presenting reserve findings

Shelia

Anytime a report/proposal is that many pages long, not all (few actually) will read it all. I propose you put a simple, short (several paragraphs at most, KISS), sell them on the idea, Homeowners Overview as the introduction.

I suggest no longer then one short page.

Explain what a Reserve Study is in a few sentences.

Maybe an short, brief such as example such anticipated roof replacement and how easy it will be to puit money away in anticipation/plan for such rather then face the cost all at once. Get them to understand the principal of a capital reserve. Do not assume all do.

Then a few sentences on how the report anticipates/suggests how to fund such.

In business I saw many executives virtually quote the Management Overview we included in very large proposals, to justify why they were going ahead with what we had proposed when I personally know some never even read the entire porposal.

Not to sound pedantic, but you will win many over with a simple, well written, good news type introduction. Many will not read beyond it.

Hope this helps.

Shelia,

As others have said, take this time to run articles in the newsletter explaining what a reserve study is, how it is done and what the results tell the Board and membership.

Does the study show a need for an assessment increase? Start explaining why it's needed now so there aren't as many questions at the meeting.

Hope this helps,

Tim

Thanks for the article - I will adapt some of this! I'll talk to my fellow board members about scheduling our resere specialist for our September meeting. Since that's when we start preparing next year's budget any, this would be a good time for homeowners to see what's coming up.

Cost of a reserve study depends on a number of factors, among them:

The "level" of study - e.g. level one is an initial study with site visit, level 2 is an update to a previous study with site visit, and level three is a simple update without site visit.

The extent of the association's common elements.

The study we had done in 2011 was a level 2 study. The level one study had been done by the same engineering firm. We have extensive common elements (41 acres of common land, clubhouse, pools, roads, etc.).

The cost of our study in 2011 was $4,300.

Hope that helps.

MD does not require a reserve study...yet. MD is a little behind on HOA laws, but they are making strides in the right direction.

We have board members who don't want to put money in there because we can't touch it without permission. And rightfully so. We started collecting votes to use the money to repair and restripe our parking lots in March...we don't even have 25% yet and we need 50% plus 1. Pretty soon our 90 days will be up and we will have to start the process over...

We are a townhouse community with 5 private courts not maintained by the Town or County. We also have a Storm Water Management Pond, Common Areas, sidewalks and Brick Signs...thats it. No buildings, but the SWM Pond is in dire need of repair, which was just estimated at $14k, plus there is a serious drainage issue in one of the Common Areas, plus the parking lot proposals were from $18k-$22k, and we have about $40k in reserves. And we've been told that the new EPA approved parking lot paint will only last 4-5 years...so we will be spending another $18k in 5 years.

We are in trouble if we don't 1) do a Stage 2 Reserve Study...pretty sure a Stage 1 was done about 8-10 years ago. 2) Start putting much larger amounts into reserves.

My plan is to get a list of our amenities and break them down in the budget for the homeowners to see.
Such as:
SWM Pond, 2 years - $15k, $7,500 in reserves set aside for SWM, $3750 to be added annually for 2014 SWM Pond repair.
Parking Lot Restriping - 5 years - $20k, $4,000 to be added annually for 5 year Striping Projects

Just an idea...the pond will need to happen much sooner. We just found out that the pond is in violation of the MD Wetland Protection laws, so we have to repair it ASAP!

We set our budget at $5,000 for the study, but the final cost was about $5500, as we had the specialist recalculate several figures so we could start using them in 2013 (the original draft was presented around the same time we were developing this year's budget and we didn't have time to review it and complete the budget so we could get it out to the homeowners by Dec. 1)

We're also a townhouse community with a high delinquency rate, but fortunately, we've managed to continue some contribution to reserves. Around the time I moved in, there hadn't been a reserve contribution AT ALL for two years because of them. As treasurer, I've vowed that will never happen again.

We've also done a bit of education on the reserves and why they're important - mo really asks about them, but I want to make sure people get as much information as possible on the Association's finances so they'll understand why the Board makes some of their decision. They may grumble about fee increases, but as I've reminded several owners (several times) there isn't anything one buys today that costs the same as it did a year ago, let alone 5 or 10. If they have a better idea on how to pay for repairs and improvements on a 40 year old community without raising fees, they can have at it.

Shelia, something you should also remember about reserve studies and the resulting funding/status/balance of the reserve account is that many lending institutions are requesting financial documentation from homeowner associations before approving home loans. If your reserve account is under funded, they could use that as a reason for not allowing a mortgage to go through.

Additionally, I believe an extra $500. charge from your "specialist" to tweak a few numbers is a bit much.

John, thanks for your response. My point was not about the current percentage of dues being placed into the reserve account. It was or should have described the concern which is raised when a lending institution looks at the association and sees $500,000 of expenditures which will likely occur within in the following 5 years, and a reserve account with only $50,000 in it. This would show a possible short fall of funds for needed expenditures and would trigger one or more assessments to the homeowners, and that could make it difficult for some of them to pay both their assessments and their mortgage payments. So then, is the board at fault for poor financial planning or the membership for approving the actions of the board? Will property values go down because of the needed repairs and lack of funds to maintain the properties, and so on? And, is the mortgage then a good investment for the bank?

We are voting to repair, seal coat, re-stripe and re-number all parking spaces. This project will need to occur every 4-5 years, and we have been putting some money into reserves for this project, but clearly not enough.

For the limited amenities we have...like...none...it's hard enough to charge our residents $550 per year to cover landscaping, parking patrol, insurance, electricity, management company and snow removal. Plus, a 15% delinquency rate has been plauging us for many years now due to the economy. About 5% of those are bank owned, so we can't even take them to court. We just have to wait for the home to be sold and collect our 6 months of back dues based on new MD legislation.

We are also limited to increasing our dues by 5%, which even now is only $25 per unit and adds up to about $3,000...which isn't enough to cover a $20,000 project like this. We also can't expect to budget for this kind of an expense in our annual budget, but should have been covered in Reserves.

Our residents have no clue how HOAs work, as we were the first one in this town; now there are three others. We have to get their permission to spend this money, and yet as of Friday, after 2 mailings and a newsletter, we have 7 of the 52 needed votes. This includes all 5 BOD votes...

In the previous BODs defense...about 2 years ago, the $5,000 set aside to go into the reserves that year, was cut drastically to help cover a $12,000 snow removal bill. Thanks to the snowpocalypse of 2009-2010. Then in playing catch up...the BOD reduced the reserves contribution to less than 1% of annual dues because none of the board remaind to remind them of the upcoming expenses.