Question about reserve fund

Started by DawnB • 6 replies • 2526 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

DawnB (West Virginia)
Posts: 12

Posted:

I live in a nice community of about 370 homes that is approximately 8 years old. We have no real amenities tht we have to pay for. No parks, playgrounds, ect....We do have two small ponds at the entrance that have fountains in each pond.....

Our expenses are limited to to basics that are covered under our yearly budget..

Insurance
Mowing of common area (5 acres)
Plowing (we live near DC)
Leagal fees
Office supplies
electricity (we have a few lights)
(I may be forgeting a few other small things)

Our monthly dues are $10 a month or about 41k in revenue. This seems to cover our yearly budget ok, but as of the moment we have about $4000 in our reserve fund, this is about 2k more than we had when the community took over management.

My question is about a reserve fund. We have no sidewalks, each house has a drainage ditch to contol water. We have about 4.5 miles of road that vaires in age as the development was built in three stages. The newest road is several months old, the middle stage of homes has raods that are about 4 years old, and at least half the roads are 7-8 years old.

My concern is with the fact that we, as a community have no long term budget (10-20 year prediction of capital improvment costs. The develpment was handed over to the homeowners to manage about 3 years ago.

WE have raods that will need to be fixed in as little as 3 years, they will probably last 5. My understanding is that resurfacing costs 60k-120k per mile.

Anyone that can comment on our reserve fund on this with any authority? Knowing that our capital improvment costs are as little as 5 years away should we be concerned that were really not saving any money for long term costs?

AudreyB (Florida)
Posts: 104

Posted:

Hi Dawn,

I can tell what I know, because I've seen it happen within my community or county.

Our developer has come back over the years to black top our roads. Check to see if your developer will do the same for your community, so your association does not have to concern themselves with this in the future.

Within our county, is there is this huge city that the majority of the homeowner's had no sidewalks, had those unsightly drainage ditches, well water,and septic tanks. The city changed those unsightly drainage ditches, by putting in the correct drainage and sidewalks, and for a small fee would hook those homeowner's with well water and septic tanks to city water and sewer. What a beautiful difference! The property value really sky rocketed there too!

I would venture to say, check with your city or county roads and ground people, to see if there are any plans to change those ditches into better drainage, and sidewalks in your future. If not, find out what their requirements are in your area to begin such a project, and if your community needs to follow any procedures to get this project going for your community.

My community has sidewalks. After a period of time, some gave way to be pushed up and when you walk on the sidwalk you didn't notice the lip before you triped? After I have noticed that's there, and was fortunate enough not to break my neck, I'm to call the city, have them come out to fix it. If the sidewalk is badly craked, and you are not responsbile for putting those cracks in the sidewalk, the city replaces those too.

So, your reserve fund is safe for now,I think.

I would like to know what you found out.

Best wishes,
Audrey

ds111 (<Not Specified>)
Posts: 7

Posted:

In our community, we had to get roads officially turned over to the city, before they would maintain them. As Audrey says, you should check with your county or city to see if they plan to maintain your roads. If not, ask what the procedure might be to get them to do it. They may have minimum requirements that the raods must meet, before they take over and any upgrade cost may fall on you or your developer.

You are smart to get on top of this now, before it becomes a crisis.

Good Luck!

LisaS (Illinois)
Posts: 341

Posted:

You are absolutely right in being concerned. At present, you ahve to plan for the worst case scenario. That looks to be that your roads remain private and the HOA is responsible for their upkeep.

There should be a cost estimate for the replacement/repair of the items for which you are responsible and their usable life expectancy. Historic rate of inflation should be added for each year left until repairs are needed. This will give you a reasonable amount of neccesary reserve. By having this number adequate fees can be collected monthly/yearly to fund the reserve. There is a ton of information on this on the internet and at the library.

We have 300 homes and currently pay $100 per year. The only private holdings we have are a gazebo, 8 acre pond, and about 3 miles of landscaping. We have $25,000 in reserve and our association was turned over 1 year ago. The reserve was formed by collecting $100 from each title transfer since building started (4 years). We have a life expectancy and replacement cost mapped for everything down to the shrubs. We even have a 'slush fund' of around $2000 for the unexpected drought or vandalism.

It's not too late to start planning ahead. It would be awful to have the roads fail and be looking at a very large surprise 'special assesment'for each homeowner.

hoatalk (California)
Posts: 603

Posted:

Here's an interesting news article that covers your situation on road repairs:

http://www.eastvalleytribune.com/index.php?sty=53320

- HOATalk

HOATalk.com, A free service of Community123.com
Provider of Upscale Community Websites
CLICK HERE to get a FREE trial community website
*See legal notice below (end of page)

TomK2 (Ohio)
Posts: 39

Posted:

You reserves should depend on how your documents read. What is the Association responsible for? Roofs, siding, roads, paint etc.. It is best if the board budgets ten per cent (10%) of annual income for reserves. Some states have a mandatory per centage for reserves. 10% can add up quickley so it is best to have a limit the board can spend without an owner vote and always have two board members sign checks! Bond the people that handle the money!!!!

BradP (Kansas)
Posts: 2,640

Posted:

Tom:

Actually you should have a reserve study done which will forecast replacement schedules and costs and then you can see how much per year you will need to set aside. Saying you need 10% of your budget in reserves is dangerous, what if you have a small budget and there fore aren't saving enough.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here