August 19, Raintree HOA Attn: Emily Bresina HOA Simple PO Box Denver, CO Regarding: Reserve Study Draft.

Transcription

1 August 19, 2015 Raintree HOA Attn: Emily Bresina HOA Simple PO Box Denver, CO Regarding: Reserve Study Draft Dear Emily: Please find enclosed a Draft version of the Reserve Study for Summerhill Condominium Association. This draft version is being delivered via electronic media. The final bound copy will be printed and mailed along with a compact disc containing all of the association s data upon receipt of the balance due. As you will see in the Financial Analysis section of the report, we find the current budgeted Reserve contribution ($15,481 per month in 2015) to be less than ideal in increasing the strength of the Reserve account for the long term. Therefore, we suggest increasing the Reserve contribution to $29,300 per month starting in 2016, followed by nominal annual increases of 0.50% % thereafter to help offset the effects of inflation. The client will have 45 days to review the draft and report any feedback for necessary revisions. If revisions are not requested within 90 days of delivery of the Draft Version, the report will be considered complete and final. Any changes requested after this point will be made at an additional fee to the association. Payment in full is due 45 days from the delivery date of the Draft Version. Final reports will not be released until account is paid in full, late charges are incurred for accounts past 90 days of draft delivery at the rate of $25.00 for every 30 days past due. In the meantime, if you have any questions, please feel free to give our office a call (303) Sincerely, Matthew Woytek, RS, PRA Senior Project Manager P.O. Box 1762 Castle Rock, CO Phone (303) Fax (303)

2 Raintree HOA Denver, CO Level 1, Limited Reserve Analysis Report Period 01/01/15 12/31/15 Client Reference Number Property Type Condominiums Number of Units 268 Fiscal Year End December 31 Draft Version Date of Property Observation - July 30, 2015 Project Manager - Ryan Morita Main Contact Person - Ms. Emily Bresina, Community Manager Report was prepared on - Wednesday, August 19, 2015 P.O. Box 1762 Castle Rock, CO Phone (303) Fax (303)

3 Table of Contents SECTION 1: SECTION 2: SECTION 3: Introduction to Reserve Analysis... page 1 General Information and Answers to FAQ s... page 2-3 Summary of Reserve Analysis... page 4 Physical Analysis (Photographic)... page 1-41 Financial Analysis a) Funding Summary... page 1 b) Percent Funded Graph... page 2 c) Asset 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 SECTION 4: Glossary of Terms and Definitions... page 1-2

4 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 typically in the Asset Inventory Section of the original Reserve Analysis. It should be noted there is not an Asset Inventory Section in this report due to the product requested by the client. 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 2 (pages 1 12) 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 observation. 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 not been investigated in the preparation of 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 judgment of Aspen Reserve Specialties and should not be construed as a guarantee or assurance of predicting future events. 1

5 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 normal maintenance and replacement 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 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. Aging 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 observation should be conducted at least once every three years. Is it the law to have a Reserve Study conducted? The Government requires reserve analyses in approximately 20 states. The State of Colorado currently requires all associations to adopt a Reserve policy, but does not currently enforce a Reserve Study is completed. Despite enacting this current law, the chances are also very good the documents of the association require the association to have a Reserve fund established. This may not mean a Reserve Analysis is required, but how are you going to know there are enough funds in the account if you don t have the proper information? Hypothetically, some associations look at the Reserve fund and think $100,000 is a lot of money and they are in good shape. What they don t know is a major component will need to be replaced within 5 years, and the cost of the project is going to exceed $125,000. So while $100,000 sounds like a lot of money, in reality it won t even cover the cost of the component, let alone all the other amenities the association is responsible to maintain. 2

6 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 Observation The Property Observation was conducted following a review of the documents that were established by the developer identifying all common area assets. In some cases, the Board of Directors at some point may have revised the documents. In either case, the most current set of documents was reviewed prior to evaluating the property. In addition, common area assets may have been reported to Aspen Reserve Specialties by the client, or by other parties. Estimated life expectancies and life cycles are based upon conditions that were readily accessible and visible at the time of the observation. We did not destroy any landscape work, building walls, or perform any methods of intrusive investigation during the observation. In these cases, information may have been obtained by contacting the contractor or vendor that has worked on the property. 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

7 Summary of Raintree HOA Assoc. ID # Projected Starting Balance as of January 1, $139,391 Ideal Reserve Balance as of January 1, $1,784,214 Percent Funded as of January 1, % Recommended Reserve Allocation (per month) - $29,300 (starting 2016) Minimum Reserve Allocation (per month) - $27,325 (starting 2016) Recommended Special Assessment for $696,800 ($2,600 per unit) This report is an update to an existing Reserve Study Report that was prepared six years ago for the 2008 fiscal period. A property site observation was conducted on July 30, 2015 to verify conditions and update information in the previous report. 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 268 units within 67 residential buildings as well as a pool, cabana, (2) tennis courts, (3) mail kiosks, landscaping, and an irrigation system. For purposes of this report, we are using 1974 as an average construction date for the common area assets. Recently completed Reserve projects include siding on 45 of the 67 residential buildings. It was reported by the property manager and verified that there are plans in place to replace the tennis courts with a landscaped and irrigated area in These items are captured in components #1201 Tennis Courts Removal and #1802 Tennis Courts Major Landscaping and Irrigation. Please refer to the Projected Reserve Expenditures table of the financial analysis section of the report for a detailed list of components that will need to be addressed in the near future. In comparing the projected balance of $139,391 versus the ideal Reserve Balance of $1,784,214, we find the association Reserve fund to be in a weak financial position at this time (approximately 8% funded of ideal). Based on the information contained in this report, we find no alternative but to recommend a special assessment for the 2016 fiscal year in the amount of $696,800 ($2,600 per unit). In addition, we find the current budgeted Reserve contribution ($15,481 per month in 2015) to be less than ideal in increasing the strength of the Reserve account for the long term. Therefore, we suggest increasing the Reserve contribution to $29,300 per month starting in 2016, followed by nominal annual increases of 0.50% % thereafter to help offset the effects of inflation. By following the recommendation, the plan will maintain the Reserve account in a positive manner, while gradually increasing to a fully funded position within the thirty-year period. In the percent Funded graph, you will see that we have also suggested a minimum Reserve contribution of $27,325 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 likely 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 $7.37 in this case) to the Reserve fund to only stay above a certain threshold. 4

8 Funding Summary For Raintree HOA Beginning Assumptions Financial Information Source Research With Client # of units 268 Fiscal Year End December 31, 2016 Monthly Dues from 2015 budget $52, Monthly Reserve Allocation from 2015 Budget $15, Projected Starting Reserve Balance (as of 1/1/2016) $139,391 Reserve Balance: Average Per Unit $520 Ideal Starting Reserve Balance (as of 1/1/2016) $1,784,214 Ideal Reserve Balance: Average Per Unit $6,658 Economic Factors Past 20 year Average Inflation Rate (Based on CCI) 3.50% Current Average Interest Rate 1.00% Current Reserve Status Current Balance as a % of Ideal Balance 8% Recommendations for 2016 Fiscal Year Monthly Reserve Allocation $29,300 Per Unit $ Minimum Monthly Reserve Allocation $27,325 Per Unit $ Primary Annual Increases 0.50% # of Years 12 Primary Annual Increases 3.50% # of Years 18 Special Assessment $696,800 Per Unit $2,600 Changes From Prior Year (2015 to 2016) Increase/Decrease to Reserve Allocation $13,819 as Percentage 89% Per Unit $

9 Percent Funded Graph For Raintree HOA Percent Funded Recommended Monthly Reserve Allocation from 2015 Budget Minimum 120% 100% % Level of Funding 80% 60% 40% 20% 0% Year 2

10 Component Inventory for Raintree HOA Category Asset # Asset Name UL RUL Best Cost Worst Cost Roofing 105 Comp Shingle Roof - Replace (1) 20 0 $148,000 $166, Comp Shingle Roof - Replace (2) 20 6 $861,200 $968, Wood Shake Roof - Replace 20 0 $6,050 $6, Gutters/Downspouts - Replace (1) 20 0 $12,760 $14, Gutters/Downspouts - Replace (2) 20 6 $74,025 $84,600 Painted Surfaces 204 Building Ext Surfaces - Repaint (1) 5 4 $198,000 $225, Building Ext Surfaces - Repaint (2) 5 5 $48,400 $55, Building Ext Surfaces - Repaint (3) 5 6 $48,400 $55, Iron Fencing - Repaint 6 0 $1,225 $1, Wood Fencing - Restain 5 0 $5,670 $6,300 Siding Materials 301 Fiber Cement Siding - Major Repairs (1) 10 9 $63,000 $76, Fiber Cement Siding - Major Repairs (2) $15,400 $18, Fiber Cement Siding - Major Repairs (3) $15,400 $18, Fiber Cement Siding - Replace (1) 99 0 $145,250 $145, Fiber Cement Siding - Replace (2) 99 1 $145,250 $145,250 Drive Materials 401 Asphalt - Major Overlay 25 0 $222,415 $285, Asphalt - Surface Application 5 0 $74,140 $84, Drive Concrete - Replacement Allowance 5 0 $11,035 $12,010 Property Access 502 Garage Doors - Replacement Allowance 5 4 $28,475 $33, Garage Access Doors - Replacement All 5 4 $10,890 $12,565 Decking 601 Concrete Flatwork - Replacement Allowa 5 0 $25,440 $27, Wood Balconies - Replacement Allowanc 5 4 $26,380 $31,405 Mechanical Equip. 703 Water Heater - Replace 12 0 $2,000 $2, HVAC Furnace - Replace 25 0 $2,500 $2,750 Prop. Identification 801 Monument/Signage - Repair/Replace 18 4 $11,250 $12, Mailboxes - Replace 20 4 $21,450 $24,700 Fencing/Walls 1001 Wood Fencing - Replace 15 0 $41,580 $47, Ironwork Fencing - Replace $7,875 $8, Split Rail Fencing - Replace 18 2 $2,660 $3,230 Pool/Spa 1101 Pool - Resurface/Coping/Tile 10 8 $24,675 $27, Pool Heater - Replace 10 2 $5,000 $6, Pool Filter - Replace 20 7 $2,400 $3, Pool Pump - Replace N/A $0 $ Pool Cover - Replace $4,810 $5,550 Courts 1201 Tennis Courts - Removal 99 1 $31,500 $34,500 Interiors 1413 Restroom - Remodel $9,000 $10,000 Light Fixtures 1604 Pole Lights - Replace 18 2 $2,750 $3,025 Irrig. System 1701 Irrigation System - Major Repairs 3 2 $27,360 $30, Irrigation Controllers - Replace 12 2 $7,200 $9,000 Landscaping 1801 Landscaping - Replenish 3 2 $27,360 $30, Tennis Courts - Major Landscaping and I 99 1 $27,950 $33,525 3

11 Significant Components For Raintree HOA Significance: Ave Curr (Curr Cost/UL) ID Asset Name UL RUL Cost As $ As % 105 Comp Shingle Roof - Replace (1) 20 0 $157,250 $7, % 106 Comp Shingle Roof - Replace (2) 20 6 $915,025 $45, % 107 Wood Shake Roof - Replace 20 0 $6,463 $ % 120 Gutters/Downspouts - Replace (1) 20 0 $13,670 $ % 121 Gutters/Downspouts - Replace (2) 20 6 $79,313 $3, % 204 Building Ext Surfaces - Repaint (1) 5 4 $211,500 $42, % 205 Building Ext Surfaces - Repaint (2) 5 5 $51,700 $10, % 206 Building Ext Surfaces - Repaint (3) 5 6 $51,700 $10, % 207 Iron Fencing - Repaint 6 0 $1,313 $ % 209 Wood Fencing - Restain 5 0 $5,985 $1, % 301 Fiber Cement Siding - Major Repairs (1) 10 9 $69,750 $6, % 302 Fiber Cement Siding - Major Repairs (2) $17,050 $1, % 303 Fiber Cement Siding - Major Repairs (3) $17,050 $1, % 304 Fiber Cement Siding - Replace (1) 99 0 $145,250 $ % 305 Fiber Cement Siding - Replace (2) 99 1 $145,250 $ % 401 Asphalt - Major Overlay 25 0 $254,190 $10, % 402 Asphalt - Surface Application 5 0 $79,435 $15, % 403 Drive Concrete - Replacement Allowance 5 0 $11,523 $2, % 502 Garage Doors - Replacement Allowance 5 4 $30,988 $6, % 503 Garage Access Doors - Replacement Allow 5 4 $11,728 $2, % 601 Concrete Flatwork - Replacement Allowance 5 0 $26,563 $5, % 607 Wood Balconies - Replacement Allowance 5 4 $28,893 $5, % 703 Water Heater - Replace 12 0 $2,125 $ % 706 HVAC Furnace - Replace 25 0 $2,625 $ % 801 Monument/Signage - Repair/Replace 18 4 $11,875 $ % 803 Mailboxes - Replace 20 4 $23,075 $1, % 1001 Wood Fencing - Replace 15 0 $44,730 $2, % 1002 Ironwork Fencing - Replace $8,138 $ % 1009 Split Rail Fencing - Replace 18 2 $2,945 $ % 1101 Pool - Resurface/Coping/Tile 10 8 $26,225 $2, % 1105 Pool Heater - Replace 10 2 $5,500 $ % 1108 Pool Filter - Replace 20 7 $2,700 $ % 1113 Pool Cover - Replace $5,180 $ % 1201 Tennis Courts - Removal 99 1 $33,000 $ % 1413 Restroom - Remodel $9,500 $ % 1604 Pole Lights - Replace 18 2 $2,888 $ % 1701 Irrigation System - Major Repairs 3 2 $28,800 $9, % 1703 Irrigation Controllers - Replace 12 2 $8,100 $ % 1801 Landscaping - Replenish 3 2 $28,800 $9, % 1802 Tennis Courts - Major Landscaping and Irrig 99 1 $30,738 $ % 4

12 Significant Components Graph For Raintree HOA 106 Comp Shingle Roof - Replace (2) 204 Building Ext Surfaces - Repaint (1) 402 Asphalt - Surface Application 205 Building Ext Surfaces - Repaint (2) All Other 46% 7% 22% 20% 5% Significance: (Curr Cost/UL) Asset ID Asset Name UL RUL Average Curr. Cost As $ As % 106 Comp Shingle Roof - Replace (2) 20 6 $915,025 $45,751 22% 204 Building Ext Surfaces - Repaint (1) 5 4 $211,500 $42,300 20% 402 Asphalt - Surface Application 5 0 $79,435 $15,887 8% 205 Building Ext Surfaces - Repaint (2) 5 5 $51,700 $10,340 5% All Other See Expanded Table on Page 4 For Additional Breakdown $96,896 46% 5

13 Yearly Summary For Raintree HOA Fiscal Fully Funded Starting Reserve Percent Annual Reserve Rec. Special Interest Reserve Year Start Balance Balance Funded Contribs Ass'mnt Income Expenses 2016 $1,784,214 $139,391 8% $351,600 $696,800 $6,394 $751, $1,290,003 $443,065 34% $353,358 $0 $5,139 $216, $1,337,496 $585,260 44% $355,125 $0 $7,249 $82, $1,533,034 $865,114 56% $356,900 $0 $10,484 $ $1,829,018 $1,232,498 67% $358,685 $0 $12,350 $364, $1,766,091 $1,238,555 70% $360,478 $0 $12,864 $276, $1,801,315 $1,335,398 74% $362,281 $0 $8,768 $1,287, $800,512 $418,987 52% $364,092 $0 $6,021 $3, $1,103,051 $785,664 71% $365,913 $0 $9,176 $110, $1,315,222 $1,050,372 80% $367,742 $0 $9,984 $480, $1,161,397 $947,189 82% $369,581 $0 $9,915 $289, $1,210,225 $1,036,705 86% $371,429 $0 $11,354 $184, $1,380,759 $1,235,020 89% $373,286 $0 $14,214 $13, $1,745,376 $1,609,015 92% $386,351 $0 $18,105 $ $2,148,291 $2,013,471 94% $399,873 $0 $19,323 $579, $1,976,982 $1,852,676 94% $413,869 $0 $18,840 $368, $2,030,986 $1,916,917 94% $428,354 $0 $20,959 $89, $2,388,276 $2,276,583 95% $443,347 $0 $24,578 $103, $2,757,129 $2,641,134 96% $458,864 $0 $28,581 $51, $3,206,671 $3,077,428 96% $474,924 $0 $29,894 $678, $3,036,986 $2,903,877 96% $491,546 $0 $27,313 $861, $2,686,302 $2,561,018 95% $508,750 $0 $27,572 $141, $3,083,902 $2,955,754 96% $526,557 $0 $32,097 $48, $3,607,955 $3,466,332 96% $544,986 $0 $36,922 $127, $4,276,157 $3,921,167 92% $564,061 $0 $38,674 $706, $3,995,216 $3,816,938 96% $583,803 $0 $36,149 $1,020, $3,594,869 $3,415,921 95% $604,236 $0 $23,692 $2,719, $1,440,855 $1,324,585 92% $625,384 $0 $16,414 $6, $2,037,524 $1,959,548 96% $647,273 $0 $22,592 $68, $2,610,398 $2,560,698 98% $669,927 $0 $23,499 $1,113,111 6

14 Reserve Contributions For Raintree HOA Reserve Contributions Recommended Current Minimum $70,000 $60,000 $50,000 Monthly Contribution $40,000 $30,000 $20,000 $10,000 $ Year 7

15 Component Funding Information For Raintree HOA Ave Current Current Fund ID Component Name Cost Balance Balance Monthly 105 Comp Shingle Roof - Replace (1) $157,250 $157,250 $139,391 $1, Comp Shingle Roof - Replace (2) $915,025 $640,518 $0 $6, Wood Shake Roof - Replace $6,463 $6,463 $0 $ Gutters/Downspouts - Replace (1) $13,670 $13,670 $0 $ Gutters/Downspouts - Replace (2) $79,313 $55,519 $0 $ Building Ext Surfaces - Repaint (1) $211,500 $42,300 $0 $5, Building Ext Surfaces - Repaint (2) $51,700 $0 $0 $1, Building Ext Surfaces - Repaint (3) $51,700 $0 $0 $1, Iron Fencing - Repaint $1,313 $1,313 $0 $ Wood Fencing - Restain $5,985 $5,985 $0 $ Fiber Cement Siding - Major Repairs (1) $69,750 $6,975 $0 $ Fiber Cement Siding - Major Repairs (2) $17,050 $0 $0 $ Fiber Cement Siding - Major Repairs (3) $17,050 $0 $0 $ Fiber Cement Siding - Replace (1) $145,250 $145,250 $0 $ Fiber Cement Siding - Replace (2) $145,250 $143,783 $0 $ Asphalt - Major Overlay $254,190 $254,190 $0 $1, Asphalt - Surface Application $79,435 $79,435 $0 $2, Drive Concrete - Replacement Allowance $11,523 $11,523 $0 $ Garage Doors - Replacement Allowance $30,988 $6,198 $0 $ Garage Access Doors - Replacement Allowance$11,728 $2,346 $0 $ Concrete Flatwork - Replacement Allowance $26,563 $26,563 $0 $ Wood Balconies - Replacement Allowance $28,893 $5,779 $0 $ Water Heater - Replace $2,125 $2,125 $0 $ HVAC Furnace - Replace $2,625 $2,625 $0 $ Monument/Signage - Repair/Replace $11,875 $9,236 $0 $ Mailboxes - Replace $23,075 $18,460 $0 $ Wood Fencing - Replace $44,730 $44,730 $0 $ Ironwork Fencing - Replace $8,138 $5,425 $0 $ Split Rail Fencing - Replace $2,945 $2,618 $0 $ Pool - Resurface/Coping/Tile $26,225 $5,245 $0 $ Pool Heater - Replace $5,500 $4,400 $0 $ Pool Filter - Replace $2,700 $1,755 $0 $ Pool Cover - Replace $5,180 $863 $0 $ Tennis Courts - Removal $33,000 $32,667 $0 $ Restroom - Remodel $9,500 $2,111 $0 $ Pole Lights - Replace $2,888 $2,567 $0 $ Irrigation System - Major Repairs $28,800 $9,600 $0 $1, Irrigation Controllers - Replace $8,100 $6,750 $0 $ Landscaping - Replenish $28,800 $9,600 $0 $1, Tennis Courts - Major Landscaping and Irrigation$30,738 $30,427 $0 $0.00 Ideal 8

16 Yearly Cash Flow For Raintree HOA Year Starting Balance $139,391 $443,065 $585,260 $865,114 $1,232,498 Reserve Income $351,600 $353,358 $355,125 $356,900 $358,685 Interest Earnings $6,394 $5,139 $7,249 $10,484 $12,350 Special Assessments $696,800 $0 $0 $0 $0 Funds Available $1,194,185 $801,562 $947,634 $1,232,498 $1,603,533 Reserve Expenditures $751,120 $216,302 $82,519 $0 $364,978 Ending Balance $443,065 $585,260 $865,114 $1,232,498 $1,238,555 Year Starting Balance $1,238,555 $1,335,398 $418,987 $785,664 $1,050,372 Reserve Income $360,478 $362,281 $364,092 $365,913 $367,742 Interest Earnings $12,864 $8,768 $6,021 $9,176 $9,984 Special Assessments $0 $0 $0 $0 $0 Funds Available $1,611,898 $1,706,447 $789,100 $1,160,753 $1,428,097 Reserve Expenditures $276,499 $1,287,461 $3,435 $110,382 $480,909 Ending Balance $1,335,398 $418,987 $785,664 $1,050,372 $947,189 Year Starting Balance $947,189 $1,036,705 $1,235,020 $1,609,015 $2,013,471 Reserve Income $369,581 $371,429 $373,286 $386,351 $399,873 Interest Earnings $9,915 $11,354 $14,214 $18,105 $19,323 Special Assessments $0 $0 $0 $0 $0 Funds Available $1,326,685 $1,419,487 $1,622,520 $2,013,471 $2,432,666 Reserve Expenditures $289,980 $184,467 $13,505 $0 $579,990 Ending Balance $1,036,705 $1,235,020 $1,609,015 $2,013,471 $1,852,676 Year Starting Balance $1,852,676 $1,916,917 $2,276,583 $2,641,134 $3,077,428 Reserve Income $413,869 $428,354 $443,347 $458,864 $474,924 Interest Earnings $18,840 $20,959 $24,578 $28,581 $29,894 Special Assessments $0 $0 $0 $0 $0 Funds Available $2,285,385 $2,366,230 $2,744,507 $3,128,578 $3,582,246 Reserve Expenditures $368,468 $89,647 $103,373 $51,151 $678,369 Ending Balance $1,916,917 $2,276,583 $2,641,134 $3,077,428 $2,903,877 Year Starting Balance $2,903,877 $2,561,018 $2,955,754 $3,466,332 $3,921,167 Reserve Income $491,546 $508,750 $526,557 $544,986 $564,061 Interest Earnings $27,313 $27,572 $32,097 $36,922 $38,674 Special Assessments $0 $0 $0 $0 $0 Funds Available $3,422,736 $3,097,340 $3,514,408 $4,048,240 $4,523,902 Reserve Expenditures $861,718 $141,586 $48,076 $127,072 $706,964 Ending Balance $2,561,018 $2,955,754 $3,466,332 $3,921,167 $3,816,938 Year Starting Balance $3,816,938 $3,415,921 $1,324,585 $1,959,548 $2,560,698 Reserve Income $583,803 $604,236 $625,384 $647,273 $669,927 Interest Earnings $36,149 $23,692 $16,414 $22,592 $23,499 Special Assessments $0 $0 $0 $0 $0 Funds Available $4,436,890 $4,043,849 $1,966,383 $2,629,412 $3,254,123 Reserve Expenditures $1,020,969 $2,719,264 $6,835 $68,714 $1,113,111 Ending Balance $3,415,921 $1,324,585 $1,959,548 $2,560,698 $2,141,013 9

17 Yearly Expenditures Graph For Raintree HOA Reserve Expenditures $3,000,000 $2,500,000 $2,000,000 Annual Totals $1,500,000 $1,000,000 $500,000 $ Year

18 Projected Reserve Expenditures For Raintree HOA Year Asset ID Asset Name Projected Cost Comp Shingle Roof - Replace (1) $157, Wood Shake Roof - Replace $6, Gutters/Downspouts - Replace (1) $13, Iron Fencing - Repaint $1, Wood Fencing - Restain $5, Fiber Cement Siding - Replace (1) $145, Asphalt - Major Overlay $254, Asphalt - Surface Application $79, Drive Concrete - Replacement Allowance $11, Concrete Flatwork - Replacement Allowance $26, Water Heater - Replace $2, HVAC Furnace - Replace $2,625 Total Per Annum 1001 Wood Fencing - Replace $44,730 $751, Fiber Cement Siding - Replace (2) $150, Tennis Courts - Removal $34, Tennis Courts - Major Landscaping and Irrigati $31,813 $216, Split Rail Fencing - Replace $3, Pool Heater - Replace $5, Pole Lights - Replace $3, Irrigation System - Major Repairs $30, Irrigation Controllers - Replace $8, Landscaping - Replenish $30,851 $82, No Expenditures Projected $ Building Ext Surfaces - Repaint (1) $242, Garage Doors - Replacement Allowance $35, Garage Access Doors - Replacement Allowanc$13, Wood Balconies - Replacement Allowance $33, Monument/Signage - Repair/Replace $13, Mailboxes - Replace $26,479 $364, Building Ext Surfaces - Repaint (2) $61, Wood Fencing - Restain $7, Asphalt - Surface Application $94, Drive Concrete - Replacement Allowance $13, Concrete Flatwork - Replacement Allowance $31, Irrigation System - Major Repairs $34, Landscaping - Replenish $34,205 $276, Comp Shingle Roof - Replace (2) $1,124, Gutters/Downspouts - Replace (2) $97, Building Ext Surfaces - Repaint (3) $63, Iron Fencing - Repaint $1,613 $1,287, Pool Filter - Replace $3,435 $3, Pool - Resurface/Coping/Tile $34, Irrigation System - Major Repairs $37, Landscaping - Replenish $37,924 $110, Building Ext Surfaces - Repaint (1) $288, Fiber Cement Siding - Major Repairs (1) $95, Garage Doors - Replacement Allowance $42, Garage Access Doors - Replacement Allowanc$15, Wood Balconies - Replacement Allowance $39,378 $480, Building Ext Surfaces - Repaint (2) $72, Wood Fencing - Restain $8, Fiber Cement Siding - Major Repairs (2) $24, Asphalt - Surface Application $112,051 11

19 Year Asset ID Asset Name Projected Cost Total Per Annum 403 Drive Concrete - Replacement Allowance $16, Concrete Flatwork - Replacement Allowance $37, Ironwork Fencing - Replace $11, Pool Cover - Replace $7,307 $289, Building Ext Surfaces - Repaint (3) $75, Fiber Cement Siding - Major Repairs (3) $24, Irrigation System - Major Repairs $42, Landscaping - Replenish $42,047 $184, Iron Fencing - Repaint $1, Water Heater - Replace $3, Pool Heater - Replace $8,311 $13, No Expenditures Projected $ Building Ext Surfaces - Repaint (1) $342, Garage Doors - Replacement Allowance $50, Garage Access Doors - Replacement Allowanc$18, Wood Balconies - Replacement Allowance $46, Restroom - Remodel $15, Irrigation System - Major Repairs $46, Irrigation Controllers - Replace $13, Landscaping - Replenish $46,618 $579, Building Ext Surfaces - Repaint (2) $86, Wood Fencing - Restain $10, Asphalt - Surface Application $133, Drive Concrete - Replacement Allowance $19, Concrete Flatwork - Replacement Allowance $44, Wood Fencing - Replace $74,938 $368, Building Ext Surfaces - Repaint (3) $89,647 $89, Irrigation System - Major Repairs $51, Landscaping - Replenish $51,687 $103, Iron Fencing - Repaint $2, Pool - Resurface/Coping/Tile $48,713 $51, Building Ext Surfaces - Repaint (1) $406, Fiber Cement Siding - Major Repairs (1) $134, Garage Doors - Replacement Allowance $59, Garage Access Doors - Replacement Allowanc$22, Wood Balconies - Replacement Allowance $55,546 $678, Comp Shingle Roof - Replace (1) $312, Wood Shake Roof - Replace $12, Gutters/Downspouts - Replace (1) $27, Building Ext Surfaces - Repaint (2) $102, Wood Fencing - Restain $11, Fiber Cement Siding - Major Repairs (2) $33, Asphalt - Surface Application $158, Drive Concrete - Replacement Allowance $22, Concrete Flatwork - Replacement Allowance $52, Split Rail Fencing - Replace $5, Pole Lights - Replace $5, Irrigation System - Major Repairs $57, Landscaping - Replenish $57,306 $861, Building Ext Surfaces - Repaint (3) $106, Fiber Cement Siding - Major Repairs (3) $35,113 $141, Monument/Signage - Repair/Replace $25, Pool Heater - Replace $11, Pool Cover - Replace $11,041 $48, Irrigation System - Major Repairs 12 $63,536

20 Year Asset ID Asset Name Projected Cost Total Per Annum 1801 Landscaping - Replenish $63,536 $127, Building Ext Surfaces - Repaint (1) $482, Iron Fencing - Repaint $2, Garage Doors - Replacement Allowance $70, Garage Access Doors - Replacement Allowanc$26, Wood Balconies - Replacement Allowance $65, Water Heater - Replace $4, Mailboxes - Replace $52,688 $706, Building Ext Surfaces - Repaint (2) $122, Wood Fencing - Restain $14, Asphalt - Major Overlay $600, Asphalt - Surface Application $187, Drive Concrete - Replacement Allowance $27, Concrete Flatwork - Replacement Allowance $62, HVAC Furnace - Replace $6,204 $1,020, Comp Shingle Roof - Replace (2) $2,238, Gutters/Downspouts - Replace (2) $193, Building Ext Surfaces - Repaint (3) $126, Irrigation System - Major Repairs $70, Irrigation Controllers - Replace $19, Landscaping - Replenish $70,444 $2,719, Pool Filter - Replace $6,835 $6, Pool - Resurface/Coping/Tile $68,714 $68, Building Ext Surfaces - Repaint (1) $573, Fiber Cement Siding - Major Repairs (1) $189, Garage Doors - Replacement Allowance $84, Garage Access Doors - Replacement Allowanc$31, Wood Balconies - Replacement Allowance $78, Irrigation System - Major Repairs $78, Landscaping - Replenish $78,102 $1,113, Building Ext Surfaces - Repaint (2) $145, Iron Fencing - Repaint $3, Wood Fencing - Restain $16, Fiber Cement Siding - Major Repairs (2) $47, Asphalt - Surface Application $222, Drive Concrete - Replacement Allowance $32, Concrete Flatwork - Replacement Allowance $74, Wood Fencing - Replace $125,548 $668,852 13

21 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

22 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