Treasurer’s Report: Our Financial Safety Net for Storms

As I write this article, we are at the start of the most active part of the annual hurricane season. This region is particularly susceptible to severe weather events, including hurricanes, tropical storms, and tornadoes, which can cause significant damage to common areas and shared infrastructure. There are several key reasons why it is important to have a dedicated storm reserve fund.

First and foremost, a storm reserve fund provides a financial safety net for the PDPOA. Unlike the operating fund, which covers day-to-day expenses like landscaping and routine maintenance, a storm reserve is specifically for non-routine, large-scale, and often unexpected costs. When a storm strikes, it can cause damage to a variety of community assets, such as buildings, roads, bridges and sidewalks. Without a dedicated fund, the HOA would be forced to scramble for a way to pay for these immediate and costly repairs.

This leads to the second crucial point: avoiding special assessments. A special assessment is a one-time, lump-sum fee levied on all homeowners to cover an unexpected expense. In the aftermath of a major storm, a special assessment could place a significant and sudden financial burden on residents, many of whom may also be dealing with damage to their personal property. A well-funded storm reserve allows the HOA to handle these repairs promptly avoiding special assessments, which can cause financial hardship and friction within the community.

Third, a storm reserve fund helps to maintain and protect property values. A community that is well-maintained and can quickly repair damage from a storm is more attractive to potential buyers. Having a healthy reserve fund demonstrates fiscal responsibility and gives homeowners and lenders confidence in the long-term health of the community.

Lastly, while we were able to rely on FEMA and other governmental resources after Hurricane Matthew, there is no guarantee that these resources will continue to be available to assist with recovery in the future.

A 2004 Amendment to our Covenants established a Storm Reserve fund and the ability of PDPOA to assess residential property owners to contribute to this fund both before and after a natural disaster. The Storm Reserve Fund covers un-budgeted and unexpected expenses as a result of a storm or other natural disaster. This fund is for the clean-up and removal of debris and trees, repair and replacement of damaged infrastructure, and to otherwise recover from extraordinary wind, rain, flooding, hail, or other damage resulting from or as a result of a natural disaster, or Act of God including but not limited to an earthquake, hurricane, tropical storm, or cyclone.

This fund has a designated maximum level of $2 million adjusted for CPI since its inception. The fund balance may exceed the designated maximum level due to investment earnings. It is currently funded to its maximum allowed level. In times of crisis, other reserve funds may also be tapped for recovery. In addition, the PDPOA has access to a line of credit up to $5 million to pay for storm recovery expenses.

Finally, if the PDPOA has insufficient funds to pay for natural disaster recovery, the Board may establish a Special Storm Recovery Assessment to cover unbudgeted and unexpected expenses. The assessment has a designated maximum level of $1,000 per year per lot as adjusted by the CPI since the inception of the Storm Reserve Fund. Once those expenses have been covered, the $200 storm reserve assessment may be reinstated in the following calendar year to replenish the Storm Reserve Fund. This fund is reviewed annually during the budget process.

In conclusion, a storm reserve fund is not just a good idea, it’s a vital component of responsible financial management. It provides a buffer against the devastating financial impact of severe weather, protects homeowners from burdensome special assessments, helps maintain property values, and demonstrates a commitment to the long-term health and stability of the community. By proactively setting aside funds, the HOA can ensure that it is prepared to handle the unique challenges of its geographical location and keep the community safe and secure for all residents.

— Bob Talbot, Treasurer