Reserves

Entered on 8/30/06 view Asembly Bill AB 2100 affecting our reserves.

This Page is in response to a question brought up at the 8/24/06 Resident's Voice Meeting.

Paraphrasing the Question; "Director Portlock blamed the increasing Reserve Assessments on changes in the 'Davis Stirling Act' which resulted in the need for Home Owner Associations to increase their Reserves."

His statement is partially true. Two items affect our Reserves.

  1. The state was contemplating forcing the Home Owners to reach a specified % of Reserves which would have been higher than what we currently have for any of our corporations. No specific number has yet been established.
  2. What has happened is a change in the state regulations that now require that a Home Owner Association must provide a 30 year projection on major cost items. A plan must be submitted with either the necessary reserve funding, or, a written statement on how the association will meet the 30 year cost needs to cover these items.

The size of our Association is such that many of our costs can be covered by normal yearly operating costs and Reserve Funding is not necessarily equivalent to Reserve Funding of smaller Associations. The state legislators were trying to prevent Home Owner Associations from going broke due to the impact of high cost items that are not adequately Reserve Funded and they did it by forcing everyone to provide a 30 year plan. Good planning in the past will not impact reserve funding in the future. We have added some items to our reserves that were not in our plans in the past and this will increase our future Reserve Assessments slightly. Much of our Reserve increases are a result of adding these new future cost items along with a failure to tighten our belts and establish a plan for the future which will maintain our amenities and not add to them.

Clubhouse VII and the proposal for CH II will have affected our Reserve needs by increased assessments. Don't be fooled when someone tells you that these items will not affect your assessments. Any money that is expended on added amenities, must be paid for through our assessments. Selling property to pay for added amenities takes available money that could be used to increase our reserve funding and result in decreased assessment. If instead, you spend that money on a new amenity, you will have to raise the assessments to increase our Reserve Funding.

Prudently spending our money will minimize our assessments regardless of state legislation and that is what we should expect from our Boards.

 

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