Paradise Island Condominium Association Final Report of the Reserve Study Review Committee

Transcription

1 Paradise Island Condominium Association Final Report of the Reserve Study Review Committee March 11, 2014 Chairperson Mary Linak Members Jeff Duppler Chuck Lanius Bill Murphy Paul Pudlas Advisor Mike Ashworth, Resident Manager

2 March 11, 2014 Final Report

3 Reserve Study Review Committee Report Summary The PICA Board of Directors chartered a Reserve Study Review Committee to update the previous study dated July 27th, Both the charter and committee members are in appendices at the end of this report. The team met nine times between September 17, 2013 and January 13, Ongoing verbal updates were given to the Board during this period. Key Points from the Review 1. All decks and balconies, including wood, metal & composite were physically measured and inspected for current condition as well as wear or defects. The worksheets are available from the Resident Manager. 2. Concrete patios, sidewalks and stoops were physically measured and inspected for current condition as well as wear or defects. The worksheets are available from the Resident Manager. 3. During the course of this review, the team members discussed the need for a strong maintenance program that is difficult to fund solely through the annual Operating Budget. To address this need, an auxiliary Reserve Refurbishment Budget was created and funded within the reserve budget. 4. With the addition of this Refurbishment Budget, several elements were not assigned a cost within the Reserve/Replacement Budget due to their extended remaining useful lives, but periodic maintenance expenses were covered. 5. Future replacement cost of the floating docks was split between the Association and slip owners. 6. Based on the Committee s findings during physical inspection, research, and estimates from various contractors, spending over the 30-year span of the study was realigned between replacement and refurbishment costs. Total expenditures are projected to be $ 2,566,934 over this time frame, representing the team s best efforts to balance costs and look for alternatives, while maintaining the integrity of PICA s assets. 1

4 Discussion The Reserve Committee members reviewed the 2010 study and decided to break out decks, balconies and concrete structures by unit, in order to create a current inventory and rating on the condition of each. The team was then able to predict the remaining useful life of these elements. By creating this level of detail, it was possible to account for several replacements completed in the last three years. This plan is similar to the way roofs were handled in the 2010 review. The Resident Manager was once again an advisor to the Committee, providing valuable technical support and access to past repair and replacement records. He was also in contact with various contractors, engineers and vendors throughout the study to ensure the accuracy of cost estimates. His assistance with the spreadsheets used and published in this study was crucial to the Committee meeting its goal within the expected timeframe. 2

5 Physical Exterior Building Elements Balconies, Metal Deck and Wood Frame: The details of size and condition are recorded in the report spreadsheet. In short, the committee found these decks to be in good condition and likely to have a useful life of 45 years. Replacement costs are estimated to be $35 per sq. ft. in today s dollars. Therefore, replacement is broken into five phases based on year built. However, these decks are likely to need maintenance before reaching the need for replacement. For that reason, there is a five-phased painting plan in the Refurbishment Budget beginning in 2026 and ending in During inspection, several support posts were found with cracks and the Committee would recommend that these be replaced as needed from the Operating Budget to prevent a larger expense. In addition, this team agrees with the findings of the 2010 (and earlier) report regarding insufficient overhang and misdirected storm water from the upper balconies on Holtz buildings and recommends drip edge flashing or gutters be installed. Decks and Balconies, Wood: The details of size and condition are recorded in the report spreadsheet. Based on recent replacements, the team discussed whether composite material or treated lumber should be used in the future. Based on a cost analysis that compared the life span of the various materials and the expense of periodic wood staining, the Committee recommends future replacements be done with composite material. This includes all rail systems. Estimates place the cost of this recommendation at $47 per sq. ft. in today s dollars. The timing for replacement is based on deck conditions found in the physical inventory and falls into five phases. Funds for staining were placed in the Refurbishment Budget until all wood decks have been replaced with composite material. Roofs, Asphalt Shingles: The Committee reviewed engineering reports on the Holtz roofs from 2008, and the 2013 inspection report from a local roofing contractor which included satellite measurements and a $330 per square all inclusive replacement cost. Based on this information, it is recommended that the roofs on buildings 14 and 15 be budgeted for replacement in 2015 and Thereafter, roof replacement has been spread between 2018 and 2024, with both the contractor s rating and budget concerns determining the order in which the work is completed. For those buildings that have already been reroofed and those planned in the future, the expected useful life is 25 years. This next round of roofing would begin in 2033 as shown in the Reserve Expenditures spreadsheet. The Committee retained the line item for attic inspections but extended the timing to every 10 years with the next inspections slated for This change is based on recent experience. 3

6 Walls, Aluminum Siding: The Committee found that aluminum siding within the Association remains in excellent condition and research found that, with periodic painting, the useful life of this material can be 50 years or more. Therefore, rather than budgeting for replacement costs, the team placed funds in the Refurbishment Budget for painting the aluminum siding in five phases beginning in The estimate is based on the original study square footage of 8075 sq. ft. and costs found on-line. Walls, Vinyl Siding: Through research, the Committee found vinyl siding is expected to have a useful life of 50 years. The vinyl siding within PICA is in excellent condition and no funds were budgeted within the span of this study for replacement. Chimney Caps: This item was removed from Reserve Funding and should be handled in the Operating Budget on an as needed basis. Gutters and Downspouts: The Committee recommends this element be replaced, if needed, in conjunction with the siding on a unit. Since both aluminum and vinyl siding have life spans of 50 years, there is no cost budgeted within the Reserve Fund for total replacement. However, there is a recommendation to install gutters and downspouts or drip edge flashing to the second story decks on Holtz buildings. Light Fixtures: This item was removed from Reserve Funding and should be handled in the Operating Budget on an as needed basis considering the recent wholesale replacement. Building Services Elements Elevator, Hydraulic Pump and Controls: The expected useful life of the elevator is 50 years which extends funding for replacement beyond the scope of this study. Periodic repairs and inspections will be funded through the Operating Budget. Property Site Elements Concrete Patios: The Committee inspected each concrete patio within PICA to record measurements and condition on a 1 5 scale with a rating of 5 meaning a useful life of 70 years. Of the nearly 80 patios, one was found to need maintenance within 3 years, one had a 5-year timeline and 6 will need work within 10 years. None of them were in need of complete replacement, but will need some repair. It was the inspection of all concrete surfaces within PICA that led to including $5000 in each of five different years over the span of this study in the Refurbishment Budget for concrete maintenance. 4

7 Repair of all the various concrete surfaces in this section of the study would be funded from this budget. Concrete Sidewalks: Of the 50 sidewalk sections inspected, two were found to be in poor condition and have been repaired. Four sections will need maintenance within five years and another twenty rated a 10-year timeline for repair. All others are considered to have a 50-year useful life. Concrete Stoops, Steps and Aprons: Eleven stoops/steps/aprons are in need of repair in Eight stoops would be in the next group to be repaired in The others were rated as fours and fives on the inspection scale and their repair would be funded by later budget allowances for concrete refurbishment. Asphalt Pavement, Phased Overlay: The Committee Advisor spoke to a local asphalt contractor to obtain quotes and potential timing for this three inch deep overlay estimate. The estimate is for $9.45 per sq. yd. over two phases in 2027 and Measurements from the previous study were used. This recommendation also includes continued funding for asphalt sealing every three years, but in the Refurbishment Budget. Asphalt Pavement, Partial Replacement: There are approximately 1100 square yards of pavement that require replacement this year. Their location is the driveway up to building 19 and the driveway between buildings 12 and 13. The contractor estimate for total asphalt replacement is $16 per sq. yd. and the funds are budgeted for Asphalt Pavement, Total Replacement: With the periodic resealing and phased overlay described above, the Committee recommends complete asphalt replacement beginning in Light Poles: This item was removed from Reserve funding and should be handled in the operating budget on an as needed basis. Retaining Walls, Stone: The Committee agreed with the recommendations of the previous study and kept the three-phase inspection and partial replacement funds in the reserve budget. Wells, Pumps: The Committee agreed with the recommendations of the previous study and funded the scheduled replacement of one pump per year beginning in 2018 and ending in Docks, Fixed: The deck surfaces of the fixed docks were replaced with composite material in 2013, giving them an expected useful life of 50 years from that date. Therefore, no funds were included in this study for future replacement. The metal frames 5

8 and supports may need repair or partial replacement when inspected each season. These costs would be part of the Operating Budget/Marina Budget. Docks, Floating: The Committee recommends splitting the cost of floating dock replacement between the Association and slip owners. The Association would be responsible for total linear feet on each central dock and the slip owners would cover the cost for total linear feet along the slips. This split is shown on the Reserve Expenditures spreadsheet. The cost for floating docks has been reduced based upon recent estimates from the manufacturer, ShoreStation. An exact replacement system is no longer available, but the new docks would be similar except for the decking material, which is now treated lumber as opposed to the existing plastic. Estimated assembly costs are also included in the spreadsheet. Since replacement is far in the future, decisions regarding the materials to be used will be made at that time. Pond and Lake Shoreline, Erosion Control: This element remains funded at the same level as recommended by the previous study. 6

9 Financial Inflation Rate Assumptions: Committee members researched various on-line references in regard to inflation rate predictions. These included the Federal Reserve Bank of Cleveland, Statista.com, the Congressional Budget Office and Federal Reserve.gov. Projections over the next ten years ranged from 1.5% to 2.0%. The Committee agreed to use a forecast of 1.85% inflation on average for spending projections. This estimate will need to be reviewed and updated by future Reserve Study teams. Interest Rate Assumptions: Interest rates are at all-time lows and it is difficult to predict when they will increase. The Committee is recommending that the PICA Board use a laddering method to reinvest the Certificate of Deposit (CD) that will mature this year in order to earn more interest on funds that will not be needed in the near future. Research does show that on-line banking institutions are offering higher interest rates on various types of deposits and could be an option for PICA. This CD along with the bond fund and deposit accounts will earn less than the 2010 estimate. The team agreed to set the interest projection at 1.85% with the goal of offsetting estimated inflation. Operating Budget Threshold: The Committee had many discussions on the dollar limit of expenditures to be financed within the Reserve Budget and noted the conflict between replacement and repair for high cost elements with long useful lives. In the end, a decision was reached to create an auxiliary to the Reserve Budget titled Reserve Refurbishment Budget that includes wood deck staining, asphalt sealing, concrete repair, aluminum siding painting and metal deck painting. The dollar threshold for costs to include in this budget was $5000, with one exception. Due to the wood deck replacement schedule, eventually there will not be enough wood decks that need staining to reach this dollar level. By providing for these scheduled refurbishments, the Committee enables the Board to avoid large swings in the Operating Budget. Maintain Adequate Reserves: The overriding goal of the Committee was to account for all necessary expenses to maintain the common elements within PICA while growing a Reserve Fund adequate to cover these expenses now and into the future. The path to accomplishing this goal is illustrated in the Reserve Funding Plan Cash Flow spreadsheet. Reserve funding consists of the current balance, interest earned, annual contributions from unit owners, reimbursement from slip owners for improvements and PIHOA payments for the new fixed docks. Based on this funding model, the Reserve balance would cover all costs itemized in the Reserve Expenditures spreadsheet through 7

10 2043. The Committee strove to keep contribution increases as low as possible while assuring funds would be available for replacements and repairs as specified. 8

11 Recommendations to the Board 1. The Reserve Committee recommends contributions to the Reserve Fund increase by 30% ($12,000) in 2014, with an additional 5% increase (not compounded) each subsequent year through 2029, thus ensuring adequate funds are available to cover expected costs and future inflation. See Reserve Funding spreadsheet. 2. Move several large refurbishment costs from the Operating Budget to a new section of the Reserve Budget as demonstrated in the Reserve Expenditures spreadsheet. This action will smooth out planning for operating expenses while assuring funds are available for deck staining, asphalt sealing, concrete repair, aluminum siding painting and metal deck painting when needed. 3. The Reserve Committee recommends a robust maintenance program within the annual Operating Budget to prolong the useful life of physical elements inventoried in this study. Replacement of various assets could be moved further into the future by planning for things like deck post replacements, building cleaning, and roof maintenance. 4. Light poles and fixtures along with chimney cap replacement should be moved to the Operating Budget due to their relatively low cost and sporadic need. 5. As a part of the plan to achieve investment earnings of 1.85% on average, per year, the Committee recommends laddering the Certificate of Deposit maturing in It is recommended the Board charter a new review every 3 to 5 years to update these working documents and accommodate new information or changes in the condition of PICA common elements. 9

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13 Appendices: A. Charter B. Members C. Reserve Expenditure Spreadsheet D. Reserve Funding Sheet E. Reserve Funding Graph

14 Appendix A Charter for the Reserve Study Review Committee Purpose: The Reserve Study Review Committee is commissioned by the Board of Directors to review the July 27, 2010 Final Report of the Reserve Study Review Committee of the Paradise Island Condo Association and make recommendations back to the Board concerning actions that may be appropriate for the Board to take regarding PICA Reserves. Responsibilities: The committee will review the original study. They will review the physical analysis and comment on the completeness of the component inventory, the estimated years of replacement, useful life remaining, unit cost of the components, and the validity of the assumptions used in the physical study, making use of the repair, replacement and maintenance data over the past 3 years. They will also review the financial analysis and comment on the assumptions made concerning inflation rate and interest rate, the operating budget threshold, and potential need to augment the Reserves so as to maintain adequate Reserves. The committee will make periodic reports of progress to the Board and provide a written report to the Board by March Term: The committee shall exist for a period of 6 months, with potential extension by application to the Board. Committee Organization: The committee chair shall be Mary Linak. Additional and/or replacement members will be selected by the chairman with Board approval. Mike Ashworth, Resident Manager, will provide access to maintenance records, repair contracts, and any necessary files. Additionally, Mike Ashworth shall serve as an advisor to the committee as will Tim Hood, the previous Reserve Study Review Committee chairperson. Approved by the Board: 08/27/2013 Original Signed Mike Plumer, Board Secretary

15 Appendix B Reserve Study Committee Members Mary Linak Chairperson Jeff Duppler Chuck Lanius Bill Murphy Paul Pudlas Mike Ashworth Advisor

16 Appendix C Reserve Expenditures Paradise Island Condominium Association Inflation Rate = 1.85% TOTAL Expenditure over 30 year period = 2,566,934 Life Analysis 30 Yr Units No. Estimated Next Useful Life Remaining Use- Unit Cost Replacement 2014 Cost of Line Unit Per Phas Units Reserve Component Inventory Yr of Last Item Total Phase es Year Built Replacement Curr future Repl ful Life per Phase 1a sq ft ,820 1b sq ft ,110 Balconies, Metal Deck & Wood Frame, phased 1c sq ft ,478 replacement 1d sq ft ,984 1e sq ft ,270 2a sq ft varies 2017 varies varies NA ,740 2b sq ft varies 2021 varies varies NA ,766 Balconies, Wood Deck & Frame, phased replacement 2c sq ft varies 2022 varies varies NA ,800 (with composite) 2d sq ft varies 2024 varies varies NA ,860 2e sq ft varies 2029 varies varies NA ,852 3a each Roof Replacement - Building ,350 51,350 3b each Roof Replacement - Building ,350 51,350 3c each Roof Replacement - Building ,350 51,350 3c each Roof Replacement - Building ,350 51,350 3d each Roof Replacement - Building ,350 51,350 3e each Roof Replacement - Building ,350 51,350 3f each Roof Replacement - Building ,800 20,800 3g each Roof Replacement - Building ,800 20,800 3h each Roof Replacement - Building ,725 23,725 3i each Roof Replacement - Building ,725 23,725 3j each Roof Replacement - Building ,725 23,725 3l each Roof Replacement - Building ,950 33,950 3m each Roof Replacement - Building ,500 68,500 3n each Roof Replacement - Building ,200 59,200 3o each Roof Replacement - Building ,350 51,350 3p each Roof Replacement - Building ,500 41,500 3q each Roof Replacement - Building ,850 18,850 3r each Roof Replacement - Building ,850 18,850 3s each Roof Replacement - Building ,150 20,150 3t each Roof Replacement - Building ,850 18,850 3u each Roof Replacement - Building ,000 18,000 3v each Inspect all attics on 10 year basis NA NA 5 10,000 10, sq ft Walls, Vinyl Siding, partial replacement varies NA , sq ft Walls, Aluminum Siding varies NA NA see rfrb 5 43, each Elevator, Hydraulic Pump and Controls NA 30 36,000 36,000 7a sq yds Asphalt Pavement, Repaving, Phased Overlay varies to to 20 NA ,338 7b sq yds Asphalt Pvmt, Repaving, total repl, (12,13,19) varies to to 20 NA ,325 7c sq yds Asphalt Pvmt, Repaving, total repl ( in phases) varies to to , sq yds Concrete Replacement varies NA NA see rfrb unknown unknown lin ft Docks, floating (Associations portion) NA NA , sq ft Docks Fixed(*see narrative) NA NA unknown unknown lin ft Pond and Lake Shoreline, Erosion Control, partial NA , sq ft Ret.Walls, Stone, insp.& part. replacement varies NA , each Wells, Pumps varies ,000 4,000 Capital Expend Reserve Refurbishment Categories 14a Unit No.> 2771, 2777, 2779, 2783, 2785, ,294 7,294 14b Unit No.> 2780 & ,588 3,096 14c 2776, 2794, 2792, 2790, 2788, 2786, 2784, 2782, Unit No.> 2804, 2802, 2800, , ,602 9, Asphalt Sealing Every 3 Years beginning in , Concrete Repair As Needed 5, Aluminum Siding As Needed 7, Metal Deck Painting As Needed 5,000 Maintenance Expend Total - All Expendit Accumulated Expe Slip Owner's Reserve Components Lin. Ft Docks, floating (Slip Owners portion) NA NA ,915

17 s, Years > Total Future Cost of Repl (30 Yr proj ,856 20,856 76,383 76,383 23,000 23,000 21,850 21, ,627 71,651 56,279 56,279 59,461 59,461 43,785 43,785 18, ,961 55,257 61,681 61,681 29,466 23,648 23,648 27,981 27,981 28,498 28,498 28,498 28,498 40,040 40,040 76,464 76,464 83, ,384 52, ,744 43,050 27,701 20,659 20,659 22,084 22,084 27,198 20,843 20,843 39,938 10,960 13, , ,194 68,959 70,235 17,325 17,325 65,662 unknown 49,289 unknown 36,837 36, ,318 46,739 56,142 74,878 4,304 4,384 4,465 4,548 4,632 4,717 4,805 4,894 4,984 5,076 5,170 5,266 ditures By Year 17,325 52,300 89,788 20,856 59, , ,766 71,981 84, , ,482 49,744 61,126 74,036 75,405 90,082 7,567 8,143 3,271 3,520 9,960 10,718 11,533 15,560 16,440 17,369 18,351 19,389 5,000 5,480 6,117 6,582 8,256 17,128 9,215 6,230 6,345 6,463 6,582 ditures by Year 5, ,087 3, ,920 18,860 3,520 17,369 8,256 11,533 41,596 6,230 6,345 25,851 22,380 tures - by Year 22,325 52, ,876 24,127 59, , ,626 75, , , ,015 91,340 67,356 80, , ,462 enditures 22,325 74, , , , , , , , ,282 1,024,298 1,115,637 1,182,994 1,263,375 1,364,632 1,477,094 70,413

18 ,976 18,186 82,704 29,466 83,865 27,701 82,704 87,380 68,076 70,618 27,198 15,813 74,368 65,662 49,289 67,437 5,363 5,463 6,807 78,340 5, ,517 27,198 76,990 67, , ,408 68, ,835 20,485 21,643 22,866 24,159 25,525 7,907 9,560 9,916 6,704 6,704 30, ,916 21, , ,907 24, ,525 85,044 35, ,434 48,840 76,990 67,437 22, , ,567 68, ,359 1,562,138 1,597,644 1,597,644 1,739,078 1,787,919 1,864,908 1,932,345 1,955,211 1,955,211 1,978,932 2,168,499 2,236,575 2,236,575 2,566,934 70,413

19 Appendix D Reserve Funding Plan Cash Flow Analysis 2014 Budget Reserves at Beginning of , Reserve Contribution 40,000 Paradise Island Condominium Association Interest Rate 1.85% 2014 Reserve Contribution 59,233 Inflation rate DOES NOT apply to contributions Projected Reserves at EOY ,378 Multiple (of 2013) Year Reserve Category Reserves at Beginning of Year 335, , , , , , , , , ,767 Total Recommended Reserve Contribution 59,233 59,988 58,448 60,448 62,448 64,448 66,448 68,448 70,448 72,448 Estimated Interest Earned, During Year 6,880 7,150 6,090 6,875 7,055 5,857 4,667 4,623 4,119 2,624 Anticipated Expenditures, By Year -22,325-52, ,876-24,127-59, , ,626-75, , ,376 Anticipated Reserves at Year End 378, , , , , , , , , ,463 Absolute value of expenditure by year for graph 22,325 52, ,876 24,127 59, , ,626 75, , ,376 Increase All Owners Average Low High Marina Contributions PIHOA Slip Owners Electrical Reimbursement for Fixed Piers Marina Income Combined Multiple (of 2013) Year Reserve Category Reserves at Beginning of Year 144,463 85,447 71,861 84,487 86,118 68,555 41,291 41,448 89, ,742 Total Recommended Reserve Contribution 74,448 76,448 78,448 80,448 82,448 84,448 84,448 82,000 82,000 82,000 Estimated Interest Earned, During Year 1,552 1,305 1,535 1,564 1, ,627 3,174 2,133 Anticipated Expenditures, By Year -135,015-91,340-67,356-80, , ,462-85,044-35, ,434 Anticipated Reserves at Year End 85,447 71,861 84,487 86,118 68,555 41,291 41,448 89, , ,441 Absolute value of expenditure by year for graph 135,015 91,340 67,356 80, , ,462 85,044 35, ,434 Increase All Owners Average Low High Marina Contributions PIHOA Slip Owners Electrical Reimbursement for Fixed Piers Marina Income Combined

20 Multiple (of 2013) Year Reserve Category Reserves at Beginning of Year 117, , , , , , , , , ,878 Total Recommended Reserve Contribution 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 Estimated Interest Earned, During Year 2,786 2,930 3,254 4,408 6,007 7,196 5,339 5,696 7,318 2,859 Anticipated Expenditures, By Year -48,840-76,990-67,437-22, , ,567-68, ,359 Anticipated Reserves at Year End 153, , , , , , , , , ,378 Absolute value of expenditure by year for graph 48,840 76,990 67,437 22, , ,567 68, ,359 Increase All Owners Average Low High

21 Appendix E Paradise Island Condominium Association 2014 Reserve Study Expenditures and Funding Analysis 450, Total Recommended Reserve Contribution Anticipated Reserves at Year End Absolute value of expenditure by year for graph 400, ,000 Reserve Ac ccumulations 300, , , , , , Years