How should our HOA board budget for electric, water and sewer costs?

By OurHOA · General information · Revised October 31, 2026

How an HOA treasurer budgets utility costs: 24 months of bills, usage vs rate, rate change notices, irrigation swings, a contingency line and a mid-year check.

Part of the HOA board handbook: treasurer and money.

The short answer

Build the utility budget account by account, from at least 24 months of actual bills, and treat usage and price as two separate numbers. Usage tells you how much water and power the common areas burn in a normal year and in a bad one. Price tells you what the utility will charge for it next year, and that comes from rate notices, contract dates and city budget hearings, not from last year's total. Multiply the two, add the fixed charges, then set a contingency for the line that swings most, which for most communities is irrigation water. Check actual spending against the plan halfway through the year. Budget procedures come from your declaration, your bylaws and state law, so the steps below are general education for treasurers, not legal advice.

Start with a list of every meter

Before you open a spreadsheet, find out what the association pays for. Pull every utility bill for the last 24 months, from the bank statements if the paper is gone, and make one row per account: utility name, account number, meter number, service address, rate class and what the meter feeds. A 70-home community might have six: an entrance sign and lighting meter, a clubhouse electric meter, a pool pump meter, a clubhouse water meter with sewer charges, a dedicated irrigation water meter and a trash or recycling contract. Walk the property with the list. You may find a meter nobody can explain, often an old construction service the developer never closed or an irrigation controller still billing to a lot the builder sold. Or a common area light turns out to be wired to a homeowner's panel. Check whether any account still lists a former director as the contact, since that person will get the rate notices.

Split each bill into usage, rate and fixed charges

A $1,400 water bill tells you nothing on its own. Read the line items and put three numbers in your sheet for each month: units used (kilowatt-hours or thousands of gallons), the price per unit including tiers, and fixed charges such as the meter or customer charge, taxes, franchise fees and drought or fuel surcharges. This split is what makes the budget defensible. If the irrigation bill rose 40 percent, you need to know whether the community used 40 percent more water in a hot summer, whether the rate went up, or whether the bill crossed into a higher tier. Tiered water rates deserve extra care, because the last few thousand gallons in a dry month can cost far more per gallon than the first. Chart monthly usage for both years side by side. A month that spikes in one year and not the other usually points to a leak, a stuck valve or a controller someone reprogrammed, and that is a repair, not a budget trend.

Find the rate changes before they land

Price changes are usually announced months ahead. The treasurer's job is to be on the list that hears about them. In Texas, Water Code section 13.187(a-1) bars a Class A privately owned water or sewer utility, meaning one with 10,000 or more taps or connections, from changing rates unless it sends each ratepayer a statement of intent at least 35 days before the new rates take effect. The statement must compare bills at 5,000 and 10,000 gallons of water and explain how a ratepayer can intervene. City-owned utilities, water supply corporations and districts fall outside that chapter's definition of a utility, so city rates move through the council's own budget process. Ask the city when it holds its utility rate hearing and put that date on the board calendar. Texas electricity in competitive areas carries its own trap. Under the Public Utility Commission rule at 16 TAC section 25.475(e), a retail electric provider must send at least three written notices before a fixed-rate contract expires, and for a small commercial customer the final notice can come as late as 14 days before the end date. If nobody acts, the account moves to a month-to-month product whose price may change every billing cycle. Put every electric contract end date in the budget sheet, and start shopping 60 to 90 days before it. In Florida and Colorado, common area electricity usually comes from a regulated utility, a cooperative or a city utility at its published rates, and water and sewer from a city or district. Sign up for the utility's rate case notices, read the inserts that come with the bill, and ask the city or district finance office what increases are planned for next year. Write the source and date next to each assumption in the budget.

Plan irrigation as its own line

Irrigation is the line most likely to blow up a utility budget, because it depends on weather the board cannot predict. Keep it on its own meter if the utility allows a dedicated irrigation meter, and on its own budget line either way. Build two numbers for it: a typical year, using the average usage of the last two or three summers, and a dry year, using the highest summer you have on record. The budget carries the typical year. The gap between the two becomes the contingency you hold for a drought summer. If the irrigation line is large enough to hurt, the cheapest savings usually come from fixing the system rather than from the budget. Our guide on how to cut an HOA water bill with an irrigation audit covers that work.

A worked example

Take a 70-home community with a January fiscal year. The treasurer's sheet shows these 24-month results and known changes: Irrigation water averaged $12,200 a year. The dry summer two years ago produced $14,600. The city adopted an 8 percent water rate increase effective March 1, before irrigation season, so the full increase applies: $12,200 times 1.08 is $13,176, budgeted at $13,200. Clubhouse and pool electricity ran $6,000 a year on a fixed-rate contract that ends June 30. Renewal quotes came in 15 percent higher. Half a year at the old price ($3,000) plus half at the new price ($3,450) gives $6,450. Entrance and sign lighting held flat at $1,800, after an LED conversion two years ago. Clubhouse water and sewer ran $2,400, with a 5 percent sewer increase announced for next year, budgeted at $2,520. Those four lines total $23,970. The dry-year gap on irrigation at the new rate is $14,600 times 1.08, or $15,768, less $13,176, about $2,600. The board adds a $2,600 utility contingency line, for a utility budget of $26,570. Spread over 70 homes, that is about $380 per home for the year, or roughly $31.60 a month. Next year the electric increase lands for all 12 months, so warn owners now that the clubhouse line will rise again by about $450.

Report, contingency and the mid-year check

Keep utilities visible in the budget rather than buried in a general maintenance line. In Florida, section 720.303(6)(a) requires an annual budget showing estimated revenues and expenses and the estimated surplus or deficit, and an association that prepares a report of cash receipts and expenditures under section 720.303(7)(b)2 must disclose expenses for refuse collection and utility services. In Colorado, section 38-33.3-303(4)(a) requires the board to deliver a summary of the proposed budget to owners within 90 days after adopting it and set a meeting; unless the declaration says otherwise, the budget stands unless a majority of all owners vetoes it. In Texas, the declaration and bylaws usually control how the budget is adopted, so read them before the budget meeting. At the six-month mark, compare actual spending to plan for each account, not the utility total. For a calendar-year community, the July review catches early summer irrigation before the most expensive months. If irrigation is running ahead of the typical-year line, the board can tighten watering schedules, look for leaks and decide whether to draw on the contingency before August, rather than discovering the shortfall in the December statements. If the contingency goes unused, your documents and state law decide what happens to the surplus.

Wording the board can copy

A budget note for owners: "Utilities are budgeted at $26,570 next year, up from about $20,000 spent this year, which had a wet summer. The budget assumes an average summer, not another wet one. The city raised water rates 8 percent starting March 1, our clubhouse electric contract renews July 1 at a higher price, and the sewer rate rises 5 percent. The total includes a $2,600 contingency for a dry summer. If it is not needed, the board will report the savings at year end." A motion: "Moved to adopt the utility lines of the [year] budget as presented, including a utility contingency of $[amount], and to direct the treasurer to report actual utility spending by account against the budget at the July board meeting."

Mistakes treasurers make

Copying last year's total forward, which bakes one unusual summer into the budget or hides a rate increase. Budgeting from one year of bills instead of two. Ignoring an electric contract end date until the month-to-month price shows up on a bill. Treating a usage spike as a trend when it was a broken valve. Lumping utilities into a single line so nobody can tell which account went over. Leaving rate notices addressed to a director who left the board. And forgetting that a mid-year rate change splits one increase across two budgets. If a water bill looks wrong rather than just high, our guide on disputing a master-metered water bill with the utility walks through the challenge process.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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