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GLYNWATER EAST ASSOCIATION

GLYNWATER EAST ASSOCIATION. Reserve Study Informational Meeting April 27, 2011. Purpose of Today’s Meeting. For Members to learn about and understand the issues raised by the Reserve Study.

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GLYNWATER EAST ASSOCIATION

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  1. GLYNWATER EAST ASSOCIATION Reserve Study Informational Meeting April 27, 2011

  2. Purpose of Today’s Meeting • For Members to learn about and understand the issues raised by the Reserve Study. • To provide time for you to make comments, voice opinions, or ask questions about what has been presented.

  3. Agenda for Today’s Meeting • Overview of Board Duty to Reserve for replacement of common elements. • Key findings of the Reserve Study. • Consultant’s preliminary recommendations. • Board Action to date. • Key Issues to be considered. • Why you are here today. • Q&A – Discussion for clarity and understanding • Next Steps.

  4. Association Board Duties • Establish funding for reserves in accord with Minnesota Statute 515B.4-107 (Revised 2010). • Budget sufficiently to meet funding goals. • Not use reserves for current operations. • Set investment boundaries. • Not use Association funds for unauthorized or prohibited uses. • Reserve study updates (3 years) and action/response planning. • Provide information for Resale Disclosure Certificate (Law requires Seller to provide certificate to Buyer). • Assure appropriate formalities are observed so that fees and method of collecting are enforceable (filing changes in declarations with county, bylaw changes, Member approvals).

  5. Key Findings - Reserve Study • Pre-2011 Funding – Our Funding is inadequate and results in cash deficits no later than 2019 and a shortfall of $2 million by 2039. • Full Funding – To maintain reserves proportionate to full depreciation of all components will require HOA of $434 per month immediately and 4 % annual increases. • Base-line Funding – To avoid deficits will require HOA of $344 immediately and 4% annual increases.

  6. Recommendation & Board Action • Incremental Reserve Underfunding Recovery: • Increase initially to $239 per month (Vs to $434 under Full Funding). • 24% annual increases through 2024. • Weights funding more to future owners. • Includes funding replacement of all components. • Board Action Taken: • Increased HOA FEE to $275 per month - 1-1-2011. • Initiated plan to discuss and decide a model for funding and the related HOA increases for 2012 and thereafter (includes this informational meeting).

  7. Future Options for Funding Roofing Example – Simplistic (PV) • Special Assessment ($10,000 each Member): • Need Member approval every 3 years to exclude this Common Element from Reserve Funding. • Need Member approval each assessment at time needed (may not get it). • Association must collect and this may require foreclosure if member cannot pay. • Debt ($260,000): • Must qualify for bank loan. • Must pledge Association assets. • Must pay interest (and increase HOA fee to cover P&I). • Defer repair when it is needed (Accept Declining property value - $10,000 per unit?). • Collect Adequate reserves (Increase HOA Fees ≈ $100/mo).

  8. HOA Fee Components • Operational Expenses (current ≈ 60% of HOA fee) • Utilities • Administrative • Services • Repair Expenses • Reserve Expenses – Examples = roof, deck, doors & windows, siding, driveway, and mailbox replacement. • Budgeting is excluded for assets that have a useful life equal to or exceeding the useful life of the entire facility.

  9. ISSUES to be considered in 2011 • Weight to give to various tradeoffs: • Current HOA Fee Vs Future property values. • Current HOA Fee Vs Future approval and collection. • Exclusion of certain common elements like doors, windows, decks, etc. • Quality of replacements (look, composition). • Timing of replacements (pre-planned/incremental Vs “we need to do it all right now!”). • Means of Funding (Reserve, Assess, take on Debt).

  10. Next Steps • In 2011, the Board must formally approve a funding plan and establish an initial series of HOA fee increases • If the plan relies in any part on excluding Limited Common Elements (and perhaps certain other elements) or relying on Assessments or Debt, the Board must seek approval by the Members. • In order to make a recommendation the Board will need to develop its understanding, or provide clear definitions, of responsibilities (is plumbing in walls between units a Common or Limited Common element) and this may change whether the Association or the Member pays for repairs to those elements.

  11. Why You are Here Today. • To learn about and understand the issues. • To provide time for you to make comments, voice opinions, or ask questions about what has been presented. • To consider how this affects election of director(s) by Members in June. • To consider what input or you wish to have to the Board during the decision process.

  12. Process • Make a list of your questions: We will Collect Questions, group and answer them if we can. • Make a list of the comments or opinions you wish to make: We will take all comments, group and discuss them for clarity. • Closing comments. • NOTE: we will not make specific decisions about funding today – this is input to the Board.

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