Parkwood HOA. Level 1 Reserve Study. Report Period 1/1/ /31/2012. Date of Property Inspection. Report prepared on Saturday, August 11, 2012

Transcription

1 Parkwood HOA Level 1 Reserve Study Report Period 1/1/ /31/2012 Client Reference Number Property Type Number of Units Fiscal Year End Townhouse 8 12/31 Date of Property Inspection Prepared By Analysis Method Funding Goal 6/7/2012 Dale Gifford Cash Flow Full Funding Report prepared on Saturday, August 11, 2012 TEL: (888) Fax: (866)

2 Table of Contents Introduction Executive Summary page 1 Introduction page 2 General Information and Frequently Asked Questions page 3-4 Reserve Analysis Funding Summary page 5 Percent Funded Graph page 6 Component Inventory page 7 Significant Components page 8 Significant Components Graph page 9 Yearly Summary page 10 Yearly Reserve Contributions Graph page 11 Component Funding Information page 12 Yearly Cash Flow page 13 Yearly Reserve Expenditures Graph page 14 Projected Reserve Expenditures by Year page Component Evaluation Component Evaluation page 1-25 Glossary of Commonly used Words and Phrases

3 Executive Summary Parkwood HOA - ID # Information to complete this Reserve Study was gathered by performing an on-site inspection of the common area elements. In addition, we also obtained information by contacting any vendors and/or contractors that have worked on the property recently, as well as communicating with the property representative (BOD Member and/or Community Manager). To the best of our knowledge, the conclusions and recommendations of this report are considered reliable and accurate insofar as the information obtained from these sources. Projected Starting Balance as of 1/1/2012 $0 Ideal Reserve Balance as of 1/1/2012 $37,854 Percent Funded as of 1/1/2012 0% Recommended Reserve Contribution (per month) $1,960 Minimum Reserve Contribution (per month) $1,810 Recommended Special Assessment $0 Parkwood HOA is an 8-unit Townhome community. The community offers the security of an entry system as well underground parking garages as amenities. Construction on the community was completed in Currently Programmed Projects There are no projects programmed to occur this fiscal year (FY2012). (See page 15) Major Reserve Expenditures The first major reserve expenditure is programmed to occur in fiscal year Projects programmed to occur in fiscal year 2016 include metal railing repaint (Comp# 207), and building exteriors repair/repaint (Comp# 217). We have programmed approximately $35,017 in reserve funds or approximately 35% of fiscal year 2016 s recommended starting balance towards the completion of these projects (see pages 10 & 15). Significant Reserve Projects The association s significant reserve projects include garage doors replace (Comp# 502), building exteriors repair/repaint (Comp# 207), boilers replace (Comp# 702), and pitched roof comp shingle replace (Comp# 105). The fiscal significance of these components is approximately 27%, 25%, 11%, and 5% respectively (see page 9). A component s significance is calculated by dividing its replacement cost by its useful life. In this way, not only is a component s replacement cost considered but also the frequency of occurrence. These components most significantly contribute to the total monthly reserve contribution. As these components have a high level of fiscal significance the association should properly maintain them to ensure they reach their full useful lives. Reserve Funding In comparing the projected starting reserve balance of $0 versus the ideal reserve balance of $37,854 we find the association s reserve fund to be approximately 0% funded. This indicates a weak reserve fund position. In order to strengthen the account fund, we suggest adopting a monthly reserve contribution of $1,960 ($245.00/unit) per month. We have also included a minimum reserve contribution of $1,810 ($226.25/unit) per month. If the contribution falls below this rate, then the reserve fund may fall into a situation where special assessments, deferred maintenance, and lower property values are likely at some point in the future. 1

4 Introduction Reserve Study Purpose The purpose of this Reserve Study is to provide an educated estimate of the necessary reserve balance and allocation. 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 time to obtain competitive estimates and bids that will result in cost savings to the individual homeowners. It 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. Preparer s Credentials Mr. Gifford has been working in the community association industry for the last 9 years. Prior to taking a position, as the Regional Project Manager covering the Utah region, at Complex Solutions, he worked in community association management in Utah. While in community association management his positions included, Maintenance Supervisor, Senior Portfolio Manager and Vice President of Community Management. His work in community association management gave him extensive experience with; budget creation, reserves and reserve budgeting, community inspections and analyzing common area components. Reserve Specialist (RS) designation from Community Associations Institute (CAI) Personally has prepared over 350 reserve studies in Salt Lake City Utah and surrounding areas Bachelor of Science in Chemistry from Emporia State University Certified Manager of Community Associations (CMCA ) designation from the National Board of Certification for Community Association Managers (NBC-CAM) Association Management Specialist (AMS ) designation from Community Associations Institute (CAI) Professional Community Association Manager (PCAM ) designation from Community Associations Institute (CAI) Active member and former Board member and chapter President of the Utah Chapter of Community Associations Institute (UCCAI) Recipient of Community Associations Institute s (CAI) annual award of Excellence In Chapter Leadership for service an achievement in 2010 Budget Breakdown Every association conducts their business within a budget. There are typically two main parts to this budget, operating and reserves. The operating budget includes all expenses that occur on an annual basis. These would include management fees, maintenance expenses, utilities, etc. The reserves are primarily made up of capital replacement items such as roofing, fencing, mechanical equipment, etc., that do not normally occur on an annual basis. Typically, the reserve contribution makes up 15% - 40% of the association s total budget. Therefore, reserves are considered to be a major part of the overall monthly association assessment. Report Sections The Reserve Analysis Section contains the evaluation of the association s reserve balance, income, and expenses. It includes a finding of the client s current reserve fund status (measured as percent funded) and a recommendation for an appropriate reserve allocation rate (also known as the funding plan). The Component Evaluation Section contains information regarding the physical status and replacement cost of major common area components 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 estimates will most likely vary from year to year. 2

5 General Information and 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 assessment. 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 and long term operations of your association. It is suggested that a third party professionally prepare the Reserve Study since there is no vested interest in the property. After we have a Reserve Study completed, 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 Study easy to read and understand. Please take the time to review it carefully and make sure the main ingredients (component 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 large portion of the total monthly assessment 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 reveal the strength of the reserve fund prior to purchasing a condominium, town home, or any property that belongs to an association. How often do we update or review the Reserve Study? 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 Study 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 Study. Therefore, this analysis should be reviewed annually, and a property inspection should be conducted at least once every three years. What is a Reserve Component versus an Operating Component? A Reserve component is an item that is the responsibility of the association to maintain, has a limited useful life (for Reserve purposes less than 30 years), predictable remaining useful life, typically occurs on a cyclical basis that exceeds 1 year, and costs above a minimum threshold amount. An Operating expense is typically a fixed expense that occurs on an annual basis as well as general repairs and maintenance. What are the GREY areas 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. What happens during the Site Visit? The Site Visit was conducted of the common areas as reported by client. From our site visit we identified those common area components that we have determined require reserve funding. Based on information provided by the client, client s vendors, and our assessment of the components we have developed a component list and life and cost estimates. Estimated life expectancies and life cycles are based upon conditions that were readily accessible and visible at the time of the inspection. We did not destroy any landscape work, building walls, or perform any methods of intrusive investigation during the inspection. In these cases, information may have been obtained by contacting the contractor or vendor that has worked on the property. We have assumed any and all components have been properly built and will reach normal, typical life expectancies. In general a reserve study is not intended to identify or fund for construction defects. We did not and will not look for or identify construction defects during our site visit. 3

6 What is the Financial Analysis? We projected the starting balance by taking the most recent balance statement, adding expected reserve contributions for the rest of the fiscal year, and subtracting any pending projects that will be paid for before the end of the current fiscal 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 generally 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 is generally considered a fair financial position. The majority of associations fall into this category. 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 is generally considered a strong financial position. This indicates financial strength of a reserve fund and every attempt to maintain this level should be a goal of the association. 100% Funded is considered an ideal financial position. This means that the association has the exact amount of funds in the reserve account. Disclosures: We will identify only those major components with a useful life of 30-years or less that generally meet industry standards for reserve funding. The projected life expectancy of the major components and the funding needs of the reserves of the association are based upon the association performing appropriate routine and preventative maintenance for each major component. Failure to perform such maintenance can negatively impact the remaining useful life of the major components and dramatically increase the funding needs of the reserves of the association. This Reserve Study assumes that all construction assemblies and components identified herein are built properly and are free from defects in materials and/or workmanship. Defects can lead to reduced useful life and premature failure. It was not the intent of this Reserve Study to inspect for or to identify defects. If defects exist, repairs should be made so that the construction components and assemblies at the community reach the full and expected useful lives. Information provided to the preparer of a reserve study by an official representative of the association regarding financial, historical, physical, quantitative or reserve project issues will be deemed reliable by the preparer. A reserve study will be a reflection of information provided to the preparer of the reserve study. The total of actual or projected reserves required as presented in the reserve study is based upon information provided that was not audited. A reserve study is not intended to be used to perform an audit, an analysis of quality, a forensic study or a background check of historical records. An on-site inspection conducted in conjunction with a reserve study should not be deemed to be a project audit or quality inspection. The results of this study are based on the independent opinion of the preparer and his experience and research during the course of his career in preparing Reserve Studies. In addition the opinions of experts on certain components have been gathered through research within their industry and with client s actual vendors. There is no implied warrantee or guarantee regarding our life and cost estimates/predictions. There is no implied warrantee or guarantee in any of our work product. Our results and findings will vary from another preparer s results and findings. A Reserve Study is necessarily a work in progress and subsequent Reserve Studies will vary from prior studies. Update Reserve Studies: Level II Studies: Quantities of major components as reported in previous reserve studies are deemed to be accurate and reliable. The reserve study relies upon the validity of previous reserve studies. Level III Studies: In addition to the above we have not visited the property when completing a Level III Financial Update study. Therefore we have not verified the current condition of the common area components.. Insurance: We carry general and professional liability insurance as well as workers compensation insurance. Actual or Perceived Conflicts of Interest: There are no potential actual or perceived conflicts of interest that we are aware of. Inflation and Interest Rates: The after tax interest rate used in the financial analysis may or may not be based on the clients reported after tax interest rate. If it is we have not verified or audited the reported rate. The interest rate may also be based on an amount we believe appropriate given the 30-year horizon of this study and may or may not reflect current or historical inflation rates. 4

7 Funding Summary Beginning Assumptions # of units 8 Fiscal Year End 31-Dec Budgeted Monthly Reserve Allocation $0 Projected Starting Reserve Balance $0 Ideal Starting Reserve Balance $37,854 Economic Assumptions Projected Inflation Rate 3.00% Reported After-Tax Interest Rate 0.50% Current Reserve Status Current Balance as a % of Ideal Balance 0% Recommendations Recommended Monthly Reserve Allocation $1,960 Per Unit $ Future Annual Increases 3.00% For number of years: 30 Increases thereafter: 0.00% Minimum Recommended Monthly Reserve Allocation $1,810 Per Unit $ Future Annual Increases 3.00% For number of years: 30 Increases thereafter: 0.00% Changes From Prior Year Recommended Increase to Reserve Allocation $1,960 as Percentage 0% Minimum Recommended Increase to Reserve Allocation $1,810 as Percentage 0% 5

8 Percent Funded - Graph 120% 100% 80% % Level of Funding 60% 40% 20% 0% Recommended Current Minimum 6

9 Category ID # Component Name Component Inventory Useful Life (yrs.) Remaining Useful Life Best Cost (yrs.) Worst Cost Roofing 104 Flat Roof - Single-Ply Membrane - Repla $6,250 $8, Pitched Roof - Comp Shingle - Replace $23,700 $26, Pitched Roof - Metal - Replace N/A 120 Rain Gutters/Downspouts - Replace $8,690 $10,270 Painted Surfaces 203 Garage Surfaces - Repaint 10 8 $1,885 $2, Metal Railing - Repaint 6 4 $2,800 $3, Building Exteriors - Repair/Repaint 6 4 $25,375 $30,450 Siding Materials 304 Metal Siding - Replace N/A $0 $0 Drive Materials 403 Concrete - Repair/Replace 10 8 $2,500 $3,500 Property Access 502 Garage Doors - Replace $91,000 $117,000 Decking 602 Porch Tile - Replace $11,625 $15, Deck - Resurface $12,720 $16, Composite Decking - Replace $6,350 $9, Porch Coating - Replace $1,600 $2,000 Mechanical Equip. 702 Boilers - Replace $36,000 $46, Air Handler - Repair/Replace N/A $0 $0 715 Pumps - Replace $4,000 $8, Air Tester - Replace 10 8 $1,200 $1, VFD Controllers - Replace $750 $1,250 Life / Safety 901 Fire Protection System - Renovate $4,000 $6, Security Camera System - Upgrade/Repl 10 8 $6,000 $8,000 Interiors 1490 Ceiling Tile - Replace N/A $0 $0 Light Fixtures 1602 Exterior Building Light Fixtures - Replace $3,300 $4, Pole Lights - Replace $4,050 $5, Garage Fixtures - Replace $3,525 $5,875 7

10 Significant Components ID # Component Name Useful Life (yrs.) Remaining Useful Life (yrs.) Average Current Cost Significance: (Curr Cost/UL) As $ As % 104 Flat Roof - Single-Ply Membrane - Repl $7,500 $ % 105 Pitched Roof - Comp Shingle - Replace $25,181 $1, % 120 Rain Gutters/Downspouts - Replace $9,480 $ % 203 Garage Surfaces - Repaint 10 8 $2,320 $ % 207 Metal Railing - Repaint 6 4 $3,200 $ % 217 Building Exteriors - Repair/Repaint 6 4 $27,913 $4, % 403 Concrete - Repair/Replace 10 8 $3,000 $ % 502 Garage Doors - Replace $104,000 $5, % 602 Porch Tile - Replace $13,563 $ % 604 Deck - Resurface $14,840 $ % 609 Composite Decking - Replace $7,938 $ % 690 Porch Coating - Replace $1,800 $ % 702 Boilers - Replace $41,000 $2, % 715 Pumps - Replace $6,000 $ % 790 Air Tester - Replace 10 8 $1,300 $ % 790 VFD Controllers - Replace $1,000 $ % 901 Fire Protection System - Renovate $5,000 $ % 903 Security Camera System - Upgrade/Rep 10 8 $7,000 $ % 1602 Exterior Building Light Fixtures - Replac $3,850 $ % 1604 Pole Lights - Replace $4,950 $ % 1690 Garage Fixtures - Replace $4,700 $ % 8

11 Significant Components - Graph 502 Garage Doors - Replace 217 Building Exteriors - Repair/Repaint 702 Boilers - Replace 105 Pitched Roof - Comp Shingle - Replace All Other 32% 27% 5% 11% 25% ID # Component Name Useful Life Remaining Useful Life Average Current Significance: (Curr Cost/UL) (yrs.) (yrs.) Cost As $ As % 502 Garage Doors - Replace $104,000 $5,200 27% 217 Building Exteriors - Repair/Repaint 6 4 $27,913 $4,652 25% 702 Boilers - Replace $41,000 $2,050 11% 105 Pitched Roof - Comp Shingle - Replace $25,181 $1,007 5% All Other See Expanded Table For Breakdown $6,018 32% 9

12 Yearly Summary Year Fully Starting Ending % Reserve Interest Reserve Funded Reserve Reserve Balance Balance Funded Contributions Income Expenses Balance 2012 $37,854 $0 0% $23,520 $59 $0 $23, $58,485 $23,579 40% $24,226 $179 $0 $47, $80,319 $47,983 60% $24,952 $303 $0 $73, $103,410 $73,239 71% $25,701 $431 $0 $99, $127,815 $99,371 78% $26,472 $477 $35,017 $91, $117,523 $91,302 78% $27,266 $526 $0 $119, $143,649 $119,094 83% $28,084 $667 $0 $147, $171,236 $147,846 86% $28,927 $813 $0 $177, $200,350 $177,586 89% $29,794 $921 $17,253 $191, $213,285 $191,048 90% $30,688 $1,034 $0 $222, $245,120 $222,771 91% $31,609 $1,091 $41,813 $213, $235,606 $213,658 91% $32,557 $1,152 $0 $247, $269, $247,367 92% $33,534 $1,324 $0 $282, $305,544 $282,225 92% $34,540 $1,441 $23,937 $294, $318,684 $294,269 92% $35,576 $1,531 $13,311 $318, $344,022 $318,065 92% $36,643 $1,686 $0 $356, $384,715 $356,394 93% $37,743 $1,756 $49,926 $345, $376,116 $345,965 92% $38,875 $1,831 $0 $386, $419,621 $386,672 92% $40,041 $1,199 $334,907 $93, $120,445 $93,005 77% $41,242 $569 $0 $134, $158,242 $134,817 85% $42,480 $782 $0 $178, $198,199 $178,079 90% $43,754 $1,002 $0 $222, $240,412 $222,835 93% $45,067 $1,080 $59,615 $209, $223,575 $209,367 94% $46,419 $1,041 $49,697 $207, $217,569 $207,130 95% $47,811 $1,158 $0 $256, $263,725 $256,099 97% $49,246 $1,407 $0 $306, $312,454 $306,751 98% $50,723 $1,664 $0 $359, $363,870 $359,139 99% $52,245 $1,931 $0 $413, $418,090 $413,314 99% $53,812 $1,756 $179,488 $289, $290,363 $289, % $55,426 $1,589 $0 $346,410 10

13 Reserve Contributions - Graph Monthly Reserve Contributions $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Year Recommended Current Minimum 11

14 ID Component Name Component Funding Information UL RUL Quantity Average Current Cost Ideal Balance Current Fund Balance Monthly 104 Flat Roof - Single-Ply Membrane - Replace Approx 1,250 Sq.ft. $7,500 $1,000 $0 $ Pitched Roof - Comp Shingle - Replace Approx 5,925 Sq.ft. $25,181 $2,015 $0 $ Rain Gutters/Downspouts - Replace Approx 1,580 Linear ft. $9,480 $632 $0 $ Garage Surfaces - Repaint 10 8 Approx 2,900 Sq.ft. $2,320 $464 $0 $ Metal Railing - Repaint 6 4 Approx 400 Linear ft. $3,200 $1,067 $0 $ Building Exteriors - Repair/Repaint 6 4 Approx 20,300 Sq.ft. $27,913 $9,304 $0 $ Concrete - Repair/Replace 10 8 Moderate Sq.ft. $3,000 $600 $0 $ Garage Doors - Replace (13) Garage Doors $104,000 $10,400 $0 $ Porch Tile - Replace Approx 775 Sq.ft. $13,563 $1,356 $0 $ Deck - Resurface Approx 1,060 Sq.ft. $14,840 $1,484 $0 $ Composite Decking - Replace Approx 1,270 Sq.ft. $7,938 $529 $0 $ Porch Coating - Replace Approx 100 Sq.ft. $1,800 $240 $0 $ Boilers - Replace (2) Boilers $41,000 $4,100 $0 $ Pumps - Replace (8) Pumps $6,000 $800 $0 $ Air Tester - Replace 10 8 (1) Air Tester $1,300 $260 $0 $ VFD Controllers - Replace (1) Controller $1,000 $133 $0 $ Fire Protection System - Renovate (1) System $5,000 $500 $0 $ Security Camera System - Upgrade/Replace 10 8 (1) System $7,000 $1,400 $0 $ Exterior Building Light Fixtures - Replace (44) Fixtures $3,850 $481 $0 $ Pole Lights - Replace (9) Pole Lights $4,950 $619 $0 $ Garage Fixtures - Replace (47) Fixtures $4,700 $470 $0 $24.34 $295,534 $37,854 $0 $1, Current Fund Balance as a percentage of Ideal Balance: 0% 12

15 Yearly Cash Flow Year Starting Balance $0 $23,579 $47,983 $73,239 $99,371 Reserve Income $23,520 $24,226 $24,952 $25,701 $26,472 Interest Earnings $59 $179 $303 $431 $477 Special Assessments $0 $0 $0 $0 $0 Funds Available $23,579 $47,983 $73,239 $99,371 $126,320 Reserve Expenditures $0 $0 $0 $0 $35,017 Ending Balance $23,579 $47,983 $73,239 $99,371 $91,302 Year Starting Balance $91,302 $119,094 $147,846 $177,586 $191,048 Reserve Income $27,266 $28,084 $28,927 $29,794 $30,688 Interest Earnings $526 $667 $813 $921 $1,034 Special Assessments $0 $0 $0 $0 $0 Funds Available $119,094 $147,846 $177,586 $208,301 $222,771 Reserve Expenditures $0 $0 $0 $17,253 $0 Ending Balance $119,094 $147,846 $177,586 $191,048 $222,771 Year Starting Balance $222,771 $213,658 $247,367 $282,225 $294,269 Reserve Income $31,609 $32,557 $33,534 $34,540 $35,576 Interest Earnings $1,091 $1,152 $1,324 $1,441 $1,531 Special Assessments $0 $0 $0 $0 $0 Funds Available $255,470 $247,367 $282,225 $318,206 $331,375 Reserve Expenditures $41,813 $0 $0 $23,937 $13,311 Ending Balance $213,658 $247,367 $282,225 $294,269 $318,065 Year Starting Balance $318,065 $356,394 $345,965 $386,672 $93,005 Reserve Income $36,643 $37,743 $38,875 $40,041 $41,242 Interest Earnings $1,686 $1,756 $1,831 $1,199 $569 Special Assessments $0 $0 $0 $0 $0 Funds Available $356,394 $395,892 $386,672 $427,912 $134,817 Reserve Expenditures $0 $49,926 $0 $334,907 $0 Ending Balance $356,394 $345,965 $386,672 $93,005 $134,817 Year Starting Balance $134,817 $178,079 $222,835 $209,367 $207,130 Reserve Income $42,480 $43,754 $45,067 $46,419 $47,811 Interest Earnings $782 $1,002 $1,080 $1,041 $1,158 Special Assessments $0 $0 $0 $0 $0 Funds Available $178,079 $222,835 $268,982 $256,827 $256,099 Reserve Expenditures $0 $0 $59,615 $49,697 $0 Ending Balance $178,079 $222,835 $209,367 $207,130 $256,099 Year Starting Balance $256,099 $306,751 $359,139 $413,314 $289,395 Reserve Income $49,246 $50,723 $52,245 $53,812 $55,426 Interest Earnings $1,407 $1,664 $1,931 $1,756 $1,589 Special Assessments $0 $0 $0 $0 $0 Funds Available $306,751 $359,139 $413,314 $468,882 $346,410 Reserve Expenditures $0 $0 $0 $179,488 $0 Ending Balance $306,751 $359,139 $413,314 $289,395 $346,410 13

16 Yearly Reserve Expenditures - Graph $350,000 $300,000 $250,000 Annual Totals $200,000 $150,000 $100,000 $50,000 $ Year 14

17 Projected Reserve Expenditures by Year Year ID # Component Name Projected Total Per Cost Annum 2012 No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ Metal Railing - Repaint $3, Building Exteriors - Repair/Repaint $31,416 $35, No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ Garage Surfaces - Repaint $2, Concrete - Repair/Replace $3, Air Tester - Replace $1, Security Camera System - Upgrade/Replac $8,867 $17, No Expenditures es Projected ed $ Metal Railing - Repaint $4, Building Exteriors - Repair/Repaint $37,512 $41, No Expenditures Projected $ No Expenditures Projected $ Flat Roof - Single-Ply Membrane - Replace $11, Porch Coating - Replace $2, Pumps - Replace $8, VFD Controllers - Replace $1,469 $23, Exterior Building Light Fixtures - Replace $5, Pole Lights - Replace $7,487 $13, No Expenditures Projected $ Metal Railing - Repaint $5, Building Exteriors - Repair/Repaint $44,791 $49, No Expenditures Projected $ Garage Surfaces - Repaint $3, Concrete - Repair/Replace $5, Garage Doors - Replace $177, Porch Tile - Replace $23, Deck - Resurface $25, Boilers - Replace $69, Air Tester - Replace $2, Fire Protection System - Renovate $8, Security Camera System - Upgrade/Replac $11, Garage Fixtures - Replace $8,001 $334, No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ Metal Railing - Repaint $6, Building Exteriors - Repair/Repaint $53,483 $59,615 15

18 Year Comp ID Component Name Projected Cost Total Per Annum Pitched Roof - Comp Shingle - Replace $49,697 $49, No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ No Expenditures Projected $ Flat Roof - Single-Ply Membrane - Replace $17, Rain Gutters/Downspouts - Replace $21, Garage Surfaces - Repaint $5, Metal Railing - Repaint $7, Building Exteriors - Repair/Repaint $63, Concrete - Repair/Replace $6, Composite Decking - Replace $18, Porch Coating - Replace $4, Pumps - Replace $13, Air Tester - Replace $2, VFD Controllers - Replace $2, Security Camera System - Upgrade/Replac $16,015 $179, No Expenditures Projected $0 16

19 Component Evaluation Comp #: 104 Flat Roof - Single-Ply Membrane - Replace Building Roofs Approx 1,250 Sq.ft. Life Expectancy: 15 Remaining Life: 13 Best Cost: $6,250 $5.00/Sq.ft.; Estimate to replace roof Worst Cost: $8,750 $7.00/Sq.ft.; Higher estimate Source of Information: CSL Cost Database Unable to inspect these roofs at the time of the inspection. Research with the Client reveals these roofs are in good condition.. The roof should be inspected and cleaned yearly to prevent damage and to ensure a full life from this component. This component has a useful life of approximately years. Remaining life based on current age. Page 1 of 25

20 Comp #: 105 Pitched Roof - Comp Shingle - Replace Building Roofs Approx 5,925 Sq.ft. Life Expectancy: 25 Remaining Life: 23 Best Cost: $23,700 $4.00/Sq.ft.; Estimate to replace roof Worst Cost: $26,663 $4.50/Sq.ft.; Higher estimate for more labor costs Source of Information: CSL Cost Database The roofs are in good condition. No problems were noted at the time of the inspection. Typically this type of roofing material has a useful life of approximately 25 years. Inspect roofs regularly and make local repairs as necessary as an operating expense to ensure full life from this component. Remaining life based on current age. Page 2 of 25

21 Comp #: 108 Pitched Roof - Metal - Replace Building Roofs Approx 5,800 Sq.ft. Life Expectancy: N/A Remaining Life: Best Cost: Worst Cost: Source of Information: The metal roof is in good condition. There is no expectation to replace this type of roof under normal circumstances. We recommend making local repairs as necessary as an operating expense. No reserve funding necessary. Page 3 of 25

22 Comp #: 120 Rain Gutters/Downspouts - Replace Building Roofs Approx 1,580 Linear ft. Life Expectancy: 30 Remaining Life: 28 Best Cost: $8,690 $5.50/Linear ft.; Estimate to replace Worst Cost: $10,270 $6.50/Linear ft.; Higher estimate to replace Source of Information: CSL Cost Database The rain gutters and downspouts are in good condition. No problems were noted at the time of the inspection. We recommend funding to replace these gutters and downspouts every years. Remaining life based on current age Page 4 of 25

23 Comp #: 203 Garage Surfaces - Repaint Parking Garage Approx 2,900 Sq.ft. Life Expectancy: 10 Remaining Life: 8 Best Cost: $1,885 $.65/Sq.ft.; Estimate to repaint Worst Cost: $2,755 $.95/Sq.ft.; Higher estimate for more prep work Source of Information: CSL Cost Database The painted garage wall surfaces are in good condition. No significant appearance concerns observed at time of inspection. We recommend funding to repaint these surfaces approximately every 10 years to maintain appearance. Remaining life based on current age. Page 5 of 25

24 Comp #: 207 Metal Railing - Repaint Common Area Approx 400 Linear ft. Life Expectancy: 6 Remaining Life: 4 Best Cost: $2,800 $7.00/Linear ft.; Estimate to repaint Worst Cost: $3,600 $9.00/Linear ft; Higher estimate for additional prep work Source of Information: CSL Cost Database The painted metal fencing surfaces are in good condition. Minor areas of rust and fading were noted at the time of the inspection. Repaint this component approximately every 6 years to maintain appearance and protect metal surfaces. Remaining life based on current age. Page 6 of 25

25 Comp #: 217 Building Exteriors - Repair/Repaint Building Exteriors Approx 20,300 Sq.ft. Life Expectancy: 6 Remaining Life: 4 Best Cost: $25,375 $1.25/Sq.ft.; Estimate to repaint Worst Cost: $30,450 $1.50/Sq.ft.; Higher estimate Source of Information: CSL Cost Database The painted wood siding surfaces are in good condition. No significant appearance concerns were noted at the time of the inspection. Expect to repaint these surfaces approximately every 4-6 years to maintain appearance and protect wood surfaces. Remaining life based on current age. Page 7 of 25

26 Comp #: 304 Metal Siding - Replace Building Exteriors Approx 2,175 Sq.ft. Life Expectancy: N/A Remaining Life: Best Cost: $0 Worst Cost: $0 Source of Information: The metal siding is in good condition. Due to the extended useful life of this component, reserve funding is not appropriate. Repair and replace as necessary as an operating expense. No reserve funding necessary. Page 8 of 25

27 Comp #: 403 Concrete - Repair/Replace Common Area Moderate Sq.ft. Life Expectancy: 10 Remaining Life: 8 Best Cost: $2,500 Allowance to repair/replace Worst Cost: $3,500 Higher allowance for more repairs/replacements Source of Information: CSL Cost Database The concrete is generally in good condition. No problems were noted at the time of the inspection. No expectation to completely replace the concrete surfaces. We recommend making local repairs as necessary as an operating expense and funding to make more significant repairs approximately every 10 years. Remaining life based on current age. Page 9 of 25

28 Comp #: 502 Garage Doors - Replace Garage Entrance & Garage Interior (13) Garage Doors Quantity description: Life Expectancy: 20 Remaining Life: 18 Best Cost: $91,000 $7,000/Door; Estimate to replace doors (2) - 7 ft. x 16 ft. (4) - 7 ft. x 9 ft. (7) - 7 ft. x 18 ft. (13) - Total Worst Cost: $117,000 $9,000/Door; Higher estimate Source of Information: CSL Cost Database The garage doors are in good condition. No problems were noted or reported at the time of inspection. We recommend funding to replace this door approximately every 20 years to ensure appearance and proper function. Remaining life based on current age. Page 10 of 25

29 Comp #: 602 Porch Tile - Replace Building Porches Approx 775 Sq.ft. Life Expectancy: 20 Remaining Life: 18 Best Cost: $11,625 $15/Sq.ft.; Estimate to replace Worst Cost: $15,500 $20/Sq.ft.; Higher estimate for more installation costs Source of Information: CSL Cost Database The tile is in generally good condition. Loose tile was noted on one of the porches at the time of the inspection. We recommend funding to replace the tile approximately every 20 years to ensure appearance and keep up with current decorative tastes. Remaining life based on current age. Page 11 of 25

30 Comp #: 604 Deck - Resurface Building Decks Approx 1,060 Sq.ft. Life Expectancy: 20 Remaining Life: 18 Best Cost: $12,720 $12/Sq.ft.; Estimate to resurface Worst Cost: $16,960 $16/Sq.ft.; Higher estimate for more installation costs Source of Information: CSL Cost Database Unable to inspect the deck surfaces at the time of the inspection. For the purposes of this report we will assume the deck surfaces are in good condition and aging normally. We recommend funding to resurface this component approximately every 15 to 20 years. Remaining life based on current age. Page 12 of 25

31 Comp #: 609 Composite Decking - Replace Building Decks & Porches Approx 1,270 Sq.ft. Life Expectancy: 30 Remaining Life: 28 Best Cost: $6,350 $20/Sq.ft.; Estimate to repair/replace 25% Worst Cost: $9,525 $30/Sq.ft.; Higher estimate for more repairs Source of Information: CSL Cost Database The composite decking is in good condition. There is no expectation to completely replace this type of decking. Make local repairs as necessary as an operating expense. We recommend funding to make more significant repairs approximately every years. Remaining life based on current condition. Page 13 of 25

32 Comp #: 690 Porch Coating - Replace Building Porch Approx 100 Sq.ft. Life Expectancy: 15 Remaining Life: 13 Best Cost: $1,600 $16/Sq.ft.; Estimate to repair/replace Worst Cost: $2,000 $20/Sq.ft.; Higher estimate for more repairs/replacement Source of Information: CSL Cost Database The porch coating is in good to fair condition. Areas where the coating is breaking off were noted at the time of the inspection. We recommend funding to replace or make major repairs to this component approximately every years. Remaining life based on current age. Page 14 of 25

33 Comp #: 702 Boilers - Replace Mechanical Room (2) Boilers Life Expectancy: 20 Remaining Life: 18 Best Cost: $36,000 $18,000/Boiler; Estimate to replace boiler Worst Cost: $46,000 $23,000/Boiler; Higher estimate for more installation cost Source of Information: CSL Cost Database The boilers are in good condition. No problems were noted or reported during the inspection. Expect a typical useful life of approximately 20 years from this component. Remaining life based on current age. Page 15 of 25

34 Comp #: 714 Air Handler - Repair/Replace Mechanical Room (1) Air Handler Life Expectancy: N/A Remaining Life: Best Cost: $0 Worst Cost: $0 Source of Information: The air handler is in good condition. Due to the extended useful life and minimal cost of maintaining this component, reserve funding is not appropriate. Maintain as necessary as an operating cost. No reserve funding necessary. Page 16 of 25

35 Comp #: 715 Pumps - Replace Mechanical Rooms (8) Pumps Quantity description: Life Expectancy: 15 Remaining Life: 13 Best Cost: $4,000 $500/Pump; Estimate to replace pumps (2) - Circulation (6) - Sewage (8) - Total Worst Cost: $8,000 $1,000/Pump; Higher estimate Source of Information: CSL Cost Database Unable to inspect all the pumps during the inspection. The Manager reports the pumps are in good condition and operating normally. With regular maintenance, expect a useful life of approximately 15 years from this component. Remaining life based on current age. Page 17 of 25

36 Comp #: 790 Air Tester - Replace Parking Garage (1) Air Tester Quantity description: Life Expectancy: 10 Remaining Life: 8 (1) - Macurco CM-21A Best Cost: $1,200 Estimate to replace Worst Cost: $1,400 Higher estimate Source of Information: CSL Cost Database The air tester appears to be in good condition. We recommend funding to replace these testers approximately every 10 years to ensure proper function and keep up with current technology. Remaining life based on current age. Page 18 of 25

37 Comp #: 790 VFD Controllers - Replace Mechanical Room (1) Controller Life Expectancy: 15 Remaining Life: 13 Best Cost: $750 Estimate to replace Worst Cost: $1,250 Higher estimate Source of Information: CSL Cost Database The VFD Controller is in good condition. No problems were reported at the time of the inspection. We recommend funding to replace this component approximately every 15 years. Remaining life based on current age. Page 19 of 25

38 Comp #: 901 Fire Protection System - Renovate Common Area (1) System Life Expectancy: 20 Remaining Life: 18 Best Cost: $4,000 Allowance to renovate system Worst Cost: $6,000 Higher allowance for more extensive renovation Source of Information: CSL Cost Database Although the fire protection system is designed to last the life of the community we recommend funding for an allowance to renovate the system approximately every 20 years to ensure proper function and to keep up with current technology and code requirements. Perform regular, professional inspections and repairs as an operating expense. Remaining life based on current age. Page 20 of 25

39 Comp #: 903 Security Camera System - Upgrade/Replace Common Area (1) System Life Expectancy: 10 Remaining Life: 8 Best Cost: $6,000 Estimate to upgrade/replace Worst Cost: $8,000 Higher estimate to upgrade/replace Source of Information: CSL Cost Database The security camera system is in good condition. No problems were reported at the time of the inspection. We recommend funding to upgrade/replace this security camera system approximately every 10 years to ensure proper function and keep up with current technology. Remaining life based on current age. Page 21 of 25

40 Comp #: 1490 Ceiling Tile - Replace Parking Garage Approx 2,400 Sq.ft. Life Expectancy: N/A Remaining Life: Best Cost: $0 Worst Cost: $0 Source of Information: The ceiling tiles are in good condition. No problems were noted at the time of the inspection. Due to the minimal cost associated with replacing this component, no reserve funding is appropriate. Replace individual tiles as necessary as an operating expense. No reserve funding necessary. Page 22 of 25

41 Comp #: 1602 Exterior Building Light Fixtures - Replace Building Exteriors (44) Fixtures Quantity description: Life Expectancy: 16 Remaining Life: 14 Best Cost: $3,300 $75/Fixture; Estimate to replace (4) - Ceiling (40) - Wall (44) - Total Worst Cost: $4,400 $100/Fixture; Higher estimate Source of Information: CSL Cost Database The exterior light fixtures are in good condition. No problems were noted at the time of the inspection. Expect to replace these lights approximately every 16 years to maintain appearance. Remaining life based on current age. Page 23 of 25

42 Comp #: 1604 Pole Lights - Replace Common Area (9) Pole Lights Life Expectancy: 16 Remaining Life: 14 Best Cost: $4,050 $450/Fixture; Estimate to replace light fixtures Worst Cost: $5,850 $650/Fixture; Higher estimate for more installation costs Source of Information: CSL Cost Database The pole lights are in good condition. No problems were noted at the time of the inspection. We recommend funding to replace these pole light fixtures, poles and to refurbish the electrical approximately every 16 years. Remaining life based on current age. Page 24 of 25

43 Comp #: 1690 Garage Fixtures - Replace Parking Garage (47) Fixtures Quantity description: Life Expectancy: 20 Remaining Life: 18 Best Cost: $3,525 $75/Fixture; Estimate to replace (4) - Can (27) - Fluorescent (16) - Wall (47) - Total Worst Cost: $5,875 $125/Fixture; Higher estimate Source of Information: CSL Cost Database The garage light fixtures are in good condition. No problems were noted at the time of the inspection. Expect to replace these lights approximately every 20 years to maintain appearance and keep up with current decorative tastes. Remaining life based on current age. Page 25 of 25

44 Glossary of Commonly Used Words And Phrases (Provided by the National Reserve Study Standards of the Community Associations Institute) 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 Also referred to as an Asset. 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. Component Full Funding When the actual (or projected) cumulative reserve balance for all components is equal to the fully funded balance. 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 (UL - RUL). 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 expenses over time is presented. The financial analysis is one of the two parts of the Reserve Study. Fully Funded Balance An indicator against which the 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 of a reserve component. This number is calculated for each component, and then summed together for an association total. FFB = Current Cost * Effective Age / Useful Life Fund Status The status of the reserve fund as compared to an established benchmark, such as percent funded. Funding Goals Independent of calculation 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. Funding Plan An association s plan to provide income to a reserve fund to offset anticipated expenditures from that fund.

45 Funding Principles Sufficient funds when required Stable contributions through the year Evenly distributed contributions over the years Fiscally responsible GSF - Gross Square Feet Life and Valuation Estimates The task of estimating useful life, remaining useful life, and repair or replacement costs for the reserve components. LF - Linear Feet Percent Funded The ratio, at a particular point in time (typically the beginning of the fiscal year), of the actual (or projected) reserve balance to the ideal fund balance, expressed as a percentage. Physical Analysis The portion of the Reserve Study where the component evaluation, 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 current fiscal year have a 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 that the association is obligated to maintain. Also known as reserves, reserve accounts, or cash reserves. In this report the reserve balance is based upon information provided and is not audited. Reserve Study A budget-planning tool, which 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. Governing documents or local statutes often regulate special assessments. Surplus An actual (or projected) reserve balance that is greater than the fully funded balance. Useful Life (UL) Also known as life expectancy. 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 of installation.