Sanctuary on the Park HOA Jordan & Caley Centennial, CO 80111

Transcription

1 Sanctuary on the Park HOA Jordan & Caley Centennial, CO Level 3 Reserve Analysis Reserve Study without Property Inspection Report Period 01/01/11 12/31/011 Date of Property Inspection Inspector Report Prepared by Main Contact Client Reference Number 7603 Property Type Patio Homes Number of Units 53 Fiscal Year End December 31 Not Applicable Not Applicable G. Michael Kelsen, RS, PRA Ms. Diane Miller, Community Manager Report was prepared on - Thursday, August 11, 2011 Revised Final Report P.O. Box 1762 Castle Rock, CO Phone (303) Fax (303)

2 Table of Contents SECTION 1: Introduction to Reserve Analysis page 1 General Information and Answers to FAQ s pages 2-3 Summary of Reserve Analysis page 4 SECTION 2: Financial Analysis a) Funding Summary page 1 b) Percent Funded Graph page 2 c) Component Inventory List page 3 d) Significant Components Table page 4 e) Significant Components Graph page 5 f) Yearly Summary Table page 6 g) Yearly Contributions Graph page 7 h) Component Funding Information page 8 i) Yearly Cash Flow Table page 9 j) Projected Expenditures Year by Year Graph page 10 k) Projected Expenditures Year by Year page 11 SECTION 3: Glossary of Terms and Definitions pages 1-2

3 Introduction to the Reserve Analysis The elected officials of this association made a wise decision to invest in a Reserve Analysis to get a better understanding of the status of the Reserve funds. This Analysis will be a valuable tool to assist the Board of Directors in making the decision to which the dues are derived. Typically, the Reserve contribution makes up 15% - 40% of the association s total budget. Therefore, Reserves is considered to be a significant part of the overall monthly association payment. Every association conducts its business within a budget. There are typically two main parts to this budget, Operating and Reserves. The Operating budget includes all expenses that are fixed on an annual basis. These would include management fees, maintenance fees, utilities, etc. The Reserves is primarily made up of Capital Replacement items such as asphalt, roofing, fencing, mechanical equipment, etc., that do not normally occur on an annual basis. The Reserve Analysis is also broken down into two different parts, the Physical Analysis and the Financial Analysis. The Physical Analysis is information regarding the physical status and replacement cost of major common area components that the association is responsible to maintain. It is important to understand that while the Component Inventory will remain relatively stable from year to year, the Condition Assessment and Life/Valuation Estimates will most likely vary from year to year. You can find this information in the Asset Inventory Section (Section 2) of this Reserve Analysis. The Financial Analysis Section is the evaluation of the association s Reserve balance, income, and expenses. This is made up of a finding of the clients current Reserve Fund Status (measured as Percent Funded) and a recommendation for an appropriate Reserve Allocation rate (also known as the Funding Plan). You can find this information in Section 3 (pages 1 13) of this Reserve Analysis. The purpose of this Reserve Analysis is to provide an educated estimate as to what the Reserve Allocation needs to be. The detailed schedules will serve as an advanced warning that major projects will need to be addressed in the future. This will allow the Board of Directors to have ample timing to obtain competitive estimates and bids that will result in cost savings to the individual homeowners. This will also ensure the physical well being of the property and ultimately enhance each owner s investment, while limiting the possibility of unexpected major projects that may lead to Special Assessments. It is important for the client, homeowners, and potential future homeowners to understand that the information contained in this analysis is based on estimates and assumptions gathered from various sources. Estimated life expectancies and cycles are based upon conditions that were readily visible and accessible at time of the inspection. No destructive or intrusive methods (such as entering the walls to inspect the condition of electrical wiring, plumbing lines, and telephone wires) were performed. In addition, environmental hazards (such as lead paint, asbestos, radon, etc.), construction defects, and acts of nature have also been excluded from this report. If problem areas were revealed, a reasonable effort has been made to include these items within the report. While every effort has been made to ensure accurate results, this report reflects the judgement of Aspen Reserve Specialties and should not be construed as a guarantee or assurance of predicting future events. 1

4 General Information and Answers to Frequently Asked Questions Why is it important to perform a Reserve Study? As previously mentioned, the Reserve allocation makes up a significant portion of the total monthly dues. This report provides the essential information that is needed to guide the Board of Directors in establishing the budget in order to run the daily operations of your association. It is suggested that a third party professionally prepare a Reserve Study since there is no vested interest in the property. Also, a professional knows what to look for and how to properly develop an accurate and reliable component list. Now that we have it, what do we do with it? Hopefully, you will not look at this report and think it is too cumbersome to understand. Our intention is to make this Reserve Analysis very easy to read and understand. Please take the time to review it carefully and make sure the main ingredients (asset information) are complete and accurate. If there are any inaccuracies, please inform us immediately so we may revise the report. Once you feel the report is an accurate tool to work from, use it to help establish your budget for the upcoming fiscal year. The Reserve allocation makes up a significant portion of the total monthly dues and this report should help you determine the correct amount of money to go into the Reserve fund. Additionally, the Reserve Study should act as a guide to obtain proposals in advance of pending projects. This will give you an opportunity to shop around for the best price available. The Reserve Study should be readily available for Real Estate agents, brokerage firms, and lending institutions for potential future homeowners. As the importance of Reserves becomes more of a household term, people are requesting homeowners associations to reveal the strength of the Reserve fund prior to purchasing a single family home, condominium or townhome. How often do we update or review it? Unfortunately, there is a misconception that these reports are good for an extended period of time since the report has projections for the next 30 years. Just like any major line item in the budget, the Reserve Analysis should be reviewed each year before the budget is established. Invariably, some assumptions have to be made during the compilation of this analysis. Anticipated events may not materialize and unpredictable circumstances could occur. Deterioration rates and repair/replacement costs will vary from causes that are unforeseen. Earned interest rates may vary from year to year. These variations could alter the content of the Reserve Analysis. Therefore, this analysis should be reviewed annually, and a property inspection should be conducted at least once every three years. Is it the law to have a Reserve Study conducted? Legislation requires Reserve Studies in approximately 20 states. Currently, there is a bill pending in the State of Colorado that will require Reserve Studies. While the language was revised before the bill was passed, it is likely that Reserve Studies will be required by the State at some point in the near future. In addition, the documents of the association may require the association to have a Reserve fund established. This doesn t mean a Reserve Analysis is required, but how are you going to know you have enough funds in the account if you don t have the proper information? Hypothetically, some associations look at the Reserve fund and think that $50,000 is a lot of money and they are in good shape. What they don t know is that resurfacing the streets will to need to be completed within the next 5 years, and the cost of the project is going to exceed 2

5 $75,000. So while $50,000 sounds like a lot of money, in reality it won t even cover the cost of resurfacing the streets, let alone all the other amenities the association is responsible to maintain. What makes an asset a Reserve item versus an Operating item? A Reserve asset is an item that is the responsibility of the association to maintain, has a limited Useful Life, predictable Remaining Useful Life expectancies, typically occurs on a cyclical basis that exceeds 1 year, and costs above a minimum threshold cost. An operating expense is typically a fixed expense that occurs on an annual basis. For instance, minor repairs to a roof for damage caused by high winds or other weather elements would be considered an operating expense. However, if the entire roof needs to be replaced because it has reached the end of its life expectancy, then the replacement would be considered a Reserve expense. The GREY area of maintenance items that are often seen in a Reserve Study One of the most popular questions revolves around major maintenance items, such as painting the buildings or seal coating the asphalt. You may hear from your accountant that since painting or seal coating is not replacing a capital item, then it cannot be considered a Reserve issue. However, it is the opinion of several major Reserve Study providers that these items are considered to be major expenses that occur on a cyclical basis. Therefore, it makes it very difficult to ignore a major expense that meets the criteria to be considered a Reserve component. Once explained in this context, many accountants tend to agree and will include any expenses, such as these examples, as a Reserve component. The Property Inspection A Property Inspection was not conducted for this report per the contract agreement. The Reserve Fund Analysis We projected the starting balance from taking the most recent balance statement, adding expected Reserve contributions for the rest of the year, and subtracting any pending projects for the rest of the year. We compared this number to the ideal Reserve Balance and arrived at the Percent funded level. Measures of strength are as follows: 0% - 30% Funded Is considered to be a weak financial position. Associations that fall into this category are subject to Special Assessments and deferred maintenance, which could lead to lower property values. If the association is in this position, actions should be taken to improve the financial strength of the Reserve Fund. 31% - 69% Funded The majority of associations are considered to be in this fair financial position. While this doesn t represent financial strength and stability, the likelihood of Special Assessments and deferred maintenance is diminished. Effort should be taken to continue strengthening the financial position of the Reserve fund. 70% - 99% Funded This indicates financial strength of a Reserve fund and every attempt to maintain this level should be a goal of the association. 100% Funded This is the ideal amount of Reserve funding. This means that the association has the exact amount of funds in the Reserve account that should be at any given time. 3

6 Summary of Sanctuary on the Park HOA - Assoc. ID # Projected Starting Balance as of January 1, $187,868 Ideal Reserve Balance as of January 1, $161,396 Percent of Fully Funded as of January 1, % Recommended Reserve Allocation (per month) - $2,050 Minimum Reserve Allocation (per month) - $1,700 Recommended Special Assessment - $0 This report is an update to an existing Reserve Study Report that was prepared two years ago for the 2009 fiscal period. A property site inspection was not conducted per the request of the association. While we commend the Board of Directors in making a decision to update the previous Reserve Study, we recommend having a trained professional inspect the property at least every 4 5 years to verify conditions, useful life, and remaining life of components. Since there has not been a physical inspection of the property for approximately 4 years, we recommend the association perform an updated Reserve Study with an on-site inspection within the next couple years. To update the figures in this report, we obtained information by contacting the property representative (Community Manager) and some vendors that have worked on the property over the past couple years. To the best of our knowledge, the conclusions and suggestions of this report are considered reliable and accurate insofar as the information obtained from these sources. This property contains 53 single family detached homes in a community where construction began approximately 12 years ago in The maintenance responsibilities of the association include the private streets, perimeter fencing, and entrance monuments. Since the last report, the association has replaced the wood perimeter fence with a Trex material, rebuilt a section of the irrigation system for the native area, and completed minor asphalt repairs. Reserve projects scheduled this next year include seal coating the asphalt, building a new monument on Jordan, replacing some of the irrigation clocks, and improving some of the landscaping. In comparing the projected balance of $187,868 versus the ideal Reserve Balance of $161,396, we find the association Reserve account to be above the fully funded position (approximately 116% fully funded) at this time. This indicates that more money has been set aside than needed to be at this point in time. As a result of the information in this report, we find that the current (2011) budgeted Reserve allocation of $1,838 per month will be less than sufficient in maintaining the strength of the Reserve fund. Therefore, we are recommending an increase of the Reserve contribution to $2.050 per month, followed by nominal annual increases of 5.00% thereafter to help offset the effects of inflation. By following the recommendation, the plan will maintain the percent funded at the ideal position (100%) throughout the thirty-year period. In the percent Funded graph, you will see that we have also suggested a minimum Reserve contribution of $1,700 per month. If the Reserve contribution falls below this rate, then the Reserve fund will fall into a situation where Special Assessments, deferred maintenance, and lower property values are possible at some point in the future. The minimum Reserve allocation follows the threshold theory of Reserve funding where the percent funded status is not allowed to dip below 30% funded at any point during the thirty-year period. This was provided for one purpose only, to show the association how small the difference is between the two scenarios and how it would not make financial sense to contribute less money (approximately $6.60 per unit per month in this case) to the Reserve fund to only stay above a certain threshold. 4

7 Funding Summary For Sanctuary on the Park HOA Beginning Assumptions Financial Information Source Research With Client # of units 53 Fiscal Year End December 31, 2011 Monthly Dues from 2010 budget $8, Monthly Reserve Allocation from 2011 Budget $1, Projected Starting Reserve Balance (as of 1/1/2011) $187,868 Ideal Starting Reserve Balance (as of 1/1/2011) $161,396 Economic Factors Current Inflation Rate (Based on Construction Cost Index 4.50% Reported After-Tax Interest Rate 3.00% Current Reserve Status Current Balance as a % of Ideal Balance 116% Recommendations for 2011 Fiscal Year Monthly Reserve Allocation $2,050 Per Unit $38.68 Minimum Monthly Reserve Allocation $1,700 Per Unit $32.08 Primary Annual Increases 5.00% # of Years 30 Special Assessment $0 Per Unit $0 Changes to Current (2011) Budget Increase/Decrease to Reserve Allocation $212 as Percentage 12% Per Unit $4.00 1

8 Percent Funded Graph For Sanctuary on the Park HOA 140% Percent Funded Recommended Monthly Reserve Allocation from 2011 Budget Minimum 120% 100% % Level of Funding 80% 60% 40% 20% 0% Year

9 Component Inventory for Sanctuary On The Park HOA Category Asset # Asset Name UL RUL Best Cost Worst Cost Drive Materials 401 Asphalt - Overlay $151,900 $173, Asphalt - Seal Coat/crack fill 4 0 $7,000 $8, Drain Swales/Border - Repair 10 7 $18,000 $22,000 Prop. Identification 801 Monument - Construct (Jordan) 20 0 $10,000 $11, Monument - Rebuild 20 8 $6,000 $7, Bulletin Boards - Replace N/A $0 $0 803 Mailboxes - Replace 20 8 $6,400 $7, Street Signs - Replace N/A $0 $0 Fencing/Walls 1001 Trex Fencing - Replace $30,000 $35, Stone Columns - Repair 15 3 $7,200 $9, Split Rail Fence - Partial Replacement 5 1 $12,950 $15, Retaining Wall - Replace N/A $0 $0 Recreation Equip Bench - Replace N/A $0 $0 Light Fixtures 1609 Street Lights - Replace N/A $0 $0 Irrig. System 1701 Irrigation System 10 5 $25,000 $30, Irrigation Timeclocks - Replace (2011) 10 0 $3,500 $4, Irrigation Timeclocks - Replace (2012) 10 1 $3,500 $4, Irrigation Timeclocks - Replace (2013) 10 2 $3,850 $4, Irrigation Timeclocks - Replace (2014) 10 3 $3,850 $4, Irrigation Timeclocks - Replace (2010) 10 9 $3,850 $4,400 Landscaping 1801 Grounds Improvements (2011) 30 0 $5,500 $6, Landscape Improvements 3 1 $4,000 $6,000 Miscellaneous 2001 Wood Bollards - Replace N/A $0 $0 3

10 Significant Components For Sanctuary on the Park HOA Significance: Ave Curr (Curr Cost/UL) ID Asset Name UL RUL Cost As $ As % 401 Asphalt - Overlay $162,750 $8, % 402 Asphalt - Seal Coat/crack fill 4 0 $7,600 $1, % 406 Drain Swales/Border - Repair 10 7 $20,000 $2, % 801 Monument - Construct (Jordan) 20 0 $10,500 $ % 801 Monument - Rebuild 20 8 $6,750 $ % 803 Mailboxes - Replace 20 8 $7,000 $ % 1001 Trex Fencing - Replace $32,500 $1, % 1005 Stone Columns - Repair 15 3 $8,100 $ % 1009 Split Rail Fence - Partial Replacement 5 1 $14,338 $2, % 1701 Irrigation System 10 5 $27,500 $2, % 1703 Irrigation Timeclocks - Replace (2010) 10 9 $4,125 $ % 1703 Irrigation Timeclocks - Replace (2011) 10 0 $3,750 $ % 1703 Irrigation Timeclocks - Replace (2012) 10 1 $3,750 $ % 1703 Irrigation Timeclocks - Replace (2013) 10 2 $4,125 $ % 1703 Irrigation Timeclocks - Replace (2014) 10 3 $4,125 $ % 1801 Grounds Improvements (2011) 30 0 $5,750 $ % 1802 Landscape Improvements 3 1 $5,000 $1, % 4

11 Significant Components Graph For Sanctuary on the Park HOA 401 Asphalt - Overlay 1009 Split Rail Fence - Partial Replacement 1701 Irrigation System 406 Drain Swales/Border - Repair All Other 36% 33% 11% 8% 12% Significance: (Curr Cost/UL) Asset ID Asset Name UL RUL Average Curr. Cost As $ As % 401 Asphalt - Overlay $162,750 $8,138 33% 1009 Split Rail Fence - Partial Replacement 5 1 $14,338 $2,868 12% 1701 Irrigation System 10 5 $27,500 $2,750 11% 406 Drain Swales/Border - Repair 10 7 $20,000 $2,000 8% All Other See Expanded Table on Page 4 For Additional Breakdown $8,798 36% 5

12 Yearly Summary For Sanctuary on the Park HOA Fiscal Year Starting Fully Funded Reserve Percent Annual Reserve Rec. Special Interest Reserve Start Balance Balance Funded Contribs Ass'mnt Income Expenses 2011 $161,396 $187, % $24,600 $0 $5,669 $27, $165,475 $190, % $25,830 $0 $5,821 $24, $174,522 $198, % $27,122 $0 $6,368 $4, $205,688 $227, % $28,478 $0 $7,127 $13, $229,645 $248, % $29,901 $0 $7,791 $15, $254,875 $271, % $31,397 $0 $8,210 $34, $262,507 $276, % $32,966 $0 $8,634 $18, $288,223 $299, % $34,615 $0 $9,123 $34, $300,557 $309, % $36,345 $0 $9,500 $30, $318,843 $324, % $38,163 $0 $10,367 $6, $364,915 $367, % $40,071 $0 $11,572 $13, $406,983 $405, % $42,074 $0 $8,504 $293, $160,258 $162, % $44,178 $0 $5,309 $19, $190,204 $191, % $46,387 $0 $6,299 $16, $227,335 $228, % $48,706 $0 $7,691 $ $285,083 $284, % $51,142 $0 $8,634 $53, $291,953 $291, % $53,699 $0 $8,853 $54, $300, $299, % $56,384 $0 $9,325 $42, $323,610 $322, % $59,203 $0 $10,452 $17, $376,145 $374, % $62,163 $0 $12,023 $21, $430,280 $427,871 99% $65,271 $0 $13,205 $52, $456,456 $453,651 99% $68,535 $0 $14,147 $45, $494,025 $490,748 99% $71,961 $0 $15,655 $24, $558,717 $554,333 99% $75,559 $0 $17,837 $11, $642,612 $636,377 99% $79,337 $0 $18,809 $115, $624,805 $619, % $83, $0 $18,615 $97, $627,963 $623,437 99% $87,470 $0 $19,608 $45, $689,750 $685,485 99% $91,843 $0 $21,248 $65, $736,405 $732, % $96,435 $0 $22,385 $90, $763,104 $761, % $101,257 $0 $24,473 $14,784 6

13 Reserve Contributions For Sanctuary on the Park HOA Reserve Contributions Recommended Current Minimum Monthly Contribution $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Year 7

14 Component Funding Information For Sanctuary on the Park HOA Ave Current Current Fund ID Component Name Cost Future Cost Balance Balance Monthly 401 Asphalt - Overlay $162,750 $264,119 $73,238 $85,250 $ Asphalt - Seal Coat/crack fill $7,600 $9,063 $7,600 $8,847 $ Drain Swales/Border - Repair $20,000 $27,217 $6,000 $6,984 $ Monument - Construct (Jordan) $10,500 $25,323 $10,500 $12,222 $ Monument - Rebuild $6,750 $9,599 $4,050 $4,714 $ Mailboxes - Replace $7,000 $9,955 $4,200 $4,889 $ Trex Fencing - Replace $32,500 $93,470 $1,300 $1,513 $ Stone Columns - Repair $8,100 $9,243 $6,480 $7,543 $ Split Rail Fence - Partial Replacement $14,338 $14,983 $11,470 $13,351 $ Irrigation System $27,500 $34,270 $13,750 $16,005 $ Irrigation Timeclocks - Replace (2010) $4,125 $6,130 $413 $480 $ Irrigation Timeclocks - Replace (2011) $3,750 $5,824 $3,750 $4,365 $ Irrigation Timeclocks - Replace (2012) $3,750 $3,919 $3,375 $3,929 $ Irrigation Timeclocks - Replace (2013) $4,125 $4,505 $3,300 $3,841 $ Irrigation Timeclocks - Replace (2014) $4,125 $4,707 $2,888 $3,361 $ Grounds Improvements (2011) $5,750 $21,536 $5,750 $6,693 $ Landscape Improvements $5,000 $5,225 $3,333 $3,880 $ Ideal 8

15 Yearly Cash Flow For Sanctuary on the Park HOA Year Starting Balance $187,868 $190,537 $198,061 $227,046 $248,700 Reserve Income $24,600 $25,830 $27,122 $28,478 $29,901 Interest Earnings $5,669 $5,821 $6,368 $7,127 $7,791 Special Assessments $0 $0 $0 $0 $0 Funds Available $218,137 $222,188 $231,551 $262,651 $286,392 Reserve Expenditures $27,600 $24,126 $4,505 $13,951 $15,026 Ending Balance $190,537 $198,061 $227,046 $248,700 $271,366 Year Starting Balance $271,366 $276,703 $299,632 $309,348 $324,831 Reserve Income $31,397 $32,966 $34,615 $36,345 $38,163 Interest Earnings $8,210 $8,634 $9,123 $9,500 $10,367 Special Assessments $0 $0 $0 $0 $0 Funds Available $310,973 $318,303 $343,369 $355,193 $373,361 Reserve Expenditures $34,270 $18,671 $34,022 $30,362 $6,130 Ending Balance $276,703 $299,632 $309,348 $324,831 $367,231 Year Starting Balance $367,231 $405,286 $162,391 $191,994 $228,509 Reserve Income $40,071 $42,074 $44,178 $46,387 $48,706 Interest Earnings $11,572 $8,504 $5,309 $6,299 $7,691 Special Assessments $0 $0 $0 $0 $0 Funds Available $418,874 $455,864 $211,878 $244,680 $284,906 Reserve Expenditures $13,588 $293,473 $19,884 $16,171 $0 Ending Balance $405,286 $162,391 $191,994 $228,509 $284,906 Year Starting Balance $284,906 $291,462 $299,536 $322,977 $374,744 Reserve Income $51,142 $53,699 $56,384 $59,203 $62,163 Interest Earnings $8,634 $8,853 $9,325 $10,452 $12,023 Special Assessments $0 $0 $0 $0 $0 Funds Available $344,682 $354,014 $365,245 $392,632 $448,930 Reserve Expenditures $53,220 $54,478 $42,268 $17,889 $21,059 Ending Balance $291,462 $299,536 $322,977 $374,744 $427,871 Year Starting Balance $427,871 $453,651 $490,748 $554,333 $636,377 Reserve Income $65,271 $68,535 $71,961 $75,559 $79,337 Interest Earnings $13,205 $14,147 $15,655 $17,837 $18,809 Special Assessments $0 $0 $0 $0 $0 Funds Available $506,347 $536,333 $578,365 $647,730 $734,523 Reserve Expenditures $52,696 $45,585 $24,032 $11,353 $115,328 Ending Balance $453,651 $490,748 $554,333 $636,377 $619,195 Year Starting Balance $619,195 $623,437 $685,485 $732,936 $761,384 Reserve Income $83,304 $87,470 $91,843 $96,435 $101,257 Interest Earnings $18,615 $19,608 $21,248 $22,385 $24,473 Special Assessments $0 $0 $0 $0 $0 Funds Available $721,114 $730,515 $798,577 $851,757 $887,114 Reserve Expenditures $97,677 $45,029 $65,640 $90,373 $14,784 Ending Balance $623,437 $685,485 $732,936 $761,384 $872,330 9

16 Yearly Expenditures Graph For Sanctuary on the Park HOA Reserve Expenditures $300,000 $250,000 $200,000 ual Totals $150,000 Ann $100,000 $50,000 $ Year 10

17 Projected Reserve Expenditures For Sanctuary on the Park HOA Year Asset ID Asset Name Projected Cost Asphalt - Seal Coat/crack fill $7, Monument - Construct (Jordan) $10, Irrigation Timeclocks - Replace (2011) $3,750 Total Per Annum 1801 Grounds Improvements (2011) $5,750 $27, Split Rail Fence - Partial Replacement $14, Irrigation Timeclocks - Replace (2012) $3, Landscape Improvements $5,225 $24, Irrigation Timeclocks - Replace (2013) $4,505 $4, Stone Columns - Repair $9, Irrigation Timeclocks - Replace (2014) $4,707 $13, Asphalt - Seal Coat/crack fill $9, Landscape Improvements $5,963 $15, Irrigation System $34,270 $34, Split Rail Fence - Partial Replacement $18,671 $18, Drain Swales/Border - Repair $27, Landscape Improvements $6,804 $34, Asphalt - Seal Coat/crack fill $10, Monument - Rebuild $9, Mailboxes - Replace $9,955 $30, Irrigation Timeclocks - Replace (2010) $6,130 $6, Irrigation Timeclocks - Replace (2011) $5, Landscape Improvements $7,765 $13, Asphalt - Overlay $264, Split Rail Fence - Partial Replacement $23, Irrigation Timeclocks - Replace (2012) $6,086 $293, Asphalt - Seal Coat/crack fill $12, Irrigation Timeclocks - Replace (2013) $6,996 $19, Irrigation Timeclocks - Replace (2014) $7, Landscape Improvements $8,861 $16, No Expenditures Projected $ Irrigation System $53,220 $53, Asphalt - Seal Coat/crack fill $15, Split Rail Fence - Partial Replacement $28, Landscape Improvements $10,112 $54, Drain Swales/Border - Repair $42,268 $42, Stone Columns - Repair $17,889 $17, Irrigation Timeclocks - Replace (2010) $9, Landscape Improvements $11,539 $21, Asphalt - Seal Coat/crack fill $18, Monument - Construct (Jordan) $25, Irrigation Timeclocks - Replace (2011) $9,044 $52, Split Rail Fence - Partial Replacement $36, Irrigation Timeclocks - Replace (2012) $9,451 $45, Irrigation Timeclocks - Replace (2013) $10, Landscape Improvements $13,168 $24, Irrigation Timeclocks - Replace (2014) $11,353 $11, Asphalt - Seal Coat/crack fill $21, Trex Fencing - Replace $93,470 $115, Irrigation System $82, Landscape Improvements $15,027 $97, Split Rail Fence - Partial Replacement $45,029 $45, Drain Swales/Border - Repair $65,640 $65, Asphalt - Seal Coat/crack fill $26,066 11

18 Year Asset ID Asset Name Projected Cost Total Per Annum 801 Monument - Rebuild $23, Mailboxes - Replace $24, Landscape Improvements $17,148 $90, Irrigation Timeclocks - Replace (2010) $14,784 $14, Irrigation Timeclocks - Replace (2011) $14, Grounds Improvements (2011) $21,536 $35,581 12

19 Glossary of Commonly used Words and Phrases (provided by the National Reserve Study Standards of the Community Associations Institute) Asset or Component Individual line items in the Reserve Study, developed or updated in the Physical Analysis. These elements form the building blocks for the Reserve Study. Components typically are: 1) Association Responsibility, 2) with limited Useful Life expectancies, 3) have predictable Remaining Life expectancies, 4) above a minimum threshold cost, and 5) required by local codes. Cash Flow Method A method of developing a Reserve Funding Plan where contributions to the Reserve fund are designed to offset the variable annual expenditures from the Reserve fund. Different Reserve Funding Plans are tested against the anticipated schedule of Reserve expenses until the desired Funding Goal is achieved. Component Inventory The task of selecting and quantifying Reserve Components. This task can be accomplished through on-site visual observations, review of association design and organizational documents, a review of established association precedents, and discussion with appropriate association representatives. Deficit An actual (or projected) Reserve Balance, which is less than the Fully Funded Balance. Effective Age The difference between Useful Life and Remaining Useful Life. Not always equivalent to chronological age, since some components age irregularly. Used primarily in computations. Financial Analysis The portion of the Reserve Study where current status of the Reserves (Measured as cash or Percent Funded) and a recommended Reserve contribution rate (Reserve Funding Plan) are derived, and the projected Reserve income and expense over time is presented. The Financial Analysis is one of the two parts of the Reserve Study. Component Full Funding When the actual (or projected) cumulative Reserve balance for all components is equal to the Fully Funded Balance. Fully Fund Balance (aka Ideal Balance) An indicator against which Actual (or projected) Reserve Balance can be compared. The Reserve balance that is in direct proportion to the fraction of life used up of the current Repair or Replacement cost. This number is calculated for each component, and then summed together for an association total. FFB = Replacement Cost X Effective Age / Useful Life Fund Status The status of the Reserve Fund as compared to an established benchmark, such as percent funding. Funding Goals Independent of methodology utilized, the following represent the basic categories of Funding Plan Goals. Baseline Funding: Establishing a Reserve funding goal of keeping the Reserve Balance above zero. Component Full Funding: Setting a Reserve funding goal of attaining and maintaining cumulative Reserves at or near 100% funded. Threshold Funding: Establishing a Reserve funding goal of keeping the Reserve balance above a specified dollar or Percent Funded amount. Depending on the threshold, this may be more or less conservative than the Component Fully Funding method. 1

20 Funding Plan An associations plan to provide income to a Reserve fund to offset anticipated expenditures from that fund. Funding Principles Sufficient Funds When Required Stable Contribution Rate over the Years Evenly Distributed Contributions over the Years Fiscally Responsible Life and Valuation Estimates The task of estimating Useful Life, Remaining Useful Life, and Repair or Replacement Costs for the Reserve components. Percent Funded The ratio, at a particular point of time (typically the beginning of the Fiscal Year), of the actual (or projected) Reserve Balance to the accrued Fund Balance, expressed as a percentage. Physical Analysis The portion of the Reserve Study where the Component Inventory, Condition Assessment, and Life and Valuation Estimate tasks are performed. This represents one of the two parts of the Reserve Study. Remaining Useful Life (RUL) Also referred to as Remaining Life (RL). The estimated time, in years, that a reserve component can be expected to continue to serve its intended function. Projects anticipated to occur in the initial year have 0 Remaining Useful Life. Replacement Cost The cost of replacing, repairing, or restoring a Reserve Component to its original functional condition. The Current Replacement Cost would be the cost to replace, repair, or restore the component during that particular year. Reserve Balance Actual or projected funds as of a particular point in time (typically the beginning of the fiscal year) that the association has identified for use to defray the future repair or replacement of those major components in which the association is obligated to maintain. Also known as Reserves, Reserve Accounts, Cash Reserves. This is based upon information provided and is not audited. Reserve Provider An individual that prepares Reserve Studies. Also known as Aspen Reserve Specialties. Reserve Study A budget-planning tool that identifies the current status of the Reserve fund and a stable and equitable Funding Plan to offset the anticipated future major common area expenditures. The Reserve Study consists of two parts: The Physical Analysis and the Financial Analysis. Special Assessment An assessment levied on the members of an association in addition to regular assessments. Special Assessments are often regulated by governing documents or local statutes. Surplus An actual (or projected) Reserve Balance that is greater that the Fully Funded Balance. Useful Life (UL) Also known as Life Expectancy, or Depreciable Life. The estimated time, in years, that a Reserve component can be expected to serve its intended function if properly constructed and maintained in its present application or installation. 2