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Determining the HOA Fee - "The Budget Process" Our HOA fee is comprised of two components. 1. The Operating Budget: This represents the expenses associated with the daily operation of the community facilities and activities, e.g. maintenance, landscaping, utilities, insurance, salaries, etc. 2. Reserve Funding: Money set aside for repairs and replacement of association assets, e.g. streets, roofs, flooring, furniture, A/C components, etc. The budget process begins in August with a comprehensive review of the current year's budgeted line items by a subgroup of Committee members. This review examines the actual spending trends over the last 12 months compared to the budget. During this analysis an examination of potential expense changes (increases or decreases) are factored into the new budget. The following are examples: • utilities: published approved increase rates • insurance policy premiums • changes in contract pricing for the coming year – landscape services, administrative personnel, janitorial services, etc. A draft budget is prepared with the above information and expense trends. The subgroup reviews and refines the draft budget and presents it to the entire Finance Committee for input during October. The calculation of the reserve portion of the HOA fee is prepared simultaneously. The critical element in determining the funding requirement for the reserves is the Reserve Study. This study is conducted by a vendor with specific expertise in analyzing the reserve needs for an HOA. Every three years, a complete examination of the HOA assets is performed which includes every item of community property. A useful life and a replacement cost estimate is completed for each asset. A comprehensive Reserve Study is performed every three years with annual updates in between. The BOD provides guidance regarding the level of funding that the Association believes is best for the HOA. In July, 2018, the Four Seasons' Reserve was funded at 125 percent. At that time, the Finance Committee recommended a reduction in the reserve to provide additional operational budget requirements. Individual homeowner's contribution to the reserve portion of the HOA fee was reduced from $52 to $19. After six months of this adjustment, the reserve funding was 114 percent. In order to prevent funding from falling below 100 percent in 2019, the contribution was raised to $39. As a result of the comprehensive Reserve Study completed in October, 2019, the analysis indicated funding of $36 per month per household to maintain a 104 percent level of reserve funding. Please note the BOD's goal is to maintain the reserve funding above 100 percent to protect homeowners from unusual cost increases that could result in inadequate funding and require potential special assessments. After completing the operational and reserve requirements for 2020, the current HOA fee was multiplied by the number of homes and compared to the funding needs. This analysis produced a shortfall which was apportioned to each homeowner to balance the new budget. As a final reality check, the Riverside County Consumer Price Index (CPI) was used to determine if our spending was representative of our area. The 2020 budget, which was recommended by the Finance Committee for BOD approval, was closely aligned to this CPI. As stated earlier, this process is comprehensive and thorough. The Finance Committee and the BOD take this responsibility seriously as we are all homeowners. If you have further questions, don't hesitate to contact the Finance Committee or, better yet, attend one of our upcoming meetings. ~ Baron Ginnetti, b2ginnetti@gmail.com Finance Committee FOUR SEASONS BREEZE | FEBRUARY 2020 21 Another Dues Increase? Yes, and here is why: Many of you have asked and others are likely wondering why our assessments were increased effective January 1, 2020, when our association has over $9 million in the bank for our reserve fund. The explanation is simple. Our day-to-day operational costs are increasing in 2020 and our reserve funds, by law, cannot be used for monthly operational costs. Reserve funds can only be used for the replacement and or repair of the association's assets. Here are some examples of recent and planned uses of our reserve funds: 2019 roof repairs for The Lodge, RCN and Spa buildings, Summit pool replacement lift, Summit spa resurfacing, new flooring in Spa building; 2020 reupholster and/or replace Theater seating. With the completed build-out of our community, we are now 100 percent responsible for all of the community's assets and common areas, including the Conservancy. The 2020 level of need to support these increased budgeted operational costs and adequately fund our reserve is $227 per month per household, which is comprised of $191 for operational costs and $36 for the reserve fund. Contract costs (landscaping, equipment maintenance, administration, janitorial, etc.), utility rates, and insurance premiums have increased. The HOA will have a new ongoing annual cost of maintenance and inspection for the Conservancy area that had previously been the responsibility of our builder. For the Front Yard Cost Center, the assessment increase is primarily due to landscaping services and utilities increases. For the Springdales, the assessment increase is due to insurance and maintenance cost increases. ~ Claudia Rozzi, (909) 677-7776

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