Discretionary Spending limits in Texas HOA

I recently had one of my board members ask me a great question about board spending limits. In Ca. I remember we had a spending limit that was a % of our annual budget without a vote of members. I do not recall reading anything about this in our Texas DADs. This has come up because we have a larger than normal amount of excess funds in our Operating account. This would be a Capitol Improvement project that could possibly get proposed I am assuming.

Ellen,
We have had excess operating funds for the 5 years that I have been on the board. We roll it over every year. our dues are relatively low already at $41.00 per month paid quarterly. It has never been a good idea in my opinion to reduce dues because of this surplus. We have kept them low and with everyone's costs on good and services because of inflation going up we may end up needing to raise dues in the coming years. We have 1450+ SFHs and any increase or decrease causes major problems for owners that have to change bill pay information. As I am sure many people do not read our communications, and this can lead to late fees and angry calls to the PMC and then credits back to the owner. Having extra funds to cover the highs and lows of each year usually balance things out. Our Reserves are fully funded and are 109% currently.

Our PM stated that in Texas the budget does not need to be mailed to the owners annually but does get approved in the board meeting that is open to the owners.

We rarely have them, but if there was an excess after expenses, we'd deposit it into reserves. Reserves are for major improvements to the common area anyway, so the more you have, the less likely you'd need loans or special assessments.

You might also establish a contingency fund that could pay for unexpected repairs beyond the operating budget, but wouldn't qualify as a reserve expense. There could be tax implications for that, so talk to a tax accountant first.

If you have a considerable amount of operating funds, you may want to take a closer look at your budget. It may be you overestimated some line items and could dial them back this year. Or you were very lucky and/or great at holding the like on expenses. If so, congrats- perhaps making some improvements would be the thing to do. You would still do your due diligence in picking vendors and determine what's needed then poll the homeowners to see what they prefer.

As for reducing assessments, it can be messy to reduce them and then turnaround and say "uh, we have to increase assessments and it'll be well beyond what you were paying two years ago". It's easier to hold assessments at the same level for a year or two. The same applies to refunding the excess. ' that would be considered income and you'd have to send 1099s to everyone.