Clear Hills Condominiums AND MAINTENANCE RESERVE STUDY SCHEDULE UPDATE. Clear Hills Condominiums HOA 7595 SW Clear Hills Dr. Portland, OR 97225

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1 Clear Hills Condominiums RESERVE STUDY AND MAINTENANCE SCHEDULE UPDATE PREPARED FOR: Clear Hills Condominiums HOA 7595 SW Clear Hills Dr. Portland, OR PROJECT NUMBER: REPORT DATE: December 9, 2015 REVISION DATE: December 21, 2015 PREPARED BY: (P) (F) , FORENSIC BUILDING CONSULTANTS. ALL RIGHTS RESERVED.

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3 TABLE OF CONTENTS Table of Contents 2 Executive Summary 3 Reserve Study Scope 3 Funding Model Calculations summaries 4 Scope of Reserve Study 6 Reserve Study Parameters 7 Property Site 9 Reserve Study Exclusions 10 Component Inventory 11 Component Inventory: Representative Photographs 13 Reserve Study Findings: Annual Expenditure Details 24 Annual Expenditure Detail (YEARS ) 25 Annual Expenditure Detail (YEARS ) 26 Annual Expenditure Detail (YEARS ) 27 CURRENT Funding Model Projection 28 Threshold Funding Model Projection 29 Appendix A: Maintenance Schedule 30 MAINTENANCE SCHEDULE 31 Appendix B: Important Information 38 Purpose of Report 39 Standard Terms and Definitions 40 Overview of Capital Planning Tools 43 Reserve Study Methodology 48 Disclosures and Limitations 50 PAGE 2

4 EXECUTIVE SUMMARY Client Name: Clear Hills Condominium Homeowners Association (HOA) Property Name: Clear Hills Condominiums (Property) Property Address: 7595 SW Clear Hills Dr. Portland, OR Report Type: Reserve Study Update (RS) Report Date: December 9, 2015 Dear Clear Hills HOA: As requested, Forensic Building Consultants (Forensic) has prepared an updated 30-year Reserve Study and Maintenance Schedule for the Clear Hills Condominiums community (Property). The following report consists of the following: 1) a physical analysis of the current condition of a limited representative sample of the Property s commonly-owned building components, and 2) a financial analysis of the Association s current reserve fund balance, contribution, and anticipated replacement schedule, and 3) a recommended maintenance schedule for the commonly-owned building components. The intent of this Reserve Study is to evaluate the results of the physical and financial analyses in order to help the Association assess their current reserve funding and to arrive at an appropriate annual reserve fund contribution for the Property, based on the anticipated replacements and renewals of major commonly-owned building components over the next thirty (30) years. RESERVE STUDY SCOPE Forensic s Reserve Study (RS) was limited to the observation, evaluation, and quantification of the common as-built construction assemblies and components, as they existed at the time of our presence on site at the Property. Note that Forensic s RS was limited to the following: Update to Reserve Study and Maintenance Plan Provider will review the Full Reserve Study (Type I) and update the computations, funding plan, and fund status for Year 3. PAGE 3

5 RESERVE STUDY AND MAINTENANCE SCHEDULE FUNDING MODEL CALCULATIONS SUMMARIES GENERAL ASSESSMENT OF CURRENT RESERVE FUND STATUS Based on the component inventory data and the schedule for renewal and replacement of the common element components over the next 30 years, the figure below illustrates the Threshold Assessment Funding Model. Reserve%Fund%vs.%Time% Threshold%Model% Current%Model% $300,000 $250,000 Reserve%Fund%($)% $200,000 $150,000 $100,000 $50,000 $0 2015% 2016% 2017% 2018% 2019% 2020% 2021% 2022% 2023% 2024% 2025% 2026% 2027% 2028% 2029% RECOMMENDED RESERVE FUND CONTRIBUTION RATE Year% 2030% 2031% 2032% 2033% 2034% 2035% 2036% 2037% 2038% 2039% 2040% 2041% 2042% 2043% 2044% In order for the Association to maintain its desired minimum threshold of $12,000 between the closing balance of one year and the scheduled expenditures for the subsequent year, we recommend the principal reserve fund contribution for 2016 to be $23,168. Per unit contribution is $ annually or $77.23 monthly (assuming contributions are split equally between the 25 property owners). Per the Association s instructions, this annual contribution has been modeled assuming a 0% increase each year while inflation is currently estimated at 1.0%. 1 EXPLANATORY NOTES 1 Inflation Data 2012, Capital Professional Services, LLC < PAGE 4

6 RESERVE STUDY AND MAINTENANCE SCHEDULE The increase in recommended reserve contribution versus current reserve contribution is largely due to the the projected asphalt overlay project scheduled for This result is based on the component inventory data, the adjusted remaining useful life (RUL) of those components, and the input data provided by the Association. The annual projected ending balance for the reserve fund using each model is tabulated in the Reserve Study Findings section of this report. CURRENT FUNDING MODEL SUMMARY OF CALCULATIONS Current Reserve Contribution: $23,124 THRESHOLD FUNDING MODEL SUMMARY OF CALCULATIONS Recommended (Threshold Model) 2016 Reserve Contribution: $23,168 PAGE 5

7 Scope of Reserve Study PAGE 6

8 RESERVE STUDY PARAMETERS EXPLANATORY NOTES The following data (provided by the Association) forms the basis for the funding model inputs. Level of Service: Year 3 Reserve Study Update Description: Reserve Study includes Component Inventory (verification), Condition Assessment (based upon on-site visual observations), Life and Valuation Estimates, Fund Status, and a Funding Plan Fiscal Year Start: January 1, 2016 Fiscal Year End: December 31, 2016 Model Interest Rate: Reserve Fund 2015 Starting Balance: 0.10 % Inflation Rate: 1.0 % $68,646 Contingency: 0.0 % Current Annual Contribution: $23,124 Annual Contribution Increase: 0 % Threshold Minimum Balance: $12,000 Number of Units: 25 Property Occupancy Type: Residential single-family and multifamily dwellings Date of Original Construction: 1968 General Description of Property: The Property consists of: Seven (7) one-story, wood-framed, multifamily buildings Eleven (11) one-story, wood-framed, single family buildings One (1) single-story, wood-framed, panel clad pool house The Property underwent a major underground utility upgrade in 2013 The structures are built atop concrete foundations In general, the Property appears to be in good physical condition PAGE 7

9 Description of Pool House Exterior Wall Assemblies: n Panel siding (believed to be T1-11 siding) n Cedar trim members, exterior sealant joints Description of Pool House Roof Assemblies: n Cedar roofing shake n Wood trim members, exterior sealant joints, and sheet metal flashing n Felt-based roof underlayment n Roof sheathing and wood framing members Description of Fenestration Assemblies: n Aluminum flange-mounted window units Description of Pool Deck: n Concrete topping slab wearing surface n Pedestrian Traffic Coating Some calculations are based on data and assumptions received from Client. Per Client s instructions, the rates below are fixed and inflation is calculated at 0% for the following components: Asphalt Overlay - $63,225 every thirty (30) years Landscape Bark Dust - $1,500 every two (2) years Sprinkler System - $10,000 every fifteen (15) years Pool Fence Repair/Replace - $1,000 every ten (10) years Pool Fence Paint/Stain - $200 every five (5) years Landscape Pruning - $2,000 every two (2) years Signage - $850 every ten (10) years Metal Handrail Painting - $200 every five (5) years Retaining Walls-Stamped - $800 every two (2) years Water Heater - $300 every ten (10) years Pool-Heater - $2,700 every ten (10) years Pool-Repaint/Replaster - $6,500 every five (5) years Pool-Furniture - $3,500 every five (5) years Water Pressure Pump Maintenance - $1,500 every two (2) years PAGE 8

10 PROPERTY SITE The aerial image below, obtained from Google Maps, illustrates the overall site conditions at the Property. Note that this image is oriented so that North corresponds with the top of the page. PAGE 9

11 RESERVE STUDY EXCLUSIONS EXPLANATORY NOTES The following components and systems have been excluded from this Reserve Study. Any pricing and component information for these systems contained within this report was provided by the Association, was included only for budgeting purposes, and has not been independently assessed or verified by Forensic: Site Utilities Foundation and Concealed Structural Components Mechanical and HVAC Systems Low-Voltage Electrical Systems Emergency Power Systems Plumbing Systems Fire Detection and Alarm Systems Fire Suppression Systems These systems (where they exist) will likely require periodic renewal and replacement during the next 30 years. However, the condition assessment and verification of replacement costs of these systems are beyond the scope of this Reserve Study. It is recommended that the Association have these systems evaluated by qualified professionals prior to inclusion in future Reserve Studies for the Property. PAGE 10

12 CLEAR HILLS CONDOMINIUMS COMPONENT INVENTORY EXPLANATORY NOTES In order to compile the 30-year funding forecast, this reserve study estimates the expected useful life (EUL) and remaining useful life (RUL) of the various building components and systems (components) included within the scope of the study, and provides estimated replacement or renewal costs for those components. Each common element component is identified as being primarily in one of four categories, and an appropriate modification to the components remaining useful life (RUL) was made for each, based on the actual condition and nature of the component Interior Component (Aesthetic): Maximum 100% extension of expected useful life (EUL) Exterior Component (Aesthetic): Maximum 50% extension of expected useful life (EUL) Interior Component (Performance): Maximum 50% extension of expected useful life (EUL) Exterior Component (Performance): Maximum 25% extension of expected useful life (EUL) Note that the component inventory tables on the following pages incorporate the abbreviations and terminology listed below: Qty. Quantity of a given component Current Replace. Cost Current cost of replacement for a given component EUL Expected useful life of given component RUL Remaining useful life of given component 1 st Repl. Date First anticipated replacement date for a given component, based upon RUL EUL Adj. Adjustment to EUL based on visual observation of component condition PAGE 11

13 COMPONENT NAME QTY. UNIT TYPE UNIT COST CURRENT REPL. COST YEAR IN SERVICE AGE EUL EUL ADJ. (+/-) RUL 1st REPL. DATE 1. Site Work 2. Poolhouse 3. M is 1.1 Asphalt Overlay 1 Lsum $63, $63, /1/ Asphalt Sealcoat SF $0.16 $7, /1/ Landscape Bark Dust 1 Lsum $1, $1, /1/ Concrete Curb Repair 1 Lsum $2, $2, /1/ Concrete Step Replacement 1 Lsum $2, $2, /1/ Sprinkler System 1 Lsum $10, $10, /1/ Pool Fence-Repair/Replace 1 Lsum $10, $10, /1/ Pool Fence-Paint/Stain 1 Lsum $ $ /1/ Landscape Tree Replacement 1 Lsum $5, $5, /1/ Entry Monument 25 Each $ $8, /1/ Signage 1 Lsum $ $ /1/ Lighting-Entry and Pool Fence 10 Each $ $1, /1/ Metal Handrail Replacement Allowance 1 Lsum $1, $1, /1/ Metal Handrail Painting 1 Lsum $ $ /1/ Retaining Walls-Stamped 1 Lsum $ $ /1/ Retaining Walls-Masonry 1 Lsum $1, $1, /1/ Retaining Walls-Masonry (2021 additional) 1 Lsum $1, $1, /1/ Mailboxes 26 Each $ $7, /1/ Utilities-Inspection/Scoping 1 Lsum $6, $6, /1/ Utilities-Inspection/Scoping (2016 additional) 1 Lsum $1, $1, /1/ Utilities-Repair Allowance 1 Lsum $5, $5, /1/ Siding-Panel 953 SF $4.70 $4, /1/ Doors-Exterior 4 Each $ $2, /1/ Painting-Exterior 1037 SF $1.60 $1, /1/ Windows 2 Each $ $1, /1/ Roofing Replacement 588 SF $6.02 $3, /1/ Gutters & Downspouts 105 LF $4.70 $ /1/ Bathroom Sinks 2 Each $ $ /1/ Bathroom-Mirrors/Fixtures 1 Lsum $ $ /1/ Bathroom-Toilets 2 Each $ $ /1/ Lighting-Interior 4 Each $ $ /1/ Water Heater 1 Each $ $ /1/ Pool-Pumps 2 Each $ $1, /1/ Pool-Sweep & Pump 1 Each $ $ /1/ Pool-Sweep & Pump (2016 Sweep) 1 Each $1, $1, /1/ Pool-Filter & Parts 1 Each $ $ /1/ Pool-Heater 1 Each $2, $2, /1/ Pool-Cover 1 Each $3, $3, /1/ Pool-Repaint/Replaster 1 Each $6, $6, /1/ Pool-Furniture 1 Each $3, $3, /1/ Water Pressure Pump Maint 1 Lsum $1, $1, /1/ Note: The item Pool Area Cleaning/Maintenance has been included for budgetary purposes only, this item pertains to the repair and/or replacement of common components including but necessarly limited to: Wood Handrails, Signage, Monument Signage PAGE 12

14 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS 1 SITE COMPONENTS 1.1 Asphalt Pavement 1.2 Asphalt Overlay Roadways Explanatory Notes: Expected overlay of asphalt payment expected in the year 2021, after potential settling of patchwork due to utility upgrades. 1.3 Landscaping Bark Dust Common Areas 1.4 Concrete Curbs Perimeter of roadways Explanatory Notes: Curbs are generally in good condition, cracking at joint locations. PAGE 13

15 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS 1.6 Sprinkler System All buildings Explanatory Notes: Primarily located in common areas 1.9 Pool Fence Repair/Replace 1.10 Pool Fence Paint/Stain Perimeter of pool area Explanatory Notes: 5 high wood fence, two gates 1.11 Landscaping Pruning 1.12 Landscaping Tree Replacement Common areas PAGE 14

16 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS 1.15 Entry Monument Intersection of SW Montclair St and SW Cedar Hills St. Explanatory Notes: Additional photograph illustrating Property entry signage attached to masonry Postlamp Repair/Replacement Allowance Atop columns at masonry entry wall Note: Additional type of signage on column face 1.17 Signage Roadway intersections Explanatory Notes: Street name identification signage PAGE 15

17 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS 1.18 Lighting Entry and Pool Fence Entry pathways at front of units Atop wood fencing posts at pool perimeter Pool house Explanatory Notes: Flood light PAGE 16

18 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS Exterior of pool house Explanatory Notes: Additional type of exterior light 1.19 Metal Handrail Replacement Allowance 1.20 Metal Handrail Painting Ramp to pool off of SW Clear Hills Dr. Explanatory Notes: Metal guardrails should be inspected for stability as well as corrosion annually; remediate as necessary. Note: Cracking of concrete pathway at ADA accessible pool entry Southwest of pool house Explanatory Notes: Metal guardrails should be inspected for stability as well as corrosion, remediate as necessary. PAGE 17

19 COMPONENT INVENTORY: REPRESENTATIVE PHOTOGRAPHS 1.21 Retaining Walls Stamped Concrete Throughout the property Explanatory Notes: Concrete retaining wall 1.22 Retaining Walls Masonry Intersection of SW Montclair Dr. and SW Clear Hills Dr. Explanatory Notes: Retaining wall is generally in good condition, minor algae growth. Brick units should be inspected periodically for failed mortar applications Utilities Inspection/Scoping 1.25 Utilities Repair Allowance Common Areas, primarily underground Explanatory Notes: Site utility improvements PAGE 18

20 2 POOL HOUSE COMPONENTS 2.1 Siding Pool house cladding Explanatory Notes: Panel siding 2.3 Exterior Paint Siding, projecting roof overhang, wood trim members, swing doors Explanatory Notes: Metal clad window 2.2 Swing Door Front and side elevations of pool house 2.4 Window Front elevation of pool house Explanatory Notes: Metal clad window PAGE 19

21 2.5 Roofing Pool house Explanatory Notes: Cedar shake roofing. Substantial organic growth on the north side of the roof. Forensic noted omitted ventilation provisions within the attic cavity/roof assembly; recommended installation of adequate ventilation provisions 2.6 Gutters and Downspouts Front and rear elevations of the pool house Explanatory Notes: Rear Gutter replaced in Bathroom Sinks 2.10 Bathroom Mirrors/Fixtures Pool house Explanatory Notes: Mirror, Soap Dispenser, Paper Towel Dispenser, Partition Wall PAGE 20

22 Shower Fixture Exterior of pool house Explanatory Notes: Wall mounted shower fixture 2.11 Bathroom-Toilets Pool house Explanatory Notes: Replace components as necessary, same paint schedule as building exteriors 2.14 Water Heater Pool house closet Explanatory Notes: Water heater supply for showers and sinks within pool house PAGE 21

23 2.15 Pool Pumps Pool house closet Explanatory Notes: Pool cleaner pump, pool filter pump 2.17 Pool - Filter & Parts Pool house closet Explanatory Notes: Repair allowance included for replacement parts and labor Manufacturer: Ray Pac 2.18 Pool Heater Pool house closet Explanatory Notes: Due to limited part availability, recommended replacement upon failure PAGE 22

24 2.19 Pool Cover Pool area 2.21 Furniture Pool Furniture Explanatory Notes: Furniture is stored away in the pool house during the off-season. PAGE 23

25 Reserve Study Findings: Annual Expenditure Details PAGE 24

26 ANNUAL EXPENDITURE DETAIL (YEARS ) 1. Sitework 2. Pool Description Asphalt Overlay $63, Asphalt Sealcoat $7, Landscape Bark Dust $1,500 $1,500 $1,500 $1,500 $1, Concrete Curb Repair $2, Concrete Step Replacement 1.6 Sprinkler System $10, Pool Fence-Repair/Replace 1.10 Pool Fence-Paint/Stain $200 $ Landscape Pruning $2,000 $2,000 $2,000 $2,000 $2, Landscape Tree Replacement 1.15 Entry Monument 1.16 Postlamp repair/replacement allowance $1,000 $1, Signage $ Lighting-Entry and Pool Fence $1, Metal Handrail Replacement Allowance $1, Metal Handrail Painting $200 $ Retaining Walls-Stamped $800 $800 $800 $800 $ Retaining Walls-Masonry $1, Mailboxes $8, Utilities-Inspection/Scoping $6, Utilities-Inspection/Scoping (2016 additional) $1, Utilities-Repair Allowance $5, Siding-Panel $4, Doors-Exterior $2, Painting-Exterior $1, Windows $1, Roofing Replacement $3, Gutters & Downspouts $ Bathroom Sinks 2.10 Bathroom-Mirrors/Fixtures $ Bathroom-Toilets $ Lighting-Interior $ Water Heater $ Pool-Pumps $1, Pool-Sweep & Pump $ Pool-Sweep & Pump (2016 Sweep) $1, Pool-Filter & Parts $ Pool-Heater $2, Pool-Cover $3, Pool-Repaint/Replaster $6,500 $6, Pool-Furniture $3,500 $3, Water Pressure Pump Maint $1,500 $1,500 $1,500 $1,500 $1,500 TOTAL $31,173 $5,151 $83,590 $0 $14,711 $21,836 $7,414 $0 $5,800 $17,731 PAGE 25

27 ANNUAL EXPENDITURE DETAIL (YEARS ) 1. Sitework 2. Pool Description 1.1 Asphalt Overlay 1.2 Asphalt Sealcoat 1.3 Landscape Bark Dust 1.4 Concrete Curb Repair 1.5 Concrete Step Replacement 1.6 Sprinkler System 1.9 Pool Fence-Repair/Replace 1.10 Pool Fence-Paint/Stain 1.12 Landscape Tree Replacement 1.15 Entry Monument 1.17 Signage 1.18 Lighting-Entry and Pool Fence 1.19 Metal Handrail Replacement Allowance 1.20 Metal Handrail Painting 1.21 Retaining Walls-Stamped 1.22 Retaining Walls-Masonry 1.22 Retaining Walls-Masonry (2021 additional) 1.23 Mailboxes 1.24 Utilities-Inspection/Scoping 1.24 Utilities-Inspection/Scoping (2016 additional) 1.25 Utilities-Repair Allowance 2.1 Siding-Panel 2.2 Doors-Exterior 2.3 Painting-Exterior 2.4 Windows 2.5 Roofing Replacement 2.6 Gutters & Downspouts 2.9 Bathroom Sinks 2.10 Bathroom-Mirrors/Fixtures 2.11 Bathroom-Toilets 2.13 Lighting-Interior 2.14 Water Heater 2.15 Pool-Pumps 2.16 Pool-Sweep & Pump 2.16 Pool-Sweep & Pump (2016 Sweep) 2.17 Pool-Filter & Parts 2.18 Pool-Heater 2.19 Pool-Cover 2.20 Pool-Repaint/Replaster 2.21 Pool-Furniture 3.1 Water Pressure Pump Maint TOTAL ,354 8,781 9, ,817 2,231 2, ,198 1,500 1,500 1,500 1,500 1,500 6,514 1,851 3, , , , ,000 3,500 1,105 1,161 2,700 6,500 6,500 1, , ,000 6,856 7,205 5, ,500 1,500 1,500 1,500 1,500 $32,428 $11,272 $10,751 $1,500 $21,199 $22,147 $4,645 1,705 $13,580 $4,118 $30,523 PAGE 26

28 ANNUAL EXPENDITURE DETAIL (YEARS ) 1. Sitework 2. Pool Description 1.1 Asphalt Overlay 1.2 Asphalt Sealcoat 1.3 Landscape Bark Dust 1.4 Concrete Curb Repair 1.5 Concrete Step Replacement 1.6 Sprinkler System 1.9 Pool Fence-Repair/Replace 1.10 Pool Fence-Paint/Stain 1.12 Landscape Tree Replacement 1.15 Entry Monument 1.17 Signage 1.18 Lighting-Entry and Pool Fence 1.19 Metal Handrail Replacement Allowance 1.20 Metal Handrail Painting 1.21 Retaining Walls-Stamped 1.22 Retaining Walls-Masonry 1.22 Retaining Walls-Masonry (2021 additional) 1.23 Mailboxes 1.24 Utilities-Inspection/Scoping 1.24 Utilities-Inspection/Scoping (2016 additional) 1.25 Utilities-Repair Allowance 2.1 Siding-Panel 2.2 Doors-Exterior 2.3 Painting-Exterior 2.4 Windows 2.5 Roofing Replacement 2.6 Gutters & Downspouts 2.9 Bathroom Sinks 2.10 Bathroom-Mirrors/Fixtures 2.11 Bathroom-Toilets 2.13 Lighting-Interior 2.14 Water Heater 2.15 Pool-Pumps 2.16 Pool-Sweep & Pump 2.16 Pool-Sweep & Pump (2016 Sweep) 2.17 Pool-Filter & Parts 2.18 Pool-Heater 2.19 Pool-Cover 2.20 Pool-Repaint/Replaster 2.21 Pool-Furniture 3.1 Water Pressure Pump Maint TOTAL ,229 9, ,112 2,465 2,591 1,500 1,500 1,500 1,500 1,500 1, , ,270 2,025 2, ,000 4, ,500 3,500 2,700 1,232 6,500 6,500 1,220 1, , ,573 7,959 6, ,500 1,500 1,500 1,500 1,500 10,000 $27,568 $10,249 $15,933 $1,500 $11,954 $20,440 $4,891 $3,134 $2,300 $47,223 PAGE 27

29 CURRENT FUNDING MODEL PROJECTION Year Current Funding Model Assessment Current Funding Model Interest Current Funding Model Expenditures Current Funding Model Ending Reserve Balance 2016 $23,124 $42 $32,273 $59, $23,124 $54 $5,151 $77, $23,124 $12 $83,590 $17, $23,124 $28 $0 $40, $23,124 $34 $14,710 $48, $23,124 $36 $20,736 $51, $23,124 $47 $7,414 $66, $23,124 $63 $0 $90, $23,124 $75 $5,800 $107, $23,124 $79 $17,731 $112, $23,124 $67 $40,932 $95, $23,124 $69 $19,772 $98, $23,124 $75 $14,251 $107, $23,124 $91 $0 $130, $23,124 $98 $14,299 $139, $23,124 $91 $32,208 $130, $23,124 $102 $8,145 $145, $23,124 $113 $7,177 $161, $23,124 $124 $7,618 $177, $23,124 $127 $18,623 $182, $23,124 $118 $36,188 $169, $23,124 $121 $18,750 $173, $23,124 $127 $15,932 $180, $23,124 $143 $0 $204, $23,124 $149 $15,054 $212, $23,124 $148 $24,123 $211, $23,124 $158 $8,391 $226, $23,124 $174 $1,634 $248, $23,124 $186 $5,800 $265, $23,124 $187 $21,823 $267,179 PAGE 28

30 THRESHOLD FUNDING MODEL PROJECTION Year Threshold Funding Model Assessment Threshold Funding Model Interest Threshold Funding Model Expenditures Threshold Funding Model Ending Reserve Balance 2015 $23,168 $59 $7,633 $84, $23,168 $67 $11,161 $96, $16,591 $20 $84,314 $28, $16,591 $31 $1,500 $43, $16,591 $34 $11,610 $48, $16,591 $33 $18,441 $46, $16,591 $42 $3,914 $59, $16,591 $52 $1,500 $74, $16,591 $60 $5,800 $85, $16,591 $51 $29,631 $72, $16,591 $40 $32,428 $56, $16,591 $44 $11,272 $62, $16,591 $48 $10,751 $68, $16,591 $58 $1,500 $83, $16,591 $55 $21,199 $78, $16,591 $51 $22,147 $73, $16,591 $60 $4,645 $85, $16,591 $62 $13,580 $88, $16,591 $71 $4,118 $100, $16,591 $61 $30,523 $86, $16,591 $53 $27,567 $76, $16,591 $58 $10,250 $82, $16,591 $58 $15,932 $83, $16,591 $69 $1,500 $98, $16,591 $72 $11,954 $103, $16,591 $69 $20,441 $99, $16,591 $78 $4,891 $111, $16,591 $87 $3,134 $124, $16,591 $97 $2,300 $138, $16,591 $76 $47,223 $108,383 PAGE 29

31 Appendix A: Maintenance Schedule PAGE 30

32 MAINTENANCE SCHEDULE EXPLANATORY NOTES The following recommendations are based on industry standard best practices, and are intended to provide easy-to-follow guidelines for the Association to follow regarding the maintenance and preservation of the Association's common elements. Each component is unique, and is subject to unique conditions, which may require an accelerated maintenance, renewal, or replacement schedule. The Association should inspect and replace these components as needed. The Association assumes 100% responsibility for the inspection and maintenance activities described herein, and should contact their community manager and/or maintenance manager if they discover or believe there to be water intrusion or premature degradation of a component or assembly. 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY BUILDING APPURTENANCES Decks and Railings COMMON AREAS Deck Furnishings HVAC Units Inspect for debris build-up and organic growth. Clean deck and railing surfaces as necessary. Inspect for loose, missing, or cracked components, rot, and trip hazards. Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Inspect for loose, missing, or cracked components, rot, sharp edges, and other damage. Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Inspect exhaust vent fans for operability, electrical shorts, and debris-build up. Clean or replace HVAC system filters. Semi-annually (spring and fall) Annually (spring) Annually (spring) Annually (spring) Annually (spring) Semi-annually (summer and winter) PAGE 31

33 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Interior Walls and Ceilings Interior Furnishings Interior Lighting Fixtures Water Heaters Inspect for microbial growth, moisture-staining, holes, cracking, graffiti, or other damage. Regularly monitor locations that exhibit wetness/dampness, color differences, swelling/warping, blistering/cracking, abnormal odors, or failure of previous repairs. Inspect for loose, missing, or cracked components, sharp edges, and other damage. Inspect for operability and electrical shorts. Replace lamps as necessary. Drain and refill hot water tank. Inspect water heater, pointof-service, pressure-reducer valve, and shut-off valves for leaks. Annually (summer) Annually (summer) Semi-annually (summer and winter) Annually (summer) EXTERIOR SEALANTS AND FINISHES Exterior Finish Paint Exterior Sealant Joints Inspect for cracking, peeling, blistering, or other evidence of paint failure. Prep and clean loose material from wall surface using a dust cloth and vacuum. Apply compatible touch-up paint to entire wall surface in between architectural breaks (corner to corner or joint to joint). Spray and back-roll paint using a low-pressure sprayer (30-50 psi) with a 50 fanshaped tip. Brush trims, edges, and protruding surfaces. Always test an inconspicuous surface first to confirm color matching of new finishes to existing finishes. Protect adjacent building components and landscaping that may be damaged by paint overspray. Inspect for sealant failure (open voids) or degradation ( chalking or cracking). Re-seal pinhole sealant failure areas with compatible sealant materials. At more extensive areas of sealant failure or degradation, remove existing sealant and clean debris and loose material from joint using a wire brush, dust cloth, and vacuum. Install new sealant that is compatible with adjacent materials (Sonolastic 750 VLM by Sonneborn is recommended). Sealant joints should be dimensioned, installed, and tooled per ASTM C1193 specifications. Dynamic sealant joints featuring a closed-cell backer rod should be installed between dissimilar materials per ASTM E2112 specifications. Regularly monitor sealant repair areas for recurrence of failure, degradation, or staining. Remove and replace temporary sealant joint applications (installed during winter) as necessary. Annually (fall) Semi-annually (spring and fall) Annually (spring) PAGE 32

34 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Fluid-Applied Traffic Coatings Inspect for cracking, peeling, blistering, or other evidence of failure. Prep and re-coat areas of failure as necessary. Annually (fall) EXTERIOR WALLS Electrical Outlets Exterior Lighting Fixtures Exterior Walls (General) Inspect for damaged covers or electrical shorts. Test ground fault plugs. Inspect for operability and electrical shorts. Replace lamps as necessary. Inspect weather-resistance of seals and gaskets at wall penetration. Inspect exterior wall surfaces for organic growth or graffiti. Clean wall surfaces as necessary with a compatible granulated soap/mild detergent applied using a low-pressure sprayer (30-50 psi) with a 50 fan-shaped tip. Never use muratic acid or petroleum-based cleaners or solvents. Scrub problematic wall surfaces vigorously with a stiff bristle brush (do not use a wire brush) and rinse thoroughly using a garden hose or low-pressure sprayer ( psi) with a fan-shaped tip. Do not allow cleaning solution to dry on building components. Always test an inconspicuous surface first to confirm the effect that scrubbing and application of cleaning solution will have on various building components. Protect adjacent building components and landscaping that may be damaged by cleaning solution. Inspect exterior wall surfaces for damaged, loose, or missing components, rot, storm damage, or other weatherresistance deficiencies. Inspect accessible interior surfaces for microbial growth, moisture staining, or evidence of water leakage to the interior. Regularly monitor locations that exhibit wetness/dampness, color differences, swelling/warping, blistering/cracking, abnormal odors, or failure of previous repairs. Inspect exterior wall surfaces for presence of bird or insect nests. Semi-annually (spring and fall) Semi-annually (summer and winter) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) PAGE 33

35 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Foundations Hose Bibbs Inspect for cracking, spalling, settlement, or damage caused by salt/de-icing chemicals. Patch or repair as necessary, following American Concrete Institute (ACI) concrete repair protocol. Regularly monitor concrete repair areas for recurrence of cracking or spalling. Disconnect hoses and drain hose bibbs. Winterize hose bibbs as necessary in advance of freezing temperatures. Annually (spring) Annually (fall) FENESTRATION UNITS Windows and Doors (General) Inspect weather stripping for continuity and air leakage. Annually (fall) Inspect for missing, cracked, or broken glazing components, or other damage to window or door unit, including evidence of forced entry. Inspect window and door hardware for operability and closer adjustment. Lubricate operable window and door hinges. Inspect interior surfaces for microbial growth, moisture staining, or evidence of water leakage to the interior. Clean exterior surfaces with compatible cleaning solution. Repair holes in window screens and wash screens with compatible cleaning solution. Annually (spring) Annually (spring) Semi-annually (spring and fall) Semi-annually (spring and fall) Annually (spring) POOLS AND SPAS Filters Heaters Pumps Resurfacing Replastering ROOFS Inspect for operability. Clean filter as necessary. Replace failed components as necessary, Inspect for operability and electrical shorts. Check for Replace failed components as necessary, Inspect for operability and electrical shorts. Replace failed components as necessary, Inspect surface for failure in pedestrian traffic coat, remediate conditions as necessary per manufacturers instructions. Turn off all working pool equipment, drain and inspect problematic areas, remediate as necessary. As recommended by manufacturer As recommended by manufacturer As recommended by manufacturer Annually (spring) Annually (spring) PAGE 34

36 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Exhaust Vents Gutters and Downspouts Roof Surfaces (General) SITEWORK Asphalt Paving Catch Basins and Trench Drains Concrete Flatwork Inspect for proper operation of dampers or louvers, blockage by debris, or evidence of birds/rodents. Clean exhaust vents and screens as necessary. Inspect for debris build-up and organic growth. Clean gutters and downspouts as necessary. Identify and regularly monitor locations affected by recurring debris-build up or standing water. Inspect for damaged, loose, or missing components, as well as leaking joints. Inspect roof surfaces for organic growth or debris build-up. Clean roof surfaces as necessary with a compatible granulated soap/mild detergent applied using a low-pressure sprayer (30-50 psi) with a 50 fan-shaped tip. Never use muratic acid or petroleum-based cleaners or solvents. Scrub problematic roof surfaces vigorously with a stiff bristle brush (do not use a wire brush) and rinse thoroughly using a garden hose or low-pressure sprayer ( psi) with a fan-shaped tip. Do not allow cleaning solution to dry on building components. Always test an inconspicuous surface first to confirm the effect that scrubbing and application of cleaning solution will have on various building components. Protect adjacent building components and landscaping that may be damaged by cleaning solution. Inspect roof surfaces for damaged, loose, or missing components, storm damage, or other weather-resistance deficiencies. Inspect roof surfaces for presence of bird or insect nests. Patch all cracks in asphalt greater than 1/4 in width with hot-applied crack sealer. Monitor oil leaks that will disintegrate asphalt. Clean as necessary. Inspect for debris build-up and organic growth. Clean catch basins or trench drains as necessary. Inspect for debris build-up and organic growth. Clean concrete flatwork surfaces as necessary. Inspect for cracking, spalling, settlement, trip hazards, or damage caused by salt/de-icing chemicals. Patch or repair as necessary. Monthly Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Annually (spring) Annually (spring) Semi-annually (spring and fall) Semi-annually (spring and fall) Annually (spring) PAGE 35

37 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Fencing and Railings Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Inspect base of wood fence pickets for debris build-up and clearance to soil. Remove debris and modify soil as necessary to maintain adequate clearance. Annually (spring) Semi-annually (spring and fall) Gates Irrigation Systems Landscaping Light Poles Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Blow out sprinkler lines and inspect backflow devices for operability. Inspect electronic timers for operability and electric shorts. Redirect sprinkler heads away from building surfaces. Inspect soil finish grade for proper drainage away from structure. Fill in low areas as necessary to allow for 5% minimum positive slope away from structure. Inspect soil finish grade for blockage of masonry veneer weep provisions at base of wall locations. Inspect for plants growing on or too close to structure. Trim or remove plants as necessary to maintain minimum 6 clearance to structure. Inspect light poles for operability. Replace lamps as necessary. Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Annually (spring) Annually (fall) Annually (spring) Annually (spring) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (spring and fall) Semi-annually (summer and winter) Annually (spring) PAGE 36

38 1. COMPONENT MAINTENANCE ACTION(S) REQUIRED FREQUENCY Mailboxes* *(Not responsibility of CHCHOA) Inspect for loose, missing or cracked components, rot, sharp edges, and other damage. Repair or replace as necessary. Inspect metal components for rust or paint failure. Clean rust and loose material from metal using wire brush, dust cloth, and vacuum. Prep and repaint with two coats of compatible rust-inhibiting primer. Following application of primer and finish, apply compatible clear coat waterproof sealer to areas of work to help prevent additional corrosion. Annually (spring) Annually (spring) Retaining Walls (Masonry) Inspect wall surfaces for loose or missing masonry units. Annually (spring) Inspect masonry joints for failed mortar. Clean loose mortar material from joints using a wire brush, dust cloth, and vacuum. Tuckpoint smaller mortar failure areas with compatible materials. Remove and replace mortar at larger failure areas. Inspect masonry surfaces for presence of efflorescent staining. Clean efflorescence from wall surfaces as necessary with solution consisting of 1 part white household vinegar to 5 parts water, applied using a low-pressure sprayer (30-50 psi) with a 50 fan-shaped tip. Never use muratic acid or petroleum-based cleaners or solvents. Scrub problematic wall surfaces vigorously with a stiff bristle brush (do not use a wire brush) and rinse thoroughly with clean water using a garden hose or low-pressure sprayer ( psi) with a fan-shaped tip. Do not allow cleaning solution to dry on building components. Always test an inconspicuous surface first to confirm the effect that scrubbing and application of cleaning solution will have on various building components. Protect adjacent building components and landscaping that may be damaged by cleaning solution. Avoid use of de-icing chemicals on surfaces immediately adjacent to masonry veneer. Annually (spring) Annually (spring) Throughout winter PAGE 37

39 Appendix B: Important Information PAGE 38

40 PURPOSE OF REPORT A MULTI-PURPOSE TOOL This reserve study report is an important part of the Association s budgetary process. Following the recommendations contained within this report should ensure the Association s smooth budgetary transitions from one fiscal year to the next, and either decrease or eliminate the need for special assessments. In addition, this reserve study serves a variety of useful purposes: Following the recommendations of a reserve study performed by a professional consultant can protect the Board of Directors in a community from personal liability concerning reserve components and reserve funding A reserve study is required by your accountant during the preparation of the Association s annual audit. A reserve study is often requested by lending institutions during the process of loan applications, both for the community and, in many cases, the individual owners The reserve study report is also a detailed inventory of the Association s major assets and serves as a management tool for scheduling, coordinating and planning future repairs and replacements The reserve study report is a tool that can assist the Board in fulfilling its legal and fiduciary obligations for maintaining the community in a state of good repair. If a community is operating on a special assessment basis, it cannot guarantee that an assessment, when needed, will be passed. Therefore, it cannot guarantee its ability to perform the required repairs or replacements to those major components for which the association is obligated. Since the reserve study includes measurements and cost estimates of the Association s assets, the detail reports may be used to evaluate the accuracy and price of contractor bids when assets are due to be repaired or replaced. The reserve study is an annual disclosure to the membership concerning the financial condition of the Association, and may be used as a consumers guide by prospective purchasers The reserve study report provides a record of the time, cost, and quantities of past reserve replacements. At times, the Association s management company and Boards of Directors are transitory, which may result in the loss of these important records. PAGE 39

41 STANDARD TERMS AND DEFINITIONS Adjustment to Useful Life Once the Estimated Useful Life (EUL) is determined, it may be adjusted, up or down, by this separate figure for the current cycle of replacement. This will allow for a current period adjustment without affecting the estimated replacement cycles for future replacements. Annual Assessment Increase This represents the percentage rate at which the Association will increase its assessment to reserves at the end of each year. For example, in order to accumulate $10,000 in 10 years, you could set aside $1,000 per year. As an alternative, you could set aside $795 the first year and increase that amount by 5% each year until the year of replacement. In either case you arrive at the same amount. The idea is that you start setting aside a lower amount and increase that number each year in accordance with the planned percentage. Ideally this figure should be equal to the rate of inflation. It can, however, be used to aid those Associations that have not set aside appropriate reserves in the past, by making the initial year s allocation less formidable. Annual Fixed Reserves An optional figure, which if used, will override the normal process of allocating reserves to each asset. Budget Year Beginning/Ending The budgetary year for which the report is prepared. For Associations with fiscal years ending December 31st, the monthly contribution figures indicated are for the 12-month period beginning 1/1/20xx and ending 12/31/20xx. Component: The individual line items in the reserve study, developed or updated in the Physical Analysis. These elements form the building blocks for 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 Inventory The task of selecting and qualifying reserve components. This task can be accomplished through on-site visual, review of Property design and organizational documents, a review of established Property precedents, and discussion with appropriate Association representative(s). Condition Assessment: The task of evaluating the current condition of the component based on observed or reported characteristics. Current Replacement Cost The estimated Replacement Cost effective at the beginning of the fiscal year for which the report is being prepared. Estimated Useful Life (EUL) The estimated useful life of a component based upon industry standards, manufacturer specifications, visual inspection, location, usage, association standards and prior history. All of these factors are taken into consideration when tailoring the estimated useful life to the particular component. For example, the carpeting in a hallway or elevator (a heavy traffic area) will not have the same life as the identical carpeting in a seldom-used meeting room or office. 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, and the projected Reserve income and expense over time is presented. The Financial Analysis is one of the two parts of a Reserve Study. Funding Plan: An Association s plan to provide income to a Reserve Fund to offset anticipated expenditures from that fund. PAGE 40

42 Funding Principles: Sufficient Funds When Required Stable Contribution Rate over the Years Evenly Distributed Contributions over the Years Fiscally Responsible Future Replacement Cost The estimated cost to repair or replace the component at the end of its estimated useful life based upon the current replacement cost and inflation. Inflation This figure is used to approximate the future cost to repair or replace each component in the report. The current cost for each component is compounded on an annual basis by the number of remaining years to replacement, and the total is used in calculating the monthly reserve contribution that will be necessary to accumulate the required funds in time for replacement. Interest Contribution (After Taxes) The interest that should be earned on the reserves, net of taxes, based upon their beginning reserve balance and monthly contributions for one year. This figure is averaged for budgeting purposes. Investment Yield Before Taxes The average interest rate anticipated by the Association based upon its current investment practices. Life and Valuation Estimates: The task of estimating Useful Life, Remaining Useful Life, and Repair or Replacement Costs for the Reserve components. Number of Units and/or Phases As applicable, the number of units and/or phases included in this version of the report. Physical Analysis: The portion of the Reserve Study where the Component Inventory, Condition Assessment, and Life and Valuation Estimate tasks are performed. This represents one of the two parts of the Reserve Study. Placed-In-Service Date The month and year that the component was placed-in-service. This may be the construction date, the first escrow closure date in a given phase, or the date of the last servicing or replacement. Projected Reserve Balance The anticipated reserve balance on the first day of the fiscal year for which this report has been prepared. This is based upon information provided and not audited. Remaining Useful Life (RUL) The estimated time, in years, that a reserve component can be expected to continue to serve its intended function. Projects anticipated to occur in the initial year have zero Remaining Useful Life. Replacement Cost: The cost of replacing, repairing, or restoring a Reserve Component to its original functional condition. The Current Replacement Cost would be the cost to replace, repair, or restore the component during that particular year. Replacement Year The year that the component is scheduled to be replaced. The appropriate funds will be available by the first day of the fiscal year for which replacement is anticipated. PAGE 41

43 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. Based upon information provided and not audited. Reserve Provider: An individual who prepares Reserve Studies. Reserve Study: A budget planning tool which identifies the current status of the Reserve Fund and a stable and equitable Funding Plan to offset the anticipated future major common area expenditures. The Reserve Study consists of two parts: the Physical Analysis and the Financial Analysis. PAGE 42

44 OVERVIEW OF CAPITAL PLANNING TOOLS INTRODUCTION Preparing the annual budget and overseeing the Association s finances are perhaps the most important responsibilities of board members. The annual operating and reserve budgets reflect the planning and goals of the association and set the level and quality of service for all of the Association s activities. FUNDING OPTIONS When a major repair or replacement is required in a community, an Association has essentially four options available to address the expenditure: Option 1 The first, and only logical means that the Board of Directors has to ensure its ability to maintain the components for which it is obligated, is by assessing an adequate level of reserves as part of the regular membership assessment, thereby distributing the cost of the replacements uniformly over the entire membership. The community is not only comprised of present members, but also future members. Any decision by the Board of Directors to adopt a calculation method or funding plan which would disproportionately burden future members in order to make up for past reserve deficits, would be a breach of its fiduciary responsibility to those future members. Unlike individuals determining their own course of action, the board is responsible to the community as a whole. Whereas, if the association was setting aside reserves for this purpose, using the vehicle of the regularly assessed membership dues, it would have had the full term of the life of the roof, for example, to accumulate the necessary moneys. Additionally, those contributions would have been evenly distributed over the entire membership and would have earned interest as part of that contribution Option 2 The second option is for the association to acquire a loan from a lending institution in order to affect the required repairs. In many cases, banks will lend to an association using future homeowner assessments as collateral for the loan. With this method, the current board is pledging the future assets of an association. They are also incurring the additional expense of interest fees along with the original principal amount. In the case of a $150,000 roofing replacement, the association may be required to pay back the loan over a three to five year period, with interest. Option 3 The third option, too often used, is simply to defer the required repair or replacement. This option, which is not recommended, can create an environment of declining property values due to expanding lists of deferred maintenance items and the association s financial inability to keep pace with the normal aging process of the common area components. This, in turn, can have a seriously negative impact on sellers in the association by making it difficult, or even impossible, for potential buyers to obtain financing from lenders. Increasingly, lending institutions are requesting copies of the association s most recent reserve study before granting loans, either for the association itself, a prospective purchaser, or for an individual within such an association. Option 4 The fourth option is to pass a special assessment to the membership in an amount required to cover the expenditure. When a special assessment is passed, the association has the authority and responsibility to collect the assessments, even by means of foreclosure, if necessary. However, an association considering a special assessment cannot guarantee that an assessment, when needed, will be passed. Consequently, the association cannot guarantee its ability to perform the required repairs or replacements to those major components for which it is obligated when the PAGE 43