Paying Back Reserves

Our HOA wants to raise our dues by 20%. They have some strange Idea that were need to pay back the money we borrowed from the reserves in 3-1/2. Because of rains (global warming) and slab leaks and it started with the housing crises, this represents a $100 increase on “blue collar” community.

We are in California. From what I read in Davis Sterling, when you borrow from the reserves, you are suppose to pay it back in a year, unless the Board each year votes to extend the loan. There is no requirement to force this hardship on our HOA. We just need a more intelligent Board.

Is this true or do we really need to do this.

What Tim said. Sooner or later repairs will be necessary and homeowners will have to pay for it anyway, so it's better to start now instead of being caught a few years from now (when it'll cost a lot more - you do remember a little thing called inflation, don't you?)

I also live in a moderate income community and appreciate your concern about the impact on homeowners - when I served on my board, it was something we always wrestled with. However, an increase in assessments is a hell of a lot better than a special assessment, which you'd have to pay in addition to the increased assessments. Don't forget a HOA loan works a lot like your mortgage, car loan or whatever else you borrow money for - the sooner you pay it back the less in interest you'll pay.

Why not suggest that the board commission an advisory committee (that YOU can volunteer for) that would review income and expenses for, say, the last 5 years? The committee could look at various line items and see which ones have risen faster than others during that time, figure out why and come up with recommendations to control those costs. You'll still have assessment increases, but this may help reduce the amount of the increase.

Michael, like the others said, it sounds like you need to do this. Nationwide the guidance from professional Reserve planners is to spread costs over multiple years and multiple owners. Why? Because this is far more equitable and fair than dumping a huge special assessment on the owners who happen to reside in the HOA in one particular year.

You could ask to see the most recent reserve study and/or ask the Board for a more detailed explanation of the big picture. That is, have the Board provide the five most expensive capital assets, how much life each has left, and the expected cost of replacement. This might help all understand whether this increase is appropriate.

I don't understand. Why would you be against paying back the reserve fund?

Your answers, Michael, are all at davis.stirling.com, Main Index, Reserves. So I think you've learned there that the board must, by law, send Owners a plan about how they will pay back reserves when they borrow from them. So....I'm not sure what your question is.

You've probably also read that dues cannot increase more than 20% in a year without an vote by the Owners (I think). You might look at that part again at davis-stirling.com. Be sure to spell it right.

Is the increase $100/yr. or month, BTW?

Pay me now, pay me later. They could be paying it back a little at a time now, or all at once when the money is needed for it's original purpose.

True, but if you don't....

It's inherently unfair to future owners who are not savvy enough to look into the reserves before buying. You could argue that it's their own fault if they don't. I wouldn't go so far as to call it a moral question, but it's right up against that line.