By Heather Michon
Correspondent
The Lake Monticello Owners Association (LMOA) will ask residents for permission to potentially draw funds from the Emergency Reserve Account (ERA) to help pay off a $680,000 COVID-era federal loan.
Directors voted 6-0 to add the question to the ballot that will go out to members for the annual meeting during their monthly meeting on Thursday night (April 25).
In April 2020, the LMOA applied for a $646,843 loan from the Paycheck Protection Program (PPP), an emergency fund established by Congress to provide up to eight weeks of payroll assistance for eligible businesses facing furloughs and layoffs as the country shut down in the face of the expanding pandemic.
LMOA was concerned that illness and rising unemployment would prevent members from keeping up with the dues and permits, and could lead to staff layoffs.
Current LMOA president Larry Henson said that the LMOA directors on the board at the time “believed it was their fiduciary responsibility” to apply for the loan.
Henson said that the PPP program guidelines had been contradictory and constantly changing, but the LMOA had “trusted the SBA (Small Business Administration) to vet the application properly.”
Because the LMOA was found to have used the funds for their intended purpose, the SBA forgave the loan in full in May 2021. The association then took the debt off the books.
But in December 2024, it received a demand letter from the DOJ, stating that, as a 501(c)(4) homeowners’ association, LMOA had been ineligible for PPP loan forgiveness.
Now, the government wants the money back, with interest. Failure to settle and repay the $681,000 could result in prosecution under the False Claims Act. A conviction could lead to a fine double or triple the amount of the original debt.
Henson said an attorney’s analysis of DOJ settlements with other HOAs under similar PPP loan cases generally found that the amounts were about 1.2 to 1.5 times the original loan amount.
The ERA is a reserve fund created when LMOA sold the water treatment plant to Aqua in the 1990s.
Residents have voted to approve withdrawals in the past. In 2014, a majority voted to loan the association $2 million from the ERA to fund the construction of the new clubhouses at Ashlawn and Fairway. A portion of annual dues goes back into the fund each year, with the loan expected to be fully repaid by 2030.
The question of using ERA funds to help pay the PPP loan will be on the ballot that will go out to residents in the next few weeks. Results will be announced at the annual meeting in late June.
