PM+Reserves Veteran Owned Business SPECIALIZING IN RESERVE STUDIES SINCE 1990 A PROFESSIONAL CORPORATION

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1 PM+Reserves Veteran Owned Business SPECIALIZING IN RESERVE STUDIES SINCE 1990 A PROFESSIONAL CORPORATION BROAD RUN OAKS HOA Gainesville, VA Level I Full Reserve Study, March 3, 2017 Prepared for: Board of Directors Engineer Mario B. "Ben" Ginnetti, PRA, RS, P.E. Copyright by Mario B. Ginnetti This document contains copyright and proprietary data. It may only be reproduced for the exclusive use of Broad Run Oaks HOA. All other rights reserved by the author Poplar Tree Court Chantilly, VA (703) FAX (703) pmplusreserves@cox.net

2 TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY... 1 STUDY INFORMATION... 3 MAINTENANCE/REPAIR/REPLACEMENT TIPS & RESERVE CONSIDERATIONS... 5 READING AND UNDERSTANDING TABLES & CHARTS... 7 PHOTOGRAPHS... 9 APPENDIX A Table of Repair/Replacement Reserves and Years 1 10 Expense Projection... A1 Years Expense Projection... A3 Funding Plans - 30 Year Projection... A5 Property Comparison... A6 Comments... A7 Excel Spreadsheet Components... No Page # Broad Run Oaks HOA i by MBG

3 EXECUTIVE SUMMARY KEY TO UNDERSTANDING STUDY RESULTS The purpose of a reserve study is to establish a financial plan for keeping the property s common and limited common elements in good repair. The plan is developed by identifying the component, assessing its condition and estimating both the time when work will be needed and cost of work. In a PM+ study these entries can be found beginning on page A1, columns (1), (4) and (5). Those entries combined with reserve savings, current reserve contribution, interest and inflation rates and how much of a contingency should be preserved to fund unforeseen events are the factors that determine the reserve contribution. RELEVANT DATA 1st Study Year FY17 $385,040 AOH Start FY17 FY Begins 01-Jan-17 $52,840 Your Contribution in FY17 Inspection Date(s) 12/1-5/ % Inflation # Units % Interest AOH (cash/investments start of fiscal year) and Current Year Contribution were provided to PM+ and were best estimates available when provided, they are not audited amounts. INTEREST AND INFLATION factors¹ best project the future needs of the property. Inflation is based on the last ten-year average for the Consumer Price Index (CPI); interest on savings is based on the ten-year average of the Constant Maturity Yield for the 10-Year U.S. Treasury note. NOTE If changes to amounts/factors are desired PM+ will provide a revised study, if requested. THE FOLLOWING TABLE COMPARES AND SUMMARIZES the reserve funding plans. Association column is based on the contribution approved by the board of directors or last year s contribution adjusted for inflation; Cash Flow and Component plans are those recommended by the Community Association Institute (CAI) and the Association for Professional Reserve Analysts (APRA). Each portrays total funding, amounts expected from interest and contributions, and minimums and maximums year end balances anticipated over 30 and 50-years: ANALYSIS: CONTRIBUTION SUMMARY FUNDING PLANS Association's² Cash Flow Component Reserve Contribution FY17 $52,840 $64,180 $65,870 Avg Owner Contribution FY vg Owner Contribution/Month Year Income 2,527,060 3,233,920 3,233,920 Income From Interest 400, , ,970 Income From Assessments 2,126,760 2,583,640 2,712, Year Min Balance (265,730) 405, , Year Max Balance 730,180 1,004, , Year Min Balance (1,475,260) 157, , Year Max Balance 35,590 1,134,840 1,227, Although factors used may not prove to be precise they should be reasonable predictors of cost increases and contributions needed to support the reserve requirement over the life of the study. 2. If the study is being done for other than the current fiscal year, inflation is applied to prior year contribution. Broad Run Oaks HOA by MBG

4 Reserve Study March 3, 2017 As indicated in the above summary, the association s contribution will need to be increased to meet the reserve needs of the property. The recommended owner contribution assumes interest earned on savings will be applied to the reserves and not used to offset operating account expenses or used for other purposes. If interest is not applied to the reserves, then the annual contribution will need to be increased by the interest amount. Cash flow method is the preferred method for funding reserves. It provides consistency in the annual contribution from one year to the next year. Future contribution increases are mostly attributable to inflation. Funding plan dollar amounts shown in columns (15), (18) and (21) of the Funding Plans 30 Year Projection chart are the approximate year end balances, both minimum and maximum, that can be expected if the plans are funded as shown. Properly funded plans will meet the following objectives: 1) funds are always available for needed work, 2) there is always a minimum amount of savings available to provide for unforeseen contingencies, and 3) when studies are updated, there is not a substantial increase needed to meet the reserve requirement. To avoid substantial increases PM+ studies take into consideration the first thirty years of the study and an additional twenty years, making the "look at" period a total of fifty years. The 50-year projection is to assure the recommended contribution is based on a sound long range analysis of the property's reserve needs. RECOMMENDATION: Fund the reserves using the Cash Flow method. WHERE THE CONTRIBUTIONS TO THE RESERVES GO: OTHER PROPERTY FEATURES 19% RESERVE STUDY UPDATES 1% PAVEMENTS /CONCRETE 8% COMMUNITY CENTER 72% Broad Run Oaks HOA by MBG

5 STUDY INFORMATION THIS STUDY is the 2nd (Last PM+ study Sep 17 th, 2010) engagement for the property by PM+. PM+ has neither collaborated with nor provided consulting advice to others on issues pertaining to the property. THIS IS A LEVEL I FULL STUDY with on-site visit. The association requested a Level I Full Study. STUDY WAS DONE in its entirety by Mario B. Ben Ginnetti, a registered professional engineer (P.E.) licensed to practice engineering in the states of Virginia, Maryland and the District of Columbia. Mr. Ginnetti is also a CAI Certified Reserve Specialist (RS) and a Professional Reserve Analyst (PRA). RESERVE STUDY criteria is defined by the Community Association Institute (CAI) and the Association of Professional Reserve Analysts (APRA). In complying with the criteria this study compares the Associations current funding plan to the two recommended methods for preparing reserve studies, Cash Flow (AKA Pooling) and Component. This is a reserve study only - no other use is intended. STUDY WAS COMPILED in accordance with generally accepted standards and represents our professional opinion on the components, timing and dollar amounts that should be budgeted for repair and replacement. In compiling this study information was obtained from field measurements, visual observations and management (information provided by management is considered to be reliable). Also taken into consideration are construction features, current conditions and component age. Testing was not performed, nor was demolition done or panels removed to determine conditions that are not obvious. Based on our observations and the information gained during the visit this study contains, to the best of our ability, all material issues required to determine the funding needed to meet the property s reserve requirement. FOR PROPERTIES LOCATED IN THE STATE OF VIRGINIA, Virginia Statutes, 2003 Condominium and Property Owner s Association Act require the association to conduct reserve studies at least every five years, review the results of the study at least annually and make adjustments as necessary unless the condominium instruments/declaration imposes more stringent requirements. Your attention is called to Sections :1or of the Statutes for the complete text. AGE, UNITS AND STYLE Construction was complete in the early 2000's. 381 Single Family Units. Major amenities Community center, swimming pool, tennis courts and tot lot. All newly added except tennis court that existed when property was built. CASH FLOW AND COMPONENT METHOD STUDIES This study was calculated using both the Cash Flow and Component methods. A synopsis of each method is as follows: CASH FLOW METHOD - This method develops the funding plan by having the annual contributions offset the variable annual expenses. All expenses are averaged over the life of the study to calculate the annual contribution needed to support the reserve requirement. Yearly contribution increases are mostly attributed to inflation. COMPONENT METHOD - This method develops the funding plan by dividing the remaining useful life into the balance needed to fund the component for only the next cycle of work. Yearly contributions can vary significantly from year to year depending on where the components are in their life cycle. Contribution needed to pay expenses will equal to the cash flow method over the life of the study. FUNDING GOAL This study complies with the Threshold Funding Plan established by the Community Association Institute (CAI) for reserve studies. Funding goal objective is to keep the reserve balance above a specified dollar or Percent Broad Run Oaks HOA by MBG

6 Reserve Study March 3, 2017 Funded amount. IN DEVELOPING the reserve we consider components that have a predictable life cycle as well as those that will most likely need annual maintenance and repairs to keep them in serviceable condition. They are as follows: PREDICTABLE LIFE CYCLE These components have a predictable life cycle (an average useful life). At the end of its useful life total replacement will be needed. ANNUAL ALLOWANCES We reserve an average annual amount for these components. They are typically life of the property or long lasting components that do not have a predictable life cycle. We assume the association will keep these components in satisfactory condition with timely spot repairs. FOLLOWING CONSIDERATIONS should be taken into account to properly manage the reserves: 1) properly funded reserves avoids special assessments, 2) each owner should pay their fair share for the time they use the component, 3) when reserve funds are available the Association is more inclined not to defer work; deferral results in additional deterioration and catch-up costs to restore the component to a good condition, 4) government mortgage guarantees agencies, i.e. FHA, require a current reserve study to be available before backing a loan, and 5) some state laws require them. In addition to these considerations, a new factor has recently become apparent. Years ago owners were poorly informed on the importance of the reserves and paid very little attention to whether or not a property had an adequate plan for funding the reserves. With the inclusion of reserve tables in resale packages and other publicity, many potential buyers are now verifying the reserve status before they buy. ALTHOUGH we use generally accepted techniques and best information available, it is possible actual costs and useful lives can vary significantly from our estimates. We recognize that possibility and attempt with our methodology to arrive at the overall funding recommendation that will avoid, or minimize the amount of funding if a special assessment is needed to do reserve work. FOR THE RESERVES to be an effective budget management tool it will need periodic updates. Because reserves on hand, current costs, quality of maintenance, acts of God, vandalism, and useful life can vary from year to year, a periodic review will assure it remains an effective management tool. We recommend studies be updated every 3 years. UNLESS OTHERWISE NOTED this study does not take into consideration any work the association may need to correct hazardous or defective conditions, such as issues with asbestos, radon, lead, mold, FRT, etc., nor will it fund major projects to repair/replace facades, building tension cables, utilities and other essential systems. Projects of this nature require the services of engineers or other consultants to determine scope, timing and projects costs. If requested, once costs and project timing are known, we will provide a revised study at no additional cost. FOR ANY RESERVE PROJECTS in progress on the date(s) of our visit our observation of the work should not be considered a project audit or quality control inspection. We leave that to others to determine. IF WE DESCRIBE PREVENTIVE MAINTENANCE recommendations in this study they are intended to be general in nature and the most common tasks needed to extend useful life. They are not all inclusive; we do not imply that is all that is necessary for good maintenance. Manufactures brochures, service specialty companies, and other qualified sources should be consulted to establish the full array of actions needed for proper preventive maintenance. FUNDING FROM RESERVE VERSUS OPERATING ACCOUNT - There could be components in this study the association is funding from the operating account. When there are we recommend they be funded from the reserves. When components are worked on it usually extends their useful life - a proper reserve expense. Reserve funds are intended to keep property components in good repair and to replace those that need replacing; operating funds are intended for maintenance and reoccurring operating expenses. Broad Run Oaks HOA by MBG

7 MAINTENANCE/REPAIR/REPLACEMENT TIPS & RESERVE CONSIDERATIONS THERE ARE THREE LEVELS of care needed to maximize the useful life of equipment and property components: 1) Maintenance, 2) Repair and 3) Replacement. MAINTENANCE is taking care of a component by doing such tasks as sealing pavement cracks to prevent water from undermining the base, painting to prevent metal corrosion or wood rot, lubricating moving parts on mechanical equipment, fan belt adjustments, etc. It involves the least expenditure of funds and is the best way to maximize useful life. Repair is replacing a portion of a component, such as, a section of pavement, a part of a roof, an air conditioning compressor, etc. It's usually more expensive than maintenance. The most costly is replacement. It involves the entire replacement of the component. APPLICATION of good maintenance and repair techniques can be explained by the following example: An asphalt parking lot of 1000 square yards develops a 10 foot long crack in the surface. The crack can be sealed for about a dollar a linear foot. By doing so, water will not seep through the asphalt causing damage to the base course. That simple maintenance action extended the useful life of the pavement at minimum cost. Assume the crack was not sealed and it grew to a 12' by 12' base damaged area. Cost of repairs would be approximately 60 times as much as fixing the crack. If the damaged area was not repaired and eventually the entire lot had to be replaced it would cost considerably more. Therefore, the prudent thing to do is good maintenance. It's the least costly of the three levels of work. PRIOR TO TOTALLY REPLACING a component, e.g., a roof, a fence, an air conditioner, etc., all measures should be taken to extend the useful life of the component with repairs. If the roof is leaking do not automatically think the entire roof needs to be replaced. Most leaks occur around penetrations and flashed areas and they can be repaired for less than replacing the entire roof. Fence posts almost always rot out at ground level before the rest of the fence. Posts can be replaced without purchasing a complete new fence. The same applies to most mechanical/electrical equipment. Tube leaks frequently occur in boilers; compressor failures occur in air conditioners and circuit breakers wear out in electric panels. These kinds of failures are repairable without replacing the entire component. The reserve table should be used as an aid in establishing budgets - not as a work plan. When used as a budget management tool its effectiveness will be recognized when funds are readily available to do work - when it must be done. Do not use the remaining useful life data as a work plan. It should be treated as a window of probable expectancy, based on statistical information, historical trends, conditions at time of survey and experience of when repair or replacement is most likely to be needed. Actual work should not be done until needed. For example, if paving is estimated to need replacement in five years but it's not a problem at that time, put it off until it is a problem. Conversely, if repairs are necessary sooner, do them sooner. WHEN CONTRACTING for services, seek competitive bids and purchase only what s necessary to restore the component to its like original condition. Include state-of-the-art improvements but avoid over buying or substantially enhancing a component beyond its original condition. Such improvements are not included in the cost estimates. CATASTROPHIC FAILURES to such components as footers, foundations, floors, exterior walls and total replacement of utility systems, etc., are not included in the table. They are not included because they are not predictable and it is rare that these components have to be replaced in total. We do recommend a reasonable annual amount be set aside for some repairs and reflect that in the reserve table. FUNDING FOR RESERVES SHOULD BE FAIR TO ALL OWNERS; past, present and future. The worst case scenario for a property is to have no money set aside to pay for repairs/replacements forcing the current owners to pay the total cost. Additionally, having insufficient reserves also presents some injustices as illustrated by the following example: Mr. and Mrs. X owned a unit at the property for the first ten years of its existence when reserve funding was suppressed and insufficient to take care of future problems. Mr. and Mrs. X sell their unit and leave. Five years Broad Run Oaks HOA by MBG

8 Reserve Study March 3, 2017 after they leave the pavement and sidewalks need to be repaired. Mr. & Mrs. Y now own the unit and receive notice they are to be specially assessed to pay for the repair costs. For demonstration purposes let's say the pavement and sidewalk repairs costs $150,000 and the association has $50,000 in the reserve account. Let's also assume there are 100 units at this property. Over the last fifteen years, past and present owners set aside $50,000 to take care of the $150,000 expenditure. Expressed in $/year that equates to $3,333/yr. or $33.33 per owner per year. Mr. & Mrs. X had the benefit of good paving and sidewalks for 10 years at a total cost to them of $ Unfortunately for Mr. & Mrs. Y, they only used the components for five years, but it will cost them $ for their share of the repairs. Calculations for the above are as follows: 5 years they lived there X $33.33/yr. = $ The difference between amount in reserves and repair costs divided by number of unit owners: ($150,000-50,000)/100 = $ Total cost to Mr. & Mrs. Y = $ Or, said another way: Mr. and Mrs. X used the components for 66% of their useful life but only paid 22% of the repair cost. Mr. and Mrs. Y used the components for 34% of their useful life but had to pay 78% of the cost. For funding to be fair all owners should contribute their share of the costs for the period of time they use the component. Broad Run Oaks HOA by MBG

9 READING AND UNDERSTANDING TABLES & CHARTS RELEVANT DATA Study fiscal year, inspection date(s), units, association s financial data, and interest/inflation rates. CONTRIBUTION SUMMARY Financial summary of study results. TABLE OF REPAIR & REPLACEMENT RESERVES The Repair and Replacement Table shows the common or limited common element, average and remaining useful life, and estimated cost for work. This information, for the most part, is self-explanatory; however, when we believe more information is needed, we provide comments or use photographs. Column (1) The property components the association should include in the reserves. Where a 15%, 30%, etc., is shown it means total replacement of the item is not anticipated. If we have omitted or added components that are not common or limited common area responsibility, please inform us so we can provide a revised table. It also applies if the association accomplishes the work from their annual operating expense and a reserve set-aside is not needed. If components are included that are operating expenses, we leave it to others to determine the correct tax consequence of the component. (2) Approximate quantity and unit of measure. The following abbreviations are used; however, they may not all appear in this study: AC Acres AOH - Amount-On-Hand AnAvg - Annual Average BLD - Building EA - Each CY - Cubic Yards LF - Linear Feet LS - Lump Sum HP Horsepower RC - Replacement Cost SF - Square Feet SY - Square Yards TN - Tons UN - Units > - Greater Than < - Less Than (3) The components average useful life (Avg). Leading publications on useful life data, our own experiences and historical trends are used to determine average useful life. (4) Our best estimate of the remaining useful life (RUL). Some components in the table may not fail precisely as shown. We use the remaining useful life in conjunction with the estimated cost to calculate the annual contribution needed to fund the component. Actual remaining useful life can be significantly different. (5) Estimated costs are in current dollars; actual cost can be significantly different. Estimates are based on similar work in the greater Washington area, association experience, industry publications, such as R.S. Means and HomeTech, contractors and other reliable sources. It assumes the association will competitively seek bids and obtain a fair price in today's market. Some work, such as balconies, roofing, garages, façade, boiler and chiller replacements, etc. may need the services of an engineer or architect to determine scope and oversee repairs. Those estimates take precedence over those shown in the table. Conditions that are not obvious from observations, such as excessive deterioration in materials and systems could also affect costs. (6) Distribution of the funds the association had (is projected to have) at the start of their fiscal year or the amount we were requested to use. The program distributes a prorated amount to each component. (7) The amount needed to fund the balance of the requirement. (8) The contribution needed to fund the 1 st year applying the cash flow method. This value is the product of the components and the Funding Plans - 30 Year Projection chart. The annual contribution is calculated Broad Run Oaks HOA by MBG

10 Reserve Study March 3, 2017 so that the reserve balance never falls below the X axis and there is always a minimum balance for unforeseen contingencies. (9) The contribution needed to fund the 1 st year applying the component method. Fiscal Years 1-10 Expense Projection Projected cash out-lays over the first ten years of the study. Fiscal Years Expense Projection Projected cash out-lays over the next twenty years of the study. Average Contribution Per Owner - The average contribution needed per owner to fund the 1st year reserve contribution. This amount is not indicative of each owner s individual contribution. FUNDING PLANS - 30 YEAR PROJECTION Column (10) - Fiscal Year. (11) - Projected annual expenses. (12) - Cumulative expenses over 30-years. (13), (16) and (19) - Interest earned per funding plan based on previous year end balance. (14), (17) and (20) - Contribution per funding plan, inflation applied. (15), (18) and (21) - Projected year-end balance per funding plan. GRAPHS Graphs depict the projected contributions and year end balances for each plan. The contribution objective should be to have a consistent contribution, year after year, that can be maintained with inflation adjustments. Avoid fluctuating contributions as they can impose financial hardships on owners. The objective for the reserve balance is to have the year end balances always above the x-axis. If it falls below, this indicates a special assessment or loan will be needed to support the reserves. SUMMARY 30-Year Income - projected from interest and owners. 30-Year Average Annual Contribution - average association contribution over 30-years. 30-Year Average Contribution/Owner - average contribution to be paid by each owner. 30 & 50-Year Minimum/Maximum Balances - includes contingency for unforeseen events. PROPERTY COMPARISON (NOT SHOWN IN SOME STUDIES) The Property Comparison chart compares the property s current funding to the last 100 properties we have studied. The comparison shows the maximums, minimums and property averages compared to your property. Three comparisons are made: % Funded - Ratio of the current to the ideal Reserve Balance for each component in the Reserve Table. The ratio is a product of the used-up life, useful life and component cost. Reserve Depletion Factor - Number of years amount-on-hand will fund (It's the same as the go broke date if no more money is added to the reserves). Cost Per Owner Average contribution per owner needed to meet the reserve requirement. Dollar amounts will vary from property to property based on construction features, common/limited common elements, past contributions to the reserves and other factors that may not result in a true comparison. Broad Run Oaks HOA by MBG

11 PHOTOGRAPHS - to assist the reader in identifying components and understanding reserve table assumptions. Not all components may be shown; see following section for additional comments. Broad Run Oaks is a 381-unit single family housing community located in Gainesville, Virginia. Photo is typical of the housing style. All exterior components of the home are owner responsibility. Just completed community center and swimming pool complex. Rear view of community center; pool deck in foreground. Large meeting room available for owner use. Fully equipped kitchen. Shower/bathrooms. Broad Run Oaks HOA-FY17 9 3/3/2017

12 Two HVAC units, one 2.5 tons and the other 5 tons provides heat and cool needs of the building. Pool whitecoating is normally needed about every five years. Although we allow for this work to occur on that schedule, the decision to whitecoat should be evaluated when pools are drained. Reserve provides for pool filters, water supply/return piping and other filtration system components. Tot-lot equipment is sturdy; it should have a long useful life. Rubberized surface, awning, tables and benches will need replacing more frequently than equipment. Tennis court has many open cracks which detract from play. We assume the association will do major repairs in 2017 to improve court condition. Broad Run Oaks HOA-FY /3/2017

13 Association is only responsible for Douglas Fir Loop and community center complex pavements and concrete. VDOT is responsible for main roads; pipe stems that were in the previous study have been removed as they are not association responsibility. See our recommendations in comments section for proper care of pavements. Entry for street lights and lights at entrances considers poles, wiring, fixtures and controls will be repaired as needed. No assumption all units will need to be replaced at the same time. A reasonable amount to replace dead or diseased trees and shrubbery. Does not include normal landscaping upkeep, which is funded from the operating account nor large scale improvements. Also included in the reserves are signs, sign posts, picnic tables, park benches, doggie stations, and other miscellaneous components. Well-maintained components enhance property appearance. Broad Run Oaks HOA-FY /3/2017

14 APPENDIX A Broad Run Oaks HOA-FY17 3/3/2017

15 by MBG COMPONENT APPROX'MT USEFUL LIFE ESTIMATED DISTR'BTN BALANCE FY17 FISCAL YEARS 1-10 EXPENSE PROJECTION QUANTITY AVG REM COST IN OF AOH NEEDED CONTRIBUTION (YRS) CURRENT $ AS OF TO FUND CASH FLOW COMPONENT Jan-17 RESERVE METHODS (1) (2) (3) (4) (5) (6) (7) (8) (9) COMMUNITY CENTER ROOFING ROOFING-SHINGLES 4,400 SF $17,600 $6,630 $10,970 $290 $300 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 GUTTERS/DOWNSPOUTS 251 LF ,010 1,130 1, FAÇADE SIDING REPLACEMENT 9,586 SF ,510 21,670 35, WINDOWS WINDOWS 11 EA ,700 2,900 4, DOORS/HARDWARE EXTERIOR DOOR-DOUBLE 5 EA ,000 10,550 17, EXTERIOOR DOOR-SINGLE 4 EA ,200 4,970 8, INTERIOR DOORS LS 5 5 1, , , ,260 DECORATING CORRIDORS/LOBBY CARPET-FLOORS 127 SY 7 7 7,510 2,830 4, , VINYL TILE 273 SF , , FURNISHINGS 11 EA ,850 1,450 2, ,580 CEILING LIGHTING FIXTURES 11 EA ,700 1,020 1, TV 1 EA RENOVATE KITCHEN LS ,000 8,670 14, RENOVATE SHOWER ROOMS 2 EA ,000 13,560 22, MECHANICAL/PLUMBING/ELECTRICAL HVAC A/C & HEATING 7.5 TN ,000 79, ,880 4,580 4, PLUMBING WATER HEATER 1 EA ,500 4,330 7, PLUMBING/CONDENSATE/DRAINS LS ,000 3,010 4, ELECTRICAL PANELS/WIRING LS , BUILDING MOUNTED LIGHT FIXTURES 7 EA , EXIT/BATTERY BACKUP-EMERGENCY LIGHTS 11 EA , , SECURITY SYSTEM LS 5 5 3,000 1,130 1, , ,570 STREET LIGHTS 6 EA ,800 7,460 12, MISC. MECHANICAL/PLUMBING/ELECTRICAL/FIRE LS 1 1 1, ,500 1,530 1,560 1,590 1,620 1,650 1,680 1,720 1,750 1,780 SWIMMING POOL WHITECOAT 5,205 SF ,750 11,960 19,790 2,080 2, , ,780 FILTER/PUMPS/WATER LINES-SINGLE TANK LS ,000 9,420 15, COPING/TILES/WALLS/TILE&FLOORS LS ,050 19,610 32,440 1,220 1, POOL FURNITURE LS ,220 6,860 11, , ADA LIFT CHAIRS 1 EA ,000 1,880 3, ,950 REPLACE CONCRETE DECK 7,295 SF ,840 35,730 59, ' ALUMINIUM FENCE 390 LF ,360 3,530 5, COURTS AND TOT LOTS TENNIS COURT(S) RESURFACE/NETS 2 EA ,000 5,650 9, , ,850 MAJOR COURT REPAIRS 2 EA ,000 24,110 39,890 20,940 21,500 64, ' CHAIN LINK FENCE 460 LF ,320 7,280 12, PARK BENCH 1 EA TOT LOT METAL AND PLASTIC EQUIPMENT LS ,000 9,040 14, RUBBERIZED SURFACE 1,911 SF ,580 11,520 19,060 1,430 1, , PICNIC TABLE 2 EA , ,500 PARK BENCH 3 EA , ,290 Broad Run Oaks HOA-FY17 A1 3/3/2017

16 by MBG COMPONENT APPROX'MT USEFUL LIFE ESTIMATED DISTR'BTN BALANCE FY17 FISCAL YEARS 1-10 EXPENSE PROJECTION QUANTITY AVG REM COST IN OF AOH NEEDED CONTRIBUTION (YRS) CURRENT $ AS OF TO FUND CASH FLOW COMPONENT Jan-17 RESERVE METHODS (1) (2) (3) (4) (5) (6) (7) (8) (9) WASTE RECEPTABLE 1 EA AWNING 1,656 SF ,430 2,800 4, , TOTAL COMMUNITY CENTER 862, , ,720 38,770 39,780 PAVEMENTS/CONCRETE OLDER PAVEMENTS DOUGLAS FIR LOOP PREVENTIVE MAINTENANCE 1,819 SY 4 1 4,180 1,570 2,610 1,370 1, , ,880 0 PAVEMENT OVERLAY 1,819 SY ,470 9,600 15,870 8,330 8,550 25, BASE/SUB-BASE/REPAIRS 91 SY ,180 1,200 1,980 1,040 1,070 3, ROAD TO TENNIS COURT PREVENTIVE MAINTENANCE 950 SY 4 1 2, , , ,560 0 PAVEMENT OVERLAY 950 SY ,300 5,010 8,290 4,350 4,470 13, BASE/SUB-BASE/REPAIRS 48 SY , , , NEW PAVEMENTS SWIMMING POOL PAVED PARKING PREVENTIVE MAINTENANCE 870 SY 4 4 2, , , , PAVEMENT OVERLAY 870 SY ,180 4,590 7, BASE/SUB-BASE/REPAIRS 44 SY , GRAVEL REPLENISHMENT LS 5 5 3,000 1,130 1, , ,570 CONCRETE-SIDEWALKS/CURBS/GUTTERS LS 4 1 2, , , , , TOTAL PAVEMENTS/CONCRETE 70,980 26,750 44,230 17,750 18,230 OTHER PROPERTY FEATURES ENTRANCE FEATURE(S)-REPAIRS/LETTER LS , , , RESTORATION/CLEANING TREES/LANDSCAPING-DISEASED/DEAD ITEM LS 1 1 6,000 2,260 3,740 1,960 2,020 6,000 6,120 6,240 6,360 6,480 6,610 6,740 6,870 7,000 7,140 REPLACEMENT FENCING-4' SPLIT RAIL-3 RAIL WITH WIRE TENBROOK DRIVE & SIERRA SUNSET LANE 870 LF ,230 8,000 13,230 1,160 1, , NEAR TENBROOK DRIVE & DOUGLASS FIR LOOP 1,660 LF ,500 15,260 25,240 2,210 2, , WET POND AERATOR/DIFFUSER LS ,000 4,520 7, , IRRIGATION SYSTEM LS SITE ITEMS LS 1 1 2, , ,500 2,550 2,600 2,650 2,700 2,750 2,810 2,860 2,920 2, TOTAL OTHER PROPERTY FEATURES 85,480 32,200 53,280 7,350 7,550 RESERVE STUDY UPDATES LS 3 3 2,800 1,050 1, , , , TOTAL RESERVE STUDY UPDATES 2,800 1,050 1, TOTAL RESERVES $1,022,020 $385,040 $636,980 $64,180 $65,870 $120,660 $10,960 $14,090 $13,510 $79,470 $99,430 $54,840 $35,860 $25,940 $100,910 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Reserve Contribution FY17 $64,180 $65,870 Avg Owner Contribution FY17 $168 $173 Notes: Avg Owner Contribution/Month $14.04 $14.41 All dollars rounded to nearest $10. Totals may not add due to rounding. One year remaining useful life indicates the useful life of the component is used up. Broad Run Oaks HOA-FY17 A2 3/3/2017

17 COMPONENT by MBG USEFUL LIFE ESTIMATED FISCAL YEARS EXPENSE PROJECTION AVG REM COST IN (YRS) CURRENT $ (1) (3) (4) (5) COMMUNITY CENTER ROOFING ROOFING-SHINGLES $17,600 $0 $0 $0 $0 $0 $0 $0 $0 $0 $25,400 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 GUTTERS/DOWNSPOUTS , ,270 FAÇADE SIDING REPLACEMENT , WINDOWS WINDOWS , DOORS/HARDWARE EXTERIOR DOOR-DOUBLE , ,020 EXTERIOOR DOOR-SINGLE , ,110 # INTERIOR DOORS 5 5 1, , , , ,330 DECORATING CORRIDORS/LOBBY CARPET-FLOORS 7 7 7, , , , VINYL TILE , , # FURNISHINGS , , ,740 CEILING LIGHTING FIXTURES , ,730 TV RENOVATE KITCHEN , , ,270 RENOVATE SHOWER ROOMS , , MECHANICAL/PLUMBING/ELECTRICAL HVAC A/C & HEATING , , ,660 PLUMBING WATER HEATER , , , PLUMBING/CONDENSATE/DRAINS , ELECTRICAL PANELS/WIRING , BUILDING MOUNTED LIGHT FIXTURES , ,700 EXIT/BATTERY BACKUP-EMERGENCY LIGHTS , , ,380 SECURITY SYSTEM 5 5 3, , , , ,250 STREET LIGHTS , , # MISC. MECHANICAL/PLUMBING/ELECTRICAL/FIRE 1 1 1,500 1,820 1,860 1,890 1,930 1,970 2,000 2,040 2,080 2,120 2,160 2,210 2,250 2,290 2,340 2,380 2,430 2,480 2,530 2,580 2,630 SWIMMING POOL WHITECOAT , , , , ,590 FILTER/PUMPS/WATER LINES-SINGLE TANK , , ,770 COPING/TILES/WALLS/TILE&FLOORS , , , POOL FURNITURE , , , ADA LIFT CHAIRS , , ,750 REPLACE CONCRETE DECK , ' ALUMINIUM FENCE , ,390 COURTS AND TOT LOTS TENNIS/MULTI-PURPOSE COURT(S) RESURFACE/NETS , , , , ,760 0 MAJOR COURT REPAIRS , , ' CHAIN LINK FENCE , , PARK BENCH TOT LOT METAL AND PLASTIC EQUIPMENT , , RUBBERIZED SURFACE , , , , PICNIC TABLE , , ,210 PARK BENCH , , ,890 WASTE RECEPTABLE AWNING , , , TOTAL COMMUNITY CENTER 862,760 Broad Run Oaks HOA-FY17 A3 3/3/2017

18 COMPONENT by MBG USEFUL LIFE ESTIMATED FISCAL YEARS EXPENSE PROJECTION AVG REM COST IN (YRS) CURRENT $ (1) (3) (4) (5) PAVEMENTS/CONCRETE OLDER PAVEMENTS DOUGLAS FIR LOOP PREVENTIVE MAINTENANCE 4 1 4, , , , , PAVEMENT OVERLAY , , BASE/SUB-BASE/REPAIRS , , ROAD TO TENNIS COURT PREVENTIVE MAINTENANCE 4 1 2, , , , , PAVEMENT OVERLAY , , BASE/SUB-BASE/REPAIRS , , NEW PAVEMENTS SWIMMING POOL PAVED PARKING PREVENTIVE MAINTENANCE 4 4 2, , , , , PAVEMENT OVERLAY , , ,320 BASE/SUB-BASE/REPAIRS , , ,660 k# GRAVEL REPLENISHMENT 5 5 3, , , , ,250 k CONCRETE-SIDEWALKS/CURBS/GUTTERS/STEPS 4 1 2, , , , , , TOTAL PAVEMENTS/CONCRETE 70,980 OTHER PROPERTY FEATURES ENTRANCE FEATURE(S)-REPAIRS/LETTER , , , # TREES/LANDSCAPING-DISEASED/DEAD ITEM 1 1 6,000 7,280 7,420 7,560 7,710 7,860 8,020 8,170 8,330 8,490 8,660 8,830 9,000 9,180 9,360 9,540 9,720 9,910 10,110 10,300 10,500 FENCING-4' SPLIT RAIL-3 RAIL WITH WIRE TENBROOK DRIVE & SIERRA SUNSET LANE , , NEAR TENBROOK DRIVE & DOUGLASS FIR LOOP , , k# WET POND AERATOR/DIFFUSER , , , k# IRRIGATION SYSTEM ,000 1,020 1,040 1,060 1,080 1,100 1,130 1,150 1,170 1,190 1,220 1,240 1,260 1,290 1,310 k# SITE ITEMS 1 1 2,500 3,030 3,090 3,150 3,210 3,280 3,340 3,410 3,470 3,540 3,610 3,680 3,750 3,820 3,900 3,970 4,050 4,130 4,210 4,290 4, TOTAL OTHER PROPERTY FEATURES 85,480 k RESERVE STUDY UPDATES 3 3 2, , , , , , , , TOTAL RESERVE STUDY UPDATES 2,800 TOTAL RESERVES $1,022,020 $13,040 $19,230 $38,980 $148,950 $447,300 $123,250 $17,770 $39,640 $18,040 $187,300 $202,670 $16,130 $19,500 $60,030 $172,280 $136,110 $25,690 $180,680 $48,170 $707,400 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Broad Run Oaks HOA-FY17 A4 3/3/2017

19 FUNDING PLANS - 30 YEAR PROJECTION Funding Plans FY Expenses Associations Cash Flow Method Component Method Annual * Cumulative Interest Contr'btn Balance Interest Contr'btn Balance Interest Contr'btn Balance (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) $250,000 Contribution AOH $385,040 $385,040 $385, , ,660 12,010 52, ,230 12,010 64, ,570 12,010 65, , , ,620 10,270 53, ,410 10,630 65, ,670 10,680 36, , , ,710 11,930 54, ,170 12,660 66, ,950 11,790 40, , , ,220 13,580 55, ,230 14,690 68, ,140 13,000 47, , , ,690 15,330 57, ,170 16,850 69, ,860 14,460 63, , , ,120 15,110 58, ,040 17,060 70, ,180 14,400 66, , , ,960 14,290 59, ,810 16,700 72, ,110 13,810 54, , , ,820 14,880 60, ,310 17,760 73, ,490 14,240 52, , , ,760 16,110 61, ,140 19,480 74, ,940 15,210 55, , , ,670 17,730 62, ,820 21,620 76, ,020 16,610 67, , , ,710 17,090 64, ,960 21,530 77, ,370 16,070 62, , , ,940 19,220 65, ,290 24,220 79, ,740 18,130 67, , , ,920 21,260 66, ,180 26,860 80, ,550 20,200 82, , , ,870 22,780 67, ,920 29,000 82, ,110 22, , , ,300 1,223,170 20,960 69, ,810 27,830 84, ,760 21, , , ,250 1,346,420 9,820 70, ,960 17,370 85, ,640 13,040 99, , ,770 1,364,190 8,490 71, ,640 16,740 87, ,040 12,710 66, , ,640 1,403,830 10,440 73, ,800 19,440 89, ,970 14,640 72, , ,040 1,421,870 11,820 74, ,370 21,590 90, ,390 16,110 87, , ,300 1,609,170 13,960 76, ,280 24,540 92, ,270 18, , , ,670 1,811,840 10,930 77, ,280 22,350 94, ,400 17, , , ,130 1,827,970 7,370 79, ,780 19,670 96, ,230 15,450 70, , ,500 1,847,470 9,570 80, ,660 22,780 98, ,680 17,640 80, , ,030 1,907,500 11,780 82, ,800 25, , ,680 20,090 98, , ,280 2,079,780 12,850 84, ,370 28, , ,440 21, , , ,110 2,215,890 10,490 85, ,390 26, , ,040 21, , , ,690 2,241,580 9,250 87, ,260 26, , ,920 21, , , ,680 2,422,260 11,460 89, ,050 29, , ,220 24, , , ,170 2,470,430 8,960 90, ,590 28, ,230 1,004,800 24, , , ,400 3,177,830 10,560 92,520 (265,730) 31, , ,130 27, , ,130 SUMMARY 30-Year Income = $400,300 $2,126,760 $650,280 $2,583,640 $520,970 $2,712, Yr Avg Annual Contr'btn = 70,890 86,120 90, Yr Avg Contr'btn/Owner = Year Minimum Balance = ($265,730) $405,670 $377, Year Maximum Balance = 730,180 1,004, , Year Minimum Balance = (1,475,260) 157, , Year Maximum Balance = 35,590 1,134,840 1,227,610 Notes: * An annual average cost. Some expenditures may be needed in earlier years, some in later years, depending on when the actual work is done. Data is a projection based on this point in time. The projection will change as current cost, remaining useful life, amount-on-hand, contribution and contingency vary. Data should be considered a more accurate projection for years 1-5 than the out-years. Minimum balance does not include the first year. $200,000 $150,000 $100,000 $50,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 -$200,000 $ Associations Cash Flow Method Component Method Reserve Balance -$400, Associations Cash Flow Method Component Method by MBG Broad Run Oaks HOA-FY17 A5 3/3/2017

20 PROPERTY COMPARISON Sample Size = 100 HOA's/POA's Maximum 325 Maximum 17.6 Minimum Property Avg Upper 25% > 181% Lower 25% < 75% Minimum Property Avg Upper 25% > 7.7 Lower 25% < 3.5 Median 110 Median 5.7 Broad Run Oaks 222 Broad Run Oaks 6.9 % Funded Reserve Depletion Factor (Years) Maximum Minimum Property Avg Median 3, , ,420 2,300,030 Upper 25% > $275,000 Lower 25% < $58,000 Maximum Minimum Property Avg Median ,098 Upper 25% > $348 Lower 25% < 126 Broad Run Oaks 385,040 Broad Run Oaks 168 AOH Cost Per Owner Legend: This comparison only compares the first study year to other properties. % Funded -- Used-up life divided by Useful Life times Current Cost. Reserve Depletion Factor -- Number of years the amount-on-hand will fund if no more is contributed to the reserves. Cost Per Owner - The average cost per owner to meet the reserve requirement compared to other properties by MBG Broad Run Oaks HOA-FY17 A6 3/3/2017

21 COMMENTS Attention is directed to columns (1) COMPONENT, (3) AVG and (4) REM USEFUL LIFE, and (5) ESTIMATED COST IN CURRENT DOLLARS on Page A1. These entries, along with reserve savings at the start of the fiscal year and contingency built into the funding plan, determine the annual contribution needed to support the reserves. The remaining useful life approximates the time period when funding should be available for repair/replacement work. Good maintenance and repair practices prior to replacement can extend component useful life; conversely, poor or no maintenance/repair will shorten life and result in more cost to the association. Following comments are provided for components that may need further explanation. COMMUNITY CENTER DOORS/HARDWARE INTERIOR DOORS As needed repairs/replacement. PLUMBING After years of use these systems leak and develop other problems that need repairs. We reserve a reasonable amount for this work - actual cost will vary depending on conditions at that time. ELECTRICAL Repair/replacement of panels and wiring when failures occur. MISC. MECHANICAL/PLUMBING/ELECTRICAL/FIRE A annual expenditure to keep in good repair common area systems, such as, fire, security, unit heaters, motors, pumps, canned ceiling lights and other mechanical, plumbing and electric systems that are not reserved for elsewhere. PAVEMENTS/CONCRETE CONCRETE-SIDEWALKS/CURBS/GUTTERS TENNIS COURT(S) OTHER PROPERTY FEATURES ENTRANCE FEATURE(S)-REPAIRS/LETTER RESTORATION/CLEANING IRRIGATION SYSTEM SITE ITEMS RESERVE STUDY UPDATES There are three considerations that apply to asphalt pavements: 1) Implement a preventive maintenance program - preventive maintenance consist of sealing open cracks (equal to or greater than 1/8 ), repair wearing surface/base/sub-base areas that have failed (distinguished by alligator or chicken wire cracking), apply a seal coat to the entire surface and repaint traffic markings. An additional benefit of sealcoating and traffic markings is the pavement will look uniform and that enhances property appearance. Funding for this work is identified as Preventive Maintenance and/or "Immediate Repairs for Life Extension." Although we allow for preventive maintenance to be done every four years, if cracks open or asphalt failures occur sooner they should be repaired as needed. Contingency built into the funding plan should be more than adequate to fund this work, 2) Be prepared to repave all asphalt around the time period shown in the table. When repaving there are two possible courses of action, a) mill only near gutter pans to preserve proper drainage and place back 1-1/2" (or more) of compacted asphalt throughout, and b) total milling of all asphalt and repave to thickness removed. Notes: a) Asphalt is an oil based product - price varies with the cost of a barrel of oil, and b) When pavements are shared with adjacent properties quantity shown is one-half the shared amount. 3) Although we allow for 100% of the asphalt to be repaved our experience supports a smaller percentage of the base/sub-base will need repairs prior to overlaying. Sidewalks, steps, curbs, gutters, and other concrete will need repairs when they heave, settle, badly crack and/or deteriorate. Defective areas should be corrected to keep them in good condition. After years of use courts usually develop large open cracks that detract from play. Repairs are usually accomplished with a crush stone overlay, mats or carpet. Provides for masonry repairs/repointing, cleaning and name restoration. These systems can be kept in good repair by doing spot repairs/replacements as needed. Repairs/replacements to signs, sign posts, flood lights, low height wood retaining walls, picnic tables/benches, exercise trails, trash receptacles, dog stations, mechanical, plumbing, electrical systems and other miscellaneous items. Cost for a future PM+ update. When associations spend reserve funds they alter the remaining useful life of the component. Longer useful lives result in lower annual reserve contributions. If the association is spending moderate to large amounts of funds doing reserve projects we recommend the reserves be updated every 3-years. If minimum funding is being spent, 5-year intervals should be sufficient. EXCLUSIONS MAIL BOXES PRESSURE WASHING/PAINTING/STAINING CATASTROPHES STORM WATER WET PONDS Individual owner responsibility. Not included in the reserves. Maintenance work, properly funded from the operating account. Are not predictable events - no reserve allowance. If one occurs funding from other sources may be needed if the contingency built into the reserves is insufficient to cover expenses. No allowance. We assume major repairs and dredging are the responsibility of the County. If this is incorrect please advise so we can revise the study by MBG Broad Run Oaks HOA-FY17 A7 3/3/2017