Report on the Proposed Budget for 2010

The Board of Directors for PLCA reports that for 2009 we were successful in staying within the limits of what our revenues produced and what expenses we incurred while also maintaining a small surplus. What was not included in the 2009 budget was any funding for our our Reserves, which we will get to in further detail later in this report."

Our proposed budget for 2010 will keep our operating expenses; which are the daily, weekly, monthly or annual costs covering such items as electricity, water, insurance, landscaping, etc. at the same levels as from 2009. We want to maintain the current levels of expenses being covered with the existing level of revenues being received from owners.

What we need to address is our Reserves. Reserves are a saving account to make funds available to cover future costs involving the long term upkeep of our assets. Reserves are specifically held separate from our operating budget for such major expenses as painting the buildings, replacing a roof, resurfacing the parking areas, repair of a structure or major plumbing problem. These are the large expenses that are not covered by the monthly fees collected for the annual operating expenses. Reserves are held in a separate account and can only be used for their specific intended purpose. At present we have a funded Reserve account of a little over $24,000. This total was produced when each owner purchasing their unit(s) contributed to the fund in an

amount equal to two (2) months maintenance fees, approximately $400, which totals just over $24,000. Since that time there has been no additional funding to the Reserves because the Builder/Developer/Owner was allowed to forego the funding, therefore keeping our maintenance at a low and attractive monthly fee. In the big picture”  approach this does not benefit PLCA's long term health because repair costs will always be required and if the Reserves are not funded it will mean huge special assessments,

which can be due immediately or in very short order, to pay the costs of an upcoming repair. Also, and very important, not showing adequate Reserves creates a poor financial picture of PLCA for prospective buyers and could limit their ability to obtain a mortgage. Sufficient Reserves enhances your property value should you decide to sell.

 The way Reserve funding is calculated is by first determining the estimated time until a repair or replacement is required, i.e., painting the exterior of all the buildings would be required about every 7 to 8 years. Next the estimated cost of such a job, including materials and labor is determined, which gives us a proposed total cost for the job. Then we break down this amount to what percentage of the total needs to be saved each year to yield the total amount already saved up for when the job must be done.

The State of Florida by law requires an annual budget. Attached is our Proposed Budget for 2010 reflecting both operating costs and the annual funding of Reserves. Please note at the bottom of the Proposed Budget for 2010 the line item captioned Reserves. The State of Florida provides the ability for an association to reduce the level of funding of Reserves on a annual basis by a majority vote of owners. It is the Board's recommendation that we begin funding our Reserves at a conservative yet sufficient amount by starting with 1/3 or 33% of the total annual funding of Reserves for 2010.

This is a good amount to start the funding process and yet not such a sizable amount as to create undue financial hardship on owners. This will require an agreed upon vote by a majority of owners. Please be aware of the following: DICTATED BY STATE OF FLORIDA LAW, IF A MAJORITY OF OWNERS DOESN'T CARRY A RESOLUTION AGREEING TO REDUCE THE FUNDING OF THE RESERVES, THEN BY DEFAULT PLCA MUST FUND THE RESERVES AT THE TOTAL 100% ANNUAL AMOUNT AS LISTED IN THE BUDGET.

The bottom line is there will be no increase in PLCA operating costs for 2010 but anincrease in monthly maintenance fees to fund Reserves. The recommended partial 33% funding of Reserves would increase your monthly maintenance fees by approximately $40 per month for the smaller units and $55 for the larger units. If there is no majority agreement on the funding of Reserves then the State requires us to fund the full 100%, which will triple this monthly increase. In summary, PLCA will maintain a strong budget for 2010 that has current funding levels for our operating costs (day to day expenses) throughout 2010 and it is the Board's recommendation that we should start funding the Reserves for future major expenditures.