By Heather Michon
Correspondent
Residents of the Lake Monticello Owners Association (LMOA) will soon cast votes on a critical proposal that could authorize the use of the community’s Emergency Reserve Account (ERA) to repay all or part of a previously forgiven COVID-era Paycheck Protection Program (PPP) loan.
Proposal #2 on this year’s annual meeting ballot seeks member approval for the Board of Directors to use ERA funds “to pursue and implement a repayment plan” in the case.
The U.S. Department of Justice is demanding repayment of the $680,000 loan issued through the PPP in the spring of 2020.
Although the Small Business Administration (SBA) approved and later forgave the loan, the Justice Department has told HOAs like Lake Monticello that they were not eligible for loan forgiveness and must now pay the loans back with interest and penalties.
The Board of Directors maintains that it acted in good faith in applying for the loan in April 2020. The association employed 74 people at that time and believed the PPP loan would help prevent furloughs.
While the LMOA continued to collect dues during this period, the automatic three percent increase was reduced to 1.5 percent that year.
The association hopes to reach a settlement in the case rather than risk potentially costly litigation against the DOJ. An analysis of settlement cases with other HOAs indicates that the government usually settles for 1.2-1.5 times the original loan.
The Emergency Reserve Account, funded initially with about $8 million from the 1998 sale of the water treatment plant to Aqua, requires member approval for the BOD to access the fund. In the past, members have approved using ERA funds for dam repairs, the reconstruction of the clubhouses, and pool renovations.
“A ‘yes’ vote to this proposal would allow the BOD to utilize the ERA to (partially or fully) satisfy the SBA’s demand for repayment while working to avoid a special assessment to LMOA members,” the association argues.
While there is no timeline for settlement, the BOD is asking for permission to access the fund whenever a settlement is reached, rather than having to hold a special meeting down the road at a cost of approximately $12,000.
Instructions on casting electronic ballots went out by email on May 27, and residents will also receive instructions by postcard. Voting closes at 5 p.m. on June 20. The annual meeting is scheduled for June 28.
