Shareholders in Tropical Isles Co-op, Inc. will be asked on an annual basis to consider voting in favor of a motion for waiver that will also establish a Contingency Fund. The motion will be fully stated on the Limited Proxy Form mailed to shareholders. It will be formally presented to the membership at a meeting called for that purpose. Members will be asked to submit their revocable Limited Proxy casting their vote in favor of the motion to waive whether or not they plan to attend the meeting.
Chapter 719.106(1)(j) Florida Statutes gives the members of a Cooperative the right to waive the requirement that Specific Reserve Accounts be established for capital expenditures and deferred maintenance. A majority vote of the Shareholders is required to waive this "statutory requirement".
As a Shareholder you might ask, "Why should I vote to waive the statutory requirements for specific reserves?" And, indeed, this is an excellent question!
It will be explained in depth at the Special Shareholder Meeting that will be called to act on this issue. In the meantime, you still should submit your revocable Limited Proxy so, here is a brief response to the question.
Shareholders need to read the entire motion and note that it clearly provides for the establishment Contingency Funds in place of the specific statutory reserve accounts. Contingency funds give the Co-op needed flexibility to respond to situations. That flexibility is eliminated when statutory reserve accounts are established because the funds can then only be used for the specific purpose specified no matter what happens!
For example, a co-op establishes a specific reserve account to re-pave the communities roadways. The account accumulates $150,000 or more over time. These funds can be used only to re-pave roadways. Then, a major storm hits and destroys the clubhouse, shuffleboard area, solar heaters for the swimming pool, etc. Insurance covers some of the losses but the deductibles and un-insured loses total up to $100,000. Where does the money come from?
If the co-op shareholders had the foresight to waive statutory reserve accounts and establish a Contingency Fund, the Contingency Fund can be used to cover this expense. If they failed to waive the statutory requirement, their funds are locked in specific reserve accounts and unavailable for any other purpose. In this example, every member could potentially face a significant "one time assessment" to cover their portion of the $100,000 storm loses while $150,000 sits in the roadway re-paving account and can not be touched except to re-pave the roadways!
That is why it is so important to waive specific statutory reserves and establish a Contingency Fund.
One final comment: Shareholders should note that the motion, if adopted, waives the statutory requirement for one year ONLY. Shareholders will have the opportunity annually to vote the Contingency Fund approach up or down.