Do-It-Yourself Reserve Study. Green Valley Resort Homes

Transcription

1 Do-It-Yourself Reserve Study Green Valley Resort Homes Green Valley, AZ Report #: For Period Beginning: January 1, 2018 Expires: December 31, 2018 Date Prepared: September 21, 2017

2 Hello, and welcome to your Reserve Study! W e don t want you to be surprised. This Report is designed to help you anticipate, and prepare for, the major common area expenses your association will face. Inside you will find: 1) The Reserve Component List (the Scope and Schedule of your Reserve projects) telling you what your association is Reserving for, what condition they are in now, and what they ll cost to replace. 2) An Evaluation of your current Reserve Fund Size and Strength (Percent Funded). This tells you your financial starting point, revealing your risk of deferred maintenance and special assessments. 3) A Recommended Multi-Year Reserve Funding Plan, answering the question What do we do now? More Questions? Visit our website at or call us at: or Relax, it s from Association Reserves AZ, LLC

3 Table of Contents 3- Minute Executive Summary...i Reserve Study Summary...i Reserve Component List Table 1...ii Introduction, Objectives, and Methodology...1 Which Physical Assets are Funded by Reserves?...2 How much Reserves are enough?...2 How much should we contribute?...3 What is our Recommended 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 Component Significance Table Year Reserve Plan Summary Table Year Reserve Plan Year by Year Detail Table Accuracy, Limitations, and Disclosures...25 Terms and Definitions...26 Do-It-Yourself Worksheet... Appendix Association Reserves AZ, LLC

4 3- Minute Executive Summary Association: Green Valley Resort Homes #: Location: Green Valley, AZ # of Units: 168 Report Period: January 1, 2018 through December 31, 2018 Findings/Recommendations as-of 1/1/2018: Projected Starting Reserve Balance:...$364,098 Current Fully Funded Reserve Balance:...$448,597 Average Reserve Deficit (Surplus) Per Unit:...$503 Recommended 2018 Annual Full Funding Contributions:...$68,000 Alternate Minimum Contributions* to keep Reserves above $0:...$55,000 Recommended 2018 Special Assessment for Reserves:... $0 Most Recent Budgeted Reserve Contribution Rate:...$64,600 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 personnel. Your Reserve Fund is 81% Funded. This means special assessment & deferred maintenance risk is currently low. The objective of your multi-year Funding Plan is to Fully Fund your Reserves, where associations enjoy a low risk of such Reserve cash flow problems. Based on this starting point, your anticipated future expenses, and your historical Reserve contribution rate, our recommendation is to increase Reserve contributions to $68,000/year. Nominal annual increases are scheduled to help offset inflation (see tables herein for details). *officially called Baseline Funding Association Reserves AZ, LLC i

5 Table 1: Executive Summary Useful Rem. Current Life Useful Repl. Cost # Component (yrs) Life (yrs) Estimate Common Area 1 Concrete Repair 5 2 $1,500 2 Asphalt Resurface $100,000 3 Asphalt MicroSeal/Repair 5 1 $21,000 4 Pole Lights Replace $6,000 5 Pole Lights Paint 10 0 $2,000 6 Walk Lights Replace 25 9 $3,500 7 Monument Refurb 20 9 $4,400 8 Patio Furniture 15 7 $15,000 9 Wood Trim Repair 25 9 $7, Wood Trim Paint 10 1 $6, Tile Roofs Replace $20, Roofs Recoat Bldgs ABD 5 2 $21, Roofs Recoat Bldgs CHI 5 1 $30, Roofs Recoat Bldgs EFJ 5 4 $31, Roof Replace Bldgs ABD 20 9 $73, Roof Replace Bldgs CHI 20 9 $138, Roof Replace Bldgs EFJ 20 9 $106, Stucco Paint 10 2 $125, Decorative Rock Replenish 5 1 $1,800 Pool Area 20 Drinking Fountain Replace $ Pool Gates Replace 30 4 $2, Ramada Carpet Replace 10 3 $1, Restroom/Shower Remodel $2, Pool Deck Resurface $20, Pool Deck (S) Seal/Repair 5 3 $6, Pool Deck Drains Refurb (S) $13, Pool Resurface 20 7 $18, Spa Resurface $3, Pool/Ramada Furniture Replace 15 7 $2, Pool Filter Replace (A) 15 7 $1, Pool Filter Replace (B) 15 2 $1, Spa Filter Replace $1, Pool Heater Replace (A) 10 1 $3, Pool Heater Replace (B) 10 3 $3, Spa Heater Replace 10 1 $2, Ramada Tile Roof Refurbish $3, Total Funded Components Note 1: a Useful Life of N/A means a one-time expense, not expected to repeat. Note 2: Yellow highlighted line items are expected to require attention in the initial year. Association Reserves AZ, LLC ii

6 Assoc Introduction A Reserve Study is the art and science of anticipating, and preparing for, an association s 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 combination of research and welldefined computations, following consistent National Reserve Study Standard principles. The foundation of this and every Reserve Study is your Reserve Component List (what you are reserving for). This is because the Reserve Component List defines the scope and schedule of all your anticipated upcoming Reserve projects. Based on that List and your starting balance, we calculate the association s Reserve Fund Strength (reported in terms of Percent Funded ). Then we compute a Reserve Funding Plan to provide for the Reserve needs of the association. These form the three results of your Reserve Study. Reserve contributions are not for the future. Reserve contributions are designed to offset the ongoing, daily deterioration of your Reserve assets. Done well, a stable, budgeted Reserve Funding Plan will collect sufficient funds from the owners who enjoyed the use of those assets, so the association is financially prepared for the irregular expenditures scattered through future years when those projects eventually require replacement. Methodology For this Do-It-Yourself Reserve Study Kit, the client has provided the Reserve Component List, Reserve Balance, and values for interest and inflation. We then calculated Reserve Fund strength (Percent Funded) and developed a Funding Plan using the cash-flow methodology, designed to Fully Fund the association s Reserves. Association Reserves AZ, LLC 1

7 Assoc Which Physical Assets are Funded by Reserves? National Reserve Study Standards outlines a 4-part test to determine which expenses should appear in your Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the remaining life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost (often between.5% and 1% of an association s total budget). This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How much Reserves are enough? Reserve adequacy is not measured in cash terms. Reserve adequacy is found when the amount of current Reserve cash is compared to Reserve component deterioration (the needs of the association). Having enough means the association can execute its projects in a timely manner with existing Reserve funds. Not having enough typically creates deferred maintenance or special assessments. Adequacy is measured in a two-step process: 1) Calculate the value of deterioration at the association (called Fully Funded Balance, or FFB). 2) Compare that to the Reserve Fund Balance, and express as a percentage. Association Reserves AZ, LLC 2

8 Assoc Each year, the value of deterioration at the association changes. When there is more deterioration (as components approach the time they need to be replaced), there should be more cash to offset that deterioration and prepare for the expenditure. Conversely, the value of deterioration shrinks after projects are accomplished. The value of deterioration (the FFB) changes each year, and is a moving but predictable target. There is high risk of special assessments and deferred maintenance when the Percent Funded is weak, below 30%. Approximately 30% of all associations are in this high risk range. While the 100% point is Ideal (indicating Reserve cash is equal to the value of deterioration), a Reserve Fund in the 70% -130% range is considered strong (low risk of special assessment). Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! How much should we contribute? According to National Reserve Study Standards, there are four Funding Principles to balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. Second, a stable contribution is desirable because it keeps these naturally irregular expenses from unsettling the budget. Reserve contributions that are evenly distributed over current and future owners enable each owner to pay their fair share of the association s Reserve expenses over the years. And finally, we develop a plan that is fiscally responsible and safe for Board Members to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Board Members invite liability exposure when Reserve contributions are inadequate to offset ongoing common area deterioration. Association Reserves AZ, LLC 3

9 Assoc What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the value of deterioration is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. Evidence shows that associations in the % range enjoy a low risk of special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. Doing so allows the Reserve Fund to drop into the 0-30% range, where there is a high risk of special assessments & deferred maintenance. Since Baseline Funding still provides for the timely execution of all Reserve projects, and only the margin of safety is different, Baseline Funding contributions average only 10% - 15% less than Full Funding contributions. Threshold Funding is the title of all other Cash or Percent Funded objectives between Baseline Funding and Full Funding. Association Reserves AZ, LLC 4

10 Assoc Projected Expenses While this Reserve Study looks forward 30 years, we have no expectation that all these expenses will all take place as anticipated. This Reserve Study needs to be updated annually because we expect the timing of these expenses to shift and the size of these expenses to change. We do feel more certain of the timing and cost of near-term expenses than expenses many years away. Your first five years of projected Reserve expenses total $278,107. Adding the next five years, your first ten years of projected Reserve expenses are $897,678. Please be aware of your near-term expenses, which are typically projected more accurately than the more distant projections. The figure below summarizes the projected future expenses at your association as defined by your Reserve Component List. A summary of these expenses are shown in Table 5, while details of the projects that make up these expenses are shown in Table 6. Annual Reserve Expenses $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ Years Figure 1 Association Reserves AZ, LLC 5

11 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $364,098 as-of the start of your Fiscal Year on January 1, As of January 1, 2018, your Fully Funded Balance is computed to be $448,597 (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 81% Funded. Across the country approx 1% of associations in this range experience special assessments or deferred maintenance. Recommended Funding Plan Based on your current Percent Funded and both your near-term and longterm Reserve needs, we recommend budgeted contributions of $68,000 this Fiscal Year. The overall 30-yr plan, in perspective, is shown below. This same information is shown numerically in Tables 5 & 6. Annual Reserve Funding Recommended Alternate (Minimum) Current Budget $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Years Figure 2 Association Reserves AZ, LLC 6

12 Assoc The following chart shows your Reserve balance under our recommended Full Funding Plan, an alternate Baseline Funding Plan, and at your current budgeted contribution rate, compared to your always-changing Fully Funded Balance target. $1,600,000 $1,400, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 120% Percent Funded Recommended Funding Plan Alternate (Minimum) Funding Plan Current Budget 100% 80% 60% 40% 20% 0% Years Figure 4 Association Reserves AZ, LLC 7

13 Assoc Table Descriptions The tabular information in this Report is broken down into six tables. Table 1 is a summary of your Reserve Components (your Reserve Component List), the information found in Table 2. Table 2 is your Reserve Component List, which forms the foundation of this Reserve Study. This table represents the information from which all other tables are derived. Table 3 shows the calculation of your Fully Funded Balance, the measure of your current Reserve component deterioration. For each component, the Fully Funded Balance is the fraction of life used up multiplied by its estimated Current Replacement Cost. Table 4 shows the significance of each component to Reserve needs of the association, helping you see which components have more (or less) influence than others on your total Reserve contribution rate. The deterioration cost/yr. of each component is calculated by dividing the estimated Current Replacement Cost by Useful Life, then that component s percentage of the total is displayed. Table 5: This table provides a one-page 30-year summary of the cash flowing into and out of the Reserve Fund, with a display of the Fully Funded Balance, Percent Funded, and special assessment risk for each year. Table 6: This table shows the cash flow detail for the next 30 years. This table makes it possible to see which components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves AZ, LLC 8

14 Table 2: Reserve Component List Detail Rem. Current Useful Useful Repl. Cost # Component Quantity Life Life Estimate Common Area 1 Concrete Repair Multiple SQ 5 2 $1,500 2 Asphalt Resurface sf $100,000 3 Asphalt MicroSeal/Repair sf 5 1 $21,000 4 Pole Lights Replace 88 lamps $6,000 5 Pole Lights Paint 88 Poles 10 0 $2,000 6 Walk Lights Replace 47 lamps 25 9 $3,500 7 Monument Refurb 2 monuments 20 9 $4,400 8 Patio Furniture 93 pieces 15 7 $15,000 9 Wood Trim Repair Multiple Pergola Posts 25 9 $7, Wood Trim Paint sf 10 1 $6, Tile Roofs Replace 4100 sf $20, Roofs Recoat Bldgs ABD sf 5 2 $21, Roofs Recoat Bldgs CHI sf 5 1 $30, Roofs Recoat Bldgs EFJ sf 5 4 $31, Roof Replace Bldgs ABD sf 20 9 $73, Roof Replace Bldgs CHI sf 20 9 $138, Roof Replace Bldgs EFJ sf 20 9 $106, Stucco Paint 42 Buildings 10 2 $125, Decorative Rock Replenish Multiple sf 5 1 $1,800 Pool Area 20 Drinking Fountain Replace 1 Drinking Fountain $ Pool Gates Replace 2 Wrought Iron Gates 30 4 $2, Ramada Carpet Replace 65 sq yds 10 3 $1, Restroom/Shower Remodel 2 Restooms 1 Shower $2, Pool Deck Resurface 4476 sf $20, Pool Deck (S) Seal/Repair 4476 sf 5 3 $6, Pool Deck Drains Refurb (S) 254 lf $13, Pool Resurface 48k Gallon Pool 20 7 $18, Spa Resurface 9' Diameter, 3ft Depth $3, Pool/Ramada Furniture Replace Assorted Pieces 15 7 $2, Pool Filter Replace (A) Triton 7.06 sf 15 7 $1, Pool Filter Replace (B) Triton 7.06 sf 15 2 $1, Spa Filter Replace Triton 3.14 sf $1, Pool Heater Replace (A) Raypak 399k BTU 10 1 $3, Pool Heater Replace (B) Raypak 399k BTU 10 3 $3, Spa Heater Replace Raypak 264k BTU 10 1 $2, Ramada Tile Roof Refurbish 912 sf $3, Total Funded Components Association Reserves AZ, LLC 9

15 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance Common Area 1 Concrete Repair $1,500 X 3 / 5 = $900 2 Asphalt Resurface $100,000 X 11 / 25 = $44,000 3 Asphalt MicroSeal/Repair $21,000 X 4 / 5 = $16,800 4 Pole Lights Replace $6,000 X 8 / 25 = $1,920 5 Pole Lights Paint $2,000 X 10 / 10 = $2,000 6 Walk Lights Replace $3,500 X 16 / 25 = $2,240 7 Monument Refurb $4,400 X 11 / 20 = $2,420 8 Patio Furniture $15,000 X 8 / 15 = $8,000 9 Wood Trim Repair $7,500 X 16 / 25 = $4, Wood Trim Paint $6,500 X 9 / 10 = $5, Tile Roofs Replace $20,000 X 5 / 50 = $2, Roofs Recoat Bldgs ABD $21,280 X 3 / 5 = $12, Roofs Recoat Bldgs CHI $30,360 X 4 / 5 = $24, Roofs Recoat Bldgs EFJ $31,200 X 1 / 5 = $6, Roof Replace Bldgs ABD $73,000 X 11 / 20 = $40, Roof Replace Bldgs CHI $138,000 X 11 / 20 = $75, Roof Replace Bldgs EFJ $106,000 X 11 / 20 = $58, Stucco Paint $125,000 X 8 / 10 = $100, Decorative Rock Replenish $1,800 X 4 / 5 = $1,440 Pool Area 20 Drinking Fountain Replace $700 X 5 / 15 = $ Pool Gates Replace $2,500 X 26 / 30 = $2, Ramada Carpet Replace $1,300 X 7 / 10 = $ Restroom/Shower Remodel $2,500 X 6 / 20 = $ Pool Deck Resurface $20,000 X 5 / 20 = $5, Pool Deck (S) Seal/Repair $6,100 X 2 / 5 = $2, Pool Deck Drains Refurb (S) $13,860 X 2 / 20 = $1, Pool Resurface $18,500 X 13 / 20 = $12, Spa Resurface $3,800 X 2 / 20 = $ Pool/Ramada Furniture Replace $2,100 X 8 / 15 = $1, Pool Filter Replace (A) $1,750 X 8 / 15 = $ Pool Filter Replace (B) $1,750 X 13 / 15 = $1, Spa Filter Replace $1,050 X 5 / 15 = $ Pool Heater Replace (A) $3,500 X 9 / 10 = $3, Pool Heater Replace (B) $3,500 X 7 / 10 = $2, Spa Heater Replace $2,500 X 9 / 10 = $2, Ramada Tile Roof Refurbish $3,800 X 12 / 30 = $1,520 $448,597 Association Reserves AZ, LLC 10

16 Table 4: Component Significance Current Useful Repl. Cost Deterioration Deterioration # Component Life Estimate Cost/Yr. Significance Common Area 1 Concrete Repair 5 $1,500 $ % 2 Asphalt Resurface 25 $100,000 $4, % 3 Asphalt MicroSeal/Repair 5 $21,000 $4, % 4 Pole Lights Replace 25 $6,000 $ % 5 Pole Lights Paint 10 $2,000 $ % 6 Walk Lights Replace 25 $3,500 $ % 7 Monument Refurb 20 $4,400 $ % 8 Patio Furniture 15 $15,000 $1, % 9 Wood Trim Repair 25 $7,500 $ % 10 Wood Trim Paint 10 $6,500 $ % 11 Tile Roofs Replace 50 $20,000 $ % 12 Roofs Recoat Bldgs ABD 5 $21,280 $4, % 13 Roofs Recoat Bldgs CHI 5 $30,360 $6, % 14 Roofs Recoat Bldgs EFJ 5 $31,200 $6, % 15 Roof Replace Bldgs ABD 20 $73,000 $3, % 16 Roof Replace Bldgs CHI 20 $138,000 $6, % 17 Roof Replace Bldgs EFJ 20 $106,000 $5, % 18 Stucco Paint 10 $125,000 $12, % 19 Decorative Rock Replenish 5 $1,800 $ % Pool Area 20 Drinking Fountain Replace 15 $700 $47 0.1% 21 Pool Gates Replace 30 $2,500 $83 0.1% 22 Ramada Carpet Replace 10 $1,300 $ % 23 Restroom/Shower Remodel 20 $2,500 $ % 24 Pool Deck Resurface 20 $20,000 $1, % 25 Pool Deck (S) Seal/Repair 5 $6,100 $1, % 26 Pool Deck Drains Refurb (S) 20 $13,860 $ % 27 Pool Resurface 20 $18,500 $ % 28 Spa Resurface 20 $3,800 $ % 29 Pool/Ramada Furniture Replace 15 $2,100 $ % 30 Pool Filter Replace (A) 15 $1,750 $ % 31 Pool Filter Replace (B) 15 $1,750 $ % 32 Spa Filter Replace 15 $1,050 $70 0.1% 33 Pool Heater Replace (A) 10 $3,500 $ % 34 Pool Heater Replace (B) 10 $3,500 $ % 35 Spa Heater Replace 10 $2,500 $ % 36 Ramada Tile Roof Refurbish 30 $3,800 $ % 36 Total Funded Components $62, % Association Reserves AZ, LLC 11

17 Table 5: 30-Year Reserve Plan Summary Report Start Date: 01/01/18 Interest: 0.4% Inflation: 3.0% Reserve Fund Strength Calculations (All values as of Fiscal Year Start Date) Projected Reserve Balance Changes Starting Fully Special Loans or Reserve Funded Percent Assmt Reserve Special Interest Reserve Year Balance Balance Funded Risk Contribs. Assmts Income Expenses 2018 $364,098 $448, % Low $68,000 $0 $1,392 $2, $431,490 $524, % Low $70,720 $0 $1,518 $67, $436,098 $537, % Low $73,549 $0 $1,380 $158, $352,390 $458, % Low $76,491 $0 $1,349 $11, $418,319 $531, % Low $79,550 $0 $1,539 $37, $461,479 $580, % Low $82,732 $0 $1,763 $ $545,974 $673, % Low $86,042 $0 $1,954 $63, $570,494 $705, % Low $89,483 $0 $2,027 $73, $588,052 $730, % Low $93,063 $0 $2,211 $7, $675,598 $826, % Low $96,785 $0 $1,706 $474, $299,675 $446, % Med $100,657 $0 $1,218 $5, $396,510 $541, % Low $104,683 $0 $1,414 $90, $411,718 $554, % Low $108,870 $0 $1,265 $210, $311,154 $446, % Med $113,225 $0 $1,261 $16, $409,633 $538, % Low $117,754 $0 $1,288 $202, $326,442 $443, % Low $122,464 $0 $1,304 $31, $419,051 $526, % Low $127,363 $0 $1,543 $85, $462,650 $557, % Low $132,457 $0 $1,766 $50, $546,412 $629, % Low $137,756 $0 $2,075 $46, $639,323 $710, % Low $143,266 $0 $2,396 $54, $730,276 $788, % Low $148,996 $0 $2,815 $3, $878,475 $925, % Low $152,721 $0 $3,133 $122, $912,182 $948, % Low $156,539 $0 $2,913 $319, $752,354 $771, % Low $160,453 $0 $2,881 $21, $894,176 $900, % Low $164,464 $0 $3,312 $63, $998,528 $993, % Low $168,576 $0 $3,790 $3, $1,167,229 $1,155, % Low $172,790 $0 $4,194 $114, $1,229,569 $1,211, % Low $177,110 $0 $4,460 $91, $1,319,444 $1,297, % Low $181,538 $0 $4,919 $13, $1,491,944 $1,470, % Low $186,076 $0 $4,100 $830,925 Association Reserves AZ, LLC 12

18 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $364,098 $431,490 $436,098 $352,390 $418,319 Annual Reserve Contribution $68,000 $70,720 $73,549 $76,491 $79,550 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,392 $1,518 $1,380 $1,349 $1,539 Total Income $433,490 $503,728 $511,027 $430,230 $499,409 # Component Common Area 1 Concrete Repair $0 $0 $1,591 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $0 3 Asphalt MicroSeal/Repair $0 $21,630 $0 $0 $0 4 Pole Lights Replace $0 $0 $0 $0 $0 5 Pole Lights Paint $2,000 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $0 7 Monument Refurb $0 $0 $0 $0 $0 8 Patio Furniture $0 $0 $0 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $0 10 Wood Trim Paint $0 $6,695 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $22,576 $0 $0 13 Roofs Recoat Bldgs CHI $0 $31,271 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $35, Roof Replace Bldgs ABD $0 $0 $0 $0 $0 16 Roof Replace Bldgs CHI $0 $0 $0 $0 $0 17 Roof Replace Bldgs EFJ $0 $0 $0 $0 $0 18 Stucco Paint $0 $0 $132,613 $0 $0 19 Decorative Rock Replenish $0 $1,854 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $0 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $2, Ramada Carpet Replace $0 $0 $0 $1,421 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $0 24 Pool Deck Resurface $0 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $6,666 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $0 $0 27 Pool Resurface $0 $0 $0 $0 $0 28 Spa Resurface $0 $0 $0 $0 $0 29 Pool/Ramada Furniture Replace $0 $0 $0 $0 $0 30 Pool Filter Replace (A) $0 $0 $0 $0 $0 31 Pool Filter Replace (B) $0 $0 $1,857 $0 $0 32 Spa Filter Replace $0 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $3,605 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $3,825 $0 35 Spa Heater Replace $0 $2,575 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $0 $0 Total Expenses $2,000 $67,630 $158,636 $11,911 $37,930 Association Reserves AZ, LLC 13

19 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Ending Reserve Balance: $431,490 $436,098 $352,390 $418,319 $461,479 Association Reserves AZ, LLC 14

20 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $461,479 $545,974 $570,494 $588,052 $675,598 Annual Reserve Contribution $82,732 $86,042 $89,483 $93,063 $96,785 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,763 $1,954 $2,027 $2,211 $1,706 Total Income $545,974 $633,970 $662,004 $683,326 $774,090 # Component Common Area 1 Concrete Repair $0 $0 $1,845 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $0 3 Asphalt MicroSeal/Repair $0 $25,075 $0 $0 $0 4 Pole Lights Replace $0 $0 $0 $0 $0 5 Pole Lights Paint $0 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $4,567 7 Monument Refurb $0 $0 $0 $0 $5,741 8 Patio Furniture $0 $0 $18,448 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $9, Wood Trim Paint $0 $0 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $26,172 $0 $0 13 Roofs Recoat Bldgs CHI $0 $36,251 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $40, Roof Replace Bldgs ABD $0 $0 $0 $0 $95, Roof Replace Bldgs CHI $0 $0 $0 $0 $180, Roof Replace Bldgs EFJ $0 $0 $0 $0 $138, Stucco Paint $0 $0 $0 $0 $0 19 Decorative Rock Replenish $0 $2,149 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $0 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $0 22 Ramada Carpet Replace $0 $0 $0 $0 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $0 24 Pool Deck Resurface $0 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $7,727 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $0 $0 27 Pool Resurface $0 $0 $22,753 $0 $0 28 Spa Resurface $0 $0 $0 $0 $0 29 Pool/Ramada Furniture Replace $0 $0 $2,583 $0 $0 30 Pool Filter Replace (A) $0 $0 $2,152 $0 $0 31 Pool Filter Replace (B) $0 $0 $0 $0 $0 32 Spa Filter Replace $0 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $0 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $0 $0 35 Spa Heater Replace $0 $0 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $0 $0 Total Expenses $0 $63,476 $73,952 $7,727 $474,416 Association Reserves AZ, LLC 15

21 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Ending Reserve Balance: $545,974 $570,494 $588,052 $675,598 $299,675 Association Reserves AZ, LLC 16

22 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $299,675 $396,510 $411,718 $311,154 $409,633 Annual Reserve Contribution $100,657 $104,683 $108,870 $113,225 $117,754 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,218 $1,414 $1,265 $1,261 $1,288 Total Income $401,549 $502,607 $521,853 $425,640 $528,675 # Component Common Area 1 Concrete Repair $0 $0 $2,139 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $151,259 3 Asphalt MicroSeal/Repair $0 $29,069 $0 $0 $0 4 Pole Lights Replace $0 $0 $0 $0 $0 5 Pole Lights Paint $2,688 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $0 7 Monument Refurb $0 $0 $0 $0 $0 8 Patio Furniture $0 $0 $0 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $0 10 Wood Trim Paint $0 $8,998 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $30,340 $0 $0 13 Roofs Recoat Bldgs CHI $0 $42,025 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $47, Roof Replace Bldgs ABD $0 $0 $0 $0 $0 16 Roof Replace Bldgs CHI $0 $0 $0 $0 $0 17 Roof Replace Bldgs EFJ $0 $0 $0 $0 $0 18 Stucco Paint $0 $0 $178,220 $0 $0 19 Decorative Rock Replenish $0 $2,492 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $941 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $0 22 Ramada Carpet Replace $0 $0 $0 $1,909 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $3, Pool Deck Resurface $0 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $8,958 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $0 $0 27 Pool Resurface $0 $0 $0 $0 $0 28 Spa Resurface $0 $0 $0 $0 $0 29 Pool/Ramada Furniture Replace $0 $0 $0 $0 $0 30 Pool Filter Replace (A) $0 $0 $0 $0 $0 31 Pool Filter Replace (B) $0 $0 $0 $0 $0 32 Spa Filter Replace $1,411 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $4,845 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $5,140 $0 35 Spa Heater Replace $0 $3,461 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $0 $0 Total Expenses $5,040 $90,889 $210,699 $16,007 $202,233 Association Reserves AZ, LLC 17

23 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Ending Reserve Balance: $396,510 $411,718 $311,154 $409,633 $326,442 Association Reserves AZ, LLC 18

24 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $326,442 $419,051 $462,650 $546,412 $639,323 Annual Reserve Contribution $122,464 $127,363 $132,457 $137,756 $143,266 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,304 $1,543 $1,766 $2,075 $2,396 Total Income $450,210 $547,957 $596,873 $686,242 $784,985 # Component Common Area 1 Concrete Repair $0 $0 $2,479 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $0 3 Asphalt MicroSeal/Repair $0 $33,699 $0 $0 $0 4 Pole Lights Replace $0 $0 $9,917 $0 $0 5 Pole Lights Paint $0 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $0 7 Monument Refurb $0 $0 $0 $0 $0 8 Patio Furniture $0 $0 $0 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $0 10 Wood Trim Paint $0 $0 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $35,173 $0 $0 13 Roofs Recoat Bldgs CHI $0 $48,719 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $54, Roof Replace Bldgs ABD $0 $0 $0 $0 $0 16 Roof Replace Bldgs CHI $0 $0 $0 $0 $0 17 Roof Replace Bldgs EFJ $0 $0 $0 $0 $0 18 Stucco Paint $0 $0 $0 $0 $0 19 Decorative Rock Replenish $0 $2,888 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $0 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $0 22 Ramada Carpet Replace $0 $0 $0 $0 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $0 24 Pool Deck Resurface $31,159 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $10,385 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $23,596 $0 27 Pool Resurface $0 $0 $0 $0 $0 28 Spa Resurface $0 $0 $0 $6,469 $0 29 Pool/Ramada Furniture Replace $0 $0 $0 $0 $0 30 Pool Filter Replace (A) $0 $0 $0 $0 $0 31 Pool Filter Replace (B) $0 $0 $2,892 $0 $0 32 Spa Filter Replace $0 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $0 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $0 $0 35 Spa Heater Replace $0 $0 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $6,469 $0 Total Expenses $31,159 $85,306 $50,461 $46,919 $54,709 Association Reserves AZ, LLC 19

25 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Ending Reserve Balance: $419,051 $462,650 $546,412 $639,323 $730,276 Association Reserves AZ, LLC 20

26 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $730,276 $878,475 $912,182 $752,354 $894,176 Annual Reserve Contribution $148,996 $152,721 $156,539 $160,453 $164,464 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,815 $3,133 $2,913 $2,881 $3,312 Total Income $882,087 $1,034,329 $1,071,634 $915,688 $1,061,951 # Component Common Area 1 Concrete Repair $0 $0 $2,874 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $0 3 Asphalt MicroSeal/Repair $0 $39,066 $0 $0 $0 4 Pole Lights Replace $0 $0 $0 $0 $0 5 Pole Lights Paint $3,612 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $0 7 Monument Refurb $0 $0 $0 $0 $0 8 Patio Furniture $0 $0 $28,742 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $0 10 Wood Trim Paint $0 $12,092 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $40,775 $0 $0 13 Roofs Recoat Bldgs CHI $0 $56,479 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $63, Roof Replace Bldgs ABD $0 $0 $0 $0 $0 16 Roof Replace Bldgs CHI $0 $0 $0 $0 $0 17 Roof Replace Bldgs EFJ $0 $0 $0 $0 $0 18 Stucco Paint $0 $0 $239,513 $0 $0 19 Decorative Rock Replenish $0 $3,349 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $0 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $0 22 Ramada Carpet Replace $0 $0 $0 $2,566 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $0 24 Pool Deck Resurface $0 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $12,039 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $0 $0 27 Pool Resurface $0 $0 $0 $0 $0 28 Spa Resurface $0 $0 $0 $0 $0 29 Pool/Ramada Furniture Replace $0 $0 $4,024 $0 $0 30 Pool Filter Replace (A) $0 $0 $3,353 $0 $0 31 Pool Filter Replace (B) $0 $0 $0 $0 $0 32 Spa Filter Replace $0 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $6,511 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $6,908 $0 35 Spa Heater Replace $0 $4,651 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $0 $0 Total Expenses $3,612 $122,147 $319,280 $21,512 $63,423 Association Reserves AZ, LLC 21

27 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Ending Reserve Balance: $878,475 $912,182 $752,354 $894,176 $998,528 Association Reserves AZ, LLC 22

28 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $998,528 $1,167,229 $1,229,569 $1,319,444 $1,491,944 Annual Reserve Contribution $168,576 $172,790 $177,110 $181,538 $186,076 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $3,790 $4,194 $4,460 $4,919 $4,100 Total Income $1,170,893 $1,344,213 $1,411,139 $1,505,901 $1,682,120 # Component Common Area 1 Concrete Repair $0 $0 $3,332 $0 $0 2 Asphalt Resurface $0 $0 $0 $0 $0 3 Asphalt MicroSeal/Repair $0 $45,288 $0 $0 $0 4 Pole Lights Replace $0 $0 $0 $0 $0 5 Pole Lights Paint $0 $0 $0 $0 $0 6 Walk Lights Replace $0 $0 $0 $0 $0 7 Monument Refurb $0 $0 $0 $0 $10,369 8 Patio Furniture $0 $0 $0 $0 $0 9 Wood Trim Repair $0 $0 $0 $0 $0 10 Wood Trim Paint $0 $0 $0 $0 $0 11 Tile Roofs Replace $0 $0 $0 $0 $0 12 Roofs Recoat Bldgs ABD $0 $0 $47,269 $0 $0 13 Roofs Recoat Bldgs CHI $0 $65,474 $0 $0 $0 14 Roofs Recoat Bldgs EFJ $0 $0 $0 $0 $73, Roof Replace Bldgs ABD $0 $0 $0 $0 $172, Roof Replace Bldgs CHI $0 $0 $0 $0 $325, Roof Replace Bldgs EFJ $0 $0 $0 $0 $249, Stucco Paint $0 $0 $0 $0 $0 19 Decorative Rock Replenish $0 $3,882 $0 $0 $0 Pool Area 20 Drinking Fountain Replace $1,466 $0 $0 $0 $0 21 Pool Gates Replace $0 $0 $0 $0 $0 22 Ramada Carpet Replace $0 $0 $0 $0 $0 23 Restroom/Shower Remodel $0 $0 $0 $0 $0 24 Pool Deck Resurface $0 $0 $0 $0 $0 25 Pool Deck (S) Seal/Repair $0 $0 $0 $13,956 $0 26 Pool Deck Drains Refurb (S) $0 $0 $0 $0 $0 27 Pool Resurface $0 $0 $41,094 $0 $0 28 Spa Resurface $0 $0 $0 $0 $0 29 Pool/Ramada Furniture Replace $0 $0 $0 $0 $0 30 Pool Filter Replace (A) $0 $0 $0 $0 $0 31 Pool Filter Replace (B) $0 $0 $0 $0 $0 32 Spa Filter Replace $2,198 $0 $0 $0 $0 33 Pool Heater Replace (A) $0 $0 $0 $0 $0 34 Pool Heater Replace (B) $0 $0 $0 $0 $0 35 Spa Heater Replace $0 $0 $0 $0 $0 36 Ramada Tile Roof Refurbish $0 $0 $0 $0 $0 Total Expenses $3,664 $114,644 $91,695 $13,956 $830,925 Association Reserves AZ, LLC 23

29 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Ending Reserve Balance: $1,167,229 $1,229,569 $1,319,444 $1,491,944 $851,195 Association Reserves AZ, LLC 24

30 Assoc Accuracy, Limitations, and Disclosures Because we have no control over future events, we do not expect that all the events anticipated in this Report will occur as planned. The starting Reserve Balance and interest rate earned on deposited Reserve funds that you provided to us were considered reliable representations of the association s current situation. Because the physical condition of your components, the association s Reserve balance, the economic environment, and legislative environment change each year, this Reserve Study is by nature a one-year document. Because a long-term perspective improves the accuracy of near-term planning, this Report projects expenses for the next 30 years. It is our recommendation and that of the Financial Accounting Standards Board (FASB) that your Reserve Study be updated each year as part of the annual budget process. Association Reserves and its employees have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. DJ Vlaming, R.S., company president, is a credentialed Reserve Specialist (#61). All work done by Association Reserves AZ, LLC 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. This Report was prepared only for Reserve budget and disclosure purposes (to help identify and address the normal deterioration of properly built and installed components with predictable life expectancies). The Funding Plan in this Report was developed using the cash-flow methodology to achieve the specified Funding Objective. Association Reserves liability in any matter involving this Reserve Study is limited to our Fee for services rendered. 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 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 AZ, LLC 25

31 Assoc Terms and Definitions BTU DIA GSF GSY HP LF British Thermal Unit (a standard unit of energy) Diameter Gross Square Feet (area). Equivalent to Square Feet Gross Square Yards (area). Equivalent to Square Yards 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 value of the deterioration of the Reserve Components. This is the fraction of life used up of each component multiplied by its estimated Current Replacement. While calculated for each component, it is 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 6. 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. Percent Funded: The ratio, at a particular point in time (the first day of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life (RUL): The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life (UL): The estimated time, in years, that a common area component can be expected to serve its intended function. Association Reserves AZ, LLC 26

32 Assoc Do-It-Yourself Worksheets Note: Any questions relating to the information contained in this Appendix should be directed to the contact person indicated on the following page, not Association Reserves. Association Reserves AZ, LLC 27

33 Assoc Association Reserves AZ, LLC 28

34 Assoc Association Reserves AZ, LLC 29