Financing Remediation Projects

Important Considerations

• Plan Early:
  Develop a relationship with a lender early on to best prepare the association for financing. Projects typically “percolate” for months and/or years. This is valuable time to work with a lender to determine the amount available to borrow and a plan for any deficiencies the lender might detect.
• Conserve Your Reserves:
  In determining funds available, keep in mind that lenders will require a certain amount of liquidity and the ability for the association to continue to fund their reserves. For major remediation projects, a “post-construction” reserve study is a valuable tool for the association to plan required reserve contributions annually after remediation. This shows the lender that the association is proactively planning its budget to meet the future capital maintenance needs and be able to service its loan payment.
• Educate, Educate, Educate:
  Successful special assessment ratifications result from keeping the owners informed throughout the process. Your project team is happy to prepare town hall presentations so there are no surprises when it is time to ratify the supplemental budget. Engage your attorney to be sure all appropriate steps are taken to properly ratify the budget.

Next Steps

Now that the owners have enthusiastically embraced the project, it is time to think about the funds being accumulated for the special assessment. You will want to open a special assessment account that, depending on the size of the assessment, could well be over the FDIC limit of $250,000. Not to worry. Columbia Bank’s DDM account can provide FDIC insurance up to $25 million with complete liquidity and is seamless to the association. Funds over a target balance are swept daily to the DDM account where funds will be distributed amongst various institutions in $250,000 increments.