We're planning an initial show and tell meeting with our community in a week to
present a draft reserve study, coming back for final approval and requesting
an increase in condo fees in May. Despite all the work we've put into
this, being all amateurs, we still have some major questions. Any input from
this group would be appreciated! I believe we would be willing to share our
study at least privately to others in a similar boat - we've certainly benefited
from being able to look at others' studies.
-I've read the document from the
Province of Ontario about planning reserve
studies, and I don't understand all the implications of choosing a funding model
- from fully funded to baseline funded. If we choose baseline funded
we're at more risk of not having funds on hand should something come up
unexpectedly... but if we do fully funded we risk putting a lot of money
into low-yield investments?? Is that what it boils down to?
-Exterior paint - in or out? I've just re-read all the messages on this list,
and that seems to be controversial. The reserve studies we've looked at from
other communities do include exterior paint in the replacement reserves, and
the California document lists it as a replacement reserve item. Sharon, I see
you've argued for it belonging properly to maintenance reserves - even if the
paint interval is quite long. Which brings me to my next question...
-Maintenance reserves - I understand that if you are filing the 1120-H it is
no problem to hold money for this type of fund - though I would assume you
would then pay taxes at the 30% rate on interest on those funds - which you
would not on capital replacement reserves? But if you file the corporate
1120 can you carry over a fund from year to year other than the capital
replacement reserves without a special vote each year from the board or
membership? I thought at the end of the year the membership had to vote to
either put excess funds into capital replacement reserves or return to
members. Or is it not excess if it has been designated to an operating reserve?
Assume if filing 1120 you pay 15% on interest on the operating reserves -
however, this fund should never grow large, so that's why it's not a big problem?
-Assumptions about interest earnings and construction inflation - we have been
working on this study without official professional help, but we have consulted
privately with an experienced person in a property management company, and he
advised us to choose the same rate for our inflation assumption and interest
earnings assumption. From reading messages on this list, I sense that this
is too optimistic - what have others assumed?
-Another paint question - I notice HardiePlank siding has been mentioned
here before - that's what we have, and our
neighbouring cohousing community has
it too, done by the same builder in 2000, and they are still on track to
repaint at about a 15 year interval. Report from them is no repainting has
happened yet, 9 years in, and they believe their paint to be in good
condition. Our buildings were painted in 2005-2006 and are doing well except for
a few spots with water damage, but that has been covered for free for us so far.
We were thinking of proposing a 12 year interval based on the information we've
been able to gather, but clearly any large deviation to this affects our
budget greatly as it's one of our biggest expenses. Any further thoughts
or experiences about Hardieplank beyond what has already been mentioned on the list?
Thanks for any help! -Rosemary |
