Reserved

What does the board do when our reserves are 100% funded? Do we decrease our monthly dues? Just curious on any ideas.

Can you quote exactly what your covenants say about setting the monthly dues / annual assessment for members? Typically the annual budget determines the monthly dues. For, say, the coming year, the reserves are still forecast to be 100% funded, and a lower assessment would meet the operating (maintenance et cetera) needs of the HOA, the monthly dues / annual assessment could go down.

Congrats on the 1000% funding reserves (most HOAs, including mine can't say thst!). But as John noted inflation hasn't gone anywhere and so you'll like have to continue adjusting assessments accordingly.

That doesn't mean there won't be years where you might be able to keep the assessments the same. you should also be taking a look at routine expenses to see if there are areas where you can cut costs. For example, look at some of your contractors - there could be services you no longer need. or consider bidding out the work. A contractor may offer you some price breaks for being a longtime customer in order to keep your business.

You are only 100% for a specific point in time. It means you are contributing 100% of the required contributions to replace an asset when it's useful life is up.

An example, if you have a pool heater that costs $2500 and has a useful life of 5 years, then to achieve 100 funding, you will need to contribute $500 annually for its potential replacement in 5 years.

Maintaining a reserve account(s) and reserve study is a science, especially when there is a large number of assets. But, pack yourselves on the back, you are on the correct path.

One thing to keep in mind is that projected reserve requirements are not hard dollars. They're estimates based on educated assumptions about the remaining useful life of physical assets and economic conditions over the next 30 or more years. Some of these assumptions will turn out to be wrong.

I agree with others who recommend not making huge changes. What you're doing has been working well, and as long as you comply with your governing docs and state laws about reserve requirements in HOAs, you're good. If you have a few extra dollars lying around and you haven't updated your reserve study in the last couple of years, you may want to consider doing so. The economy has gotten a good kick in the last two years and more frequent extreme weather events are beating up on physical assets, so any projections done a few years back are probably overly optimistic.

For COAs/HOAs with significant length of underground piping, and having observed pipe failing within 25 years, this is one I have pondered. I think NpS is right on, regarding the high margin of error for estimates of useful life, or even the expected lifespan, of, say, PVC piping (which is often used for underground piping) are all over the map. Can PVC water supply piping be replaced piecemeal? Sure. But this is likely a lot more expensive than doing it all in one fell swoop.

How long does interior PVC pipe last? Longer than exterior pipe, for the most part. But the latter is not all that helpful. When would a condo association's interior pipe all have to be replaced? Maybe this point denotes the end-of-life for some condos, given that the replacement of interior pipe means tearing out all the walls and so on.

I wonder how long some condo buildings will last. The life expectancy of apartment buildings (without major renovations) is like 75-100 years. New York City has some apartment buildings over 100 years old. (Then again, New York City is supplied by "Water Tunnel No. 1" and "Water Tunnel No. 2," completed in 1917 and 1935 respectively. This is like 20+ foot diameter piping. The shutoff valves for the two tunnels are so beat up that engineers are afraid that shutting them, to do repairs on the tunnels, might mean the valves could not be opened again. Construction on Water Tunnel No. 3 started in 1970. Perhaps NYC is hanging on by a thread, infrastructure wise.)

A study of condos that have been razed on account of age yada could be interesting.

From Aug 2020, https://www.hawaiibusiness.com/condo-owners-beware-part-1/:
A Condominium Can Last Hundreds of Years, But Not Its Components

A 40-year-old Honolulu condominium can show its age in many ways: brittle, leaking pipes; cracks in its concrete walls and decks; rusted rebar; and corroded railings and window frames.
Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable.
...
Kimo Pierce, president of Hawaii Plumbing Group, says condo associations should start looking at replacing their pipes at 40 years and be ready to start the project at 45 years. Once the pipes hit 50 years, he says, a condo is “on borrowed time.”

Cast-iron drain, waste and vent pipes eventually rust from the inside out. That can lead to clogged and cracked pipes and, eventually, water leaks. It’s during the investigation of these leaks that contractors discover if the pipes need to be replaced, he says.

There can be millions of feet of pipes and hundreds of units in a high-rise condo, so the process to repipe involves a lot of coordination. Contractors hold town hall meetings before construction begins to educate owners about the project, its schedule and what’s expected of them. They also do a pre-construction walk-through of each unit to check for any preexisting water damage and to identify which walls will be removed and how they will be replaced.The cost to complete this work is generally influenced by the size of the building, how the pipes are laid out, the number of stacks shared between units and other variables, Lecky says. Pierce estimates that a one-bedroom, one-bathroom condo can cost $17,000 to $20,000 to repipe. That means a 100-unit building with all one-bed, one-bath units might cost $1.7 million to $2 million to repipe.

Bergeman says, depending on the building’s configuration, he’s seen per-unit prices range from less than $10,000 to over $80,000, but the typical cost is $20,000 to $30,000.

It's very possible, Melissa that an HOA's reserves can be 100% funded, and repairs/replacements have been occurring regularly.

When one of our reserve accounts reached 130% funded, we reduced the monies to it for a couple of years, but we all still contribute to it. Just less than previously.

WE don't have our drain lines in reserves yet--we're 20 y.o. But we probably should start thinking about it. Thanks for interesting info Augustin.

We've had a couple of different certified reserves analysts and they always recommended a regular monthly contribution. They do NOT recommend to "replenish when needed."