Get 2 months of free community web site hosting from Community123.com!
Tuesday, January 28, 2020
Get 2 months of free community web site hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Working Capital v. Capital Reserve
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
PegM1
(Pennsylvania)

Posts:8


01/13/2020 2:28 PM  
Quick Question and thank you, in advance, for any help:

If a retention pond (common element) needs to be completely rebuilt (could be $30,000-$50,000) should the payment come from the working capital fund or can it be taken from the capital reserve fund? Our reserve study allows for dredging of the ponds but says nothing about a rebuild. Thank you!
TimB4
(Virginia)

Posts:16633


01/13/2020 2:32 PM  
The proper way would be from the Reserves.
However, if you have the money in the operational funds, it shouldn't matter.
If concerned, transfer the funds into the reserves before spending.

Additionally, update the reserve study to allow for dredging, repairs and replacement/rebuild.
GeorgeS21
(Florida)

Posts:1877


01/13/2020 3:15 PM  
Sounds like a number too large to fit into the current years ops budget - is your working capital the same as current year operations?

This is exactly the reason for reserve funds, and comprehensive reserve studies.

Rebuild can mean a lot of things.

To substantiate the cost of rebuilding, I would move funds required to the reserve fund, to leave an audit path.

SteveM9
(Massachusetts)

Posts:3516


01/13/2020 5:38 PM  

If a retention pond (common element) needs to be completely rebuilt (could be $30,000-$50,000)


Rebuilt? I'd get lots of quotes, questions, and opinions. Sounds like a contractor trying to take advantage of you. Maybe even do nothing.
SteveM9
(Massachusetts)

Posts:3516


01/13/2020 5:42 PM  
Maybe even discus removal of the retention pond thus no more maintenance.
GeorgeS21
(Florida)

Posts:1877


01/13/2020 6:14 PM  
Ummm ... I’m thinking the retention pond must be there for a reason.
AugustinD


Posts:2411


01/13/2020 7:05 PM  
Posted By PegM1 on 01/13/2020 2:28 PM
If a retention pond (common element) needs to be completely rebuilt (could be $30,000-$50,000) should the payment come from the working capital fund or can it be taken from the capital reserve fund? Our reserve study allows for dredging of the ponds but says nothing about a rebuild.
It's a capital asset (meaning useful life longer than one year). I suggest the board pay for the rebuild out of the reserve fund. Then the board should see if it can possibly put a little more into the reserve fund from its operating budget in the next year or so, by cutting operating expenses. If the reserve fund is not healthy, an assessment increase or special assessment ought to be considered. Else I am with George on maintaining the retention pond (to say the least). It's just about guaranteed that the city where this HOA is regulates drainage. When the development where the HOA sits was first built, the City's land use department likely approved drainage including the retention pond. The HOA cannot just eliminate the retention pond without risking liability to others when flooding happens and getting tagged with a violation from the city.

For the next reserve study, and like Tim wrote, change the line item on retention ponds to include dredging and a complete rebuild every __ years.
SteveM9
(Massachusetts)

Posts:3516


01/13/2020 7:33 PM  
the City's land use department likely approved drainage including the retention pond. The HOA cannot just eliminate the retention pond without risking liability to others when flooding happens and getting tagged with a violation from the city.


Maybe, maybe not. Many retention ponds are for nothing. As part of "rebuilding" the pond, its likely to be drained, thus bringing into question if it needs to exist at all.


GeorgeS21
(Florida)

Posts:1877


01/13/2020 7:43 PM  
Sheesh.

Steve - I’d probably leave this one to the on site engineers. Maybe make that sort of recommendation - to work with local engineering staff to understand why the pond is there?
NpS
(Pennsylvania)

Posts:3987


01/13/2020 8:21 PM  
For good explanation of Dry Stormwater Basins, see:

https://pecpa.org/wp-content/uploads/Water-Resources-Maintaining-Stormwater-Basins.pdf


Sikubali jukumu. Read all posts at your own risk.
TimB4
(Virginia)

Posts:16633


01/13/2020 9:26 PM  
Steve,

Retention ponds are typically required by the EPA to manage storm water and sediment.
Failure to properly maintain (much less completely remove) such a pond would result in major fines from the EPA.

Better yet, contact the local branch of government that deals with storm water and ask how best to address the issue.
JohnC46
(South Carolina)

Posts:9053


01/14/2020 9:43 AM  
Posted By TimB4 on 01/13/2020 9:26 PM
Steve,

Retention ponds are typically required by the EPA to manage storm water and sediment.
Failure to properly maintain (much less completely remove) such a pond would result in major fines from the EPA.

Better yet, contact the local branch of government that deals with storm water and ask how best to address the issue.




In SC, the State mandates and controls them. The HOA pays for any maintenance.
MarkM19
(Texas)

Posts:506


01/14/2020 1:32 PM  
Peg,
This sounds fishy to me as other have pointed out. A retention pond is really just a low lying part of the development that is used for runoff of excess water from storm drains. I have never heard of rebuilding this are before. I can understand dredging possibly but rebuilding seems like someone trying to use scary words on a Board. You really need to get at least 3 other vendors out to give bids on what the Pond needs. Give them no information from any sources that may not be accurate.

Over my 10+ years of being on Boards and 39 years in business before retiring recently I have noticed that some Property Managers and Boards are ripe for Bad contractors to pray on them. You have a terrible combination of a PMC that is trying to get tasks done and use the same vendors over and over with very little oversight. Oversight takes time and Knowledge of many areas and expertise. Then you have HOA Boards made up of people that have in many cases less experience than the PMs and take their suggestions without many challenges. Both parties are spending "Other Peoples Money" so as long as they have it they take the easiest path. Contractors know when they are bidding on jobs who the customer is and what they will except. This may sound skeptical but I have seen it time after time. They need to be challenged.
GeorgeS21
(Florida)

Posts:1877


01/14/2020 1:48 PM  
Our retention ponds are carefully shaped, lined, connected via storm water management systems via huge pipes and pumps, road swales and ditches.

They are not low areas, but rather engineered systems.
MarkM19
(Texas)

Posts:506


01/14/2020 2:14 PM  
George,
The areas you are describing seems like City infrastructure more than HOA assets or Liabilities. If in fact they were installed and are maintained by the HOA the Reservist who did the first Study should have estimated the Life span and repair costs for all of the component's. It would still be doubtful that it would ever need to be fully rebuilt.

As usual we are left to speculate with only the information we are provided.
GenoS
(Florida)

Posts:3495


01/14/2020 3:01 PM  
Posted By GeorgeS21 on 01/14/2020 1:48 PM
Our retention ponds are carefully shaped, lined, connected via storm water management systems via huge pipes and pumps, road swales and ditches.

They are not low areas, but rather engineered systems.

Same here. Florida's quasi-governmental Water Management Districts have strict permitting requirements for construction, maintenance and operation. I imagine the significance of stormwater retention and/or detention ponds in other states is not as big of a deal as it is in Florida. In Florida, detention ponds are most definitely not just low-lying lands in the back corner of a development. They are integral pieces of a "Stormwater Management System" and such systems consists of the ponds and many other components, as George points out. In most cases, stormwater systems must be certified by professional engineers before an operational permit is granted. From design, to construction, to operation, to maintenance, stormwater management in Florida is a big deal. I would guess in northern states, like Pennsylvania, maybe not so much.

Volume I of my WMD's "Environmental Resource Permit - Applicant's Handbook" is 263 pages long.
The "Permit Information Manual" (which includes Volume II of the Applicant's Handbook) is 650 pages long.

Unlike the condo and HOA laws in Florida, enforcement actions of the Water Management Districts are real and so are the fines for non-compliance.
AugustinD


Posts:2411


01/14/2020 4:20 PM  
Posted By GenoS on 01/14/2020 3:01 PM
From design, to construction, to operation, to maintenance, stormwater management in Florida is a big deal. I would guess in northern states, like Pennsylvania, maybe not so much.
I'm in a state where flooding from storm water is a problem certain times of the year. Not like Florida, but still, lots of damage has been occurring with the larger storms in the last few years. To get a new subdivision's drainage plan approved by the city where I am is a huge but necessary bureaucratic endeavor. A HOA cannot just put down significant additional impermeable surface (for, say, additional parking) without completing a long application, including engineering studies. I spoke with some civic-active relatives in Illinois about this, commenting about how stormwater is heavily regulated where I am. My relatives responded: 'It comes up all the time in our Illinois city as well, with the land use department. Whenever new pavement is laid, problems with drainage often arise.'

Here's a small town in Pennsylvania with a 90 page stormwater management ordinance:
http://www.westpikeland.com/wp-content/uploads/Stormwater_Ordinance.pdf . Then evidently there's Pennsylvania's Storm Water Management Act of 1978, https://www.legis.state.pa.us/cfdocs/legis/li/uconsCheck.cfm?yr=1978&sessInd=0&act=167, requiring cities to set up programs and ordinances for storm water management or else.

Yada yada. The OP should find out what its obligations are with regard to the retention pond, to stay informed and so his Board can explain why they have to maintain the pond (if it is not already obvious).
JohnC46
(South Carolina)

Posts:9053


01/15/2020 2:24 PM  
Peg

Who told you to rebuilt the retention pond?
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Working Capital v. Capital Reserve



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement