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Fully Funded Reserve Budgets Are A Must

Fully Funded Reserve Budgets Are a Must for HOA Boards

While we are all enjoying a brief and unexpected reprieve on gasoline prices this holiday season, as a general rule you can bank on the fact that as each year passes, things usually get more expensive. You may not know it but there are actually two categories of inflation: the Consumer Price Index (CPI) and the Producer Price Index (PPI). While both are published and made available by the Bureau of Labor Statistics, the latter and lesser known PPI is more significant for HOA Boards and condo associations as it measures cost increases in manufacturing and construction output. Often twice as high as the CPI, the PPI is the one that has a greater effect on operation, replacement and maintenance costs in your community. And it’s no secret that those costs continue to increase.

Annual budgets obviously have to keep up, and properly funded reserve funds will help offset these inflationary cost increases decrease the risk for those dreaded special assessments our members love so much. Further, relying solely on special assessments to fund major repairs and replacement projects often leads to a failure to maintain property and a loss in value for the community. HOAs and community associations that delay or simply ignore adequately funding their reserves will regret it soon enough. The income and expenses these funds are designed to cover should be reviewed on an annual basis and adjustments should be made as needed. Having a professional reserve study done is also a very smart idea and perhaps the best way to assess if you are on the right track. Most reserve studies will recommend a funding plan that steers the HOA away from special assessments. Questions? Just call us and we’ll be happy to help you at Association Management Solutions serving the greater Charlotte, NC region.


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