Cohousing-L Mailing List: Re: Use of Reserves

[Jerry Koch-Gonzalez (jerry]

Pay for the Drainage and Paths DEFERRED MAINTENANCE  out of replacement
reserves.
And update your replacement reserve schedule to come up with a new yearly
amount to add into the replacement reserves so that you have the funds you
need for the next items you need to replace.

Jerry Koch-Gonzalez  413-687-5444
Co-Founder
, Sociocracy For All <http://sociocracyforall.org/> and  New England NVC
<http://newenglandnvc.org/>
Founding Resident, Pioneer Valley Cohousing Community
<http://cohousing.com/>

To talk to me about sociocracy or NVC, go here:
https://talktojerry.youcanbook.me


On Fri, Nov 13, 2020 at 10:01 AM Bonnie Fergusson via Cohousing-L <
cohousing-l [at] cohousing.org> wrote:

> In California the HOA is allowed to borrow from the Reserve funds for
> improvements as long as you pay it back within 1 year.  You might need to
> check with your state laws about this since they vary from state to state.
> Bonnie FergussonSwans Market CohousingOakland, CA
>
>
> Sent from Yahoo Mail for iPad
>
>
> On Friday, November 13, 2020, 6:39 AM, Sharon Villines via Cohousing-L <
> cohousing-l [at] cohousing.org> wrote:
>
> > On Nov 12, 2020, at 10:31 AM, pam gilchrist <pamgilchrist1 [at] gmail.com>
> wrote:
>
> > We have a healthy Reserve of about $200,000 with a line item of $5000
> every
> > three years for Path's maintenance - due this year but no line item for
> > this additional expense of about $40,000.
>
> From my studies and discussions with Reserve Specialists, this is an
> entirely ordinary expense for Reserve Funds. The amounts required for items
> in the Reserve Study are estimated costs. Real costs may be higher or
> lower, be needed sooner or later or never. This is why funds are
> recalculated annually. It balances out the guesses with actual costs.
>
> That you are doing extra work is a normal expense. The purpose of the
> Capital Replacement funds are to maintain the value of the property.
> Ideally, the fund balance plus the value of the property would be equal to
> market rate. A condo that needs some work but has a large reserve fund is
> more valuable than a condo with inadequate or no reserves.
>
> So the issue is whether the expenditure of the funds is to preserve value.
> “Preserving value” also  means keeping the property up to market standards.
> No one would replace the HVAC system with one that was made when the
> building was built. You replace to current standards, but that is not
> considered an improvement in the same way as adding a pool might be.
>
> In this instance the design of the walkways is inadequate and they require
> high maintenance costs. Doing the serious work would maintain the value of
> the property at market rate. And might save maintenance costs in the
> future.
>
> We borrowed from our Reserve Fund to install solar panels. We put the
> money back each month that we used to spend on electricity and the money we
> get from producing more electricity than we use.
>
> There are certain tax laws that apply in some situations. They are related
> to how you pay taxes on the interest income on the reserve account—probably
> for very large funds or larger condos. A tax  person could say whether this
> is an issue. Otherwise, fiscally sensible practices apply to the Reserve
> funds just like the operating budget.
>
> Sharon
> ----
> Sharon Villines
> Takoma Village Cohousing, Washington DC
> http://www.takomavillage.org
>
>
>
>
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