THE HERITAGE HOMEOWNERS ASSOCIATION ANNUAL MEETING Nelson suite

THE HERITAGE HOMEOWNERS ASSOCIATION ANNUAL MEETING Nelson suite at Lutsen Resort MARCH 9, 2019

March 9, 2019 THE HERITAGE HOA MEETING AGENDA • Report on area activities: ▫ Superior Hiking Trail– Denny Caneff ▫ Sugar Loaf Cove – Molly Thompson ▫ Area events – Mike Larson • Property owner & board member introductions – Rob Ilstrup • Presentation of proxy statements – Rob Ilstrup / Lisa Zallar • Approval of agenda – Rob Ilstrup • Presentation & approval of 2019 budget, dues & assessments – Bill Gabler • Discussion / vote on entrance lighting project - Bill Gabler • Septic system usage report, & MPCA permit renewal - Bill Gabler • Architectural Review Committee report – Mary Hanson • 2019 calendar - Rob Ilstrup • Approval of 2018 annual meeting minutes – Lisa Zallar • Other business - Open discussion • Treasurer’s report – Bill Gabler • Adjourn

March 9, 2019 THE HERITAGE HOA 2019 OPERATING BUDGET ASSUMPTIONS v HOA dues set at $1, 200 per unit, same as in 2018. v Solar lighting at entrances budgeted at $10, 000, subject to property owner approval. v 15 homes connected to septic system at 12/31/18. Three additional homes likely to be connected in 2019. v MPCA permit renewed in 2019: v System modifications required - $50, 000 estimated cost – funded through Expansion Reserve. v Final system expansion required prior to 31 st home being connected.

March 9, 2019 THE HERITAGE HOA RECAP OF UNITS Actual at 12/31/18 Est. at 12/31/19 7 8 22 37 8 10 19 37 Multi family: Heritage townhomes built Heritage townhome - unbuilt Total – multi family 3 4 7 Total Heritage units 44 44 Single family: Built – full-time residence Built – seasonal Unbuilt lots Total – single family

March 9, 2019 THE HERITAGE HOA 2019 OPERATING ACCOUNT - SUMMARY Beginning balance January 1 Total income Total expense Net Operating results Transfer (to) from Utilities Maintenance Reserve Ending balance December 31 North Shore Federal C. U. 2018 Budget 2018 Actual 2019 Budget $13, 531 $49, 200 ($48, 800) $400 $13, 531 $48, 796 ($32, 502) $16, 294 $29, 825 $50, 700 ($53, 150) ($2, 450) $0 $0 (2, 500) $13, 931 $29, 825 $24, 875

March 9, 2019 THE HERITAGE HOA 2019 OPERATING ACCOUNT - DUES Total Units Allocation Basis Single family units 37 37 $1, 200 $44, 400 Heritage Townhomes 7 4 $1, 200 Delinquent dues collected in 2019 Total Per Unit 2019 Dues $4, 800 $1, 500 44 41 $50, 700

March 9, 2019 THE HERITAGE HOA 2019 OPERATING ACCOUNT - EXPENSES Sewer and water systems: Septic monitoring fees MN Dept. of Health permit Repairs MPCA permit renewal expenses Water line repair project Total sewer & water systems Common area maintenance: Snow removal/mowing Tree & brush removal Road maintenance Curb stop marking project Entrance landscaping Total common area maintenance 2018 Budget 2018 Actual 2019 Budget $12, 000 $200 $0 $6, 000 $20, 200 $8, 695 $525 $0 $1, 089 $0 $10, 309 $12, 000 $550 $0 $3, 000 $0 $15, 550 $7, 500 $3, 500 $1, 000 $2, 400 $6, 100 $1, 481 $150 $1, 122 $3, 582 $7, 500 $3, 500 $1, 500 $2, 000 $15, 900 $12, 435 $15, 000

March 9, 2019 THE HERITAGE HOA 2019 OPERATING ACCOUNT - EXPENSES Utilities: Drainfield electric North pump house South pump house Pump house telephone Entrance lighting Total electric Administrative Accounting & office expense Postage & office supplies Property consulting Insurance Legal Annual meeting Other (Superior Natl. Grand Opening) Total administrative Total Operating Expense 2018 Budget $3, 000 $1, 200 $1, 500 $1, 000 $0 $6, 700 2018 Actual $2, 004 $1, 356 $1, 384 $915 $0 $5, 659 2019 Budget $3, 000 $1, 500 $1, 000 $10, 000 $17, 000 $100 $1, 000 $2, 400 $1, 000 $500 $0 $6, 000 $746 $20 $0 $2, 502 $0 $331 $500 $4, 099 $1, 000 $100 $500 $2, 500 $1, 000 $500 $0 $5, 600 $48, 800 $32, 502 $53, 150

March 9, 2019 THE HERITAGE HOA 2019 SEPTIC MAINTENANCE RESERVE 2018 Budget 2018 2019 Actual Budget Beginning balance January 1 Additions: $21, 531 $20, 250 Transfer from Operating Reserve Interest Total additions $0 $50 $0 $31 $2, 500 $50 $2, 550 $0 $0 $1, 312 $0 $0 Deductions: Board approved projects Total deductions Operating surplus (deficit) $50 ($1, 281) $2, 550 Ending balance December 31 $21, 581 $20, 250 $22, 800 North Shore Federal C. U. $21, 581 $20, 250 $22, 800

March 9, 2019 THE HERITAGE HOA 2019 SEPTIC EXPANSION RESERVE 2018 Budget 2018 Actual 2019 Budget $198, 613 $200, 008 $0 $600 $0 $1, 395 $19, 800 $20, 600 $30, 000 $0 $0 $50, 000 Operating surplus (deficit) ($29, 400) $1, 395 $(29, 400) Ending balance December 31 $169, 213 $200, 008 $170, 608 North Shore Federal C. U. $169, 213 $200, 008 $170, 608 Beginning balance January 1 Additions: Funded through sewer hook up fees Interest Total additions Deductions: System expansion costs Total deductions

March 9, 2019 THE HERITAGE HOA 2018 SEPTIC USAGE 1400 D J FMAMJ J ASOND Average Monthly Flow (gpd) Heritage At Lutsen Flow Data

March 9, 2019 THE HERITAGE HOA 2018 SEPTIC USAGE STATISTICS v 15 homes currently connected to system, 3 more anticipated in 2019. v. Average daily flow (system) - 1049 gallons v. Highest daily flow - 2347 gallons (3/10/18) v. Highest monthly average daily flow - 1300 gallons v. Average daily flow (per home) - 70 gallons

March 9, 2019 THE HERITAGE HOA SEPTIC SYSTEM EXPANSION - RENEWED PERMIT v Modifications required in 2019: v Enhanced reporting to MPCA. v Install enhanced flow monitoring equipment. v Install additional monitoring well. v Est. cost $50, 000 (funded through system expansion reserve). v Capacity expansion after the 31 st home is constructed: v Install additional holding & filter tanks & pumping capacity. v Install additional vertical flow wetland. v Est. cost $104, 000 (funded through system expansion reserve). v Balance in system expansion reserve: v at 12/31/2018 - $200, 008. v at 12/31/2019 - $170, 600 est. (after funding required 2019 modifications). Note - Current Permit Expired on 11/30/16, renewal is in final public hearing process

March 9, 2019 THE HERITAGE HOMEOWNERS ASSOCIATION SEPTIC SYSTEM RESULTS