Glengarry Condominium OA

Transcription

1 Washington Office Corporate Office 505 South 336 th St., Ste 620 Calabasas, CA Federal Way, WA Regional Offices TEL 253/ Phoenix, AZ FAX 253/ San Francisco, CA Denver, CO Full Reserve Study Honolulu, HI Las Vegas, NV Miami, FL Glengarry Condominium OA Bothell, WA Report #: For Period Beginning: January 1, 2017 Expires: December 31, 2017 Date Prepared: December 6, 2016

2 Hello, and welcome to your Reserve Study! W e don t want you to be surprised. This Report is designed to help you anticipate, and prepare for, the major common area expenses your association will face. Inside you will find: 1) The Reserve Component List (the Scope and Schedule of your Reserve projects) telling you what your association is Reserving for, what condition they are in now, and what they ll cost to replace. 2) An Evaluation of your current Reserve Fund Size and Strength (Percent Funded). This tells you your financial starting point, revealing your risk of deferred maintenance and special assessments. 3) A Recommended Multi-Year Reserve Funding Plan, answering the question What do we do now? More Questions? Visit our website at or call us at: 253/ Relax, it s from Association Reserves WA, LLC.

3 Table of Contents 3- Minute Executive Summary...i Reserve Study Summary...i Reserve Component List Table 1...ii Introduction, Objectives, and Methodology...1 Which Physical Assets are Funded by Reserves?...2 How do we establish Useful Life and Remaining Useful Life estimates?...2 How do we establish Current Repair/Replacement Cost Estimates?...2 How much Reserves are enough?...3 How much should we contribute?...4 What is our Recommended Funding Goal?...4 Projected Expenses...6 Expense Graph Figure Reserve Fund Status & Recommended Funding Plan...7 Funding Plan Graph Figure Cash Flow Graph Figure % Funded Graph Figure Table Descriptions...9 Reserve Component List Detail Table Contribution & Fund Breakdown Table Component Significance Table Year Reserve Plan Summary Table Year Reserve Plan Year by Year Detail Table Accuracy, Limitations, and Disclosures...20 Terms and Definitions...22 Component Details... Appendix Association Reserves WA, LLC.

4 3- Minute Executive Summary Association: Glengarry Condominium OA #: Location: Bothell, WA # of Units: 141 Report Period: January 1, 2017 through December 31, 2017 Findings/Recommendations as-of 1/1/2017: Projected Starting Reserve Balance:...$100,000* Current Fully Funded Reserve Balance:... $134,568 Average Reserve Deficit (Surplus) Per Unit:... $ %2017 Annual Full Funding Contributions:... $14,000 Baseline contributions (min to keep Reserves above $0):... $13,350 Recommended 2017 Special Assessment for Reserves:... $0 Most Recent Budgeted Reserve Contribution Rate:... $4,400 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves % Annual Inflation Rate % This is a Full Reserve Study, based on our site inspection on November 18, 2016 and meets or exceeds all requirements of the RCW. This study was prepared by a credentialed Reserve Specialist (RS ). Your Reserve Fund is currently 74% Funded. This means the association s special assessment & deferred maintenance risk is currently low. The objective of your multi-year Funding Plan is to fund your Reserves to a level where you will enjoy a low risk of such Reserve cash flow problems. *Although the Association does not currently have a separate, dedicated reserve account, the starting balance here is the amount in the operating account they consider to be reserve funds. Based on this starting point and your anticipated future expenses, our recommendation is to increase your Reserve contributions to the 100% level as noted above. The 100% Full contribution rate is designed to achieve this funding objective by the end of our 30-year report scope. No assets appropriate for Reserve designation were excluded. See photo appendix for component details and the basis of our assumptions. Association Reserves WA, LLC i

5 Table 1: Executive Summary Useful Rem. Current Life Useful Cost # Component (yrs) Life (yrs) Estimate 100 Concrete - Repair/Replace 5 3 $4, Private Roads - Repave $176, Private Roads - Repair 5 0 $4, Transmission Line Fence - Replace $4, Pond Fencing - Repair/Replace $29, Street Trees - Prune/Replace 10 0 $10, Detention Ponds - Maintain 3 2 $3, Private Catchbasins - Inspect/Clean 5 1 $2, Entry Monument - Replace $2, Mailboxes - Replace 20 7 $15, Trail/Court, Asphalt - Repairs 5 1 $5, Play Equipment - Replace 18 5 $15, Total Funded Components Note 1: a Useful Life of N/A means a one-time expense, not expected to repeat. Note 2: Yellow highlighted line items are expected to require attention in the initial year, green highlighted items are expected to occur within the first five years. Association Reserves WA, LLC ii

6 Assoc Introduction A Reserve Study is the art and science of anticipating, and preparing for, an association s major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a combination of research and welldefined computations, following consistent National Reserve Study Standard principles. The foundation of this and every Reserve Study is your Reserve Component List (what you are reserving for). This is because the Reserve Component List defines the scope and schedule of all your anticipated upcoming Reserve projects. Based on that List and your starting balance, we calculate the association s Reserve Fund Strength (reported in terms of Percent Funded ). Then we compute a Reserve Funding Plan to provide for the Reserve needs of the association. These form the three results of your Reserve Study. Reserve contributions are not for the future. Reserve contributions are designed to offset the ongoing, daily deterioration of your Reserve assets. Done well, a stable, budgeted Reserve Funding Plan will collect sufficient funds from the owners who enjoyed the use of those assets, so the association is financially prepared for the irregular expenditures scattered through future years when those projects eventually require replacement. Methodology For this Full Reserve Study, we started with a review of your Governing Documents, recent Reserve expenditures, an evaluation of how expenditures are handled (ongoing maintenance vs Reserves), and research into any well-established association precedents. We performed an on-site inspection to quantify and evaluate your common areas, creating your Reserve Component List from scratch. Association Reserves WA, LLC 1

7 Assoc Which Physical Assets are Funded by Reserves? There is a national-standard four-part test to determine which expenses should appear in your Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the remaining life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost (often between.5% and 1% of an association s total budget). This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How do we establish Useful Life and Remaining Useful Life estimates? 1) Visual Inspection (observed wear and age) 2) Association Reserves database of experience 3) Client History (install dates & previous life cycle information) 4) Vendor Evaluation and Recommendation How do we establish Current Repair/Replacement Cost Estimates? In this order 1) Actual client cost history, or current proposals 2) Comparison to Association Reserves database of work done at similar associations 3) Vendor Recommendations 4) Reliable National Industry cost estimating guidebooks Association Reserves WA, LLC 2

8 Assoc How much Reserves are enough? Reserve adequacy is not measured in cash terms. Reserve adequacy is found when the amount of current Reserve cash is compared to Reserve component deterioration (the needs of the association). Having enough means the association can execute its projects in a timely manner with existing Reserve funds. Not having enough typically creates deferred maintenance or special assessments. Adequacy is measured in a two-step process: 1) Calculate the value of deterioration at the association (called Fully Funded Balance, or FFB). 2) Compare that to the Reserve Fund Balance, and express as a percentage. Each year, the value of deterioration at the association changes. When there is more deterioration (as components approach the time they need to be replaced), there should be more cash to offset that deterioration and prepare for the expenditure. Conversely, the value of deterioration shrinks after projects are accomplished. The value of deterioration (the FFB) changes each year, and is a moving but predictable target. There is a high risk of special assessments and deferred maintenance when the Percent Funded is weak, below 30%. Approximately 30% of all associations are in this high risk range. While the 100% point is Ideal (indicating Reserve cash is equal to the value of deterioration), a Reserve Fund in the 70% -130% range is considered strong (low risk of special assessment). Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! Association Reserves WA, LLC 3

9 Assoc How much should we contribute? According to National Reserve Study Standards, there are four Funding Principles to balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. Second, a stable contribution is desirable because it keeps these naturally irregular expenses from unsettling the budget. Reserve contributions that are evenly distributed over current and future owners enable each owner to pay their fair share of the association s Reserve expenses over the years. And finally, we develop a plan that is fiscally responsible and safe for Boardmembers to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Boardmembers invite liability exposure when Reserve contributions are inadequate to offset ongoing common area deterioration. What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the value of deterioration is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. Evidence shows that associations in the % range enjoy a low risk of special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. Doing so allows the Reserve Fund to drop into the 0-30% range, where there is a high risk of special assessments & deferred maintenance. Since Baseline Funding still provides for the timely execution of all Reserve projects, and only the margin of safety is different, Baseline Funding contributions average only 10% - 15% less than Full Funding contributions. Threshold Funding is the title of all other Cash or Percent Funded objectives between Baseline Funding and Full Funding. Association Reserves WA, LLC 4

10 Assoc Site Inspection Notes During our site visit on November 18, 2016, we visually inspected all visible common area while compiling a photographic inventory, noting: current condition, make & model information where appropriate, apparent levels of care and maintenance, exposure to weather elements and other factors that may affect the components useful life. We met with board members and discussed past projects, current concerns and future plans. Association Reserves WA, LLC 5

11 Assoc Projected Expenses While this Reserve Study looks forward 30 years, we have no expectation that all these expenses will all take place as anticipated. This Reserve Study needs to be updated annually because we expect the timing of these expenses to shift and the size of these expenses to change. We do feel more certain of the timing and cost of near-term expenses than expenses many years away. Your first five years of projected Reserve expenses total $30,404. Adding the next five years, your first ten years of projected Reserve expenses are $93,204. Please be aware of your near-term expenses, which we are able to project more accurately than the more distant projections. The figure below summarizes the projected future expenses at your association as defined by your Reserve Component List. A summary of these expenses are shown in Table 5, while details of the projects that make up these expenses are shown in Table 6. Annual Reserve Expenses $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Years Figure 1 Association Reserves WA, LLC 6

12 Assoc Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $100,000 as-of the start of your Fiscal Year on January 1, As of January 1, 2017, your Fully Funded Balance is computed to be $134,568 (see Table 3). This figure represents the deteriorated value of your common area components. Comparing your Reserve Balance to your Fully Funded Balance indicates your Reserves are 74% Funded. Across the country, approx 2% of associations in this range experience special assessments or deferred maintenance. Recommended Funding Plan Based on your current Percent Funded and your near-term and long-term Reserve needs, we are recommending budgeted contributions of $14,000/year this Fiscal Year.The overall 30-yr plan, in perspective, is shown below. This same information is shown numerically in both Table 5 and Table 6. Annual Reserve Funding Recommended Alternate (Minimum) Current Budget $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ Years Figure 2 Association Reserves WA, LLC 7

13 Assoc The following chart shows your Reserve balance under our recommended Full Funding Plan, an alternate Baseline Funding Plan, and at your current budgeted contribution rate, compared to your always-changing Fully Funded Balance target. $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50, Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $ Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 120% Percent Funded Recommended Funding Plan Alternate (Minimum) Funding Plan Current Budget 100% 80% 60% 40% 20% 0% Years Figure 4 Association Reserves WA, LLC 8

14 Assoc Table Descriptions The tabular information in this Report is broken down into six tables. Table 1 is a summary of your Reserve Components (your Reserve Component List), the information found in Table 2. Table 2 is your Reserve Component List, which forms the foundation of this Reserve Study. This table represents the information from which all other tables are derived. Table 3 shows the calculation of your Fully Funded Balance, the measure of your current Reserve component deterioration. For each component, the Fully Funded Balance is the fraction of life used up multiplied by its estimated Current Replacement Cost. Table 4 shows the significance of each component to Reserve needs of the association, helping you see which components have more (or less) influence than others on your total Reserve contribution rate. The deterioration cost/yr of each component is calculated by dividing Current Replacement Cost by Useful Life, then that component s percentage of the total is displayed. Table 5: This table provides a one-page 30-year summary of the cash flowing into and out of the Reserve Fund, with a display of the Fully Funded Balance, Percent Funded, and special assessment risk for each year. Table 6: This table shows the cash flow detail for the next 30 years. This table makes it possible to see which components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves WA, LLC 9

15 Table 2: Reserve Component List Detail Rem. Useful Useful [ --- Current Cost Estimate --- ] # Component Quantity Life Life Best Case Worst Case 100 Concrete - Repair/Replace Poured in place 5 3 $3,000 $5, Private Roads - Repave ~64,000 GSF, asphalt $160,000 $192, Private Roads - Repair ~64,000 GSF, asphalt 5 0 $3,000 $5, Transmission Line Fence - Replace ~340 LF, wood, split rail $4,100 $5, Pond Fencing - Repair/Replace ~1,400 LF, coated chn lnk $25,200 $33, Street Trees - Prune/Replace Ash, pear, cherry, etc $9,500 $11, Detention Ponds - Maintain (2) stormwater ponds 3 2 $3,000 $3, Private Catchbasins - Inspect/Clean ~(28) metal road grates 5 1 $2,200 $3, Entry Monument - Replace Engraved rock $1,500 $2, Mailboxes - Replace (10) metal cluster stands 20 7 $13,000 $17, Trail/Court, Asphalt - Repairs ~1,300 GSF, asphalt 5 1 $4,000 $6, Play Equipment - Replace (1) wood medium structure 18 5 $12,500 $17, Total Funded Components Association Reserves WA, LLC 10

16 Table 3: Fully Funded Balance Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance 100 Concrete - Repair/Replace $4,000 X 2 / 5 = $1, Private Roads - Repave $176,000 X 13 / 30 = $76, Private Roads - Repair $4,000 X 5 / 5 = $4, Transmission Line Fence - Replace $4,750 X 2 / 20 = $ Pond Fencing - Repair/Replace $29,400 X 13 / 30 = $12, Street Trees - Prune/Replace $10,500 X 10 / 10 = $10, Detention Ponds - Maintain $3,250 X 1 / 3 = $1, Private Catchbasins - Inspect/Clean $2,850 X 4 / 5 = $2, Entry Monument - Replace $2,000 X 13 / 25 = $1, Mailboxes - Replace $15,000 X 13 / 20 = $9, Trail/Court, Asphalt - Repairs $5,000 X 4 / 5 = $4, Play Equipment - Replace $15,000 X 13 / 18 = $10,833 $134,568 Association Reserves WA, LLC 11

17 Table 4: Component Significance Current Useful Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance 100 Concrete - Repair/Replace 5 $4,000 $ % 120 Private Roads - Repave 30 $176,000 $5, % 121 Private Roads - Repair 5 $4,000 $ % 140 Transmission Line Fence - Replace 20 $4,750 $ % 141 Pond Fencing - Repair/Replace 30 $29,400 $ % 172 Street Trees - Prune/Replace 10 $10,500 $1, % 182 Detention Ponds - Maintain 3 $3,250 $1, % 185 Private Catchbasins - Inspect/Clean 5 $2,850 $ % 200 Entry Monument - Replace 25 $2,000 $80 0.6% 205 Mailboxes - Replace 20 $15,000 $ % 322 Trail/Court, Asphalt - Repairs 5 $5,000 $1, % 340 Play Equipment - Replace 18 $15,000 $ % 12 Total Funded Components $14, % Association Reserves WA, LLC 12

18 Table 5: 30-Year Reserve Plan Summary Fiscal Year Start: 01/01/17 Interest: 1.0% Inflation: 3.0% Reserve Fund Strength Calculations (All values as of Fiscal Year Start Date) Projected Reserve Balance Changes Starting Fully Special Loans or Reserve Funded Percent Assmt Reserve Special Interest Reserve Year Balance Balance Funded Risk Contribs. Assmts Income Expenses 2017 $100,000 $134, % Low $14,000 $0 $1,002 $14, $100,502 $138, % Low $14,700 $0 $1,043 $8, $108,159 $148, % Low $15,435 $0 $1,147 $3, $121,293 $165, % Low $16,207 $0 $1,278 $4, $134,407 $181, % Low $17,017 $0 $1,436 $ $152,860 $203, % Low $17,868 $0 $1,496 $25, $146,430 $199, % Low $18,761 $0 $1,518 $9, $157,336 $213, % Low $19,699 $0 $1,587 $18, $160,174 $218, % Low $20,684 $0 $1,667 $9, $173,341 $233, % Low $21,719 $0 $1,850 $ $196,910 $259, % Low $22,805 $0 $1,995 $19, $202,223 $266, % Low $23,945 $0 $2,075 $15, $212,877 $278, % Low $25,142 $0 $2,251 $2, $237,418 $304, % Low $26,399 $0 $2,488 $5, $260,432 $329, % Low $27,719 $0 $2,731 $4, $285,965 $356, % Low $29,105 $0 $2,988 $6, $311,826 $382, % Low $30,560 $0 $3,223 $12, $333,012 $404, % Low $32,088 $0 $1,774 $344, $22,008 $85, % High $33,693 $0 $316 $14, $41,120 $97, % Med $35,377 $0 $591 $ $77,088 $125, % Med $37,146 $0 $800 $32, $82,976 $122, % Med $37,518 $0 $949 $14, $106,839 $138, % Low $37,893 $0 $1,264 $ $145,995 $169, % Low $38,272 $0 $1,438 $43, $141,793 $158, % Low $38,654 $0 $1,619 $ $182,066 $192, % Low $39,041 $0 $1,983 $8, $214,715 $219, % Low $39,431 $0 $2,235 $23, $232,443 $233, % Low $39,826 $0 $2,368 $33, $241,317 $237, % Low $40,224 $0 $2,580 $9, $274,970 $268, % Low $40,626 $0 $2,928 $7,659 Association Reserves WA, LLC 13

19 Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) Fiscal Year Starting Reserve Balance $100,000 $100,502 $108,159 $121,293 $134,407 Annual Reserve Contribution $14,000 $14,700 $15,435 $16,207 $17,017 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,002 $1,043 $1,147 $1,278 $1,436 Total Income $115,002 $116,245 $124,741 $138,778 $152,860 # Component 100 Concrete - Repair/Replace $0 $0 $0 $4,371 $0 120 Private Roads - Repave $0 $0 $0 $0 $0 121 Private Roads - Repair $4,000 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $0 $0 141 Pond Fencing - Repair/Replace $0 $0 $0 $0 $0 172 Street Trees - Prune/Replace $10,500 $0 $0 $0 $0 182 Detention Ponds - Maintain $0 $0 $3,448 $0 $0 185 Private Catchbasins - Inspect/Clean $0 $2,936 $0 $0 $0 200 Entry Monument - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $5,150 $0 $0 $0 340 Play Equipment - Replace $0 $0 $0 $0 $0 Total Expenses $14,500 $8,086 $3,448 $4,371 $0 Ending Reserve Balance: $100,502 $108,159 $121,293 $134,407 $152,860 Association Reserves WA, LLC 14

20 Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) Fiscal Year Starting Reserve Balance $152,860 $146,430 $157,336 $160,174 $173,341 Annual Reserve Contribution $17,868 $18,761 $19,699 $20,684 $21,719 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,496 $1,518 $1,587 $1,667 $1,850 Total Income $172,224 $166,709 $178,622 $182,525 $196,910 # Component 100 Concrete - Repair/Replace $0 $0 $0 $5,067 $0 120 Private Roads - Repave $0 $0 $0 $0 $0 121 Private Roads - Repair $4,637 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $0 $0 141 Pond Fencing - Repair/Replace $0 $0 $0 $0 $0 172 Street Trees - Prune/Replace $0 $0 $0 $0 $0 182 Detention Ponds - Maintain $3,768 $0 $0 $4,117 $0 185 Private Catchbasins - Inspect/Clean $0 $3,403 $0 $0 $0 200 Entry Monument - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $18,448 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $5,970 $0 $0 $0 340 Play Equipment - Replace $17,389 $0 $0 $0 $0 Total Expenses $25,794 $9,373 $18,448 $9,184 $0 Ending Reserve Balance: $146,430 $157,336 $160,174 $173,341 $196,910 Association Reserves WA, LLC 15

21 Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) Fiscal Year Starting Reserve Balance $196,910 $202,223 $212,877 $237,418 $260,432 Annual Reserve Contribution $22,805 $23,945 $25,142 $26,399 $27,719 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,995 $2,075 $2,251 $2,488 $2,731 Total Income $221,710 $228,242 $240,270 $266,306 $290,881 # Component 100 Concrete - Repair/Replace $0 $0 $0 $5,874 $0 120 Private Roads - Repave $0 $0 $0 $0 $0 121 Private Roads - Repair $5,376 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $0 $0 141 Pond Fencing - Repair/Replace $0 $0 $0 $0 $0 172 Street Trees - Prune/Replace $14,111 $0 $0 $0 $0 182 Detention Ponds - Maintain $0 $4,499 $0 $0 $4, Private Catchbasins - Inspect/Clean $0 $3,945 $0 $0 $0 200 Entry Monument - Replace $0 $0 $2,852 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $6,921 $0 $0 $0 340 Play Equipment - Replace $0 $0 $0 $0 $0 Total Expenses $19,487 $15,365 $2,852 $5,874 $4,916 Ending Reserve Balance: $202,223 $212,877 $237,418 $260,432 $285,965 Association Reserves WA, LLC 16

22 Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) Fiscal Year Starting Reserve Balance $285,965 $311,826 $333,012 $22,008 $41,120 Annual Reserve Contribution $29,105 $30,560 $32,088 $33,693 $35,377 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,988 $3,223 $1,774 $316 $591 Total Income $318,058 $345,609 $366,875 $56,017 $77,088 # Component 100 Concrete - Repair/Replace $0 $0 $0 $6,810 $0 120 Private Roads - Repave $0 $0 $290,901 $0 $0 121 Private Roads - Repair $6,232 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $8,087 $0 141 Pond Fencing - Repair/Replace $0 $0 $48,594 $0 $0 172 Street Trees - Prune/Replace $0 $0 $0 $0 $0 182 Detention Ponds - Maintain $0 $0 $5,372 $0 $0 185 Private Catchbasins - Inspect/Clean $0 $4,573 $0 $0 $0 200 Entry Monument - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $8,024 $0 $0 $0 340 Play Equipment - Replace $0 $0 $0 $0 $0 Total Expenses $6,232 $12,597 $344,867 $14,896 $0 Ending Reserve Balance: $311,826 $333,012 $22,008 $41,120 $77,088 Association Reserves WA, LLC 17

23 Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) Fiscal Year Starting Reserve Balance $77,088 $82,976 $106,839 $145,995 $141,793 Annual Reserve Contribution $37,146 $37,518 $37,893 $38,272 $38,654 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $800 $949 $1,264 $1,438 $1,619 Total Income $115,034 $121,442 $145,995 $185,705 $182,066 # Component 100 Concrete - Repair/Replace $0 $0 $0 $7,894 $0 120 Private Roads - Repave $0 $0 $0 $0 $0 121 Private Roads - Repair $7,224 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $0 $0 141 Pond Fencing - Repair/Replace $0 $0 $0 $0 $0 172 Street Trees - Prune/Replace $18,964 $0 $0 $0 $0 182 Detention Ponds - Maintain $5,870 $0 $0 $6,414 $0 185 Private Catchbasins - Inspect/Clean $0 $5,302 $0 $0 $0 200 Entry Monument - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $9,301 $0 $0 $0 340 Play Equipment - Replace $0 $0 $0 $29,604 $0 Total Expenses $32,058 $14,603 $0 $43,912 $0 Ending Reserve Balance: $82,976 $106,839 $145,995 $141,793 $182,066 Association Reserves WA, LLC 18

24 Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) Fiscal Year Starting Reserve Balance $182,066 $214,715 $232,443 $241,317 $274,970 Annual Reserve Contribution $39,041 $39,431 $39,826 $40,224 $40,626 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,983 $2,235 $2,368 $2,580 $2,928 Total Income $223,090 $256,381 $274,637 $284,122 $318,524 # Component 100 Concrete - Repair/Replace $0 $0 $0 $9,152 $0 120 Private Roads - Repave $0 $0 $0 $0 $0 121 Private Roads - Repair $8,375 $0 $0 $0 $0 140 Transmission Line Fence - Replace $0 $0 $0 $0 $0 141 Pond Fencing - Repair/Replace $0 $0 $0 $0 $0 172 Street Trees - Prune/Replace $0 $0 $0 $0 $0 182 Detention Ponds - Maintain $0 $7,009 $0 $0 $7, Private Catchbasins - Inspect/Clean $0 $6,146 $0 $0 $0 200 Entry Monument - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $33,319 $0 $0 322 Trail/Court, Asphalt - Repairs $0 $10,783 $0 $0 $0 340 Play Equipment - Replace $0 $0 $0 $0 $0 Total Expenses $8,375 $23,938 $33,319 $9,152 $7,659 Ending Reserve Balance: $214,715 $232,443 $241,317 $274,970 $310,865 Association Reserves WA, LLC 19

25 Assoc Accuracy, Limitations, and Disclosures Washington disclosure, per RCW: The reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair or replacement of a reserve component. Because we have no control over future events, we do not expect that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect Reserve funds to continue to earn interest, so we believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. We can control measurements, which we attempt to establish within 5% accuracy through a combination of on-site measurements, drawings, and satellite imagery. The starting Reserve Balance and interest rate earned on deposited Reserve funds that you provided to us were considered reliable and were not confirmed independently. We have considered the association s representation of current and historical Reserve projects reliable, and we have considered the representations made by its vendors and suppliers to also be accurate and reliable. Component Useful Life, Remaining Useful Life, and Current Cost estimates assume a stable economic environment and lack of natural disasters. Because the physical condition of your components, the association s Reserve balance, the economic environment, and legislative environment change each year, this Reserve Study is by nature a one-year document. Because a long-term perspective improves the accuracy of near-term planning, this Report projects expenses for the next 30 years. It is our recommendation and that of the Financial Accounting Standards Board (FASB) that your Reserve Study be updated each year as part of the annual budget process. Association Reserves WA, LLC and its employees have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. James D. Talaga R.S., company president, is a credentialed Reserve Specialist (#66). All work done by Association Reserves WA, LLC is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the association s situation. Association Reserves WA, LLC 20

26 Assoc Component quantities indicated in this Report were developed by Association Reserves unless otherwise noted in our Site Inspection Notes comments. No destructive or intrusive testing was performed. This Report and this site inspection were accomplished only for Reserve budget purposes (to help identify and address the normal deterioration of properly built and installed components with predictable life expectancies). The Funding Plan in this Report was developed using the cash-flow methodology to achieve the specified Funding Objective. Association Reserves liability in any matter involving this Reserve Study is limited to our Fee for services rendered. Association Reserves WA, LLC 21

27 Assoc Terms and Definitions BTU DIA GSF GSY HP LF British Thermal Unit (a standard unit of energy) Diameter Gross Square Feet (area). Equivalent to Square Feet Gross Square Yards (area). Equivalent to Square Yards Horsepower Linear Feet (length) Effective Age: The difference between Useful Life and Remaining Useful Life. Note that this is not necessarily equivalent to the chronological age of the component. Fully Funded Balance (FFB): The value of the deterioration of the Reserve Components. This is the fraction of life used up of each component multiplied by its estimated Current Replacement. While calculated for each component, it is summed together for an association total. FFB = (Current Cost X Effective Age) / Useful Life Inflation: Interest: Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 6. Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded monthly using the rate defined in the Executive Summary. Annual interest earning assumption appears in the Executive Summary. Percent Funded: The ratio, at a particular point in time (the first day of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life (RUL): The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life (UL): The estimated time, in years, that a common area component can be expected to serve its intended function. Association Reserves WA, LLC 22

28 Assoc Component Details The primary purpose of the photographic appendix is to provide the reader with the basis of our funding assumptions resulting from our physical analysis and subsequent research. The photographs herein represent a wide range of elements that were observed and measured against National Reserve Study Standards to determine if they meet the criteria for reserve funding. 1) Common area maintenance repair & replacement responsibility 2) Components must have a limited life 3) Life limit must be predictable 4) Above a minimum threshold cost (board s discretion typically 1/2 to 1% of annual operating expenses). Some components are recommended for reserve funding, while others are not. The components that meet these criteria in our judgment are shown with corresponding maintenance, repair or replacement cycles to the left of the photo (UL = Useful Life or how often the project is expected to occur, RUL = Remaining Useful Life or how many years from our reporting period) and a representative market cost range termed Best Cost and Worst Cost below the photo. There are many factors that can result in a wide variety of potential costs, we are attempting to represent a market average for budget purposes. Where there is no UL, the component is expected to be a one-time expense. Where no pricing, the component deemed inappropriate for Reserve Funding. Association Reserves WA, LLC 23

29 Component Details Association Reserves, Assoc. #: /1/2016

30 Inventory Appendix Comp #: 100 Concrete - Repair/Replace Quantity: Poured in place Location: Sidewalks/curbs adjacent to private roads Funded?: Yes. History: None known Evaluation: Although soiled in most areas, no major damage/deterioraiton observed. Curb edges have stenciling which has been redone in the past out of the operating budget. Annual repair needs below the reserve funding thredhold (1% or more of total annual expenses) should be factored in the operating budget. However, In our experience, larger repair/replacement expenses emerge as the community ages that cannot be comfortably absorbed in the operating budget. Although currently it is difficult to predict timing, scope and costs of larger repairs, we recommend a periodic allowance as shown here for these larger costs. Evaluate frequently and track costs for adjustements to future reserve studies, if needed. As routine maintenance, inspect regularly and pressure wash for appearance. Repair any trip hazards (1/2 difference in height) immediately to ensure safety. Repair promptly as needed to prevent water penetrating into the base, which can cause further damage. Factors affecting the quality, service life of the concrete include; the preparation of the underlying soil and drainage, thickness and strength of concrete used, steel reinforcement (none likely), and amount and weight of vehicle traffic, if any and tree roots nearby. Useful Life: 5 years Remaining Life: 3 years Best Case: $ 3,000 Lower allowance Worst Case: $ 5,000 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

31 Comp #: 120 Private Roads - Repave Quantity: ~64,000 GSF, asphalt Location: Private roads: 195th Pl SE, 194th St SE, 24th Ave SE, 25th Ave SE, 25th Dr SE, 26th Ave SE, 192nd Pl SE, 26th Dr SE Funded?: Yes. History: None known Evaluation: Although a few local cracks, no widespread problems (cracking, excessive wear, alligator cracking) observed during our limited visual review. We noted a large crack at the 194th St SE cul-de-sac. This area should be inspected and local repairs made soon to avoid further damage. These roads have not been sealcoated in the past (see next component). These roads have adjacent concrete curbs/gutters, appeared crowned at center and have catchbasins installed. All of these factors help extend the life of the asphalt. Plan for large scale repaving as shown here. This component assumes local repairs are made as recommended in next component. Resurfacing is typically one of the larger expense items in a reserve study. When need to resurface is apparent within a couple of years, consult with geotechnical engineer for recommendations, specifications / scope of work and project oversight. As routine maintenance, keep surfaces clean and free of debris, ensure that drains are free flowing, repair cracks, and clean oil stains promptly. Assuming proactive maintenance, plan to resurface at roughly the time frame below. Resources: Pavement Surface Condition Field Rating Manual for Asphalt Pavement. DD5164EB34F5/0/AsphaltPavementBook.pdf Washington Asphalt Pavement Association Useful Life: 30 years Remaining Life: 17 years Best Case: $ 160,000 Lower allowance Worst Case: $ 192,000 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

32 Comp #: 121 Private Roads - Repair Quantity: ~64,000 GSF, asphalt Location: Private roads: 195th Pl SE, 194th St SE, 24th Ave SE, 25th Ave SE, 25th Dr SE, 26th Ave SE, 192nd Pl SE, 26th Dr SE Funded?: Yes. History: None known Evaluation: Although a few local cracks, no widespread problems (cracking, excessive wear, alligator cracking) observed during our limited visual review. We noted a large crack at the 194th St SE cul-de-sac. This area should be inspected and local repairs made soon to avoid further damage. These roads have not been sealcoated in the past (see next component). These roads have adjacent concrete curbs/gutters, appeared crowned at center and have catchbasins installed. All of these factors help extend the life of the asphalt. Since roads have not been seal coated in the past and are in mostly good condition at this time, we are not including funding here for sealcoat, however we are recommending periodic funding for local repairs/crack filling. The first cycle should include close examination/repairs at 194th at noted above (also, see photo here). These cycles/costs can vary greatly. Have evaluated by professional at least annually and adjust this component if needed. Useful Life: 5 years Remaining Life: 0 years Best Case: $ 3,000 Lower allowance Worst Case: $ 5,000 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

33 Comp #: 125 Bridge - Repair/Replace Quantity: ~39' X 16', concrete Location: Within Tract 997 at west end/cul-de-sac of Stafford Way Funded?: No. Snohomish County responsible to maintain History: None known Evaluation: This bridge is number BR 646 with Snohomish County and although located on Tract 997 owned by Glengarry Condominium OA, it is the responsibility of Snohomish County to maintain. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Comp #: 140 Transmission Line Fence - Replace Quantity: ~340 LF, wood, split rail Location: Both sides of the road along Stafford Way just east of 26th Dr. SE Funded?: Yes. History: Installed in 2015 Evaluation: This split rail fence was installed new in 2015 (no fencing in this area in the past) Plan to replace at roughly the time frame below. Typical failures occur from deterioration through end grains, contact with ground and surrounding landscape. As routine maintenance, inspect regularly for any damage and repair as needed. Avoid unnecessary contact with ground, sprinkler patterns and surrounding vegetation. Painting or staining the fence has a higher overall life cycle cost but may extend life somewhat in addition to aesthetic benefit (see next component). Useful Life: 20 years Remaining Life: 18 years Best Case: $ 4,100 Lower allowance Worst Case: $ 5,400 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

34 Comp #: 141 Pond Fencing - Repair/Replace Quantity: ~1,400 LF, coated chn lnk Location: Surrounding two drainage ponds (Tract 999 on West side of 23rd Dr. SE and Tract 997 off west end cul-desac of Stafford Way) Funded?: Yes. History: None known Evaluation: Vinyl coated, chain link fence appeared in generally good condition in areas we were able to view. Many areas not visible/accessible due to vegetation growth/limited access. For financial planning purposes, plan on replacing at roughly the time frame shown below. Evaluate fence as remaining useful life approaches zero years and adjust life accordingly. Chain link fencing is generally a low maintenance item. Inspect periodically and repair as needed. If corrosion is observed, apply rust inhibitor to prevent corrosion from decreasing the useful life. Useful Life: 30 years Remaining Life: 17 years Best Case: $ 25,200 Lower allowance Worst Case: $ 33,600 Higher allowance Cost Source: ARI Cost Database Association Reserves, Assoc. #: /1/2016

35 Comp #: 170 Landscape - Refurbish Quantity: Shrubs, grass, trees, etc Location: Common areas and maintenance at unit front yards Funded?: No. Useful life not predictable History: No major projects known Evaluation: Street trees are addressed in the next component. In addition to common area landscaping, the Association maintains the landscaping at each units front yard (mowing, etc.) however ultimately each individual unit owner is responsible for major plant replacement, etc. No major or widespread issues observed. Currently, landscaping maintenance is funded out of the operating budget with some additional funds budgeted for miscellaneous landscape work (extensions/improvements, bark, dead plants, etc.) As the association ages, many find the need or desire for larger scale refurbish projects not covered within the maintenance contract. These types of projects can include: bed renovations, major replanting, large scale bark or mulch replacements, turf renovations, drainage improvements, etc. At this time, with funding within the operating budget and no major problems observed, no reserve funding included here. Walk area each year with landscape contractor and perhaps landscape architect to assess the overall health, function and future needs of maintenance and refurbish to determine if supplemental reserve funding should be planned for. Useful Life: Remaining Life: Best Case: Lower allowance Worst Case: Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

36 Comp #: 172 Street Trees - Prune/Replace Quantity: Ash, pear, cherry, etc. Location: In planter strips adjacent to roads throughout community Funded?: Yes. History: None known Evaluation: The Association is responsible to maintain the planter strips adjacent to all roads throughout the community. These strips include grass and street trees. The Association has a proposal from NLS to crown clean and crown raise 144 of these trees which they plan to have completed in 2017 as shown here. We recommend periodic funding for these type of projects. If the community has not already done so, consult with a qualified arborist to assess the appropriateness of current plantings and for a long term plan for the care and management of the trees within the community, balancing aesthetic with protection of association assets. Tree roots can be damaging to walkways, irrigation, underground utilities and building structure. Adjust funding in reserve study updates if needed based on inspections/evaluations. Useful Life: 10 years Remaining Life: 0 years Best Case: $ 9,500 Lower allowance Worst Case: $ 11,500 Higher allowance Cost Source: Bid: Northwest Landscape Service Association Reserves, Assoc. #: /1/2016

37 Comp #: 175 Irrigation System - Repair/Replace Quantity: Pipes, valves, etc. Location: Common areas Funded?: No. Useful life not predictable History: None known Evaluation: Our visual observation of the irrigation system was limited as the majority of system components are below grade. At the time of this study, no information (plans and/or specifications) was provided to us regarding the extent of the irrigation system. No predictable large-scale costs at this time. Have your landscaper or irrigation specialist periodically unearth sections to check lines for any damage or deterioration. PVC can eventually become brittle and leak (typically not before the 40 year mark of life). As routine maintenance, inspect, test, and repair system as needed from operating budget. Follow proper winterization and spring startup procedures. If properly installed and bedded without defect, the lines could last for many years. Controls for the system can vary greatly in number, cost, and life expectancy - typically each controller is less than $500. Other elements (i.e. sprinkler heads, valves) within this system are generally lower cost and have a failure rate that is difficult to predict. These elements are better suited to be handled through the maintenance and operating budget, not reserves. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Association Reserves, Assoc. #: /1/2016

38 Comp #: 182 Detention Ponds - Maintain Quantity: (2) stormwater ponds Location: Phase 1 pond: Tract 999 on West side of 23rd Dr. SE and Phase 2 pond: Tract 997 off west end cul-de-sac of Stafford Way) Funded?: Yes. History: Some cleanup in 2016 at Phase 1 pond Evaluation: Analysis of the detention ponds are beyond the scope of a reserve study. As discussed with Snohomish County, Phase 1 pond empties to the county right-of-way and is inspected annually by the county. This pond was last inspected in 2016 and clean-up work was performed by the Association at the request of the county. Phase 2 pond empties to a wetland and according to Snohomish County, this type of pond does not get inspected by the county, however the Association is ultimately responsible to maintain it. No history of work at this pond is known. As discussed with board members, the clean-up in 2016 typically has occurred in the past at 3 to 5 year intervals. In addition to some funding within the Associations' annual budget, we recommend a periodic funding allowance as shown for these larger clean-up projects. This component should be adjusted if needed based on routine inspections. Useful Life: 3 years Remaining Life: 2 years Best Case: $ 3,000 Lower allowance Worst Case: $ 3,500 Higher allowance Cost Source: Client Cost History Association Reserves, Assoc. #: /1/2016

39 Comp #: 185 Private Catchbasins - Inspect/Clean Quantity: ~(28) metal road grates Location: Within private roads: 195th Pl SE, 194th St SE, 24th Ave SE, 25th Ave SE, 25th Dr SE, 26th Ave SE, 192nd Pl SE, 26th Dr SE Funded?: Yes. History: None known Evaluation: There are several catchbasins throughout the private roads in the community. No history of cleaning reported and Snohomish County reports they do not inspect these private catchbasins, however the Association is responsible to maintain these catchbasins. We recommend annual inspections and local cleaning as needed. In addition to this, we recommend periodic funding for comprehensive cleaning of these catchbasins as shown. Costs and timing can vary due to many factors that are difficult to determine. Useful Life: 5 years Remaining Life: 1 years Best Case: $ 2,200 Lower allowance Worst Case: $ 3,500 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

40 Comp #: 188 Critical Areas - Maintain Quantity: Wetlands, native growth Location: Various common area tracts throughout community Funded?: No. Useful life not predictable History: None known Evaluation: Native growth areas are typically a low maintenance item, as they are designed to be left permanently undisturbed in a substantially natural state. No basis for reserve funding at this time, incorporate into future reserve study updates if funding basis emerges. Comply with any and all governmental regulations regarding these areas. Activities that may be allowed in a native growth area are very limited, but may include maintenance of the drainage basin and removal of trees deemed hazardous by the local jurisdiction. Washington State s Growth Management Act (GMA) was established by the state legislature in The GMA requires the State and local governments to identify and protect critical areas and natural resource lands. Native growth areas are typically either recorded as an easement or as a separate tract/parcel of land. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Association Reserves, Assoc. #: /1/2016

41 Comp #: 200 Entry Monument - Replace Quantity: Engraved rock Location: Entry area of property, NE corner of 196th St and 23rd Ave. Funded?: Yes. History: None known Evaluation: Although dirt/soiled, the engraved monument rock appears stable with no major cracking/damaged noted. Over time this monument will wear/deteriorated. Best to plan for replacement funding as shown. Inspect periodically and clean/repair as needed. Useful Life: 25 years Remaining Life: 12 years Best Case: $ 1,500 Lower allowance Worst Case: $ 2,500 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

42 Comp #: 205 Mailboxes - Replace Quantity: (10) metal cluster stands Location: Adjacent to roads throughout community Funded?: Yes. History: None known Evaluation: Mailboxes appeared in stable condition with no major damage/deterioration noted. In our experience, it is best to plan for total replacement at roughly the time frame below due to constant usage and wear over time. As routine maintenance, inspect regularly, clean by wiping down for appearance, change lock cylinders, lubricate hinges, and repair as needed from operating budget. Note: USPS has a limited budget for replacement and should not be relied upon for purposes of long term financial planning. Useful Life: 20 years Remaining Life: 7 years Best Case: $ 13,000 Lower allowance Worst Case: $ 17,000 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

43 Comp #: 322 Trail/Court, Asphalt - Repairs Quantity: ~1,300 GSF, asphalt Location: Tract 995 Recreation Tract accessed at North end of 24th Ave. SE or east side of 25th Ave. SE between Units 89 and 90 Funded?: Yes. History: None known Evaluation: Some local cracks/damage at foot trails, however basketball court area is mostly stable. No coating noted at any of the surfaces. Due to variation in condition, we recommend funding for periodic allowances for repairs/replacement of sections. Have evaluated routinely and adjust this component if needed. At this point a comprehensive project is not included. Only foot traffic on these surfaces. Useful Life: 5 years Remaining Life: 1 years Best Case: $ 4,000 Lower allowance Worst Case: $ 6,000 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016

44 Comp #: 340 Play Equipment - Replace Quantity: (1) wood medium structure Location: Tract 995 Recreation Tract accessed at North end of 24th Ave. SE or east side of 25th Ave. SE between Units 89 and 90 Funded?: Yes. History: None known Evaluation: Some local wear of wood surfaces, however no obvious instabilty observed. Replacement cycles vary depending on the amount of use/abuse, however expect extensive park area renovation at roughly the time frame listed below. Inspect for stability, damage and excessive wear and utilize maintenance funds for any repairs needed between replacement cycles. There is a single metal bench in this area. We assume it can be replaced along with this equipment or as part of the operating budget when needed needed. Resource: (although not public, this document is a good guideline) Useful Life: 18 years Remaining Life: 5 years Best Case: $ 12,500 Lower allowance Worst Case: $ 17,500 Higher allowance Cost Source: ARI Cost Database: Similar Project Cost History Association Reserves, Assoc. #: /1/2016