61B-76.003: Budgets
61B-76.005: Reserves
PURPOSE AND EFFECT: This proposed rule amendment is for the purpose of allowing cooperative associations to use the pooling method for funding reserves for capital expenditures and deferred maintenance. The pooling method is a funding formula that utilizes a combined analysis and common source of money to pay for the maintenance or repair of assets within the pooled reserve account. The pooling method provides associations with more flexibility and meets the statutory requirement that reserve funding be based on the estimated deferred maintenance or replacement cost and funded over the lives of the assets to be reserved. This change is recommended to provide cooperative associations the same regulatory requirements that exist for condominium associations. The proposed rule amendment also conforms the language to the same terminology used for condominiums.
SUMMARY: This rule amendment addresses the funding of reserves for capital expenditures and deferred maintenance in cooperatives regulated under Chapter 719, Florida Statutes.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 719.501(1)(f), (j) FS.
LAW IMPLEMENTED: 719.106(1)(e), (j), 719.107(2), 719.501(1)(j), 719.618(1) FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
DATE AND TIME: June 9, 2008, 9:00 a.m.
PLACE: The Northwood Centre, Suite 16, Conference Room, 1940 N. Monroe Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 48 hours before the workshop/meeting by contacting: Sharon A. Malloy, Senior Management Analyst II at (850)488-1631. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Sharon A. Malloy, Senior Management Analyst II, Division of Florida Land Sales, Condominiums and Mobile Homes, 1940 North Monroe Street, Tallahassee, Florida 32311-1030, (850)488-1631
THE FULL TEXT OF THE PROPOSED RULE IS:
61B-76.003 Budgets.
(1) Required elements for estimated operating budgets. The budget for each association shall:
(a) through (d) No change.
(e) Unless the association maintains a pooled account for reserves required by Section 719.106(1)(j), Florida Statutes, the association shall include a schedule stating each reserve account for capital expenditures and deferred maintenance as a separate line item with the following minimum disclosures:
1. The total estimated useful life of the asset component;
2. The estimated remaining useful life of the asset component;
3. The estimated replacement cost or deferred maintenance expense of the asset component;
4. The estimated fund balance as of the beginning of the period for which the budget will be in effect; and
5. The developer’s total funding obligation, when all units are sold, for each converter reserve account established pursuant to Section 719.618, Florida Statutes, if applicable.
(f) If the association maintains a pooled account for reserves required by Section 719.106(1)(j), Florida Statutes, the association shall include a separate schedule of any pooled reserves with the following minimum disclosures:
1. The total estimated useful life of each asset within the pooled analysis;
2. The estimated remaining useful life of each asset within the pooled analysis;
3. The estimated replacement cost or deferred maintenance expense of each asset within the pooled analysis; and
4. The estimated fund balance of the pooled reserve account as of the beginning of the period for which the budget will be in effect.
(g) Include a separate schedule of any other reserve funds to be restricted by the association as a separate line item with the following minimum disclosures:
1. The intended use of the restricted funds; and
2. The estimated fund balance of the item as of the beginning of the period for which the budget will be in effect.
(2) through (3) No change.
Specific Authority 719.501(1)(f), (j) FS. Law Implemented 719.106(1)(e), (j), 719.107(2), 719.501(1)(j) FS. History–New 12-20-95, Amended_____________.
61B-76.005 Reserves.
(1) through (2) No change.
(3) Calculating reserves required by statute. Reserves for deferred maintenance and capital expenditures required by Section 719.106(1)(j), Florida Statutes, shall be calculated using a formula that will provide funds equal to the total estimated deferred maintenance expense or total estimated replacement cost for an asset or group of assets over the remaining useful life of the asset or group of assets. Funding formulas for reserves required by Section 719.106(1)(j), Florida Statutes, shall be based on either a separate analysis of each of the required assets or a pooled analysis of two or more of the required assets.
(a) If the association maintains separate reserve accounts for each of the required assets, tThe amount of the current year contribution to each reserve component shall be the sum of the following calculation:
1.(a) The total amount necessary, if any, to bring a negative account component balance to zero; and
2.(b) The total estimated deferred maintenance expense or total estimated replacement cost of the reserve asset component less the estimated balance of the reserve account component as of the beginning of the period for which the budget will be in effect. The remainder, if greater than zero, shall be divided by the estimated remaining useful life of the asset. The formula may be adjusted each year for changes in estimates and deferred maintenance performed during the year and may consider factors such as inflation and earnings on invested funds.
(b) If the association maintains a pooled account of two or more of the required reserve assets, the amount of the contribution to the pooled reserve account as disclosed on the proposed budget shall be not less than that required to ensure that the balance on hand at the beginning of the period for which the budget will go into effect plus the projected annual cash inflows over the remaining estimated useful lives of all of the assets that make up the reserve pool are equal to or greater than the projected annual cash outflows over the remaining estimated useful lives of all of the assets that make up the reserve pool, based on the current reserve analysis. The projected annual cash inflows may include estimated earnings from investment of principal. The reserve funding formula shall not include any type of balloon payments.
(4) through (9) No change.
Specific Authority 719.501(1)(f), (j) FS. Law Implemented 719.106(1)(j), 719.501(1)(j), 719.618(1) FS. History–New 12-20-95, Amended 1-19-97,__________.