By Heather Michon
Correspondent
Along with selecting three new board members, Lake Monticello residents will be asked to weigh in on two proposals aimed at securing long-term financial stability as they cast their ballots ahead of the Lake Monticello Owners Association’s Annual Meeting on Sept. 26.
Directors Jay Hinkle and Mike Harrison participated in a virtual town hall on Aug. 28 to explain the proposals.
LMOA holds funds in reserve equal to the projected replacement cost of all community amenities over a 30-year period. Current projections indicate a need for $66.4 million in reserves–$31.6 million for Major Repairs & Replacement (MR&R), $21 million for Roads, and $13.8 million for Lake Health.
But funding has not kept pace with costs over the past several years. “The members have not supported votes [to raise dues],” said Harrison. “And boards have been afraid to ask.”
As a result, MR&R and Roads reserve accounts are projected to fall to critical levels as early as 2025, jeopardizing scheduled repaving and repair projects. By 2036, reserves accounts could be underfunded by as much as $10.8 million.
In 2019, the Board of Directors tried to remedy the shortfall by proposing a $180 dues increase. Members voted the measure down by nearly a 2-1 margin.
Hinkle said the directors and the administration had worked over the past year to come up with fixes that didn’t require a dues increase. Through the deferral and elimination of some planned reserve spending and the redirection of other funds into Reserves, they had come up with about 80 percent of the money needed. The proposals now before the member will cover the remaining 20 percent.
Proposal #1 would redirect dues currently going towards repayment of funds withdrawn from the Emergency Reserve Account (ERA) during the renovation of the community’s two clubhouses.
In 2014, members voted to withdraw $2 million from the ERA, with the understanding that it would be repaid through members’ dues by 2030. Each year, $38 of each household’s dues is allocated towards this repayment. Under Proposal #1, the money would be allocated instead to the Reserve accounts, for a total of $2 million by 2030.
Harrison, who sat on the board when the association sold the water treatment plant for $6.63 million in the late 1980s, said they had erred in calling it the Emergency Reserve Account. Both the name and the structure of the account were designed “to prevent money from being taken out” without member approval, a process which can take months or years to accomplish. As a result, he said, it doesn’t really function as an “emergency” fund.
The ERA would maintain a balance of about $1 million, which Hinkle said was more than financial experts recommend for HOA emergency reserves. He added that it would not impact the community’s ability to deal with emergencies if they arose.
Proposal #2 is more straightforward. It increases the Property Transfer Fee (PTF) from $650 to $800. The PTF is paid by homebuyers as part of their closing costs.
If both proposals pass, it will increase Reserves by $2.2 million without a dues increase or a special assessment. Projections show that the changes would fund MR&R through 2046 and Roads through 2040.
The annual meeting, originally scheduled for late June but delayed due to the pandemic, will be held online on Sept. 26 at 10 a.m. However, the deadline for ballots is no later than 5 p.m. on Sept. 18. Each household has received their mail-in ballots, but the directors encouraged members to vote online to reduce the amount of paper the Election Committee has to handle in tabulating the votes. Visit lmoavoice.org for more information.
