F U L L R E S E RV E S T U DY R E P O RT

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1 Office: (888) Fax: (813) E Busch Blvd., Unit 171 Tampa, FL Hawks Point Community Development District F U L L R E S E RV E S T U DY R E P O RT For 30-Year Projection Period Beginning January 1, 2017 This report contains intellectual property developed by Custom Reserves, LLC specific to this engagement and cannot be reproduced or distributed to those who conduct reserve studies without the written consent of Custom Reserves, LLC. See the proposal for details concerning the use of this report.

2 Table of Contents Property Overview... 3 Executive Summary... 4 Financial Analysis... 5 Property Component Inventory... 7 Reserve Expenses Appendix A Condition Assessment... 9 Photographs Appendix B Expense Chart and Comparison Graph Cash Flow Funding Plan Appendix C Terms and Definitions Disclosures and Limitations Credentials Page 2

3 PROPERTY OVERVIEW R U S K I N, F L L A T I T U D E : ' " N L O N G I T U D E : ' " W Page 3

4 EXECUTIVE SUMMARY A site visit was conducted on May 4, There were 9 common area components identified that require reserve funding during the noninvasive, visual inspection of the community. Supplemental information to the physical inspection typically includes the following sources: 1. CDD board members, management and staff 2. Client s vendors Maintenance records of the reserve components where available 5. Project plans where available Hawks Point Community Development District (Hawks Point CDD) is a planned unit development located in Ruskin, Florida and is responsible for the common elements shared by 1058 property owners. The Hawks Point CDD infrastructure was built from 2008 through The development contains property site components. A Reserve Study comprises two parts: Physical Analysis Component Inventory Condition Assessment Estimated Useful Life Remaining Useful Life Replacement Cost Financial Analysis Fund Status Funding Plan The intention of the Reserve Study is to forecast the CDD's ability to repair or replace major components as they wear out in future years. This Reserve Study complies with or exceeds all applicable statutes and national standards. Page 4

5 FINANCIAL ANALYSIS This Reserve Study provides the 30-year cash flow analysis or pooling method to project and illustrate the reserve funding plan. The unaudited cash status of the reserve fund, as of March 31, 2017, as reported by Management and the Board is zero dollars. Hawks Point CDD did not budget for Reserves in the fiscal year FY The cash flow method of developing a reserve funding plan is where the reserve contributions are designed to offset the variable annual reserve expenses. Different reserve funding plans are tested against the anticipated schedule of reserve expenses until the desired adequate or sufficient funding goal is achieved. The cash flow recommended 2018 reserve contribution is $22,000. The CDD can then budget annual inflationary increases thereafter. The following table depicts the next 30 years of cash flow recommended contributions from Appendix C: Recommended Recommended Year Contribution Year Contribution 2018 $22, $31, $22, $32, $23, $33, $23, $33, $24, $34, $24, $35, $25, $36, $26, $37, $26, $38, $27, $38, $27, $39, $28, $40, $29, $41, $30, $42, $30, $43,800 1 FY 2017 starts October 1, 2017 and ends September 30, Page 5

6 The funding goal of the cash flow analysis is to keep the reserve balance above a sufficient, not excessive threshold when reserves are needed the most due to one or more years of significant expenses. This threshold or risk year falls in 2018 and 2035 due to deferred maintenance and perimeter fences respectively. The age and long-lived components of the property are considered in the accumulated year 2047 ending reserves of $275,694. External market factors incorporated in this Reserve Study are an inflation rate of 2.4% based on the Consumer Price Index published by the Bureau of Labor Statistics and interest rate of 0.5%. Most community bylaws provide that funds shall be held in a bank, with FDIC or similar insurance to cover all funds. The actual timing of the events depicted may not occur exactly as projected. However, items that are within a high degree of accuracy are measurements, pricing and interest on reserves. Internal changes such as deferred or accelerated projects, interest and inflation rates are likely. Updates to the Reserve Study incorporate these changes. To ensure equity in the adopted funding plan, ongoing annual Board reviews and an update of this Reserve Study with an on-site visit is recommended anywhere from two- to three-years depending on the complexity of the community and changes in external market factors. It is recommended by the American Institute of Certified Public Accountants (AICPA) that your Reserve Study be updated annually. Page 6

7 PROPERTY COMPONENT INVENTORY The analysis began by separating the property components into specific areas of responsibility for replacement and repair. These classes of property are as follows: 1. Reserve Components are defined by the following: CDD responsibility Limited useful life expectancies Predictable remaining useful life expectancies Replacement cost above a minimum threshold 2. Long-Lived Components are defined as those items without predictable remaining useful life expectancies: Foundations Structural Frames 3. Operating Budget Components or money provided for repairs and replacements relating but not limited to: General maintenance to the common elements Expenses less than $10,000 Infrequent Replacements Landscape Other Repairs normally funded through the Operating Budget A contingency is intended to provide a hedge for unforeseen events. There is no set rule for the amount of contingency to be set aside other than the use of common sense based on experience. 4. Home Owner Components: Homes and Lots Townhomes (Association) 5. Other Property Components: Lift Station (County) Light Poles (Electric Company) Pipes, Subsurface Utilities, Water and Sewer (County) Streets (Association) Page 7

8 The following 11X17 spreadsheets depict the reserve components, quantities, useful lives projected costs and estimated times of replacements for the next 30 years in Appendix A with a narrative condition assessment to follow. Page 8

9 RESERVE EXPENSES Appendix A Page 1 of 2 Hawks Point Projected Inflation Rate 2.4% Community Development District Line Total Per 1st Year of Useful Remaining Cost of Total Future Fiscal Item Reserve Component Cycle Phase Units Replacement Life Life Unit Replacement Costs of Year Quantity Quantity Years Years Cost per Phase Replacement Fences, Aluminum Linear Feet 2035 to $25.00 $24,500 $37,546 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 2 Fences, Vinyl 2,840 2,840 Linear Feet to $26.00 $73,840 $113,159 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3 Irrigation System, Clocks 5 5 Each 2020 to 5 3 $1, $6,000 $53,066 $0 $0 $0 $6,442 $0 $0 $0 $0 $7,254 $0 4 Irrigation System, Grounding, Phased 1 1 Allowance 2018 N/A 1 $7, $7,500 $15,544 $0 $7,680 $7,864 $0 $0 $0 $0 $0 $0 $0 5 Irrigation System, Well Stations 1 1 Allowance 2025 to 10 8 $33, $33,000 $154,575 $0 $0 $0 $0 $0 $0 $0 $0 $39,895 $0 6 Perimeter Wall, Paint Applications 1,980 1,980 Linear Feet to 7 1 $6.00 $11,880 $87,133 $0 $12,165 $0 $0 $0 $0 $0 $0 $14,362 $0 7 Ponds, Erosion Control, Partial 1 1 Allowance 2023 to 15 6 $50, $50,000 $139,921 $0 $0 $0 $0 $0 $0 $57,646 $0 $0 $0 8 Signage, Phased 1 1 Allowance to 20 9 $10, $10,000 $46,676 $0 $0 $0 $0 $0 $0 $0 $0 $0 $12,379 9 Storm Water System, Partial 1 1 Allowance 2033 to $30, $30,000 $43,845 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Reserve Study Update 1 1 Allowance to 3 2 $1, $1,100 $1,100 $1,100 Total Expenses $692,567 $0 $19,845 $8,964 $6,442 $0 $0 $57,646 $0 $61,510 $12,379 5/9/2017

10 RESERVE EXPENSES Hawks Point Community Development District Appendix A Page 2 of 2 Line Item Reserve Component Fences, Aluminum $0 $0 $0 $0 $0 $0 $0 $0 $37,546 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 2 Fences, Vinyl $0 $0 $0 $0 $0 $0 $0 $0 $113,159 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3 Irrigation System, Clocks $0 $0 $0 $8,167 $0 $0 $0 $0 $9,195 $0 $0 $0 $0 $10,353 $0 $0 $0 $0 $11,656 $0 $0 4 Irrigation System, Grounding, Phased $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 5 Irrigation System, Well Stations $0 $0 $0 $0 $0 $0 $0 $0 $50,572 $0 $0 $0 $0 $0 $0 $0 $0 $0 $64,108 $0 $0 6 Perimeter Wall, Paint Applications $0 $0 $0 $0 $0 $16,956 $0 $0 $0 $0 $0 $0 $20,018 $0 $0 $0 $0 $0 $0 $23,633 $0 7 Ponds, Erosion Control, Partial $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $82,275 $0 $0 $0 $0 $0 $0 $0 $0 $0 8 Signage, Phased $0 $0 $0 $0 $0 $0 $0 $0 $15,325 $0 $0 $0 $0 $0 $0 $0 $0 $18,971 $0 $0 $0 9 Storm Water System, Partial $0 $0 $0 $0 $0 $0 $43,845 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Reserve Study Update Total Expenses $0 $0 $0 $8,167 $0 $16,956 $43,845 $0 $225,798 $0 $0 $82,275 $20,018 $10,353 $0 $0 $0 $18,971 $75,764 $23,633 $0 5/9/2017

11 CONDITION ASSESSMENT The condition assessment of this Full Reserve Study includes narratives that describe the reserve components, documents specific problems and conditions based on representative samples. 1. Fences, Aluminum The CDD maintains 980 linear feet of aluminum fences located around the entrances. The aluminum fences are original and in good condition. The finish on aluminum fences is relatively maintenance free. Aluminum fences have a useful life of up to 25 years. Hawks Point CDD should budget for replacements by Fences, Vinyl The CDD maintains approximately 2,840 linear feet of vinyl fences located throughout the community. The fences are original and in good overall condition. As vinyl ages it becomes brittle and susceptible to damage. The useful life of vinyl fences is from 20- to 25-years. Hawks Point CDD should budget for replacements by The costs noted in the expense spreadsheet Appendix A include removal. 3. through 5. Irrigation System The CDD maintains an irrigation system. The irrigation system components include five clocks, five well stations, valves and piping. The system is mostly original and in fair to good overall reported condition. The system has a long useful life with the benefit of ongoing maintenance. This ongoing maintenance includes partial replacements as needed. The CDD should fund these minor partial replacements through the operating budget. The clocks have a useful life of up to five ears and the well stations have a useful life of up to 10 years. Hawks Point CDD should budget for replacement of the clocks every five years beginning by 2020 and the well stations by 2025 and every 10 years thereafter. The clocks need to be grounded in the near term per a conversation with the maintenance contractor. 6. Perimeter Wall, Paint Applications The CDD maintains approximately 1,980 linear feet of wall located at the north perimeter. Periodic applications of a protective paint finish or waterproof coating is essential in order to maintain the appearance and integrity of the wall. Page 9

12 The paint finishes are original and in fair overall condition. Paint finishes have a useful life from five- to seven-years. Hawks Point CDD should budget for the next paint finish application in 2018 and every seven years thereafter. 7. Ponds, Erosion Control The CDD maintains the ponds throughout the community. Hawks Point CDD utilizes a wet pond system. Wet ponds treat storm water runoff by utilizing sunlight and vegetation which breaks down, filters and cleanses pollutants. The system includes a series of pipes and drains throughout the property designed to carry storm water directly to the pond system for processing. The pond shorelines comprise 25,000 linear feet. The ponds are original and in good overall condition. Areas of shoreline erosion are noted. Page 3 of Appendix B depicts this condition in Figures 17 and 18. Shoreline erosion can be caused by a variety of natural factors including steep slopes, changes in water elevation and storm water runoff. Erosion can lead to partial dredging of the ponds particularly near the drainage inlet and outlet structures. Waterbodies of this type should utilize mapping and bathymetry to develop an effective management strategy by knowing the exact surface area, depths, structural locations and sediment accumulation. A bathymetric and sedimentation survey should be conducted every three- to five-years. State environmental officials urge a 10-foot buffer zone around ponds, where no pesticides, fertilizer, or other chemicals should be used, and native plants are left to flourish. That enables the plants to soak up nitrogen and phosphorus before too much flows to the lagoon or other fragile waters, where the two nutrients fuel fish-killing toxic algae blooms. Any native plants along the pond s littoral shelf should be left in place. Horticulture experts say to choose native plants or if they re already there, let them grow. The right plant in the right place can out-compete problem species such as cattails and torpedo grass that can clog up ponds. Native plants also provide cover for fish and habitat for tiny organisms that small fish eat to colonize. The plant roots also help hold the pond s banks in place. Page 10

13 Hawks Point CDD should budget for erosion control of up to five percent (5%) of the shorelines every 15 years or by 2023 and again by 2038 based on the age and condition of the ponds. The CDD should map the ponds and place marked stakes along the shorelines at multiple locations to monitor the effects of erosion. 8. Signage The CDD maintains monument signage located throughout the community entrances. The signage is original and in good condition overall. The signage has a useful life of 15- to 20-years. Signage is a discretionary item and the times of replacement can vary. Hawks Point should budget for phased replacements of up to fifty percent (50%) beginning by 2026 and every nine years therafter. 9. Storm Water System The storm water system comprises approximately 135 curb inlets and catch basins that collect storm water from the pavement. Storm water systems are so low maintenance that they are often overlooked. However, overlooking systems of this type leads to major problems. Over time, drain can become clogged with leaves and other debris. Maintenance of storm water systems is required in every municipality as a condition for use of the land to prevent adverse impacts on adjoining properties. Hawks Point CDD should routinely keep drains clear. The overall reported condition of the catch basins is good. The useful life of a storm water system varies up to 75 years. Achieving this useful life typically requires interim capital repairs or partial replacements. The CDD should anticipate occasional displacement of a catch basin and the surrounding pavement from erosion as time goes on. Erosion causes settlement of catch basins. The catch basin can shift and need replacement if left unrepaired. The CDD should plan to repair any displaced catch basins and partial pipe replacements as needed by The exact times and amount of capital repairs or replacements varies upon natural forces. The following Appendix B pictures depict the reserve components and specific conditions noted in the condition assessment. Page 11

14 1 Appendix B Figure 1 Aluminum Fence Figure 4 Vinyl Fence Figure 2 Aluminum Fence Figure 5 Vinyl Fence Figure 3 Vinyl Fence Figure 6 Irrigation Well Station

15 2 Appendix B Figure 7 Irrigation Well Station Figure 10 Irrigation Clock Figure 8 Irrigation Well Station Figure 11 Perimeter Wall Figure 9 Irrigation Well Station Figure 12 Perimeter Wall

16 3 Appendix B Figure 13 Road Depression at Sewer Line Figure 16 Pond Algae Figure 14 Pond Overview Figure 17 Pond Shoreline Erosion Figure 15 Pond Shoreline Plantings Figure 18 Pond Shoreline Erosion

17 4 Appendix B Figure 19 Crack in Pond Outlet Figure 20 Curb Inlet Concrete Spall Figure 21 Catch Basin

18 EXPENSE CHART AND COMPARISON GRAPH The Reserve Expenses reflect current and future local costs of replacements with anticipated inflation. The following chart illustrates the relative importance of the Reserve Expenses. Significance of Future Expenses Reserve Study Update 0.2% Storm Water System 27% Remaining Components 19% Fences 22% Irrigation System 32% The following graph depicts the next 30 years of Projected Expenses, Reserve Balances and cash flow Recommended Contributions: $300,000 $250,000 $200,000 $150,000 $100,000 Recommended Contributions Projected Expenses Reserve Balance $50,000 $0 Page 12

19 Appendix C Cash Flow Funding Plan or Pooling Method Hawks Point Community Development District FY Beginning of Year Reserves $0 $0 $2,155 $15,702 $32,338 $56,100 $80,581 $48,138 $73,779 $38,638 $53,051 $80,516 $108,819 $137,963 $159,787 $190,586 Recommended Reserve Contributions 0 22,000 22,500 23,000 23,600 24,200 24,800 25,400 26,000 26,600 27,200 27,900 28,600 29,300 30,000 30,700 Anticipated Interest Earned 0.5% Projected Expenses 0 19,845 8,964 6, , ,510 12, , ,956 Projected Year End Reserves $0 $2,155 $15,702 $32,338 $56,100 $80,581 $48,138 $73,779 $38,638 $53,051 $80,516 $108,819 $137,963 $159,787 $190,586 $205,283 Threshold/ Risk Year Beginning of Year Reserves $205,283 $193,864 $227,033 $35,370 $69,347 $104,294 $57,940 $74,412 $101,531 $140,039 $179,639 $220,337 $243,268 $210,520 $230,740 Recommended Reserve Contributions 31,400 32,200 33,000 33,800 34,600 35,400 36,200 37,100 38,000 38,900 39,800 40,800 41,800 42,800 43,800 Anticipated Interest Earned 0.5% 1, , ,102 1,216 1,053 1,154 Projected Expenses 43, , ,275 20,018 10, ,971 75,764 23,633 0 Projected Year End Reserves $193,864 $227,033 $35,370 $69,347 $104,294 $57,940 $74,412 $101,531 $140,039 $179,639 $220,337 $243,268 $210,520 $230,740 $275,694 Threshold/ Risk Year Notes: 1) FY 2017 Begins October 1, 2017 and Ends September 30, ) FY 2017 Beginning Reserve Balance as of: 3/31/2017 3) Interest Earned is compounded on the Beginning Year Reserve Balance, the first year is a partial amount earned 4) Taxes on the interest earned are considered negligible 5/9/2017

20 TERMS AND DEFINITIONS Cash Flow Method - A method of calculating Reserve contributions where contributions to the Reserve fund are designed to offset the variable annual expenditures from the Reserve fund. Different Reserve Funding Plans are tested against the anticipated schedule of Reserve expenses until the desired Funding Goal is achieved. Component - An individual line item in the Reserve Study developed or updated in the Physical Analysis. These elements form the building blocks of the Reserve Study. Components typically are: 1) Association responsibility, 2) with limited Useful Life expectancies, 3) predictable Remaining Useful Life expectancies, 4) above a minimum threshold cost, and 5) as required by local codes. Component Assessment and Valuation - The task of estimating Useful Life, Remaining Useful Life, and Repair or Replacement Costs for the Reserve components. This task is accomplished either with or without onsite visual observations, based on Level of Service selected by the client. Component Inventory - The task of selecting and quantifying Reserve Components. This task is accomplished through onsite visual observations, review of association design and organizational documents, and a review of established association precedents. Component Method - A method of calculating Reserve contributions where the total reserve contribution is based on the sum of contributions for individual components. Effective Age - The difference between Useful Life and Remaining Useful Life. Not always equivalent to chronological age, since some components age irregularly. Used primarily in computation. Financial Analysis - The portion of a Reserve Study where current status of the Reserves (measured as cash or Percent Funded) and a recommended Reserve contribution rate (Reserve Funding Plan) are derived. The Financial Analysis is one of the two parts of a Reserve Study. Fully Funded - 100% Funded. When the actual (or projected) Reserve balance is equal to the Fully Funded Balance. Fully Funded Balance (FFB) - Total Accrued Depreciation. An indicator against which Actual (or projected) Reserve balance can be compared. In essence, it is the Reserve balance that is proportional to the current Repair/replacement cost and the fraction of life used up. This number is calculated for each component, them summed together for an association total. Two formulae can be utilized, depending on the provider s sensitivity to interest and inflation effects. Note: both yield identical results when interest and inflation are equivalent. Funding Goals - Independent of methodology utilized, the following represent the basic categories of Funding Plan goals. Page 13

21 Baseline Funding - Establishing a Reserve funding goal of keeping the Reserve cash balance above zero. Fully Funding - Setting a Reserve funding goal of attaining and maintaining Reserves at or near 100% funded. Statutory Funding - Establishing a Reserve funding goal of setting aside the specific minimum amount of Reserves required by local statues. Threshold Funding - Establishing a Reserve funding goal of keeping the Reserve balance above a specified dollar or Percent Funded amount. Depending on the threshold this may be more or less conservative than Fully Funded. Funding Plan - An Association s plan to provide income to a Reserve fund to offset anticipated expenditures from that fund. Minimum Balance - A minimum Reserve balance established by the client. Physical Analysis - The portion of the Reserve Study where the Component inventory, Condition Assessment and Life Adjustment and Valuation tasks are performed. This represents one of the two parts of the Reserve Study. Remaining Useful Life (RUL) - Also referred to as Remaining Life (RL). The estimated time, in years, that a reserve component can be expected to continue to serve its intended function. Replacements anticipated to occur in the initial or base year have zero Remaining Useful Life. Reserve Assessments - The portion of assessments contributed to the Reserve Fund. Reserve Balance - Actual or projected funds as of a particular point in time that the association has identified for use to defray the future repair or replacement of those major components which the association is obligated to maintain. Also known as Reserves, Reserve Accounts, Cash Reserves. Special Assessment - An assessment levied on the members of an association in addition to regular assessments. Special Assessments are often regulated by Governing Documents or local statutes. Straight Line - A formula used to calculate the annual reserve fund contribution for a specific component. Projected replacement cost divided by the useful life equals the annual payment. Useful Life (UL) - Total Useful Life or Depreciable Life. The estimated time, in years, that a reserve component can be expected to serve its intended function in its present application or installation. Page 14

22 DISCLOSURES AND LIMITATIONS No destructive testing was performed. Latent defects in design or construction are excluded from this report. There are no material issues to our knowledge that have not been disclosed to the client that would affect the integrity of this Reserve Study report. Custom Reserves has no interests with the client other than this Reserve Study. Component quantities and estimates of costs indicated in this Report were developed by Custom Reserves unless otherwise noted in our Condition Assessment comments. The sources for the costs outlined in the study include experience, historical information and R.S. Means, Incorporated. This report should be used for budget and planning purposes only. CREDENTIALS PAUL GRIFONI Licensed Home Inspector EDUCATION - University of Massachusetts - Bachelor of Science in Engineering PROFESSIONAL AFFILIATIONS / DESIGNATIONS Reserve Specialist (RS) - Community Associations Institute Professional Reserves Analyst (PRA) - Association of Professional Reserve Analysts Page 15