WHAT IS A RESERVE STUDY AND WHY ARE THEY IMPORTANT? Tom Larson, PE, RS, PRA Facility Engineering Associates, PC
What is a Reserve Study? A budget planning tool which identifies the current status of the Reserve Fund and provides recommendations for a stable and equitable funding plan to offset the anticipated future major common area expenditures.
What is a Reserve Study? Community Associations Institute (CAI) National Standards Adopted in 1998 Define Required Content Define Levels of Service Provide for RS Designation
What is a Reserve Study? Association of Professional Reserve Analysts (APRA) Standards Adopted in 1995 Define Required Content Define Levels of Service Provide for PRA Designation
What is a Reserve Study? Required Content The Reserve Study consists of two parts: The physical analysis The financial analysis
What is a Reserve Study? The Physical Analysis includes Component inventory - listing of the common elements Condition assessment on site inspection Life and valuation estimates
What is a Reserve Study? The Financial Analysis includes: The evaluation and analysis of the Association s balance, income and expenses. A finding of the current Reserve Fund status, and a recommendation for appropriate funding (funding plan).
What is a Reserve Study? Levels of Service CAI National Standards outline 3 levels of service Level I Level II Full Reserve Study Reserve Study Update w/ Site Visit Level III Reserve Study Update w/ No Site Visit
What is a Reserve Study? Component Inventory Condition Assessment (On site inspection) Remaining Useful Life & Replacement Cost Estimates Funding Status Funding Plan Level I Full X Level II Update w/ Site Visit * (Verify) Level III Update w/ No Site Visit N/A X X N/A X X X X X X X X X
Reserve Funding Plans Two primary methods to analyze and evaluate a community s reserve fund plan are Component Method Cash Flow Method
Component Analysis For each common component, determine Remaining Useful Life (RUL), and Replacement Cost Amount to reserve each year = Replacement Cost RUL EXAMPLE: New roof was installed this year, cost was $100,000. Typical useful life of the roof is 20 years. RUL = 20 years Replacement cost = $100,000 Amount to reserve = $100,000/20 years $5,000/year
Component Analysis Component funding requirement is determined by adding up the requirement for all components Component Replacement Cost Current Balance Remainder to Fund Remaining Useful Life Annual Contribution Roof $100,000 - $15,000 $115,000 20 $5,750 Balcony Repairs $200,000 $50,000 $150,000 2 $75,000 Boiler $65,000 $40,000 $25,000 10 $2,500 Chiller $35,000 $30,000 $5,000 8 $625 Cooling Tower $80,000 $50,000 $30,000 10 $3,000 Pavement $120,000 $80,000 $40,000 5 $8,000 Carpeting $75,000 $40,000 $35,000 4 $8,750 Tot Lot $15,000 $8,000 $7,000 7 $1,000 TOTAL $690,000 $283,000 $104,625
What does Fully Funded mean? Component Replacement Cost Component Analysis Estimated Useful Life (EUL) Amount to Fund per Year Remaining Useful Life (RUL) Fully Funded Amount Roof $100,000 20 $5,000 20 $0 Balcony Repairs $200,000 20 $10,000 2 $180,000 Boiler $65,000 30 $2,167 10 $43,340 Chiller $35,000 25 $1,400 8 $23,800 Cooling Tower $80,000 25 $3,200 10 $48,000 Pavement $120,000 20 $6,000 5 $90,000 PPaPavement Carpeting $75,000 10 $7,500 4 $45,000 Tot Lot $15,000 15 $1,000 7 $8,000 TOTAL $690,000 $438,140
Component Analysis For our example, the fully funded balance is calculated at $438,140 The actual balance is $283,000 So the community s reserve fund is: $283,000/$438,140 = 65% percent funded
Component Analysis For this community, let s say the current annual contribution to reserves is $35,000. Component Replacement Cost Current Balance Remainder to Fund Remaining Useful Life Annual Contribution Roof $100,000 - $15,000 $115,000 20 $5,750 Balcony Repairs $200,000 $50,000 $150,000 2 $75,000 Boiler $65,000 $40,000 $25,000 10 $2,500 Chiller $35,000 $30,000 $5,000 8 $625 Cooling Tower $80,000 $50,000 $30,000 10 $3,000 Resurface $120,000 $80,000 $40,000 5 $8,000 Pavement Carpeting $75,000 $40,000 $35,000 4 $8,750 Tot Lot $15,000 $8,000 $7,000 7 $1,000 TOTAL $690,000 $283,000 $104,625 Is $35,000 enough?
Cash Flow Analysis For each component, determine Remaining Useful Life (RUL), and Replacement Cost Amount to reserve each year = Replacement Cost RUL Instead, determine reserve expenditures by year.
Cash Flow Analysis Using the same components from the earlier example: Component Replacement Cost Remaining Useful Life Roof $100,000 20 Balcony Repairs $200,000 2 Boiler $65,000 10 Chiller $35,000 8 Cooling Tower $80,000 10 Resurface Pavement $120,000 5 Carpeting $75,000 4 Tot Lot $15,000 7 TOTAL $690,000
Cash Flow Analysis Show projected expenditures by year: Year Expenditure Replacement Cost Year Expenditure Replacement Cost 1 11 2 Balcony Repairs $200,000 12 Carpeting $75,000 3 13 4 Carpeting $75,000 14 5 Pavement $120,000 15 6 16 7 Tot Lot $15,000 17 Tot Lot $15,000 8 Chiller $35,000 18 9 19 10 Boiler, Cooling $145,000 20 Roof $100,000
Cash Flow Analysis Once you know Starting balance Current contribution level to reserves Projected expenditures by year Then you can determine If the contribution level is sufficient to meet projected expenditures, and if not, What does the contribution need to be?
Cash Flow Analysis For each year of the study Starting Balance + Contribution - Expenditures = Reserve Cash Balance
Cash Flow Analysis For each year of the study Starting Balance + Contribution - Expenditures = Reserve Cash Balance
Cash Flow Analysis Current Reserve Balance $283,000 Component Contribution $104,625 Annual Contribution $35,000 Year Starting Reserve Annual Expenditures Ending Reserve Balance Contribution Balance 1 $283,000 $35,000 $0 $318,000 2 $318,000 $35,000 $200,000 $153,000 3 $153,000 $35,000 $188,000 4 $188,000 $35,000 $75,000 $148,000 5 $148,000 $35,000 $120,000 $63,000 6 $63,000 $35,000 $98,000 7 $98,000 $35,000 $15,000 $118,000 8 $118,000 $35,000 $35,000 $118,000 9 $118,000 $35,000 $153,000 10 $153,000 $35,000 $145,000 $43,000 11 $43,000 $35,000 $78,000 12 $78,000 $35,000 $75,000 $38,000 13 $38,000 $35,000 $73,000 14 $73,000 $35,000 $108,000 15 $108,000 $35,000 $143,000 16 $143,000 $35,000 $178,000 17 $178,000 $35,000 $15,000 $198,000 18 $198,000 $35,000 $233,000 19 $233,000 $35,000 $268,000 20 $268,000 $35,000 $100,000 $203,000
Reserve Funding Plans The standards also define Funding Goals, independent of methodology used Baseline Funding: Establishing a Reserve funding goal of keeping the Reserve cash balance above zero.
Reserve Funding Plans The standards also define Funding Goals Full Funding: Setting a Reserve funding goal of attaining and maintaining Reserves at or near 100% funded.
Reserve Funding Plans The standards also define Funding Goals Statutory Funding: Establishing a Reserve funding goal of setting aside the specific minimum amount of Reserves required by local statutes.
Reserve Funding Plans The standards also define Funding Goals 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 Fully Funding.
Component Listing Study 2003 Inflation Rate: 2.67% Period: 2022 Investment Rate: Text Item Description Typical Target Replacement/Repair Cost to Section Useful (year) Replace/Repair** No. Life (yrs) Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 (present worth) CAPITAL RESERVES 1.0 Community Center Building 1.3.a Replace Roof 20 2013 2033 $12,300 1.3.b Replace Siding & Trim 35 2028 $15,000 1.3.c Paint Clubhouse 5 2004 2009 2014 2019 2024 $5,000 1.3.d Replace Windows 35 2028 $15,000 1.3.e Replace Lower Level Exterior Doors 15 2003 2018 2033 $3,200 1.3.e Replace Upper Level Exterior Doors 25 2018 2043 $5,500 1.3.f Replace 7.5-ton Heat Pumps 15 2008 2023 $12,600 1.3.f Replace Indoor AHU for 7.5-ton units 25 2018 2043 $6,000 1.3.g Replace 2.5-ton Heat Pump 15 2015 2030 $2,100 1.3.g Replace Indoor AHU for 2.5-ton unit 25 2015 2040 $900 1.3.h Replace Water Heater 15 2008 2023 $4,000 1.3.i Replace Exercise Equipment 7 2005 2012 2019 2026 $8,000 1.3.j Refurbish Community Center Upstairs 5 2003 2008 2013 2018 2023 $10,000 1.3.k Replace Downstairs Carpet 10 2004 2014 2024 $2,500 1.3.l Refurbish Pool Changing Rooms 20 2013 2033 $10,000 1.3.m Replace Wood Deck 20 2013 2033 $3,000 1.3.n Refinish Raquetball Court 10 2004 2014 2024 $5,000 1.3.o Replace Office Equipment 4 2005 2009 2013 2017 2021 $2,500 1.3.p Replace Kitchen Appliances 15 2008 2023 $2,000 2.0 Swimming Pools & Deck 2.3.a Whitecoat Main Pool & Wading Pool 8 2010 2018 2026 $12,000 2.3.b Spa Whitecoat & Repairs 8 2003 2011 2019 2027 $1,500 2.3.d Replace Pool Covers 15 2017 2032 $7,800 2.3.e Replace Pool Filtration Equipment & Pumps 20 2013 2033 $15,000 2.3.f Replace Spa Heater 18 2011 2029 $2,800 2.3.g Replace/Restrap Pool Furniture 5 2003 2008 2013 2018 2023 $7,500 2.3.h Replace Lifeguard Chairs & Ladders 20 2013 2033 $10,000 2.3.i Concrete Pool Deck Repairs 5 2005 2010 2015 2020 2025 $7,500 2.3.j Brick Terrace and Retaining Wall Repairs 15 2003 2018 2033 $15,000 2.3.k Replace 4-Ft. Metal Fencing 30 2023 2053 $4,000 2.3.l Replace Chain-Link Fence Gate 25 2003 2028 $1,100 2.3.l Replace Perimeter Chain-Link Fence 25 2018 2043 $24,000 3.0 Community Center Site Features 3.3.a Asphalt Pavement - Seal Coat 5 2003 2008 2018 2023 $2,450 3.3.b Asphalt Pavement - Overlay 20 2013 2033 $24,500 3.3.c Curb & Gutter Repairs 3 2005 2008 2011 2014 2017 $1,500 3.3.d Sidewalk Repairs 3 2005 2008 2011 2014 2017 $1,000
Calendar of Expenditures TABLE 2 EXPENDITURE FORECAST BY YEAR Text Item Description Cost to Cost to Total Section Replace/Repair Replace/Repair Expenditures No. (present worth) (future worth) 2003 1.3.e Replace Lower Level Exterior Doors $3,200 $3,200 1.3.j Refurbish Community Center Upstairs $10,000 $10,000 2.3.b Spa Whitecoat & Repairs $1,500 $1,500 2.3.g Replace/Restrap Pool Furniture $7,500 $7,500 2.3.j Brick Terrace and Retaining Wall Repairs $15,000 $15,000 2.3.l Replace Chain-Link Fence Gate $1,100 $1,100 3.3.a Asphalt Pavement - Seal Coat $2,450 $2,450 4.3.a Asphalt Trail Repairs $5,000 $5,000 4.3.e Multi-purpose Court Color Coat $4,500 $4,500 $50,250 2004 1.3.c Paint Clubhouse $5,000 $5,134 1.3.k Replace Downstairs Carpet $2,500 $2,567 1.3.n Refinish Raquetball Court $5,000 $5,134 $12,834 2005 1.3.i Replace Exercise Equipment $8,000 $8,433 1.3.o Replace Office Equipment $2,500 $2,635 2.3.i Concrete Pool Deck Repairs $7,500 $7,906 3.3.c Curb & Gutter Repairs $1,500 $1,581 3.3.d Sidewalk Repairs $1,000 $1,054 4.3.f Community Center Tot Lot $8,000 $8,433 $30,042 2006 4.3.b Community Center Tennis Court Color Coat $6,000 $6,494 4.3.b Section 8B Tennis Court Color Coat $6,000 $6,494 4.3.g Section 12 Tot Lot $10,000 $10,823 4.3.a Asphalt Trail Repairs $5,000 $5,411 $29,221 2007 4.3.h Section 8 Tot Lot $15,000 $16,667 $16,667 2008 1.3.f Replace 7.5-ton Heat Pumps $12,600 $14,374 1.3.h Replace Water Heater $4,000 $4,563 1.3.p Replace Kitchen Appliances $2,000 $2,282 1.3.j Refurbish Community Center Upstairs $10,000 $11,408 2.3.g Replace/Restrap Pool Furniture $7,500 $8,556 3.3.a Asphalt Pavement - Seal Coat $2,450 $2,795 3.3.c Curb & Gutter Repairs $1,500 $1,711 3.3.d Sidewalk Repairs $1,000 $1,141 4.3.e Multi-purpose Court Color Coat $4,500 $5,134 $51,964 2009 1.3.c Paint Clubhouse $5,000 $5,856 1.3.o Replace Office Equipment $2,500 $2,928 4.3.a Asphalt Trail Repairs $5,000 $5,856 $14,641 2010 2.3.a Whitecoat Main Pool & Wading Pool $12,000 $14,431 4.3.i Section 6 Tot Lot $12,000 $14,431 2.3.i Concrete Pool Deck Repairs $7,500 $9,019 $37,880
Component Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 End Study Period: 2022 $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $60,833 $50,250 2004 $472,436 $54,819 $12,834 2005 $485,050 $51,137 $30,042 2006 $498,001 $50,423 $29,221 2007 $511,298 $49,670 $16,667 2008 $524,949 $49,150 $51,964 2009 $538,965 $49,557 $14,641 2010 $553,356 $51,058 $37,880 2011 $568,130 $50,553 $23,212 2012 $583,299 $51,020 $16,479 2013 $598,873 $54,059 $136,395 2014 $614,863 $56,296 $82,044 2015 $631,280 $56,936 $21,264 2016 $648,135 $58,923 $70,427 2017 $665,441 $60,084 $30,080 2018 $683,208 $66,031 $156,122 2019 $701,450 $69,261 $63,262 2020 $720,178 $71,545 $54,778 2021 $739,407 $71,876 $12,052 2022 $759,149 $72,490 $19,797
Component Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 End Study Period: 2022 $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $60,833 $60,833 $50,250 $260,583 57% 2004 $472,436 $260,583 $54,819 $54,819 $12,834 $302,568 64% 2005 $485,050 $302,568 $51,137 $51,137 $30,042 $323,663 67% 2006 $498,001 $323,663 $50,423 $50,423 $29,221 $344,865 69% 2007 $511,298 $344,865 $49,670 $49,670 $16,667 $377,868 74% 2008 $524,949 $377,868 $49,150 $49,150 $51,964 $375,053 71% 2009 $538,965 $375,053 $49,557 $49,557 $14,641 $409,969 76% 2010 $553,356 $409,969 $51,058 $51,058 $37,880 $423,146 76% 2011 $568,130 $423,146 $50,553 $50,553 $23,212 $450,487 79% 2012 $583,299 $450,487 $51,020 $51,020 $16,479 $485,028 83% 2013 $598,873 $485,028 $54,059 $54,059 $136,395 $402,692 67% 2014 $614,863 $402,692 $56,296 $56,296 $82,044 $376,944 61% 2015 $631,280 $376,944 $56,936 $56,936 $21,264 $412,616 65% 2016 $648,135 $412,616 $58,923 $58,923 $70,427 $401,113 62% 2017 $665,441 $401,113 $60,084 $60,084 $30,080 $431,117 65% 2018 $683,208 $431,117 $66,031 $66,031 $156,122 $341,026 50% 2019 $701,450 $341,026 $69,261 $69,261 $63,262 $347,025 49% 2020 $720,178 $347,025 $71,545 $71,545 $54,778 $363,791 51% 2021 $739,407 $363,791 $71,876 $71,876 $12,052 $423,616 57% 2022 $759,149 $423,616 $72,490 $72,490 $19,797 $476,309 63%
Component Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 End Study Period: 2022 $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $60,833 $60,833 $50,250 $260,583 57% 2004 $472,436 $260,583 $54,819 $54,819 $12,834 $302,568 64% 2005 $485,050 $302,568 $51,137 $51,137 $30,042 $323,663 67% 2006 $498,001 $323,663 $50,423 $50,423 $29,221 $344,865 69% 2007 $511,298 $344,865 $49,670 $49,670 $16,667 $377,868 74% 2008 $524,949 $377,868 $49,150 $49,150 $51,964 $375,053 71% 2009 $538,965 $375,053 $49,557 $49,557 $14,641 $409,969 76% 2010 $553,356 $409,969 $51,058 $51,058 $37,880 $423,146 76% 2011 $568,130 $423,146 $50,553 $50,553 $23,212 $450,487 79% 2012 $583,299 $450,487 $51,020 $51,020 $16,479 $485,028 83% 2013 $598,873 $485,028 $54,059 $54,059 $136,395 $402,692 67% 2014 $614,863 $402,692 $56,296 $56,296 $82,044 $376,944 61% 2015 $631,280 $376,944 $56,936 $56,936 $21,264 $412,616 65% 2016 $648,135 $412,616 $58,923 $58,923 $70,427 $401,113 62% 2017 $665,441 $401,113 $60,084 $60,084 $30,080 $431,117 65% 2018 $683,208 $431,117 $66,031 $66,031 $156,122 $341,026 50% 2019 $701,450 $341,026 $69,261 $69,261 $63,262 $347,025 49% 2020 $720,178 $347,025 $71,545 $71,545 $54,778 $363,791 51% 2021 $739,407 $363,791 $71,876 $71,876 $12,052 $423,616 57% 2022 $759,149 $423,616 $72,490 $72,490 $19,797 $476,309 63% $55,034 Average $46,471 Average
Component Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 End Study Period: 2022 $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $60,833 $60,833 $50,250 $260,583 57% 2004 $472,436 $260,583 $54,819 $54,819 $12,834 $302,568 64% 2005 $485,050 $302,568 $51,137 $51,137 $30,042 $323,663 67% 2006 $498,001 $323,663 $50,423 $50,423 $29,221 $344,865 69% 2007 $511,298 $344,865 $49,670 $49,670 $16,667 $377,868 74% 2008 $524,949 $377,868 $49,150 $49,150 $51,964 $375,053 71% 2009 $538,965 $375,053 $49,557 $49,557 $14,641 $409,969 76% 2010 $553,356 $409,969 $51,058 $51,058 $37,880 $423,146 76% 2011 $568,130 $423,146 $50,553 $50,553 $23,212 $450,487 79% 2012 $583,299 $450,487 $51,020 $51,020 $16,479 $485,028 83% 2013 $598,873 $485,028 $54,059 $54,059 $136,395 $402,692 67% 2014 $614,863 $402,692 $56,296 $56,296 $82,044 $376,944 61% 2015 $631,280 $376,944 $56,936 $56,936 $21,264 $412,616 65% 2016 $648,135 $412,616 $58,923 $58,923 $70,427 $401,113 62% 2017 $665,441 $401,113 $60,084 $60,084 $30,080 $431,117 65% 2018 $683,208 $431,117 $66,031 $66,031 $156,122 $341,026 50% 2019 $701,450 $341,026 $69,261 $69,261 $63,262 $347,025 49% 2020 $720,178 $347,025 $71,545 $71,545 $54,778 $363,791 51% 2021 $739,407 $363,791 $71,876 $71,876 $12,052 $423,616 57% 2022 $759,149 $423,616 $72,490 $72,490 $19,797 $476,309 63% $1,100,680 Total $929,420 Total
Cash Flow Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 End Study Period: 2022 $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $35,000 $60,833 $50,250 $234,750 51% 2004 $472,436 $234,750 $35,000 $54,819 $12,834 $256,916 54% 2005 $485,050 $256,916 $35,000 $51,137 $30,042 $261,874 54% 2006 $498,001 $261,874 $35,000 $50,423 $29,221 $267,653 54% 2007 $511,298 $267,653 $35,000 $49,670 $16,667 $285,986 56% 2008 $524,949 $285,986 $35,000 $49,150 $51,964 $269,021 51% 2009 $538,965 $269,021 $35,000 $49,557 $14,641 $289,380 54% 2010 $553,356 $289,380 $35,000 $51,058 $37,880 $286,500 52% 2011 $568,130 $286,500 $35,000 $50,553 $23,212 $298,288 53% 2012 $583,299 $298,288 $35,000 $51,020 $16,479 $316,809 54% 2013 $598,873 $316,809 $35,000 $54,059 $136,395 $215,414 36% 2014 $614,863 $215,414 $35,000 $56,296 $82,044 $168,370 27% 2015 $631,280 $168,370 $35,000 $56,936 $21,264 $182,106 29% 2016 $648,135 $182,106 $35,000 $58,923 $70,427 $146,679 23% 2017 $665,441 $146,679 $35,000 $60,084 $30,080 $151,600 23% 2018 $683,208 $151,600 $35,000 $66,031 $156,122 $30,478 4% 2019 $701,450 $30,478 $35,000 $69,261 $63,262 $2,216 0% 2020 $720,178 $2,216 $35,000 $71,545 $54,778 -$17,562-2% 2021 $739,407 -$17,562 $35,000 $71,876 $12,052 $5,386 1% 2022 $759,149 $5,386 $35,000 $72,490 $19,797 $20,588 3% Unconservative $35,000 $46,471 Average - $35,000 for next Average 20 years
Cash Flow Analysis CASH FLOW SUMMARY- CAPITAL RESERVES Years 1-20 Initial Contribution: Projected Increase: Beginning Balance $35,000 Begin Study Period: 2003 3.00% End Study Period: 2022 < Add an annual increase $250,000 Year Reserve Beginning Yearly Component Interest Paid Capital Ending Reserve % Component Reserve Contribution Method On Reserve Expenditure Balance Total Value Balance Contribution Balance Assets 2003 $460,150 $250,000 $35,000 $60,833 $50,250 $234,750 51% 2004 $472,436 $234,750 $36,050 $54,819 $12,834 $257,966 55% 2005 $485,050 $257,966 $37,132 $51,137 $30,042 $265,056 55% 2006 $498,001 $265,056 $38,245 $50,423 $29,221 $274,080 55% 2007 $511,298 $274,080 $39,393 $49,670 $16,667 $296,806 58% 2008 $524,949 $296,806 $40,575 $49,150 $51,964 $285,416 54% 2009 $538,965 $285,416 $41,792 $49,557 $14,641 $312,566 58% 2010 $553,356 $312,566 $43,046 $51,058 $37,880 $317,732 57% 2011 $568,130 $317,732 $44,337 $50,553 $23,212 $338,857 60% 2012 $583,299 $338,857 $45,667 $51,020 $16,479 $368,045 63% 2013 $598,873 $368,045 $47,037 $54,059 $136,395 $278,687 47% 2014 $614,863 $278,687 $48,448 $56,296 $82,044 $245,091 40% 2015 $631,280 $245,091 $49,902 $56,936 $21,264 $273,729 43% 2016 $648,135 $273,729 $51,399 $58,923 $70,427 $254,701 39% 2017 $665,441 $254,701 $52,941 $60,084 $30,080 $277,562 42% 2018 $683,208 $277,562 $54,529 $66,031 $156,122 $175,969 26% 2019 $701,450 $175,969 $56,165 $69,261 $63,262 $168,871 24% 2020 $720,178 $168,871 $57,850 $71,545 $54,778 $171,943 24% 2021 $739,407 $171,943 $59,585 $71,876 $12,052 $219,476 30% 2022 $759,149 $219,476 $61,373 $72,490 $19,797 $261,052 34% $44,784 Average $46,471 Average
Cash Flow Analysis
Reserve Funding Plans For either method, an accurate determination of Remaining Useful Life and Replacement Cost is the key In general, Component Method funding is conservative, but a more complex accounting challenge, and rarely followed in reality Using a Cash Flow analysis is simpler and more accurately reflects actual reserve accounting
Why Are They Important? Why do a Reserve Study? To ensure that the funds will be available to make necessary repairs and replacements when the time comes This protects property value Helps prevent the need for special assessments or Association loans
Reserve Studies How often should you do a reserve study? It depends on the community Typically, every 3 to 5 years for a Level I or Level II study Level III updates can be done every 1-2 years In Virginia, a reserve study must be done at least every 5 years
Reserve Studies A Reserve Study is NOT: The Association budget An operations and maintenance plan A comprehensive engineering evaluation of all components An infallible document
Reserve Studies A Reserve Study IS: A check on the reserve fund status A planning tool to help determine the proper funding level A guide for required repairs and replacements
Recommendations Use a Reserve Specialist (CAI) or Professional Reserve Analyst (PRA) Check references Cheapest is not always best Provide the Reserve Analyst with as much information as possible Always get a draft report for Board review
QUESTIONS? Tom Larson Larson@feapc.com