.5 percent surcharge. In a large association requiring multiple pickups or compactors, the additional charge “could be significant,” Garrett says. “You have to budget for it.” But first, you have to find it. “I’d be reading contracts very carefully,” he suggests.

On the Edge
After gas prices spiked three years ago, many vendors added energy-related escalator clauses to their contracts, allowing them to impose surcharges if fuel costs rose above a specified amount. Garrett says most of his

clients’ landscaping contracts have these escalators, although, he notes, none have been triggered thus far. “We’re not there yet,” he says, “but we could be on the edge.” Churchill says he has used fuel cost escalators “occasionally,” but not often, and more for winter plowing than for spring and summer landscaping. On a plowing job, he notes, the equipment is running virtually non-stop for hours at a time and crews might have to make several repeat visits to the same site. The fuel required to power lawn mowers, on the other hand, isn’t a significant part of the overall cost. “It’s not the cost of running the mowers,” Churchill says, “it’s the cost of getting to the sites” that begins to add up for companies like his. But intense competition makes it virtually impossible to insert escalators in contracts or trigger them if they are incorporated, Churchill says, explaining, “I’m afraid to add any costs my competitors won’t include.” And some

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CONDO MEDIA • JUNE 2011

Condo Media - June 2011

Table of Contents for the Digital Edition of Condo Media - June 2011