|Re: Association Reserves questions||<– Date –> <– Thread –>|
|From: Oliveau (Oliveauaol.com)|
|Date: Wed, 17 May 2006 14:05:40 -0700 (PDT)|
Hey Pat, Last year we raised our Catoctin Creek Village HOA dues to account for Reserve Fund contributions. My answers to your questions are inserted below. Hope this helps, -Kevin Oliveau In a message dated 5/17/2006 9:00:09 AM Eastern Standard Time, redtail [at] cablespeed.com writes: - How do we prepare the members for the big increase? We know many of the "logical" reasons for it, but I'm sure it's going to be an emotional discussion. It would help us to be able to show what percentage of the annual budget other Cohousing communities pay for reserves. If you're willing to provide this information, please also include number of units, age of project, whether urban or rural, and if you too are catching up with previously under-funded reserves. We are a rural project of 18 homes, but only 9 of the 18 lots have been sold thus far. We decided to increase HOA dues to make the necessary contributions to the Reserve Fund. But we calculated the amount as if all 18 lots were sold. That is, everyone paid 1/18th of the necessary Reserve payments. Given that we really only have 9 households contributing, that means we are only making half the necessary contributions. Fortunately, we also had some other funds which we transferred to the Reserve fund. That put us about 18 months ahead to begin with. The rationale is that as we sell the remaining 9 lots, the Capital Reserve contributions will come up to the correct level. The hope is that the initial contribution will keep us from falling behind until we sell that 18th lot. People were not happy about the dues increase, but I think it helped that we explained in detail what the Reserve Fund was for and we presented a detailed list of items to-be-replaced. I also told a story about another HOA I lived in which didn't have any reserve funds and ended up tripling dues with a special assesment when the pool and they playgrounds all needed to be replaced in the same year. The response seemed to be, "let's look at the rest of the budget to see if there's other areas where we can save money." - We have a long list of potential reserves components, around 60. Should we itemize the smaller things in our reserves study, which requires effort to estimate life and replacement costs for each of them, or should we instead lump them in a 'general' reserves category to cover the (unspecified) small stuff (and gradually increase the funding over time to match inflation)? Or should we just handle this via 'general maintenance' in our annual operating budget? I wouldn't put in things like vacuum cleaners. But I would put in bathroom cabinets, plumbing fixtures, exterior doors and windows, mirrors, mowers, and appliances. Some of this stuff is may seem small, but when you add it all up, and it's usually a lot more that you would have guessed. You should also budget for General Maintenance, but that's different from the Reserve fund. General Maintenance is painting the fence when it needs it. The Reserve Fund is there to pay for a new fence when the old one collapses into a heap. Your Reserve Fund should make assumptions about what inflation will be, and what kind of interest you can earn. A spreahsheet is very helpful for doing all the calculations. Those numbers will have a big impact on the amount you need to contribute each month. Also, if you don't actually put the reserve funds into an interest-bearing account, you'll have to increase your contributions accordingly.
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