capital reserves

Started by CharlesG5 • 7 replies • 1896 views

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CharlesG5 (Florida)
Posts: 60

Posted:

Live in a HOA in Florida. Around our lakes St Johns River water Management District has put a 10 foot area from the waters edge up the slope and has deemed it to be a mitigated area. This means nothing can be cut or removed. They have given us permission to remove some trees and replant with Florida native plants.

My question is can the money be taken out of capital reserves because we are improving common ground. My president does not want to ask the CPA or attorney because it costs money.

KerryL1 (California)
Posts: 14,550

Posted:

Being neither an attorney nor a reserves specialist, I'd still answer no, unless trees are listed as one of your reserves components. And some HOAs do list trees.

In CA we may not use funds from reserves except to make major repairs of or replace elements that are listed in the reserves study. So, in your case, we would build the estimated cost for your additions into our '15 operating budget as two line items in your landscape category.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Charles,

It depends on what your Reserves are earmarked for. If there isn't anything earmarked for beach erosion, storm water management or trees, then I would say that you may not use the Reserves for such work.

However, you could borrow from the reserves providing you have a written plan on how to pay back that money. Example: Simple resolution that The Board will borrow $x from the Reserves for abc and increase assessments by y% for x years to pay back the loan.

Mind you, like others, I am not an attorney and I do not work within the legal profession.

KerryL1 (California)
Posts: 14,550

Posted:

Tim makes a good point and in CA we also may borrow from reserves. But that's in our state statutes, so Florida's might help you.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Please let us know how the meeting went.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Charles,

I'd argue that the HOA could tap reserve funds to remove and replace perennial trees/vegetation given the change of rules along your waterfront. This would not apply to flower beds or other plantings that will require regular maintenance. We had severe T-storm damage destroy trees in a street median and faced this same dilemma.

However, if you have some regular budget funds to accomplish the waterline changes, follow that route and save your reserves. The board could always add a 30-year expense on the reserve funds to replace the trees/bushes that are originally planted as they die.

AnnH5 (Florida)
Posts: 304

Posted:

Yes, you could borrow from your reserves. However, I doubt that your HOA has been saving for a new mitigation area and it's management in your reserves. It sounds to me like you have a brand new line item or two that you will be adding to your annual budget. You need to start planning if you will need to raise your assessments and by how much.

KerryL1 (California)
Posts: 14,550

Posted:

I soooo agree with Ann.

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