Haw. Code R. § 16-107-72
Provided an association assesses and collects sufficient funds to comply with the law and these rules, the association board may:
to pay the cost to maintain, repair, or replace assets of the association. This section shall apply if the board underestimates the reserve requirements for an asset, or if the cost to maintain, repair, or replace an asset will reduce the association's replacement reserve funds to less than fifty per cent of a full replacement reserve during any budget year.
Example:
An association's full replacement reserve requirement is $500,000, but the association has only $250,000 of that amount in cash, as the law permits. The association's replacement reserve account designates $200,000 of the $250,000 to replace its roof in 2001 (i.e., after the transition period ends on January 1, 2000). In 2001, the association replaces its roof on schedule. If the association spends all of the $200,000 designated in its replacement reserve account for the roof, large assessments will be necessary to re-establish fifty per cent of a full replacement reserve in cash by the end of 2001.
Replacing the roof will reduce the association's replacement reserve requirements during 2001 by $200,000, from $500,000 to $300,000 (to which must be added, however, the funds required during 2001 for the other association assets). Nevertheless, spending the $200,000 will also reduce the association's replacement reserve funds by $200,000, from $250,000 to $50,000 (plus whatever the association collects during 2001).
Thus, by the end of 2001, the association will have only $50,000 in reserves, but need at least $150,000 (i.e., fifty per cent of its full replacement reserve requirements of $300,000). Therefore, the association must collect at least
$100,000 by the end of 2001 to reach the minimum replacement reserve of $150,000 (plus whatever else the reserve study indicates is necessary for other assets).
To reduce the hardship, the board can fund the expenses for the roof by borrowing or by special assessments. Even if the association has designated a specific fund in its replacement reserve account for the asset, the board may also transfer the money in that fund to other designated funds. Essentially, the section permits the board to use cash on hand, special assessments, borrowing, or any combination of the three to replace the roof and reduce the hardship on the owners.
Haw. Code R. § 16-107-72