LarryK3 (Florida)
Posts: 4
Posts: 4
Posted:
Opening up a new topic for HOA Loans. Pardon me if there is already an open HOA Loan topic - I didn't see it.
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KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
What is your question? Situation? Concern?
Does your HOA want to get a loan? Or??
Does your HOA want to get a loan? Or??
DouglasK1 (Florida)
Posts: 2,046
Posts: 2,046
Posted:
I'll borrow money from your HOA.
Escaped former treasurer and director of a self managed association.
GenoS (Florida)
Posts: 4,276
Posts: 4,276
Posted:
I get approved for about 20 loans a week if my email spam folder is to be believed. This topic was gonna be something like that, I suspect.
LarryK3 (Florida)
Posts: 4
Posts: 4
Posted:
Gosh based on the dialogue so far, I'm really sorry to have opened up the topic. I was innocently thinking that this topic would be worthwhile for HOAs. I didn't have a specific question in mind. In fact, I work with HOA loans every day and thought there may be some questions that boards or treasurers wanted to discuss.
MarkM19 (Texas)
Posts: 1,459
Posts: 1,459
Posted:
Larry,
So you are selling something. Not interested. Take this website off your list.
So you are selling something. Not interested. Take this website off your list.
GenoS (Florida)
Posts: 4,276
Posts: 4,276
Posted:
Quote:
Posted By LarryK3 on 11/06/2018 12:07 PM
Gosh based on the dialogue so far, I'm really sorry to have opened up the topic. I was innocently thinking that this topic would be worthwhile for HOAs. I didn't have a specific question in mind. In fact, I work with HOA loans every day and thought there may be some questions that boards or treasurers wanted to discuss.
Gosh based on the dialogue so far, I'm really sorry to have opened up the topic. I was innocently thinking that this topic would be worthwhile for HOAs. I didn't have a specific question in mind. In fact, I work with HOA loans every day and thought there may be some questions that boards or treasurers wanted to discuss.
Q.E.D.
LarryK3 (Florida)
Posts: 4
Posts: 4
Posted:
I'm not selling anything Mark and I'm an HOA board member myself. It is meant to be an innocent topic.
No problems if you aren't interested. Others may be.
No problems if you aren't interested. Others may be.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Without some kind of context, it just isn't a "topic."
GenoS (Florida)
Posts: 4,276
Posts: 4,276
Posted:
It's like a booth on the floor of a conference with a sign that says, "Ask Me About Loans". That's a sales pitch if ever there was one. This site is not a portal where vendors can set up shop and try to lure in customers.
It's not a "Topic", it's an unsolicited commercial sales pitch, also known as "spam".
It's not a "Topic", it's an unsolicited commercial sales pitch, also known as "spam".
SteveM9 (Massachusetts)
Posts: 3,699
Posts: 3,699
Posted:
Quote:
Posted By LarryK3 on 11/06/2018 12:07 PM
Gosh based on the dialogue so far, I'm really sorry to have opened up the topic.
Gosh based on the dialogue so far, I'm really sorry to have opened up the topic.
Larry, you asked no question, nor offered any knowledge, leaving people very confused.
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
There's no confusion.
HOA loans are horrible products that limit a community's ability to save money and keep HOA finances in a reactive stance as opposed to saving money proactively and planning for community improvements. HOAs can do years and years of damage to their operational budgets by relying on HOA loans or having the carrying of loans as a hedge against raising dues to build a cash account. The banks are friendly, helpful and willing to lend money where needed so the "devil" is in the debt accrued and NOT on financial lenders.
I've led and HOA board through debt repayment. This is a first-hand account.
HOA loans are horrible products that limit a community's ability to save money and keep HOA finances in a reactive stance as opposed to saving money proactively and planning for community improvements. HOAs can do years and years of damage to their operational budgets by relying on HOA loans or having the carrying of loans as a hedge against raising dues to build a cash account. The banks are friendly, helpful and willing to lend money where needed so the "devil" is in the debt accrued and NOT on financial lenders.
I've led and HOA board through debt repayment. This is a first-hand account.
LarryK3 (Florida)
Posts: 4
Posts: 4
Posted:
Kelly, thank you very much for your post. This is exactly the type of discussion that I was hoping would occur within this topic. I'm sorry, you had such a bad experience but may I ask what circumstances put the HOA in the position of getting a loan?
Also, I'm curious about the loan-related experiences of other HOAs.
Also, I'm curious about the loan-related experiences of other HOAs.
RoyalP
Posts: 1,104
Posts: 1,104
Posted:
To state what should be obvious:
Loans must be repaid WITH INTEREST thereby making the expenditure(s) MUCH more expensive than if they had been 'pre-funded' via a reserve fund.
Loans will, of course, shift the cost to the 'new guys' and away from the people who actually 'used up' and did not fund the replacement of the items in question.
I have heard over and over in my 55+ community:
I say:
Loans must be repaid WITH INTEREST thereby making the expenditure(s) MUCH more expensive than if they had been 'pre-funded' via a reserve fund.
Loans will, of course, shift the cost to the 'new guys' and away from the people who actually 'used up' and did not fund the replacement of the items in question.
I have heard over and over in my 55+ community:
Why should I pay, I won't be here later.
I say:
Never a lender or a borrower be.
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
Quote:
Posted By LarryK3 on 11/08/2018 9:18 AM
Kelly, thank you very much for your post. This is exactly the type of discussion that I was hoping would occur within this topic. I'm sorry, you had such a bad experience but may I ask what circumstances put the HOA in the position of getting a loan?
Also, I'm curious about the loan-related experiences of other HOAs.
Kelly, thank you very much for your post. This is exactly the type of discussion that I was hoping would occur within this topic. I'm sorry, you had such a bad experience but may I ask what circumstances put the HOA in the position of getting a loan?
Also, I'm curious about the loan-related experiences of other HOAs.
Hi Larry,
The loan experience and lenders were nice and made the deal.
Our HOA did not save money for future repairs to our pool. The pool suffered a large failure that was partially expected due to age and partially not expected due to literal structural failure. The HOA had little cash savings and took a loan (which was non-collateralized as we're not allowed to use common property as debt collateral). The loan term was 6 years and anyone could question the appropriateness of even carrying this loan.
In year 5, our clubhouse needed such repair that the insurance company threatened to drop us and declare the house uninhabitable by its terms. Since we were paying a loan payment, we weren't saving enough cash and were forced into consolidation loan for a fresh, seven-year term. I was new president at this point.
The consolidation loan held our monthly payment steady, which was a operational cost, and we raised dues by the inflation rate to increase cash flow (while staving off cost increase requests from vendors and being very very prudent on repairs). Our loan payment and monthly cash deposit was nearly equal in cost.
Over a couple of years, we increased our cash savings enough to match the outstanding loan amount.
At that point, I asked the board to "whistle by the graveyard" and pay off the loan while depleting cash (as I had developed some certainty that we'd build cash reserves in time for the next round of property improvements).
We paid off the loan and immediately sent the previous loan payments into savings - doubling our monthly savings rate. This was 2010 or so.
That said....to this day (because we can only raise dues by the US inflation rate), we are not at a point where we are truly healthy from a cash savings standpoint. We won't need a loan for a future repair but we cannot, financially, have two future "Reserve Fund Project" needs arise in parallel.
That loan was a bailout and a financial curse.
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
Quote:
Posted By RoyalP on 11/08/2018 11:06 AM
To state what should be obvious:
Loans must be repaid WITH INTEREST thereby making the expenditure(s) MUCH more expensive than if they had been 'pre-funded' via a reserve fund.
Loans will, of course, shift the cost to the 'new guys' and away from the people who actually 'used up' and did not fund the replacement of the items in question.
I have heard over and over in my 55+ community:
To state what should be obvious:
Loans must be repaid WITH INTEREST thereby making the expenditure(s) MUCH more expensive than if they had been 'pre-funded' via a reserve fund.
Loans will, of course, shift the cost to the 'new guys' and away from the people who actually 'used up' and did not fund the replacement of the items in question.
I have heard over and over in my 55+ community:
Why should I pay, I won't be here later.
I say:
Never a lender or a borrower be.
BINGO!
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Our twin tower rooftop cooling towers (provide HVAC) were prematurely failing due to construction defects. We got a loan for about &750K (was in '09, as I recall). collateral was our mo. assessments to owners. We paid it off about a year later with the settlement against the developer.
It wasn't hard to get and we paid maybe 1% above the going interest rate at the time
It wasn't hard to get and we paid maybe 1% above the going interest rate at the time
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
HOA in MA consisting of 175 units. 150 in townhouses of 3-4 units per building. 25 standalone homes. Needed extensive work to the tune of about 4 million dollars. The HOA made arrangements for a loan with a local bank. Each owner would be assessed $20K to $30K depending on the size of their unit. Owners would have upto 5 years to pay the assessment. Pay in full at once or finance with the bank with several plans offered but a max of 5 years.
Needed 75% of all owners to approve. 82% approved. Several dissenters banded together, hired a lawyer, and went to court. This took a few months but the court ruled all was done proper and legally so it stood.
For those that financed their assessment, it became a negotiating point when selling.
Place ended up look great. Values jumped.
Needed 75% of all owners to approve. 82% approved. Several dissenters banded together, hired a lawyer, and went to court. This took a few months but the court ruled all was done proper and legally so it stood.
For those that financed their assessment, it became a negotiating point when selling.
Place ended up look great. Values jumped.
SheliaH (Indiana)
Posts: 6,964
Posts: 6,964
Posted:
Quote:
Posted By LarryK3 on 11/08/2018 9:18 AM
Kelly, thank you very much for your post. This is exactly the type of discussion that I was hoping would occur within this topic. I'm sorry, you had such a bad experience but may I ask what circumstances put the HOA in the position of getting a loan?
Also, I'm curious about the loan-related experiences of other HOAs.
Kelly, thank you very much for your post. This is exactly the type of discussion that I was hoping would occur within this topic. I'm sorry, you had such a bad experience but may I ask what circumstances put the HOA in the position of getting a loan?
Also, I'm curious about the loan-related experiences of other HOAs.
Well, it would have been simpler and faster if you'd just said what you wanted to do in the first place - something like "Has your community ever taken out a loan? if so, what was it for, what were the pros and cons, what did you learn, etc." The way you started this thread, no one had a clue as to what you were talking about.
That said....I prefer HOAs avoid loans whenever possible (that's why one should have a reserve fund and a reserve study at least every five years). As Pita said, loans mean interests and so your budgets have to factor in loan payments, paying regular expenses and funding reserves - just like you do with your household budget. Sometimes you don't have a choice to get one, especially if the community was destroyed from, say a wildfire or earthquake, and there wasn't enough insurance money and reserves to pay for damages.
If you must get a loan, I think it's important to let the homeowners know at the start and give them the numbers to see how intense the situation has become. In lieu of a loan, you might have to persuade homeowners to accept assessment increases of 10% a year or more for a few years, with the money designated for that project (our community allows up to a 5% increase without homeowner approval). You also need to review the loan agreements with your attorney carefully and come up with a payment schedule that'll enable you to pay off the loan as quickly as possible.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
CaroleM6 (California)
Posts: 5
Posts: 5
Posted:
Iām curious about the accounting for a loan repayment. The loan purpose was to fund asphalt repair and replacement that the reserves were not well-funded to handle. So the item is a reserve item, but it seems the accountants and the Davis-Stirling code (CA Civil code) experts disagree on whether the repayment should be from loans or reserves. No special assessment was made to repay the loan back when it was put in place. Itās almost paid now, but Iād still like to know the proper way to account for a bank loan repayment for a reserve expense.
CaroleM6 (California)
Posts: 5
Posts: 5
Posted:
I meant - whether the loans should be repaid from Operating or Reserve Funds.
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Carole,
In my opinion, because a loan payment is typically done monthly, combined with the fact that the reason for the loan was the failure to increase assessments enough to properly fund the reserves, payments should come from the Operating funds.
In my opinion, because a loan payment is typically done monthly, combined with the fact that the reason for the loan was the failure to increase assessments enough to properly fund the reserves, payments should come from the Operating funds.
CaroleM6 (California)
Posts: 5
Posts: 5
Posted:
Tim, I hadnāt thought about the failure to fund argumentā¦thanks.
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
Quote:
Posted By TimB4 on 06/20/2025 3:03 PM
Carole,
In my opinion, because a loan payment is typically done monthly, combined with the fact that the reason for the loan was the failure to increase assessments enough to properly fund the reserves, payments should come from the Operating funds.
Carole,
In my opinion, because a loan payment is typically done monthly, combined with the fact that the reason for the loan was the failure to increase assessments enough to properly fund the reserves, payments should come from the Operating funds.
Put $1 in your left hand and $1 in your right hand. If you need $5 and take out, does it really matter what hand you are using to pay it back? The funds are coming from general assessments.
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Dean,
It matters for accounting purposes and audits.
Otherwise, realistically, no. I agree with you.
It matters for accounting purposes and audits.
Otherwise, realistically, no. I agree with you.
ElleN (Idaho)
Posts: 1,338
Posts: 1,338
Posted:
Quote:
Posted By CaroleM6 on 06/20/2025 9:24 AM
Iām curious about the accounting for a loan repayment. The loan purpose was to fund asphalt repair and replacement that the reserves were not well-funded to handle. So the item is a reserve item, but it seems the accountants and the Davis-Stirling code (CA Civil code) experts disagree on whether the repayment should be from loans or reserves. No special assessment was made to repay the loan back when it was put in place. Itās almost paid now, but Iād still like to know the proper way to account for a bank loan repayment for a reserve expense.
Iām curious about the accounting for a loan repayment. The loan purpose was to fund asphalt repair and replacement that the reserves were not well-funded to handle. So the item is a reserve item, but it seems the accountants and the Davis-Stirling code (CA Civil code) experts disagree on whether the repayment should be from loans or reserves. No special assessment was made to repay the loan back when it was put in place. Itās almost paid now, but Iād still like to know the proper way to account for a bank loan repayment for a reserve expense.
https://www.hoaleader.com/public/Can-You-Pay-Back-HOA-Loan-Out-Reserves.cfm
To me, and per the article, one of the best reasons for re-paying from the operating account is that the funding in the reserves has been well-publicized (sometimes pursuant to statute) to owners as being reserved specifically to pay for reserve component replacement and major upkeep. When a board, pursuant to law, tells owners one thing and then does another, that's breaching a fairly formal agreement. Legal implications arise.
But read the whole article. Let's see if it convinces you to pay the loan back from the operating account.
CaroleM6 (California)
Posts: 5
Posts: 5
Posted:
And thatās the crux of me askingā¦
CaroleM6 (California)
Posts: 5
Posts: 5
Posted:
The article āhad me at helloā and I came here looking for the contrary opinion because I agree with the operating fund being the better source of loan repayment, but I have another board member who feels strongly that itās to be paid from the fund for which most of the loan funds were purposed: reserves. I think that is a GAAP accounting bias, and the opposite outcome, pay from Operating funds, is a Davis-Stirling (CA Code) bias that protects reserve funds in a purest way. To me, paying from reserves feels like ādouble countingā the reserves: the reserve fund gets charged when the item is replaced or repaired, and gets charged to pay the loan. So Iād go, instead, to operating funds. I guess if you special assessed for a particular item and segregated the loan funds for it, then I could see assessing enough for the item AND the loan and keeping them all clearly distinguished. But we didnāt special assess for it.
ElleN (Idaho)
Posts: 1,338
Posts: 1,338
Posted:
Quote:
Posted By CaroleM6 on 06/22/2025 11:08 AM
I have another board member who feels strongly that itās to be paid from the fund for which most of the loan funds were purposed: reserves. I think that is a GAAP accounting bias,
I have another board member who feels strongly that itās to be paid from the fund for which most of the loan funds were purposed: reserves. I think that is a GAAP accounting bias,
What I am seeing is that the HOA's income statements will not show payment of the loan's principal as an expense. Instead payment of the principal reduces the HOA's liability. As the HOA pays down principal, the liability shown on the balance sheet goes down.
Again, repayment of principal is //not// reported on the income statement.
Interest on a loan is recorded as an expense on the income statements. Interest would be paid from the operating account (and be an operating expense).
See
https://www.freshbooks.com/hub/accounting/loan-repayment-accounting-entry
https://ramp.com/expense-category/loan-payments
https://www.accountingcoach.com/blog/interest-principal-loan-payments#:~:text=Example%20of%20Loan%20Payment,Credit%20of%20$2%2C000%20to%20Cash
BryonW (Massachusetts)
Posts: 55
Posts: 55
Posted:
37 unit condo in Massachusetts.
I have been a trustee for almost 2 years now.
We have a loan... 15 year term, taken out in 2012, and will be paid off 2027. During the whole term of the loan, little or no money has been saved to reserves because everyone thought "all our money is going to the loan, we can't raise dues even more!". Now, with the loan 2 years away, our reserves are dangerously low, and many expensive items are beginning to show wear and tear. I feel the loan was very bad for this reason: it delayed the hard conversation about doing a reserve study, and setting dues properly.
RE: the question of whether loan payments come out of operating or reserve, here is how we do it (unsure if correct or not, appreciate input):
From a cash management standpoint: all our monthly dues payments come into operating account. Then property manager makes a monthly transfer to the reserve account, and the loan is paid from reserve.
From a reporting standpoint: on balance sheet, the loan appears as a liability under the Reserve fund. On income statement, the interest portion of the loan payments (not principle) appear as expense under the Reserve fund.
When we need to report what % of our budget goes to reserves (for example, on the lender questionnaire when a unit sells), we consider the full loan payment (principle and interest) as going toward reserve. The reasoning is that the work that was paid for by the loan was reserve work (a roof replacement, and some other Capital items).
I have been a trustee for almost 2 years now.
We have a loan... 15 year term, taken out in 2012, and will be paid off 2027. During the whole term of the loan, little or no money has been saved to reserves because everyone thought "all our money is going to the loan, we can't raise dues even more!". Now, with the loan 2 years away, our reserves are dangerously low, and many expensive items are beginning to show wear and tear. I feel the loan was very bad for this reason: it delayed the hard conversation about doing a reserve study, and setting dues properly.
RE: the question of whether loan payments come out of operating or reserve, here is how we do it (unsure if correct or not, appreciate input):
From a cash management standpoint: all our monthly dues payments come into operating account. Then property manager makes a monthly transfer to the reserve account, and the loan is paid from reserve.
From a reporting standpoint: on balance sheet, the loan appears as a liability under the Reserve fund. On income statement, the interest portion of the loan payments (not principle) appear as expense under the Reserve fund.
When we need to report what % of our budget goes to reserves (for example, on the lender questionnaire when a unit sells), we consider the full loan payment (principle and interest) as going toward reserve. The reasoning is that the work that was paid for by the loan was reserve work (a roof replacement, and some other Capital items).
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
Quote:
Posted By BryonW on 06/22/2025 6:30 PM
37 unit condo in Massachusetts.
I have been a trustee for almost 2 years now.
We have a loan... 15 year term, taken out in 2012, and will be paid off 2027. During the whole term of the loan, little or no money has been saved to reserves because everyone thought "all our money is going to the loan, we can't raise dues even more!". Now, with the loan 2 years away, our reserves are dangerously low, and many expensive items are beginning to show wear and tear. I feel the loan was very bad for this reason: it delayed the hard conversation about doing a reserve study, and setting dues properly.
RE: the question of whether loan payments come out of operating or reserve, here is how we do it (unsure if correct or not, appreciate input):
From a cash management standpoint: all our monthly dues payments come into operating account. Then property manager makes a monthly transfer to the reserve account, and the loan is paid from reserve.
From a reporting standpoint: on balance sheet, the loan appears as a liability under the Reserve fund. On income statement, the interest portion of the loan payments (not principle) appear as expense under the Reserve fund.
When we need to report what % of our budget goes to reserves (for example, on the lender questionnaire when a unit sells), we consider the full loan payment (principle and interest) as going toward reserve. The reasoning is that the work that was paid for by the loan was reserve work (a roof replacement, and some other Capital items).
37 unit condo in Massachusetts.
I have been a trustee for almost 2 years now.
We have a loan... 15 year term, taken out in 2012, and will be paid off 2027. During the whole term of the loan, little or no money has been saved to reserves because everyone thought "all our money is going to the loan, we can't raise dues even more!". Now, with the loan 2 years away, our reserves are dangerously low, and many expensive items are beginning to show wear and tear. I feel the loan was very bad for this reason: it delayed the hard conversation about doing a reserve study, and setting dues properly.
RE: the question of whether loan payments come out of operating or reserve, here is how we do it (unsure if correct or not, appreciate input):
From a cash management standpoint: all our monthly dues payments come into operating account. Then property manager makes a monthly transfer to the reserve account, and the loan is paid from reserve.
From a reporting standpoint: on balance sheet, the loan appears as a liability under the Reserve fund. On income statement, the interest portion of the loan payments (not principle) appear as expense under the Reserve fund.
When we need to report what % of our budget goes to reserves (for example, on the lender questionnaire when a unit sells), we consider the full loan payment (principle and interest) as going toward reserve. The reasoning is that the work that was paid for by the loan was reserve work (a roof replacement, and some other Capital items).
Was Bernie Madhoff a past president of your HOA? Laundering the loan payments through the reserve account and reporting to mortgage companies the payments as a percentage of revenue as reserve contributions is fraud.
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
This is because it misrepresents the financial situation, potentially inflating assets or hiding liabilities, and can be used to deceive lenders or investors
BryonW (Massachusetts)
Posts: 55
Posts: 55
Posted:
Dean - please explain more.
If we pay for a roof replacement using cash from our reserve fund, that is a valid reserve expense.
If the same roof replacement is paid for using a loan, then I believe the loan payments are a valid reserve expense as well.
Why do you disagree?
If we pay for a roof replacement using cash from our reserve fund, that is a valid reserve expense.
If the same roof replacement is paid for using a loan, then I believe the loan payments are a valid reserve expense as well.
Why do you disagree?
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
I'll add the obvious:
You have 10 lots in your Association
Your members contributed $10 per month to the reserve for roads for 10 years.
You accumulated $12,000 in the reserves to repair roads.
Your road repair costs $24,000 and will last 10 years.
You take a $12,000 loan at 8% interest for 10 years for a monthly payment of 145.59
You decide to pay the loan back from the reserves. OK
25,200 (estimated inflation) needed for roads in 10 years divided by 10 lots = $252 per year ($21 per month per lot)
Your loan repayment is $14.56 per lot.
A total of $35.56 per lot per month to save for future road repair and pay back the loan.
So as long as your Board is willing to increase assessments (in the above example) by more than 200% it shouldn't matter which account you pay the loan from.
The point being, you didn't save enough initially (likely because your assessments were too low).
You now need to raise assessments to fund the reserves so a new loan isn't needed in the future.
You also need to raise the assessments to pay for the loan.
Failure to do both will result in a special assessment, another loan or a larger increase in the future.
It really doesn't matter which account you take the money from.
You need to raise assessments because you were unable to save enough previously for the repair (hence the loan)
You also need to raise assessments to repay the loan (because it's obvious from needing the loan you weren't collecting enough money to meet your bills).
I know, most of the board doesn't plan to be there that long so lets just kick the can down the road and make everyone happy with low assessments.
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
Quote:
Posted By BryonW on 06/25/2025 6:18 PM
Dean - please explain more.
If we pay for a roof replacement using cash from our reserve fund, that is a valid reserve expense.
If the same roof replacement is paid for using a loan, then I believe the loan payments are a valid reserve expense as well.
Why do you disagree?
Dean - please explain more.
If we pay for a roof replacement using cash from our reserve fund, that is a valid reserve expense.
If the same roof replacement is paid for using a loan, then I believe the loan payments are a valid reserve expense as well.
Why do you disagree?
Yes, payment for a roof from the reserve account is a proper expense, but a loan is not a reserve account contribution.
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