Is Reserve Funding Mandatory in Wa?

HI, I'm a new Treasurer in a pre 2018 Washington State Single Family Homes HOA. After reading our latest Reserve Study it talks about 4 different funding methods from Minimum to Full Funding. In reading some articles and the RCW (Below) I see nothing that even REQUIRES us to FUND a Reserve. It appears the RCW only Requires us to do a reserve Study.
Can someone clarify this for me? and if there is an RCW that REQUIRES Funding can you send me the site.

Thanks
Mark

https://www.rafellawgroup.com/wp-content/uploads/sites/3147/2016/04/ReserveStudiesinWashington-TheNewStandard.pdf

https://app.leg.wa.gov/RCW/default.aspx?cite=64.34.380

Correction. The latter should read, "Here's the link for newer Washington HOAs, ... "

-- MarkM44, FWIW you are asking good questions.

-- Reserve studies and funding is not an exact science. Best practices is to have a professional reserve study done at least every five years and have the manager and treasurer adjust the study once a year.

-- Reserve studies and funding is not exact science because, For example, the remaining useful life of a reserve component is only a guess. The more life the component has in it, the cruder will be the guess of its useful remaining life.

-- Other evidence that reserve studies and funding are not an exact science is how the industry tends to say things like, "A reserve account funded to between 70% and 100% (of what a reserve fund recommends) is rated as 'good.'" More at sites like https://www.cedcore.com/blog/percent-funded-benchmarks/

-- Even though reserve funding is not an exact science, reserve studies are still extremely helpful to guiding HOAs/COAs on how much to save. Reserve studies help explain to owners why some of each dollar of their assessment is going into a 'savings account' to pay for infrastructure down the road. Without reserve studies, boards would have no idea how much to save each year and how much of the owners' assessments should go into the reserve account. (Granted even when reserve studies are done every five years, I estimate that most boards do not understand reserve studies and their underlying financial principles. Instead, the boards cave to owners who do not want an assessment increase.)

-- I presume the different funding levels (of which you speak) correspond to something like the reserve account being funded as either weak, fair, good and excellent.

-- I know of no state that requires HOAs/COAs to fund reserves to a certain level, based on a professional reserve study. However, because of what happened in Surfside Florida in June, 2021, I believe insurance companies are cracking down. Insurers may become Thee Driving Force behind reserve accounts being funded to at least 90%. As well, lenders may join with insurers.

-- I suggest that your Board ask (1) the company that did the reserve study; and (2) the HOA/COA attorney which funding level would be best and why. If I were on this Board, I would insist on full funding, though again, to be reviewed annually. What a reserve account's "percent funded" value is will change each year. If the Board has to pay the company that did the reserve study to do a little presentation to owners and the board alike, with a question-and-answer-period as well, I say it would be well worth it. It could be filmed and put on the HOA/COA web site.

FWIW, in my experience reserve study companies are usually happy to adjust the numbers for remaining useful life and estimated cost to replace. Directors and owners being the 'boots on the ground' every day, they may have a better handle on these numbers.

Washington HOA statutes require the HOA to update the reserve study annually. Per the statutes, a reserve study professional is required to perform a reserve study every third year. See https://app.leg.wa.gov/RCW/default.aspx?cite=64.90.545

Per statute, the reserve study is supplemental to the annual budget. See https://app.leg.wa.gov/RCW/default.aspx?cite=64.90.525

Per statute, the budget must be disclosed. Per statute, the reserve study must state the extent to which the reserve account is funded. See https://app.leg.wa.gov/RCW/default.aspx?cite=64.90.550

Yeah but it is all buried in the annual disclosure of the budget.

Also I thought it worthwhile to clarify that Washington does not require a full-blown, on site yada reserve study every year.

Hi Augustin,
Thanks for all your help. You seem to know the RCW pretty well. Am I right that RCW 64.38 applies to HOA's formed prior to 2018 and RCW 64.90 applies to those created after but the Reserve sections of RCW 64.90 apply to all HOA's no matter when created?
Are there other SIGNIFICANT parts of 64.90 that also apply to pre 2018 HOA's

Thanks
Mark

MarkM44, re 64.38 and 64.90, you have things more straight than I do. You are correct: 64.38 applies to pre-July 1, 2018 HOAs, with some caveatss. You are correct: 64.90 applies to July 1, 2018 and later HOAs, with some caveats. Among these caveats is: Per https://app.leg.wa.gov/RCW/default.aspx?cite=64.38.095, the following provisions of chapter 64.90 RCW apply, and any inconsistent provisions of 64.90 do not apply, to a common interest community created before July 1, 2018:
(a) RCW 64.90.095;
(b) RCW 64.90.405(1) (b) and (c);
(c) RCW 64.90.525; [budget distribution] and
(d) RCW 64.90.545. [reserve study frequency]

What I posted about how often a reserve study must be done and, per Henry's and my follow-up posts, be distributed, is correct. In other words, both 64.38 and 64.90 state that the reserve study is a supplement to the annual budget. Both state the budget has to be distributed to the owners annually. Both 64.38 and 64.90 require HOAs to have a professional prepare a full-blown study every three years. 64.38 requires an annual update, unless such an update is an "unreasonable hardship."

I am making the mistake of trying to summarize statutes that twist and turn. That is, 64.38 refers to sections of 64.90 (and vice versa?) often. And so on. It's best if you go to the table of the contents of the statutes themselves, and pick and choose what you need, wending and winding further as needed. If push comes to shove, urge the board to get the advice of the HOA attorney.

Mandatory or not is the issue. If a Reserve Study is not done and not properly funded, you are asking for trouble down the road including Special Assessments.

KerryL1, so this is unexpected reserve component expenses, driving down the percent funded figure. It happens. Thx for the explanation.