Why do we need reserves / a replacement fund? Can’t we just pay for maintenance needs as they occur?

Several reasons support a POA having a strong replacement fund. Lending institutions view the funding level of an association’s reserve or replacement fund as a key indicator of the financial health of the organization. This is similar to how investors view the liquid assets of a public corporation. It provides confidence that the association or business has the means to meet future needs that are critical to its performance and to respond to unexpected conditions that may arise. 

Well-funded reserves also provide protection to association members against expected or unexpected spikes in spending needs to replace critical infrastructure.  A good example of this is the periodic need to repave the private roads in Dunes West. Instead of placing that one to two year burden, in excess of a million dollars, completely on current property owners inside the gates, the impact of that cost is diluted by being drawn from the contributions to the reserve fund by owners that have accumulated over the course of many years.  Both of these factors are accentuated in the case of the DWPOA by the high value (and replacement cost) of the assets owned by the association members.