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FOUR SEASONS BREEZE | APRIL 2019 7 By John Noonan What happens when an Association does not have the appropriate Reserve Funds to make necessary repairs or replace community assets? In 2002, I became Board President of a homeowner's association in Pomona. The association was in its 25th year. Members were promised that at the end of 25 years their roofs would be replaced. There should have been $3,000,000 in the reserve account for this project. When we received the current balance on the account, we discovered that the account had only $9,000. At this point, we did not have enough money to even repair roofs let alone put on new roofs. There were no funds to paint the units or fix the wood decay around eaves. The only option we had was to ask the members for an assessment. By law, we could only ask for $1,500 per household. The members objected and went through the process to vote down the assessment. Our next alternative was to raise the dues to the maximum allowed for the next five years. This rise in dues still only allowed us to do repairs, no new roofs. We had to create a process to determine which members were first on the list for roof repairs. We could not repair them all. We had to move other funds from other projects just to fix large leaks. If a member had a small leak, their roof might be tarped but not repaired, and they may have to wait for months for the repair. We had no "rainy-day" fund and it was literally raining. The community became known as the "Blue Tarp Community." Because of the shift of funds, other projects such as landscaping, painting the outside wall, repairing gates, and tree trimming went undone. Ten years later members of this community still have not received their new roofs and repairs are still being done. Even more serious, we discovered that bank and mortgage companies would only loan new buyers 50 percent of the current value of the homes. We discovered that the previous treasurer, who also owned our management company, was sending out bogus financial statements to banks on new mortgages. When we started sending out the true financial statements to bank and mortgage companies, new buyers could not get loans. This ultimately caused a sharp depreciation in the value of our homes. To this date, the prices in that community have not kept up with the current rate of values of other homes in the same area. Right now, in Four Seasons Beaumont, we are very lucky to have our reserve at approximately 115 percent of what is required, thanks to a wonderful Finance Committee that we've had over the past 10 years. They understood what was needed. We are also very lucky to have additional funds coming in every month from new sales. Soon those new funds will no longer be coming in and we'll have new expenses because the community will be taking over more common areas. We will have to start being extremely diligent in our spending. Over the past year, I have attended several association seminars. At every seminar the topic of reserves was the number one subject. Every speaker said that if we are not raising our dues by nine percent every year for the next five years, because of the rise in minimum wages and the increased price of goods and other services, we could be in the red. Hopefully, with our Finance Committee and Board Members who understand finances, we can avoid this dire prediction. HOAs Could Face Disaster Without Adequate Reserves

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