Cohousing-L Mailing List: Re: Reserves versus operational repairs/replacements, and earlier, Reserve Studies

[Kathy Ahlers (kathy]

In the nonprofit sector, the question of reserves--how to justify them, how
to communicate with funders about them, how to budget/allocate for and
forecast them, and how to protect and account for them (reserves versus
operational funds) has been and continues to be a lively topic.

Although not organizationally nonprofit corporations, per se, cohousing
communities generally have operated on a nonprofit model (unless there's a
revenue-generating arm, such as a CSA farm or a cheese-making operation or
whatever), so there may be fruitful overlap in guidance to explore from the
nonprofit sector, especially re: budgeting, in accounting practices, how to
account for the time value of money and inflation, and any other research
that would underpin effective forecasting and planning.

In Minnesota, a service organization for nonprofits (and it's a nonprofit,
itself) offers training on such things:
E.g., happening tomorrow
https://www.propelnonprofits.org/trainings/12-golden-rules-of-nonprofit-finance-3/

Kathy

Kathy Ahlers
President, board of directors
Twin Cities Cohousing Network, a 501c3 organization
pronouns: she/her/hers
tccoho.org
Follow us on Facebook <https://www.facebook.com/TwinCitiesCohousing/?ref=nf>



On Mon, Feb 6, 2023 at 5:46 AM Sarah Lesher <sarah.lesher [at] gmail.com> wrote:

> *From: *Sarah Lesher <sarah.lesher [at] gmail.com>
>
> Date: Sun, 5 Feb 2023
>
>
> > On 6 Dec 2021 18:43:43
>
> > Sharon Villines (sharon [at] sharonvillines.com)
>
> > Cohousing-L <cohousing-l [at] cohousing.org> wrote an extended >
> explanation of capital reserves vs.    > annual operations.
>
> > “Most of us are oblivious of the importance of the Reserves
>
> > but they are as valuable as your unit.
>
> > In essence they are part of the value of your unit.”
>
> > In a much earlier post on reserve studies , 9 Aug 2006
>
> > 04:29:52 Dahako (Dahakoaol.com) wrote
>
> > Another way of thinking about reserve funds is that they are a > way to
> make sure that the people who are "using up" a
>
> > community resource, like the commonhouse roof
>
> > or the access road are the people who pay for it.
>
> > So, as you live in a community, you are paying each month in
>
> > your condo or HOA fee for the wear-and-tear happening while
>
> > you are there.  When a physical  resource is
>
> > completely worn out, then the accumulated financial resource
>
> > is available to re-make the physical resource
>
> > and the cycle starts again.
>
> > That way, the total value of the physical and financial
>
> > resources available never wanes.  It is actually very elegant.
>
>
>
> > In my opinion, making the balance of community resources
>
> > decrease is not only selfish and irresponsible, it isn't very >
> "cohousing".  Most communities are about taking care of each
>
> > other and stewarding resources.
>
> > To me, this doesn't mean just in the now, but through time.”
>
>
>
> Our community, Cantine’s Island, Saugerties, NY, was founded as an HOA in
> NY state which has/had almost no regulation of HOA’s, certainly not
> requirements about reserves (except for NY City, which does).
>
>
> How many other communities are concerned enough about the status of their
> reserve funds to seek a formal reserve study with regular updates
> disseminated to members?  This is required in 30 states (plus NYC), but do
> cohousing groups in states where it is not required do it as part of being
> responsible and future-thinking?  (See Dahako above.)
>
>
> Half of the adults in our community are over 70.  Others are young
> families, or even more financially stressed, single mothers.  It will be
> very difficult to compensate for the lack of long term investment in a
> reserve fund substantial enough for dealing with some special challenges we
> face (including a crumbling iron foundry from the 1800’s).
>
>
> But developers are pouncing where they can in our region, and some of us
> fear they may start coming for the 10 lovely riverside acres of Cantine’s
> Island.
>
>
> How have other communities handled this?  Or even if not, does anyone have
> suggestions?
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