Episode 8
Why Reserve Funds Matter and How to Adequately Budget for Them
Homeowners’ associations should set aside anywhere from 15 to 40 percent of their annual budget to adequately fund reserves, says Reserve Specialist Matthew Swain. However, many boards and associations kick the can down the road and avoid setting aside money into their reserve fund because they don’t want to increase assessments. But if you treat reserves like an impound account on a mortgage, it will be easier for boards and associations to pay expenses when components fail or need to be replaced or repaired. In this episode, host Tom Freeley and Swain discuss how to approach a reserve budget, what a reserve study should cover, the three- part test for reserve studies, and national reserve study standards.
SPECIAL GUEST:
Matthew Swain, President of the San Diego County Office of Association Reserves
Matthew is a reserve specialist who joined Association Reserves in 2005. He has a bachelor’s in physics and his background includes a wide range of knowledge in mathematics, statistics, electronics, and fluid dynamics, which has been a benefit to clients as he models complex physical and financial change at a wide range of properties. He works with a host of HOAs and planned unit developments including urban mid and high rises as well as beach-front resorts and suburban and rural properties throughout San Diego.
Episode Blog
INTRO: On this week’s episode of CACM chat HOA life to hear exclusive insights and expert perspectives on community association management from leaders across California. This podcast is about the hard work that managers do to positively impact the lives of more than 15 million residents living in over 50,000 homeowner associations across California.
TOM: Hey, welcome back. All of you out there in podcast world to another episode of the CACM Chat HOA Life podcast, where no HOA topic is off limits. Look, here in California, we’re in budget season, which means managers are stressed and multitasking on steroids to meet budget deadlines in order to meet the board’s approval deadlines, in order to meet annual mailing deadlines, and on and on and on. But a vital part of budgets are reserved budgets.
You can’t do an accurate budget. And as I have said in the past, I strongly recommend giving your boards a real budget. But you can’t do that without an accurate reserve study. A reserve study is strategic to an association. But if it’s not an accurate reserve study, it will be a detriment to the association. So, to help us understand the importance of an accurate reserve study, I’m very excited to welcome Matthew Swain, RSEBP.
Matthew is president of the San Diego County Office of Association Reserves. He joined Association Reserves in 2005, just prior to completing his Bachelor of Science in physics at California Lutheran University and launched the San Diego office in 2008. His background, which gave him a wide range of knowledge in mathematics, statistics, electronics, and fluid dynamics has been a benefit to clients as he models complex physical and financial change at a wide range of properties.
For his expertise, Matthew holds the Reserve Specialist designation through CAI and caters to a host of urban and mid and high rises, as well as beachfront resorts, while also maintaining a strong portfolio of suburban North County PUDs and rural East County HOAs. Matthew, thanks for joining us. So excited to have you on today.
MATTHEW: Thanks so much, Tom. Really happy to be here today.
TOM: Well, you know, as you just heard me say, you know, I’ve been earlier podcast regarding preparation of financials and budgets. You know, I’m a strong believer in giving a board of directors a real budget, whether that real budget says you’re going to be a hundred thousand dollars deficit or a hundred thousand dollars net revenue. Let the board have a very real budget. And I’m assuming you would agree with that from a financial reserve specialist perspective.
MATTHEW: Absolutely. Quite often, we talk about the fact that we are truth tellers. And even if that truth hurts, we’re here to accurately budget for an association’s long-term predictable expenses. So just like with the operating budget, we want to recognize reality and present that to the board, whether they like it or not.
TOM: That’s a good, and I love the “truth tellers” cause I’m going to, I’m going to borrow that in future presentations. because I think that’s a hundred percent accurate is, you know, a lot of managers. Yeah. Well, first of all, I guess a lot of managers don’t do the actual budget. A lot of managers have input on the budget, but if they work for a larger management company, a lot of times the manager will work through what their specific knowledge on the budget would be in certain components, things like that.
But a lot of times the budget itself is prepared by back-office accounting personnel. So, for the benefit of the managers, I strongly encourage every manager put your hands in as deep into the reserves and as deep into the budget preparation as possible, because you’re the one who the board’s going to have to, you’re going to have to answer to the board for any questions, any overages, any underages, so on. So, make yourself super, super knowledgeable and familiar.
But Matthew, truth tellers, in a reserve study has a lot of different thought processes. A lot of accounting firms, lot of reserve specialists will take a current reserve study, add on a CPI increase and walk away. Say, this is good. I’m on the, as we have talked about in the past, I’m a slightly different personality when it comes to those things. And I believe that, well, I’m not going to add and give you my beliefs, you know that my podcast and listeners aren’t here for me, they’re here for you. So how would you recommend managers approach their reserve budget that has to obviously impact their operational budget?
MATTHEW: Well, we like to start from the 30,000-foot view perspective. And we look at what are we trying to do here? What are we trying to accomplish through the budget process? And when we’re looking at homeowners’ associations, common interest developments, they are at their very core, a nonprofit entity. So of course, their whole role in the budget process is to set income to match projected expenses. And that’s usually somewhat easy.
I used to say pretty easy, but now I’ll say somewhat easy to deal with those day-to-day month-to-month expenses when we’re looking at energy costs, water costs, salaries, things like that, day-to-day. You see those bills come in on a regular basis. So, you can reach out to vendors and say, your landscaping company, hey, what are you looking at for your increase in your contract next year? You can go to SDG &E for San Diego or PG &E up in Northern California, SoCal Edison, go to your local electric company and you can look at what their rate projections are for the upcoming year.
But what’s often missed is exactly what you touched on there with reserves. And reserves we see with different communities for location, type, age, things like that, anywhere from around 15 to 40 percent of their annual budget should be going towards reserves if they’re going to adequately fund reserves.
And to adequately fund means that you’re setting aside that annual bill of deterioration. So, it goes back to the whole premise of what are we trying to accomplish? It’s a mutual benefit nonprofit corporation. So, we need the income to match the expenses.
If the bill of deterioration for your reserve components is $100,000, well, you need to set aside $100,000 as far as that total income that needs to pay that bill. So, managers need to really understand the reserve study part that goes into the budget. And the managers we see as the coach, you know, they may not be doing the entire budget. They oftentimes do have a team, but it’s important that they understand the significance of the reserve budget.
TOM: Absolutely.
MATTHEW: And it’s important that they coach the board to really understand that significance because every year that they fall short on paying that bill of deterioration because the board tries to keep assessments low, keep them flat, keep that increase to only 2 or 3 percent because they feel that that’s all that the community can afford.
Well, then they’re not recognizing that annual bill of deterioration. They’re just pushing that cost onto somebody else in the future. That’s not equitable. It’s not fair. And it’s not truly recognizing the total expenses for that annual budget process.
TOM: So, if I’m a manager and I see my reserve study that says you have X amount of useful life on X components, and then obviously they’re all over the board, it could be zero life, meaning hair on fire, get this taken care of now, all the way up to 20, 30 years. But if I’m looking at a reserve study that says, hey, I need to make $100,000, contribute $100,000 into reserves, but my operating budget won’t let me do that. There’s no way I can create the revenue, added revenue to meet that $100,000.
Oftentimes managers or a board, not just managers, but a board of directors will direct the manager. Well, I think we have, you know, $500,000 in reserves. Let’s just take that line at them, you know, cut that, cut that contribution down a little bit. And now all of a sudden you have a balanced budget. Now if you’re looking for a zero-based balanced budget, at least now all of sudden you have a zero-based balanced budget. What are your thoughts on the logic behind that?
MATTHEW: Well, we find that communities really miss the mark so often when it comes to reserve transfers and reserve budgets. And the industry as a whole really has been not well served by using the word contributions for reserves in the first place. So, taking that language and really shifting how we talk about reserves, because if we talk about them in terms of transfers, if we talk about reserves as an actual bill that needs to be paid each year, then that really changes the conversation because the word contribution in and of itself sounds like, that’s something we can cut. It sounds like a donation. It sounds like it’s optional.
So instead, we re-characterize how we talk about reserves, when we talk about the actual bill, we talk about transfers, then that really shifts the thinking. So, often boards look to reserves, they look to repairs and maintenance that kind of contingency that’s needed from year to year as places to cut first because they don’t see the actual electric bill or excuse me the reserve bill come in they see the electric bill they see the landscaping bill they see the management company bill and so they know that they have to pay those but when it comes to contingencies when it comes to reserves and the actual expenses drawing out that roof replacement or that asphalt seal project resurfacing the pool because those actual expenses come on varied schedules and they don’t see them every month.
That’s where we find boards taking the shortcut, taking the easy way out and saying, well, we’ll just forget about that for now. And we’re to pass that on to somebody else because and so often they want to throw up that white flag and say, well, we just can’t afford it. So, we’ll let somebody else deal with that, but it’s a real bill.
TOM: Well, somebody else being their neighbor. I mean, nobody else can deal with it.
MATTHEW: Somebody else being somebody who comes on the board two, three, five years down the road and say, gosh.
TOM: Kicking the can.
MATTHEW: Exactly. Kicking the can. And it’s human nature. Look at retirement accounts in America and how so often folks talk about, financial planners talk about how underfunded retirement accounts are in the United States. And that’s because it’s human nature to kick that can down the road and say, yes, I know that over my 40 year or so working life, I need to contribute this much. And I say contribute because that’s a retirement issue.
TOM: Got it.
MATTHEW: So, we think of that so often in the industry as reserves. it’s just contributions. We can just kind of put them in when we can. And we’ll forget about it when we can because budgets are tight. But they’re missing the boat. They’re not paying for it. Instead, if we think about it more like, you a lot of people have mortgages with impounds and they, the mortgage company forces one twelfth of that insurance, that property tax bill to go into an impound account. If we treat reserves more like that, it’s actually going to save the association money in the long run. It’s going to make it easier for boards to pay those expenses when the actual roof fails, when the boiler fails.
And it’s going to make the manager’s job much easier because then when you see that life coming up to zero, you know that the funds have been transferred. They’ve been accurately budgeted for, and now you can pay that actual expense when the bill really does come due.
TOM: Well, I do, A, really appreciate the education on the change of terminology, contributions to transfers. And I have not heard that before.
And so, I really do appreciate that. And for the managers and the board members out in podcast world, listening, wherever you’re listening, that’s a really, really, really smart, simple change in thought processes to look at it that way. And then from a personal note, please folks, don’t let your 401k, just start funding it because I’m old and I should have done this a long time ago. And I’m one of those guys that kicked it down the, kicked the can down the road. Please don’t.
Do yourselves, be smart, start that 401k early. Personal note from me.
MATTHEW: Great advice, I support that 100%.
TOM: So, I’ll use the same $100,000 analogy. If I have a budget and I’m just going to round numbers, I have $100,000 loss, or let’s just say a $50,000 loss on a proposed budget, and I have $100,000 going into my contribution, I’m sorry, my transfer into reserves. Thank you. I appreciate that. See I caught it quick.
MATTHEW: Yep.
TOM: If I’m transferring a hundred thousand dollars into my reserves, but I just had a contractor look at my roof. You brought up roofs. So, it’s easy. I just had a contract to looked at my roof and said, well, you’ve done some fantastic maintenance on this roof over the years. And I randomly go, well, what do you, what does it look? I mean, how does it look?
What’s my potential? When am I going to have to start focusing on repairs and, you know, potential replacement of this route. Oh, you’ve got 10 more years in this roof. All of a sudden, my reserve study, I go back and look out my reserve study says, well I only have five or four? What’s the logic or responsibility of taking, of having the conversation, the manager or the board having the conversation with the reserve specialist to say, your reserve study calls for five- or four-years remaining lifespan on my roof. I just got a roofing contractor that qualifies my roof at maybe, you know, another 10 years.
Can’t we at that point in cooperation with the reserve specialist modify that reserve study to change that from five years or four years and increase that to 10 years where you’ve now just financially benefited your reserve study, but at the same time you have a real recommendation also. Like I wouldn’t do that just randomly.
MATTHEW: Right.
TOM: But is that something that’s reasonable?
MATTHEW: We can if an expert will actually put their name to that justification. So, we’ve had more members, we’ve had managers that say, so and so vendor said we can extend the life on this component or that component. And as a reserve specialist, we need to make sure that we’re doing what’s right for the community. And so, while we’re not held to the standards of a CPA audit, we do want to make sure that we have some sort of documentation on that. So, will the roofer put that validation for that extended life in an email? They don’t have to write up a whole contract and agreement and sign it and things like that, but will they put their name on it? Because if an expert will not put their name on that life extension, that life adjustment, then it may not be realistic. It may be them just kind of shooting from the hip rather than actually.
TOM: Yeah, looks great. Yeah, look, yeah, your roof looks great, but without understanding, you know, a prior leak could have caused other damage underneath.
MATTHEW: Exactly. They may not have taken a real thorough look. Maybe they just did some cleaning and said, well, if you don’t have any leaks, then yeah, sure. It’s fine for a while, but let’s make sure, let’s make sure that those vendors are actually the ones who really have their hands in the work and really know for the roof that they really know it well. They’re doing that annual preventative maintenance.
And with roofing, that’s a great reminder for roofing and gutters to make sure that the boards aren’t cutting those annual maintenance programs on those really key elements because you can put a 30-year shingle roof or even a 20, 25-year flat roof that has that NDL warranty on it. But if you don’t do the preventative maintenance, if you’re not taking diligent care of that roof, then it’s not going to hit that life cycle.
TOM: Sure. So, I’m fortunate enough to have an investment property at an association whose name will remain anonymous. And the prior manager, now prior manager and management company did not have a maintenance schedule, like a maintenance plan per se. There was no, hey, Wednesdays we’re going to do this or January we’re going to do this, February we’re going to do this. They didn’t have that plan.
What’s your recommendation for managers and association boards? Because our listeners are also board members around the country. What would your recommendation be to managers and board members regarding a specific maintenance plan? You brought it up and it’s a really, really, I think a very important topic.
MATTHEW: Yeah, we found that over the years, those communities that have reserve studies, they have different levels of care of the property.
So, whether it’s the roof, the asphalt, the wood siding, the balcony decks, you name it, these components all need regular inspections, regular maintenance. And if an association simply says, great, we’ve got a reserve study, we’re transferring those monthly dollars that we’ve budgeted for that 30-year roof, 30-year asphalt, five year seal coat, you name it.
But they’re not doing the annual inspections or whatever the preventative maintenance schedule calls for, and they’re not taking care of cleaning those gutters, they’re not taking care of looking at the siding, making sure that the irrigation overspray isn’t hitting it, things like that, then they’re going to fall short because those life expectancies that we report in the reserve study are typical life expectancies. They get adjusted during that three-year site visit that’s required by California Civil Code, but we’re only coming on site once every three years typically.
And then we get information from management, the board in those in-between years. So, if they’re ignoring those components until they actually come up for failure, they’re probably going to fail a lot sooner than projected, which is going to blow that reserve budget right out of the water. Because if your 30-year roof is getting one thirtieth of a replacement cost transferred into reserves each year, but it fails at year 20, then you’re going to be off by over 30 % of that budget. That’s not going to be set aside.
TOM: So underfunded, well, just as a not being prepared from a reserve standpoint for, I’m going to call it crisis. There was a community in Orange that Senator Umberg’s district, California Senator Umberg’s district who helped create with CACM’s assistance, we helped create SB 900.
Which is specifically addressing emergencies in a homeowner association. The board needs to start commencing those repairs within 14 days, which simply just means making a phone call and getting those proposals and all that, just moving that process forward. But going back to the reserves, this community, and I felt horrible when I first heard the story, but this community had no funds to satisfy their crisis, which was a gas leak.
So, they had to replace, or they were told that they had to replace all of their gas pipes. And that was a four-month shutdown of gas, no hot water, no showers, no, I mean, was no hot water, at least in showers. I mean, it was not a very pleasant environment to be living in, but they didn’t have the reserves to address that level of a crisis.
And that was one of the reasons I wanted to have a conversation today is because an association has to prepare not just for the life expectancy of a component, but overall, what if. And then as I understand it, gas pipes are not usually listed in a reserve study. How often do you see that specific line item other than just like plumbing, a plumbing related line item?
MATTHEW: Yeah. So, I can think of one community that has a gas line in their reserve study as far as San Diego County goes that I’ve seen. And that really goes back to national reserve study standards. And national reserve study standards were back written back in the 90s. It was updated with a lot of lessons learned from various situations with aging communities, studies done, and of course, the tragic collapse of Champlain Tower South.
TOM: Sure.
And what we’ve seen in looking at national reserve study standards is you have the three-part test that we used to talk about the four-part test. was updated through those lessons learned in 2023. And that three-part test says to be a reserve component, to be something that we’re going to fund in the reserve study, it needs to fit that three-part test. It needs to be the association’s obligation. So, if we go to that Orange County property and we think, gosh, if I recall the story correctly, you know it better than I do. There was actually disagreement between the gas company and the association for who was responsible for what, correct?
TOM: Yeah, I was going to avoid that.
MATTHEW: Well, but that’s an important part. So, national…
TOM: It is an important part. It was controversial…
MATTHEW: That’s an important…
TOM: There was also controversy with the contractor as well, but that’s…
MATTHEW: So, to fund for a component we need to start with that. It needs to be an association’s obligation. So, if it’s the utility company, the city adjacent owner, if it’s unit owners, anybody but the association, then we should not be funding for it through the reserve study because the reserve study, again, going back to that premise of what’s a reserve study for, we’re going to recognize that annual bill of deterioration for components that the association’s obligated to maintain repair replace.
So, on top of that, that cost needs to be significant or material to the association. Now, very clearly replacing all the gas lines in the community, that’s going to be very significant. That’s a six, seven figure project for sure. Even smaller communities are going to be very expensive.
TOM: Oh yeah, it’s massive.
MATTHEW: And then the third part of the third part, three-part test is the most crucial when it to utilities. You need to have a predictable scope and schedule. So, for gas lines that are buried under the dirt, for plumbing lines, whether its supply lines, sewer lines, storm drain lines, for electrical infrastructure. So, for all these big utility elements, they can fit those first two parts. They can be associations obligation. They can be significant. But if we don’t have any sort of predictability, then we, National Reserve Study standards, are not supposed to be setting up general contingencies where we’re just throwing darts blind. We need to recognize real bills.
And so that’s not to say that we should ignore them because they are very expensive. And we’re seeing anywhere from typically around the 30 to 50-year mark, a lot of utility elements do start to fail. We have communities that were built in the sixties that are replacing major electrical infrastructure. So, what’s important within the reserve study process is just like the Exterior Elevated Elements Bill, SB 326. We don’t know, we as reserve specialists don’t know the structural conditions of decks because we’re charged with doing a diligent visual inspection. So, we’re not pulling open siding, we’re not going with borescopes into soffits, things like that.
And so, what happened through that process of SB 326 was that this other set of qualified professionals can do that inspection and that SB 326 legislation requires an association have that evaluation done every nine years. And that’s very intentional because the diligent visual inspection of the reserve studies every three years. So those get on the same cycle every third reserve study cycle. So, then we can incorporate those findings. So, what we as reserve specialists need to start doing, our company is preparing for this for next year as we start rolling out new reserve studies updates is to guide our clients in that process.
How do we comply with this law, which says you need to fund for these major components, when National Reserve Study Standards says it needs to be predictable? And through our process of diligent visual inspections, we can’t predict those failures. Like we can see peeling paint on metal fencing, like we can see shingles slipping on shingle roofs, like we can see roads crumbling with deteriorated asphalt.
So, we can’t see the condition of the gas lines, electrical service, things like that. So, we need to guide our clients to bring in other experts. We need to first recognize what is and isn’t association responsibility. And then when they bring those experts in to evaluate those utility components, then if they can define that predictable scope and schedule, we can then incorporate them into the reserve study.
TOM: And for those managers, board members, listeners who that sounds foreign, like, what do I do? It’s underground. Cameras, cameras, run a camera line down all the way down the line that you can actually see what’s inside of a pipe. You can actually see what’s, what’s going on underground or on your roof or behind a wall. You just have to run a camera. Matthew, you’ve, you’ve mentioned a couple of times national standards. That’s not, that’s essentially best business practices. So, are you a proponent of developing some, and again, specific to California. Are you a proponent of developing some sort of legislation that identifies a minimum level of funding for homeowner associations?
MATTHEW: We find that associations tend to be underfunded, both in California and across the country. And it would be absolutely wise, prudent, and best practice for associations to be fully funded.
I would say as far as minimum funding requirements, what’s important is to make sure that associations focus on first having current credible reserve studies and that they’re not funding based on some percentage of budget because as I mentioned earlier in this podcast, most associations are anywhere in the 15 to 40 % of annual budget going to reserves to be adequately funded. So that percentage is going to vary depending on the property age, things like that.
So, if we’re going to set up legislation, it needs to be based on national reserve study standards and percent funded, not percentage of budget.
TOM: Okay. I appreciate that. For the managers out there who’s wondering, well, how do I make it, or can I even make a change in a reserve study? Meaning, hey, going back to the gas lines. Hey, I didn’t see gas lines on my reserve study. Can they just have a conversation with the reserve specialist and with their board to say, this is an actual common area component. It’s not listed on the reserve study. And it could be literally anything. I’m just using the gas line as a, as a hypothetical scenario.
Can’t they just reach out to their reserve specialist and say, Hey, this is not listed on the reserve study and it should be.
MATTHEW: They can absolutely provide that input, but we need to go back to that three-part test and say, if it’s association obligation, if it’s significant and predictable schedule. So, we definitely encourage. In fact, I get concerned when clients simply take the reserve study and move forward and don’t ask questions. But we always want to make sure that as communities continue to learn more about their community on how things are aging, what’s their responsibility? What can they predictably plan for? They should be asking those questions, and they should be having those conversations with their reserve specialist.
TOM: So, and the last question I have is essentially use of the reserves. There’s over, I’ve been doing this a couple of days now, maybe 40 years. And I’ve always had this varying thought process provided to me that, well, you can’t use reserves for that because there’s not a line item for it. Or if there is a line item for it, well, that’s more of a repair. So that should go out of operating and not out of the reserves.
I’m going to ask you the question. So, considering that a reserve study, your reserve funds and you’re transferring into the reserves, it’s considered a repair and replacement reserve. So, would it be accurate to say that if a reserve study has a maintenance or a repair of a line item, plumbing repair, simple one to pick on, a plumbing repair in the reserves, you can then actually use that reserve for that repair as opposed to a replacement.
MATTHEW: There’s a lot of gray areas there, Tom.
TOM: Yeah, I know. That’s why I think that’s why I figured I’d throw it out there.
MATTHEW: Yeah. So, we always start with, first of all, what’s the premise behind a reserve study? A reserve study is not a stone tablet that says this is what you can and can’t spend reserve dollars on. So just because a component or a repair or a project is not in the reserve study, doesn’t automatically disqualify it from being something that you can spend reserve dollars on. First of all, if you see, and not just the common area element, but you see the actual project, because within the reserve study, you have the assets such as roads, roofs, plumbing, pools, things like that. But then you have different projects related to those items too. So for a high rise downtown, you may have a major refurbish of your cooling tower every eight to 10, 15 years, and then you may have a replacement on every second or third cycle there.
So maybe you have an eight year refurbish, a 24-year replacement. So, you’re have not just the components, but the actual projects. So, if the component and the project fit real easy, obviously that’s going to be something you can spend reserve dollars on. If you have the component but not the project, then that’s something you need to talk with your reserve specialist about and say, does this truly fit?
If so, should we add it to the reserve study? If you take a boiler on, let’s say, a domestic hot water system on one of those high rises downtown, and you’ve hit the 15-year lifespan on that boiler, but your vendor comes to you and says, you know, we’re doing our regular preventive maintenance, and we found that you need X, Y, and Z, and if you spend these dollars here, maybe it’s 5 to 10 % of your replacement cost, but you can get another five years of life out of that boiler.
Well, you can spend reserve dollars on that project and that project doesn’t even have to be specified in the reserve study because you’re extending the life of that reserve component. So, depending on the specific project, it’s good to talk with your reserve specialist and sometimes involve legal counsel as well, depending on exactly what it is you’re going to spend reserve dollars on if it’s not listed in the reserve study.
TOM: What if it’s a contingency line item, meaning my operating account is running short, but my reserve study says I have a contingency or an operational contingency, whatever, however you want to term it. Can the reserves then also be applied to something like that or that line item?
MATTHEW: Well, that goes back.
TOM: I know it’s a gray area and it depends, but.
MATTHEW: So that goes back really to national reserve study standards, three-part tests. So, I always, when I see a reserve study prepared by another firm where they just have a line item that says contingency, one year zero, X number of dollars, that throws up red flags to me because guess what? That doesn’t fit the three-part test. If you have contingencies, that belongs in operating. If on the other hand, you say concrete, so we’ve talked a lot about plumbing and concretes very similar.
Concrete sidewalks typically are not funded for on a full replacement because concrete has a varied life cycle to it. And you have different factors from water runoff to storm drain runoff to tree roots to there’s so many different factors there. So oftentimes communities have like a five-, seven- or 10-year cycle of repairs, which some people would call a contingency for their concrete. So, if we’ve defined that there’s a predictable scope and schedule to those repairs and you have issues with your concrete, then you can spend reserve dollars on that concrete project.
TOM: Okay, well I want to thank you very much for taking the time to have a conversation and help explain some of the intricacies of reserves. Do you have any parting words for our manager listeners, our board member listeners, and anybody else who’s listening?
MATTHEW: I would just encourage managers to coach the boards and for the boards to really keep their eye on the goal of what is it we’re trying to do? We’re trying to recognize that bill so that we are truly paying that bill every year and not shortchanging future owners. That’s equitable, it’s fair, and it’s the right way to run a mutual benefit nonprofit corporation.
TOM: Outstanding. Matthew, I greatly appreciate your knowledge, your experience, and your insights that you shared with us today to managers and all of you listeners out there want to thank you as well. Listen, if you have questions either for Matthew or for us at CACM or you have suggestions, you want to share a story, please email us at podcast at CACM.org. Once again, Matthew, thanks so much to our listeners. I’ll talk to you soon. Thanks.
OUTRO: And that concludes this week’s episode of CACM Chat, HOA Life. Have questions you want answered? Send them to podcast@cacm.org and we’ll address them in an upcoming episode. Make sure to regularly check out our website at cacm.org. And don’t forget to join our rapidly expanding social media community. Just follow @CACMchat on LinkedIn, Facebook, Instagram, and X. Thanks for joining me.