July 11, 2005

Dear Friends and Neighbors,

It is that time of the year when it is necessary to review our annual budget.  It is always an interesting time, since most of us do not get involved in the community�s affairs unless we are asked for money, and then most of us what to know why we are asked to shell out more than we have in the past.  I would like to address this issue with you all, so that there is a better perspective of our community and the assets we all own.

First of all, the community is a collection of properties, which are individually owned and it is the commonly held properties that we collectively own.  These common properties include such things as the side roads (not Via Kachess) the fire station, the water system, tanks and pumps, the road grader and the snow blower, which we use each year to keep the roads clear and the common areas around the community.  Each of these items is an assets of the community, but each has 167 owners, and even more when we consider the joint equities under Washington law.

When the community was formed, the developers invested moneys in most of these assets in order to make properties they would sell to be of greater value.  And as properties began to sell, the income from annual assessment (Dues) was adequate to cover maintenance costs of the community�s assets (easy to do when everything is new).  There was also a limited demand on systems such as roads, water systems, the club house and such since there were a limited number of homes in the community, limited demand for water, no snow plowing, less use of the club house and so on.  Now that our community is more developed and we have some 112 homes in use, we have much greater demand on all of the assets, and 25 years of wear and tear.  The annual costs to maintain all of the assets are growing with each new home, like it or not.   And as the existing assets deteriorate, they impair the resale value of each home and property in the community.

There is a greater risk to the community, in the possibility of failure of some of the systems that we have in place.  Take for instance the water system.  If we were to have a major leak in the system, a loss or significant decrease in the supply of water from the infiltration field, the loss of a tank or contamination of the system, there is the risk that all of the homes in the community would become unlivable, and certainly un-sellable.  There are no agencies in state, local or federal government that will step in and repair the system or help the community make such repairs.  And contrary to a commonly held opinion, there are no �rich neighbors� in the community willing put up the needed cash.  We can not borrow money to make these repairs since no bank will lend on assets that are owned by 167 different owners.  We also can not borrow on the promise of future revenues from annual assessments.  The cost of repair or replacement would be on each member of the community.

The same exists with the roads.  If there are pot-holes, water damage and broken pavement on any of the roads other than Via Kachess, it is the responsibility of the community to pay for the repairs.  If you walk the roads of the community today, you can see the damage that 25 years of snow and ice and vehicles have caused.  Our roads do not look like they belong to a first rate neighborhood, like we all would like to have.  Some of the roads are more gravel than pavement.  The substandard conditions of the roads impair the value of individual properties and homes, in the same manner as a home on a gravel road is less valuable than a home on a paved road.  This summer, we must spend most, if not all of the road�s reserve maintenance fund to make necessary repairs.  This fund will need to be replenished immediately.

Last year the community approved the creation of a Reserve Maintenance fund as a means to designate moneys for future expenditure on these assets.  The assignment of funds was to various assets in 4 categories: Roads and Culverts, Water System, Buildings and structures, Snow Removal Equipment.  An analysis of the assets in these categories was made to determine approximate replacement cost in today�s dollars and the estimated useful life as they sit today.

As an example, in the case of the snow removal equipment, if we had a major breakdown in the snowplow, such as a drive train or engine failure, the parking areas, and side roads would not be plowed until a replacement unit could be acquired.  Residents visiting their homes in the winter months would have to shovel through a thick ice berm, left by the County plow, then dig out an area to park their vehicle off of Via Kachess Road.  If you normally park in the lower parking loops, you would have to shovel a path to the parking area as well.  Without a reserve fund to cover the replacement of this equipment, we would have to put a special assessment vote to community, if approved, collect the funds then find and procure a replacement vehicle.  This process would take 4-5 months.  If we had a reserve fund properly funded to cover the cost of the asset replacement, this process could be reduced to less than 30 days.

If we look at all of assets for which the reserve maintenance fund was established, we have an estimated replacement cost of nearly $620,000.  The greatest cost would be for expected repairs and replacements of the water system, with an estimated cost to repair or replace at nearly $280,000.  Costs for this are estimated and may be different, but it is for sure that the costs are not going down.

To date, we have funded $100,000.  The money for this funding was derived from the sale of a lot and the recovery of delinquent dues.  Both of these sources are not available this year, and so the amount that can be funded from the excess of the budget is $0.  Without an increase in annual assessment (dues) there will be no additional funds next year.  With a 10% increase in annual assessment (which the board of directors can approve without a community vote), the addition to the reserve maintenance fund will be less than $4,000 in 2005-2006.  There will not be enough money to address the rapidly deteriorating roads, to repaint the club house, to fix the inevitable need to replace the snow plow or road grader, and the re-sale value of our individual assets, our houses and lots, will continue to be impaired.

I am asking each of you to consider an increase of $100 in annual assessment in order to build the reserve maintenance fund.  We do not need to have the entire fund this year, but we will need to do so in the next couple of years.  There is a bill before the Washington State Legislature this year that would require co-ops, condominiums and home owners associations to provide such reserve funds.  As with the communities existing reserve maintenance fund, designated moneys would be assigned for use in maintaining/replacing the items in that category and can not be expended for any other use without the majority approval of the community. If we do not act soon, we may be required to do so in the next few years, and it may require that we fully fund the accounts in a shorter period of time.

Additionally, the board of directors is making every effort to increase effective communication to all residents.  The most efficient way to accomplish this goal is to have email addresses for all residents.  Email notifications are much faster than hard copy mailers and save money on supply, labor, and postage expenses.  If you have not provided an email address, please do so immediately by contacting Marisa Angrisano, Secretary/Treasurer at kac.sec.tres@comcast.net.  Your information will not be sold or shared with any outside entities.

Each year the association is required to have an independent audit performed, unless waived by the community with a majority vote.  We have not been audited in the past and need to have a vote for this year�s decision.  The ballot included has a vote for this issue.

Enclosed in this mailer are several important items.  Please take a moment to review the list below and make sure that you have all the items listed.  If any items are missing, please contact Marisa Angrisano immediately at (425)482-0936 or by email at kac.sec.tres@comcast.net.

The enclosed vote, if mailed, must be received by August 19, 2005 to be counted.  Additionally, we will be having a meeting on August 20, 2005 at 8:00am at the Kachess Community Clubhouse.  It will be at this meeting that the votes will be tallied, so you can hand your vote in person at this meeting.  On Saturday, July 30, 2005 at 9:00am at the Kachess Community Clubhouse we will hold an informal meeting to provide the opportunity for residents to ask questions related to any items on this vote.  Please try to make time for this meeting so that you are well informed when you vote.  If you have any questions, please feel free to contact Steve Hegge at (425)407-1412 or Mo Hanan at (425)392-2424.

One last item for all residents is the Annual Potluck Picnic.  This year it will be held on Saturday, August 20, 2005 at 5:00pm at the Kachess Community Clubhouse.  The Association will provide water, pop, hamburgers, and hot dogs.  We are asking that residents use the following guide for bringing food according to the first letter of your last name.

A � M              Side dishes, salads, etc.
N � Z               Desserts

We hope to see everyone there and look at this as an opportunity for neighbors and residents to get to know each other and the current board of directors.

Regards,

Kachess Community Association Board of Directors