Do-It-Yourself Reserve Study Kit

Transcription

1 Do-It-Yourself Reserve Study Kit Kawela Plantation Kaunakakai, HI Report #: For Period Beginning: January 1, 2012 Expires: December 31, 2012 Date Prepared: August 20, 2011

2 Hello, and welcome to your Reserve Study! T his Report is a valuable budget planning tool, for with it you control the future of your association. It contains all the fundamental information needed to understand your current and future Reserve obligations, the most significant expenditures your association will face. W ith Respect to Reserves, this Report will tell you where you are, and where to go from here. In this Report, you will find 1) A List of What you are Reserving For 2) An Evaluation of your Reserve Fund Size and Strength 3) A Recommended Multi-Year Reserve Funding Plan More Questions? Visit our website at or call us at: Association Reserves, Inc.

3 Table of Contents Executive Summary...i Reserve Study Summary...i Reserve Component List Table 1...ii Introduction, Objectives, and Methodology...1 Which Physical Assets are Covered by Reserves?...2 The Financial Analysis...2 So How much Reserves are enough? Computing your Percent Funded....2 How much should we contribute?...3 What is our Funding Goal?...4 Projected Expenses...5 Expense Graph Figure Reserve Fund Status & Recommended Funding Plan...6 Funding Plan Graph Figure Cash Flow Graph Figure % Funded Graph Figure Table Descriptions...8 Reserve Component List Detail Table Contribution & Fund Breakdown Table Year Reserve Plan Summary Table Year Reserve Plan Year by Year Detail Table Accuracy, Limitations, and Disclosures...26 Terms and Definitions...27 Do-It-Yourself Worksheet... Appendix Association Reserves, Inc.

4 Executive Summary Association: Kawela Plantation Assoc. #: Location: Kaunakakai, HI # of Units: 210 Report Period: January 1, 2012 through December 31, 2012 Results as-of 1/1/2012: Projected Starting Reserve Balance:...$106,195 Fully Funded Reserve Balance:...$258,541 Reserve Deficit (Surplus) Per Unit:...$725 Percent Funded: % Recommended 2012 Quarterly Reserve Contribution:...$20,050 Recommended 2012 Special Assessment for Reserves:...$70,000 Most Recent Reserve Contribution Rate:...$184 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves % Annual Inflation Rate % This Reserve Study is based on the information provided to our firm, shown in the attached appendix, without oversight or review by Association Reserves, Inc. personnel. Because your Reserve Fund is 41.1% Funded (the ratio of actual Reserve cash to the calculated deteriorated fraction of your Reserve assets), this represents a fair position. In perspective, reserve strength typified by absence of special assessments and other cash flow problems is typically found in associations at the 70% Funded Level. Based on this starting point, your anticipated future expenses, and your historical Reserve contribution rate, our recommendation is to increase your Reserve contributions with a $70,000 Special Assessment. Your multi-year Funding Plan is designed to gradually bring you to the 100% level, or Fully Funded. Reserve projects anticipated this year include generator replacement. Association Reserves, Inc. i

5 Table 1: Executive Summary Useful Rem. Life Useful Current Future # Component (yrs) Life (yrs) Cost Cost Domestic Water System 1 DW #1 Well Pump & Valve - Repl 10 0 $35,000 $49,371 2 DW #2A Well Pump & Valve - Repl 5 4 $77,000 $88,359 3 DW #3A Well Pump & Valve - Repl 5 4 $77,000 $88,359 4 DW Booster Pump #1 & Valve - Repl 10 3 $17,000 $18,848 5 DW Booster Pump #2 & Valve - Repl 10 3 $17,000 $18,848 6 Inventory - Replace N/A 0 $10,000 $0 7 DW #2A Well Casing - Replace $175,000 $474,579 8 DW #3A Well Casing - Replace $175,000 $458,530 9 Telemetry SCADA - Replace 6 4 $25,000 $28, Telemetry - Motor Controls - Repl N/A 0 $8,000 $0 11 Trailer Mounted Lift 10 7 $36,000 $45, Pole Lights - Partial Replace 20 0 $7,000 $13, Clay Valves -Replace 10 0 $2,000 $2, Generator Set - Replace N/A 0 $75,000 $0 15 Chlorination Sys - Replace 10 9 $10,000 $13, Utility Vehicle -Replace 8 7 $8,000 $10, Old Well Pumps - Remove N/A 0 $35,000 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace 6 3 $250 $277 4 (1) Dell Computer - Replace 6 5 $1,800 $2,138 5 (1) Executive Desk & Chair - Replace 10 0 $700 $987 6 (2) File Cabinets - Replace 10 0 $300 $423 - Clerical Office 8 (1) Sharp Copier - Replace 6 3 $5,216 $5,783 9 (1) HP Fax/Color Printer - Replace 6 3 $250 $ (1) HP Color Printer _Replace 6 3 $250 $ (1) Dell Computer - Replace 6 3 $1,200 $1, (1) Dell Computer - Replace 6 5 $1,800 $2, (2) Executive Desk & (2) Chair - Replace 10 0 $1,400 $1, (3) File Cabinets - Replace 10 0 $450 $635 - Water System's Office 16 (1) HP Printer - Replace 6 0 $250 $ (1) Table - Replace 6 3 $80 $89 18 (1) Chair - Replace 10 0 $100 $ Conference Room Chairs $1,200 $1, Office Bldg Roof - Replace $11,000 $15,517 Association Reserves, Inc. ii

6 Table 1: Executive Summary Useful Rem. Life Useful Current Future # Component (yrs) Life (yrs) Cost Cost Office Interior Refurbish 22 - Office Interior Walls - Repaint 10 0 $1,250 $1, Flooring Offices & Conference Room) - Replace 15 0 $750 $1, Interior Doors (2 Single; 1 Double 10 0 $500 $ Kitchen & Bathroom - Refurbish 15 0 $3,000 $5, Storage Room - Remodel N/A 0 $6,000 $0 27 Lawnmower & Trailer - Replace 10 6 $5,670 $6, Utility Vehicle - Replace 8 3 $9,000 $9,978 Del Monte Park Refurbish 30 - Plumbing - Replace 12 0 $5,000 $7, Structure/Roof - Replace 10 0 $7,000 $9, Pavilion - Construct 20 0 $10,000 $19, Office Bldg Exterior - Repaint 6 0 $8,000 $9, Total Funded Components Association Reserves, Inc. iii

7 Assoc Introduction It is all very simple, really. A Reserve Study is the art and science of anticipating and preparing for major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a process of research and analysis along well defined methodologies. A Reserve Study consists of two parts: the Physical Analysis and the Financial Analysis. The Physical Analysis contains the information about the current condition and repair or replacement cost of the major common area components the association is obligated to maintain. In this Do-It-Yourself Reserve Study Kit, the Physical Analysis information has been assembled by the client. The Financial Analysis contains an evaluation of the association's Reserve balance (measured by Percent Funded) and a recommended Funding Plan to offset the anticipated Reserve expenses. The primary responsibility of the Board of Directors is to maintain, protect, and enhance the assets of the association. As the physical assets age and deteriorate, it is important to accumulate financial assets, keeping the two in balance. The Reserve Study is the document that helps keep the physical and financial assets of the association in balance. This Reserve Study is a budget-planning document. The primary information you will get from this document is a list of your major Reserve components, a finding of the current status (strength) of your Reserve Fund, and a recommended Funding Plan. The basic objective of the Reserve Study is to provide a plan to collect funds at a stable rate to offset the predicted irregular Reserve expenses. Setting a stable Reserve contribution rate will ensure that each owner pays their own fair share of the ongoing, gradual deterioration of the common areas. Methodology Association Reserves and the Board of Directors share a common goal: to point your association responsibly in the direction of proper Reserve planning. In this Do-It-Yourself Kit, the client has elected Reserve balance, and the interest rate earned on your Reserve funds. The Reserve Component List you provided is shown in Table 1 and Table 2. With this information and an assumed inflation rate (as shown on the Executive Summary), we are able to project the array of future major expenses facing the association. Association Reserves, Inc. 1

8 Assoc Which Physical Assets are Covered by Reserves? Reserve expenses are the larger, infrequent expenses that require significant advance planning. Operating expenses, on the other hand, are those ongoing daily, weekly, or monthly expenses that occur and recur throughout the year. Small surprises are typically handled as maintenance contingencies, while the larger ones may be covered by insurance or require special assessments. There is a national-standard four-part test to determine which expense items should be funded through Reserves. This four-part test was provided to the client in the workbook used to help compile the Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the limited life must be predictable (not a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost. This limits Reserve Components to major, predictable expenses. Most Reserve Studies do not typically Reserve for building foundations and major infrastructure elements since they do not have limited life expectancies. Light bulbs or other small items are usually not listed as Reserve Components since their individual costs are insignificant. Finally, it is usually inappropriate to include unpredictable expenses such as damage due to fire, flood, or earthquake since these typically cannot be considered reasonably predictable. The Financial Analysis We have used the Reserve Component List provided by the client to compute the association s current Percent Funded and an appropriate Reserve Contribution rate. These two pieces of information are considered the Financial Analysis. So How much Reserves are enough? Computing your Percent Funded. Your Reserve cash Balance can measure reserves, but the true measure is whether the funds are adequate for the needs of the association. Reserve Fund size is therefore measured by Percent Funded. Percent Funded is the actual (or projected) Reserve Balance, divided by the association s calculated Fully Funded Balance (FFB), expressed as a percentage. The Fully Funded Balance is the sum of the value of the deterioration fraction of each individual Reserve components, not the total replacement value of those components. The Fully Funded Balance for each individual component is shown in Table 3. of all the Reserve Components. To show how this works with one component, in the case of a $10,000 component with a 10 year Useful Life, in the third year the Fully Funded Balance is three tenths of $10,000, or $3,000. The FFB grows as assets age, but shrinks as components are replaced. Deteriorated associations have a higher FFB than association with assets in good condition. The Fully Funded Balance changes each year, and is a predictable, but moving target. Association Reserves, Inc. 2

9 Assoc Special assessments and deferred maintenance are common when the Percent Funded is weak (below 30%). While the 100% point is Ideal, a Reserve Fund above the 70% level should be considered strong because cash flow problems are rare. Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. An association with a strong Reserve Fund should experience smooth sailing financially, while an association with a weak Reserve Fund should expect cash flow problems. New buyers should be very aware of this important disclosure! Percent Funded - 130% Ideal - 100% - 70% - 30% - 0% Strong Fair Weak How much should we contribute? There are four Funding Principles that we balance in developing your Reserve Funding Plan. First and foremost, our objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. A stable contribution rate is desirable because it indicates the association is being run on a stable financial platform, not being driven by the winds of change from year to year. For fairness, it is important to evenly distribute the contributions over the years so each owner pays their fair share of the deterioration in direct proportion to the amount of time they are owners. And finally, any Funding Plan must be based on fiscally responsible principles. Your Funding Plan was created by a process where different solutions were tested until one was found that most successfully met all four of these principles and achieved your Funding Goal. Association Reserves, Inc. 3

10 Assoc What is our Funding Goal? There are different Funding Goals to strive for, ranging from conservative to risky. Establishing a goal of simply having sufficient cash for all future years is called Baseline Funding. The drawback is that there is little or no margin for error, and expenses that are higher than budgeted or projects that occur earlier than planned will often cause special assessments. Full Funding is when the association has the goal of becoming Fully Funded (Reserve Cash equals the FFB). Such an objective means the association is following the simple and responsible principle that you replace what you use up. Believing this to be the responsible choice, our Funding Plan will direct you to Full Funding. Members of Fully Funded associations enjoy low exposure to the risk of special assessments or deferred maintenance. Strong interest earnings will minimize their Reserve contributions. Board members enjoy peace of mind that the association s physical and financial assets are in balance, and therefore a degree of insulation from claims of fiscal irresponsibility. Threshold Funding option is different in that the association selects a target other than 0% or 100%. This objective may be between 0% and 100% Funded, higher than 100% Funded, or a particular Reserve cash balance. Associations choosing Threshold Funding select this option to customize their risk exposure. Association Reserves, Inc. 4

11 Assoc Projected Expenses The figure below shows the array of the projected future expenses at your association. As with all computations in this Report, the estimates in this figure are based on the average of Best and Worst Case expense projections. As you can see, expenses are projected 30 years into the future, using the Inflation rate shown in the Executive Summary. This figure clearly shows the near term and future expenses that your association will face. Note the cycle of water system expenses. Annual Reserve Expenses $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ Years Figure 1 A summary of this information is shown in Table 4, while details of the projects that make up this information are shown in Table 5. Since this is a projection about future events that may or may not take place as anticipated, we feel more certain about nearterm projects than those many years away. While this Reserve Study is a one-year document, it is based on 30 years worth of looking forward into the future. Association Reserves, Inc. 5

12 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $106,195 as-of the start of your Fiscal Year on January 1, As of January 1, 2012, your Fully Funded Balance is computed to be $258,541 (see Table 3). This figure represents the deteriorated value of your common area components. Comparing your Reserve Balance to your Fully Funded Balance indicates your Reserves are 41% Funded. As indicated earlier in the Executive Summary, this represents a fair status, Recommended Funding Plan Based on your current Percent Funded and your projected cash flow requirements, we are recommending Reserve contributions of $20,050/Quarter this Fiscal Year and $70,000 Special Assessment. This represents the first year of a 30-year Funding Plan. This same information is shown numerically in both Table 4 and Table 5 Funding Plan Recommended Current $60,000 $50,000 Quarterly Contributions $40,000 $30,000 $20,000 $10,000 $ Years Figure 2 Association Reserves, Inc. 6

13 Assoc Your projected Reserve Balance as a result of following this Recommended multi-year Funding Plan and your Current Funding Plan is shown below, compared to your Fully Funded Balance target. $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Current Funding Plan $ Years Figure 3 A simple comparison (a percentage comparison) of your Actual Reserve Balance to the moving Fully Funded Balance target is shown below. In this figure it is easy to see how your Reserve Fund gradually draws closer to the Fully Funded (100%) level. 120% Percent Funded Recommended Funding Plan Current Funding Plan 100% 80% 60% 40% 20% 0% Years Figure 4 Association Reserves, Inc. 7

14 Assoc Table Descriptions The tabular information in this Report is broken down into five tables. Table 1 summarizes your funded Reserve Components, and is part of the Executive Report summary that appeared earlier in this Report. Table 2 provides the main component description, life, and cost factors for all components determined to be appropriate for Reserve designation. This table represents the core information from which all other tables are derived. Table 3 is presented primarily as an accounting summary page. The results of the individual line item Fully Funded Balance computations are shown. These individual quantities are summed to arrive at the Fully Funded Balance for the association as of the start date of the Report. The figures in the Current Fund Balance column and the Quarterly Reserve Contribution column show our distribution throughout the line items. If the association is underfunded, Reserve Funds are distributed first to components with a short Remaining Useful Life. If the association s Reserve Balance is above 100% Funded, funds are distributed evenly for all components. Contribution rates for each component are a proportionate distribution of the total contribution on the basis of the component s significance to the association (current cost divided by useful life). This presentation is not meant to cause clients to redistribute association funds, it simply presents one way to evenly distribute the total among all the different line items. Table 4: This table provides a one-page 30-year summary of the cash flowing into and out of the association, compared to the Fully Funded Balance for each year. Table 5: This table shows the cash flow detail for the next 30 years. This table makes it possible to see what components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves, Inc. 8

15 Table 2: Reserve Component List Detail Rem. Current Useful Useful Replacement # Component Quantity Life Life Cost Domestic Water System 1 DW #1 Well Pump & Valve - Repl (1) 10 HP Multi Stage 10 0 $35,000 2 DW #2A Well Pump & Valve - Repl (1) 15 HP Multi Stage 5 4 $77,000 3 DW #3A Well Pump & Valve - Repl (1) 15 HP Multi Stage 5 4 $77,000 4 DW Booster Pump #1 & Valve - Repl (1) 15 HP Cam Pump 10 3 $17,000 5 DW Booster Pump #2 & Valve - Repl (1) 15 HP Cam Pump 10 3 $17,000 6 Inventory - Replace Various Parts N/A 0 $10,000 7 DW #2A Well Casing - Replace Approx 235 LF $175,000 8 DW #3A Well Casing - Replace Approx 235 LF $175,000 9 Telemetry SCADA - Replace (1) HMI/Computer 6 4 $25, Telemetry - Motor Controls - Repl (8) PLC N/A 0 $8, Trailer Mounted Lift (1) Trailer Mounted Lift 10 7 $36, Pole Lights - Partial Replace Approx (7) Lights 20 0 $7, Clay Valves -Replace (1) 3" Flg. Valve 10 0 $2, Generator Set - Replace (2) Units N/A 0 $75, Chlorination Sys - Replace (1) System 10 9 $10, Utility Vehicle -Replace (1) Pick Up w/side cabinets 8 7 $8, Old Well Pumps - Remove (4) Well Sites N/A 0 $35,000 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace (1) Dell Color Laser Printer 6 3 $250 4 (1) Dell Computer - Replace (1) Dell Computer 6 5 $1,800 5 (1) Executive Desk & Chair - Replace (1) Executive Desk & Chair 10 0 $700 6 (2) File Cabinets - Replace (2) File Cabinets 10 0 $300 - Clerical Office 8 (1) Sharp Copier - Replace (1) Sharp Copier 6 3 $5,216 9 (1) HP Fax/Color Printer - Replace (1) HP Fax/Color Printer 6 3 $ (1) HP Color Printer _Replace (1) HP Color Printer 6 3 $ (1) Dell Computer - Replace (1) Dell Computer 6 3 $1, (1) Dell Computer - Replace (1) Dell Computer 6 5 $1, (2) Executive Desk & (2) Chair - Replace (2) Executive Desk & (2) Chair 10 0 $1, (3) File Cabinets - Replace (3) File Cabinets 10 0 $450 - Water System's Office 16 (1) HP Printer - Replace (1) HP Printer 6 0 $ (1) Table - Replace (1) Table 6 3 $80 18 (1) Chair - Replace (1) Chair 10 0 $ Conference Room Chairs (52) Pieces $1, Office Bldg Roof - Replace Approx 3,540 GSF $11,000 Association Reserves, Inc. 9

16 Table 2: Reserve Component List Detail Rem. Current Useful Useful Replacement # Component Quantity Life Life Cost Office Interior Refurbish 22 - Office Interior Walls - Repaint Approx 3,240 GSF 10 0 $1, Flooring Offices & Conference Room) - Replace Approx 2,550 GSF 15 0 $ Interior Doors (2 Single; 1 Double (3) Pieces 10 0 $ Kitchen & Bathroom - Refurbish (1) Kitchen & (1.5) Bathrm 15 0 $3, Storage Room - Remodel Approx 690 GSF N/A 0 $6, Lawnmower & Trailer - Replace (1) Rider & Trailer 10 6 $5, Utility Vehicle - Replace (1) Pick Up Truck 8 3 $9,000 Del Monte Park Refurbish 30 - Plumbing - Replace (2) Restrooms & (2) Showers 12 0 $5, Structure/Roof - Replace 700 GSF Bldg & 670 GSF Roof 10 0 $7, Pavilion - Construct 1000 GSF 20 0 $10, Office Bldg Exterior - Repaint Approx 3,240 GSF 6 0 $8, Total Funded Components Association Reserves, Inc. 10

17 Table 3: Contribution and Fund Breakdown Rem. Fully Current Useful Useful Current Funded Fund Reserve # Component Life Life Cost Balance Balance Contributions Domestic Water System 1 DW #1 Well Pump & Valve - Repl 10 0 $35,000 $35,000 $0.00 $1, DW #2A Well Pump & Valve - Repl 5 4 $77,000 $3 $0.00 $4, DW #3A Well Pump & Valve - Repl 5 4 $77,000 $3 $0.00 $4, DW Booster Pump #1 & Valve - Repl 10 3 $17,000 $2 $0.00 $ DW Booster Pump #2 & Valve - Repl 10 3 $17,000 $2 $0.00 $ Inventory - Replace N/A 0 $10,000 $999 $ $ DW #2A Well Casing - Replace $175,000 $28 $0.00 $1, DW #3A Well Casing - Replace $175,000 $11,667 $0.00 $1, Telemetry SCADA - Replace 6 4 $25,000 $8,333 $0.00 $1, Telemetry - Motor Controls - Repl N/A 0 $8,000 $8,000 $8, $ Trailer Mounted Lift 10 7 $36,000 $10,800 $0.00 $1, Pole Lights - Partial Replace 20 0 $7,000 $7,000 $0.00 $ Clay Valves -Replace 10 0 $2,000 $2,000 $0.00 $ Generator Set - Replace N/A 0 $75,000 $75,000 $75, $ Chlorination Sys - Replace 10 9 $10,000 $1,000 $0.00 $ Utility Vehicle -Replace 8 7 $8,000 $1,000 $0.00 $ Old Well Pumps - Remove N/A 0 $35,000 $35,000 $22, $0.00 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace 6 3 $250 $125 $0.00 $ (1) Dell Computer - Replace 6 5 $1,800 $300 $0.00 $ (1) Executive Desk & Chair - Replace 10 0 $700 $700 $0.00 $ (2) File Cabinets - Replace 10 0 $300 $300 $0.00 $ Clerical Office 8 (1) Sharp Copier - Replace 6 3 $5,216 $2,608 $0.00 $ (1) HP Fax/Color Printer - Replace 6 3 $250 $125 $0.00 $ (1) HP Color Printer _Replace 6 3 $250 $125 $0.00 $ (1) Dell Computer - Replace 6 3 $1,200 $600 $0.00 $ (1) Dell Computer - Replace 6 5 $1,800 $300 $0.00 $ (2) Executive Desk & (2) Chair - Replace 10 0 $1,400 $1,400 $0.00 $ (3) File Cabinets - Replace 10 0 $450 $450 $0.00 $ Water System's Office 16 (1) HP Printer - Replace 6 0 $250 $250 $0.00 $ (1) Table - Replace 6 3 $80 $40 $0.00 $ (1) Chair - Replace 10 0 $100 $100 $0.00 $ Conference Room Chairs $1,200 $0 $0.00 $ Office Bldg Roof - Replace $11,000 $4,889 $0.00 $ Association Reserves, Inc. 11

18 Table 3: Contribution and Fund Breakdown Rem. Fully Current Useful Useful Current Funded Fund Reserve # Component Life Life Cost Balance Balance Contributions Office Interior Refurbish 22 - Office Interior Walls - Repaint 10 0 $1,250 $1,250 $0.00 $ Flooring Offices & Conference Room) $750 $750 $0.00 $14.85 Replace 24 - Interior Doors (2 Single; 1 Double 10 0 $500 $500 $0.00 $ Kitchen & Bathroom - Refurbish 15 0 $3,000 $3,000 $0.00 $ Storage Room - Remodel N/A 0 $6,000 $6,000 $0.00 $ Lawnmower & Trailer - Replace 10 6 $5,670 $2,268 $0.00 $ Utility Vehicle - Replace 8 3 $9,000 $5,625 $0.00 $ Del Monte Park Refurbish 30 - Plumbing - Replace 12 0 $5,000 $5,000 $0.00 $ Structure/Roof - Replace 10 0 $7,000 $7,000 $0.00 $ Pavilion - Construct 20 0 $10,000 $10,000 $0.00 $ Office Bldg Exterior - Repaint 6 0 $8,000 $8,000 $0.00 $ Total Funded Components $257,542 $106,195 $20,050 Association Reserves, Inc. 12

19 Table 4: 30-Year Reserve Plan Summary Fiscal Year Beginning: 01/01/12 Interest: 1.5% Inflation: 3.5% Starting Fully Annual Loans or Projected Reserve Funded Percent Reserve Special Interest Reserve Year Balance Balance Funded Rating Contribs. Assmts Income Expenses 2012 $106,195 $258, % Fair $80,200 $70,000 $1,093 $217, $39,588 $180, % Weak $83,007 $0 $1,225 $ $123,820 $262, % Fair $85,912 $0 $2,519 $ $212,251 $347, % Fair $88,919 $0 $3,457 $55, $248,918 $379, % Fair $92,031 $0 $2,903 $205, $138,446 $260, % Fair $95,252 $0 $2,778 $4, $232,201 $347, % Fair $98,586 $0 $4,122 $17, $317,798 $428, % Strong $102,037 $0 $5,148 $55, $369,003 $474, % Strong $105,608 $0 $6,371 $ $480,981 $583, % Strong $109,304 $0 $6,327 $233, $363,223 $457, % Strong $113,130 $0 $5,438 $119, $362,313 $448, % Strong $117,090 $0 $6,204 $20, $465,459 $545, % Strong $121,188 $0 $7,794 $20, $574,419 $649, % Strong $125,429 $0 $9,221 $53, $655,895 $726, % Strong $129,819 $0 $9,004 $249, $545,440 $607, % Strong $134,363 $0 $9,012 $31, $656,991 $713, % Strong $139,066 $0 $10,571 $53, $753,446 $804, % Strong $143,933 $0 $11,930 $71, $838,240 $884, % Strong $148,971 $0 $13,670 $15, $985,556 $1,029, % Strong $154,185 $0 $13,538 $332, $820,686 $856, % Strong $159,581 $0 $12,613 $130, $862,151 $890, % Strong $165,166 $0 $14,137 $17, $1,024,061 $1,047, % Strong $170,947 $0 $16,356 $53, $1,158,076 $1,178, % Strong $176,930 $0 $18,068 $100, $1,252,475 $1,269, % Strong $183,123 $0 $17,416 $381, $1,071,127 $1,078, % Strong $189,532 $0 $17,609 $ $1,278,269 $1,281, % Strong $196,166 $0 $20,683 $13, $1,481,249 $1,483, % Strong $203,032 $0 $22,907 $132, $1,574,923 $1,575, % Strong $210,138 $0 $21,199 $552, $1,253,403 $1,242, % Strong $217,493 $0 $13,557 $929,089 Association Reserves, Inc. 13

20 Table 5: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $106,195 $39,588 $123,820 $212,251 $248,918 Annual Reserve Contribution $80,200 $83,007 $85,912 $88,919 $92,031 Planned Special Assessments $70,000 $0 $0 $0 $0 Interest Earnings $1,093 $1,225 $2,519 $3,457 $2,903 Total Income $257,488 $123,820 $212,251 $304,627 $343,853 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $35,000 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $88,359 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $88,359 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $18,848 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $18,848 $0 6 Inventory - Replace $10,000 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $0 8 DW #3A Well Casing - Replace $0 $0 $0 $0 $0 9 Telemetry SCADA - Replace $0 $0 $0 $0 $28, Telemetry - Motor Controls - Repl $8,000 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $0 $0 $0 12 Pole Lights - Partial Replace $7,000 $0 $0 $0 $0 13 Clay Valves -Replace $2,000 $0 $0 $0 $0 14 Generator Set - Replace $75,000 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $0 16 Utility Vehicle -Replace $0 $0 $0 $0 $0 17 Old Well Pumps - Remove $35,000 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $0 $0 $0 $277 $0 4 (1) Dell Computer - Replace $0 $0 $0 $0 $0 5 (1) Executive Desk & Chair - Replace $700 $0 $0 $0 $0 6 (2) File Cabinets - Replace $300 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $0 $0 $0 $5,783 $0 9 (1) HP Fax/Color Printer - Replace $0 $0 $0 $277 $0 10 (1) HP Color Printer _Replace $0 $0 $0 $277 $0 11 (1) Dell Computer - Replace $0 $0 $0 $1,330 $0 12 (1) Dell Computer - Replace $0 $0 $0 $0 $0 13 (2) Executive Desk & (2) Chair - Replace $1,400 $0 $0 $0 $0 14 (3) File Cabinets - Replace $450 $0 $0 $0 $0 Association Reserves, Inc. 14

21 Table 5: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $250 $0 $0 $0 $0 17 (1) Table - Replace $0 $0 $0 $89 $0 18 (1) Chair - Replace $100 $0 $0 $0 $0 19 Conference Room Chairs $1,200 $0 $0 $0 $0 20 Office Bldg Roof - Replace $0 $0 $0 $0 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $1,250 $0 $0 $0 $ Flooring Offices & Conference Room) - $750 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $500 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $3,000 $0 $0 $0 $0 26 Storage Room - Remodel $6,000 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $0 $0 $0 $0 28 Utility Vehicle - Replace $0 $0 $0 $9,978 $0 Del Monte Park Refurbish 30 - Plumbing - Replace $5,000 $0 $0 $0 $0 31 -Structure/Roof - Replace $7,000 $0 $0 $0 $ Pavilion - Construct $10,000 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $8,000 $0 $0 $0 $0 Total Expenses $217,900 $0 $0 $55,709 $205,407 Ending Reserve Balance: $39,588 $123,820 $212,251 $248,918 $138,446 Association Reserves, Inc. 15

22 Table 5: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $138,446 $232,201 $317,798 $369,003 $480,981 Annual Reserve Contribution $95,252 $98,586 $102,037 $105,608 $109,304 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,778 $4,122 $5,148 $6,371 $6,327 Total Income $236,477 $334,910 $424,983 $480,981 $596,613 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $0 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $104,943 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $104,943 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $0 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $0 $0 6 Inventory - Replace $0 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $0 8 DW #3A Well Casing - Replace $0 $0 $0 $0 $0 9 Telemetry SCADA - Replace $0 $0 $0 $0 $0 10 Telemetry - Motor Controls - Repl $0 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $45,802 $0 $0 12 Pole Lights - Partial Replace $0 $0 $0 $0 $0 13 Clay Valves -Replace $0 $0 $0 $0 $0 14 Generator Set - Replace $0 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $13, Utility Vehicle -Replace $0 $0 $10,178 $0 $0 17 Old Well Pumps - Remove $0 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $0 $0 $0 $0 $341 4 (1) Dell Computer - Replace $2,138 $0 $0 $0 $0 5 (1) Executive Desk & Chair - Replace $0 $0 $0 $0 $0 6 (2) File Cabinets - Replace $0 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $0 $0 $0 $0 $7,109 9 (1) HP Fax/Color Printer - Replace $0 $0 $0 $0 $ (1) HP Color Printer _Replace $0 $0 $0 $0 $ (1) Dell Computer - Replace $0 $0 $0 $0 $1, (1) Dell Computer - Replace $2,138 $0 $0 $0 $0 13 (2) Executive Desk & (2) Chair - Replace $0 $0 $0 $0 $0 14 (3) File Cabinets - Replace $0 $0 $0 $0 $0 Association Reserves, Inc. 16

23 Table 5: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $0 $307 $0 $0 $0 17 (1) Table - Replace $0 $0 $0 $0 $ (1) Chair - Replace $0 $0 $0 $0 $0 19 Conference Room Chairs $0 $0 $0 $0 $0 20 Office Bldg Roof - Replace $0 $0 $0 $0 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $0 $0 $0 $0 $ Flooring Offices & Conference Room) - $0 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $0 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $0 $0 $0 $0 $0 26 Storage Room - Remodel $0 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $6,970 $0 $0 $0 28 Utility Vehicle - Replace $0 $0 $0 $0 $0 Del Monte Park Refurbish 30 - Plumbing - Replace $0 $0 $0 $0 $0 31 -Structure/Roof - Replace $0 $0 $0 $0 $ Pavilion - Construct $0 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $0 $9,834 $0 $0 $0 Total Expenses $4,276 $17,111 $55,980 $0 $233,391 Ending Reserve Balance: $232,201 $317,798 $369,003 $480,981 $363,223 Association Reserves, Inc. 17

24 Table 5: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $363,223 $362,313 $465,459 $574,419 $655,895 Annual Reserve Contribution $113,130 $117,090 $121,188 $125,429 $129,819 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $5,438 $6,204 $7,794 $9,221 $9,004 Total Income $481,791 $485,607 $594,441 $709,070 $794,719 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $49,371 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $124,639 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $124,639 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $26,587 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $26,587 $0 6 Inventory - Replace $0 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $0 8 DW #3A Well Casing - Replace $0 $0 $0 $0 $0 9 Telemetry SCADA - Replace $35,265 $0 $0 $0 $0 10 Telemetry - Motor Controls - Repl $0 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $0 $0 $0 12 Pole Lights - Partial Replace $0 $0 $0 $0 $0 13 Clay Valves -Replace $2,821 $0 $0 $0 $0 14 Generator Set - Replace $0 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $0 16 Utility Vehicle -Replace $0 $0 $0 $0 $0 17 Old Well Pumps - Remove $0 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $0 $0 $0 $0 $0 4 (1) Dell Computer - Replace $0 $2,628 $0 $0 $0 5 (1) Executive Desk & Chair - Replace $987 $0 $0 $0 $0 6 (2) File Cabinets - Replace $423 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $0 $0 $0 $0 $0 9 (1) HP Fax/Color Printer - Replace $0 $0 $0 $0 $0 10 (1) HP Color Printer _Replace $0 $0 $0 $0 $0 11 (1) Dell Computer - Replace $0 $0 $0 $0 $0 12 (1) Dell Computer - Replace $0 $2,628 $0 $0 $0 13 (2) Executive Desk & (2) Chair - Replace $1,975 $0 $0 $0 $0 14 (3) File Cabinets - Replace $635 $0 $0 $0 $0 Association Reserves, Inc. 18

25 Table 5: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $0 $0 $378 $0 $0 17 (1) Table - Replace $0 $0 $0 $0 $0 18 (1) Chair - Replace $141 $0 $0 $0 $0 19 Conference Room Chairs $0 $1,752 $0 $0 $0 20 Office Bldg Roof - Replace $15,517 $0 $0 $0 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $1,763 $0 $0 $0 $ Flooring Offices & Conference Room) - $0 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $705 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $0 $0 $0 $0 $0 26 Storage Room - Remodel $0 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $0 $0 $0 $0 28 Utility Vehicle - Replace $0 $13,140 $0 $0 $0 Del Monte Park Refurbish 30 - Plumbing - Replace $0 $0 $7,555 $0 $0 31 -Structure/Roof - Replace $9,874 $0 $0 $0 $ Pavilion - Construct $0 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $0 $0 $12,089 $0 $0 Total Expenses $119,478 $20,148 $20,022 $53,175 $249,279 Ending Reserve Balance: $362,313 $465,459 $574,419 $655,895 $545,440 Association Reserves, Inc. 19

26 Table 5: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $545,440 $656,991 $753,446 $838,240 $985,556 Annual Reserve Contribution $134,363 $139,066 $143,933 $148,971 $154,185 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $9,012 $10,571 $11,930 $13,670 $13,538 Total Income $688,815 $806,628 $909,309 $1,000,880 $1,153,279 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $0 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $148,033 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $148,033 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $0 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $0 $0 6 Inventory - Replace $0 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $0 8 DW #3A Well Casing - Replace $0 $0 $0 $0 $0 9 Telemetry SCADA - Replace $0 $43,350 $0 $0 $0 10 Telemetry - Motor Controls - Repl $0 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $64,608 $0 $0 12 Pole Lights - Partial Replace $0 $0 $0 $0 $0 13 Clay Valves -Replace $0 $0 $0 $0 $0 14 Generator Set - Replace $0 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $19, Utility Vehicle -Replace $13,403 $0 $0 $0 $0 17 Old Well Pumps - Remove $0 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $419 $0 $0 $0 $0 4 (1) Dell Computer - Replace $0 $0 $3,230 $0 $0 5 (1) Executive Desk & Chair - Replace $0 $0 $0 $0 $0 6 (2) File Cabinets - Replace $0 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $8,739 $0 $0 $0 $0 9 (1) HP Fax/Color Printer - Replace $419 $0 $0 $0 $0 10 (1) HP Color Printer _Replace $419 $0 $0 $0 $0 11 (1) Dell Computer - Replace $2,010 $0 $0 $0 $0 12 (1) Dell Computer - Replace $0 $0 $3,230 $0 $0 13 (2) Executive Desk & (2) Chair - Replace $0 $0 $0 $0 $0 14 (3) File Cabinets - Replace $0 $0 $0 $0 $0 Association Reserves, Inc. 20

27 Table 5: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $0 $0 $0 $464 $0 17 (1) Table - Replace $134 $0 $0 $0 $0 18 (1) Chair - Replace $0 $0 $0 $0 $0 19 Conference Room Chairs $0 $0 $0 $0 $0 20 Office Bldg Roof - Replace $0 $0 $0 $0 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $0 $0 $0 $0 $ Flooring Offices & Conference Room) - $1,257 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $0 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $5,026 $0 $0 $0 $0 26 Storage Room - Remodel $0 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $9,832 $0 $0 $0 28 Utility Vehicle - Replace $0 $0 $0 $0 $17,303 Del Monte Park Refurbish 30 - Plumbing - Replace $0 $0 $0 $0 $0 31 -Structure/Roof - Replace $0 $0 $0 $0 $ Pavilion - Construct $0 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $0 $0 $0 $14,860 $0 Total Expenses $31,825 $53,181 $71,069 $15,324 $332,593 Ending Reserve Balance: $656,991 $753,446 $838,240 $985,556 $820,686 Association Reserves, Inc. 21

28 Table 5: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $820,686 $862,151 $1,024,061 $1,158,076 $1,252,475 Annual Reserve Contribution $159,581 $165,166 $170,947 $176,930 $183,123 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $12,613 $14,137 $16,356 $18,068 $17,416 Total Income $992,880 $1,041,455 $1,211,364 $1,353,074 $1,453,014 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $69,643 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $175,816 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $175,816 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $37,504 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $37,504 $0 6 Inventory - Replace $0 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $0 8 DW #3A Well Casing - Replace $0 $0 $0 $0 $0 9 Telemetry SCADA - Replace $0 $0 $53,288 $0 $0 10 Telemetry - Motor Controls - Repl $0 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $0 $0 $0 12 Pole Lights - Partial Replace $13,929 $0 $0 $0 $0 13 Clay Valves -Replace $3,980 $0 $0 $0 $0 14 Generator Set - Replace $0 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $0 16 Utility Vehicle -Replace $0 $0 $0 $17,649 $0 17 Old Well Pumps - Remove $0 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $0 $515 $0 $0 $0 4 (1) Dell Computer - Replace $0 $0 $0 $3,971 $0 5 (1) Executive Desk & Chair - Replace $1,393 $0 $0 $0 $0 6 (2) File Cabinets - Replace $597 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $0 $10,742 $0 $0 $0 9 (1) HP Fax/Color Printer - Replace $0 $515 $0 $0 $0 10 (1) HP Color Printer _Replace $0 $515 $0 $0 $0 11 (1) Dell Computer - Replace $0 $2,471 $0 $0 $0 12 (1) Dell Computer - Replace $0 $0 $0 $3,971 $0 13 (2) Executive Desk & (2) Chair - Replace $2,786 $0 $0 $0 $0 14 (3) File Cabinets - Replace $895 $0 $0 $0 $0 Association Reserves, Inc. 22

29 Table 5: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $0 $0 $0 $0 $ (1) Table - Replace $0 $165 $0 $0 $0 18 (1) Chair - Replace $199 $0 $0 $0 $0 19 Conference Room Chairs $0 $2,471 $0 $0 $0 20 Office Bldg Roof - Replace $0 $0 $0 $0 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $2,487 $0 $0 $0 $ Flooring Offices & Conference Room) - $0 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $995 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $0 $0 $0 $0 $0 26 Storage Room - Remodel $0 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $0 $0 $0 $0 28 Utility Vehicle - Replace $0 $0 $0 $0 $0 Del Monte Park Refurbish 30 - Plumbing - Replace $0 $0 $0 $0 $11, Structure/Roof - Replace $13,929 $0 $0 $0 $ Pavilion - Construct $19,898 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $0 $0 $0 $0 $18,267 Total Expenses $130,729 $17,394 $53,288 $100,599 $381,887 Ending Reserve Balance: $862,151 $1,024,061 $1,158,076 $1,252,475 $1,071,127 Association Reserves, Inc. 23

30 Table 5: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $1,071,127 $1,278,269 $1,481,249 $1,574,923 $1,253,403 Annual Reserve Contribution $189,532 $196,166 $203,032 $210,138 $217,493 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $17,609 $20,683 $22,907 $21,199 $13,557 Total Income $1,278,269 $1,495,118 $1,707,187 $1,806,260 $1,484,453 # Component Domestic Water System 1 DW #1 Well Pump & Valve - Repl $0 $0 $0 $0 $0 2 DW #2A Well Pump & Valve - Repl $0 $0 $0 $0 $208,815 3 DW #3A Well Pump & Valve - Repl $0 $0 $0 $0 $208,815 4 DW Booster Pump #1 & Valve - Repl $0 $0 $0 $0 $0 5 DW Booster Pump #2 & Valve - Repl $0 $0 $0 $0 $0 6 Inventory - Replace $0 $0 $0 $0 $0 7 DW #2A Well Casing - Replace $0 $0 $0 $0 $474,579 8 DW #3A Well Casing - Replace $0 $0 $0 $458,530 $0 9 Telemetry SCADA - Replace $0 $0 $0 $65,504 $0 10 Telemetry - Motor Controls - Repl $0 $0 $0 $0 $0 11 Trailer Mounted Lift $0 $0 $91,136 $0 $0 12 Pole Lights - Partial Replace $0 $0 $0 $0 $0 13 Clay Valves -Replace $0 $0 $0 $0 $0 14 Generator Set - Replace $0 $0 $0 $0 $0 15 Chlorination Sys - Replace $0 $0 $0 $0 $27, Utility Vehicle -Replace $0 $0 $0 $0 $0 17 Old Well Pumps - Remove $0 $0 $0 $0 $0 Administration Building & Operations Office Equipment/Furniture - General Manager's Office 3 (1) Dell Color Laser Printer - Replace $0 $0 $633 $0 $0 4 (1) Dell Computer - Replace $0 $0 $0 $0 $4,881 5 (1) Executive Desk & Chair - Replace $0 $0 $0 $0 $0 6 (2) File Cabinets - Replace $0 $0 $0 $0 $0 - Clerical Office 8 (1) Sharp Copier - Replace $0 $0 $13,205 $0 $0 9 (1) HP Fax/Color Printer - Replace $0 $0 $633 $0 $0 10 (1) HP Color Printer _Replace $0 $0 $633 $0 $0 11 (1) Dell Computer - Replace $0 $0 $3,038 $0 $0 12 (1) Dell Computer - Replace $0 $0 $0 $0 $4, (2) Executive Desk & (2) Chair - Replace $0 $0 $0 $0 $0 14 (3) File Cabinets - Replace $0 $0 $0 $0 $0 Association Reserves, Inc. 24

31 Table 5: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Water System's Office 16 (1) HP Printer - Replace $0 $0 $0 $0 $0 17 (1) Table - Replace $0 $0 $203 $0 $0 18 (1) Chair - Replace $0 $0 $0 $0 $0 19 Conference Room Chairs $0 $0 $0 $0 $0 20 Office Bldg Roof - Replace $0 $0 $0 $28,822 $0 Office Interior Refurbish 22 - Office Interior Walls - Repaint $0 $0 $0 $0 $ Flooring Offices & Conference Room) - $0 $0 $0 $0 $0 Replace 24 - Interior Doors (2 Single; 1 Double $0 $0 $0 $0 $0 25 Kitchen & Bathroom - Refurbish $0 $0 $0 $0 $0 26 Storage Room - Remodel $0 $0 $0 $0 $0 27 Lawnmower & Trailer - Replace $0 $13,869 $0 $0 $0 28 Utility Vehicle - Replace $0 $0 $22,784 $0 $0 Del Monte Park Refurbish 30 - Plumbing - Replace $0 $0 $0 $0 $0 31 -Structure/Roof - Replace $0 $0 $0 $0 $ Pavilion - Construct $0 $0 $0 $0 $0 33 Office Bldg Exterior - Repaint $0 $0 $0 $0 $0 Total Expenses $0 $13,869 $132,264 $552,856 $929,089 Ending Reserve Balance: $1,278,269 $1,481,249 $1,574,923 $1,253,403 $555,364 Association Reserves, Inc. 25

32 Assoc Accuracy, Limitations, and Disclosures Because we have no control over future events, we cannot claim that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect that financial institutions will provide interest earnings on funds on-deposit. We believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. The things that can be controlled are measurements, starting Reserve Balance, and interest rate. For this Report these figures have been provided to us, and were not confirmed by our independent research. Our projections assume a stable economic environment and lack of natural disasters. Because both the physical status and financial status of the association change each year, this Reserve Study is by nature a one-year document. This information can and should be adjusted annually as part of the Reserve Study Update process so that more accurate estimates can be reflected in the Reserve plan. Reality often differs from even the best assumptions due to changing economic factors, physical factors, or ownership expectations. Because many years of financial preparation help the preparation for large expenses, this Report shows expenses for the next 30 years. We fully expect a number of adjustments will be necessary through the interim years to both the cost and timing of distant expense projections. It is our recommendation and that of the American Institute of Certified Public Accountants (AICPA) that your Reserve Study be updated annually. Association Reserves, Inc., and its employees have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. Robert M. Nordlund, P.E., R.S., company president, is a California licensed Professional Engineer (Mechanical, #22322), and credentialed Reserve Specialist (#5). All work done by Association Reserves is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the association s situation. The Board of Directors has agreed to accept full responsibility for the accuracy of the information provided to us. They have been told that Association Reserves, Inc. will not verify the accuracy of the information submitted. As a result, Association Reserves will not be responsible for updates or revisions to this Report required as a result of errors, omissions, or changes in the information that was provided to us. Association Reserves, Inc. 26

33 Assoc Terms and Definitions BTU DIA GSF GSY HP LF British Thermal Unit (a standard unit of energy) Diameter Gross Square Feet (area) Gross Square Yards (area) Horsepower Linear Feet (length) Effective Age: The difference between Useful Life and Remaining Useful Life. Note that this is not necessarily equivalent to the chronological age of the component. Fully Funded Balance (FFB): The Reserve Balance that is in direct proportion to the fraction of life used up of the current Repair or Replacement cost. This benchmark balance represents the value of the deterioration of the Reserve Components. This number is calculated for each component, then summed together for an association total. FFB = (Current Cost X Effective Age) / Useful Life Inflation: Interest: Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 5. Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded monthly using the rate defined in the Executive Summary. Annual interest earning assumption appears in the Executive Summary, page ii. Percent Funded: The ratio, at a particular point in time (typically the beginning of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life: The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life: The estimated time, in years, that a common area component can be expected to serve its intended function. Association Reserves, Inc. 27