Reserve Fund Study Planning

Transcription

1 Reserve Fund Study Planning

2 What is a reserve fund and why is it important? The study evaluates the amount of money in the reserve fund to see it is sufficient to cover the repair and replacement of common elements of the condo corporation. The condominium common elements are inspected, described and evaluated for condition by the appraiser. The replacement or repair cost new is estimated, as well as the remaining economic life or time to replacement for each common element.

3 What is a reserve fund and why is it important? It is a financial planning document as it takes in account the effects of annual inflation on building costs and the amount of potential interest which could be earned by the reserve fund during the years it is accumulating in anticipation of the replacement of big ticket common elements. It projects over the long term (at least 30 years, as this is a requirement of the legislation) the financial health of the condo corporation s reserve fund, and focuses on long term capital goals. If your condominium corporation would like a more detailed building audit, we partner with various engineering firms, so this service would be available in conjunction with the reserve fund study process.

4 What is a reserve fund and why is it important? It helps plan ahead for necessary expenses and helps avoid special assessments cash calls Helps the condo corporation be more proactive in repair and maintenance to help defer replacement of major capital items. A reserve fund in a healthy state helps the resale value and confidence of mortgage lenders in financing of a condo unit. Buyers will have more confidence that they don t have to come up with large amounts of cash to fix capital items if the reserve fund shows a healthy balance to repair and replace common elements.

5 The Condominium Act, Manitoba Information on the new Condominium Act and Regulations can be found on the Government of Manitoba website at Links to new Act and Regulations Amended act which were in force February 1, New regulations which were in force February 1, 2015

6 Who can do reserve studies? (From Condo regulation)

7 Why choose an appraiser? 1. We are experienced in costing buildings and interpreting cost manuals 2. We have experience inspecting buildings and recognizing potential problems as displayed by current building conditions. 3. We are skilled in estimating the remaining economic life of a building component. 4. This is a financial analysis we are trained in discounted cash flows and other financial analysis such as what if analysis 5. We have the skills in report writing and have experience in client communication 6. We are regulated by the Canadian Uniform Standards of Professional Appraisal Practise, which has a specific Reserve Fund Study Standard

8 Typical Reserve Fund Procedure Talk to Condo Board/President or other Representative. Determine what the common elements are, the number of units, type of condo structure Within a week, send out formal proposal for their acceptance. Professional fees vary, but reserve fund studies start at $3,000 for smaller blocks (around 15 units), and upwards, depending on the number of units, the complexity of the property, the number of common elements. Other charges include disbursements (no more than 5%), any mileage incurred outside City of Winnipeg, plus GST. If the Condo Board accepts the proposal, then the appraiser usually has initial meeting with the board to get a sense of the problems which may have been happening in the condo complex in regards to the common elements. The appraiser also gets information about how to contact roofing contractor or gain access to inspection reports, engineer s reports, etc.. Other mechanical contractors information such as heating/cooling or plumbing contractors/inspection reports are helpful.

9 Typical Reserve Fund Procedure The appraiser does an inspection of the property with board members, property manager or other representatives. We must gain access to some of the interiors of the units to determine problems in the common elements which may be displayed in the non-common areas. Put together benchmark analysis and cash flow analysis, as well as determine potential options for reserve fund contributions over the 30 year period. The thirty year period is the minimum period as set up by legislation. Meet with board to discuss preliminary findings. Draft final report, send one printed copy and secured pdf copy for their records, and future reference by potential buyers, etc. Turnaround for report (depending on availability) will usually be around 4 weeks, depending on whether or not we are able to gain access to the building and if we are getting all of the information in a timely fashion.

10 What information do we need to do the study? Contact persons on the board (need two to sign the proposal) Financial statements showing balance of reserve fund accounts Fiscal year of the corporation (i.e. Jan to Dec of year?) Condominium corporation declaration documents and by-laws of the corporation Any roofing, mechanical inspection reports (the most recent reports) Any capital improvements made over the last 10 years Any building drawings/sketches We do a title search and buy condo plan on-line

11 Insurance Replacement Cost Appraisal The Insurance Replacement Cost for the Condominium Corporation is required under the new Condo Act. An update of this replacement value is required at least every five years

12 Insurance Replacement Cost Appraisal The Condominium Act regulations require that this appraisal for insurance purposes is done by an Accredited Appraiser Canadian Institute

13 Any Questions? Please contact Debbie Pieterse at Stevenson Advisors for your Reserve Fund Study and Insurance Replacement Cost Report needs. I will be happy to answer any questions you have. Please phone me at

14 Sample Reserve Fund Study Analysis This example illustrates a typical scenario of a reserve fund study. Two key pieces of information are the opening balance of the reserve fund and the current level of contributions made to the reserve fund. The reserve fund study timeline is 30 years, the minimum required in the amendments coming into force on February 1, 2015 to The Condominium Act and regulations. The example condominium building is an older apartment style building that has been well maintained and the roof and the heating system recently updated. The capital improvements have been made over the last five years and the money to do these capital improvements was raised through makeup assessments. The opening balance of the reserve fund is $100,000 and the current reserve fund contribution is $50,000 per year. The reserve fund study analysis comprises three parts: Benchmark Analysis, Cash Flow Analysis and Scenario Analysis. COMMON ELEMENTS & BENCHMARK ANALYSIS As part of the benchmark analysis, the common elements are inspected and the replacement cost new (RCN) is estimated for each element, and as well as the remaining economic life of the element is estimated. Each common element has an analysis of its current condition, the size of the component, and the current estimated repair/replacement cost new, as well as the expected economic life, or replacement interval. This provides an estimate of when these expenses will occur, and are factored by the estimated construction cost inflation rate to try and accurately project the replacement cost as of the date of replacement. This analysis includes the calculation of the annual reserve fund contribution and the current reserve fund requirement, which is the amount of estimated depreciation already inherent in the common elements. The current reserve fund requirement is ideally what should be in the reserve fund today. In our example, the current balance of the reserve fund is $100,000, and the annual reserve fund contribution is $50,000. The calculated reserve fund requirement is $93,477 and the current reserve fund requirement is $309,109, which indicates that the reserve fund is currently underfunded by approximately $210,000. This means that during the life of the study, this present day underfunding must be made up through contributions in order to fully fund the common elements replacements without having to resort to makeup assessments.

15 CASH FLOW ANALYSIS The cost of the replacements of the common elements are projected based on their remaining economic life, as well as the reserve fund contributions and any interest earned, over the 30 year period. This illustrates how well the reserve fund will meet its obligations over the 30 year period. In this example, we know that we are currently underfunded by $210,000, so this deficit will have to made up over the 30 year period. The cash flow analysis is an important part of the reserve fund study, as many of the major common elements of a condominium corporation will have a life of 20 to 25 years, like windows and doors. This allows the Condominium Board to see the long term impact of underfunding the reserve fund. In this example, the common elements are in good shape today, but by examining the cash flows, we can see that there will be major capital outlays needed in years 19 to 26, and that is where the reserve fund becomes underfunded and where the Condominium Corporation may run into serious trouble and require makeup assessments. SCENARIO ANALYSIS As part of the reserve fund study process, we provide scenarios through analysis to the Board for their consideration in determining what reserve fund contribution to recommend. This allows condominium boards to make informed decisions by projecting cash flows over a 30 year period. By graphically illustrating both these scenarios and the baseline analysis, it is easier to see what impact various scenarios would have on the reserve fund over the life of the study. In this example, we provided three different scenarios of reserve fund contributions, and what the resulting impact was on the reserve fund balance. The Board also asked us to provide them a graphical illustration of what impact leaving their current fund contribution as is would have on the reserve fund. After examining the initial cash flow analysis, and talking with the Board, there were three scenarios presented by the appraiser, and an additional scenario proposed for analysis by the Board. The four scenarios which are illustrated as described as follows: 1. Start contributions at $50,000, increase at $25,000 increments, to a maximum contribution of $125, Pay the calculated reserve fund $93,477, plus an additional makeup assessment of $7,009 over the next 30 years. 3. Since the cash flows are not adequate in the latter half of the time period, pay the calculated reserve fund contribution of $93,477 over the first 15 years, and then increase the contribution by $19,177 in the last fifteen years. 4. This last scenario was proposed by the Board, where the annual contribution remains at $50,000 per year.

16 Please contact Debbie Pieterse at Stevenson Advisors for your Reserve Fund Study and Insurance Replacement Cost Report needs. I will be happy to answer any questions you have. Please phone me at for a no obligation quote. Debbie Pieterse, B.Sc. Agric., AAM, AACI, P. App. Appraisal Consultant Stevenson Advisors St. Mary Avenue Winnipeg, Manitoba R3C 0M6 Phone (204) Cellular (204) Fax (204) dpieterse@stevenson.mb.ca web: A member of Stevenson Group Inc. MANAGEMENT / BROKERAGE / DEVELOPMENT / CONSTRUCTION / ADVISORS

17 PROFESSIONAL PROFILE DEBBIE PIETERSE B. SC. AGRIC., AAM, AACI, P. APP. SENIOR APPRAISER WINNIPEG Debbie Pieterse joined Stevenson Advisors Ltd., in 2013 as an Appraisal Consultant. She provides agricultural, residential and commercial property appraisals and real estate consulting services on a wide variety of properties and real estate related issues. Debbie specializes in agricultural appraisals and rural properties, expropriations, reserve fund studies, real estate consulting, valuation, and market analysis. She provides these professional services to an array of individual, corporate, and institutional clients. Mrs. Pieterse works within a group of Consultants responsible for providing real estate valuation, consulting, planning, and market intelligence. The group includes consultants with varied backgrounds in urban planning, appraisal, finance, land development, housing and statistical research. Debbie is dedicated to upholding the ethical delivery of appraisal services within the industry. EXPERIENCE HIGHLIGHTS Prior to joining Stevenson Advisors, Debbie was employed with the Province of Manitoba Assessment Services Branch and Crown Lands and Property Agency. There she completed retrospective market valuations on a variety of properties throughout rural Manitoba, working in the Souris, Portage la Prairie, Dauphin and Brandon District Assessment Offices. She was District Supervisor of the Dauphin Assessment office which delivered assessment services to 22 municipalities. She was also Provincial Sales Manager and was responsible for quality assurance of verified sales data for all sales in rural Manitoba. Her work required her to be proficient in litigation and negotiation assignments. She defended a variety of property values before various tribunals such as various Boards of Revision, the Municipal Board, and the Land Value Appraisal Commission. She worked for Crown Lands and Property Agency as a property appraiser and prepared valuations for expropriations, acquisitions and disposal of Crown Property. Through these experiences she gained valuable insight and thorough understanding of various laws, acts, and case law decisions affecting real estate valuation. EDUCATION Mrs. Pieterse obtained a Bachelor of Science in Agriculture degree with a major in Animal Science from the University of Manitoba. She became an Accredited Assessor of Manitoba in She was awarded the Certificate of Real Property Assessment and Diploma of Urban Land Economics (Assessment Specialization) in 2012 from the University of British Columbia, Sauder School of Business, Real Estate division program. She is also an Accredited Member of the Appraisal Institute of Canada (AACI, P. App). Debbie is a Candidate Member of the Reserve Fund Planning Program, working towards her RFPP designation through the University of British Columbia. Debbie is a member of the International Right of Way Association (IRWA) and is a candidate for the Senior Right of Way Professional designation. She is also President of the local IRWA Manitoba Chapter 66. Debbie was the recipient of the 2012 BC Assessment Valuation Award, with the highest standing in Foundations of Appraisal and Statistical and Computer Applications in Valuation.

18 Structural Contingency Reserve Component (1): Contingency for Structural Repair This component includes a contingency for repairing the basic building structure, foundations, and structural components and the entrance canopy. Most of these components would be expected to last the entire life of the building and should not require a reserve contribution unless some unexpected deterioration becomes evident. A contingency allowance is appropriate in the event that requires structural repairs to foundation, exterior, or interior load bearing walls. The Replacement Cost New (RCN) of the building shell & entrance canopy has been calculated as $16,015,075. As the repair/ replacement cost of the roof cover, exterior finish, windows, entrance doors are included in separate reserve items, a reserve contingency of 0.5% is estimated as an adequate contingency for structural repair of $80,075. In addition, the majority of exterior windows and entry doors to the units are the responsibility of the unit holders. Unit Quantity: 1 Each Unit Cost Estimate: $80,075 Contingency Replacement Cost Estimate: $80,075 Life Span Estimate: Normal Life Expectancy: Effective Age: Estimated Remaining Life 1 s 0 s 1 s Reserve Fund Estimates: (1) Current Replacement Cost: $80,075 (2) Future Replacement Cost: $80,075 (3) Future Fund Accumulation $0 (4) Future Reserve Requirement $80,075 (5) Annual Reserve Assessment $80,075 Component Detail/Photos: The exterior walls and the foundations are in good condition. The structural reserve is a contingency fund to repair any deterioration to the superstructure of the buildings. The replacement cost estimate is a contingency for unforeseen repairs, and a structural repair reserve is recommended to be set aside every year. Sample Common Element Analysis One of these sheets is completed for each common element listed on the Benchmark Analysis

19 Structural and Architectural Reserve Component (2): Roof Cover This component includes the replacement of the roof cover, which is a torchon membrance at the end of the roof cover's expected life. The roof cover replacement was estimated by square foot of roof area which was estimated using the plan area multiplied by the pitch factor adjustment, and includes the balcony area. A 20% upwards adjustment was added to the replacement cost per square foot to allow for removal, repair and replacement of the roof components. Unit Quantity: 16,960 Contact Feet Unit Cost Estimate: $15.00 Per Contact Foot Replacement Cost Estimate: $254,400 Total Replacement Cost Life Span Estimate: Normal Life Expectancy: Effective Age: Estimated Remaining Life 25 s 15 s 10 s Reserve Fund Estimates: (1) Current Replacement Cost: $254,400 (2) Future Replacement Cost: $327,928 (3) Future Fund Accumulation $127,119 (4) Future Reserve Requirement $200,809 (5) Annual Reserve Assessment $7,983 Component Detail/Photos: The component is in good shape for its age and appears to be aging at a normal rate. Sample Common Element Analysis

20 Structural and Architectural Reserve Component (6): Building Envelope -Face Brick Repair This component includes the repair and repointing of the exterior wall covering which is face brick. The face brick is currently in good repair and there are no areas observed which have areas needing immediate repair or in the near future. The estimated repair area was estimated by the number of stories (6) x wall height per storey (9 feet) x perimeter of 560 linear feet, or total potential contact foot area of 30,240 contact feet x 75% to account for windows and door openings or a total estimated face brick wall area of 22,680 contact feet. The estimated allowance for repair was 10% every 25 years, or 2,268 contact feet. This repair is estimated to be necessary approximately to be every 25 years in order to keep the building envelope intact and prevent damage through moisture penetration. Unit Quantity: 2,268 Contact Square Feet 2,268 Contact Square Feet Unit Cost Estimate: $16.00 Per Contact Square Foot Replacement Cost Estimate: $36,288 Total area Life Span Estimate: Normal Life Expectancy: Effective Age: Estimated Remaining Life 25 s 0 s 25 s Reserve Fund Estimates: (1) Current Replacement Cost: $36,288 (2) Future Replacement Cost: $75,979 (3) Future Fund Accumulation $0 (4) Future Reserve Requirement $75,979 (5) Annual Reserve Assessment $1,630 Component Detail/Photos: The brick wall has many areas which should be repointed. Failure to do so will lead to infiltration of moisture in the building envelope which will cause additional problems. This should be repaired on regular basis, and it is estimated that there should be 25% of the area repaired every 10 years, which would allow for regular repairs/maintenance. The unit cost replacement includes the washing, repair, and repointing of the mortar of the exterior brick finish. The windows and door openings area was deducted from the calculated area. Sample Common Element Analysis

21 Reserve Fund Study Estimates - Benchmark Analysis RESERVE COMPONENTS BUILDING - EXTERIOR Normal Lifespan s Effective Age s Remaining Lifespan s Current Replacement Cost Estimated Replacement 2nd Replacement 3rd Replacement 4th Replacement 5th Replacement 6th Replacement Future Replacement Cost Current Reserve Fund Requirement Future Reserve Fund Accumulation Future Reserve Fund Requirement Annual Reserve Fund Assessment 1) Foundation Repair (Contingency) , ,439-13,439 1,200 2)Balcony Foundation Repair (Contingency) , ,720-6, ) Plumbing Repair (Contingency) , ,439-13,439 1,200 4)Electrical Repair (Contingency) , ,439-13,439 1,200 5)Exterior Refinish, wash, repair and repoint brick, masonry , ,538 63,750 72,127 26,411 5,025 6)Heating System , ,559 8,000 14, ,089 12,121 6a)Heating System - Pipe & Radiator Replacement (Contingency) , ,439-13,439 1,200 7)Security System , ,598 8,333 10,667 22,931 2,047 8)Fire Alarm System , ,037 11,667 14,934 32,103 2,865 9)Sunrooms (Contingency) , ,263 4,250 8,915 32, )Exterior Staircases , ,342 28,688 32,457 11,885 2,261 11)Interior Staircases , ,073 14,571 22,726 28,347 1,266 12)Foyer Redecorating , ,966 32,400 34,040 8,926 4,408 13) Interior Doors , ,530 10,800 17,697 79,833 3,125 14) Rear Fire Rated Door , , , ) Front Door , ,907 1,540 2,523 11, )Windows - 50% , ,375 45,000 73, ,637 13,022 16)Windows-50% , ,566 36,000 60, ,101 13,174 17)Hallway Flooring , ,460 8,000 9,051 23,408 4,453 18)Hallway Wall Painting , ,002 3,000 3,655 15,346 1,757 19)Hallway Wall Repairs , ,664 1,210 1,474 6, )Hallway Ceiling Painting , ,134 1,600 1,949 8, )Hallway Ceiling Repairs , , , ) Roof , ,529 19,600 34, ,942 14,679 23)Skylights , ,170 9,800 14,193 23,977 1,337 MISCELLANEOUS & SITE IMPROVEMENTS Miscellaneous 4 4 2, ,251-2, Landscaping and Misc Exterior Repairs 4 4 2, ,251-2, Roof repairs on advice of annual inspection 4 4 2, ,814-2, Repair Balcony Foundation , ,720-6, Reserve Fund Study 5 5 4, ,637-4, DEFERRED MAINTENANCE/CURRENT ITEMS Repair Balcony Foundation 5,000 Reserve Fund Study 4,000 TOTAL RESERVES 1,383,000 2,378, , ,851 1,947,251 93,477 Sample Benchmark Analysis - Estimating the Reserve Fund Annual Assessment Sample Reserve Fund Study Analysis Benchmark Analysis Page 1 of 7

22 Reserve Fund Study - Cash Flow Analysis Cash Flow Analysis Current Reserve Budget Yr Requirement RESERVE FUND OPENING BALANCE 100, , , , , , , , , , , , , , ,153 1,113,508 1,190,421 1,303,227 RESERVE FUND CONTRIBUTIONS Make Up Assessment Annual Reserve Assessment 50,000 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 Total Annual Assessment 50,000 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 Reserve Fund Interest Income 625 3,541 5,966 7,378 9,899 12,301 10,446 13,044 15,707 17,200 19,967 18,973 21,784 21,992 24,879 27,838 29,761 32,581 Total Cash Resources 150, , , , , , , , , , , , , ,153 1,113,508 1,234,823 1,313,658 1,429,285 RESERVE FUND EXPENDITURES BUILDING - EXTERIOR 1) Foundation Repair (Contingency) 13,439 2)Balcony Foundation Repair (Contingency) 6,720 3) Plumbing Repair (Contingency) 13,439 4)Electrical Repair (Contingency) 13,439 5)Exterior Refinish, wash, repair and repoint brick, masonry 63,750 98,538 6)Heating System 8,000 6a)Heating System - Pipe & Radiator Replacement (Contingency) 13,439 7)Security System 8,333 33,598 8)Fire Alarm System 11,667 47,037 9)Sunrooms (Contingency) 4,250 10)Exterior Staircases 28,688 44,342 11)Interior Staircases 14,571 12)Foyer Redecorating 32,400 42,966 57,743 13) Interior Doors 10,800 14) Rear Fire Rated Door ) Front Door 1,540 16)Windows - 50% 45,000 16)Windows-50% 36,000 17)Hallway Flooring 8,000 32,460 39,921 18)Hallway Wall Painting 3,000 19,002 19)Hallway Wall Repairs 1,210 7,664 20)Hallway Ceiling Painting 1,600 10,134 21)Hallway Ceiling Repairs 700 4,434 22) Roof 19,600 23)Skylights 9,800 38,170 MISCELLANEOUS & SITE IMPROVEMENTS Miscellaneous 2,251 2,534 2,852 3,209 Landscaping and Misc Exterior Repairs 2,251 2,534 2,852 3,209 Roof repairs on advice of annual inspection 2,814 3,167 3,564 4,012 Repair Balcony Foundation 6,720 Reserve Fund Study 4,637 5,376 6,232 DEFERRED MAINTENANCE/CURRENT ITEMS Repair Balcony Foundation 5,000 Reserve Fund Study 4,000 TOTAL EXPENDITURES 9,000 42,966 7, ,977 49, , ,932 44,402 10,431 CLOSING BALANCE 141, , , , , , , , , , , , , ,153 1,113,508 1,190,421 1,303,227 1,429,285 ADEQUACY ANALYSIS Reserve Requirements 309, , , , , , , , , ,056 1,007, ,300 1,091,109 1,104,931 1,226,031 1,350,159 1,432,987 1,551,858 1,684,131 Reserve Fund Surplus/Deficit -167, , , , , , , , , , , , , , , , , ,847 Percent Funded 45.8% 58.2% 62.6% 68.7% 72.7% 68.8% 72.9% 75.9% 77.1% 79.2% 78.0% 79.9% 79.6% 81.2% 82.5% 83.1% 84.0% 84.9% Sample Cash Flow Analysis Sample Reserve Fund Study Analysis Cash Flow Page 2 of 7

23 Reserve Fund Study - Cash Flow Analysis Cash Flow Analysis RESERVE FUND OPENING BALANCE 1,429,285 1,452,006 1,532,685 1,035, , , ,890 83, , ,809-86,333-82,200 11,277 RESERVE FUND CONTRIBUTIONS Make Up Assessment Annual Reserve Assessment Total Annual Assessment 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 93,477 Reserve Fund Interest Income 35,732 36,300 38,317 25,890 18,410 19,267 9,997 2, Total Cash Resources 1,558,493 1,581,783 1,664,479 1,154, , , , , ,425-86,333 7,144 11, ,036 RESERVE FUND EXPENDITURES BUILDING - EXTERIOR 1) Foundation Repair (Contingency) 2)Balcony Foundation Repair (Contingency) 3) Plumbing Repair (Contingency) 4)Electrical Repair (Contingency) 5)Exterior Refinish, wash, repair and repoint brick, masonry 6)Heating System 6a)Heating System - Pipe & Radiator Replacement (Contingency) 7)Security System 8)Fire Alarm System 9)Sunrooms (Contingency) 10)Exterior Staircases 11)Interior Staircases 12)Foyer Redecorating 13) Interior Doors 14) Rear Fire Rated Door 15) Front Door 16)Windows - 50% 16)Windows-50% 17)Hallway Flooring 18)Hallway Wall Painting 19)Hallway Wall Repairs 20)Hallway Ceiling Painting 21)Hallway Ceiling Repairs 22) Roof 23)Skylights MISCELLANEOUS & SITE IMPROVEMENTS Miscellaneous Landscaping and Misc Exterior Repairs Roof repairs on advice of annual inspection Repair Balcony Foundation Reserve Fund Study DEFERRED MAINTENANCE/CURRENT ITEMS Repair Balcony Foundation Reserve Fund Study 18,061 24,273 9,031 12,136 18,061 24,273 18,061 24, , ,559 18,061 24,273 52,344 73,282 41,263 80,087 51,073 77,602 97,530 1,806 13, , ,566 49,098 60,385 25,536 34,319 10,300 13,842 13,619 18,303 5,959 8, ,529 3,612 4,066 4,576 3,612 4,066 4,576 4,515 5,082 5,720 9,031 12,136 7,224 8,375 9,709 TOTAL EXPENDITURES 106,487 49, , ,566 77, , , ,060 60,385 89, ,336 CLOSING BALANCE 1,452,006 1,532,685 1,035, , , ,890 83, , ,809-86,333-82,200 11,277-67,300 ADEQUACY ANALYSIS Reserve Requirements 1,713,224 1,800,433 1,310,033 1,017,694 1,059, , ,524 97, , , , , ,919 Reserve Fund Surplus/Deficit Percent Funded -261, , , , , , , , , , , , , % 85.1% 79.1% 72.4% 72.8% 57.5% 21.6% % % -37.5% -34.3% 3.3% -25.0% Sample Reserve Fund Study Analysis Cash Flow Page 3 of 7

24 Cash Resources on Hand vs. Planned Expenditures $2,200,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 -$200,000 -$400, $600,000 -$800,000 -$1,000,000 -$1,200,000 -$1,400,000 -$1,600,000 -$1,800,000 Planned ly Expenditures Scenario 1 - start at $50k, increase by increments $25k to max of $125k Scenario 3- makeup assessment in years 15 to 30 Cash Resources, no makeup assessment Scenario 2-30 yr makeup assessment Scenario 4- assessment as proposed by board Sample Reserve Fund Study Analysis Results of analysis graphically displayed Page 4 of 7

25 Closing Balance of Reserve Fund $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 -$200,000 -$400,000 -$600,000 -$800,000 -$1,000,000 -$1,200,000 -$1,400,000 -$1,600,000 -$1,800,000 -$2,000,000 -$2,200,000 -$2,400,000 -$2,600,000 -$2,800,000 -$3,000, Closing Balance with no makeup assessment Scenario 1 - start at $50k, increase by increments $25k to max of $125k Scenario 2-30 yr makeup assessment Scenario 3- makeup assessment in years 15 to 30 Scenario 4- assessment as proposed by board Sample Reserve Fund Study Analysis Page 5 of 7

26 Total Annual Contributions to Reserve Fund $135,000 $130,000 $125,000 $120,000 $115,000 $110,000 $105,000 $100,000 $95,000 $90,000 $85,000 $80,000 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ Scenario 1 - start at $50k, increase by increments $25k to max of $125k Scenario 3- makeup assessment in years 15 to 30 Scenario 2-30 yr makeup assessment Scenario 4- assessment as proposed by board Sample Reserve Fund Study Analysis Page 6 of 7

27 Reserve Fund Surplus/Deficit $200,000 $0 ($200,000) Budget Yr ($400,000) ($600,000) ($800,000) ($1,000,000) ($1,200,000) ($1,400,000) ($1,600,000) ($1,800,000) ($2,000,000) ($2,200,000) Reserve Deficit/Surplus with no makeup assessment Scenario 1 - start at $25k, increase by increments $25k to max of $150k Scenario 2-30 yr makeup assessment Scenario 3- makeup assessment in years 15 to 30 Scenario 4- assessment as proposed by board Sample Reserve Fund Study Analysis Page 7 of 7