FIR RIDGE II CONDOMINIUM

Transcription

1 FIR RIDGE II CONDOMINIUM BELLINGHAM, WASHINGTON UPDATE WITHOUT SITE VISIT FEBRUARY 2014 FOR USE WITH THE FEBRUARY 2012 RESERVE STUDY PREPARED BY: DENISE DANA, RESERVE SPECIALIST M. ARCH, REGISTERED ARCHITECT JOHN LEONARD, RESERVE SPECIALIST B.S. UNIVERSITY OF MASSACHUSETTS UPDATED WITHOUT SITE VISIT BY: ERIE STONE B.A. ARCH, OREGON REGISTERED ARCHITECT 2014 BY RESERVE CONSULTANTS LTD.

2 Fir Ridge II RS3 Updates Text Page 2 CONTENTS EXECUTIVE SUMMARY... 3 ESTIMATED REPAIR SUMMARY... 4 INTRODUCTION... 5 WHAT IS A RESERVE STUDY UPDATE WITHOUT SITE VISIT PURPOSE OF A RESERVE STUDY GOVERNMENT REQUIREMENTS FOR A RESERVE STUDY LIMITATIONS AND ASSUMPTIONS OF A RESERVE STUDY OUR APPROACH TO A RESERVE STUDY ASSOCIATION OVERVIEW FINANCIAL ANALYSIS & RESERVE CONTRIBUTION RECOMMENDATIONS FUNDING PLANS FULLY FUNDED BALANCE CALCULATIONS DISCLOSURES APPENDIX - EVALUATORS CREDENTIALS APPENDIX - GRAPHS & TABLES... 19

3 Fir Ridge II RS3 Updates Text Page 3 EXECUTIVE SUMMARY BACKGROUND: Name: Fir Ridge II Condominium Date: February, 2014 Type of Study: Level 3 Update Without Site Visit No. of Units: 159 Fir Ridge II Condominium is a 159-unit residential community located in Bellingham, WA. The community has 24 wood framed buildings that are two stories. Construction was completed in about FINANCIAL INFORMATION: Reserve Account Balance on Jan 27, 2014: $864,470 Annual Operating Budget: $261,132 Component Inclusion Threshold: $2,611 Annual Budgeted Contribution Rate (2014): $101,429 Remaining Contribution for the Year: $92,976 Planned or Implemented Special Assessment: None Fully Funded Balance: $1,464,353 Percent Funded at Time of Study: 59% Funding Status at Time of Study: Adequately Funded RECOMMENDATIONS: Recommended 2015 Contribution: $156,700 Recommended Contribution per Month: $13,058 Average Contribution per Unit per Year: $ 986 Average Contribution per Unit Per Month: $ 82 Recommended Special Assessment: None Timeline for Fully Funded Status: Not Achieved by Year Baseline Funding Plan Contribution Rate: $150, Full Funding Plan Contribution Rate: $163,900 The recommended reserve contribution represents a Threshold Funding Plan to prevent special assessments over the course of the 30-year study while maintaining a minimum reserve account balance of one year s annual contribution. The fiscal year for the Reserve Study is a calendar year. Cost projection accuracy decreases into the distant future. Assumptions should be reconsidered and updated with each revision. There is no legal requirement to fund reserves. There is a requirement to have a current Reserve Study to know the recommended reserve contribution rate. Reserve Studies must be updated annually to reflect recent financial information, repairs or replacements, and to adjust for future repair costs. Every three years, the update must be based on a visual on-site inspection conducted by a Reserve Study Professional. This Reserve Study meets the requirements of the Washington Condominium Act, and was prepared by a Reserve Study Professional.

4 Fir Ridge II RS3 Updates Text Page 4 ESTIMATED REPAIR SUMMARY The following repairs are expected to occur in the next few years at Fir Ridge II Condominium. We do not believe the repairs expected to occur through 2016 warrant independent oversight, but a performance inspection or design specification may be prudent depending on the extent of the roof repair work that needs to be done. EXPENSES RECOMMENDED THROUGH 2016: COMPONENT REPAIR TO BE MADE: YEAR: ESTIMATED COST: Asphalt Paving - Major Repairs 0 (2014) $46, Concrete Paving 0 (2014) $6, Exterior Decks - Major Repair 0 (2014) $70, Gutters/Downspouts - Repairs 0 (2014) $8, Roofing - Repairs 0 (2014) $23, Exterior Doors 0 (2014) $3, Electrical 0 (2014) $20, Trash Enclosures 1 (2015) $6, Exterior Siding - Repairs 1 (2015) $53, Exterior Painting 1 (2015) $89, Exterior Lighting 1 (2015) $21, Reserve Study 1 (2015) $2,100 The following repairs make up the bulk of the Associations reserve funding requirements. Changing the timing or costs of these items may result in changes to the recommended contribution. Independent design specifications and oversight are recommended for repairs to the building envelope. We recommend that the planning stages for these repairs start at least one year before the estimated repair to obtain a scope of repair, select and schedule a contractor, and secure financing for the project. MAJOR EXPENSES OVER THE NEXT 30 YEARS: COMPONENT REPAIR TO BE MADE: NEXT IN YEAR: ESTIMATED COST: Exterior Siding - Replace 25 (2039) $1,769, Roofing - Replace 5 (2019) $464, Exterior Painting 1 (2015) $89, Gutters/Downspouts - Replace 5 (2019) $80, Exterior Decks - Major Repair 0 (2014) $70, Exterior Siding - Repairs 1 (2015) $53,220

5 Fir Ridge II RS3 Updates Text Page 5 INTRODUCTION WHAT IS A RESERVE STUDY UPDATE WITHOUT SITE VISIT An update of a Reserve Study brings the previous report up to date to allow the Association to properly set aside the funds needed to provide for replacement and repair of major building components as they fail. The update of a Reserve Study relies on much of the information contained in the original Reserve Study, such as the cost estimates and quantities for each building component. All repair costs are adjusted for inflation from the prior report, actual repair costs and bids from contractors are used to adjust cost estimates. The reserve balances are adjusted to reflect actual contributions by the Association, and actual expenditures. The new recommendations are based on starting anew with the current balance and funding future repair needs. Reserve Consultants has relied on the representations of the client in preparing this report. PURPOSE OF A RESERVE STUDY The purpose of a Reserve Study is to recommend a reasonable annual reserve Contribution Rate made by an association to its reserve account. Reserve accounts are established to fund major maintenance, repair, and replacement of common elements, including limited common elements, expected to be necessary within the next thirty years. A Reserve Study is intended to project adequate funds for the replacement or major repair of any significant component of the property as it becomes necessary without relying on special assessments. It is a budget planning tool which identifies the current status of the reserve account and a stable and equitable Funding Plan to offset the anticipated future major shared expenditures. Each reserve component is evaluated to determine the current condition, the remaining useful life, and the estimated replacement cost. This information is combined into a spreadsheet to determine funding requirements and establish the annual contribution rate needed to minimize special assessments. All costs and annual reserve balances are shown in constant dollars, and with adjustments for annual inflation and interest earned. Ideally, an even level of contributions is established that maintains a positive balance in the reserve account over the timeline the study examines. A Reserve Study also calculates a Fully Funded Balance. Fully Funded Balance is the sum total of the reserve components depreciated value using a straight line depreciation method. To calculate each component s depreciated value: Depreciated Value = Current Replacement Cost Effective Age Expected Useful Life

6 Fir Ridge II RS3 Updates Text Page 6 When assessed with the current reserve balance, the Fully Funded Balance yields a Percent Fully Funded. This acts as a measuring tool to assess an association s ability to absorb unplanned expenses. These expenses could be emergency repairs not covered by insurance, or expenses that differ from the existing Reserve Study in terms of timing or cost. The Fully Funded Balance is neither the present replacement cost of all of the Association s reserve components, nor does it have a mathematical relationship to the recommended reserve contribution funding plans. There are three levels of Reserve Studies: The first level, an initial Reserve Study, must be based upon a visual site inspection conducted by a Reserve Study Professional. This is also known as a full Level 1 Reserve Study. At least every three years, an updated Reserve Study must be prepared and based upon a visual site inspection conducted by a Reserve Study Professional. This is also known as a Level 2 Update with Site Visit. Every year, the Association must update the Reserve Study. Except as noted above, the annual updates do not require a site visit. This is also known as a Level 3 Update without Site Visit. This study is a Level 3 Update Without Site Visit. GOVERNMENT REQUIREMENTS FOR A RESERVE STUDY The content of a Reserve Study for a condominium is regulated by the Washington State government (RCW ). The required content is: (a) A reserve component list, including roofing, painting, paving, decks, siding, plumbing, windows, and any other reserve component that would cost more than one percent of the annual budget for major maintenance, repair or replacement. If one of these reserve components is not included in the Reserve Study, the study should provide commentary explaining the basis for its exclusion. The study must also include quantities and estimates for useful life of each reserve component, remaining useful life of each reserve component, and current repair and replacement cost for each component; (b) The date of the study and a statement that the study meets the requirements of this section; (c) The following level of reserve study performed: (i) Level I: Full reserve study funding analysis and plan; (ii) Level II: Update with visual site inspection; or (iii) Level III: Update with no visual site inspection; (d) The association s reserve account balance; (e) The percentage of the fully funded balance that the reserve account is funded; (f) Special assessments already implemented or planned;

7 Fir Ridge II RS3 Updates Text Page 7 (g) Interest and inflation assumptions; (h) Current reserve account contribution rate; (i) A recommended reserve account contribution rate; a contribution rate for a full funding plan to achieve one hundred percent fully funded reserves by the end of the thirty-year study period, a baseline funding plan to maintain the reserve balance above zero throughout the thirty-year study period without special assessments, and a contribution rate recommended by a reserve study professional; (j) A projected reserve account balance for thirty years and a funding plan to pay for projected costs from those reserves without reliance on future unplanned special assessments; and (k) A statement on whether the reserve study was prepared with the assistance of a reserve study professional. The Washington State government further requires the following disclosure in every Reserve Study (RCW ): "This reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair, or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair, or replacement of a reserve component." The full Washington Condominium Act may be reviewed on the Washington State Legislature s website at and parts to for the Reserve Study Amendment s portions. In April 2011, the Act was amended to change the required content within the Reserve Studies, add reporting of the Reserve Study results as part of the budget summary to owners, and extend the Reserve Study requirement to homeowners associations with significant assets. For questions regarding the Act, we recommend contacting an attorney familiar with condominiums' legal requirements. LIMITATIONS AND ASSUMPTIONS OF A RESERVE STUDY This Reserve Study is not a report on the condition of the buildings maintained by the Association, or a detailed report of repairs necessary to the building. It is also not an investigation into or comment on the quality of construction of the reserve components, or whether the construction complies with the building code or the requirements of the Washington Condominium Act.

8 Fir Ridge II RS3 Updates Text Page 8 The observations made by Reserve Consultants Ltd. are limited to a visual inspection of a sample of the reserve components. Unless informed otherwise, our assumption is that the components are constructed in substantial compliance with the building code and to industry standards, and that it will receive ordinary and reasonable maintenance and repair by the Association. These assumptions include that most reserve components will achieve their normal useful lives for similar components in the Pacific Northwest, and that they will be replaced when necessary to prevent damage to other reserve components. This Reserve Study assumes that the Association will be maintained to keep a good level of appearance, with a special emphasis on retaining the original appearance of the Association to the greatest possible extent. The analysis also assumes that the Association will replace materials as they are required with good quality materials, installed by qualified, licensed, contractors. We further assume that the Association will experience the full typical useful life for the new materials installed. The long term nature of this study requires that certain assumptions and predictions be made about future events. Since there can be no guarantee that these future events will occur as assumed, this analysis must be viewed in light of the circumstances under which it was conducted. Reasonable effort has been made to ensure that the conclusions of this report are based on reliable information and sound reasoning. This report should be updated annually with actual repair costs, reserve balances, etc. Every three years it should be updated with a site inspection and professional review. Regular updating will allow changes based on actual occurrences and adjustments for the cost of repairs to be incorporated into the annual reserve contributions. This will allow any savings or additional costs to be properly allocated among unit owners. OUR APPROACH TO A RESERVE STUDY Reserve Consultants Ltd. employs a Reasonable Approach when evaluating reserve components in order to draft a study that is of greatest value to our clients. This means we attempt to predict, based on the costs involved and the client s objectives, what a reasonable person will decide to have done when maintenance, repairs, or replacement become necessary. For example, a reasonable person will not replace a fence when it only needs to be repainted. The benefit of this is that reserve contributions are minimized to allow for what it most likely to occur. Our studies are not based on a worst case scenario, but rather on what we expect is most likely to occur. Our approach assumes minor problems will be corrected as they occur, before they become major problems. Many sources were used in drafting this report. These include: Site visits and inspection of facilities;

9 Fir Ridge II RS3 Updates Text Page 9 Conference with association representatives; Review of architectural plans of the buildings, if made available; Review of the declaration for the Association, or a list of components the Association is responsible for; Generally accepted construction, maintenance, and repair guidelines. The costs estimated for this Reserve Study are based on several sources: Costs experienced by Fir Ridge II Condominium; Costs experienced by other associations in the area; RS Means Building Construction Cost Data Several factors may influence the actual costs that the Association will experience. The quality of replacement materials of items can significantly impact cost, as well as the timing between replacements. The use of Architects or independent construction managers to specify and oversee work may also cause additional expenses. Condominium associations typically experience higher costs than other comparable multifamily projects, in part due to the difficulty contractors have obtaining insurance to work on condominium buildings. When making estimates on the future inflation and interest rates, we use a staggered approach given the current economic environment. For 2014 and 2015, we use an inflation rate of 3%, and an interest rate of 1%. For the remaining years of the study, we use a 4% inflation rate and a 3% interest rate.

10 Fir Ridge II RS3 Updates Text Page 10 ASSOCIATION OVERVIEW Fir Ridge II Condominium is a 159-unit residential community located in Bellingham, Washington. The community consists of 24 two-story wood framed buildings. The buildings have vinyl siding and asphalt composition shingle roofs. Construction of the buildings was completed in approximately The Association has asphalt roads and parking areas with asphalt speed bumps. The roads are lined by concrete curbs and sidewalks. The units feature exterior decks or patios. In 1999 Reserve Consultants, Ltd. conducted an initial Reserve Study; in 2004, 2009 and 2012 we completed updates to this study with site visits. This is an update to those prior studies without a site visit. Several assumptions are made in completing this analysis that will affect the Reserve Study recommendations. This Reserve Study assumes that the Association will be maintained to keep a good level of appearance with a special emphasis on retaining the original appearance of the Association to the greatest possible extent. The analysis also assumes that the Association will replace materials as they are required with good quality materials, installed by qualified contractors. For the purposes of this Reserve Study, it is further assumed that the Association will experience the full typical useful life for the new materials installed. There are several items that the individual homeowners are responsible to maintain and pay for which include but are not limited to: Damage by tenants or their pets Windows We have not included the windows in this report. The costs for these items have not been included in the reserve account contribution recommendations. Individual owners should remember that they have the responsibility to pay for repairs to these elements and added items. The Association should establish policies and procedures regarding the maintenance on these owner responsibility items.

11 Fir Ridge II RS3 Updates Text Page 11 ADJUSTMENTS TO COMPONENT RESERVE RECOMMENDATIONS Construction Component Revisions & Adjustments from 2012 to This section provides updated information on the components from prior Reserve Studies and is intended to be used with the component sheets from those studies. Some components have been split on the spreadsheet to more accurately determine the Fully Funded Balance. All cost estimates were adjusted to reflect the actual inflation rate for construction work in the Puget Sound area, and costs actually experienced by the Association or others in the area. If necessary, the spreadsheets and graphs have been adjusted to reflect a 30-year future projection to comply with current law. The Association provided us with a record of recent expenditures on reserve components. We use those figures, where applicable, for updating component cost projections, applying an appropriate inflation factor. Where updated figures from actual work performed are not available, cost projections from the previous reserve study are updated for inflation, using the RS Means 2012 to 2014 inflation figure of 4.16% for construction work. COMPONENTS INCLUDED IN THE RESERVE STUDY: Reserve Studies for condominiums are required to include the follow components: roofing, painting, paving, decks, siding, plumbing, windows, and any other reserve component that would cost more than one percent of the annual budget for major maintenance, repair or replacement (RCW ). UPDATED: Asphalt Paving Major Repairs The association did not report any improvements since the 2012 Reserve Study, so the next repair remains in Year 0 (2014) Asphalt Paving Minor Repairs We assume the above item will include repair to the speed bumps so the next repair for this item is moved to Year 3 (2017) Lawns/Landscape No reserve funds are included for the lawns and landscape areas these items are maintained with operating budget funds Rockery Walls No reserve funds are included for the rockery walls because they are expected to last longer than 30-year reserve timeline Concrete Paving No further changes Exterior Decks Major Repair The association reports deck repairs in 2012, 2013 and anticipates additional repairs at a budget of $40,000 in We have modified this repair cycle to reflect the anticipated repair by budgeting $40,000 in Year 0 (2014).

12 Fir Ridge II RS3 Updates Text Page Exterior Decks Minor Repairs Due to the deck improvements above we have adjusted the repair cycle for this item to 20 years with the next repair in Year 10 (2024) at a budget of $26, Trash Enclosures No further changes Exterior Siding Repairs No further changes Exterior Siding Replace No further changes Exterior Stairs Repairs- No further changes Gutters and Downspouts - Repairs No further changes Gutters and Downspouts - Replace No further changes Roofing Repair No further changes Roofing Replace No further changes Exterior Doors No further changes Exterior Windows The cost for the replacement of the exterior windows is currently a home-owner responsibility. Regardless of the funding, we strongly recommend that standard plans and specifications be obtained by the Association and adhered to for the removal and installation of all new windows. The improper installation of new windows could result in water intrusion, which would lead to dry rot. Reserve Consultants or another building envelope consulting firm can provide you with standard plans and specifications Exterior Painting No further changes Mailboxes No further changes Plumbing - Repairs No further changes Storm Drainage No further changes Electrical No further changes Exterior Lighting No further changes Reserve Study Update with Site Visit The repair cycle remains at 3 years, with the next update with site visit in Year 1 (2015) at a budget of $2100. Signage No further changes.

13 Fir Ridge II RS3 Updates Text Page 13 Deck Inspection Due to considerable deck repair work in 2012 and 2013 and anticipated work in 2014, we have changed the repair cycle to Year 5 (2019) at a budget of $5703.

14 Fir Ridge II RS3 Updates Text Page 14 FINANCIAL ANALYSIS & RESERVE CONTRIBUTION RECOMMENDATIONS For budgeting purposes, we recommend that Fir Ridge II Condominium set the contribution rate at $156,700 for reserves beginning in This amount should increase annually with inflation. This amount is determined using the Cash Flow method with a Threshold Funding plan, to provide adequate reserves each time an expense is anticipated, with a minimum level of reserves (the threshold) equal to one year s reserve contribution at all times during the study period, so that no special assessments will be required. These figures are based on a reserve balance on Jan 27, 2014 of $864,470, plus a planned remaining 2014 reserve contribution of $92,976. Figures were provided by an association representative. Fir Ridge II Condominium should determine the best reserve funding level for their association based on their maintenance needs and risk aversion. Recommended 2015 Contribution: $156,700 Recommended Contribution per Month: $13,058 Average Contribution per Unit per Year: $ 986 Average Contribution per Unit Per Month: $ 82 Average Contribution per Unit per Year as 0.81% a Percentage of Average Unit Value: The contribution as a percentage of average unit value is calculated to provide a way for owners, and prospective owners, to compare the reserve requirements of one association with that of another association or of single-family home ownership. Typically, condominium associations in the Puget Sound area need to set aside from ½% to 1% of their average unit value, homeowners associations need to put aside 1/3% to ½% and single family homeowners should put aside 1% to 2% each year. See the Tables & Graphs section for additional information on contribution rates, expected expenses, and projected inflated values. FUNDING PLANS As noted above, an annual contribution of $156,700 is a Threshold Funding plan to provide funding as expenses are incurred over time, while maintaining a minimum reserve balance of one year s contribution. Absent specific instructions from clients, or unusual circumstances, this is our recommended funding plan. An alternative strategy Fir Ridge II Condominium could employ is Baseline Funding. This provides for necessary expenditures without maintaining a minimum reserve balance. To pursue such a strategy, the recommended Baseline Funding contribution rate would be $150,800. Fir Ridge II Condominium could also consider contributions to obtain and maintain the level of reserves to be Fully Funded, so that the Percent Fully Funded is 100% by Year 30. The recommended Full Funding contribution rate would be $163,900.

15 Fir Ridge II RS3 Updates Text Page 15 We recommend that Fir Ridge II Condominium adopt a policy regarding their reserve funding which would address the level of funding that the Association would strive to maintain, as well as methods of investing reserve funds to best match risk with return and investment length with expected expenses. FULLY FUNDED BALANCE CALCULATIONS The Fully Funded Balance for Fir Ridge II Condominium is $1,464,353. The actual current funding is $864,470. The Association is approximately 59% funded. This means that based on a straight line savings for each reserve component, the Association saved 59% of the accumulated depreciation of the reserve components. Generally, associations that are: 60% or more Funded are considered reasonably well funded; 25% to 60% are considered adequately funded; 25% or less Funded are considered at high risk for special assessment. At 59%, Fir Ridge II Condominium is considered adequately funded. See the Fully Funded Balance Calculation table for more detail, and the graph for a visual representation of the current level of funding.

16 Fir Ridge II RS3 Updates Text Page 16 DISCLOSURES 1 RESERVE CONSULTANTS LTD. ALSO PROVIDES CONSTRUCTION INSPECTION SERVICES FOR CONDOMINIUMS, AND DOES DESIGN AND CONSTRUCTION OVERSIGHT FOR MAJOR REPAIR PROJECTS, INCLUDING ROOFING, DECKS AND BUILDING ENVELOPE REPLACEMENT. 2 KEN HARER, A PRINCIPAL OF RESERVE CONSULTANTS LTD. IS ALSO THE MANAGING PARTNER OF CONDOMINIUM LAW GROUP, PLLC, A LAW FIRM THAT PROVIDES LEGAL SERVICES TO CONDOMINIUMS AND OTHER COMMUNITY ASSOCIATIONS. 3 NO SHAREHOLDER OR EMPLOYEE OF RESERVE CONSULTANTS LTD. HAS ANY INTEREST IN, OR OBLIGATION TO, ANY CONSTRUCTION COMPANY, MANAGEMENT COMPANY, OR DEVELOPMENT ENTITY THAT CREATES CONDOMINIUMS. 4 RESERVE CONSULTANTS LTD. HAS BEEN A MEMBER OF COMMUNITY ASSOCIATION INSTITUTE SINCE ABOUT 1993, AND HAS PERFORMED WORK FOR MANY ASSOCIATION MANAGERS. 5 THIS REPORT AND ANALYSIS IS BASED UPON OBSERVATIONS OF THE VISIBLE AND APPARENT CONDITION OF THE BUILDING AND ITS MAJOR COMPONENTS ON THE DATE OF THE INSPECTION. ALTHOUGH CARE HAS BEEN TAKEN IN THE PERFORMANCE OF THIS INSPECTION, RESERVE CONSULTANTS LTD. (AND/OR ITS REPRESENTATIVES) MAKE NO REPRESENTATIONS REGARDING LATENT OR CONCEALED DEFECTS WHICH MAY EXIST AND NO WARRANTY OR GUARANTEE IS EXPRESSED OR IMPLIED. THIS REPORT IS MADE ONLY IN THE BEST EXERCISE OF OUR ABILITY AND JUDGMENT. CONCLUSIONS IN THIS REPORT ARE BASED ON ESTIMATES OF THE AGE AND NORMAL WORKING LIFE OF VARIOUS ITEMS OF EQUIPMENT AND APPLIANCES. PREDICTIONS OF LIFE EXPECTANCY AND THE BALANCE OF USEFUL LIFE ARE NECESSARILY BASED ON INDUSTRY AND/OR STATISTICAL COMPARISONS. IT IS ESSENTIAL TO UNDERSTAND THAT ACTUAL CONDITIONS CAN ALTER THE USEFUL LIFE OF ANY ITEM. THE PREVIOUS USE OR MISUSE, IRREGULARITY OF SERVICING, FAULTY MANUFACTURE, UNFAVORABLE CONDITIONS, ACTS OF GOD, AND UNFORESEEN CIRCUMSTANCES MAKE IT IMPOSSIBLE TO STATE PRECISELY WHEN EACH ITEM WOULD REQUIRE REPLACEMENT. THE CLIENT HEREIN SHOULD BE AWARE THAT CERTAIN COMPONENTS WITHIN THE ABOVE REFERENCED PROPERTY MAY FUNCTION CONSISTENT WITH THEIR PURPOSE AT THE TIME OF INSPECTION, BUT DUE TO THEIR NATURE, ARE SUBJECT TO DETERIORATION WITHOUT NOTICE. 6 UNLESS OTHERWISE NOTED, ALL RESERVE COMPONENTS ARE ASSUMED TO MEET THE BUILDING CODE REQUIREMENTS IN FORCE AT THE TIME OF CONSTRUCTION. INFORMATION PROVIDED BY THE CLIENT IS ASSUMED TO BE ACCURATE AND RELIABLE. 7 CONCLUSIONS REACHED IN THIS REPORT ASSUME RESPONSIBLE OWNERSHIP AND COMPETENT MANAGEMENT OF THE PROPERTY. INFORMATION PROVIDED BY OTHERS IS BELIEVES TO BE RELIABLE, BUT WE ASSUME NO RESPONSIBILITY FOR ACCURACY THEREOF.

17 Fir Ridge II RS3 Updates Text Page 17 APPENDIX - EVALUATORS CREDENTIALS DENISE DANA ASSOCIATE, RESERVE CONSULTANTS LTD. B.S. EDUCATION, M. ARCHITECTURE REGISTERED ARCHITECT LICENSED ARCHITECT IN WASHINGTON, #8702 LEED ACCREDITED PROFESSIONAL Denise Dana first obtained licensure as an Architect and became a LEED accredited professional in She is currently a licensed Architect in the State of Washington and is certified by the National Council of Architectural Registration Boards. Denise holds a Bachelor of Science in Education from the University of Texas at Austin. An experienced educator, she carries a lifetime Texas Teacher Certificate in Generic Special Education and Secondary Mathematics. Denise attended the University of Houston for her Master of Architecture degree. Graduating second in her class, she was awarded the American Institute of Architects Certificate of Merit. With over ten years of experience in architecture, her resume includes a variety of project types ranging from residential to corporate. She has worked through all phases of construction including design development, construction documentation and construction administration. The project budgets vary from a few thousand dollars to over sixty million dollars. Denise has been conducting reserve studies since joining Reserve Consultants in 2008, and in 2011 she was recognized as a Reserve Specialist by the Community Association Institute. JOHN LEONARD ASSOCIATE, RESERVE CONSULTANTS LTD. BS UNIVERSITY OF MASSACHUSETTS AT AMHERST John Leonard holds a certificate in Project Management from Boston University and has training in building inspection and ICC building codes. Since August of 2003, John has worked on a variety of projects, large and small. As an Associate of Reserve Consultants, John has been working with condominium associations in management of substantial capital improvement and repair projects, including exterior envelope repair and plumbing replacement since He has an extensive background in project management. Prior to joining Reserve Consultants, John had five years experience as a project manager in the high tech sector. In 2011, he became a recognized Reserve Specialist by the Community Association Institute.

18 Fir Ridge II RS3 Updates Text Page 18 ERIE STONE ASSOCIATE, RESERVE CONSULTANTS LTD. B.A. ARCHITECTURE OREGON REGISTERED ARCHITECT LEED ACCREDITED PROFESSIONAL Erie Stone obtained licensure as an Architect over 30 years ago and became a LEED accredited professional in He is currently a licensed Architect in Oregon and is certified by the National Council of Architectural Registration Boards. Erie holds a Bachelor of Architecture degree from Washington State University. An experienced Architect, his resume includes a variety of projects ranging from residential to corporate, with emphasis on remodels. His projects include post offices, VA domiciliary housing, hospital administration buildings, emergency rooms, a courthouse remodel, numerous department stores, specialty retail stores and shopping malls. He has worked in depth through all phases of construction, including design, design development, construction documents, bidding and construction administration. The projects vary from small remodels of a few thousand dollars to a hundred million dollars.

19 Fir Ridge II RS3 Updates Text Page 19 APPENDIX - GRAPHS & TABLES The following pages include the graphs and tables which illustrate our findings and were used to determine the optimum annual reserve contribution rate to the reserve account. It is important to realize that some of these items have large unknowns for both time and price. The estimates are based upon experience, industry averages and apparent component condition. There are two categories of graphs and tables: Fully Funded Balance related and Reserve Projections related. The Fully Funded Balance material details how Fir Ridge II Condominium s Fully Funded Balance was reached, along with its Percent Fully Funded and how we project they will change over time. The Reserve Projections material details the anticipated repairs and expected financial data over the next 30 years, both in constant dollars at today s value, and using our inflation forecasts. The included Fully Funded Balance graphs and tables are: 1. Table Fully Funded Balance Calculations 2. Graph Percent Fully Funded 3. Graph Inflated Percent Funded at Year End Over 30 Years at Recommended Contribution Rate 4. Graph Inflated Fully Funded Balance vs. Projected Reserve Balance over 30 Years at Recommended Contribution Rate The included Reserve Projection graphs and tables are: 1. Graph Fir Ridge II Condominium Reserve Projections: 2014 Constant Dollars 2. Table Reserve Study Projections: 30-Year Spreadsheet with Constant Dollars 3. Graph Fir Ridge II Condominium Reserve Projections: Inflated Dollars 4. Table Reserve Study Projections: 30-Year Spreadsheet Allowing for Inflation

20 Fully Funded Balance Calculations Fir Ridge II COMPONENT DESCRIPTION Quantity Unit REPAIR CYCLE REMAINING USEFUL LIFE CURRENT REPLACE COST FULLY FUNDED BALANCE ASPHALT PAVING - MAJOR REPAIRS SF 6 0 $ 46,443 $ 46,443 ASPHALT PAVING - MINOR REPAIRS 9 EA 2 3 $ 9,752 $ - LAWNS/LANDSCAPE 1 LS 0 0 $ - $ - ROCKERY WALLS 1 LS 0 0 $ - $ - CONCRETE PAVING SF 10 0 $ 6,216 $ 6,216 EXTERIOR DECKS - MAJOR REPAIR 3200 SF 20 0 $ 70,517 $ 70,517 EXTERIOR DECKS - MINOR REPAIRS 3200 SF $ 26,468 $ 13,234 TRASH ENCLOSURES 6 EA 3 1 $ 6,771 $ 4,514 EXTERIOR SIDING - REPAIRS SF 7 1 $ 53,220 $ 45,617 EXTERIOR SIDING - REPLACE SF $ 1,769,235 $ 663,463 EXTERIOR STAIRS - REPAIRS 34 EA 10 5 $ 20,527 $ 10,264 GUTTERS/DOWNSPOUTS - REPAIRS LF 5 0 $ 8,074 $ 8,074 GUTTERS/DOWNSPOUTS - REPLACE LF 25 5 $ 80,732 $ 64,586 ROOFING - REPAIRS 854 SQ 3 0 $ 23,201 $ 23,201 ROOFING - REPLACE 854 SQ 25 5 $ 464,036 $ 371,229 EXTERIOR DOORS 159 EA 5 0 $ 3,045 $ 3,045 EXTERIOR WINDOWS SF 0 0 $ - $ - EXTERIOR PAINTING 159 UNITS 7 1 $ 89,592 $ 76,793 MAILBOXES 159 EA $ 14,053 $ 2,811 PLUMBING - REPAIRS 159 UNITS 10 5 $ 19,199 $ 9,599 STORM DRAINAGE 1 LS 10 5 $ 9,624 $ 4,812 ELECTRICAL 24 BLDG 10 0 $ 20,286 $ 20,286 EXTERIOR LIGHTING 159 UNITS 5 1 $ 21,874 $ 17,499 RESERVE STUDY 1 EA 3 1 $ 2,100 $ 1,400 SIGNAGE 1 EA $ 5,000 $ 750 DECK INSPECTION 1 LS $ 5,703 $ - FULLY FUNDED BALANCE Total $ 1,464,353 ACTUAL RESERVE BALANCE = $ 864,470 PERCENT FULLY FUNDED = 59% 2/25/2014 ABBREVIATION KEY EA each LF linear foot SQ roofing square BLDG building(s) LS lump sum SY square yard FIXT fixture(s) SF square foot ZN zone

21 Fir Ridge II PERCENT FULLY FUNDED GRAPH 100% 90% 80% 41% 39% 70% 60% 50% 40% 30% 20% 10% 0% 59% TIME OF STUDY 61% PROJECTED YEAR-END 2015 UNFUNDED BALANCE ACTUAL RESERVE BALANCE %

22 140% INFLATED PERCENT FUNDED AT YEAR END OVER 30 YEARS AT RECOMMENDED CONTRIBUTION RATE 120% 100% 80% 60% 40% 20% 0%

23 INFLATED FULLY FUNDED BALANCE VS. PROJECTED RESERVE BALANCE OVER 30 YEARS AT RECOMMENDED CONTRIBUTION RATE $7,000,000 $6,000,000 $5,000,000 FULLY FUNDED RESERVE BALANCE PROJECTED INFLATED RESERVE BALANCE $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0

24 Fir Ridge II RESERVE STUDY PROJECTIONS: 2014 CONSTANT DOLLARS $2,500,000 END BALANCE CONTRIBUTION $2,000,000 YEARLY COST $1,500,000 $1,000,000 $500,000 $ YEARS

25 FR constant spread Fir Ridge II Reserve Study Projections Reserve Consultants Ltd. 30-YEAR SPREADSHEET WITH CONSTANT DOLLARS DATE: 25-Feb-14 PER YEAR EXPENSES IN 2014 DOLLARS REPAIR NEXT # COMPONENT NAME CYCLE EXP ASPHALT PAVING - MAJOR REPAIRS 6 0 $46,443 $46, ASPHALT PAVING - MINOR REPAIRS 2 3 $9,752 $9,752 $9,752 $9, LAWNS/LANDSCAPE ROCKERY WALLS CONCRETE PAVING 10 0 $6,216 $6, EXTERIOR DECKS - MAJOR REPAIR 20 0 $70, EXTERIOR DECKS - MINOR REPAIRS $26, TRASH ENCLOSURES 3 1 $6,771 $6,771 $6,771 $6, EXTERIOR SIDING - REPAIRS 7 1 $53,220 $53, EXTERIOR SIDING - REPLACE EXTERIOR STAIRS - REPAIRS 10 5 $20, GUTTERS/DOWNSPOUTS - REPAIRS 5 0 $8,074 $8,074 $8, GUTTERS/DOWNSPOUTS - REPLACE 25 5 $80, ROOFING - REPAIRS 3 0 $23,201 $23,201 $23,201 $23, ROOFING - REPLACE 25 5 $464, EXTERIOR DOORS 5 0 $3,045 $3,045 $3, EXTERIOR WINDOWS EXTERIOR PAINTING 7 1 $89,592 $89, MAILBOXES PLUMBING - REPAIRS 10 5 $19, STORM DRAINAGE 10 5 $9, ELECTRICAL 10 0 $20,286 $20, EXTERIOR LIGHTING 5 1 $21,874 $21, RESERVE STUDY 3 1 $2,100 $2,100 $2,100 $2, SIGNAGE DECK INSPECTION $5,703 TOTAL EXPENDED BY YEAR $177,782 $173,557 $32,953 $8,871 $614,989 $91,518 $18,622 $142,812 $32,953 $78,662 CARRY OVER RESERVES $864,470 $779,664 $758,244 $910,380 $1,029,562 $1,172,827 $709,974 $770,592 $904,105 $913,429 $1,032,611 ANNUAL RESERVE CONTRIB $92,976 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 RESERVE EXPENDITURES $177,782 $173,557 $32,953 $8,871 $614,989 $91,518 $18,622 $142,812 $32,953 $78,662 ACCUMULATED RESERVES $779,664 $758,244 $910,380 $1,029,562 $1,172,827 $709,974 $770,592 $904,105 $913,429 $1,032,611 $1,106,085 INTEREST EARNED YEAR-END BALANCE $779,664 $758,244 $910,380 $1,029,562 $1,172,827 $709,974 $770,592 $904,105 $913,429 $1,032,611 $1,106,085 NOTES: COPYRIGHT 2014 Reserve Consultants Ltd. 1. Year Zero carry over balance is the current actual reserve balance as reported to Reserve Consultants Ltd. 2. Year Zero reserve contribution is that estimated for the remainder of the year, following preparation of this report.

26 FR constant spread Fir Ridge II DATE: 25-Feb-14 REPAIR NEXT # COMPONENT NAME CYCLE EXP ASPHALT PAVING - MAJOR REPAIRS ASPHALT PAVING - MINOR REPAIRS LAWNS/LANDSCAPE ROCKERY WALLS CONCRETE PAVING EXTERIOR DECKS - MAJOR REPAIR EXTERIOR DECKS - MINOR REPAIRS TRASH ENCLOSURES EXTERIOR SIDING - REPAIRS EXTERIOR SIDING - REPLACE EXTERIOR STAIRS - REPAIRS GUTTERS/DOWNSPOUTS - REPAIRS GUTTERS/DOWNSPOUTS - REPLACE ROOFING - REPAIRS ROOFING - REPLACE EXTERIOR DOORS EXTERIOR WINDOWS EXTERIOR PAINTING MAILBOXES PLUMBING - REPAIRS STORM DRAINAGE ELECTRICAL EXTERIOR LIGHTING RESERVE STUDY SIGNAGE DECK INSPECTION TOTAL EXPENDED BY YEAR CARRY OVER RESERVES ANNUAL RESERVE CONTRIB RESERVE EXPENDITURES ACCUMULATED RESERVES INTEREST EARNED YEAR-END BALANCE Reserve Study Projections Reserve Consultants, Ltd. 30-YEAR SPREADSHEET WITH CONSTANT DOLLARS $46,443 $46,443 $9,752 $9,752 $9,752 $9,752 $9,752 $6,771 $6,771 $6,771 $53,220 $6,216 $70,517 $20,527 $8,074 $8,074 $23,201 $23,201 $23,201 $3,045 $3,045 $89,592 $19,199 $9,624 $21,874 $21,874 $2,100 $2,100 $2,100 $5,000 $14,053 $20,286 $31,626 $69,644 $18,622 $236,235 $30,745 $14,752 $69,644 $18,622 $127,894 $1,106,085 $1,226,595 $1,309,087 $1,442,600 $1,594,736 $1,510,637 $1,632,029 $1,769,413 $1,851,905 $1,985,418 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $31,626 $69,644 $18,622 $236,235 $30,745 $14,752 $69,644 $18,622 $127,894 $1,226,595 $1,309,087 $1,442,600 $1,594,736 $1,510,637 $1,632,029 $1,769,413 $1,851,905 $1,985,418 $2,009,660 $1,226,595 $1,309,087 $1,442,600 $1,594,736 $1,510,637 $1,632,029 $1,769,413 $1,851,905 $1,985,418 $2,009,660 $5,703 NOTES: COPYRIGHT 2014 Reserve Consultants Ltd. 1. Year Zero carry over balance is the current actual reserve balance as reported to Reserve Consultants Ltd. 2. Year Zero reserve contribution is that estimated for the remainder of the year, following preparation of this report.

27 FR constant spread Fir Ridge II DATE: 25-Feb-14 REPAIR NEXT # COMPONENT NAME CYCLE EXP ASPHALT PAVING - MAJOR REPAIRS ASPHALT PAVING - MINOR REPAIRS LAWNS/LANDSCAPE ROCKERY WALLS CONCRETE PAVING EXTERIOR DECKS - MAJOR REPAIR EXTERIOR DECKS - MINOR REPAIRS TRASH ENCLOSURES EXTERIOR SIDING - REPAIRS EXTERIOR SIDING - REPLACE EXTERIOR STAIRS - REPAIRS GUTTERS/DOWNSPOUTS - REPAIRS GUTTERS/DOWNSPOUTS - REPLACE ROOFING - REPAIRS ROOFING - REPLACE EXTERIOR DOORS EXTERIOR WINDOWS EXTERIOR PAINTING MAILBOXES PLUMBING - REPAIRS STORM DRAINAGE ELECTRICAL EXTERIOR LIGHTING RESERVE STUDY SIGNAGE DECK INSPECTION TOTAL EXPENDED BY YEAR CARRY OVER RESERVES ANNUAL RESERVE CONTRIB RESERVE EXPENDITURES ACCUMULATED RESERVES INTEREST EARNED YEAR-END BALANCE Reserve Study Projections Reserve Consultants, Ltd. 30-YEAR SPREADSHEET WITH CONSTANT DOLLARS $46,443 $46,443 $9,752 $9,752 $9,752 $9,752 $9,752 $26,468 $6,771 $6,771 $6,771 $53,220 $53,220 $1,769,235 $20,527 $8,074 $8,074 $80,732 $23,201 $23,201 $23,201 $23,201 $464,036 $3,045 $3,045 $89,592 $89,592 $19,199 $9,624 $21,874 $21,874 $2,100 $2,100 $2,100 $6,216 $20,286 $54,827 $151,683 $9,752 $69,644 $1,848,327 $21,874 $32,953 $8,871 $152,564 $684,204 $2,009,660 $2,106,969 $2,107,422 $2,249,806 $2,332,298 $636,106 $766,368 $885,551 $1,028,816 $1,028,388 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $152,136 $54,827 $151,683 $9,752 $69,644 $1,848,327 $21,874 $32,953 $8,871 $152,564 $684,204 $2,106,969 $2,107,422 $2,249,806 $2,332,298 $636,106 $766,368 $885,551 $1,028,816 $1,028,388 $496,320 $2,106,969 $2,107,422 $2,249,806 $2,332,298 $636,106 $766,368 $885,551 $1,028,816 $1,028,388 $496,320 $5,703 NOTES: COPYRIGHT 2014 Reserve Consultants Ltd. 1. Year Zero carry over balance is the current actual reserve balance as reported to Reserve Consultants Ltd. 2. Year Zero reserve contribution is that estimated for the remainder of the year, following preparation of this report.

28 $6,000,000 Fir Ridge II RESERVE STUDY PROJECTIONS: INFLATED DOLLARS END BALANCE $5,000,000 CONTRIBUTION YEARLY COST $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ YEARS

29 Fir Ridge II 31 Year Spreadsheet Fir Ridge II Reserve Study Projections Reserve Consultants Ltd. 30-YEAR SPREADSHEET ALLOWING FOR INFLATION DATE: 25-Feb-14 PER YEAR EXPENSES (adjusted for inflation) REPAIR NEXT # COMPONENT NAME CYCLE EXP ASPHALT PAVING - MAJOR REPAIRS 6 0 $46,443 $58, ASPHALT PAVING - MINOR REPAIRS 2 3 $10,864 $11,751 $12,709 $13, LAWNS/LANDSCAPE ROCKERY WALLS CONCRETE PAVING 10 0 $6,216 $9, EXTERIOR DECKS - MAJOR REPAIR 20 0 $70, EXTERIOR DECKS - MINOR REPAIRS $38, TRASH ENCLOSURES 3 1 $6,974 $7,844 $8,824 $9, EXTERIOR SIDING - REPAIRS 7 1 $54,817 $72, EXTERIOR SIDING - REPLACE EXTERIOR STAIRS - REPAIRS 10 5 $24, GUTTERS/DOWNSPOUTS - REPAIRS 5 0 $8,074 $9,728 $11, GUTTERS/DOWNSPOUTS - REPLACE 25 5 $97, ROOFING - REPAIRS 3 0 $23,201 $25,847 $29,075 $32, ROOFING - REPLACE 25 5 $559, EXTERIOR DOORS 5 0 $3,045 $3,669 $4, EXTERIOR WINDOWS EXTERIOR PAINTING 7 1 $92,280 $121, MAILBOXES PLUMBING - REPAIRS 10 5 $23, STORM DRAINAGE 10 5 $11, ELECTRICAL 10 0 $20,286 $29, EXTERIOR LIGHTING 5 1 $22,530 $27, RESERVE STUDY 3 1 $2,163 $2,433 $2,737 $3,079 SIGNAGE DECK INSPECTION $8,361 TOTAL EXPENDED BY YEAR $177,782 $178,763 $36,712 $10,278 $741,034 $114,686 $24,270 $193,569 $46,452 $115,319 CARRY OVER RESERVES $864,470 $787,885 $773,590 $962,210 $1,125,843 $1,328,097 $801,857 $903,015 $1,106,721 $1,152,750 $1,357,855 ANNUAL RESERVE CONTRIB $92,976 $156,700 $162,968 $169,487 $176,266 $183,317 $190,650 $198,275 $206,207 $214,455 $223,033 RESERVE EXPENDITURES $177,782 $178,763 $36,712 $10,278 $741,034 $114,686 $24,270 $193,569 $46,452 $115,319 ACCUMULATED RESERVES $779,664 $765,822 $936,558 $1,094,986 $1,291,832 $770,380 $877,820 $1,077,021 $1,119,359 $1,320,753 $1,465,569 INTEREST EARNED $8,221 $7,769 $25,652 $30,858 $36,265 $31,477 $25,195 $29,701 $33,391 $37,103 $42,351 YEAR-END BALANCE $787,885 $773,590 $962,210 $1,125,843 $1,328,097 $801,857 $903,015 $1,106,721 $1,152,750 $1,357,855 $1,507, INFLATION MULTIPLIER INTEREST RATE MULTIPLIER COPYRIGHT 2014 Reserve Consultants Ltd. NOTES: 1. Year Zero carry over balance is the current actual reserve balance as reported to Reserve Consultants Ltd. 2. Year Zero reserve contribution is that estimated for the remainder of the year, following preparation of this report.

30 Fir Ridge II 31 Year Spreadsheet Fir Ridge II DATE: 25-Feb-14 REPAIR NEXT # COMPONENT NAME CYCLE EXP ASPHALT PAVING - MAJOR REPAIRS ASPHALT PAVING - MINOR REPAIRS LAWNS/LANDSCAPE ROCKERY WALLS CONCRETE PAVING EXTERIOR DECKS - MAJOR REPAIR EXTERIOR DECKS - MINOR REPAIRS TRASH ENCLOSURES EXTERIOR SIDING - REPAIRS EXTERIOR SIDING - REPLACE EXTERIOR STAIRS - REPAIRS GUTTERS/DOWNSPOUTS - REPAIRS GUTTERS/DOWNSPOUTS - REPLACE ROOFING - REPAIRS ROOFING - REPLACE EXTERIOR DOORS EXTERIOR WINDOWS EXTERIOR PAINTING MAILBOXES PLUMBING - REPAIRS STORM DRAINAGE ELECTRICAL EXTERIOR LIGHTING RESERVE STUDY 3 1 SIGNAGE DECK INSPECTION Reserve Study Projections Reserve Consultants, Ltd. 30-YEAR SPREADSHEET ALLOWING FOR INFLATION $73,641 $93,180 $14,868 $16,082 $17,394 $18,813 $20,348 $11,165 $12,559 $14,127 $94,925 $13,489 $153,026 $36,613 $14,400 $17,520 $36,789 $41,383 $46,550 $5,432 $6,609 $159,799 $34,244 $17,166 $33,350 $40,576 $3,463 $3,895 $4,382 $9,645 $30,497 $44,021 $12,376 TOTAL EXPENDED BY YEAR CARRY OVER RESERVES ANNUAL RESERVE CONTRIB RESERVE EXPENDITURES ACCUMULATED RESERVES INTEREST EARNED YEAR-END BALANCE INFLATION MULTIPLIER INTEREST RATE MULTIPLIER $48,219 $110,430 $30,710 $421,355 $57,030 $28,459 $139,730 $38,858 $277,536 $1,507,920 $1,739,649 $1,924,603 $2,205,816 $2,536,821 $2,460,674 $2,763,050 $3,114,954 $3,376,392 $3,760,450 $231,954 $241,232 $250,882 $260,917 $271,354 $282,208 $293,496 $305,236 $317,445 $330,143 $48,219 $110,430 $30,710 $421,355 $57,030 $28,459 $139,730 $38,858 $277,536 $1,691,656 $1,870,452 $2,144,775 $2,466,733 $2,386,820 $2,685,852 $3,028,087 $3,280,461 $3,654,980 $3,813,057 $47,994 $54,152 $61,041 $70,088 $73,855 $77,198 $86,867 $95,931 $105,471 $113,603 $1,739,649 $1,924,603 $2,205,816 $2,536,821 $2,460,674 $2,763,050 $3,114,954 $3,376,392 $3,760,450 $3,926,660 NOTES: COPYRIGHT 2014 Reserve Consultants Ltd. 1. Year Zero carry over balance is the current actual reserve balance as reported to Reserve Consultants Ltd. 2. Year Zero reserve contribution is that estimated for the remainder of the year, following preparation of this report.