REPLACEMENT RESERVE REPORT FY 2017 TOWNE SQUARE MASTER ASSOCIATION

Transcription

1 REPLACEMENT RESERVE REPORT FY 2017 TOWNE SQUARE MASTER ASSOCIATION REPLACEMENT RESERVE REPORT FY 2017 TOWNE SQUARE MASTER ASSOCIATION Community Management by: PROPERTY MANAGEMENT ASSOCIATES Sharon Grozich 460 Pembroke Lake Circle, Suite 302 Virginia Beach, VA Consultant: 929 West Street, Suite 310 Annapolis, MD MillerDodson.com

2 INTENTIONALLY LEFT BLANK

3 Section A Replacement Reserve Analysis REPLACEMENT RESERVE REPORT TOWNE SQUARE MASTER ASSOCIATION VIRGINIA BEACH, VIRGINIA Revised October 2, 2016 Executive Summary - A1 General Information - A2 Current Funding - A3 Cash Flow Method Funding - A4 Inflation Adjusted Funding - A Comments - A6 Section B Replacement Reserve Inventory Replacement Reserve Inventory General information - B1 Replacement Reserve Inventory Comments - B2 Schedule of Projected Replacements and Exclusions - B3 Description. Towne Square is a master association located in Virginia Beach, Virginia. Towne Square is comprised of several sub-associations that have been constructed from The Master Association consists of common elements for the site and amenities such as the Club House, tot lot, and swimming pool. The survey examined the common elements of the property, including: Asphalt drives and parking. Concrete sidewalks, curb, and gutter. Brick monuments and walls, signage, fencing, and railings. Playground swimming pool and community building. Storm water management system and lakes. Building exteriors and common interior areas for the Club House. Level of Service. This study has been performed as a Level 2 Update with Site Visit/On-Site Review as defined under the National Reserve Study Standards that have been adopted by the Community Associations Institute. As such, the component inventory is based on the study that was performed in 2011 by Miller - Dodson Associates. The inventory was adjusted to reflect changes as provided by the Community Manager or adjustments were made based on the site visit and visual inspection performed by the Analyst. The included fund status and funding plan have been developed from analysis of the adjusted inventory. Section C Projected Annual Replacements Projected Annual Replacements General Information - C1 Calendar of Projected Annual Replacements - C2 Section D Condition Assessment Appendix Accounting Summary - CF1 Component Method - CM1 Overview, Standard Terms, and Definitions Video Answers to Frequently Asked Questions

4 To aid in the understanding of this report and its concepts and practices, on our web site, we have developed videos addressing frequently asked topics. In addition, there are posted links covering a variety of subjects under the resources page of our web site at mdareserves.com. Purpose. The purpose of this Replacement Reserve Study is to provide Towne Square (hereinafter called the Association) with an inventory of the common community facilities and infrastructure components that require periodic replacement. The Study includes a general view of the condition of these items and an effective financial plan to fund projected periodic replacements. Inventory of Items Owned by the Association. Section B lists the Projected Replacements of the commonly owned items that require periodic replacement using funding from Replacement Reserves. The Replacement Reserve Inventory also provides information about excluded items, which are items whose replacements are not scheduled for funding from Replacement Reserves. Condition of Items Owned by the Association. Section B includes our estimates of the normal economic life and the remaining economic life for the projected replacements. Section C provides a year-by-year listing of the projected replacements. Section D provides additional detail for items that are unique or deserving of attention because of their condition or the manner in which they have been treated in this study. Financial Plan. The Association has a fiduciary responsibility to protect the appearance, value, and safety of the property and it is therefore essential the Association have a financial plan that provides funding for the projected replacements. In conformance with American Institute of Certified Public Accountant guidelines, Section A, Replacement Reserve Analysis evaluates the current funding of Replacement Reserves as reported by the Association and recommends annual funding of Replacement Reserves by the Cash Flow Method. Section A, Replacement Reserve Analysis includes graphic and tabular presentations of the Association s current funding and the recommended funding based on the Cash Flow Method. An Executive Summary of these calculations is provided on Page A1. The alternative Component Method of funding is provided in the Appendix. Basis. The data contained in this Replacement Reserve Study is based upon the following: The Request for Proposal submitted and executed by the Association. Miller - Dodson performed a visual evaluation on 24 June 2016 to determine a remaining useful life and replacement cost for the commonly owned elements of this facility. This study contains additional recommendations to address inflation for the Cash Flow Method only. For this recommendation, Miller - Dodson uses the Producers Price Index (PPI), which gauges inflation in manufacturing and construction. Please see page A for further details. To-Scale Drawings. Site and building plans were not used in the development of this study update. The following documents and drawings were provided by the property manager for review by Miller - Dodson Associates, Inc. in conjunction with the preparation of the original Level 1 Replacement Reserve Study done in 2011; Untitled Irrigation Drawings, dated 29 December 2008 Approved Construction Drawings. Towne Square Pump House, dated /31/2002, by Jeff Love & Associates, Inc., 12 Church Street, NE Suite 200, Vienna, VA Approved Construction Drawings. Towne Square Club House, dated 9/31/2002, by The TAF Group, Inc., 100 Landmark Square, Virginia, VA Approved Construction Drawings. Towne Square Amenities, dated December 2001, by The TAF Group, Inc., 100 Landmark Square, Virginia, VA Approved Construction Site Plans. Site Plan for Park Place Parcel A by Hassell & Folkes, PC and dated May 2002.

5 Approved Construction Site Plans. Site Plan for Park Place Parcel C by Hasselll & Folkes, PC dated June We recommend the Association assemble and maintain a library of site and building plans of the entire facility. Record drawings should be scanned into an electronic format for safe storage and ease of distribution. Upon request for a nominal fee, Miller - Dodson can provide scanning services. Current Funding. This reserve study has been prepared for Fiscal Year 2017 covering the period from January 1, 2017 to December 31, The Replacement Reserves on deposit as of January 1, 2017 are projected to be $308, The planned contribution for the fiscal year is $10, The balance and contribution figures have been supplied by the managing agent and confirmation or audit of these figures is beyond the scope of the study. For the purposes of this study, it is assumed that the annual contribution will be deposited at the end of each month. Acknowledgement. Miller - Dodson Associates would like to acknowledge the assistance and input of the Community Manager, Ms. Sharon Grozich who provided very helpful insight into the current operations of the property. Analyst s Credentials. Mr. Philip Pointon holds a Bachelors Degree in Architecture from Virginia Polytechnic Institute and State University and a Masters Degree from Old Dominion University in Engineering Management and is a graduate of the Army Management Staff College. He has been a Registered Professional Architect in the States of Virginia and Hawaii since 1990 and has served in many design, management, and construction capacities as an architect since Mr. Pointon is a Reserve Specialist as accredited by the Community Association Institute for Miller - Dodson Associates. Respectfully submitted, Philip Pointon, Architect, RS, LEED AP Reserve Specialist

6 INTENTIONALLY LEFT BLANK

7 Replacement Reserve Analysis - Page A1 EXECUTIVE SUMMARY The Towne Square Master Association Replacement Reserve Analysis uses the Cash Flow Method (CFM) to calculate Replacement Reserve funding for the periodic replacement of the 130 Projected Replacements identified in the Replacement Reserve Inventory. $107,684 RECOMMENDED REPLACEMENT RESERVE FUNDING FOR THE STUDY YEAR, 2017 We recommend the Association adopt a Replacement Reserve Funding Plan based on the annual funding recommendation above. Inflation adjusted funding for subsequent years is shown on Page A. Towne Square Master Association reports a Starting Balance of $308,92 and Annual Funding totaling $10,200. Current funding is adequate to fund the $4,244,142 of Projected Replacements scheduled in the Replacement Reserve Inventory over the 40-year Study Period. See Page A3 for a more detailed evaluation. #1 - Cumulative Replacement Reserve Funding and Expenditures Graph $7,000,000 Cash Flow Method - Cumulative Receipts 10/2/16 Added starting balance and current contribution Current Funding - Cumulative Receipts Projected Replacements - Cumulative Expenditures 6,316,92 $6,000,000 $,000,000 4,34,142 $4,000,000 $4,244,142 $3,000,000 $2,000,000 $1,000,000 $ The Current Funding Objective as calculated by the Component Method (Fully Funded) is $938,190 making the reserve account 32.9% funded. See the Appendix for more information on this method. 10/2/16. Added starting balance and current contribution.

8 Replacement Reserve Analysis - Page A2 REPLACEMENT RESERVE ANALYSIS - GENERAL INFORMATION The Towne Square Master Association Replacement Reserve Analysis calculations of recommended funding of Replacement Reserves by the Cash Flow Method and the evaluation of the Current Funding are based upon the same Study Year, Study Period, Beginning Balance, Replacement Reserve Inventory and Level of Service STUDY YEAR The Association reports that their accounting year begins on January 1, and the Study Year, the first year evaluated by the Replacement Reserve Analysis, begins on January 1, Years STUDY PERIOD The Replacement Reserve Analysis evaluates the funding of Replacement Reserves over a 40-year Study Period. $308,92 STARTING BALANCE The Association reports Replacement Reserves on Deposit totaling $308,92 at the start of the Study Year. Level Two LEVEL OF SERVICE The Replacement Reserve Inventory has been developed in compliance with the National Reserve Study Standards for a Level Two Study, as defined by the Community Associations Institute (CAI). $4,244,142 REPLACEMENT RESERVE INVENTORY - PROJECTED REPLACEMENTS The Towne Square Master Association Replacement Reserve Inventory identifies 130 items that will require periodic replacement, that are to be funded from Replacement Reserves. We estimate the cost of these replacements will be $4,244,142 over the 40-year Study Period. The Projected Replacements are divided into 14 major categories starting on Page B3. Pages B1-B2 provide detailed information on the Replacement Reserve Inventory. #2 - Annual Expenditures for Projected Replacements Graph This graph shows annual expenditures for Projected Replacements over the 40-year Study Period. The red line shows the average annual expenditure of $106,104. Section C provides a year by year Calender of these expenditures. $00,000 $427,64 $400,000 $300,000 $341,96 $266,081 $294,911 $200,000 $100,000 $0 $106, year Average $9,8 $17,143 $46,877 $62,440 $4,948 $4,83 $19,100 $168,863 $33,360 $181,79 $44,000 $19,400 $140,61 $19,390 $166,419 $11,469 $141,464 $100,418 $90,48 $81,606 $38,336 $1,90 $198,797 $10,600 $87,178 $19,9 $137,029 $84,998 $1,0 $71,830 $63,148 $60,13 $2,400 $7,730 $127,660 $187,

9 Replacement Reserve Analysis - Page A3 UPDATING UPDATING OF THE FUNDING PLAN The Association has a responsibility to review the Funding Plan annually. The review should include a comparison and evaluation of actual reserve funding with recommended levels shown on Page A4 and A. The Projected Replacements listed on Page C2 should be compared with any replacements accomplished and funded from Replacement Reserves. Discrepancies should be evaluated and if necessary, the Reserve Study should be updated or a new study commissioned. We recommend annual increases in replacement reserve funding to account for the impact of inflation. Inflation Adjusted Funding is discussed on Page A. UPDATING OF THE REPLACEMENT RESERVE STUDY At a minimum, the Replacement Reserve Study should be professionally updated every three to five years or after completion of a major replacement project. Updating should also be considered if during the annual review of the Funding Plan, discrepancies are noted between projected and actual reserve funding or replacement costs. Updating may also be necessary if there is a meaningful discrepancy between the actual inflation rate and the inflation rate used for the Inflation Adjusted Funding of Replacement Reserves on Page A. ANNUAL EXPENDITURES AND CURRENT FUNDING The annual expenditures that comprise the $4,244,142 of Projected Expenditures over the 40-year Study Period and the impact of the Association continuing to fund Replacement Reserves at the current level are detailed in Table 3. #3 - Table of Annual Expenditures and Current Funding Data - Years 1 through 40 Year Starting Balance $308,92 Projected Replacements ($9,8) ($17,143) ($46,877) ($62,440) ($4,948) ($4,83) ($19,100) ($168,863) ($33,360) ($181,79) Annual Deposit $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 End of Year Balance $449,270 $82,327 $68,60 $773,410 $868,662 $973,027 $1,104,127 $1,08,46 $1,202,30 $1,170,709 Cumulative Expenditures ($9,8) ($26,998) ($73,87) ($136,31) ($191,263) ($237,098) ($26,198) ($42,060) ($48,420) ($640,216) Cumulative Receipts $49,12 $609,32 $79,2 $909,72 $1,09,92 $1,210,12 $1,360,32 $1,10,2 $1,660,72 $1,810,92 Year Projected Replacements ($427,64) ($44,000) ($19,400) ($140,61) ($19,390) ($166,419) ($341,96) ($11,469) ($141,464) ($266,081) Annual Deposit $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 End of Year Balance $893,34 $999,4 $1,130,34 $1,139,930 $1,270,740 $1,24,21 $1,062,76 $1,097,496 $1,106,232 $990,31 Cumulative Expenditures ($1,067,780) ($1,111,780) ($1,131,180) ($1,271,79) ($1,291,18) ($1,47,603) ($1,799,60) ($1,91,029) ($2,06,493) ($2,322,73) Cumulative Receipts $1,961,12 $2,111,32 $2,261,2 $2,411,72 $2,61,92 $2,712,12 $2,862,32 $3,012,2 $3,162,72 $3,312,92 Year Projected Replacements ($100,418) ($90,48) ($81,606) ($38,336) ($1,90) ($198,797) ($10,600) ($294,911) ($87,178) ($19,9) Annual Deposit $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 End of Year Balance $1,040,133 $1,099,849 $1,168,442 $1,280,306 $1,414,916 $1,366,320 $1,0,920 $1,361,209 $1,424,231 $1,414,837 Cumulative Expenditures ($2,422,991) ($2,13,476) ($2,9,082) ($2,633,418) ($2,649,008) ($2,847,80) ($2,88,40) ($3,13,31) ($3,240,493) ($3,400,088) Cumulative Receipts $3,463,12 $3,613,32 $3,763,2 $3,913,72 $4,063,92 $4,214,12 $4,364,32 $4,14,2 $4,664,72 $4,814,92 Year Projected Replacements ($137,029) ($84,998) ($1,0) ($71,830) ($63,148) ($60,13) ($2,400) ($7,730) ($127,660) ($187,619) Annual Deposit $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 $10,200 End of Year Balance $1,428,007 $1,493,209 $1,91,904 $1,670,27 $1,77,327 $1,847,392 $1,99,192 $2,087,662 $2,110,202 $2,072,782 Cumulative Expenditures ($3,37,117) ($3,622,11) ($3,673,620) ($3,74,40) ($3,808,98) ($3,868,733) ($3,871,133) ($3,928,863) ($4,06,23) ($4,244,142) Cumulative Receipts $4,96,12 $,11,32 $,26,2 $,41,72 $,6,92 $,716,12 $,866,32 $6,016,2 $6,166,72 $6,316,92 EVALUATION OF CURRENT FUNDING The evaluation of Current Funding (Starting Balance of $308,92 & annual funding of $10,200), is done in today's dollars with no adjustments for inflation or interest earned on Replacement Reserves. The evaluation assumes Replacement Reserves will only be used for the 130 Projected Replacements identified in the Replacement Reserve Inventory and that the Association will continue Annual Funding of $10,200 throughout the 40-year Study Period. Annual Funding of $10,200 is approximately 139 percent of the $107,684 recommended Annual Funding calculated by the Cash Flow Method for 2017, the Study Year. Evaluation of the 130 Projected Replacements calculates an average annual expenditure over the next 40 years of $106,104. Annual funding of $10,200 is 142 percent of the average annual expenditure. In summary, Current Funding as reported by the Association and outlined above provides timely and adequate funding for the $4,244,142 of Projected Replacements scheduled in the Replacement Reserve Inventory over the 40-year Study Period.

10 Replacement Reserve Analysis - Page A4 CASH FLOW METHOD FUNDING $107,684 RECOMMENDED REPLACEMENT RESERVE FUNDING FOR 2017 Recommended Replacement Reserve Funding has been calculated using the Cash Flow Method (also called the Straight Line or Threshold Method). This method calculates a constant annual funding between peaks in cumulative expenditures, while maintaining a Minimum Balance (threshold) in the Peak Years. Peak Years. The First Peak Year occurs in 2047 with Replacement Reserves on Deposit dropping to the Minimum Balance after the completion of $3,37,117 of replacements from 2017 to Recommended funding declines from $107,684 in 2047 to $84,998 in Peak Years are identified in Chart 4 and Table. Minimum Balance. The calculations assume a Minimum Balance of $110,000 in Replacement Reserves. This is approx. 12 months of average expenditures based on the $106,104, 40-year average annual expenditure. Cash Flow Method Study Period. Cash Flow Method calculates funding for $4,244,142 of expenditures over the 40-year Study Period. It does not include funding for any projects beyond 206 and in 206, the end of year balance will always be the Minimum Balance. #4 - Cash Flow Method - Graph of Cumulative Receipts and Expenditures - Years 1 through 40 $,000,000 Cash Flow Method - Cumulative Receipts Cash Flow Method - Year End Balance Cumulative Expenditures Peak Year $4,34,142 $4,000,000 $4,244,142 $3,000,000 $2,000,000 $1,000,000 $0 $110, # - Cash Flow Method - Table of Receipts & Expenditures - Years 1 through 40 Year Starting Balance $308,92 Projected Replacements ($9,8) ($17,143) ($46,877) ($62,440) ($4,948) ($4,83) ($19,100) ($168,863) ($33,360) ($181,79) Annual Deposit $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 End of Year Balance $406,73 $497,294 $8,101 $603,34 $66,080 $717,929 $806,12 $74,334 $819,67 $74,46 Cumulative Expenditures $9,8 $26,998 $73,87 $136,31 $191,263 $237,098 $26,198 $42,060 $48,420 $640,216 Cumulative Receipts $416,608 $24,292 $631,976 $739,69 $847,343 $9,027 $1,062,710 $1,170,394 $1,278,077 $1,38,761 Year Projected Replacements ($427,64) ($44,000) ($19,400) ($140,61) ($19,390) ($166,419) ($341,96) ($11,469) ($141,464) ($266,081) Annual Deposit $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 End of Year Balance $42,66 $489,349 $77,632 $44,701 $632,99 $74,29 $339,987 $332,202 $298,421 $140,024 Cumulative Expenditures ($1,067,780) ($1,111,780) ($1,131,180) ($1,271,79) ($1,291,18) ($1,47,603) ($1,799,60) ($1,91,029) ($2,06,493) ($2,322,73) Cumulative Receipts $1,493,44 $1,601,128 $1,708,812 $1,816,496 $1,924,179 $2,031,863 $2,139,46 $2,247,230 $2,34,914 $2,462,97 Year Projected Replacements ($100,418) ($90,48) ($81,606) ($38,336) ($1,90) ($198,797) ($10,600) ($294,911) ($87,178) ($19,9) Annual Deposit $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 $107,684 End of Year Balance $147,290 $164,489 $190,66 $29,914 $32,007 $260,894 $37,978 $170,71 $191,27 $139,346 Cumulative Expenditures ($2,422,991) ($2,13,476) ($2,9,082) ($2,633,418) ($2,649,008) ($2,847,80) ($2,88,40) ($3,13,31) ($3,240,493) ($3,400,088) Cumulative Receipts $2,70,281 $2,677,96 $2,78,648 $2,893,332 $3,001,016 $3,108,699 $3,216,383 $3,324,066 $3,431,70 $3,39,434 Year 1st Peak nd Peak rd Peak Projected Replacements ($137,029) ($84,998) ($1,0) ($71,830) ($63,148) ($60,13) ($2,400) ($7,730) ($127,660) ($187,619) Annual Deposit $107,684 $84,998 $77,73 $77,73 $77,73 $77,73 $77,73 $77,73 $77,73 $77,73 End of Year Balance $110,000 $110,000 $136,248 $142,172 $16,777 $174,396 $249,749 $269,773 $219,866 $110,000 Cumulative Expenditures ($3,37,117) ($3,622,11) ($3,673,620) ($3,74,40) ($3,808,98) ($3,868,733) ($3,871,133) ($3,928,863) ($4,06,23) ($4,244,142) Cumulative Receipts $3,647,117 $3,732,11 $3,809,869 $3,887,622 $3,96,37 $4,043,129 $4,120,882 $4,198,636 $4,276,389 $4,34,142

11 Replacement Reserve Analysis - Page A INFLATION ADJUSTED FUNDING The Cash Flow Method calculations on Page A4 have been done in today's dollars with no adjustment for inflation. At Miller + Dodson, we belive that long-term inflation forecasting is effective at demonstrating the power of compounding, not at calculating appropriate funding levels for Replacement Reserves. We have developed this proprietary model to estimate the short-term impact of inflation on Replacement Reserve funding. $107, CASH FLOW METHOD RECOMMENDED FUNDING #6 - Inflation Adjusted Funding The 2017 Study Year calculations have been made using current replacement costs $10,000 (see Page B2), modified by the Analyst for any project specific conditions. $112, INFLATION ADJUSTED FUNDING A new analysis calculates 2018 funding based on three assumptions; Replacement Reserves on Deposit totaling $406,73 on January 1, All 2017 Projected Replacements listed on Page C2 accomplished at a cost to Replacement Reserves less than $9,8. Construction Cost Inflation of 4.0 percent in The $112,97 inflation adjusted funding in 2018 is a 4.91 percent increase over the non-inflation adjusted 2018 funding of $107,684. $100,000 $107,684 $107,684 $107,684 $112,97 $107,684 $119,011 $107,684 $12,446 $119, INFLATION ADJUSTED FUNDING A new analysis calculates 2019 funding based on three assumptions; Replacement Reserves on Deposit totaling $01,813 on January 1, All 2018 Projected Replacements listed on Page C2 accomplished at a cost to Replacement Reserves less than $17,914. Construction Cost Inflation of 4.0 percent in The $119,011 inflation adjusted funding in 2019 is a 10.2 percent increase over the non-inflation adjusted 2019 funding of $107,684. $0,000 $12, INFLATION ADJUSTED FUNDING A new analysis calculates 2020 funding based on three assumptions; Replacement Reserves on Deposit totaling $69,634 on January 1, All 2019 Projected Replacements listed on Page C2 accomplished at a cost to Replacement Reserves less than $1,191. Construction Cost Inflation of 4.0 percent in The $12,446 inflation adjusted funding in 2020 is a 16.0 percent increase over the non-inflation adjusted funding of $107, YEAR FIVE & BEYOND The inflation adjusted funding calculations outlined above are not intended to be a substitute for periodic evaluation of common elements by an experienced Reserve Analyst. Industry Standards, lender requirements, and many state and local statutes require a Replacement Reserve Study be professionally updated every 3 to years. INFLATION ADJUSTMENT Prior to approving a budget based upon the 2018, 2019 and 2020 inflation adjusted funding calculations above, the 4.0 percent base rate of inflation used in our calculations should be compared to rates published by the Bureau of Labor Statistics. If there is a significant discrepancy (over 1 percent), contact Miller Dodson + Associates prior to using the Inflation Adjusted Funding. INTEREST ON RESERVES The recommended funding calculations do not account for interest earned on Replacement Reserves. In 2017, based on a 1.00 percent interest rate, we estimate the Association may earn $3,78 on an average balance of $37,839, $4,43 on an average balance of $44,283 in 2018, and $,37 on $3,724 in The Association may elect to attribute 100 percent of the earned interest to Reserves, resulting in a reduction in the 2017 funding from $107,684 to $104,10 (a 3.32 percent reduction), $112,97 to $108,432 in 2018 (a 4.02 percent reduction), and $119,011 to $113,64 in 2019 (a 4.0 percent reduction). $0 Cash Flow Method Funding Inflation Adjusted Funding

12 Replacement Reserve Analysis - Page A6 REPLACEMENT RESERVE STUDY - SUPPLEMENTAL COMMENTS The Cash Flow Method calculates the minimum annual funding necessary to prevent Replacement Reserves from dropping below the Minimum Balance. Failure to fund at least the recommended levels may result in funding not being available for the Projected Replacements listed in the Replacement Reserve Inventory. The accuracy of the Replacement Reserve Analysis is dependent upon expenditures from Replacement Reserves being made ONLY for the 130 Projected Replacements specifically listed in the Replacement Reserve Inventory. The inclusion/exclusion of items from the Replacement Reserve Inventory is discussed on Page B1. This study is for the Master Association and does not include components described to be common elements of any of the sub-associations (Park Place, Carriage House and Battery Park).

13 Replacement Reserve Inventory - Page B1 REPLACEMENT RESERVE INVENTORY GENERAL INFORMATION Towne Square Master Association - Replacement Reserve Inventory identifies 13 items. Two types of items are identified, Projected Replacements and Excluded Items: PROJECTED REPLACEMENTS. 130 of the items are Projected Replacements and the periodic replacements of these items are scheduled for funding from Replacement Reserves. The Projected Replacements have an estimated one-time replacement cost of $2,69,863. Replacements totaling $4,244,142 are scheduled in the Replacement Reserve Inventory over the 40-year Study Period. Projected Replacements are the replacement of commonly-owned physical assets that require periodic replacement and whose replacement is to be funded from Replacement Reserves. EXCLUDED ITEMS. 23 of the items are Excluded Items, and expenditures for these items are NOT scheduled for funding from Replacement Reserves. The accuracy of the calculations made in the Replacement Reserve Analysis is dependent on expenditures NOT being made for Excluded Items. The Excluded Items are listed in the Replacement Reserve Inventory to identify specific items and categories of items that are not to be funded from Replacement Reserves. There are multiple categories of items that are typically excluded from funding by Replacement Reserves, including but not limited to: Tax Code. The United States Tax Code grants very favorable tax status to Replacement Reserves, conditioned on expenditures being made within certain guidelines. These guidelines typically exclude maintenance activities, minor repairs and capital improvements. Value. Items with a replacement cost of less that $1,000 and/or a normal economic life of less than 3 years are typically excluded from funding from Replacement Reserves. This exclusion should reflect Association policy on the administration of Replacement Reserves. If the Association has selected an alternative level, it will be noted in the Replacement Reserve Inventory - General Comments on Page B2. Long-lived Items. Items that when properly maintained, can be assumed to have a life equal to the property as a whole, are typically excluded from the Replacement Reserve Inventory. Unit improvements. Items owned by a single unit and where the items serve a single unit are generally assumed to be the responsibility of that unit, not the Association. Other non-common improvements. Items owned by the local government, public and private utility companies, the United States Postal Service, Master Associations, state and local highway authorities, etc., may be installed on property that is owned by the Association. These types of items are generally not the responsibility of the Association and are excluded from the Replacement Reserve Inventory. The rationale for the exclusion of an item from funding by Replacement Reserves is discussed in more detail in the 'Comments' sections of the Section B - Replacement Reserve Inventory. CATEGORIES. The 13 items included in the Towne Square Master Association Replacement Reserve Inventory are divided into 14 major categories. Each category is printed on a separate page, Pages B3 to B1. LEVEL OF SERVICE. This Replacement Reserve Inventory has been developed in compliance with the standards established for a Level Two - Update (with site visit and on-site review), as defined by the National Reserve Study Standards, established in 1998 by Community Associations Institute, which states: Level II Studies are based entirely on the component inventory from a prior study. This information is adjusted to reflect changes to the inventory that are provided by the Association, and the quantities are adjusted accordingly from field measurement and/or quantity takeoffs from to-scale drawings that are made available to us. The condition of all components is ascertained from a site visit and the visual inspection of each component by the analyst. The Remaining Economic Life and replacement cost of components are provided based in part on these observations. The fund status and Funding Plan are derived from analysis of this data.

14 Replacement Reserve Inventory - Page B2 REPLACEMENT RESERVE INVENTORY - GENERAL INFORMATION (cont'd) INVENTORY DATA. Each of the 130 Projected Replacements listed in the Replacement Reserve Inventory includes the following data: Item Number. The Item Number is assigned sequentially and is intended for identification purposes only. Item Description. We have identified each item included in the Inventory. Additional information may be included in the Comments section at the bottom of each page of the Inventory. Units. We have used standard abbreviations to identify the number of units including SF-square feet, LF-lineal feet, SY-square yard, LS-lump sum, EA-each, and PR-pair. Non-standard abbreviations are noted in the Comments section at the bottom of the page. Number of Units. The methods used to develop the quantities are discussed in "Level of Service" above. Unit Replacement Cost. We use four sources to develop the unit cost data shown in the Inventory; actual replacement cost data provided by the client, information provided by local contractors and suppliers, industry standard estimating manuals, and a cost database we have developed based upon our detailed interviews with contractors and service providers who are specialists in their respective lines of work. Normal Economic Life (Yrs). The number of years that a new and properly installed item should be expected to remain in service. Remaining Economic Life (Yrs). The estimated number of years before an item will need to be replaced. In "normal" conditions, this could be calculated by subtracting the age of the item from the Normal Economic Life of the item, but only rarely do physical assets age "normally". Some items may have longer or shorter lives depending on many factors such as environment, initial quality of the item, maintenance, etc. Total Replacement Cost. This is calculated by multiplying the Unit Replacement Cost by the Number of Units. Each of the 23 Excluded Items includes the Item Description, Units, and Number of Units. Many of the Excluded Items are listed as a 'Lump Sum' with a quantity of 1. For the Excluded Items, this indicates that all of the items identified by the 'Item Description' are excluded from funding by Replacement Reserves. REVIEW OF EXPENDITURES. This Replacement Reserve Study should be reviewed by an accounting professional representing the Association prior to implementation. PARTIAL FUNDING. Items may have been included in the Replacement Reserve Inventory at less than 100 percent of their full quantity and/or replacement cost. This is done on items that will never be replaced in their entirety, but which may require periodic replacements over an extended period of time. The assumptions that provide the basis for any partial funding are noted in the Comments section. REMAINING ECONOMIC LIFE GREATER THAN 40 YEARS. The calculations do not include funding for initial replacements beyond 40 years. These replacements are included in this Study for tracking and evaluation. They should be included for funding in future Studies, when they enter the 40-year window.

15 Replacement Reserve Inventory - Page B3 SITE COMPONENTS PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 1 Asphalt pavement, seal coat (60%) sf 6,22 $ $12,43 2 Asphalt pavement, seal coat (40%) sf 37,681 $ $8,290 3 Asphalt pavement, overlay (60%) sf 6,38 $ $98,942 4 Asphalt pavement, overlay (40%) sf 37,692 $ $6,961 Concrete curb & gutter (20%) ft 7,000 $ $248,00 6 Concrete curb & gutter (20%) ft 7,000 $ $248,00 7 Concrete curb & gutter (20%) ft 7,000 $ $248,00 8 Site Lighting, poles (33%) ea 19 $1, $3,983 9 Site Lighting, poles (33%) ea 19 $1, $3, Site Lighting, poles (33%) ea 19 $1, $3, Site Lighting, fixtures (33%) ea 19 $ $7,43 12 Site Lighting, fixtures (33%) ea 19 $ $7,43 13 Site Lighting, fixtures (33%) ea 19 $ $7,43 14 Landscape lighting (partial) ls 1 $3, $3,300 1 Landscape lighting (partial) ls 1 $4, $4, Signage, miscellaneous (partial) ea 10 $ none 2 $2, Signage, miscellaneous (partial) ea 10 $ $3, Signage, miscellaneous (partial) ea $ $2,14 SITE COMPONENTS - Replacement Costs - Subtotal $1,077,831 SITE COMPONENTS COMMENTS We have assumed that the Association will replace the asphalt pavement by the installation of a 2 inch thick overlay. The pavement will need to be milled prior to the installation of the overlay. Milling and the cost of minor repairs ( to 10 percent of the total area) to the base materials and bearing soils beneath the pavement are included in the cost shown above. For concrete components and other roadway shoulder work, we have assumed that the Association will conduct concrete component replacement projects in conjunction with the asphalt pavement and other concrete or right-of-way replacement projects. 7/20/12 - Deferred seal coat to Added curb & gutter replacement in All of the seal coating was performed in 2014.

16 Replacement Reserve Inventory - Page B4 SITE COMPONENTS (cont.) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 19 Community entry signs, refurbish ls 1 $2, none 2 $2,09 20 Brick monuments, repointing (partial) ls 1 $4, none 2 $4, Concrete sidewalk (6%) sf 2,100 $ $20,0 22 6' Chain link fence ls 1 $18, $18, ' Concrete fence (partial) ls 1 $13, $13, ' Wood fence lf 90 $ $16,81 2 8' Fence, aluminum picket lf 740 $ $31, ' Fence, aluminum picket (partial) lf 2,00 $ $71, ' Fence, aluminum picket (partial) lf 2,600 $ $91, ' Fence, black iron picket lf 10 $ $ ' Fence, black iron picket lf 30 $ $1,60 SITE COMPONENTS (cont.) - Replacement Costs - Subtotal $272,26 SITE COMPONENTS (cont.) COMMENTS A precast concrete wall system is being installed in 2012 to replace a significant amount of perimeter wood fence. The original installation is using a portion of the replacement reserves but is predominantly a capital improvement. This fence will have an indefinite life and is excluded except for a small portion of partial replacement due to settling, shifting or collision from automobiles. 7/20/12 - added black iron fencing and piers (2) A small portion of the black aluminum fence has been replaced The Manager reports that some of the alum. picket fence is discontinued.

17 Replacement Reserve Inventory - Page B SITE COMPONENTS (cont.) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 30 Stormwater piping, 6" PVC (10%) lf 228 $ $6, Stormwater piping, 10" PVC (10%) lf 162 $ $4, Stormwater piping, 12" RCP (10%) lf 930 $ $38, Stormwater piping, 1" RCP (10%) lf 163 $ $7,33 34 Stormwater piping, 42" RCP (10%) lf 360 $ $2,920 3 Stormwater piping, 48" RCP (2%) lf 442 $ $34, Outfall structures (at lakes) (partial) ea 1 $9, $9,00 37 Curb inlets (partial) ea 2 $, $10, Drop inlets (partial) ea 1 $4, $4, Irrigation, major components (partial) ls 1 $10, $10, Irrigation, major components (partial) ls 1 $10, $10, Irrigation, heads (partial) ls 1 $4, $4, Irrigation, piping & laterals (partial) ls 1 $, $, BMP well pumps ea 2 $7, $1, BMP well pumps ea 2 $7, $1,000 4 Sanitary sewer mains (partial) ls 1 $19, $19, Water mains (partial) ls 1 $21, $21, Sanitary lateral (club house) ls 1 $2, $2,00 48 Water lateral (club house) ls 1 $3, $3,300 SITE COMPONENTS (cont.) - Replacement Costs - Subtotal $248,39 SITE COMPONENTS (cont.) COMMENTS 7/20/12 - added 2 BMP pumps that were replaced in Changed irrigation system repair est for All of the irrigation pumps have been replaced in the past few years.

18 Replacement Reserve Inventory - Page B6 SITE COMPONENT (cont.) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 49 Dredging, Lake 1 cy 38 $ $26,6 0 Reset rip rap, Lake 1 (partial) cy 30 $ $1,370 1 Dredging, Lake 2 cy 2 $ $17,9 2 Reset rip rap, Lake 2 (partial) cy 78 $ $21,982 3 Dredging, Lake 3 cy 248 $ $17,112 4 Reset rip rap, Lake 3 (partial) cy 763 $ $22,127 Dredging, Lake 4 cy 207 $ $14,283 6 Reset rip rap, Lake 4 (partial) cy 4 $ $16,066 7 Dredging, Lake cy 09 $ $3,121 8 Reset rip rap, Lake (partial) cy 998 $ $28,942 9 Dredging, Lake 6 cy 226 $ $1,94 60 Reset rip rap, Lake 6 (partial) cy 48 $ $1, Lake aerators (fountains) ea 2 $6, $13, Lake aerators (fountains) ea 2 $6, $13, Lake aerators (fountains) ea 2 $6, $13, Lake power units (partial) ea 1 $2, $2,190 6 Benches (partial) ea 4 $ $1, Benches (partial) ea 4 $ $1, Benches (partial) ea 4 $ $1,980 SITE COMPONENT (cont.) - Replacement Costs - Subtotal $294,979 SITE COMPONENT (cont.) COMMENTS The Manager reports that the lakes are to have rip rap installed in 2012 to reduce damage caused by muskrats, nutria and other concerns of erosion. It is assumed that each linear foot of shoreline will require 1 cubic yard of rip rap. The initial rip rap placement is a capital improvement, but future dredging will require partial removal and replacement of rip rap. Dredging volumes are based on the surface areas of the Lakes as scaled from the available site plans. It is presumed that dredging will be phased at two lakes per year over a 3 year period and the actual sequence of the dredging may vary Extensive shoreline hardening (rip rap) was installed in the past few years but is a long lived component All of the pond fountains have been replaced in the past few years.

19 Replacement Reserve Inventory - Page B7 BUILDING EXTERIOR (Pool House- PH and Club House - CH and Pool Pavillion - PP) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 68 CH Shingle asphalt/fiberglass sf 2,00 $ $11, CH Gutter & downspout, 6" aluminum ft 440 $ $3, CH Siding, vinyl sf 2,400 $ $14, CH Masonry veneer, repointing ls 1 $2, $2,20 72 CH Exterior Accessories (partial) ls 1 $2, $2, CH Exterior doors ls 1 $4, $4, CH Exterior windows ls 1 $3, $3,900 7 PH Shingle asphalt/fiberglass sf 300 $ $1, PH Gutter & downspout, 6" aluminum ft 60 $ $10 77 PH Siding, vinyl ls 1 $ $6 78 PH, Exterior doors pair 1 $1, $1, PP Shingle asphalt/fiberglass sf 1,900 $ $10, PP - Pavillion wood framing sf 1,900 $ $104,00 81 Veranda trellis framing sf 00 $ $17,000 ING EXTERIOR (Pool House- PH and Club House - CH and Pool Pavillion - PP) - Replacement Costs - Subtotal $177,666 BUILDING EXTERIOR (Pool House- PH and Club House - CH and Pool Pavillion - PP) COMMENTS

20 Replacement Reserve Inventory - Page B8 BUILDING INTERIOR (CH - Club House) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 82 CH Flooring, interior carpet ls 1 $2, $2, CH Flooring, ceramic ls 1 $2, $2, CH Miscellaneous Decor ls 1 $1, $1,990 8 CH Window Treatments ls 1 $1, $1, CH Kitchen counters ls 1 $1, $1, CH Kitchen cabinets ls 1 $3, $3, CH Kitchen appliances ls 1 $1, $1, CH Kitchen fridge ea 1 $ $00 90 CH Bathroom vanities ea 2 $1, $2, CH toilet compartments ea $1, $6,47 92 CH gas fireplace ea 1 $3, $3, CH decorative lighting & ceiling fans ls 1 $1, $1, CH Plumbing fixtures (interior) ls 1 $4, $4,09 9 CH Outdoor showers ea 2 $ $1, CH Hot water heater ea 1 $ $9 97 CH HVAC System, gas fired ea 2 $2, $4, CH compressors ea 2 $1, $2,76 BUILDING INTERIOR (CH - Club House) - Replacement Costs - Subtotal $42,31 BUILDING INTERIOR (CH - Club House) COMMENTS 7/20/12 - Changed pricing of carpet The carpet was replaced in 2013 the price is based on the reported cost provided by the Manager The allowance for appliances was reduced per the Manager. The refrigerator was repalced in 2016 for $00

21 Replacement Reserve Inventory - Page B9 BUILDING INTERIOR (cont.) PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 99 Arm chairs, vinyl upholstered ea 2 $ $ Bar stool, rattan back ea 4 $ $2, Tall round table, wood ea 1 $ $ Metal cafe chairs ea 2 $ $ Checkers tables ea 1 $ $ BUILDING INTERIOR (cont.) - Replacement Costs - Subtotal $,129 BUILDING INTERIOR (cont.) COMMENTS The meeting room has 21 folding chairs and 1 folding table that are excluded.

22 Replacement Reserve Inventory - Page B10 SWIMMING POOL PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 104 Adult Swimming pool, structure sf 3,30 $ $234,00 10 Wading pool, structure sf 170 $ $6, Swimming pool, whitecoat sf 4,70 $ $36,7 107 Swimming pool, waterline tile ft 340 $ $6, Swimming pool lights ea 9 $ $3, Swimming pool, coping ft 340 $ $13, Swimming pool, cover sf 4,000 $ $8, Swimming pool pump (less than 1 hp) ea 1 $1, $1, Swimming pool pump motors ls 1 $ $ Swimming pool pump (+ hp) ea 1 $4, $4, Swimming pool filter, Triton II ea 3 $1, $, Swimming pool chemical feed system ls 1 $2, $2, Swimming pool filter, wading pool ea 1 $ none 2 $ Swimming pool, concrete deck (20%) sf 1,712 $ $18, Perimeter fence - 4' (metal) ft 480 $ $20, Pool furniture, chaise lounge, vinyl ea 38 $ $14, Pool furniture, table, round vinyl ea 8 $ $3, Pool furniture, folding chairs, vinyl ea 14 $ $4, Pool furniture, chairs, stacking vinyl ea 20 $ $1,640 SWIMMING POOL - Replacement Costs - Subtotal $388,482 SWIMMING POOL COMMENTS We have assumed that the project to replace the pool deck will include the replacement of the plumbing and electrical systems installed beneath the pavement. 7/20/12 - Deleted Pool Furniture re-strapping. Changed replacement of wading pool filter to Added the swimming pool lights Pool waterline tile and coping were replaced in Concrete tables and benches have been removed and additional vinyl chairs are added.

23 Replacement Reserve Inventory - Page B11 TOT LOT PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 123 Tot lot - MP structure (small) ea 1 $26, $26, Tot lot - swing ea 2 $1, $3, Tot lot - spring toy ea 4 $1, $, Tot lot - synthetic border ft 300 $ $,68 TOT LOT - Replacement Costs - Subtotal $40,86 TOT LOT COMMENTS Tot lots and tot lot equipment should be evaluated annually by a playground safety specialist for compliance with the Consumer Product Safety Commission, Handbook for Public Playground Safety. Defects should be corrected immediately to protect the users of the facilities from potential injury and the Association from potential liability for those injuries.

24 Replacement Reserve Inventory - Page B12 EXERCISE EQUIPMENT PROJECTED REPLACEMENTS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) 127 Treadmill, Precor C934 ea 2 $, $10, Elliptical trainer, Precor EFX ea 2 $2, $, Recumbent bike, Nautlisu NR 2000 ea 1 $2, $2, Life Fitness Fit 1.0 CM ea 1 $2, $2,00 EXERCISE EQUIPMENT - Replacement Costs - Subtotal $21,900 EXERCISE EQUIPMENT COMMENTS

25 Replacement Reserve Inventory - Page B13 VALUATION EXCLUSIONS EXCLUDED ITEMS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) Building lighting fixtures ls 1 3 EXCLUDED Tot lot mulch ls 1 3 EXCLUDED Miscellaneous signage ls 1 3 EXCLUDED Club House Fire extinguisher ls 1 3 EXCLUDED Club House Fire Protection ls 1 3 EXCLUDED CH Emergency lighting, exit light, etc. ls 1 3 EXCLUDED CH Signage ls 1 3 EXCLUDED CH Interior doors ls 1 3 EXCLUDED CH Kitchen contents ls 1 3 EXCLUDED CH Storage Contents ls 1 3 EXCLUDED VALUATION EXCLUSIONS COMMENTS Valuation Exclusions. For ease of administration of the Replacement Reserves and to reflect accurately how Replacement Reserves are administered, items with a dollar value less than $1, have not been scheduled for funding from Replacement Reserves. Examples of items excluded from funding by Replacement Reserves by this standard are listed above. The list above exemplifies exclusions by the cited standard(s) and is not intended to be comprehensive.

26 Replacement Reserve Inventory - Page B14 LONG-LIFE EXCLUSIONS EXCLUDED ITEMS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) Masonry features ls 1 3 EXCLUDED Miscellaneous culverts ls 1 3 EXCLUDED Concrete retaining walls ls 1 3 EXCLUDED Club House Exterior brick veneer ls 1 3 EXCLUDED CH Building foundation(s) ls 1 3 EXCLUDED CH Concrete floor slabs (interior) ls 1 3 EXCLUDED CH Wall, floor, & roof structure ls 1 3 EXCLUDED CH Security systems ls 1 3 EXCLUDED Common element electrical services ls 1 3 EXCLUDED Electrical wiring ls 1 3 EXCLUDED LONG-LIFE EXCLUSIONS COMMENTS Long Life Exclusions. Components that when properly maintained, can be assumed to have a life equal to the property as a whole, are normally excluded from the Replacement Reserve Inventory. Examples of items excluded from funding by Replacement Reserves by this standard are listed above. Exterior masonry is generally assumed to have an unlimited economic life but periodic repointing is required and we have included this for funding in the Replacement Reserve Inventory. The list above exemplifies exclusions by the cited standard(s) and is not intended to be comprehensive.

27 Replacement Reserve Inventory - Page B1 UNIT IMPROVEMENTS EXCLUSIONS EXCLUDED ITEMS UNIT NORMAL REMAINING ITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT # DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($) All units in Battery Park ls 1 3 EXCLUDED All units in Park Place ls 1 3 EXCLUDED All units in Carriage House ls 1 3 EXCLUDED UNIT IMPROVEMENTS EXCLUSIONS COMMENTS Unit improvement Exclusions. We understand that the elements of the project that relate to a single unit are the responsibility of that unit owner. Examples of items excluded from funding by Replacement Reserves by this standard are listed above. The list above exemplifies exclusions by the cited standard(s) and is not intended to be comprehensive.

28 Intentionally Left Blank

29 Projected Annual Replacements - Page C1 PROJECTED ANNUAL REPLACEMENTS GENERAL INFORMATION CALENDAR OF ANNUAL REPLACEMENTS. The 130 Projected Replacements in the Towne Square Master Associatio Replacement Reserve Inventory whose replacement is scheduled to be funded from Replacement Reserves are broken down on a year-by-year basis, beginning on Page C2. REPLACEMENT RESERVE ANALYSIS AND INVENTORY POLICIES, PROCEDURES, AND ADMINISTRATION REVISIONS. Revisions will be made to the Replacement Reserve Analysis and Replacement Reserve Inventory in accordance with the written instructions of the Board of Directors. No additional charge is incurred for the first revision, if requested in writing within three months of the date of the Replacement Reserve Study. It is our policy to provide revisions in electronic (Adobe PDF) format only. TAX CODE. The United States Tax Code grants favorable tax status to a common interest development (CID) meeting certain guidelines for their Replacement Reserve. If a CID files their taxes as a 'Corporation' on Form 1120 (IRC Section 277), these guidelines typically require maintenance activities, partial replacements, minor replacements, capital improvements, and one-time only replacements to be excluded from Reserves. A CID cannot co-mingle planning for maintenance activities with capital replacement activities in the Reserves (Revenue Ruling 7-370). Funds for maintenance activities and capital replacements activities must be held in separate accounts. If a CID files taxes as an "Exempt Homeowners Association" using Form 1120H (IRC Section 28), the CID does not have to segregate these activities. However, because the CID may elect to change their method of filing from year to year within the Study Period, we advise using the more restrictive approach. We further recommend that the CID consult with their Accountant and consider creating separate and independent accounts and reserves for large maintenance items, such as painting. CONFLICT OF INTEREST. Neither Miller - Dodson Associates nor the Reserve Analyst has any prior or existing relationship with this Association which would represent a real or perceived conflict of interest. RELIANCE ON DATA PROVIDED BY THE CLIENT. Information provided by an official representative of the Association regarding financial, physical conditions, quality, or historical issues is deemed reliable. INTENT. This Replacement Reserve Study is a reflection of the information provided by the Association and the visual evaluations of the Analyst. It has been prepared for the sole use of the Association and is not for the purpose of performing an audit, quality/forensic analyses, or background checks of historical records. PREVIOUS REPLACEMENTS. Information provided to Miller - Dodson Associates regarding prior replacements is considered to be accurate and reliable. Our visual evaluation is not a project audit or quality inspection. EXPERIENCE WITH FUTURE REPLACEMENTS. The Calendar of Annual Projected Replacements, lists replacements we have projected to occur over the next thirty years, begins on Page C2. Actual experience in replacing the items may differ significantly from the cost estimates and time frames shown because of conditions beyond our control. These differences may be caused by maintenance practices, inflation, variations in pricing and market conditions, future technological developments, regulatory actions, acts of God, and luck. Some items may function normally during our visual evaluation and then fail without notice. REVIEW OF THE REPLACEMENT RESERVE STUDY. For this study to be effective, it should be reviewed by the Towne Square Master Association Board of Directors, those responsible for the management of the items included in the Replacement Reserve Inventory, and the accounting professionals employed by the Association.

30 Projected Annual Replacements - Page C2 PROJECTED REPLACEMENTS - YEARS 1 TO 6 Item STUDY YEAR $ Item YEAR 2 $ Item YEAR 3 $ 16 Signage, miscellaneous (par $2, Site Lighting, fixtures (33%) $7,43 1 Landscape lighting (partial) $4, Community entry signs, refu $2,09 41 Irrigation, heads (partial) $4, ' Wood fence $16,81 20 Brick monuments, repointing $4, Irrigation, piping & laterals (p $, CH decorative lighting & ceil $1, Swimming pool filter, wading $ Arm chairs, vinyl upholstered $ Bar stool, rattan back $2, Metal cafe chairs $ Treadmill, Precor C934 $10, Elliptical trainer, Precor EFX $, Recumbent bike, Nautlisu N $2,800 Total Scheduled Replacements $9,8 Total Scheduled Replacements $17,143 Total Scheduled Replacements $46,877 Item YEAR 4 $ Item YEAR $ Item YEAR 6 $ 1 Asphalt pavement, seal coat $12,43 12 Site Lighting, fixtures (33%) $7,43 17 Signage, miscellaneous (par $3,490 2 Asphalt pavement, seal coat $8, Lake power units (partial) $2, Signage, miscellaneous (par $2,14 39 Irrigation, major components $10, CH Masonry veneer, repoint $2,20 40 Irrigation, major components $10, Irrigation, heads (partial) $4, CH Exterior Accessories (pa $2, Irrigation, heads (partial) $4,000 6 Benches (partial) $1, Tot lot - MP structure (small) $26, Irrigation, piping & laterals (p $, CH Hot water heater $9 124 Tot lot - swing $3, Benches (partial) $1, Swimming pool, cover $8, Tot lot - spring toy $, CH Miscellaneous Decor $1, Swimming pool pump (less t $1, Tot lot - synthetic border $,68 8 CH Window Treatments $1, Pool furniture, chaise lounge $14, Swimming pool pump motor $ Swimming pool pump (+ hp $4, Swimming pool filter, Triton $, Swimming pool chemical fee $2, Pool furniture, chairs, stackin $1,640 Total Scheduled Replacements $62,440 Total Scheduled Replacements $4,948 Total Scheduled Replacements $4,83

31 Projected Annual Replacements - Page C3 PROJECTED REPLACEMENTS - YEARS 7 TO 12 Item YEAR 7 $ Item YEAR 8 $ Item YEAR 9 $ 14 Landscape lighting (partial) $3,300 3 Asphalt pavement, overlay (6 $98, Irrigation, major components $10, Lake aerators (fountains) $13, Site Lighting, fixtures (33%) $7,43 61 Lake aerators (fountains) $13, CH Flooring, interior carpet $2, Concrete sidewalk (6%) $20,0 110 Swimming pool, cover $8, Irrigation, heads (partial) $4, Swimming pool pump (less t $1, BMP well pumps $1, Lake aerators (fountains) $13, Benches (partial) $1, CH HVAC System, gas fired $4, CH compressors $2, Tall round table, wood $ Checkers tables $80 Total Scheduled Replacements $19,100 Total Scheduled Replacements $168,863 Total Scheduled Replacements $33,360 Item YEAR 10 $ Item YEAR 11 $ Item YEAR 12 $ 1 Asphalt pavement, seal coat $12,43 4 Asphalt pavement, overlay (4 $6, Irrigation, heads (partial) $4,000 2 Asphalt pavement, seal coat $8,290 Concrete curb & gutter (20% $248,00 4 Sanitary sewer mains (partia $19, Stormwater piping, 6" PVC ( $6, Landscape lighting (partial) $3, Water mains (partial) $21, Stormwater piping, 10" PVC $4,949 1 Landscape lighting (partial) $4, Stormwater piping, 12" RCP $38, Community entry signs, refu $2,09 33 Stormwater piping, 1" RCP $7,33 20 Brick monuments, repointing $4, Stormwater piping, 42" RCP $2, ' Chain link fence $18,800 3 Stormwater piping, 48" RCP $34, ' Concrete fence (partial) $13, Curb inlets (partial) $10, Irrigation, major components $10, Irrigation, heads (partial) $4, Swimming pool, whitecoat $36,7 42 Irrigation, piping & laterals (p $, Swimming pool, waterline tile $6, BMP well pumps $1, Swimming pool lights $3, Lake power units (partial) $2, Swimming pool pump motor $ CH Kitchen appliances $1, Pool furniture, table, round v $3,20 9 CH Outdoor showers $1, Pool furniture, folding chairs $4, Arm chairs, vinyl upholstered $ Life Fitness Fit 1.0 CM $2,00 Total Scheduled Replacements $181,79 Total Scheduled Replacements $427,64 All Replacements not listed $44,000

32 Projected Annual Replacements - Page C4 PROJECTED REPLACEMENTS - YEARS 13 TO 18 Item YEAR 13 $ Item YEAR 14 $ Item YEAR 1 $ 127 Treadmill, Precor C934 $10, Concrete sidewalk (6%) $20,0 14 Landscape lighting (partial) $3, Elliptical trainer, Precor EFX $, ' Fence, aluminum picket (p $91, Lake aerators (fountains) $13, Recumbent bike, Nautlisu N $2, Irrigation, major components $10, Lake power units (partial) $2, Irrigation, heads (partial) $4, CH Kitchen fridge $00 42 Irrigation, piping & laterals (p $, Swimming pool, cover $8, Swimming pool pump (less t $1,200 Total Scheduled Replacements $19,400 Total Scheduled Replacements $140,61 All Replacements not listed $19,390 Item YEAR 16 $ Item YEAR 17 $ Item YEAR 18 $ 1 Asphalt pavement, seal coat $12,43 8 Site Lighting, poles (33%) $3, ' Wood fence $16,81 2 Asphalt pavement, seal coat $8, Site Lighting, fixtures (33%) $7,43 41 Irrigation, heads (partial) $4, Signage, miscellaneous (par $2, Dredging, Lake 1 $26,6 42 Irrigation, piping & laterals (p $, ' Fence, aluminum picket (p $71,70 0 Reset rip rap, Lake 1 (partia $1, BMP well pumps $1, Outfall structures (at lakes) ( $9,00 1 Dredging, Lake 2 $17,9 3 Dredging, Lake 3 $17, Drop inlets (partial) $4,890 2 Reset rip rap, Lake 2 (partia $21,982 4 Reset rip rap, Lake 3 (partia $22, Irrigation, major components $10, Lake aerators (fountains) $13,400 Dredging, Lake 4 $14, Irrigation, heads (partial) $4, CH Shingle asphalt/fiberglas $11,070 6 Reset rip rap, Lake 4 (partia $16, Lake aerators (fountains) $13, CH Gutter & downspout, 6" a $3, CH decorative lighting & ceil $1, Swimming pool pump motor $ CH Siding, vinyl $14, CH compressors $2, Swimming pool filter, Triton $, CH Exterior doors $4, Swimming pool chemical fee $2, CH Exterior windows $3, Swimming pool filter, wading $700 7 PH Shingle asphalt/fiberglas $1, Swimming pool, concrete de $18, PH Gutter & downspout, 6" a $ Pool furniture, chairs, stackin $1, PH Siding, vinyl $6 78 PH, Exterior doors $1, PP Shingle asphalt/fiberglas $10, PP - Pavillion wood framing $104,00 81 Veranda trellis framing $17, CH Flooring, interior carpet $2, CH Flooring, ceramic $2, CH Kitchen counters $1, CH Kitchen cabinets $3, CH Bathroom vanities $2, CH toilet compartments $6,47 92 CH gas fireplace $3, CH Plumbing fixtures (interio $4,09 99 Arm chairs, vinyl upholstered $ Bar stool, rattan back $2, Metal cafe chairs $780 Total Scheduled Replacements $166,419 Total Scheduled Replacements $341,96 Total Scheduled Replacements $11,469

33 Projected Annual Replacements - Page C PROJECTED REPLACEMENTS - YEARS 19 TO 24 Item YEAR 19 $ Item YEAR 20 $ Item YEAR 21 $ 14 Landscape lighting (partial) $3,300 9 Site Lighting, poles (33%) $3, Signage, miscellaneous (par $3,490 1 Landscape lighting (partial) $4, Site Lighting, fixtures (33%) $7,43 18 Signage, miscellaneous (par $2,14 39 Irrigation, major components $10, Concrete sidewalk (6%) $20,0 19 Community entry signs, refu $2,09 7 Dredging, Lake $3, Stormwater piping, 6" PVC ( $6, Brick monuments, repointing $4,770 8 Reset rip rap, Lake (partia $28, Stormwater piping, 10" PVC $4, Irrigation, major components $10,000 9 Dredging, Lake 6 $1,94 32 Stormwater piping, 12" RCP $38, Sanitary lateral (club house) $2,00 60 Reset rip rap, Lake 6 (partia $1, Stormwater piping, 1" RCP $7,33 66 Benches (partial) $1,980 6 Benches (partial) $1, Stormwater piping, 42" RCP $2, Swimming pool, whitecoat $36,7 96 CH Hot water heater $9 3 Stormwater piping, 48" RCP $34, Swimming pool, waterline tile $6, Swimming pool, cover $8, Curb inlets (partial) $10, Swimming pool lights $3, Swimming pool pump (less t $1, Irrigation, heads (partial) $4, Swimming pool, coping $13, Pool furniture, chaise lounge $14, BMP well pumps $1, Swimming pool pump motor $ Lake power units (partial) $2, Swimming pool pump (+ hp $4,00 71 CH Masonry veneer, repoint $2, Pool furniture, table, round v $3,20 72 CH Exterior Accessories (pa $2, Pool furniture, folding chairs $4, CH Miscellaneous Decor $1,990 8 CH Window Treatments $1,800 9 CH Outdoor showers $1, Tot lot - MP structure (small) $26, Tot lot - swing $3, Tot lot - spring toy $, Tot lot - synthetic border $, Life Fitness Fit 1.0 CM $2,00 Total Scheduled Replacements $141,464 Total Scheduled Replacements $266,081 Total Scheduled Replacements $100,418 Item YEAR 22 $ Item YEAR 23 $ Item YEAR 24 $ 1 Asphalt pavement, seal coat $12,43 10 Site Lighting, poles (33%) $3, Irrigation, major components $10,000 2 Asphalt pavement, seal coat $8, Site Lighting, fixtures (33%) $7,43 41 Irrigation, heads (partial) $4, Irrigation, heads (partial) $4, Landscape lighting (partial) $3, Lake aerators (fountains) $13, Irrigation, piping & laterals (p $, Lake aerators (fountains) $13, Arm chairs, vinyl upholstered $976 4 Sanitary sewer mains (partia $19, Benches (partial) $1, Swimming pool, cover $8, Water mains (partial) $21, Treadmill, Precor C934 $10, Swimming pool pump (less t $1, Perimeter fence - 4' (metal) $20, Elliptical trainer, Precor EFX $, Recumbent bike, Nautlisu N $2,800 Total Scheduled Replacements $90,48 Total Scheduled Replacements $81,606 Total Scheduled Replacements $38,336

34 Projected Annual Replacements - Page C6 PROJECTED REPLACEMENTS - YEARS 2 TO 30 Item YEAR 2 $ Item YEAR 26 $ Item YEAR 27 $ 61 Lake aerators (fountains) $13,400 3 Asphalt pavement, overlay (6 $98, Landscape lighting (partial) $3, Lake power units (partial) $2, Concrete sidewalk (6%) $20,0 1 Landscape lighting (partial) $4, ' Concrete fence (partial) $13, CH Flooring, interior carpet $2, ' Fence, aluminum picket $31, Drop inlets (partial) $4, Irrigation, major components $10, Irrigation, heads (partial) $4, Irrigation, piping & laterals (p $, Swimming pool pump motor $ Swimming pool filter, Triton $, Swimming pool chemical fee $2, Pool furniture, chairs, stackin $1,640 Total Scheduled Replacements $1,90 Total Scheduled Replacements $198,797 Total Scheduled Replacements $10,600 Item YEAR 28 $ Item YEAR 29 $ Item YEAR 30 $ 1 Asphalt pavement, seal coat $12,43 4 Asphalt pavement, overlay (4 $6, Stormwater piping, 6" PVC ( $6,373 2 Asphalt pavement, seal coat $8, Irrigation, major components $10, Stormwater piping, 10" PVC $4,949 6 Concrete curb & gutter (20% $248, Tall round table, wood $ Stormwater piping, 12" RCP $38, Irrigation, heads (partial) $4, Checkers tables $80 33 Stormwater piping, 1" RCP $7,33 43 BMP well pumps $1, Swimming pool, cover $8, Stormwater piping, 42" RCP $2, CH HVAC System, gas fired $4, Swimming pool pump (less t $1,200 3 Stormwater piping, 48" RCP $34, CH compressors $2,76 37 Curb inlets (partial) $10, Irrigation, heads (partial) $4, Irrigation, piping & laterals (p $, BMP well pumps $1, Lake power units (partial) $2, CH Kitchen fridge $00 9 CH Outdoor showers $1, Life Fitness Fit 1.0 CM $2,00 Total Scheduled Replacements $294,911 Total Scheduled Replacements $87,178 Total Scheduled Replacements $19,9

35 Projected Annual Replacements - Page C7 PROJECTED REPLACEMENTS - YEARS 31 TO 36 Item YEAR 31 $ Item YEAR 32 $ Item YEAR 33 $ 14 Landscape lighting (partial) $3, Site Lighting, fixtures (33%) $7, ' Wood fence $16,81 16 Signage, miscellaneous (par $2, Concrete sidewalk (6%) $20,0 61 Lake aerators (fountains) $13, Community entry signs, refu $2,09 41 Irrigation, heads (partial) $4, CH decorative lighting & ceil $1, Brick monuments, repointing $4,770 4 Sanitary sewer mains (partia $19, Treadmill, Precor C934 $10, ' Fence, black iron picket $30 46 Water mains (partial) $21, Elliptical trainer, Precor EFX $, ' Fence, black iron picket $1,60 62 Lake aerators (fountains) $13, Recumbent bike, Nautlisu N $2, Outfall structures (at lakes) ( $9,00 40 Irrigation, major components $10, Water lateral (club house) $3, Lake aerators (fountains) $13, CH Kitchen appliances $1, Arm chairs, vinyl upholstered $ Bar stool, rattan back $2, Metal cafe chairs $ Wading pool, structure $6, Swimming pool, whitecoat $36,7 107 Swimming pool, waterline tile $6, Swimming pool lights $3, Swimming pool pump motor $ Swimming pool filter, wading $ Swimming pool, concrete de $18, Pool furniture, table, round v $3, Pool furniture, folding chairs $4,032 Total Scheduled Replacements $137,029 Total Scheduled Replacements $84,998 Total Scheduled Replacements $1,0 Item YEAR 34 $ Item YEAR 3 $ Item YEAR 36 $ 1 Asphalt pavement, seal coat $12,43 12 Site Lighting, fixtures (33%) $7,43 17 Signage, miscellaneous (par $3,490 2 Asphalt pavement, seal coat $8, Landscape lighting (partial) $3, Signage, miscellaneous (par $2,14 39 Irrigation, major components $10,000 1 Landscape lighting (partial) $4, ' Chain link fence $18, Irrigation, heads (partial) $4, Lake power units (partial) $2, Drop inlets (partial) $4, Irrigation, piping & laterals (p $, CH Masonry veneer, repoint $2,20 40 Irrigation, major components $10,000 6 Benches (partial) $1, CH Exterior Accessories (pa $2, Irrigation, heads (partial) $4, CH Miscellaneous Decor $1, Tot lot - MP structure (small) $26, Benches (partial) $1,980 8 CH Window Treatments $1, Tot lot - swing $3, Swimming pool pump motor $ CH Hot water heater $9 12 Tot lot - spring toy $, Swimming pool pump (+ hp $4, Swimming pool, cover $8, Tot lot - synthetic border $, Swimming pool filter, Triton $, Swimming pool pump (less t $1, Swimming pool chemical fee $2, Pool furniture, chaise lounge $14, Pool furniture, chairs, stackin $1,640 Total Scheduled Replacements $71,830 All Replacements not listed $63,148 Total Scheduled Replacements $60,13

36 Projected Annual Replacements - Page C8 PROJECTED REPLACEMENTS - YEARS 37 TO 42 Item YEAR 37 $ Item YEAR 38 $ Item 20 - YEAR 39 $ 82 CH Flooring, interior carpet $2, Site Lighting, fixtures (33%) $7,43 14 Landscape lighting (partial) $3, Concrete sidewalk (6%) $20,0 27 4' Fence, aluminum picket (p $91, Irrigation, heads (partial) $4, Irrigation, major components $10, Irrigation, piping & laterals (p $, Lake aerators (fountains) $13, BMP well pumps $1, Swimming pool, cover $8, Benches (partial) $1, Swimming pool pump (less t $1, CH compressors $2,76 99 Arm chairs, vinyl upholstered $976 Total Scheduled Replacements $2,400 Total Scheduled Replacements $7,730 Total Scheduled Replacements $127,660 Item YEAR 40 $ Item 207 (beyond Study Period) $ Item 208 (beyond Study Period) $ 1 Asphalt pavement, seal coat $12,43 19 Community entry signs, refu $2,09 41 Irrigation, heads (partial) $4,000 2 Asphalt pavement, seal coat $8, Brick monuments, repointing $4, Irrigation, piping & laterals (p $, Stormwater piping, 6" PVC ( $6, ' Concrete fence (partial) $13,900 4 Sanitary sewer mains (partia $19, Stormwater piping, 10" PVC $4, ' Fence, aluminum picket (p $71,70 46 Water mains (partial) $21, Stormwater piping, 12" RCP $38, Irrigation, major components $10, Stormwater piping, 1" RCP $7,33 61 Lake aerators (fountains) $13, Stormwater piping, 42" RCP $2, Swimming pool, whitecoat $36,7 3 Stormwater piping, 48" RCP $34, Swimming pool, waterline tile $6, Curb inlets (partial) $10, Swimming pool lights $3, Irrigation, heads (partial) $4, Swimming pool, coping $13, BMP well pumps $1, Swimming pool pump motor $ Lake aerators (fountains) $13, Pool furniture, table, round v $3,20 64 Lake power units (partial) $2, Pool furniture, folding chairs $4,032 9 CH Outdoor showers $1, Life Fitness Fit 1.0 CM $2,00 Total Scheduled Replacements $187,619 Total Scheduled Replacements $184,83 Total Scheduled Replacements $49,600

37 Miller - Dodson Associates, Inc. Condition Assessment - Page D1 Towne Square Master Association 24 June 2016 CONDITION ASSESSMENT General Comments. Miller - Dodson Associates conducted a Reserve Study at Towne Square in June Towne Square is in generally good condition for a community constructed in A review of the Replacement Reserve Inventory will show that we are anticipating most of the components achieving their normal economic lives. The following comments pertain to the larger, more significant components in the Replacement Reserve Inventory and to those items that are unique or deserving of attention because of their condition or the manner in which they have been treated in the Replacement Reserve Analysis or Inventory. General Condition Statements. Excellent. 100% to 90% of Normal Economic Life expected, with no appreciable wear or defects. Good. 90% to 60% of Normal Economic Life expected, minor wear or cosmetic defects found. Normal maintenance should be expected. If performed properly, normal maintenance may increase the useful life of a component. Otherwise, the component is wearing normally. Fair. 60% to 30% of Normal Economic Life expected, moderate wear with defects found. Repair actions should be taken to extend the life of the component or to correct repairable defects and distress. Otherwise, the component is wearing normally. Marginal. 30% to 10% of Normal Economic Life expected, with moderate to significant wear or distress found. Repair actions are expected to be cost effective for localized issues, but normal wear and use are evident. The component is reaching the end of the Normal Economic Life. Poor. 10% to 0% of Normal Economic Life expected, with significant distress and wear. Left unattended, additional damage to underlying structures is likely to occur. Further maintenance is unlikely to be cost effective. SITE COMPONENTS Entry Monument and Signage. The Association maintains several entry monuments, site walls and monument piers. The monuments are made of brick masonry with precast copings and capitols and are in good overall condition, with very minimal open masonry joints or loose and broken masonry units. Precast capitols are considered to be long-life items and are therefore excluded from the Reserve Analysis but some repointing of brick may require partial resetting of precast copings and capitols. One of the main entrance monuments and signage Brick piers and walls are in good overall condition

38 Miller - Dodson Associates, Inc. Condition Assessment - Page D2 Towne Square Master Association 24 June 2016 The monument signage is engraved in stone panels and is considered a long life item, and is therefore excluded from this study. However, over time the gold leaf contrast on the characters will deteriorate and fade and should be refurbished to keep the signs appearance fresh and new. We recommend repointing and replacement of defective areas of the masonry as needed. The Association may want to consider applying a coat of Siloxane or other appropriate breathable sealant to mitigate water penetration and further degradation of the masonry work. For additional information, please see the appropriate links on our web site at Replace loose or broken bricks as needed Reset copings and repoint brick as needed In addition to the monuments, the Association is responsible for the community s various signage including stop, speed, street, and other major signs. Other small miscellaneous signs are not considered in this study and should be replaced using other funds. Numerous traffic signs including stop and fire lane signs are showing significant fading for their age. Other panel signs for the neighborhoods are in varied condition from poor to fair. Traffic signs are in marginal condition Traffic signs are in marginal condition Asphalt Pavement. The Association is responsible for the roadways and parking areas within the community; other roadways are maintained by the City. The Association maintains an inventory of asphalt pavement along the common streets and parking areas including the club house. The Association maintains an inventory of approximately 94,200 square feet of asphalt pavement. In general, the Association s asphalt pavements are in good condition, with minor cracking. Although the Manager reports that seal coating was performed in 2014 not all significant cracking was crack filled at that time.

39 Miller - Dodson Associates, Inc. Condition Assessment - Page D3 Towne Square Master Association 24 June 2016 View of clubhouse parking View of entrance drive As a rule of thumb, asphalt should be overlaid when approximately % of the surface area is cracked or otherwise deteriorated. The normal service life of asphalt pavement is typically 18 to 20 years. In order to maintain the condition of the pavement throughout the community and to ensure the longest life of the asphalt, we recommend a systematic and comprehensive maintenance program that includes: Cleaning. Long-term exposure to oil or gas breaks down asphalt. Because this asphalt pavement is generally not used for long-term parking, it is unlikely that frequent cleaning will be necessary. When necessary, spill areas should be cleaned or patched if deterioration has penetrated the asphalt. This is a maintenance activity, and we have assumed that it will not be funded from Reserves. Crack Repair. All cracks should be repaired with an appropriate compound to prevent water infiltration through the asphalt into the base. This repair should be done annually. Crack repair is normally considered a maintenance activity and is not funded from Reserves. Areas of extensive cracking or deterioration that cannot be made watertight should be cut out and patched. Seal Coating. The asphalt should be seal coated every five to seven years. For this maintenance activity to be effective in extending the life of the asphalt, cleaning and crack repair should be performed first. Numerous significant cracks are present Seal coating did not include all crack filling The pricing used is based on recent contracts for a two-inch overlay, which reflects the current local market for this work. For seal coating, several different products are available. The older, more traditional seal coating products are simply paints. They coat the surface of the asphalt and they are minimally effective. However, the newer

40 Miller - Dodson Associates, Inc. Condition Assessment - Page D4 Towne Square Master Association 24 June 2016 coating materials, such as those from Total Asphalt Management, Asphalt Restoration Technologies, Inc., and others, are penetrating. They are engineered, so to speak, to remoisturize the pavement. Asphalt pavement is intended to be flexible. Over time, the volatile chemicals in the pavement dry, the pavement becomes brittle, and degradation follows in the forms of cracking and potholes. Remoisturizing the pavement can return its flexibility and extend the life of the pavement. Lastly, the resource links provided on our website may provide insight into the general terms and concerns, including maintenance related advantages and disadvantages, which may help the Association better manage the asphalt pavements throughout the community: Concrete Work. The concrete work includes the community curbs, sidewalks, leadwalks, and other flatwork. The Association maintains an inventory of approximately 3,000 square feet of concrete flatwork. The Association maintains an inventory of approximately 7,800 linear feet of concrete curb and gutter. We have modeled for curb replacement when the asphalt pavement is overlaid. The overall condition of the concrete work is good with small areas of general deterioration, including cracking, spalling, and scale. The Manager reports a fair amount of curb replacement was performed in 2014, and that the Association has begun identifying damaged concrete walks and driveways for an upcoming replacement program. Slabs that are differentially settled have either been jacked or ground smooth to reduce or eliminate trip hazards. Walkway at clubhouse Typical community sidewalk The standards we use for recommending replacement are as follows: Trip hazard, ½ inch height difference. Severe cracking. Severe spalling and scale. Uneven riser heights on steps. Steps with risers in excess of 8¼ inches. Because it is highly unlikely that all of the concrete components will fail and require replacement in the period of the study, we have programmed funds for the replacement of these inventories and spread the funds over an extended timeframe to reflect the incremental nature of this work.

41 Miller - Dodson Associates, Inc. Condition Assessment - Page D Towne Square Master Association 24 June 2016 Typical curb and gutter Curb and gutter that has been marked for replacement The relevant links on our web site may provide useful information related to concrete terminology, maintenance, and repair. Please see Site Lighting. The Association is responsible for the operation of the facility s street and walkway lights. Site lighting is pole mounted fixtures. The lighting system was not on at the time of our site visit. We understand that the lighting system is in operating condition. The community has landscape accent lighting at the entrance areas. Many of these fixtures appear to have been replaced since the previous study was prepared. Street lights are in fair overall condition Many of the landscape fixtures have been replaced This study assumes replacement of the light fixtures every 1 to 20 years, and pole replacement every 30 to 40 years. When the light poles are replaced, we assume that the underground wiring will also be replaced. When a whole-scale lighting replacement project is called for, we recommend consulting with a lighting design expert. Many municipalities have design codes, guidelines, and restrictions when it comes to exterior illumination. In addition, new technology such LED and LIFI among others should be evaluated when considering replacement. Fencing. The Association maintains a variety of chain link, aluminum picket, and wood board perimeter fencing that is in generally good overall condition with some minor damaged and deteriorated areas. Fencing systems have a large number of configurations and finishes, and can usually be repaired as a maintenance activity by replacing individual components as they become damaged or weathered.

42 Miller - Dodson Associates, Inc. Condition Assessment - Page D6 Towne Square Master Association 24 June 2016 Protection from string machine damage during lawn maintenance can extend the useful life of some fence types. Protection from this type of damage is typically provided by applying herbicides around post bases or installing protective sheathing. Typical perimeter aluminum picket fence Pickets in various locations show damage Wood board fencing is installed along the property perimeter where the community abuts the adjacent public school property. The overall condition of the fencing is fair with a limited number of deficiencies, such as loose boards or damaged fence posts that appear to be repaired as needed. Pressure treated wood fencing should be cleaned and sealed every year or two. Typically the least cost fencing option, this type of fence can last 1 to 20 years if maintained properly. Wood perimeter fence has some leaning sections Fence includes loose or broken boards

43 Miller - Dodson Associates, Inc. Condition Assessment - Page D7 Towne Square Master Association 24 June 2016 Black painted aluminum picket fences are used at the highly visible public perimeters of the community along Independence Boulevard and Windsor Oaks Boulevard. These fences are typically 4-feet and 6-feet tall and in good overall condition with only minor damage from mowing and trimmers or trespassing. Aluminum fencing can have a useful life of 40 years or more. Periodic cleaning and touch-up painting may be required to keep the fence attractive. The Association is understood to be responsible for a significant quantity of chain link fencing surrounding a large storm water pond outside of the main limits of the Association. It is not clear if this was originally intended as a temporary fence left over from the construction but it is now considered a permanent fence. The fence has extensive vegetative overgrowth obscuring the majority from proper evaluation. But the visible portions of the fence vary from fair to poor condition. The vegetation will cause damage and reduce the life as well as make future replacement very difficult. Chain link fencing can have a useful life of 40 years or more. Periodic weed control may be required to protect and maintain the fence. It is believed the pond cannot be maintained at this time given the dense overgrowth of vegetation. For more information on fencing, visit our website link to the American Fence Association. Fence posts can have an extended useful life if these simple maintenance activities are performed. If left unattended, the pressure from expansive post rust can crack and damage the supporting material. Concrete Walls. A portion of the perimeter is provided with a seven-foot plus tall precast concrete wall installed in The wall appears to be driven posts with segments of lightweight concrete panels. This wall will have an indefinite economic life and is excluded except for a partial replacement in the event of damage by automobiles or differential settling. Chain link fence cannot be evaluated due to the overgrowth of vegetation View of concrete perimeter wall Misaligned sections were noted Several panels appear to be poorly fitted

44 Miller - Dodson Associates, Inc. Condition Assessment - Page D8 Towne Square Master Association 24 June 2016 Some portions of the wall are believed to be showing signs of settlement that result in poorly fit panels. These panels may be prone to damage is further movement occurs. Additionally, several trees are planted in close proximity to the wall and the limbs and roots may begin to encroach on the wall causing possible damage. Irrigation System. Our original estimate for the replacement costs for the irrigation system in conjunction with the 2011 Level 1 Study was based on the December 2008 drawings that were provided to us and our inspection of the visible components of the system. The irrigation system is reported to be in fair to good overall condition with the majority of zone controllers reported to have been replaced at this time. The estimate includes replacement of the major irrigation system components and periodic partial replacement of heads and piping. The Manager reports that the majority of controllers and several of the well pumps have been replaced in the past few years. Clubhouse area controller Main entrance area controller Site Furnishings. There is a variety of benches located throughout the common areas. Benches vary in size, style, value and condition. We have included partial periodic replacement assuming and average cost for benches. There are only a small number of trash receptacles and dog clean up stations. These are of relatively small value and would be replaced as needed and therefore are excluded. Site furnishings are in varied condition from fair to new Underground Utilities. The Association is responsible for the maintenance of the underground utility lines, including the storm water management pipes, water lines, and sanitary lines. Engineering drawings were originally used in the determination of these underground components when the Level 1 Study was prepared in Instead, we have provided an estimate of the approximate replacement costs based on our experience with other facilities of similar size and configuration. The inspection and evaluation of underground lines and structures is beyond the scope of work for this study. The Manager reports that one of the backflow preventers has been replace in the past few years but that there are no other known concerns with the systems at this time.

45 Miller - Dodson Associates, Inc. Condition Assessment - Page D9 Towne Square Master Association 24 June 2016 One of the community water main BFP vaults Typical curb inlet Storm Water Ponds. The community is served by six managed storm water ponds that have an approximate total surface area of 10,000 square feet. Ponds will accumulate silt and over time and lose the ability to store storm water at design levels, which could result in overflows and minor local flooding. In addition, water quality can be negatively affected by increased siltation and debris accumulation. Accordingly, ponds require periodic dredging. The Manager reports that the majority of the pond fountains have been replaced. Only one of the fountains was not operating at the time of the site visit. The Manager also reports that extensive additional rip rap has been installed as shoreline protection around the ponds. Typical pond and fountain A considerable amount of additional rip rap has been installed Estimates of cost and the frequency of dredging ponds are a function of many variables, including the volume of the pond, the siltation rate, the nature of the material being removed, the method of removal, and the haul distance to a site that will accept the spoil material. Most of this information is unknown and must be assumed for the purpose of reserve study planning. The siltation rate and cost of periodic dredging are speculative, varying greatly depending on local conditions. As a rule of thumb, dredging should be performed when approximately one-third of the volume of the pond has been filled with silt. In the absence of accurate information about the original depth of the pond and the local siltation rate, we have assumed that it will be necessary to remove one cubic yard of material over a third of the pond area every 20 years. We have assumed that the material being removed is free of heavy metals and hydrocarbons, and that it will be accepted as fill at a local landfill. A more accurate prediction of cost and cycles will require a hydrologic analysis and testing, which is beyond the scope of our study. Because of the significant cost of this work, it is recommended that the Association undertake studies to refine the assumptions of this study.

46 Miller - Dodson Associates, Inc. Condition Assessment - Page D10 Towne Square Master Association 24 June 2016 Based on our understanding, we recommend the following: Periodically remove accumulated debris and vegetation growing in the ponds. Survey the ponds to establish the current profile of the bottom. After five years of operation, have the pond re-surveyed to establish new depths to determine the local siltation rate. This will establish the frequency required for periodic dredging. Periodically sample and test for contaminants. Consult with local contractors to determine the cost of removing and disposing of the spoil, once its nature is known. Firms that specialize in this work can be typically found by internet searching Lake and Pond, Construction and Maintenance for your state or area of the country. Some states provide short lists of companies that specialize in this type of work. Please note that the periodic removal of overgrown vegetation from the pond is considered a maintenance activity and has not been reserved for or included in this study. CLUB HOUSE EXTERIOR Building Roofing. The asphalt shingle roofs on the Club House, Pool Pump House and the Pool Pavilions are in good condition. Asphalt shingle roofs can have a useful life of 20 to 0 years depending on the weight and quality of the shingle. Weathered, curled, and missing shingles are all indications that the shingles may be nearing the end of their useful life. Annual inspections are recommended, with cleaning, repair, and mitigation of vegetation performed as needed. Access, inspection, and repair work should be performed by contractors and personnel with the appropriate access equipment who are experienced in the types of roofing used for the facility. Roofing is in fair condition For additional information on roofs and roof maintenance, please see the appropriate links on our web site at Siding and Trim. The exteriors of the pool house and clubhouse buildings are clad in vinyl siding, brick veneer accents and aluminum clad trim. The siding and trim materials are in generally good overall condition. Vinyl siding and aluminum clad trim can have an extended useful life if not damaged by impact, heat, or other physical reasons. However, the coatings and finishes typically have a useful life and over time begin to weather, chalk, and show their age. For these reasons, we have modeled for the replacement of the siding and trim every 2 years.

47 Miller - Dodson Associates, Inc. Condition Assessment - Page D11 Towne Square Master Association 24 June 2016 Siding, trim, columns and accents are in good fair to good overall condition View of the pool house Synthetic products are used in the decorative architectural details. Often these are made of Polyvinylchloride or (PVC). PVC is known to have degradation problems with sunlight and in particular, ultra violet radiation. These products come from the manufacturer with several coats of primer, and painting after installation is required. Following the manufacturer s recommendations for cleaning, painting, and caulking, we expect this product to have a useful life of 40 years or more. Brick masonry is used as the main exterior cladding of the building. As masonry weathers, the mortar joints will become damaged by water penetration. As additional water gains access to the joints, repeated freezethaw cycles gradually increase the damage to the mortar joints. If allowed to progress, even the masonry units such as brick, block, and stone can have their surfaces affected and masonry units can become loose. In general, masonry is considered a long-life item and is therefore excluded from reserve funding. However, because weather and other conditions result in the slow deterioration of the mortar in masonry joints, we have included funding in this study for repointing. Repointing is the process of raking and cutting out damaged sections of mortar and replacing them with new mortar. Periodic repointing and local replacement of damaged masonry units will limit the damage done by moisture penetration. For this study, we assume that 10% of the masonry will require repointing every 10 years after approximately 30 years. For additional information about masonry and repointing, please view the relevant links at Windows and Doors. The Association is responsible for the common windows and exterior doors of the clubhouse and pool house buildings and the individual owners are responsible for the windows and doors attributed to their unit. The windows and doors are in generally good condition. Window and door units play an integral part in a facility s overall comfort, efficiency, and energy use. The quality of the installed units and the care taken in their installation and maintenance are major factors in their effectiveness and useful life. These units can have a useful life of 20 to 3 years or more depending on their use and other factors mentioned above. Doors are in fair condition

48 Miller - Dodson Associates, Inc. Condition Assessment - Page D12 Towne Square Master Association 24 June 2016 In general, we recommend coordinating the replacement of these units with other exterior work, such as siding and roof replacements. The weather tightness of the building envelope often requires transitional flashing and caulking that should be performed in coordination with each other. Warranties and advantages in economy of scale can often result in lower overall replacement costs and results that are more reliable. Lastly, coordinated replacements offer the opportunity to correct initial construction defects and improve the effectiveness of details with improved construction techniques and materials. For more information, please see our links at Windows are in fair condition CLUBHOUSE INTERIOR Flooring. The flooring in the Clubhouse includes both carpet tiles in the main meeting room and exercise room along with ceramic tile in the corridors, kitchen and restrooms. The tile is in good overall condition. Carpet has been replaced in the past few years (2012) with a higher quality carpet tile that should endure more wear and tear. Club house tile flooring Carpet tiles are in good condition Appliances, Cabinets & Counters. Counters and cabinets are in good overall condition. These components should provide a 30 year normal life under the current level of usage. The refrigerator has recently been replaced. Décor. The clubhouse includes a variety of décor items and window treatments that are in fair condition. These items typically receive very little wear & tear but are usually replaced to maintain current trends. Furnishings. The clubhouse is minimally furnished. These furnishings are of relatively modest quality and show heavy wear for their age, but they receive fairly minor use. The Manager has requested that the folding chairs and tables be added to this update. Partial view of kitchen

49 Miller - Dodson Associates, Inc. Condition Assessment - Page D13 Towne Square Master Association 24 June 2016 Restroom Finishes. The restroom vanities and toilet partitions are in good overall condition. These can have an indefinite life if not abused, but generally be replaced as part of a full restroom renovation when the finishes and plumbing fixtures require replacement. CLUBHOUSE PLUMBING, MECHANICAL & ELECTRICAL Toilet partitions are in good condition Plumbing. The Clubhouse plumbing includes a stainless steel kitchen sink, a janitor sink, hot water heater, and toilet room fixtures (lavatories, toilets and urinal) and outdoor showers for the pool area. The interior fixtures will typically provide a minimum of 30 years under normal use and with proper maintenance. The Manager reports that the shower head and faucet mixing valve for the outdoor showers have been replaced. The Manager reports no issues with any of the plumbing. Restroom plumbing is in good condition Kitchen plumbing is in good condition HVAC. The Clubhouse HVAC is comprised of two gas-fired air handling units located in the attic with the two compressors located outside. The close proximity of the shrubs screening the compressors may be reducing the effectiveness (or causing them to work harder). The community has also installed a smaller floor standing AC Unit in the exercise room since the previous study was prepared.

50 Miller - Dodson Associates, Inc. Condition Assessment - Page D14 Towne Square Master Association 24 June 2016 Lighting and Ceiling Fans. The Clubhouse interior lighting and ceiling fans are in good overall condition. These devices are generally replaced as needed, however, the decorative items will become obsolete (discontinued) and matching single replacements will be difficult. The Manager reports that the fixtures are being relamped with LED bulbs as they burn out. Entry System. The current system is a FOB entry access to allow users of the exercise room access without access to the entire clubhouse. The Manager reports that the Association is considering a replacement of the entry access system to the clubhouse. An allowance for a more robust system has been added to this update as requested. RECREATIONAL FACILITIES Swimming Pool. The community operates an outdoor pool and wading pool of concrete construction. Listed below are the major components of the pool facilities: Pool Shell. The shell for the swimming pool is in good condition. Fans and lighting are in good condition Pool Deck. The pool has a concrete deck. The overall condition of the deck is good with no tripping hazards. Whitecoat. The pool whitecoat is in good condition. We have assumed a service life of eight to ten years for the pool whitecoat. Waterline Tile. The waterline tile is in good condition. We have assumed that the waterline tile will be replaced or restored when the pool is whitecoated. Coping. The pool is edged with brick coping. The coping is in good condition. The Manager reports that the coping was redone with the waterline tile. Pump and Filter System. The filter systems for each pool are in good operating condition. The filtration and pump for the wading pool appear to have been replaced. Pool Fence. The swimming pool is enclosed by a metal fence that is in good overall condition with some fading of the original factory finish noted.

51 Miller - Dodson Associates, Inc. Condition Assessment - Page D1 Towne Square Master Association 24 June 2016 Partial view of the main pool View of the wading pool Pumps and filters are in good operating condition Waterline tile, coping and perimeter joint sealant was replace in 2014 Exercise Equipment. The Clubhouse fitness room includes six pieces of exercise equipment. One new piece of equipment has been added and the recumbent bike has been replaced. The original equipment shows a fair amount of usage but is still in marginal overall condition for their age. The Manager reports that the equipment is under a maintenance contract. The units are included for replacement assuming a similar model to those that are present. Partial view of exercise equipment

52 Miller - Dodson Associates, Inc. Condition Assessment - Page D16 Towne Square Master Association 24 June 2016 Tot Lots. The community maintains one tot lot adjacent to the clubhouse. The tot lot includes play structures, swing sets, miscellaneous play equipment, synthetic borders, and a wood chip surface. The tot lot is in generally good condition with minor wear and normal deterioration but no visible hazards. The wood chip surface is displaced or missing under one of the swings but appears to be adequate in most areas. The safety of each individual piece of playground equipment as well as the layout of the entire play area should be considered when evaluating a playground for safety. The installation and maintenance of the protective surfacing under and around all equipment is crucial. Please note that the evaluation of the equipment and these facilities for safety is beyond the scope of this work. Tot lot is in good overall condition Information for playground design and safety can be found in the "Public Playground Safety Handbook", U.S. Consumer Product Safety Commission (Pub Number 32). For a link to this handbook please see our web site at One of the two swing sets Borders display considerable fading and minor damage in some locations Our estimates for playground equipment are based on comparing photos of the existing equipment with equipment of a similar size in manufacturers catalogs. We use the pricing that is quoted by manufacturers for comparable equipment and add 30% for the disposal of the old equipment and installation of new equipment. This Condition Assessment is based upon our visual survey of the property. The sole purpose of the visual survey was an evaluation of the common elements of the property to ascertain the remaining useful life and the replacement costs of these common elements. Our evaluation assumed that all components met building code requirements in force at the time of construction. Our visual survey was conducted with care by experienced persons, but no warranty or guarantee is expressed or implied. End of Condition Assessment

53 Cash Flow Method Accounting Summary - Page CF1 CASH FLOW METHOD ACCOUNTING SUMMARY This Towne Square Master Association - Cash Flow Method Accounting Summary is an attachment to the Towne Square Master Association - Replacement Reserve Study dated Revised October 2, 2016 and is for use by accounting and reserve professionals experienced in Association funding and accounting principles. This Summary consists of four reports, the 2017, 2018, and 2019 Cash Flow Method Category Funding Reports (3) and a Three-Year Replacement Funding Report. CASH FLOW METHOD CATEGORY FUNDING REPORT, 2017, 2018, and Each of the 130 Projected Replacements listed in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of 10 categories. The following information is summarized by category in each report: Normal Economic Life and Remaining Economic Life of the Projected Replacements. Cost of all Scheduled Replacements in each category. Replacement Reserves on Deposit allocated to the category at the beginning and end of the report period. Cost of Projected Replacements in the report period. Recommended Replacement Reserve Funding allocated to the category during the report period as calculated by the Cash Flow Method. THREE-YEAR REPLACEMENT FUNDING REPORT. This report details the allocation of the $308,92 Beginning Balance (at the start of the Study Year) and the $323,01 of additional Replacement Reserve Funding in 2017 through 2019 (as calculated in the Replacement Reserve Analysis) to each of the 130 Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made using Chronological Allocation, a method developed by Miller Dodson Associates, Inc., and discussed below. The calculated data includes: Identification and estimated cost of each Projected Replacement scheduled in years 2017 through Allocation of the $308,92 Beginning Balance to the Projected Replacements by Chronological Allocation. Allocation of the $323,01 of additional Replacement Reserve Funding recommended in the Replacement Reserve Analysis in years 2017 through 2019, by Chronological Allocation. CHRONOLOGICAL ALLOCATION. Chronological Allocation assigns Replacement Reserves to Projected Replacements on a "first come, first serve" basis in keeping with the basic philosophy of the Cash Flow Method. The Chronological Allocation methodology is outlined below. The first step is the allocation of the $308,92 Beginning Balance to the Projected Replacements in the Study Year. Remaining unallocated funds are next allocated to the Projected Replacements in subsequent years in chronological order until the total of Projected Replacements in the next year is greater than the unallocated funds. Projected Replacements in this year are partially funded with each replacement receiving percentage funding. The percentage of funding is calculated by dividing the unallocated funds by the total of Projected Replacements in the partially funded year. At Towne Square Master Association the Beginning Balance funds all Scheduled Replacements in the Study Year through 2023 and provides partial funding (31%) of replacements scheduled in The next step is the allocation of the $107,684 of 2017 Cash Flow Method Reserve Funding calculated in the Replacement Reserve Analysis. These funds are first allocated to fund the partially funded Projected Replacements and then to subsequent years in chronological order as outlined above. At Towne Square Master Association the Beginning Balance and the 2017 Replacement Reserve Funding, funds replacements through 2023 and partial funds (9.0%) replacements in Allocations of the 2018 and 2019 Reserve Funding are done using the same methodology. The Three-Year Replacement Funding Report details component by component allocations made by Chronological Allocation.

54 Cash Flow Method Accounting Summary - Page CF CASH FLOW METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CF1 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: A Beginning Balance of $308,92 as of the first day of the Study Year, January 1, Total reserve funding (including the Beginning Balance) of $416,608 in the Study Year. No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2017 being accomplished in 2017 at a cost of $9,8. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study CASH FLOW METHOD CATEGORY FUNDING - TABLE CF1 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE SITE COMPONENTS 4 to 4 years 0 to 46 years $1,077,831 $8,18 $67,90 ($2,290) $10,800 SITE COMPONENTS (cont.) 6 to 3 years 0 to 30 years $272,26 $29,942 $12,789 ($6,86) $3,866 SITE COMPONENTS (cont.) 2 to 40 years 1 to 30 years $248,39 $49,133 $12,116 $61,249 SITE COMPONENT (cont.) to 30 years 3 to 18 years $294,979 $24,32 $9,808 $34,160 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 4 to 16 years $177,666 $4,30 $4,30 BUILDING INTERIOR (CH - Club House) 10 to 30 years 2 to 16 years $42,31 $11,123 $4,264 $1,386 BUILDING INTERIOR (cont.) 7 to 21 years 0 to 7 years $,129 $4,264 $802 $,066 SWIMMING POOL to 60 years 0 to 4 years $388,482 $40,310 ($700) $39,610 TOT LOT 1 years 4 years $40,86 $40,86 $40,86 EXERCISE EQUIPMENT 10 years 2 to 9 years $21,900 $19,400 $19,400

55 Cash Flow Method Accounting Summary - Page CF CASH FLOW METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CF2 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $406,73 on January 1, Total reserve funding (including the Beginning Balance) of $24,292 from 2017 through No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2018 being accomplished in 2018 at a cost of $17,143. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study CASH FLOW METHOD CATEGORY FUNDING - TABLE CF2 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE SITE COMPONENTS 4 to 4 years 0 to 4 years $1,077,831 $10,800 $12,839 ($7,43) $16,097 SITE COMPONENTS (cont.) 6 to 3 years 1 to 29 years $272,26 $3,866 $1,004 $36,870 SITE COMPONENTS (cont.) 2 to 40 years 0 to 29 years $248,39 $61,249 $66,463 ($9,600) $118,112 SITE COMPONENT (cont.) to 30 years 2 to 17 years $294,979 $34,160 $14,963 $49,124 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 3 to 1 years $177,666 $4,30 $4,30 BUILDING INTERIOR (CH - Club House) 10 to 30 years 1 to 1 years $42,31 $1,386 $1,132 $16,18 BUILDING INTERIOR (cont.) 7 to 21 years 1 to 6 years $,129 $,066 $417 $,483 SWIMMING POOL to 60 years 2 to 44 years $388,482 $39,610 $9,960 $49,70 TOT LOT 1 years 3 years $40,86 $40,86 $40,86 EXERCISE EQUIPMENT 10 years 1 to 8 years $21,900 $19,400 $906 $20,306

56 Cash Flow Method Accounting Summary - Page CF CASH FLOW METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CF3 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $497,294 on January 1, Total Replacement Reserve funding (including the Beginning Balance) of $631,976 from 2017 to No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2019 being accomplished in 2019 at a cost of $46,877. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study CASH FLOW METHOD CATEGORY FUNDING - TABLE CF3 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE SITE COMPONENTS 4 to 4 years 0 to 44 years $1,077,831 $16,097 $12,276 ($4,900) $163,472 SITE COMPONENTS (cont.) 6 to 3 years 0 to 28 years $272,26 $36,870 ($16,81) $20,0 SITE COMPONENTS (cont.) 2 to 40 years 1 to 28 years $248,39 $118,112 $90,748 $208,861 SITE COMPONENT (cont.) to 30 years 1 to 16 years $294,979 $49,124 $1,297 $0,421 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 2 to 14 years $177,666 $4,30 $4,30 BUILDING INTERIOR (CH - Club House) 10 to 30 years 0 to 14 years $42,31 $16,18 $1,303 ($1,890) $1,931 BUILDING INTERIOR (cont.) 7 to 21 years 0 to years $,129 $,483 $78 ($3,872) $2,189 SWIMMING POOL to 60 years 1 to 43 years $388,482 $49,70 $49,70 TOT LOT 1 years 2 years $40,86 $40,86 $40,86 EXERCISE EQUIPMENT 10 years 0 to 7 years $21,900 $20,306 $1,481 ($19,400) $2,387

57 Cash Flow Method Accounting Summary - Page CF CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING REPORT TABLE CF4 below details the allocation of the $308,92 Beginning Balance, as reported by the Association and the $323,01 of Replacement Reserve Funding calculated by the Cash Flow Method from 2017 to 2019, to the 130 Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made by Chronological Allocation, a method developed by Miller Dodson Associates, Inc., and outlined on Page CF1. The accuracy of the allocations is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $308,92 on January 1, Replacement Reserves on Deposit totaling $406,73 on January 1, Replacement Reserves on Deposit totaling $497,294 on January 1, Total Replacement Reserve funding (including the Beginning Balance) of $631,976 from 2017 to No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory from 2017 to 2019 being accomplished as scheduled in the Replacement Reserve Inventory at a cost of $73,87. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates, Inc., to arrange for an update of the Replacement Reserve Study. CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CF4 Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance SITE COMPONENTS 1 Asphalt pavement, seal coat (60%) 12,43 12,43 12,43 4,06 16,940 7,366 24,306 2 Asphalt pavement, seal coat (40%) 8,290 8,290 8,290 3,004 11,294 4,910 16,204 3 Asphalt pavement, overlay (60%) 98,942 30,894 63,09 93,989 4,92 98,942 98,942 4 Asphalt pavement, overlay (40%) 6,961 Concrete curb & gutter (20%) 248,00 6 Concrete curb & gutter (20%) 248,00 7 Concrete curb & gutter (20%) 248,00 8 Site Lighting, poles (33%) 3,983 9 Site Lighting, poles (33%) 3, Site Lighting, poles (33%) 3, Site Lighting, fixtures (33%) 7,43 7,43 7,43 (7,43) 12 Site Lighting, fixtures (33%) 7,43 7,43 7,43 7,43 7,43 13 Site Lighting, fixtures (33%) 7,43 2,3 4,810 7, ,43 7,43 14 Landscape lighting (partial) 3,300 3,300 3,300 3,300 3,300 1 Landscape lighting (partial) 4,900 4,900 4,900 4,900 (4,900) 16 Signage, miscellaneous (partial) 2,290 2,290 (2,290) 17 Signage, miscellaneous (partial) 3,490 3,490 3,490 3,490 3, Signage, miscellaneous (partial) 2,14 2,14 2,14 2,14 2,14 SITE COMPONENTS (cont.) 19 Community entry signs, refurbish 2,09 2,09 (2,09) 20 Brick monuments, repointing (partial) 4,770 4,770 (4,770) 21 Concrete sidewalk (6%) 20,0 6,262 12,789 19,01 1,004 20,0 20,0 22 6' Chain link fence 18, ' Concrete fence (partial) 13, ' Wood fence 16,81 16,81 16,81 16,81 (16,81) 2 8' Fence, aluminum picket 31, ' Fence, aluminum picket (partial) 71, ' Fence, aluminum picket (partial) 91, ' Fence, black iron picket ' Fence, black iron picket 1,60 SITE COMPONENTS (cont.) 30 Stormwater piping, 6" PVC (10%) 6,373 2,309 2,309 3,77 6, Stormwater piping, 10" PVC (10%) 4,949 1,793 1,793 2,932 4,72 32 Stormwater piping, 12" RCP (10%) 38,130 13,816 13,816 22,86 36, Stormwater piping, 1" RCP (10%) 7,33 2,68 2,68 4,34 7, Stormwater piping, 42" RCP (10%) 2,920 9,392 9,392 1,33 24,74 3 Stormwater piping, 48" RCP (2%) 34,918 12,62 12,62 20,683 33,33 36 Outfall structures (at lakes) (partial) 9,00 37 Curb inlets (partial) 10,980 3,978 3,978 6,04 10, Drop inlets (partial) 4, Irrigation, major components (partial) 10,000 10,000 10,000 10,000 20,000 20,000

58 Cash Flow Method Accounting Summary - Page CF6 CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CF4 cont'd Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance 40 Irrigation, major components (partial) 10,000 10,000 10,000 10,000 10, Irrigation, heads (partial) 4,000 13,249 2,1 1,800 1,60 (4,000) 13,449 2,369 1, Irrigation, piping & laterals (partial),600 11,200 11,200 2,029 (,600) 7,629 3,317 10, BMP well pumps 1,000 4,684 9,66 14, ,000 1, BMP well pumps 1,000,43,43 8,88 14,320 4 Sanitary sewer mains (partial) 19, Water mains (partial) 21, Sanitary lateral (club house) 2,00 48 Water lateral (club house) 3,300 SITE COMPONENT (cont.) 49 Dredging, Lake 1 26,6 0 Reset rip rap, Lake 1 (partial) 1,370 1 Dredging, Lake 2 17,9 2 Reset rip rap, Lake 2 (partial) 21,982 3 Dredging, Lake 3 17,112 4 Reset rip rap, Lake 3 (partial) 22,127 Dredging, Lake 4 14,283 6 Reset rip rap, Lake 4 (partial) 16,066 7 Dredging, Lake 3,121 8 Reset rip rap, Lake (partial) 28,942 9 Dredging, Lake 6 1,94 60 Reset rip rap, Lake 6 (partial) 1, Lake aerators (fountains) 13,400 13,400 13,400 13, Lake aerators (fountains) 13,400 4,184 8,4 12, ,400 13, Lake aerators (fountains) 13,400 13,400 13,400 13,400 13, Lake power units (partial) 2,190 2,190 2, ,984 1,297 4,281 6 Benches (partial) 1,980 1,980 1,980 1,980 1, Benches (partial) 1,980 1,980 1,980 1,980 1, Benches (partial) 1, ,263 1, ,980 1,980 BUILDING EXTERIOR (Pool House- 68 CH Shingle asphalt/fiberglass 11, CH Gutter & downspout, 6" aluminum 3, CH Siding, vinyl 14, CH Masonry veneer, repointing 2,20 2,20 2,20 2,20 2,20 72 CH Exterior Accessories (partial) 2,100 2,100 2,100 2,100 2, CH Exterior doors 4, CH Exterior windows 3,900 7 PH Shingle asphalt/fiberglass 1, PH Gutter & downspout, 6" aluminum PH Siding, vinyl 6 78 PH, Exterior doors 1, PP Shingle asphalt/fiberglass 10, PP - Pavillion wood framing 104,00 81 Veranda trellis framing 17,000 BUILDING INTERIOR (CH - Club H 82 CH Flooring, interior carpet 2,400 2,400 2,400 2,400 2, CH Flooring, ceramic 2, CH Miscellaneous Decor 1,990 1,990 1,990 1,990 1,990 8 CH Window Treatments 1,800 1,800 1,800 1,800 1, CH Kitchen counters 1, CH Kitchen cabinets 3, CH Kitchen appliances 1, CH Kitchen fridge CH Bathroom vanities 2, CH toilet compartments 6,47 92 CH gas fireplace 3, CH decorative lighting & ceiling fans 1,890 1,890 1,890 1,890 (1,890) 94 CH Plumbing fixtures (interior) 4,09 9 CH Outdoor showers 1, , CH Hot water heater CH HVAC System, gas fired 4,110 1,283 2,621 3, ,110 4, CH compressors 2, ,643 2, ,76 2,76 BUILDING INTERIOR (cont.) 99 Arm chairs, vinyl upholstered , (976) Bar stool, rattan back 2,116 2,116 2,116 2,116 (2,116) 101 Tall round table, wood Metal cafe chairs (780) 103 Checkers tables

59 Cash Flow Method Accounting Summary - Page CF7 CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CF4 cont'd Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance SWIMMING POOL 104 Adult Swimming pool, structure 234,00 10 Wading pool, structure 6, Swimming pool, whitecoat 36,7 107 Swimming pool, waterline tile 6, Swimming pool lights 3, Swimming pool, coping 13, Swimming pool, cover 8,760 8,760 8,760 8,760 17,20 17, Swimming pool pump (less than 1 hp) 1,200 1,200 1,200 1,200 2,400 2, Swimming pool pump motors Swimming pool pump (+ hp) 4,00 4,00 4,00 4,00 4, Swimming pool filter, Triton II,400,400,400,400, Swimming pool chemical feed system 2,400 2,400 2,400 2,400 2, Swimming pool filter, wading pool (700) 117 Swimming pool, concrete deck (20%) 18, Perimeter fence - 4' (metal) 20, Pool furniture, chaise lounge, vinyl 14,820 14,820 14,820 14,820 14, Pool furniture, table, round vinyl 3, Pool furniture, folding chairs, vinyl 4, Pool furniture, chairs, stacking vinyl 1,640 1,640 1,640 1,640 1,640 TOT LOT 123 Tot lot - MP structure (small) 26,000 26,000 26,000 26,000 26, Tot lot - swing 3,980 3,980 3,980 3,980 3, Tot lot - spring toy,200,200,200,200, Tot lot - synthetic border,68,68,68,68,68 EXERCISE EQUIPMENT 127 Treadmill, Precor C934 10,800 10,800 10,800 10,800 (10,800) 128 Elliptical trainer, Precor EFX,800,800,800,800 (,800) 129 Recumbent bike, Nautlisu NR ,800 2,800 2,800 2,800 (2,800) 130 Life Fitness Fit 1.0 CM 2, ,481 2,387

60 Component Method - Page CM1 COMPONENT METHOD $180,286 COMPONENT METHOD RECOMMENDED ANNUAL FUNDING OF REPLACEMENT RESERVES IN THE STUDY YEAR, General. The Component Method (also referred to as the Full Funded Method) is a very conservative mathematical model developed by HUD in the early 1980s. Each of the 130 Projected Replacements listed in the Replacement Reserve Inventory is treated as a separate account. The Beginning Balance is allocated to each of the individual accounts, as is all subsequent funding of Replacement Reserves. These funds are "locked" in these individual accounts and are not available to fund other Projected Replacements. The calculation of Recommended Annual Funding of Replacement Reserves is a multi-step process outlined in more detail on Page CM2. Component Method - Cumulative Receipts and Expenditures Graph $,000,000 Component Method - Cumulative Receipts Component Method - Year End Balance Projected Replacements - Cumulative Expenditures $4,04,36 $4,000,000 $3,400,088 $3,000,000 $2,000,000 $1,000,000 $1,104,448 $

61 Component Method - Page CM2 COMPONENT METHOD (cont'd) Current Funding Objective. A Current Funding Objective is calculated for each of the Projected Replacements listed in the Replacement Reserve Inventory. Replacement Cost is divided by the Normal Economic Life to determine the nominal annual contribution. The Remaining Economic Life is then subtracted from the Normal Economic Life to calculate the number of years that the nominal annual contribution should have been made. The two values are then multiplied to determine the Current Funding Objective. This is repeated for each of the 130 Projected Replacements. The total, $938,190, is the Current Funding Objective. For an example, consider a very simple Replacement Reserve Inventory with one Projected Replacement, a fence with a $1,000 Replacement Cost, a Normal Economic Life of 10 years, and a Remaining Economic Life of 2 years. A contribution to Replacement Reserves of $100 ($1, years) should have been made in each of the previous 8 years (10 years - 2 years). The result is a Current Funding Objective of $800 (8 years x $100 per year). Funding Percentage. The Funding Percentage is calculated by dividing the Beginning Balance ($308,92) by the Current Funding Objective ($938,190). At Towne Square Master Association the Funding Percentage is 32.9% Allocation of the Beginning Balance. The Beginning Balance is divided among the 130 Projected Replacements in the Replacement Reserve Inventory. The Current Funding Objective for each Projected Replacement is multiplied by the Funding Percentage and these funds are then "locked" into the account of each item. If we relate this calculation back to our fence example, it means that the Association has not accumulated $800 in Reserves (the Funding Objective), but rather at 32.9 percent funded, there is $263 in the account for the fence. Annual Funding. The Recommended Annual Funding of Replacement Reserves is then calculated for each Projected Replacement. The funds allocated to the account of the Projected Replacement are subtracted from the Replacement Cost. The result is then divided by the number of years until replacement, and the result is the annual funding for each of the Projected Replacements. The sum of these is $180,286, the Component Method Recommended Annual Funding of Replacement Reserves in the Study Year (2017). In our fence example, the $263 in the account is subtracted from the $1,000 Total Replacement Cost and divided by the 2 years that remain before replacement, resulting in an annual deposit of $368. Next year, the deposit remains $368, but in the third year, the fence is replaced and the annual funding adjusts to $100. Adjustment to the Component Method for interest and inflation. The calculations in the Replacement Reserve Analysis do not account for interest earned on Replacement Reserves, inflation, or a constant annual increase in Annual Funding of Replacement Reserves. The Component Method is a very conservative method and if the Analysis is updated regularly, adequate funding will be maintained without the need for adjustments. Component Method Data - Years 1 through 30 Year Beginning balance $308,92 Recommended annual funding $180,286 $174,62 $171,431 $163,731 $19,720 $1,002 $13,888 $14,012 $149,300 $149,486 Interest on reserves Expenditures $9,8 $17,143 $46,877 $62,440 $4,948 $4,83 $19,100 $168,863 $33,360 $181,79 Year end balance $479,36 $636,77 $761,328 $862,620 $967,391 $1,076,8 $1,211,346 $1,196,49 $1,312,43 $1,280,126 Cumulative Expenditures $9,8 $26,998 $73,87 $136,31 $191,263 $237,098 $26,198 $42,060 $48,420 $640,216 Cumulative Receipts $489,211 $663,773 $83,203 $998,934 $1,18,64 $1,313,66 $1,467,43 $1,621, $1,770,8 $1,920,341 Year Recommended annual funding $149,41 $13,448 $136,11 $136,11 $134,196 $134,196 $133,41 $128,034 $126,997 $12,760 Interest on reserves Expenditures $427,64 $44,000 $19,400 $140,61 $19,390 $166,419 $341,96 $11,469 $141,464 $266,081 Year end balance $1,002,012 $1,093,460 $1,210,17 $1,20,67 $1,320,481 $1,288,29 $1,079,718 $1,092,282 $1,077,81 $937,494 Cumulative Expenditures $1,067,780 $1,111,780 $1,131,180 $1,271,79 $1,291,18 $1,47,603 $1,799,60 $1,91,029 $2,06,493 $2,322,73 Cumulative Receipts $2,069,792 $2,20,240 $2,341,3 $2,477,469 $2,611,666 $2,74,862 $2,879,277 $3,007,311 $3,134,308 $3,260,068 Year Recommended annual funding $12,38 $12,366 $12,202 $124,97 $124,97 $124,97 $124,81 $124,81 $121,984 $121,984 Interest on reserves Expenditures $100,418 $90,48 $81,606 $38,336 $1,90 $198,797 $10,600 $294,911 $87,178 $19,9 Year end balance $962,434 $997,316 $1,040,912 $1,127,33 $1,236,901 $1,163,061 $1,277,312 $1,107,22 $1,142,08 $1,104,448 Cumulative Expenditures $2,422,991 $2,13,476 $2,9,082 $2,633,418 $2,649,008 $2,847,80 $2,88,40 $3,13,31 $3,240,493 $3,400,088 Cumulative Receipts $3,38,426 $3,10,792 $3,63,994 $3,760,91 $3,88,909 $4,010,866 $4,13,717 $4,260,67 $4,382,2 $4,04,36

62 Component Method Accounting Summary - Page CM3 COMPONENT METHOD ACCOUNTING SUMMARY This Towne Square Master Association - Component Method Accounting Summary is an attachment to the Towne Square Master Association - Replacement Reserve Study dated Revised October 2, 2016 and is for use by accounting and reserve professionals experienced in Association funding and accounting principles. This Summary consists of four reports, the 2017, 2018, and 2019 Component Method Category Funding Reports (3) and a Three-Year Replacement Funding Report. COMPONENT METHOD CATEGORY FUNDING REPORT, 2017, 2018, and Each of the 130 Projected Replacements listed in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of 10 categories. The following information is summarized by category in each report: Normal Economic Life and Remaining Economic Life of the Projected Replacements. Cost of all Scheduled Replacements in each category. Replacement Reserves on Deposit allocated to the category at the beginning and end of the report period. Cost of Projected Replacements in the report period. Recommended Replacement Reserve Funding allocated to the category during the report period as calculated by the Component Method. THREE-YEAR REPLACEMENT FUNDING REPORT. This report details the allocation of the $308,92 Beginning Balance (at the start of the Study Year) and the $26,279 of additional Replacement Reserve funding from 2017 to 2019 (as calculated in the Replacement Reserve Analysis) to each of the 130 Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made using the Component Method as outlined in the Replacement Reserve Analysis. The calculated data includes: Identification and estimated cost of each Projected Replacement schedule in years 2017 through Allocation of the $308,92 Beginning Balance to the Projected Replacements by the Component Method. Allocation of the $26,279 of additional Replacement Reserve Funding recommended in the Replacement Reserve Analysis in years 2017 through 2019, by the Component Method.

63 Component Method Accounting Summary - Page CM COMPONENT METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CM1 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: A Beginning Balance of $308,92 as of the first day of the Study Year, January 1, Total reserve funding (including the Beginning Balance) of $489,211 in the Study Year. No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2017 being accomplished in 2017 at a cost of $9,8. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study COMPONENT METHOD CATEGORY FUNDING - TABLE CM1 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE 0to46years SITE COMPONENTS 4 to 4 years 0 to 46 years $1,077,831 $163,674 $62,733 $2,290 $224,117 SITE COMPONENTS (cont.) 6 to 3 years 0 to 30 years $272,26 $34,06 $24,03 $6,86 $2,144 SITE COMPONENTS (cont.) 2 to 40 years 1 to 30 years $248,39 $3,060 $28,892 $31,91 SITE COMPONENT (cont.) to 30 years 3 to 18 years $294,979 $34,07 $18,176 $2,234 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 4 to 16 years $177,666 $2,68 $9,419 $3,104 BUILDING INTERIOR (CH - Club House) 10 to 30 years 2 to 16 years $42,31 $6,247 $3,623 $9,870 BUILDING INTERIOR (cont.) 7 to 21 years 0 to 7 years $,129 $1,189 $1,10 $2,294 SWIMMING POOL to 60 years 0 to 4 years $388,482 $27,064 $20,231 $700 $46,94 TOT LOT 1 years 4 years $40,86 $8,971 $6,379 $1,349 EXERCISE EQUIPMENT 10 years 2 to 9 years $21,900 $4,472 $,226 $9,698

64 Component Method Accounting Summary - Page CM COMPONENT METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CM2 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $479,36 on January 1, Total reserve funding (including the Beginning Balance) of $663,773 from 2017 through No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2018 being accomplished in 2018 at a cost of $17,143. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study COMPONENT METHOD CATEGORY FUNDING - TABLE CM2 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE SITE COMPONENTS 4 to 4 years 0 to 4 years $1,077,831 $224,117 $61,30 $7,43 $277,923 SITE COMPONENTS (cont.) 6 to 3 years 1 to 29 years $272,26 $2,144 $20,8 $72,729 SITE COMPONENTS (cont.) 2 to 40 years 0 to 29 years $248,39 $31,91 $28,892 $9,600 $1,243 SITE COMPONENT (cont.) to 30 years 2 to 17 years $294,979 $2,234 $18,176 $70,410 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 3 to 1 years $177,666 $3,104 $9,419 $44,24 BUILDING INTERIOR (CH - Club House) 10 to 30 years 1 to 1 years $42,31 $9,870 $3,623 $13,493 BUILDING INTERIOR (cont.) 7 to 21 years 1 to 6 years $,129 $2,294 $1,10 $3,399 SWIMMING POOL to 60 years 2 to 44 years $388,482 $46,94 $19,808 $66,402 TOT LOT 1 years 3 years $40,86 $1,349 $6,379 $21,728 EXERCISE EQUIPMENT 10 years 1 to 8 years $21,900 $9,698 $,226 $14,924

65 Component Method Accounting Summary - Page CM COMPONENT METHOD CATEGORY FUNDING REPORT Each of the 130 Projected Replacements included in the Towne Square Master Association Replacement Reserve Inventory has been assigned to one of the 10 categories listed in TABLE CM3 below. This calculated data is a summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory. The accuracy of this data is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $636,77 on January 1, Total Replacement Reserve funding (including the Beginning Balance) of $83,203 from 2017 to No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory in 2019 being accomplished in 2019 at a cost of $46,877. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates to arrange for an update of the Replacement Reserve Study COMPONENT METHOD CATEGORY FUNDING - TABLE CM3 NORMAL REMAINING ESTIMATED ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEAR CATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE SITE COMPONENTS 4 to 4 years 0 to 44 years $1,077,831 $277,923 $9,17 $4,900 $332,181 SITE COMPONENTS (cont.) 6 to 3 years 0 to 28 years $272,26 $72,729 $20,8 $16,81 $76,498 SITE COMPONENTS (cont.) 2 to 40 years 1 to 28 years $248,39 $1,243 $27,93 $79,196 SITE COMPONENT (cont.) to 30 years 1 to 16 years $294,979 $70,410 $18,176 $88,86 BUILDING EXTERIOR (Pool House- PH and C1 to 30 years 2 to 14 years $177,666 $44,24 $9,419 $3,943 BUILDING INTERIOR (CH - Club House) 10 to 30 years 0 to 14 years $42,31 $13,493 $3,623 $1,890 $1,226 BUILDING INTERIOR (cont.) 7 to 21 years 0 to years $,129 $3,399 $1,10 $3,872 $632 SWIMMING POOL to 60 years 1 to 43 years $388,482 $66,402 $19,808 $86,210 TOT LOT 1 years 2 years $40,86 $21,728 $6,379 $28,107 EXERCISE EQUIPMENT 10 years 0 to 7 years $21,900 $14,924 $,226 $19,400 $70

66 Component Method Accounting Summary - Page CM7 COMPONENT METHOD - THREE-YEAR REPLACEMENT FUNDING REPORT TABLE CM4 below details the allocation of the $308,92 Beginning Balance, as reported by the Association and the $26,279 of Replacement Reserve Funding calculated by the Cash Flow Method from 2017 to 2019, to the 130 Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made by Chronological Allocation, a method developed by Miller Dodson Associates, Inc., and outlined on Page CF1. The accuracy of the allocations is dependent upon many factors including the following critical financial data: Replacement Reserves on Deposit totaling $308,92 on January 1, Replacement Reserves on Deposit totaling $479,36 on January 1, Replacement Reserves on Deposit totaling $636,77 on January 1, Total Replacement Reserve funding (including the Beginning Balance) of $83,203 from 2017 to No expenditures from Replacement Reserves other than those specifically listed in the Replacement Reserve Inventory. All Projected Replacements scheduled in the Replacement Reserve Inventory from 2017 to 2019 being accomplished as scheduled in the Replacement Reserve Inventory at a cost of $73,87. If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates, Inc., to arrange for an update of the Replacement Reserve Study. COMPONENT METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CM4 Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance SITE COMPONENTS 1 Asphalt pavement, seal coat (60%) 12,43 1,36 2,767 4,132 2,767 6,900 2,767 9,667 2 Asphalt pavement, seal coat (40%) 8, ,84 2,7 1,84 4,600 1,84 6,44 3 Asphalt pavement, overlay (60%) 98,942 18,100 10,10 28,20 10,10 38,310 10,10 48,41 4 Asphalt pavement, overlay (40%) 6,961 8,446,229 13,67,229 18,904,229 24,132 Concrete curb & gutter (20%) 248,00 6,17 16,668 81,82 16,668 98,492 16,668 11,160 6 Concrete curb & gutter (20%) 248,00 39,397 7,468 46,86 7,468 4,333 7,468 61,801 7 Concrete curb & gutter (20%) 248,00 10,607,062 1,669,062 20,730,062 2,792 8 Site Lighting, poles (33%) 3,983,134 1,81 6,949 1,81 8,764 1,81 10,78 9 Site Lighting, poles (33%) 3,983 3,949 1,602,1 1,602 7,13 1,602 8,7 10 Site Lighting, poles (33%) 3,983 2,76 1,444 4,209 1,444,63 1,444 7, Site Lighting, fixtures (33%) 7,43 2,13 2,69 4,848 2,69 (7,43) Site Lighting, fixtures (33%) 7,43 1,66 1,177 2,833 1,177 4,011 1,177, Site Lighting, fixtures (33%) 7,43 1, , , ,3 14 Landscape lighting (partial) 3, ,414 1 Landscape lighting (partial) 4,900 1,008 1,297 2,306 1,297 3,603 1,297 (4,900) 16 Signage, miscellaneous (partial) 2, ,36 (2,290) Signage, miscellaneous (partial) 3, , , , Signage, miscellaneous (partial) 2, ,284 SITE COMPONENTS (cont.) 19 Community entry signs, refurbish 2, ,40 (2,09) Brick monuments, repointing (partial) 4,770 1,71 3,199 (4,770) Concrete sidewalk (6%) 20,0 2,07 2,07 2,07,014 2,07 7, ' Chain link fence 18,800 3,467 1,394 4,861 1,394 6,2 1,394 7, ' Concrete fence (partial) 13,900 1,221 1,13 2,373 1,13 3,26 1,13 4, ' Wood fence 16,81 4,429 4,129 8,8 4,129 12,686 4,129 (16,81) 2 8' Fence, aluminum picket 31,080 1,36 1,143 2,07 1,143 3,60 1,143 4, ' Fence, aluminum picket (partial) 71,70 8,0 3,93 12,48 3,93 16,411 3,93 20, ' Fence, aluminum picket (partial) 91,000 13,184,8 18,743,8 24,301,8 29, ' Fence, black iron picket ' Fence, black iron picket 1, SITE COMPONENTS (cont.) 30 Stormwater piping, 6" PVC (10%) 6, , , Stormwater piping, 10" PVC (10%) 4, ,48 32 Stormwater piping, 12" RCP (10%) 38,130 3,813 3,813 3,813 7,626 3,813 11, Stormwater piping, 1" RCP (10%) 7, , , Stormwater piping, 42" RCP (10%) 2,920 2,92 2,92 2,92,184 2,92 7,776 3 Stormwater piping, 48" RCP (2%) 34,918 3,492 3,492 3,492 6,984 3,492 10,47 36 Outfall structures (at lakes) (partial) 9, , , Curb inlets (partial) 10,980 1,098 1,098 1,098 2,196 1,098 3, Drop inlets (partial) 4, Irrigation, major components (partial) 10, ,33 2,994 2,33,329 2,33 7,66

67 Component Method Accounting Summary - Page CM8 COMPONENT METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CM4 cont'd Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance 40 Irrigation, major components (partial) 10,000 1,667 1,667 1,667 3,333 1,667, Irrigation, heads (partial) 4,000 2,000 2,000 2,000 (4,000) 2,000 2, Irrigation, piping & laterals (partial), ,339 3,261 2,339 (,600) 1,400 1, BMP well pumps 1, ,72 2,739 1,72 4,491 1,72 6, BMP well pumps 1,000 1,00 1,00 1,00 3,000 1,00 4,00 4 Sanitary sewer mains (partial) 19,000 1,83 1,83 1,83 3,167 1,83 4,70 46 Water mains (partial) 21,000 1,70 1,70 1,70 3,00 1,70,20 47 Sanitary lateral (club house) 2, Water lateral (club house) 3, SITE COMPONENT (cont.) 49 Dredging, Lake 1 26,6 3,790 1,340,130 1,340 6,470 1,340 7,810 0 Reset rip rap, Lake 1 (partial) 1,370 2, , , ,18 1 Dredging, Lake 2 17,9 2, , ,28 887,173 2 Reset rip rap, Lake 2 (partial) 21,982 3,137 1,109 4,24 1,109,34 1,109 6,462 3 Dredging, Lake 3 17,112 2, , , ,730 4 Reset rip rap, Lake 3 (partial) 22,127 2,914 1,067 3,982 1,067,049 1,067 6,116 Dredging, Lake 4 14,283 1, , , ,948 6 Reset rip rap, Lake 4 (partial) 16,066 2, , , ,441 7 Dredging, Lake 3,121 4,240 1,62,866 1,62 7,491 1,62 9,116 8 Reset rip rap, Lake (partial) 28,942 3,494 1,339 4,834 1,339 6,173 1,339 7,12 9 Dredging, Lake 6 1,94 1, , , , Reset rip rap, Lake 6 (partial) 1,892 1, , , ,12 61 Lake aerators (fountains) 13,400 1,489 1,489 1,489 2,978 1,489 4, Lake aerators (fountains) 13,400 1,67 1,67 1,67 3,30 1,67,02 63 Lake aerators (fountains) 13, ,83 2,387 1,83 4,223 1,83 6,08 64 Lake power units (partial) 2, ,314 6 Benches (partial) 1, , ,60 66 Benches (partial) 1, , Benches (partial) 1, BUILDING EXTERIOR (Pool House- 68 CH Shingle asphalt/fiberglass 11,070 1,80 8 2, , ,24 69 CH Gutter & downspout, 6" aluminum 3, , CH Siding, vinyl 14,280 2, , , , CH Masonry veneer, repointing 2, , ,48 72 CH Exterior Accessories (partial) 2, , , CH Exterior doors 4, , , CH Exterior windows 3, ,147 7 PH Shingle asphalt/fiberglass 1, PH Gutter & downspout, 6" aluminum PH Siding, vinyl PH, Exterior doors 1, PP Shingle asphalt/fiberglass 10,260 1, , , , PP - Pavillion wood framing 104,00 14,911,270 20,181,270 2,41,270 30, Veranda trellis framing 17,000 2, , , ,998 BUILDING INTERIOR (CH - Club H 82 CH Flooring, interior carpet 2, , CH Flooring, ceramic 2, CH Miscellaneous Decor 1, ,182 8 CH Window Treatments 1, , CH Kitchen counters 1, CH Kitchen cabinets 3, , CH Kitchen appliances 1, CH Kitchen fridge CH Bathroom vanities 2, CH toilet compartments 6, , , , CH gas fireplace 3, CH decorative lighting & ceiling fans 1, , (1,890) 94 CH Plumbing fixtures (interior) 4, ,204 9 CH Outdoor showers 1, CH Hot water heater CH HVAC System, gas fired 4, , , , CH compressors 2, ,072 BUILDING INTERIOR (cont.) 99 Arm chairs, vinyl upholstered (976) 100 Bar stool, rattan back 2, , ,93 23 (2,116) 101 Tall round table, wood Metal cafe chairs (780) 103 Checkers tables

68 Component Method Accounting Summary - Page CM9 COMPONENT METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CM4 cont'd Description of Estimated Allocation Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year # Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance SWIMMING POOL 104 Adult Swimming pool, structure 234,00 18,017 4,706 22,723 4,706 27,429 4,706 32,13 10 Wading pool, structure 6, , ,2 106 Swimming pool, whitecoat 36,7 3,32 3,32 3,32 6,60 3,32 9, Swimming pool, waterline tile 6, , , Swimming pool lights 3, , Swimming pool, coping 13, , , Swimming pool, cover 8, ,046 2,623 2,046 4,668 2,046 6, Swimming pool pump (less than 1 hp) 1, Swimming pool pump motors Swimming pool pump (+ hp) 4, , , , Swimming pool filter, Triton II, , , ,06 11 Swimming pool chemical feed system 2, , , Swimming pool filter, wading pool (700) Swimming pool, concrete deck (20%) 18,834 1,177 1,177 1,177 2,34 1,177 3, Perimeter fence - 4' (metal) 20,160 1, , , , Pool furniture, chaise lounge, vinyl 14,820 3,79 2,810 6,389 2,810 9,199 2,810 12, Pool furniture, table, round vinyl 3, Pool furniture, folding chairs, vinyl 4, , Pool furniture, chairs, stacking vinyl 1, TOT LOT 123 Tot lot - MP structure (small) 26,000,707 4,09 9,766 4,09 13,824 4,09 17, Tot lot - swing 3, , , , Tot lot - spring toy,200 1, , , , Tot lot - synthetic border,68 1, , , ,910 EXERCISE EQUIPMENT 127 Treadmill, Precor C934 10,800 2,489 2,770,260 2,770 8,030 2,770 (10,800) 128 Elliptical trainer, Precor EFX,800 1,337 1,488 2,82 1,488 4,312 1,488 (,800) 129 Recumbent bike, Nautlisu NR , , , (2,800) 130 Life Fitness Fit 1.0 CM 2,

69 Miller - Dodson Associates, Inc. Page 1 Overview, Standard Terms, and Definitions 1. COMMON INTEREST DEVELOPMENTS - AN OVERVIEW Over the past 40 years, the responsibility for community facilities and infrastructure around many of our homes has shifted from the local government to Community Associations. Thirty years ago, a typical new town house abutted a public street on the front and a public alley on the rear. Open space was provided by a nearby public park and recreational facilities were purchased ala carte from privately owned country clubs, swim clubs, tennis clubs, and gymnasiums. Today, 60% of all new residential construction, i.e. townhouses, single-family homes, condominiums, and cooperatives, is in Common Interest Developments (CID). In a CID, a homeowner is bound to a Community Association that owns, maintains, and is responsible for periodic replacements of various components that may include the roads, curbs, sidewalks, playgrounds, streetlights, recreational facilities, and other community facilities and infrastructure. The growth of Community Associations has been explosive. In 196, there were only 00 Community Associations in the United States. According to the 1990 U.S. Census, there were 130,000 Community Associations. Community Associations Institute (CAI), a national trade association, estimates there were more than 200,000 Community Associations in the year 2000, and that the number of Community Associations will continue to multiply. The shift of responsibility for billions of dollars of community facilities and infrastructure from the local government and private sector to Community Associations has generated new and unanticipated problems. Although Community Associations have succeeded in solving many short-term problems, many Associations have failed to properly plan for the tremendous expenses of replacing community facilities and infrastructure components. When inadequate replacement reserve funding results in less than timely replacements of failing components, home owners are exposed to the burden of special assessments, major increases in Association fees, and a decline in property values. 2. REPLACEMENT RESERVE STUDY The purpose of a Replacement Reserve Study is to provide the Association with an inventory of the common community facilities and infrastructure components that require periodic replacement, a general view of the condition of these components, and an effective financial plan to fund projected periodic replacements. The Replacement Reserve Study consists of the following: Replacement Reserve Study Introduction. The introduction provides a description of the property, reviews the intent of the Replacement Reserve Study, and lists documents and site evaluations upon which the Replacement Reserve Study is based. Section A Replacement Reserve Analysis. Many components owned by the Association have a limited life and require periodic replacement. Therefore, it is essential the Association have a financial plan that provides funding for the timely replacement of these components in order to protect the safety, appearance, and value of the community. In conformance with American Institute of Certified Public Accountant guidelines, a Replacement Reserve Analysis evaluates the current funding of Replacement Reserves as reported by the Association and recommends annual funding of Replacement Reserves by two generally accepted accounting methods; the Cash Flow Method and the Component Method. Miller - Dodson provides a replacement reserve recommendation based on the Cash Flow Method in Section A, and the Component Method in the Appendix of the report. Section B Replacement Reserve Inventory. The Replacement Reserve Inventory lists the commonly owned components within the community that require periodic replacement using funding from Replacement Reserves. The Replacement Reserve Inventory also provides information about components excluded from the Replacement Reserve Inventory whose replacement is not scheduled for funding from Replacement Reserves. Replacement Reserve Inventory includes estimates of the normal economic life and the remaining economic life for those components whose replacement is scheduled for funding from Replacement Reserves. Section C Projected Annual Replacements. The Calendar of Projected Annual Replacements provides a year-by-year listing of the Projected Replacements based on the data in the Replacement Reserve Inventory. Section D Condition Assessment. Several of the items listed in the Replacement Reserve Inventory are discussed in more detail. The Condition Assessment includes a narrative and photographs that document conditions at the property observed during our visual evaluation. The Appendix is provided as an attachment to the Replacement Reserve Study. Additional attachments may include supplemental photographs to document conditions at the property and additional information specific to the property cited in the Conditions Assessment (i.e. Consumer Product Safety Commission, Handbook for Public Playground Safety, information on segmental retaining walls, manufacturer recommendations for asphalt shingles or siding, etc). The Appendix also includes the Accounting Summary for the Cash Flow Method and the Component Method.

70 Miller - Dodson Associates, Inc. Page 2 Overview, Standard Terms, and Definitions 3. METHODS OF ANALYSIS The Replacement Reserve industry generally recognizes two different methods of accounting for Replacement Reserve Analysis. Due to the difference in accounting methodologies, these methods lead to different calculated values for the Minimum Annual Contribution to the Reserves. The results of both methods are presented in this report. The Association should obtain the advice of its accounting professional as to which method is more appropriate for the Association. The two methods are: Cash Flow Method. The Cash Flow Method is sometimes referred to as the "Pooling Method." It calculates the minimum constant annual contribution to reserves (Minimum Annual Deposit) required to meet projected expenditures without allowing total reserves on hand to fall below the specified minimum level in any year. First, the Minimum Recommended Reserve Level to be Held on Account is determined based on the age, condition, and replacement cost of the individual components. The mathematical model then allocates the estimated replacement costs to the future years in which they are projected to occur. Based on these expenditures, it then calculates the minimum constant yearly contribution (Minimum Annual Deposit) to the reserves necessary to keep the reserve balance at the end of each year above the Minimum Recommended Reserve Level to be Held on Account. The Cash Flow Analysis assumes that the Association will have authority to use all of the reserves on hand for replacements as the need occurs. This method usually results in a Minimum Annual Deposit that is less than that arrived at by the Component Method. Component Method. This method is a time tested mathematical model developed by HUD in the early 1980s, but has been generally relegated to a few States that require it by law. For the vast majority of Miller - Dodson s clients, this method is not used. The Component Method treats each item in the replacement schedule as an individual line item budget. Generally, the Minimum Annual Contribution to Reserves is higher when calculated by the Component Method. The mathematical model for this method works as follows: First, the total Current Objective is calculated, which is the reserve amount that would have accumulated had all of the items on the schedule been funded from initial construction at their current replacement costs. Next, the Reserves Currently on Deposit (as reported by the Association) are distributed to the components in the schedule in proportion to the Current Objective. The Minimum Annual Deposit for each component is equal to the Estimated Replacement Cost, minus the Reserves on Hand, divided by the years of life remaining. 4. REPLACEMENT RESERVE STUDY DATA Identification of Reserve Components. The Reserve Analyst has only two methods of identifying Reserve Components; (1) information provided by the Association and (2) observations made at the site. It is important that the Reserve Analyst be provided with all available information detailing the components owned by the Association. It is our policy to request such information prior to bidding on a project and to meet with the individuals responsible for maintaining the community after acceptance of our proposal. After completion of the Study, the Study should be reviewed by the Board of Directors, individuals responsible for maintaining the community, and the Association s accounting professionals. We are dependent upon the Association for correct information, documentation, and drawings. Unit Costs. Unit costs are developed using nationally published standards and estimating guides and are adjusted by state or region. In some instances, recent data received in the course of our work is used to modify these figures. Contractor proposals or actual cost experience may be available as part of the Association records. This is useful information, which should be incorporated into your report. Please bring any such available data to our attention, preferably before the report is commenced. Replacement vs. Repair and Maintenance. A Replacement Reserve Study addresses the required funding for Capital Replacement Expenditures. This should not be confused with operational costs or cost of repairs or maintenance.

71 Miller - Dodson Associates, Inc. Page 3 Overview, Standard Terms, and Definitions. DEFINITIONS Adjusted Cash Flow Analysis. Cash flow analysis adjusted to take into account annual cost increases due to inflation and interest earned on invested reserves. In this method, the annual contribution is assumed to grow annually at the inflation rate. Annual Deposit if Reserves Were Fully Funded. Shown on the Summary Sheet A1 in the Component Method summary, this would be the amount of the Annual Deposit needed if the Reserves Currently on Deposit were equal to the Total Current Objective. Cash Flow Analysis. See Cash Flow Method, above. Component Analysis. See Component Method, above. Contingency. An allowance for unexpected requirements. Roughly the same as the Minimum Recommended Reserve Level to be Held on Account used in the Cash Flow Method of analysis. Critical Year. In the Cash Flow Method, a year in which the reserves on hand are projected to fall to the established minimum level. See Minimum Recommended Reserve Level to be Held on Account. Current Objective. This is the reserve amount that would have accumulated had the item been funded from initial construction at its current replacement cost. It is equal to the estimated replacement cost divided by the estimated economic life, times the number of years expended (the difference between the Estimated Economic Life and the Estimated Life Left). The Total Current Objective can be thought of as the amount of reserves the Association should now have on hand based on the sum of all of the Current Objectives. Cyclic Replacement Item. A component item that typically begins to fail after an initial period (Estimated Initial Replacement), but which will be replaced in increments over a number of years (the Estimated Replacement Cycle). The Reserve Analysis program divides the number of years in the Estimated Replacement Cycle into five equal increments. It then allocates the Estimated Replacement Cost equally over those five increments. (As distinguished from Normal Replacement Items, see below) Estimated Economic Life. Used in the Normal Replacement Schedules. This represents the industry average number of years that a new item should be expected to last until it has to be replaced. This figure is sometimes modified by climate, region, or original construction conditions. Estimated Economic Life Left. Used in the Normal Replacement Schedules. Number of years until the item is expected to need replacement. Normally, this number would be considered to be the difference between the Estimated Economic Life and the age of the item. However, this number must be modified to reflect maintenance practice, climate, original construction and quality, or other conditions. For the purpose of this report, this number is determined by the Reserve Analyst based on the present condition of the item relative to the actual age. Estimated Initial Replacement. For a Cyclic Replacement Item (see above), the number of years until the replacement cycle is expected to begin. Estimated Replacement Cycle. For a Cyclic Replacement Item, the number of years over which the remainder of the component's replacement occurs. Minimum Annual Deposit. Shown on the Summary Sheet A1. The calculated requirement for annual contribution to reserves as calculated by the Cash Flow Method (see above). Minimum Deposit in the Study Year. Shown on the Summary Sheet A1. The calculated requirement for contribution to reserves in the study year as calculated by the Component Method (see above). Minimum Recommended Reserve Level to be Held on Account. Shown on the Summary Sheet A1, this number is used in the Cash Flow Method only. This is the prescribed level below which the reserves will not be allowed to fall in any year. This amount is determined based on the age, condition, and replacement cost of the individual components. This number is normally given as a percentage of the total Estimated Replacement Cost of all reserve components. Normal Replacement Item. A component of the property that, after an expected economic life, is replaced in its entirety. (As distinguished from Cyclic Replacement Items, see above.)

72 Miller - Dodson Associates, Inc. Page 4 Overview, Standard Terms, and Definitions Normal Replacement Schedules. The list of Normal Replacement Items by category or location. These items appear on pages designated. Number of Years of the Study. The numbers of years into the future for which expenditures are projected and reserve levels calculated. This number should be large enough to include the projected replacement of every item on the schedule, at least once. This study covers a 40-year period. One Time Deposit Required to Fully Fund Reserves. Shown on the Summary Sheet A1 in the Component Method summary, this is the difference between the Total Current Objective and the Reserves Currently on Deposit. Reserves Currently on Deposit. Shown on the Summary Sheet A1, this is the amount of accumulated reserves as reported by the Association in the current year. Reserves on Hand. Shown in the Cyclic Replacement and Normal Replacement Schedules, this is the amount of reserves allocated to each component item in the Cyclic or Normal Replacement schedules. This figure is based on the ratio of Reserves Currently on Deposit divided by the total Current Objective. Replacement Reserve Study. An analysis of all of the components of the common property of the Association for which a need for replacement should be anticipated within the economic life of the property as a whole. The analysis involves estimation for each component of its estimated Replacement Cost, Estimated Economic Life, and Estimated Life Left. The objective of the study is to calculate a recommended annual contribution to the Association's Replacement Reserve Fund. Total Replacement Cost. Shown on the Summary Sheet A1, this is total of the Estimated Replacement Costs for all items on the schedule if they were to be replaced once. Unit Replacement Cost. Estimated replacement cost for a single unit of a given item on the schedule. Unit (of Measure). Non-standard abbreviations are defined on the page of the Replacement Reserve Inventory where the item appears. The following standard abbreviations are used in this report: EA: each FT: feet LS: lump sum PR: pair SF: square feet SY: square yard

73 Miller - Dodson Associates, Inc. Page Video Answers to Frequently Asked Questions What is a Reserve Study? Who are we? What kind of property uses a Reserve Study? Who are our clients? Who conducts a Reserve Study? Reserve Specialist (RS) what does this mean? When should a Reserve Study be updated? What are the different types of Reserve Studies? What is in a Reserve Study and what is out? Improvement vs Component, is there a difference? What is my role as a Community Manager? Will the report help me explain Reserves to my clients?

74 Miller - Dodson Associates, Inc. Page 6 Video Answers to Frequently Asked Questions What is my role as a Board Member? Will a Reserve Study meet my community s needs? Community dues, how can a Reserve Study help? Will a study help keep my property competitive? How do I read the report? Will I have a say in what the report contains? Where do the numbers come from? Cumulative expenditures and funding, what? How are interest and inflation addressed? What should we look at when considering inflation? A community needs more help, where do we go? What is a Strategic Funding Plan?