Best options for CD laddering

Greetings all,

I'm on the board of a small HOA (367 homes) and take care of the accounting and website. Our Reserve account is at 40K and we add 8K/year for capital expenditures (primarily for dredging the 5 collection ponds on a rotational basis approximately every 10 years). We're 2 years out until our next dredging project (15-20K) and we'd like to set up CD laddering for the Reserve funds.

I've searched and reviewed the threads here and most are fairly out of date regarding CD laddering. My question is this: In 2017, where can the best rates be found for HOA CD's? Almost all of the online banking solutions with decent rates cater exclusively to individuals and local banks offer such paltry rates. Am I missing something? Google has not been my friend today.

Thanks,
Jay

p.s. - my first post!

367 homes IS NOT a small HOA. $40K in reserves, though, is a small number. You need a minimum of $100K to make anything and short term it's about 1%. The most you are going to make with $40K is about $5.00 per month.

In my former HOA, we had 317 homes, with $1.5M in reserves. $100K was in a Money Market account, readily available with no penalty for early withdrawal. $300K was with a special Wells Fargo mix account paying 3.5% and the balance laddered in CD's ranging up to 84 months with the most paying 2.5%.

From 2003-2007 with the market was doing well, our reserve interest averaged $50K per year. We used $10K per year to fund social activities which also reduced our tax liability.

Saying the HOA is not for profit and earning interest is a bad idea is BS. There are a lot of HOA that operate golf courses and country clubs. They are HOA's and they sure as hell are FOR profit, although, not as profitable as they once were.

Well, we're a small HOA in terms of scope if not number. Our goal is to provide CAM/amenities/trash service for less per year ($350) than the surrounding non-HOA homes pay for trash alone ($396). Other than that we pretty much stay out of the way.

I eventually want to get the reserves ranging between $50-$75K. Even at the 1.75% our local credit union offers on CD's, that's $900/yr. And I guess I'm enough of a tightwad to not leave that much money on the table. :-) Five years from now we might be back at 4-5% interest rates and getting much better returns. I just think putting a CD ladder in place is a best practice regardless of the total return. You just have to make sure that any early withdraw penalties won't affect principal.

Jay,
CD lattering is a prudent way to increase income for an HOA since this allows withdrawal of only a partion of the reserve funds as needed. Currently with very low interest rates I would consider long term (5 year) CDs to get the highest interest rate; and using CDs which can be terminated with only a penalty for only the current quarter. Then as interest rates increase each CD can be terminated and a new higher interest rate CD can be initiated.

To clarify, the use of IRS form 1120-H requires that all interest income (as well as all other "outside" income) is taxable after subtracting the $100 standard deduction.

My association got a check for over $1 million in an insurance settlement after the hurricanes of 2004. It sat in the bank for a few months while plans were made for how to use the money. In those days the money was earning about $5,000 a month in interest. Then, of course, 2008 happened and today our reserves earn interest that amounts to little more than a rounding error.