Mara Laguna - Understanding the Budget Proposal

The intention of this letter is to provide a General understanding of the Proposed Budget
for 2019 and other financial plans. More information concerning this Proposed Budget,
planned projects and the financials of the community will be presented during the meeting
and questions will be answered.

The services provided to us by our professional Belizean accounting firm and the deep
investigation by our Financial Subcommittee, have proven to be invaluable. Together, we
have added considerable insight and an ability to analyze our finances to a deeper degree.
This deeper understanding of our Income and Expenses is quite significant in regard to our
ability to more accurately forecast our financial wellbeing and our ability to structure a
feasible financial plan to accomplish the goals we set for this next time period, and beyond.

This year’s Budget Proposal will align into one document showing past budget and new
budget for a direct comparison, as they have in the past. Therefore, we are providing a copy
of each: Last years Approved Budget and Actuals, and this years Proposed Budget.

As always, Insurance is a separate item from this Budget, of which the cost will remain the
same until at least October 2019, when the policy renews. We were told last year that the
premiums would be going up, we were able to convince the insurance company to keep the
rates the same for the time being. Payment schedule also remains the same.

Our Cable bill has increased this last year. Coral Cable increased their rates several months
back. The contract that we negotiated a few years ago is still the cheapest you could get on
the entire island. Coral Cable also offers fast internet service. This allows for streaming
videos with little to no lag. These services can be acquired directly from coral Cable if you
like. The new budget shows that each unit will be charged $16.36 a month. Up from $14.96.

Back in October of last year we had several lawsuits against 9 of Reef Village Estates (RVE)
condos and villa. One of the units was sold and we collected all back owed funds with
interest and attorney fees. With 8 units left in the lawsuit the courts ruled in our favor against
RVE. We were awarded $389,643.07 plus 6% interest, attorney fees and Administration fees.
The courts have ruled that we can auction off several of these units to pay for the back
HOA fees, interest and administration fees. Auctions of these units will have already started.

Lawsuits were also filed against RVE for not following the Consent order that was handed
down in February 2017. This lawsuit was filed early this year (2018) and was awarded in our
favor by the courts. This was then handed to a receivership to handle the lawsuit. The
receiver is to make sure that the consent order is followed to the letter. PSP64 did everything
that was required of them in the consent order. RVE has not followed the consent order and
the courts ruled in our favor. We are currently waiting on judgement from the courts on
what to do next.

We also have two lawsuits against A102 and F303 that belong to Punjabi. Court dates are
being set. This is another $130,000 BZ that is owed in back HOA fees.
We have identified projects that need to be addressed within our community that must also
be addressed within this budget, and possibly in other ways:
 Improve the drainage of rainwater throughout our community and raise the grade in
order to reduce flooding,
 Replacement of the lagoon bulkhead,
 Construction of an office space on the island for Property/Rental Management
 Condo building crawl space repairs,
o Relocate utility lines
o Raise the grade under the buildings to prevent standing water
o Replace the building skirting
 Build up/improve the roads and the grade around the entire community,
 Re-establish landscaping throughout the community,
 Placement of signs with villa numbers and directions (map)
 Better dumpster placement and better dumpsters
 Recreational areas:
o Volleyball/game area
o Picnic/BBQ area
o Boat Docks and slips

More details regarding each of these projects and our means of financially covering the costs
associated with them will be discussed later in this document.

There are a few key points that we would like to make as either they will not be obvious
within the budget, or they may help in the understanding of our financial position and this
proposed budget.
 This Proposed Budget is based on 100% participation of all unit owners paying their
complete invoice monthly and on time. Because we have past experience showing
this is currently not the case, and will most likely still be the case in the future, the
financial corrections have been made to better our cash flow. This time last year we
had 22% of owners not paying at all. With some legal action and cutting off of the
water for non-payment, several units have sold and we have collected past HOA
fees. We are currently down to 10% of owners not paying. These are now in legal
action. Any additional collections will also be going into the Capital Reserve and
Improvement Fund for major Capital Repairs and Improvements identified as being
needed.
 Property Management company, Santa Rosa has worked with the EC to better
support the resort. We have looked at ways to reduce the monthly overall cost. We
will continue to strive to reduce this even more when we can. These details are
broken out within the section of the Proposed Budget called, Property Management.
Security has been a real issue this last year. Finding guards that would actually do
their job and what they were hired to do has been troublesome at best. Now that the
island bar is open this problem has increased. Local Police are being hired off duty to
work at the bar. Hence they pay no attention to our guards. We have tried working
with local police and have not had favoritism in fixing the problems. We have hired
contract guards that are doing a much better job. This comes at a cost of having to
 pay higher wages. We also were able to hire a contract landscaping company to do all
the landscaping. This has produced much greater results with little increase in pay.
 Our account balance for operating expenses has been slowly building. This last year
we had several unexpected expenses causing us to use more money that we had not
budgeted:
The replacement of more than expected septic tanks. We have nearly
replaced all the tanks due to faulty installs or the wrong type of tanks. This
was done many years ago. There are still a few tanks that have not been
repaired and were expecting them to fail at any time.
 We are aggressively going after owners that do not pay their HOA fees.
 We are now going after owners who do not follow the by-laws and applying fines.
 We are using the HOA’s disconnect policy to help in collecting past due HOA fees.
Our disconnect policy has been held up in court over 3 times now.

The Budget is a forecast, or a prediction, of what we anticipate to be spent in each category

during this term. The actual need for funds in each category may vary depending upon
factors outside of our control. We try to spend according to the budget we approve and
make adjustments as circumstances demand. The Approved Budget is a guideline for the
Executive Committee to use when making financial decisions. For this reason, the budget
will always show a variance between the Approved Budget and the Actual Income and
Expense of each category.

We have adjusted certain line items to more accurately reflect the actual Income or Expenses
required toward the management and operations of our community. Last years budget made
adjustments to accommodate a passive savings plan for a Capital Improvement/Repair
Fund, which would allow for major repairs and improvements to be made over the course of
many years. During this time, the community experienced an unexpected and overwhelming
number of septic tanks needing replacement. This demand on funds, without the approved
budget in place, drove our financial wellbeing low. The budget from last year that is now in
place is showing signs of our ability to save money and eventually apply these funds toward
Capital Repairs and Improvements. **Being very clear, this budget does cover all of our
required, normal expenses, and will cover a small portion of Capital Repairs and
Improvements each year, but will not make any marked improvement on it’s own for a
number of years, as the savings generated from this is very slow. Mainly due to nonpayment
of some owners.

The Plan
Now, let us lay our proposed plan out for you in simple terms, and then follow up with
some greater detail for those of you that want it all.
1. The first thing you will notice is the Budget remains the same as last year. There will
be No increase in monthly maintenance fees.
2. There is an increase in the monthly cable bill.
3. Insurance, as mentioned in paragraph 4 on page 1, No change to the current pay
schedule.
4. As you can see, our list of Capital Repairs and Improvement Projects still has many
other items, and some critical. For example, we need to build up the roads and grade
in the community to prevent us from being under water in the rainy season. Before
 we can do this, we need to build a new sea wall around the lagoon in order to
prevent this new road material and top soils from washing right into the lagoon.
This will not be cheap and needs to be done sooner than later.
5. We have come up with a few options as to how we will be able to afford these
Capital Repair and Improvement Projects.
a. Passively, as we save from the budgeted collections of Maintenance Fees.
This could take many years.
b. Dependent upon the collection of Delinquent Accounts. Legal action has
begun on two (2) seriously delinquent accounts, (over $130,000 BZ). Court
rulings will be in February 2019. Legal action and court rulings have already
made judgment and ruled in our favor to the amount $389,000 plus 6%
interest and $35,000 in administration fees. These units have mostly not been
lived in for years. Some were involved in the last lawsuit that we received
judgment. Legal action was taken and judgment awarded to PSP64. Units
have been selected to be auctioned off. As these units come up for auction
notices will be sent out to all owners who may be interested in bidding. It is
expected that units will be auctioned off in January/February of 2019. The
collection of these back HOA fees will be used to pay for the improvements.

The additional list of Capital Repair and Improvement Projects that are detailed above are
beyond our currently expected funding. They have been submitted for further investigation
and consideration. Please review each item individually and vote as to whether this is where
you want us to invest your money.
This list is in no specific order, although some of these do and will correspond to others:
 Replacement of the lagoon sea wall bulkhead, has been approved but not funded,
seawall behind H building was rebuilt as it was about to fall in
 Build up/improve the roads and the grade around the entire community
 Condo building crawl space repairs,
o Relocate utility lines
o Raise the grade under the buildings to prevent standing water
o Replace the building skirt with concrete block and plaster to match building
 Establish a 5 day water reserve independent of BWS.
 Recreational areas:
o Volleyball/game area
o Picnic/BBQ area
o Boat Docks and slips

See below for the details on some of the projects listed in the above paragraph.

Water Reserve
As many of you know BWS has a real problem on its hand with providing water to the
island. We have gone to great lengths to try and ensure that we have a 5 day reserve of water
for the complex. This was working great up until last month. Now BWS is restricting water
flow even greater as they cannot provide enough water to the island. One way to help is to
install water restrictions on your faucets and shower heads. When the complex is completely
full (high season) we begin to run short of water. Our other option is to install a desalination
plant in conjunction with what we already have. This would require a much smaller unit to
provide just that added extra amount of water that is needed. Just adding more tanks will not
solve the problem is there is no water flow to begin with. We are currently evaluating
options on this situation. We are also hoping that BWS can get a new contract somewhere
else that can provide plenty of water.

Sea Wall Bulkhead Replacement

This project was voted on and approved by the HOA at the last AGM in 2017, but was not
funded. Since then we have determined that the best possible way to achieve our sea wall is
to install a rock wall. The cost runs about $10,000 per 70’ of sea wall. We are asking that
owners of villas pay to have their sea wall installed. This allows the villas to actually install
the sea wall 10 feet further out into the lagoon. Several villa owners have already begun the
process. The area behind B and F building and the island will come to about $180,000 to
complete. This is the cheapest option as all other options were double the cost. This is also
us doing the work ourselves. As stated before the sea wall behind H building was completed
last year. It has not been filled in under H building yet and will be done when the road is
raised.

Build Up/Improvement of the Roads

This project would raise the roads and the grounds of the complex by 1 foot. This includes
putting drainage in so that the roads do not wash out. It is key that the crawl space and
repairs to the underside of the condo buildings be completed before the roads are finished.
This will require that the underside of the condo buildings be filled in first. We have already
filled in under A and C building. So the road improvement will start at the north area.

Condo Buildings Crawl Space/Repairs/Skirting

This project requires that we fix the piping under the buildings. We have already started the
process of connecting the drainage from the roof, to out from under the buildings. We will
then fill in under the building so that the elevation is greater than the road. This has already
been completed on A and D building. We will then put the same type of lattice work that is
around the pool around the condo buildings. We have started with A building and will be
working south. Because of security issues that were raised last year we have installed the
skirting on the main road side for all the condo buildings. There are several buildings that
the stairs are breaking apart. These will be repaired as we move from building to building.

Construction of Property/Rental Management Offices

This project in the long run will allow us to save money. We currently are paying $1200 BZ
for rent (E101). If the cost to build the office space is $20,000 BZ then in less than 16
months it will cost us nothing. This project would have two office spaces and a section in
back for storage of tools and equipment out of the weather and locked up. This would put
the presence of the HOA directly in view as you enter the gate.

Recreation Areas
Since we have taken over the island we have rebuilt the pool, replaced the bridge with a
causeway, removed the rotten deck and installed private bathrooms for the complex. There
are still many things that can be done on the island. The cabana umbrellas that are there are
going to cost a considerable amount to repair or replace. We will probably do away with
them and build an area where we can have a good size BBQ grill, a seating area with a small
sink for cleaning. Another idea is to have a horseshoe area and bag or ring toss. These will
be for private use only. A picnic area can be created beside the BBQ area. By installing a sea
wall we can raise the elevation by one foot, provide proper drainage for the island and
extend the island out into the lagoon in specific areas.

Another improvement is the boat docks. This will not happen this year. Some units were
sold with a boat slip/dock. You are going to have to prove this in documentation. Because
of the strata plan no one owns a boat dock or slip, it cannot be deeded to you. The HOA is
not responsible for building you a boat dock or slip you were sold. Since PSP64 HOA owns
all the land we will manage this as directed. There will be a walk way built going around the
island after the sea wall is in. This will provide lighting and water for a cleaning station to
each dock if and when they are built.

Once all of the Capital Repair and Improvement Projects have been completed, we will need
to start saving funds in the Capital Reserve Fund for the purpose of repeating the work on
many of these projects. While some projects may never need a complete replacement, they
will need considerable rejuvenation after a period of time. Some of these projects will not
result in a permanent state and will eventually need to be completely funded again. An
accumulation of funds over a period of time is much more palatable than a special
assessment ever will be. If and when we receive funds from the lawsuits on late HOA fees,
we will then be able to fund some projects. Some of these projects will not get done till that
time.

The Proposed Budget does not change the current HOA fees that you’re currently paying.

Since we have not decreased or increased the budget for 2019 we have come up with an
offer that everyone should like. Invoices are sent out on a timely manner at the first of each
month. This is usually the 1st to the 3rd depending on if it’s a weekend. In the past we sent
out all invoices by the 10th of each month. Payment is due on the 20th of each month and
considered late at that point.

What we are offering is a 10% discount on HOA fees, does not include insurance, water or
cable, if you pay your invoice by the 7th of each month. If you pay after the 7th you will not
be given a discount. It’s that simple. Everyone knows that their bills are due by a specific
date. If you want to set up with the accountant so that your credit card is charged this
amount each month on or before the 7th we will be happy to set this up.

So pay your invoice by the 7th of each month and get a 10% discount. Or after the 7th and get
no discount.

Please approve this budget.

The momentum has begun. Let’s keep it going. Another year of dramatic change is upon
us.