GRF reserves are healthy

MESSAGE FROM THE GRF TREASURER

by Nick Massetti

GRF Treasurer

Last week the reserve fund and its associated reserve study were described. One measure of the health of a reserve fund is its “percent funded level.” That factor is simply the HOA’s current reserve fund balance divided by the current amount needed to fund replacement of all the components in the reserve study. A high percent funded level means there is a low likelihood that a special assessment will be needed, while a low percent funded could mean a special assessment is called for.

The GRF reserve fund percent funded level at the end of 2024 was well above the strong level of 70%, and projected to climb higher in the years ahead. For that reason, there was no increase in reserve funding in the GRF 2025 budget over its 2024 amount.

With the reserve fund being a large contributor to annual budgets the opportunity to wreak havoc with assessments sometimes becomes real. One unfortunate way for a reserve fund to fall behind what is needed is for the reserve study to not include major components. When those need replacment, the funds have not been saved for that purpose. For example, the 10,000 feet of chain link fence lining the Golden Rain flood control channel was not in the GRF reserve study until a few years ago. When it was added, it immediately became the largest contributor to annual total funding requirement. That was an example of a component that for many years was considered a “lifetime component” for which no reserve is called for. However, now that Leisure World is over 60 years old such lifetime components prove to be mortal after all.

Another way for a reserve fund to fall behind is to delay replacement of a component well beyond the planned time, and then see the cost of replacement significantly increase. Of course, not adequately contributing to the reserve fund is the typical way the fund falls behind.

The Mutuals fund their reserve funds completely from their resident’s mutual’s assessments. GRF chose a different way that does not involve the current resident’s annual assessments. GRF collects a one-time fee from all new GRF members when they purchase their residences, which is called the “Trust Property Use Fee” or TPUF. The rationale is that this one-time fee catches up the new members on their responsibility to pay for all the various community amenities that have been previously paid for by past members. So far, the total amount of this fee has exceeded the required full funding contribution to the GRF reserve fund in budgets over the last decade. In the 2025 GRF budget that meant that the TPUF replaced $32 per month that would otherwise have to have been assessed of current residents. That is one of the ways the GRF Board keeps the GRF assessments in check and prudently manages for the future.