Why do the dues (assessments) automatically increase to a designated maximum amount if the annual budget fails to pass?

Provisions in our covenants protect all who invest in Dunes West property—the developer (“Declarant”—original and current), new buyers of property in the community, and the lending institutions who provide mortgages for those buyers—by assuring there will always be a way to fund the financial obligations of the POA and protect our assets and property values. 

Section 12.3.2 of the Dunes West Declaration of Covenants, Conditions, and Restrictions (CC&R) describes the provision where, if a proposed budget is not approved by a majority of the votes cast, in person or by proxy, by members entitled to vote, then the Maximum Budget and Maximum Annual Assessments are calculated according to Section 12.4. The calculation is either of:

• the “current” year budget increased by the Consumer Price Index or 5%, whichever is greater, or
• the budget and assessment from the year of Declaration filed and recorded, increased, to the year the maximum budget and assessment is being determined, by the CPI or 5% per annum, compounded, whichever Is greater.