Answers to submitted questions: Funding and Budget
Below are answers to questions that were submitted by residents at the Town Hall meeting.

1) What is the plan to cover the cost of the asphalt project?  
The LARMAC Board of Directors approved the operating budgets and reserve studies for the the master and all cost centers on April 12, 2023. The new budgets go into effect on June 1, 2023. Please visit the Budget and Finance page for details.   

2) Can the funding come from other resources such as charging homeowners who are performing new construction or requiring new homeowners to pay additional funds?  
That is not a copnsideration at this time as the vast majority of the home construction is near completion.

3) Can the additional reserve funds needed be included in the monthly Covenant Hills assessments? 
Yes, all reserve contributions are included in the monthly assessments. This is how projects, such as street repairs, are funded. Currently, of the $397.00 monthly assessment for Covenant Hills, $177.30 goes towards reserve projects, such as street repairs. 

4) Has consideration been given to prorating the assessments based on square footage given that we have homes ranging from 2000 sq ft to as much as 8,000 sq ft?
No, that is not an option that can be considered. As defined by article 8.4.1 of the master CC&Rs, an assessment unit is defined as "single-family lot of condo".  

5) What caused the percentage funded to go from 68% to 16% from one year to the next? 
Following the PMP Study performed by GMU, a 30-year budgeting plan was created to help the Board budget for the asphalt repairs. This led to the reserve study being revised to include these updated budget numbers. The previous reserve study contained about $7M in asphalt repairs over a 30-year period; however, what is actually needed to repair and maintain the streets at a satisfactory level is estimated at about $19M over a 30-year period. The addition of $12M added to the reserve study contributed to the drop from 68% funded to 16% funded.

6) Why did we wait to address the issue until the reserve funding was reduced to 16% funded?
The asphalt conditions were identified in 2021 after consulting with an engineering firm to perform a thorough review of the Covenant Hills streets, which led to the PMP Study and a plan for addressing the streets going forward. At that time, reserves were funded at 68%. Upon updating the Reserve Study with updated budget numbers, the percent funded was reduced to 16%. 

7) The letter received stated the original budget was for $7 million and the newly revised budget was closer to $18 million. Why was the original estimate so far off?
Street repair work was initially budgeted in the Covenant Hills Reserve Study using industry-standard budget numbers. This budget information was provided by a third-party Reserve Analyst dating back to the development of Covenant Hills. Upon the completion of a pavement study in 2021,  as performed by an independent engineering company, it was determined that additional funds would be needed to fund future repair work, which is above and beyond what was initially incorporated into the Reserve Study.   

8) So in another 15 years is our cost going to jump from the minor repair cost to the major repair cost? What is the hoa doing to prevent covenant residents from being stuck with another huge bill?
The Reserve Study has been updated to reflect updated budget numbers for the next 30 years, based on findings from the PMP Study. While the majority of expenses are currently planned for years 1 - 15, years 16 - 30 also have a budget outlined in the Reserve Study.

9) With interest rates on banks going up have you adjusted that income stream to account for increased interest revenue? 
Current interest rates factored into the Reserve Study is 3%, which is up from 1%.

10) How did we identify 70% percent funded as the min threshold? 
70% funded or above is generally considered strong or healthy. Refer to page 33 of the Town Hall Meeting presentation. 

11) Can some homeowners choose to pay as a lump sum while others pay over time?
Currently, the plan to build up reserve funds will occur over the next several years. The recently approved funding plan can be found here. 

12) In the September 15, 2022 letter sent to homeowners addressing the 2021-22 FY Financial Statement Audit Review, it states that "LARMAC's operating and reserve cash positions are healthy." Despite this written statement, we are being told that we have a significant reserve funding shortfall due to the condition of our Covenant Hills roads. Can you please explain this?
The Financial Statement Audit Review is based on FY 2021-2022 consolidated Financial Statements, meaning the Master and the various Special Benefit Areas (SBA) as a collective group as opposed to Covenant Hills as a separate SBA. Additionally, the changes to the Covenant Hills Reserve Study (percent funded dropping from 68% to 16%) did not occur until the current fiscal year - 2022-2023.

13) Are home builders contributing to the cost of the repair?
No, homebuilders are not responsible for street repairs once the streets are turned over to LARMAC.

14) Can you provide historical percent funded levels year over year?
Yes, this information can be found on the Budget and Financing page on Ladera Life. 

15) Why have the streets not been adequately reserved to date?
Street repair work has been budgeted in the Covenant Hills Reserve Study using industry-standard budget numbers. This budget information was provided by a third-partyvReserve Analyst dating back to the development of Covenant Hills. Upon the completion of a pavement study in 2021,  as performed by an independent engineering company, it was determined that additional funds would be needed to fund future repair work.    

16) On average, how much has been spent on street repairs each year? What type of repairs/maintenance?
An average of about $100,000 per year has been spent on spot repairs and slurry seals. 

17) I often see swaths of the landscape being removed for no obvious reason. What is the process for approving this and can these funds be allocated toward road repairs which seem to be a higher priority? 
Acacia redolens is currently being removed/replaced in various portions of the community as part of large slope renovations. While this plant is mostly healthy, removals are part of an effort to reduce this ember-receptive plant material in accordance with OCFA requirements. For more information, please visit the Landscape page of "Your HOA at Work" section of LaderaLife.

18) How many homes are in Covenant Hills?
There are 1,000 homes in the Covenant Hills special benefit area (SBA). All Covenant Hills SBA-related expenses, such as street repairs, are shared equally among these homeowners.