|Re: Association Reserves questions||<– Date –> <– Thread –>|
|From: Pat Little (redtailcablespeed.com)|
|Date: Wed, 7 Jun 2006 17:26:04 -0700 (PDT)|
Hi Sharon, Thank you for your thoughtful response, and my apologies for the late acknowledgement, I've been out of town and over busy lately. I appreciate what you are saying about using professionals, although our experience here at Jackson Place is they need a lot of hand-holding because they make mistakes, are sloppy, etc. I think we will find it too hard to figure out the cost numbers ourselves, and we have had some problems with the buildings already, so we may want to get an engineer's inspection. Cheers, Pat -----Original Message----- From: Sharon Villines [mailto:sharon [at] sharonvillines.com] Sent: Thursday, May 18, 2006 5:09 AM To: Cohousing-L Subject: Re: [C-L]_ Association Reserves questions On May 16, 2006, at 9:08 PM, Pat Little wrote: > - 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. Firstly, all communities should join the Communities Association Institute for at least a few years and read everything they publish in managing shared real estate. I know it is painful because they use the standard legalistic definitions of "Boards run communities" but they have a wealth of information there that can help communities avoid this kind of financial speed bump. We went through this as well. The CAI has a study on Best Practices Developer Transitions that suggests that the reserve study should be stared DURING CONSTRUCTION and should be done with a MAINTENANCE STUDY along with the ENGINEERING STUDY. Do not skip any of these things. If we had had these things done it would have saved us much grief and much money. I'm not in favor of trying to figure out the best way to tell community members things. Tell it straight and give them figures. They are as responsible as you are for this information. It doesn't get easier. Our Board did not listen to our management company who said right off the bat that we needed to triple our condo fees -- what does he know, we're cohousing!. Eventually we go it done but ti wasn't any easier and we looked more incompetent that we needed to look and the agony stretched over several years. Bite the bullet and make the decision. You can still phase the increase in but lay the figures on the table. Percentages in comparison with other communities is probably not helpful because reserves are for the common elements and these vary widely. Lot development models with mountain trails are very different from urban multi-household dwellings sitting on 1.5 acres of land. > - 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? Why not hire a professional? It is very complicated to estimate lives of things and future replacement costs and interest rates, etc. Specialists do this everyday and keep up to date on these things. Studies should be repeated every 3-5 years because costs change and technology changes. On the other hand you can purchase software to do these calculations. If you have people in your community who KNOW about mechanical, architectural, and electrical systems, you could attempt to do this and thus use the software to continually update your reserve needs. But these require a lot of knowledge. > And a more technical bookkeeping question - we are wondering how to > track > the reserves funds in our bookkeeping system. Most of the accumulated > reserves will be in a separate savings account, requiring 2 signatures > for > withdrawals, but collections from the current year will be in the > checking > account for some time before they get transferred to savings. We'd > like to > have a way to show, in the books, the total accumulated reserves > regardless > of which account they are in. We use QuickBooks. Does anyone have > experience > with this, and could tell us what you did? Reserve Funds must, by law, be kept in separate accounts that are essentially no-risk -- insured bank accounts or government bonds. You should consult your lawyer and CPA on this. Communities can keep their own accounts but having a CPA set them up will ensure that your are doing this properly. For the protection of your community, consult professionals. Even if you have an inhouse professional, get outside professional advice to protect your association from legal action. We have had problems even when consulting professionals but not half as big as when we didn't. I don't know the value of your real estate but at Takoma Village we are managing -- conservative estimate -- $25 million dollars in residential real estate. That may be small potatoes to the Donald Trumps of the world, but it is a lot of money and I'm sure the total value of other communities is the same. That also represents a substantial portion (if not all) of the life savings of all 43 households. Get professional advice. Sharon ----- Sharon Villines Takoma Village Cohousing, Washington DC http://www.takomavillage.org _________________________________________________________________ Cohousing-L mailing list -- Unsubscribe, archives and other info at: http://www.cohousing.org/cohousing-L/
- Sunward Elder Care, (continued)
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