I have covered it here before but new readers may ask what the heck is this? Well, here you go.
A certain portion of your yearly assessment is designated to go into replacement reserves. Replacement reserves are monies set aside specifically to replace and repair existing structures and other physical assets of your development. Examples would be roads, tennis courts, the pool, vehicles, etc. We are not allowed to use those funds for anything else. Any new capital items must be paid for from our operating funds, then they may be added as assets to the reserve account for depreciation and eventual replacement. It sounds a little strange but that is how it works.
We now will have a good handle on how much money we need per year going forward to be used from the replacement reserves, thus letting us know how much needs to be put in yearly to keep the balances sufficient as well as a substantial amount available in case of an emergency. We must not let the reserves account run low or we could find ourselves with, for instance, a section of road that is suddenly undermined and must be replaced immediately with no reserves cash to fund it. That will not happen.
Our reserves are currently in excellent shape and I know the current board members intend to keep them that way. No need to worry. Candlewick finances are healthy.
(As I typed this it came to mind how interesting it is the media can't wait to publish any perceived problem in our development but have not once mentioned our to be admired financial status. Odd, isn't it.....
Ken