Reserve Fund

I may be missing the point ...

Security equipment and systems are capital equipment, and should be included in reserves for replacement and/or repair.

If you have private roads/parking lots them funds should be going to reserves as these are capital, as well.

Buying new capital items out of reserves is an absolute no-no, however, some states and associations allow for borrowing from reserves j err certain circumstances. Drains like this probably would not be considered to be capital items as their lifetime is indefinite. They should have been purchase out of ops, and if not enough there, then by special assessment, but without a reserve line.

The concept of reserve funding is that it is pay as you go ... everyone benefits from those items being saved for ... so everyone pays a bit each year.

I believe there is only one correct way - a reserve fund - everyone absorbs the capital assets and everyone pays.

I've heard that objection before - by the time X has to be replaced, I'll be dead or have moved away, so why should I pay towards repairs I'll never benefit from? It's a ridiculous statement because by paying reserves you're paying for your use of the common areas that you co-own along with the rest of the homeowners (whether you use them or not). Don't like it? Well, that's what you signed up for when you bought your home).

By the time you move or take a dirt nap, and the house is sold, you would have paid for your use of those items and then whoever buys your house and begins paying assessments, his/her share of reserves will begin to cover HIS/HER use of those items. It's not fair for a new owner to have to turn around and pay for amenities that were used up before he/she arrived. That's one of the things reserves help prevent.

Special assessments should be RARE - as I said in a previous conversation, they might become necessary if the community needs extensive repairs to the common area because of a disaster (e.g. tornado) and there's not enough in reserves, the operating budget and an insurance payout to cover everything. Often, they become necessary because the community didn't have reserves to begin with or they were terribly underfunded, either because of too many delinquencies, board members being afraid to increase assessments because their neighbors wanted to keep assessments "low." Or various boards begin to put off major repairs and keep doing it until they have no choice but to repair it, and by then the cost has gone up so much (inflation, remember?) that you need a special assessment to cover it.

I don't know if you asked the board for details as to why they felt french drains would be necessary - if not, go to a meeting and ask. It may be investing in these drains may prevent future, expensive issues down the road - similar like you buying energy-efficient windows - pricy now, but you'll save that amount and more in lower utility bills. That said, perhaps the board could have done more research to see if there was a less expensive option or at least get more bids. This is why you need to talk to the board and maybe read the last reserve study (the specialist might have suggested the board consider this to save money)

Your assessments are going to go up anyway because of inflation and it's always possible that common area items will fall apart sooner than later and need major repair or replacement. The key is to ensure the board is making prudent financial decisions, and even then, they can only work from the information available now. It's when they ignore what's in front of them that the problems start.

Have a look at this article about underfunded HOA reserves which may address some of your concerns or give you points you might want to bring before the board - https://www.allpropertymanagement.com/blog/post/underfunding-your-hoa-reserves/

John

You raised several issues:

It is always a question as to how far down does one break the various reserves needs meaning assigning monies to specific projects such as pool replacement, road replacement, fence replacement, etc. That said, monies can be moved as long as they remain unders the general heading Reserves.

Capital improvements should not come out of the reserves. That said, money can be "borrowed" from the reserves for such if there is a plan to replace it. I would consider the new drains as a Capital Improvement.

It is only fair that you pay to replace the roads even if you are not there when they need replacement as your present use of them is wearing them out thus causing the need for future replacement.