Reserves

Is it necessary to have reserves? We don't have a pool or club house. Only common areas and 2 ponds. Our budget shows no reserves and it appears everything is paid out of bankbook balance. Also, if there is a reserve can unpaid dues be taken out of reserves and can our dues go for charities or other local outings?

Nancy

Plain and simple, you need a Reserve Fund. You never know what is going to happen especially with two ponds. Something could even happen to the common areas such as a drought that kills everything and they must be replanted and/or reseeded. As it goes now (no reserve), if a major problem occurs you would have to have a Special Assessment to cover it. Best if money is set aside for a rainy day.

Typically Reserves would not be touched for donations or outings. Some say the association should not be donating to anything and outings/special events should pay for themselves.

Basically your association is living paycheck to paycheck.Also taking money out of the Reserves to cover unpaid dues is robbing the Association to pay the Association. How are you ahead on that deal?

Repeat. Plain and simple, you need a Reserve Fund. If not, you are treading on very thin ice.

Nancy,

I expect that your ponds are storm water retention ponds.

At some point, they will need to be dredged.
At some point, surrounding vegetation may need to be replaced.
At some point, surrounding swales or berms will need maintenance.

Yes, you need reserves.

See: STORMWATER WET POND AND WETLAND MANAGEMENT GUIDEBOOK from the EPA

Additionally:
Do you have any signage (entrance signs, road signs, etc)? That will need to be replaced over time.
Do you have painted curbs that the Association may be responsible for?
Do you have group mailboxes? That will need maintained and replaced over time.
Do you have walking trails?
Do you have fencing the Association is responsible for (or has a shared responsibility for)?
Do you have playgrounds?
Do you have fountains in the ponds for aeration?

See: Subject: Reserve Studies/Funds 101 a thread on this forum. Take a look at the links (some broken links are repaired later in the thread) that help the Association identify things they may be responsible for that are not normally thought of.

Hope this helps.

Kerry the common areas are only grounds. No fencing or walls picnic or playground equipment. The Town pays for streets and lighting. The pond does have a pump. I am not on the board now. Was for 6 years. Board doesn't use state laws. It took me 7 years to finally get them to ratify our budget which is coming up in Feb. Budget they sent out needs lots of help. As Tim said they are living from one paycheck to another. I asked to speak to the Pres. before the meeting to show him certain things and he declined saying he will discuss at meeting. Thank you for your input also.

Nancy,

Keep in mind that the only other options if you do not have a Reserve fund OR if the Reserves are underfunded are:

1) Defer maintenance/repair
2) Special Assessment