RESERVE STUDY. The cost of replacement should be high enough to make it financially unsound to fund it from the operating budget.

Transcription

1 THE Page 2 Introduction RESERVE STUDY A Reserve Study is a report giving an estimate of the amount of money which must be put aside to replace the major items (or building components) that will wear out before the entire facility or project wears out. To establish guidelines for use in preparing a report of this type, Kipcon Incorporated uses the National Reserve Study Standards of the Community Associations Institute, along with our engineering judgment and experience. The Reserve Study is made up of two (2) parts: Physical Analysis The Physical Analysis provides information about the physical status and replacement cost of the major common area components the Association is obligated to maintain. It includes a Condition Assessment, along with the Life and Valuation Estimates for each component. The Component Inventory is prepared as part of the Physical Analysis portion of the Reserve Study. It provides the Association with a listing of all common area components which will ultimately be replaced from the reserve fund. The guidelines used to determine which physical components within the Community are to be included in the Component Inventory are based on the following general criteria: The component must be a common element, or otherwise noted as the responsibility of the Association. If the Association is not responsible for replacing a particular component, then it does not belong in the Component Inventory. The component must have an estimated remaining useful life of thirty (30) years or less. As the site ages, additional components may need to be added. The funding for replacement should be from one source only, not funded from another area of the budget or through a maintenance contract. The cost of replacement should be high enough to make it financially unsound to fund it from the operating budget. Components, such as painting, which are considered deferred maintenance, should not be funded from reserves. Kipcon Incorporated 2009

2 Page 3 Financial Analysis The Financial Analysis is the evaluation and analysis of the Association's current reserve status (measured as a cash balance or Percent Funded), calculation of a recommended reserve contribution rate (Funding Plan), and projection of future income and expenses. This analysis tracks the reserve fund balance, annual reserve contributions, the annual expenditure trends over the next thirty (30) years, and is based on the Component Inventory. Unless specifically requested, the calculations performed in the preparation of this report do not incorporate any adjustments for future inflation of replacement costs, or to reflect any assumed interest earned on the accumulated funds. To ensure that the information remains current, a reassessment of the physical condition of the components and updating of the replacement costs is necessary at regular intervals. These intervals vary depending on the age of the property, the types of components contained in the schedule, and the Funding Goal methodology used. Adjustments should also be made when common elements are added, replaced, or modified. For details, please refer to the specific recommendations regarding updating contained in the Recommendations and Conclusions section of this report. Reserve Study Terminology FollOWing are descriptions of various terms used in the Physical Analysis and Financial Analysis sections of this report. Adjusted Annual Contribution: Factor. The Average Annual Contribution multiplied by the Pooling Adjusted Cash Balance: Contribution. The Reserve Balance obtained by using the Adjusted Annual Annual Contribution: The reserve funding required each year based on recalculating the Component Inventory by adjusting the Reserve Cash Balance and Estimated Remaining Lives to reflect each year of the project. Annual Expenditure: Total cost of expenditures scheduled for each year. Average Annual Contribution: An average of the Annual Contribution over a set interval. Balance Requiring Funding: The amount of a Component's cost left after subtracting the Beginning Balance for each Component from the Reserve Requirement Present Dollars. Beginning Balance: Actual amount of reserve funds at a particular point in time (typically the effective date of the Reserve Study). The Beginning Balance is allocated to the individual Components using a weighting system based on the reserve requirement for each one, the total reserve requirement for all of the Components, and the Effective Age of each Component. The Summary of Replacement Reserve Needs and Component Inventory pages show the totals for each Category and Component, respectively.

3 Category: Page 4 The grouping of various reserve Components based on the general characteristics of the components. These are shown on the Summary of Replacement Reserve Needs page of this report. Component: A listing of the items for which we recommend reserves be accumulated. They are shown on the Component Inventory. The basis for selection includes: 1. A review of the governing documents regarding the common and limited common elements. 2. A review of all available maintenance contracts. 3. The type of component, its condition, and its anticipated full useful life. 4. A review of applicable statutes dealing with reserve requirements. Component Inventory: The portion of this report containing the breakdown of the individual line items which form the building blocks for the Reserve Study. Also, the act of selecting and quantifying the reserve Components. This can be accomplished through on-site visual observations, review of association design and organizational documents, review of established association precedents, and discussion with appropriate association representatives. Condition Assessment: The task of evaluating the current condition of each Component based on observed or reported characteristics. Effective Age: The difference between Estimated Useful Life and Estimated Remaining Life. It is not always equivalent to chronological age, since some Components age irregularly. Estimated Useful Life: Also known as Total Useful Life or Depreciable Life. The estimated time, in years, that a reserve component can be expected to serve its intended function if properly constructed in its present application or installation. The Estimated Useful Life values in this report come from a variety of sources, some of which are listed in the Bibliography. To ensure that all items attain their Estimated Useful Lives, it is imperative to follow a well-planned maintenance program and schedule. Estimated Remaining Useful Life: Also referred to as Remaining Life. The estimated time, in years, that a reserve Component can be expected to continue to serve its intended function. Replacements anticipated to occur in the initial year have "0" Estimated Remaining Useful Life. For the purposes of this report, this is indicated by a "1" in the Estimated Remaining Useful Life column in the Component Inventory. The Estimated Remaining Useful Life projections used in this report are based on the field inspections conducted on. The basis for these results include cursory visual observations with no invasive testing. Fully Financial Analysis: The portion of the Reserve Study where the current status of the reserves (measured as cash or Percent Funded) and a recommended reserve contribution rate (Reserve Funding Plan) are derived, and the projected reserve income and expense over time is presented. Funded: 100% funded. When the actual Reserve Fund Balance is equal to the Fully Funded Balance.

4 Page 5 Fully Funded Balance (FFB): Total Accrued Depreciation. An indicator against which the actual Reserve Fund Balance can be compared. Full Funding Goal: A column on the Summary of Replacement Reserve Needs and Component Inventory pages which shows the Reserve Fund Balance, if funded at 100%. It is calculated by dividing the Reserve Requirement Present Dollars by the Estimated Useful Life and multiplylnq by the Effective Age. Funding Goals: Independent of methodology utilized, the following represent the basic categories of Funding Plan goals. Full Funding: Setting a reserve Funding Goal of attaining and maintaining the Reserve Fund Balance at or near 100% funded. Baseline Funding: Establishing a reserve Funding Goal of keeping the reserve cash balance above zero. Statutory Funding: Establishing a reserve Funding Goal of setting aside the specific minimum amount of reserves required by local statutes. Threshold Funding: Establishing a reserve Funding Goal of keeping the reserve balance above a specified dollar or Percent Funded amount. Depending on the threshold, this may be more or less conservative than Full Funding. Funding Plan: An association's plan to provide income to a reserve fund to offset anticipated expenditures from that fund. Life and Valuation Estimates: The task of estimating useful life, remaining life, and replacement cost for the various reserve Components. Monthly/Annual Reserve Funding Required: A mathematical calculation in which the Beginning Balance is subtracted from the Reserve Requirement Present Dollars, and then divided by the Estimated Remaining Life. The Summary of Replacement Reserve Needs shows the total funding required for each Category and the Component Inventory shows the total for each Component. Notes: The accompanying notes are an integral part of the Component Schedule contained in this report. When reviewing the Component Schedule, please be sure to read all notes pertaining to a particular line item. These provide the most complete explanation of each line item, and will provide any clarifications where necessary. Percent Funded: A ratio of the current Reserve Fund Balance to the Fully Funded Balance, expressed as a percentage. It is calculated by dividing the Beginning Balance by the total amount of the Full Funding Goal and multiplying by 100. Pooling Factor: A factor used to reduce or increase the ongoing cash balance which accumulates in the reserve fund in the Baseline Funding and Threshold Funding analysis. Projected Thirty (30) Year Cash Flow Chart and Graph: This is a projection of the Reserve Fund Balance over the next thirty (30) years. This presentation typically includes the Full

5 Funding January 12,2009 Page 6 and Threshold Funding analyses, along with a projection based on maintaining the current year funding level (if provided) over the thirty (30) year period. Physical Analysis: The portion of the Reserve Study where the Component Inventory, Condition Assessment, and Ufe and Valuation Estimate tasks are performed. Quantity: The quantities shown were calculated from the drawings provided. A cursory review (without measurements) of the as-built construction was performed to compare with the design drawings during the site visit. Other measurements were performed based on common elements that were not included in the drawings and are specified in the notes section of the report. The quantities shown are for budgetary purposes only and, as such, are not intended for material purchasing or replacement bids. Reserve Fund Balance: Also known as reserves, reserve accounts, cash reserves, reserve balance. Actual or projected funds, as of a particular point in time, that the Association has identified for use to defray the future repair or replacement of those major components which the Association is obligated to maintain. It is calculated by taking the Average Annual Contribution for each year and adding it to the previous year's ending balance. Expenditures for each year are then subtracted from this sum to arrive at a new ending balance. Reserve Requirement Present Dollars: Also known as replacement cost or current replacement cost. The cost to replace each Component, calculated by multiplying the Quantity by the Unit Cost. The Summary of Replacement Reserve Needs and Component Inventory pages show the totals for each Category and Component, respectively. Summary of Expenditures by Year: thirty (30) year projection period. A chart showing the scheduled expenditures over the Summary of Replacement Reserve Needs: The page in the report which summarizes the replacement costs for each Category of the Reserve Study. It shows the total dollar amounts and is based on each Component being Fully Funded. Thirty (30) Year Cash Flow Graph: Graph depicting the projected thirty (30) year cash flow analysis. Unit Cost: The replacement cost for each Component broken down by its unit of measurement (example: $1.50 per square foot (SF». Unless specifically noted otherwise, the Unit Costs used in this report are based on the various sources listed in the Bibliography. Year Beginning: Beginning on the effective date of the Reserve Study, this column, in the Projected Thirty (30) Year Cash Flow Chart and Graph, shows the specific years which are analyzed in the cash flow projection. Kipcon Incorporated 2009

6 Page 7 Disclosures In accordance with the Nationa/ Reserve Study Standards of the Community Associations Institute, the following disclosures are provided regarding the preparation of this Reserve Study. General: Kipcon Incorporated is not aware of any involvement with Garrison Green HOA which could result in any actual or perceived conflicts of interest which would influence the preparation of this study. Physical Analysis: The on-site observations which were performed in the preparation of this study were cursory in nature and only included the accessible common and limited common elements. The surfaces of the roofs were not walked and no invasive testing was employed. In addition, some field measurements were taken to confirm or provide quantities within this report. Financial Analysis: Unless specifically noted within this report, Kipcon Incorporated has not utilized any assumptions in regard to interest, inflation, taxes, or any other outside economic factors. Personnel Credentials: This study has been prepared under the direction of Mitchell H. Frumkin, P.E., R.S. A comprehensive curriculum vitae can be provided upon request. Completeness: Kipcon Incorporated is not aware of any material issues, which if not disclosed, would cause a distortion of the Association's situation. Reliance on Client Data: Information provided by the official representative of the Association regarding financial, physical, quantity, or historical issues will be deemed reliable by Kipcon Incorporated. Scope: The Reserve Study will be a reflection of information provided to Kipcon Incorporated and assembled for the Association's use, not for the purpose of performing an audit, quality/forensic analyses, or background checks of historical records. Reserve Balance: The actual or projected total presented in the Reserve Study is based upon the information provided and was not audited. Reserve Projects: Information provided to Kipcon Incorporated about the reserve project will be considered reliable. Anyon-site inspection should not be considered a project audit or quality inspection.

7 PHYSICAL Page 8 ANALYSIS The following pages represent the Physical Analysis portion of the Reserve Study. This analysis is based on the Component Inventory which incorporates a Condition Assessment of each specific component. The Condition Assessment is presented as the Estimated Remaining Life of each Component with the accompanying Notes. Also included is a valuation of the replacement cost for each Component. These costs are derived as outlined within this study. Construction costs and useful life estimates in this report represent the Engineer's best judgment as a professional familiar with the construction industry. It is recognized, however, that neither the Engineer nor the Association has control over the cost of labor, materials. or equipment; over the contractors' methods of determining bid prices; or over competitive bidding, marketing, or negotiating conditions. Further, the Engineer cannot accurately determine the ongoing rate of deterioration, or the amount of preventive maintenance employed on an ongoing basis for determination of estimated useful lives. In all cases, unless stated otherwise, the useful life estimates are based upon visual inspections with no destructive testing employed. Accordingly, the Engineer cannot and does not warrant or represent those bids or negotiated prices, and useful lives will not vary from that presented within the evaluation prepared or agreed to by the Engineer.

8 GarrisonG!HOA proj!o Page 9 Garrison Green HOA Component Schedule Summary of Replacement Reserve Needs Effective Date: January 1, 2009 Category Reserve Requirement Present Dollars Beginning Balance Balance Requiring Funding Annual Reserve Funding Required Full Funding Balance Percent Funded Sitework Totals Waterproofing Totals Exterior Finishes Totals Electrical Totals Spec~IConstruction $737,624 $278,551 $7,000 $15,950 $10,936 $147,339 $56,443 $1,418 $4,040 $3,693 $590,285 $222,109 $5,582 $11,910 $7,243 $32,542 $12,339 $310 $916 $905 $203,597 $77,994 $1,960 $5,583 $5,103 The Percent Funded is based on Full Funding and the Funding Goal is based on Threshold Funding each component within the schedule. Grand Totals $1,050,061 $212,933 $837,128 $47,013 $294,237 72!%

9 Garrison GrIHOA Page proj.o Component Inventory Cateaorv: Sitework Component Quantity Unit Cost Reserve Annual Estimated Requirement Beginning Estimated Reserve Full Funding Remaining Present Balance Useful Life Funding Balance Useful Life Dollars Reauired Notes Asphalt Sealcoating 0 SY $1.64 $0 $0 5 5 $0.00 $0 1 Asphalt Paving Overlay 19,900 SY $14.09 $280,465 $71, $16, $98,163 2 Concrete Sidewalks 11,275 SF $8.40 $94,754 $16, $3, $22,109 3 Concrete Mailbox Pads 125 SF $8.40 $1,050 $ $37.96 $245 4 Retaining Walls 1,716 LF $ $187,044 $23, $4, $32, ' Chainlink Fence (Vinyl) 1,840 LF $11.41 $20,999 $4, $ $5, ' Chainlink Fence (Galvanized) 3,800 LF $10.81 $41,089 $8, $1, $11, ' Chainlink Fence (Vinyl) 3,960 LF $16.47 $65,221 $13, $2, $18, ' Board on Board Privacy Fence 690 LF $24.79 $17,103 $4, $ $5,986 9 Mailboxes 7 EA $1, $8,400 $2, $ $2, Catch Basins and Piping 1 LS $15, $15,000 $2, $ $3, Signage 1 LS $6, $6,500 $1, $ $2, Totals $737,624 $147,339 $32,542 $203,597

10 GarrisonGr'HOA January 12,2009 Page pr~e~o Component Quantity Unit Cost Laminated Shingles Gutters Downspouts Exterior Siding, Soffit & Trim 840 SQ 3,875 LF 4,550 LF 1 LS $ $4.87 $3.47 $15, Component Inventory Cateaory: WaterP100fina Reserve Requirement Beginning Estimated Present Balance Useful Life Dollars $228,900 $18,880 $15,771 $15,000 $46,382 $3,826 $3,196 $3, Estimated Remaining Useful Life Annual Reserve FUnding Renuired $10, $ $ $ Full Funding Balance $64,092 $5,286 $4,416 $4,200 Notes Totals $278,551 $56,443 $12,339 $77,994

11 Garrison G!HOA Project No Page 12 Component Front Porch Railings and Columns Quantity 1 LS Unit Cost Component Inventory Cate-.aorv: Exterior Reserve Requirement Present Dollars Beginning Balance Estimated Useful Life Estimated Remaining Useful Ufe Annual Reserve FUnding Reauired Full Funding Balance $7, $7,000 $1, $ $1, Notes Totals $7,000 $1,418 $310 $1,960

12 GarrisonG.HOA proj.o Page 13 Component Street and Parking Lot Lighting Quantity 22 EA Unit Cost Component Inventory Cateaorv: Electrical Reserve Requirement Present Dollars Beginning Balance Estimated Useful Life Estimated Remaining Useful Ufe Annual Reserve Funding Reauired Full Funding Balance $ $15,950 $4, $ $5, Notes Totals $15,950 $4,040 $916 $5,583

13 Page 14 Component Gazebo Quantity 1 LS Unit Cost Component Inventory Cateaorv: Soecial Construction Reserve Requirement Present Dollars Beginning Balance Estimated Useful Life Estimated Remaining Useful Ufe Annual Reserve Funding Reauired Full Funding Balance $10, $10,936 $3, $ $5, Notes Totals $10,936 $3,693 $905 $5,103

14 Notes Page 15 General Visual observations of the common elements at Garrison Green Homeowners Association were conducted on December 11, The following notes summarize various conditions related to items that have been included in the Component Inventory. Unless otherwise stated, the estimated remaining useful lives shown are based on the age of the components. Numbered 1. The asphalt throughout the community has never been seal coated. The Association requested that the seal coating to be excluded from the reserve study. Typically, to aid in the pavement achievinq its full useful life, the seal coating should be installed two (2) years after the top course of pavement has been installed and then every five (5) years thereafter. Asphalt paved road with centerline cracking 2. The asphalt paving throughout the community is in good/fair condition. There are some alligator cracks beginning to form. The unit cost shown includes an overlay of the pavement and any milling that will be necessary prior to the overlay. The cost also includes a six percent (6%) markup to account for any engineering cost that may be incurred. It is recommended that any open cracks be slurry sealed prior to the freeze thaw conditions of winter to prevent deterioration. Kipcon Incorporated 2009

15 Page 16 Asphalt paved road with centerline cracking 3. The concrete sidewalks throughout the community are in good condition. There are no signs of damage or cracking. Concrete sidewalks 4. The concrete mailbox pads located throughout the community were in good condition at the time of our site visit. Kipcon Incorporated 2009

16 Page 17 Mailbox pad 5. There are retaining walls located throughout the community that vary in height. The retaining walls are in good condition. The unit cost shown is based on an average height of the retaining walls. The average height of the retaining walls is roughly four feet three inches (4' 3"). Retaining walls 6. The four foot (4') vinyl coated chain link fence installed in various locations throughout the community is in good condition.

17 Page 18 4' vinyl coated chainlink fencing 7. The four foot (4') galvanized chain link perimeter fence is overgrown in many locations throughout the site. Some of the fencing runs through woods and may deteriorate from the overgrowing vegetation over time. Overall the fencing is in fair condition. 4' galvanized chainlink fencing 8. Overall, the six foot (6') vinyl coated chainlink fence is in good/fair condition. Most areas are in good condition but the fencing close to the wooded areas has some sections that are collapsing due to the vegetation growth on the fencing. Kipcon Incorporated 2009

18 Page 19 6' vinyl coated chainlink fencing 9. The six foot (6') privacy fencing located in-between the units on the decks is in good condition. The homeowners are responsible for maintaining the fencing; however the Association is responsible for replacing it. ----_._.~,--'-'---,----~~"' , ~ 6' Privacy fencing 10. The mailbox stations located throughout the community are in good condition. A few of the stations are beginning to rust and are in need of painting to prevent further damage to the mailbox posts. The cost is based on similar style mailboxes from previous reserve schedules. Kipcon Incorporated 2009

19 Page 20 Mailbox stations 11. The catch basins and piping were asked to be included in the reserve study by the association. The lump sum cost shown will provide the Association with the funds needed to replace any damaged basins or piping on an as-need basis. The cost was provided by the Association. Catch Basins 12. The lump sum cost shown provides the Association with the funds needed to replace any signage throughout the community on an as-need basis. The cost shown represents the removal and replacement of the metal signs and posts throughout the community and RS. Means cost estimating guides were used.

20 Page 21 Signage 13. The laminated shingles located throughout the community was in good condition. The unit cost for the roof replacement includes the removal and replacement of the fiberglass shingles. It does not include replacement of any roof sheathing, flashing, etc. The cost also includes a six percent (6%) markup in order to account for any engineering costs which may be incurred during the roofing replacement. The quantity shown is for the replacement of the roofing for all of the town home units at the site. 14. The gutters and downspouts throughout the community are in good condition and functioning properly. The estimated remaining useful life is based on replacing the gutters and downspouts at the time of the roof replacement.

21 Page 22 The gutters and downspouts 15. The lump sum cost shown provides the Association with the funds needed to replace the vinyl siding, soffit and aluminum trim on an as-need basis. The siding, soffit and trim were in good condition at the time of the inspection. The lump sum cost was provided by the Association. The vinyl siding, soffit and aluminum trim 16. Some of the units in the community had vinyl railings on the front porch and other units had metal railings. The Association is responsible for the railings and requested that these be included in the reserve schedule. The lump sum cost shown was provided by the Association and will provide the Association with the funds needed to replace the railings on an as-need basis.

22 Page 23 Porch railings 17. The street and parking lot lighting throughout the community was in good condition. Street and parking lighting 18. The Gazebo constructed out of wood was in good condition at the time of the inspection. The lump sum cost provides the Association with the funding needed to repair/replace the Gazebo. Kipcon Incorporated 2009

23 Page 24 The gazebo Kipcon Incorporated 2009

24 Page 25 Introduction FINANCIAL ANALYSIS The chart and graph (pages 27 and 28) contain a Projected Thirty (30) Year Cash Flow of the reserve requirements for Garrison Green HOA. This analysis contains three (3) funding scenarios. The first, entitled Full Funding, is based on the assumption that all of the items which make up the schedule are fully funded. By this, we mean that each item will accumulate its full replacement cost during its Estimated Remaining Ufe. At the end of this period (which varies for each reserve component), the item would be replaced and the funding cycle would start again. By using a Full Funding analysis, the reserve fund accumulates an ongoing cash balance. This is due to the fact that each Component of the fund has a different Estimated Useful Ufe and a different replacement value. The second funding analysis entitled Threshold Funding is based on keeping the Reserve Fund Balance above a specified dollar or percent funding amount. The Association requested ten percent (10%) of the total for the threshold amount. The third funding scenario represents a continuation of the Association's current contribution amount for the duration of the projection period. It is based on the Beginning Balance provided by Mr. Muhammed Williams, Mid-Atlantic Management, and the calculated expenditures Because expenditures vary from year to year, the Annual Contribution to the reserves changes over the projection period. Since it is impractical to expect the Association to adjust the amount of its contribution to the reserve fund on a yearly basis, our cash flow analysis is based on an average contribution amount (designated Average Annual Contribution) for the Full Funding scenario and an Annual Contribution for the Threshold Funding scenario in the chart contained on page 27. Based on calculating the average over the thirty (30) year reserve schedule, one amount was obtained. In the case of Garrison Green HOA, the following data was calculated: 1. The Annual Contribution for the year beginning 2009 would be $47,013. This amount is taken directly from the Summary of Replacement Reserve Needs page contained in this report, and is the number used in the cash flow projection. 2. Projections of the Annual Contribution amount for Years 2010 through 2038 also are shown. These vary from year to year but, generally increase until 2021 and then decrease to an amount of $42,072 in the final year of the projection. 3. The Average Annual Contribution for the thirty (30) years of the analysis is $44,739. This is based on calculating the total amount of the Annual Contribution column for Years 1 through 30, and averaging it. The Average Annual Contribution amounts for the remainder of the projection period (based on the thirty (30) year reserve schedule) are also shown on the chart on page The Annual Contribution for the thirty (30) year time frame when applying Threshold Funding is $36,355. Threshold Funding in the case of Garrison Green HOA is 81.26% of Fully Funding the reserve schedule. If the Association implements Threshold Funding, it is imperative that the Reserve Study be updated regularly to minimize

25 Page 26 the danger of creating a deficit in the reserve fund. The Annual Contribution amounts for the remainder of the projection period (based on the thirty (30) year reserve schedule) is also shown on the chart on page 27. On the Projected Thirty (30) Year Cash Flow chart on page 27, the column entitled Reserve Fund Balance shows the projected reserve fund amounts over the thirty (30) year period using the Fully Funded analysis. This cash balance is also represented by the upper line on the Cash Flow Graph (see page 28) which is designated as the Reserve Fund Balance - Full Funding. This is calculated by taking the amount that is currently contained in the reserve fund, adding to it the Average Annual Contribution, and subtracting from it the Annual Expenditure, if any. The column entitled ReseNe Fund Balance - Threshold Funding shows the projected reserve fund amounts over the thirty (30) year period using a Threshold Funding goal. The reduced funding goal is shown below the column heading. The Reserve Fund Balance - Threshold Funding is represented by the second line on the Cash Flow Graph and is calculated in the same manner as the Reserve Fund Balance - Full Funding, except that the Annual Contribution is used instead of the Average Annual Contribution. Following the Cash Flow Chart and Graph are various charts which summarize the expenditures that are anticipated over the projection period. Kipcon Incorporated 2009

26 GarrisonG.HOA proj.o Page 27 Year Beginning FULL FUNDING ANALYSIS Average Annual Annual Contribution C An~bual. ontn unon Expenditure Garrison Green HOA Reserve Study Funding Plan Projected Thirty Year Cash Flow Effective Date: January Reserve Fund Balance 2008 Beainnina Balance $212, $ $44,739 $0 $257, $47,042 $44,739 $0 $302, $ $44,739 $0 $347, $47,126 $44,739 $0 $391, $47,189 $44,739 $0 $436, $47,283 $44,739 $0 $481, $47,442 $44,739 $0 $526, $47,838 $44,739 $ $559, $47,176 $44,739 $0 $604, $47,363 $44,739 $0 $649, $47,679 $44,739 $0 $694, $48,316 $44,739 $0 $738, $50,209 $44,739 $328,417 $455, $43,441 $44,739 $0 $499, $43,455 $44,739 $0 $544, $43,501 $44,739 $0 $589, $43,621 $44,739 $0 $634, $43,998 $44,739 $412,859 $266, $42,161 $44,739 $0 $310, $42,160 $44,739 $0 $355, $42,164 $44,739 $0 $400, $42,178 $44,739 $0 $444, $42,226 $44,739 $121,740 $367, $ $44,739 $0 $412, $42,071 $44,739 $0 $457, $42,071 $44,739 $0 $502, $42,071 $44,739 $0 $546, $42,071 $44,739 $0 $591, $42,071 $44,739 $0 $636, $42,072 $44,739 $0 $681,140 TOTAL $1,342,159 $1,342,159 - CURRENT FUNDING ANALYSIS Annual Contribution Reserve Fund Balance $25,600 $212,933 $25,600 $238,533 $25,600 $264,133 $25,600 $289,733 $25,600 $315,333 $25,600 $340,933 $25,600 $366,533 $25,600 $392,133 $25,600 $406,797 $25,600 $432,397 $25,600 $457,997 $25,600 $483,597 $25,600 $509,197 $25,600 $206,380 $25,600 $231,980 $25,600 $257,580 $25,600 $283,180 $25,600 $308,780 $25,600 -$78,480 $25,600 -$52,880 $25,600 -$27,280 $25,600 -$1,680 $25,600 $23,920 $25,600 -$72,220 $25,600 -$46,620 $25,600 -$21,020 $25,600 $4,580 $25,600 $30,180 $25,600 $55,780 $25,600 $81,380 $25,600 $106,980 $768,000 THRESHOLD FUNDING ANALYSIS Annual Contribution Reserve Fund Balance Pooling Factor 81.26% $212,933 $36,355 $249,288 $36,355 $285,644 $36,355 $321,999 $36,355 $358,355 $36,355 $394,710 $36,355 $431,066 $36,355 $467,421 $36,355 $492,841 $36,355 $529,196 $36,355 $565,551 $36,355 $601,907 $36,355 $638,262 $36,355 $346,200 $36,355 $382,556 $36,355 $418,911 $36,355 $455,267 $36,355 $491,622 $36,355 $115,118 $36,355 $151,473 $36,355 $187,829 $36,355 $224,184 $36,355 $260,540 $36,355 $175,155 $36,355 $211,510 $36,355 $247,866 $36,355 $284,221 $36,355 $320,577 $36,355 $356,932 $36,355 $393,288 $36,355 $429,643 $1,090,663

27 Page 28 Garrison Green HOA Projected 30 Year Cash Flow Analysis $800,000 I I $700, I -en $600, $500,000 I :/" ~---\~---~- I Co $400, /' =---' H /' --+ /" I - o e. $300,000 I /~~ \ ~ $ I... \ \ ;/ '\;/ I (), ~- - Reserve Fund Balance Full Funding Current Reserve Fund Balance $100, $100.0:~ J I I I I ' I I I I I I I,, I,, ~ '~' I, I' \...-1 Reserve Fund Balance Threshold Funding 1 -$200,000 I I C'b ~~ ~'l, ~~ ~<o ~'b ~ a,'l, ~ ~ ~ ~~ ~'l, ~~ ~<o ~'b 'l,~ ~ ~ 'l,(;) 'l,(;) 'l,(;) 'l,~ ~ 'l,~ ~ ~ 'l,~ 'l,~ 'l,~ ~ ~ Years

28 ~ GarrisonG!HOA Project No Page 29 Garrison Green HOA Reserve Study Funding Plan Summary of Expenditures by Year Category Expenditures by Year (Present Dollars) Sitework Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $312,467 $0 $0 Waterproofing Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interior Finishes Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Exterior Finishes Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Electrical Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $15,950 $0 $0 Special Construction Totals $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0 Mechanical Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Grand Totals $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $328,417 $0 $0 Category Sitework Totals Waterproofing Totals Interior Finishes Totals Exterior Finishes Totals Electrical Totals Special Construction Totals Mechanical Totals Expenditures by Year (Present Dollars) $0 $0 $127,308 $0 $0 $0 $0 $110,804 $0 $0 $0 $0 $0 $0 $0 $0 $0 $278,551 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Totals $550,580 $278,551 $0 $7,000 $15,950 $21,872 $0 Grand Totals $0 $0 $412,859 $0 $0 $0 $0 $121,740 $0 $0 $0 $0 $0 $0 $0 $873,953

29 Garnson Green HOA Project No Page 30 Category: Sitework Component EXDenditures bv Year (Present Dollarsl AsphaltSealcoating $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 AsphaltPavingOverlay $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $280,465 $0 $0 Concrete Sidewalks $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Concrete Mailbox Pads $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Retaining Walls $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4' Chainlink Fence (Vinyl) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4' Chainlink Fence (Galvanized) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6' Chainlink Fence (Vinyl) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6' Boardon BoardPrivacy Fence $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $17,103 $0 $0 Mailboxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $8,400 $0 $0 Catch Basins and Piping $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Signage $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $6,500 $0 $0 Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $312,467 $0 $0

30 Garrison G!HOA Project No January 12,2009 Page 31 Category: Sitework (Continued) Component Expenditures by Year (Present Dollars) Asphalt Sealcoating $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Asphalt Paving Overlay $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Concrete Sidewalks $0 $0 $0 $0 $0 $0 $0 $94,754 $0 $0 $0 $0 $0 $0 $0 Concrete Mailbox Pads $0 $0 $0 $0 $0 $0 $0 $1.050 $0 $0 $0 $0 $0 $0 $0 Retaining Walls $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4' Chainlink Fence (Vinyl) $0 $0 $20,999 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4' Chainlink Fence (Galvanized) $0 $0 $41,089 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6' Chain link Fence (Vinyl) $0 $0 $65,221 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6' Board on Board Privacy Fence $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Mailboxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Catch Basins and Piping $0 $0 $0 $0 $0 $0 $0 $15,000 $0 $0 $0 $0 $0 $0 $0 Signage $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Totals $0 $0 $127,308 $0 $0 $0 $0 $110,804 $0 $0 $0 $0 $0 $0 $0

31 Page 32 Category: Waterproofing Component Expenditures by Year (Present Dollars) Laminated Shingles $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Gutters $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Downspouts $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Exterior Siding, Soffit & Trim $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0,Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

32 Garnson Green HOA Project No Page 33 Category: Waterproofing (Continued) Component Expenditures by Year (Present Dollars) Laminated Shingles $0 $0 $228,900 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Gutters $0 $0 $18,880 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Downspouts $0 $0 $15,771 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Exterior Siding, Soffit & Trim $0 $0 $15,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Totals $0 $0 $278,551 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

33 Page 34 Category: Exterior Finishes Expenditures bv Year (Present Dollars) Component Front Porch Railings and Columns $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ITotals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

34 Garrison Green HOA proj!oo Page 35 Category: Exterior Finishes (Continued) Expenditures by Year (Present Dollars) Component Front Porch Railings and Columns $0 $0 $7,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Totals $0 $0 $7,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

35 Garrison G!HOA proj~o Page 36 Category: Electrical Expenditures by Year (Present Oollans) Component Street and Parking Lot Lighting $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $15,950 $0 $0 [Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $15,950 $0 $0

36 GarrisonG.HOA proj.o Page 37 Category: Electrical (Continued) Expenditures by Year (Present Dollars) Component Street and Parking Lot Lighting $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Totals $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

37 GarrisonG.HOA proj.o Page 38 Category: Special Construction EXDenditures bv Year (Present Dollarsl Component Gazebo $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0 ITotals $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0

38 GarrisonG.HOA proj.o Page 39 Category: Special Construction (Continued) EXDenditures bv Year (Present Dollars) Component Gazebo $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0 Totals $0 $0 $0 $0 $0 $0 $0 $10,936 $0 $0 $0 $0 $0 $0 $0

39 RESERVE Page 40 STUDY RECOMMENDATIONS AND CONCLUSIONS After reviewing both the Physical and Financial Analyses prepared for the Garrison Green HOA, we recommend the following: 1. The amount of $36,355 per year (calculated by averaging Years 1 through 30 in the cash flow projection) should be allocated to the reserve fund in each of the next two (2) years. This recommended amount is $10,755 more than the Association is currently contributing. The increased funding amount is likely due to the fact that this is the first reserve schedule for Garrison Green HOA. If the Association implements Threshold Funding, it is imperative that the Reserve Study be updated regularly to minimize the danger of creating a deficit in the reserve fund. Following proper maintenance plans to extend the estimated useful lives of the various components should be implemented. Please contact us if you would like additional recommendations on alternative ways to allocate your funds to reach the recommended goal. 2. The Reserve Study should be updated in two (2) years in order to provide the Association with a current assessment of the status of its reserve fund. 3. The Board of should review each line item in the Component Inventory Schedule to make sure that no overlap exists between what is indicated in the Schedule and any other portion of the budget. For example, we may show the replacement of fencing on the Component Inventory Schedule, but at the same time, the Association may be replacing the fencing from its operating budget. If such duplication exists, the item should either be removed from the Component Inventory or the operating budget. It should not be funded in two (2) different locations. Such duplication affects the overall budget. 4. The Components of the Reserve Study also should be reviewed to ensure that their replacement is not covered elsewhere under a maintenance contract. An example would be reserving funds for the replacement of lawn sprinkler components, while at the same time the Association has a maintenance contract for that item. Therefore, carefully review the Component Inventory to discover any such duplication. 5. The Board of should review the items on the Component Inventory to be sure that they are all the Association's responsibility. As an example: if we have included street lights but, at the same time, the local utility company or municipality is responsible for the maintenance and repair of the lights, the lights should be removed from the Component Inventory. 6. Carefully review the individual components on the Component Inventory to determine if several smaller, individual components can be consolidated into one (1) line item that can be continuously funded. For example: if there are five (5) or six (6) components with a total replacement cost of $1,000 each, the Association may want to consider funding all six (6) components under one (1) line item fora total of $1,000 rather than reserving the full $5,000 or $6,000 dollars for all of these items. Should one (1) of these six (6) items ever have to be replaced, that $1,000 line item would have to be brought current within a year or so after its expenditure. By doing this, rather than funding the full $6,000, only a

40 portion Page 41 of the total would be funded. This approach would allow the Association to reduce their Annual Contribution to the reserve fund. 7. The Board of should review the Component Inventory and the Operating Budget to decide if any line item of less than a given amount will be funded directly through the Operating Budget rather than through the Component Inventory. If this is the case, any item with the given value or less should be removed and the Component Inventory footnoted accordingly. In conclusion, we feel that the existing conditions at Garrison Green HOA are accurately represented within this report. Remember, costs and useful lives fluctuate due to variables such as overall economic conditions, conditions within the construction industry, unanticipated severe weather, and the amount of ongoing maintenance performed. To ensure that proper funding levels are maintained, implement an updating policy such as the one outlined within this report. It also should be kept in mind that this report is prepared for budgetary purposes only. In most cases, bids solicited for replacement of any of the components will not match the costs shown in the Component Inventory. The costs contained within this report are obtained from the sources listed and are based on the replacement of the existing components with components of similar quality. Specific notes in this regard may be contained within this report. Kipcon Incorporated 2009

41 GLOSSARY Page 42 OF ABBREVIATIONS Abbreviation Definition Abbreviation Definition Avg. B.F. BitiBitum. Bldg. Brk. Calc. C.C.F. C.F. C.L.F. Col. Cone. Cont. C.S.F. Cu. Ft. C.Y. DHW Diam. Ea. Est. Ext. Fig. Fin. Fixt. FIr. FRP Ft. Galv. Ht. Htrs. HVAC HW In. Int. Inst. Insul. lb. L.F. Average Board Feet Bituminous Building Brick Calculated Hundred Cubic Feet Cubic Feet Hundred Lineal Feet Column Concrete Continuous, Continued Hundred Square Feet Cubic Feet Cubic Yard Domestic Hot Water Diameter Each Estimated Exterior Figure Finished Fixture Floor Fiberglass Reinforced Plastic Foot, Feet Galvanized Height Heaters Heating, Ventilation and AC Hot Water Inch Interior Installation Insulation Pound Lineal Feet Lg. L.S. Maint. Mat., Mat'!. Max. MBF M.C.F. Min. Misc. M.L.F. M.S.F M.S.Y. NA No. O.C. P.E. Ply. Pr. PVC Pvmt. Quan., Qty. R.C.P. Reinf. Req'd Sch., Sched. S.F. Sq. Std. S.Y. Sys. T&G Th., Thk. Tot. Unfin. V.C.T. Vent. Yd. Long, Length Lump Sum Maintenance Material Maximum Thousand Board Feet Thousand Cubic Feet Minimum Miscellaneous Thousand Lineal Feet Thousand Square Feet Thousand Square Yards Not Available/Applicable Number On Center Professional Engineer Plywood Pair Polyvinyl Chloride Pavement Quantity Reinforced Concrete Pipe Reinforced Required Schedule Square Feet Square Standard Square Yards System Tongue and Groove Thick Total Unfinished Vinyl Composition Tile Ventilator Yard Kipcon Incorporated 2009

42 BIBLIOGRAPHY Page 43 1) A Complete Guide to Reserve Funding & Reserve Investment Strategies Edited by Mitchell H. Frumkin, P.E., MBA, and Christopher J. Juall Community Associations Institute Fifth Edition ) National Reserve Study Standards By the Community Associations Institute Dated ) Common Interest Realty Association Audit and Accounting Guide By the American Institute of Certified Public Accountants Dated ) 4) Life Cycle Cost Analysis By the American Institute of Architects Dated 1977 Means Open Shop Building Construction Cost Data By RS. Means Company, Inc. Dated ) Means Site Work and Landscaping Cost Data By RS. Means Company, Inc. Dated ) Means Mechanical Cost Data By R S. Means Company, Inc. Dated ) Means Electrical Cost Data By R S. Means Company, Inc. Dated 2008 Kipcon Incorporated 2009