Do-It-Yourself Reserve Study. Crown Ridge Estates HOA

Washington Office Corporate Office 505 South 336 th St., Ste 620 Calabasas, CA Federal Way, WA 98003 Regional Offices TEL 253/661-5437 Phoenix, AZ FAX 253/661-5430 San Francisco, CA arwa@reservestudy.com Denver, CO www.reservestudy.com Honolulu, HI Las Vegas, NV Miami, FL Do-It-Yourself Reserve Study Crown Ridge Estates HOA Arlington, WA Report #: 24249-1 For Period Beginning: January 1, 2015 Expires: December 31, 2015 Date Prepared: August 12, 2014

Hello, and welcome to your Reserve Study! W e don t want you to be surprised. This Report is designed to help you anticipate, and prepare for, the major common area expenses your association will face. Inside you will find: 1) The Reserve Component List (the Scope and Schedule of your Reserve projects) telling you what your association is Reserving for, what condition they are in now, and what they ll cost to replace. 2) An Evaluation of your current Reserve Fund Size and Strength (Percent Funded). This tells you your financial starting point, revealing your risk of deferred maintenance and special assessments. 3) A Recommended Multi-Year Reserve Funding Plan, answering the question What do we do now? More Questions? Visit our website at www.reservestudy.com or call us at: 253/661-5437 Relax, it s from Association Reserves WA, LLC

Table of Contents 3- Minute Executive Summary...i Reserve Study Summary...i Reserve Component List Table 1...ii Introduction, Objectives, and Methodology...1 Which Physical Assets are Funded by Reserves?...2 How much Reserves are enough?...2 How much should we contribute?...3 What is our Recommended Funding Goal?...4 Projected Expenses...5 Expense Graph Figure 1...5 Reserve Fund Status & Recommended Funding Plan...6 Funding Plan Graph Figure 2...6 Cash Flow Graph Figure 3...7 % Funded Graph Figure 4...7 Table Descriptions...8 Reserve Component List Detail Table 2...9 Contribution & Fund Breakdown Table 3...10 Component Significance Table 4...11 30 Year Reserve Plan Summary Table 5...12 30 Year Reserve Plan Year by Year Detail Table 6...13 Accuracy, Limitations, and Disclosures...19 Terms and Definitions...20 Do-It-Yourself Worksheet... Appendix Association Reserves WA, LLC

3- Minute Executive Summary Association: Crown Ridge Estates HOA #: 24249-1 Location: Arlington, WA # of Units: 233 Report Period: January 1, 2015 through December 31, 2015 Findings/Recommendations as-of 1/1/2015: Projected Starting Reserve Balance:...$16,527 Current Fully Funded Reserve Balance:...$110,344 Average Reserve Deficit (Surplus) Per Unit:...$403 Recommended 2015 Annual Full Funding Contributions:...$12,910 Alternate minimum contribs* to keep Reserves above $0:...$11,000 Recommended 2015-17 Special Assessment, each year...$23,300 Most Recent Budgeted Reserve Contribution Rate:...$9,900 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves... 0.50% Annual Inflation Rate... 3.00% This Reserve Study is based on the information provided to our firm, shown in the attached appendix, without oversight or review by Association Reserves personnel. This study was prepared by, or under the supervision of a credentialed Reserve Study Specialist (RS ) Your Reserve Fund is currently 15% Funded. This means the association s special assessment & deferred maintenance risk is currently high. The objective of your multi-year Funding Plan is to fund your Reserves to a level where you will enjoy a low risk of such Reserve cash flow problems. Based on this starting point, your anticipated future expenses, our recommendation is to increase your Reserve contributions to $12,910 and levy a special assessment as noted above. No assets appropriate for Reserve designation were excluded. Association Reserves WA, LLC. i

Table 1: Executive Summary 24249-1 Useful Rem. Current Life Useful Repl. Cost # Component (yrs) Life (yrs) Estimate 1 Asphalt Paths (Old) - Repair 3 1 $3,900 2 Asphalt Pahs (New) - Repair 5 3 $1,400 3 Chain Link Pond Fence - Replace 30 15 $52,000 4 Black Chain Link Fence - Replace 30 22 $4,300 5 Wood Boarders - Repair / Replace 20 5 $7,800 6 Stormwater Ponds - Maintain 5 4 $6,000 7 Tract 996-2015 One Time Project N/A 0 $9,250 8 Cluster Mailboxes - Repair / Replace 15 5 $19,300 9 Parcel Boxes - Repair / Replace 20 5 $9,350 10 Play Equipment - Replace 20 5 $32,000 11 Basketball Equipment - Replace 30 15 $2,600 12 Bike Rack - Replace 30 15 $2,200 13 Benches, Picnic SE, Trsh - Replace 20 5 $19,500 14 Gazebo 20 15 $6,000 15 Signage 10 5 $1,200 16 French Drain Maintenance / Replace 25 25 $1,900 17 Swale - Maintenance 30 20 $2,200 17 Total Funded Components Note 1: a Useful Life of N/A means a one-time expense, not expected to repeat. Note 2: Yellow highlighted line items are expected to require attention in the initial year, green highlighted items are expected to occur within the first five years. Cross reference component number with inventory appendix. Association Reserves WA, LLC. ii

Assoc. 24249-1 Introduction A Reserve Study is the art and science of anticipating, and preparing for, an association s major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a combination of research and welldefined computations, following consistent National Reserve Study Standard principles. The foundation of this and every Reserve Study is your Reserve Component List (what you are reserving for). This is because the Reserve Component List defines the scope and schedule of all your anticipated upcoming Reserve projects. Based on that List and your starting balance, we calculate the association s Reserve Fund Strength (reported in terms of Percent Funded ). Then we compute a Reserve Funding Plan to provide for the Reserve needs of the association. These form the three results of your Reserve Study. Reserve contributions are not for the future. Reserve contributions are designed to offset the ongoing, daily deterioration of your Reserve assets. Done well, a stable, budgeted Reserve Funding Plan will collect sufficient funds from the owners who enjoyed the use of those assets, so the association is financially prepared for the irregular expenditures scattered through future years when those projects eventually require replacement. Methodology For this Do-It-Yourself Reserve Study Kit, the client has provided the Reserve Component List, Reserve Balance, and values for interest and inflation. We then calculated Reserve Fund strength (Percent Funded) and developed a Funding Plan using the cash-flow methodology, designed to Fully Fund the association s Reserves. Association Reserves WA, LLC 1

Assoc. 24249-1 Which Physical Assets are Funded by Reserves? There is a national-standard four-part test to determine which expenses should appear in your Reserve Component List. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the remaining life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost (often between.5% and 1% of an association s total budget). This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How much Reserves are enough? Reserve adequacy is not measured in cash terms. Reserve adequacy is found when the amount of current Reserve cash is compared to Reserve component deterioration (the needs of the association). Having enough means the association can execute its projects in a timely manner with existing Reserve funds. Not having enough typically creates deferred maintenance or special assessments. Adequacy is measured in a two-step process: 1) Calculate the value of deterioration at the association (called Fully Funded Balance, or FFB). 2) Compare that to the Reserve Fund Balance, and express as a percentage. Association Reserves WA, LLC 2

Assoc. 24249-1 Each year, the value of deterioration at the association changes. When there is more deterioration (as components approach the time they need to be replaced), there should be more cash to offset that deterioration and prepare for the expenditure. Conversely, the value of deterioration shrinks after projects are accomplished. The value of deterioration (the FFB) changes each year, and is a moving but predictable target. There is high risk of special assessments and deferred maintenance when the Percent Funded is weak, below 30%. Approximately 30% of all associations are in this high risk range. While the 100% point is Ideal (indicating Reserve cash is equal to the value of deterioration), a Reserve Fund in the 70% -130% range is considered strong (low risk of special assessment). Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! How much should we contribute? According to National Reserve Study Standards, there are four Funding Principles to balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. Second, a stable contribution is desirable because it keeps these naturally irregular expenses from unsettling the budget. Reserve contributions that are evenly distributed over current and future owners enable each owner to pay their fair share of the association s Reserve expenses over the years. And finally, we develop a plan that is fiscally responsible and safe for Boardmembers to recommend to their association. Remember, it is the Board s job to provide for the ongoing care of the common areas. Boardmembers invite liability exposure when Reserve contributions are inadequate to offset ongoing common area deterioration. Association Reserves WA, LLC 3

Assoc. 24249-1 What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the value of deterioration is called Full Funding (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. Evidence shows that associations in the 70-130% range enjoy a low risk of special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. Doing so allows the Reserve Fund to drop into the 0-30% range, where there is a high risk of special assessments & deferred maintenance. Since Baseline Funding still provides for the timely execution of all Reserve projects, and only the margin of safety is different, Baseline Funding contributions average only 10% - 15% less than Full Funding contributions. Threshold Funding is the title of all other Cash or Percent Funded objectives between Baseline Funding and Full Funding. Association Reserves WA, LLC 4

Assoc. 24249-1 Projected Expenses While this Reserve Study looks forward 30 years, we have no expectation that all these expenses will all take place as anticipated. This Reserve Study needs to be updated annually because we expect the timing of these expenses to shift and the size of these expenses to change. We do feel more certain of the timing and cost of near-term expenses than expenses many years away. Your first five years of projected Reserve expenses total $25,939. Adding the next five years, your first ten years of projected Reserve expenses are $143,687. Please be aware of your near-term expenses, which are typically projected more accurately than the more distant projections. The figure below summarizes the projected future expenses at your association as defined by your Reserve Component List. A summary of these expenses are shown in Table 5, while details of the projects that make up these expenses are shown in Table 6. Annual Reserve Expenses $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 2015 2020 2025 2030 2035 2040 2045 Years Figure 1 Association Reserves WA, LLC 5

Assoc. 24249-1 Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $16,527 as-of the start of your Fiscal Year on January 1, 2015. As of January 1, 2015, your Fully Funded Balance is computed to be $110,344 (see Table 3). This figure represents the deteriorated value of your common area components. Comparing your Reserve Balance to your Fully Funded Balance indicates your Reserves are 15% Funded. Across the country approx 48% of associations in this range experience special assessments or deferred maintenance. Recommended Funding Plan Based on your current Percent Funded and your near-term and long-term Reserve needs, we are recommending budgeted contributions of $12,910 this Fiscal Year 2015 along with a special assessment of $23,300 in each of the years 2015-2017. The overall 30-yr plan, in perspective, is shown below. This same information is shown numerically in both Table 5 and Table 6. Annual Reserve Funding Recommended Alternate (Minimum) Current Budget $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 2015 2020 2025 2030 2035 2040 2045 Years Figure 2 Association Reserves WA, LLC 6

Assoc. 24249-1 The following chart shows your Reserve balance under our recommended Full Funding Plan, an alternate Baseline Funding Plan, and at your current budgeted contribution rate, compared to your always-changing Fully Funded Balance target. $250,000 30-Yr Cash Flow Target Fully Funded Balance Recommended Funding Plan Alternate (Minimum) Current Budget $200,000 $150,000 $100,000 $50,000 $0 2015 2020 2025 2030 2035 2040 2045 Years Figure 3 This figure shows this same information, plotted on a Percent Funded scale. 120% Percent Funded Recommended Funding Plan Alternate (Minimum) Funding Plan Current Budget 100% 80% 60% 40% 20% 0% 2015 2020 2025 2030 2035 2040 2045 Years Figure 4 Association Reserves WA, LLC 7

Assoc. 24249-1 Table Descriptions The tabular information in this Report is broken down into six tables. Table 1 is a summary of your Reserve Components (your Reserve Component List), the information found in Table 2. Table 2 is your Reserve Component List, which forms the foundation of this Reserve Study. This table represents the information from which all other tables are derived. Table 3 shows the calculation of your Fully Funded Balance, the measure of your current Reserve component deterioration. For each component, the Fully Funded Balance is the fraction of life used up multiplied by its estimated Current Replacement Cost. Table 4 shows the significance of each component to Reserve needs of the association, helping you see which components have more (or less) influence than others on your total Reserve contribution rate. The deterioration cost/yr of each component is calculated by dividing the estimated Current Replacement Cost by Useful Life, then that component s percentage of the total is displayed. Table 5: This table provides a one-page 30-year summary of the cash flowing into and out of the Reserve Fund, with a display of the Fully Funded Balance, Percent Funded, and special assessment risk for each year. Table 6: This table shows the cash flow detail for the next 30 years. This table makes it possible to see which components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves WA, LLC 8

Table 2: Reserve Component List Detail 24249-1 Rem. Current Useful Useful Repl. Cost # Component Quantity Life Life Estimate 1 Asphalt Paths (Old) - Repair Tract 993/998; Approx. 3 1 $3,900 13,600 GSF 2 Asphalt Pahs (New) - Repair Tract 993; Approx 4,800 5 3 $1,400 GSF 3 Chain Link Pond Fence - Replace Approx. 2,400 LF, 6' High 30 15 $52,000 4 Black Chain Link Fence - Replace Approx. 180 LF, 6' High 30 22 $4,300 5 Wood Boarders - Repair / Replace Tract 993/998; Approx. 400 20 5 $7,800 LF, timbers 6 Stormwater Ponds - Maintain Tract 995/996 5 4 $6,000 7 Tract 996-2015 One Time Project Tree/brush removal, owing N/A 0 $9,250 8 Cluster Mailboxes - Repair / Replace (18) Metal Cluster Stands 15 5 $19,300 9 Parcel Boxes - Repair / Replace (11) Metal Parcel Sttands 20 5 $9,350 10 Play Equipment - Replace (2) Medium Steel Sets 20 5 $32,000 11 Basketball Equipment - Replace (2) Steel Assembly 30 15 $2,600 12 Bike Rack - Replace (2) Steel Structure 30 15 $2,200 13 Benches, Picnic SE, Trsh - Replace (41) Assorted 20 5 $19,500 14 Gazebo (1) Wood Structure 20 15 $6,000 15 Signage (12) Wood Polls & (20) 10 5 $1,200 Assorted Signs 16 French Drain Maintenance / Replace Tract 983; 2'X92' Area 25 25 $1,900 17 Swale - Maintenance Tract 983; 3'X180' Area 30 20 $2,200 17 Total Funded Components Association Reserves WA, LLC 9

Table 3: Fully Funded Balance 24249-1 Current Fully Cost Effective Useful Funded # Component Estimate X Age / Life = Balance 1 Asphalt Paths (Old) - Repair $3,900 X 2 / 3 = $2,600 2 Asphalt Pahs (New) - Repair $1,400 X 2 / 5 = $560 3 Chain Link Pond Fence - Replace $52,000 X 15 / 30 = $26,000 4 Black Chain Link Fence - Replace $4,300 X 8 / 30 = $1,147 5 Wood Boarders - Repair / Replace $7,800 X 15 / 20 = $5,850 6 Stormwater Ponds - Maintain $6,000 X 1 / 5 = $1,200 7 Tract 996-2015 One Time Project $9,250 X 0 / 0 = $9,250 8 Cluster Mailboxes - Repair / Replace $19,300 X 10 / 15 = $12,867 9 Parcel Boxes - Repair / Replace $9,350 X 15 / 20 = $7,013 10 Play Equipment - Replace $32,000 X 15 / 20 = $24,000 11 Basketball Equipment - Replace $2,600 X 15 / 30 = $1,300 12 Bike Rack - Replace $2,200 X 15 / 30 = $1,100 13 Benches, Picnic SE, Trsh - Replace $19,500 X 15 / 20 = $14,625 14 Gazebo $6,000 X 5 / 20 = $1,500 15 Signage $1,200 X 5 / 10 = $600 16 French Drain Maintenance / Replace $1,900 X 0 / 25 = $0 17 Swale - Maintenance $2,200 X 10 / 30 = $733 $110,344 Association Reserves WA, LLC 10

Table 4: Component Significance 24249-1 Current Useful Repl. Cost Deterioration Deterioration # Component Life Estimate Cost/yr Significance 1 Asphalt Paths (Old) - Repair 3 $3,900 $1,300 12.9% 2 Asphalt Pahs (New) - Repair 5 $1,400 $280 2.8% 3 Chain Link Pond Fence - Replace 30 $52,000 $1,733 17.2% 4 Black Chain Link Fence - Replace 30 $4,300 $143 1.4% 5 Wood Boarders - Repair / Replace 20 $7,800 $390 3.9% 6 Stormwater Ponds - Maintain 5 $6,000 $1,200 11.9% 7 Tract 996-2015 One Time Project N/A $9,250 $0 0.0% 8 Cluster Mailboxes - Repair / Replace 15 $19,300 $1,287 12.7% 9 Parcel Boxes - Repair / Replace 20 $9,350 $468 4.6% 10 Play Equipment - Replace 20 $32,000 $1,600 15.8% 11 Basketball Equipment - Replace 30 $2,600 $87 0.9% 12 Bike Rack - Replace 30 $2,200 $73 0.7% 13 Benches, Picnic SE, Trsh - Replace 20 $19,500 $975 9.6% 14 Gazebo 20 $6,000 $300 3.0% 15 Signage 10 $1,200 $120 1.2% 16 French Drain Maintenance / Replace 25 $1,900 $76 0.8% 17 Swale - Maintenance 30 $2,200 $73 0.7% 17 Total Funded Components $10,105 100.0% Association Reserves WA, LLC 11

Table 5: 30-Year Reserve Plan Summary 24249-1 Fiscal Year Start: 01/01/15 Interest: 0.5% Inflation: 3.0% Reserve Fund Strength Calculations (All values as of Fiscal Year Start Date) Projected Reserve Balance Changes Starting Fully Special Loans or Reserve Funded Percent Assmt Reserve Special Interest Reserve Year Balance Balance Funded Risk Contribs. Assmts Income Expenses 2015 $16,527 $110,344 15.0% High $12,910 $23,300 $150 $9,250 2016 $43,637 $114,535 38.1% Med $13,297 $23,300 $300 $4,017 2017 $76,518 $124,554 61.4% Med $13,696 $23,300 $476 $0 2018 $113,990 $139,333 81.8% Low $14,107 $0 $603 $1,530 2019 $127,170 $153,311 82.9% Low $14,530 $0 $646 $11,143 2020 $131,204 $158,148 83.0% Low $14,966 $0 $436 $103,349 2021 $43,257 $68,509 63.1% Med $15,415 $0 $255 $0 2022 $58,928 $82,992 71.0% Low $15,878 $0 $323 $4,797 2023 $70,332 $93,343 75.3% Low $16,354 $0 $389 $1,773 2024 $85,301 $107,501 79.3% Low $16,845 $0 $450 $7,829 2025 $94,767 $116,243 81.5% Low $17,350 $0 $505 $5,241 2026 $107,381 $128,320 83.7% Low $17,870 $0 $583 $0 2027 $125,835 $146,577 85.8% Low $18,407 $0 $677 $0 2028 $144,918 $165,814 87.4% Low $18,959 $0 $754 $7,783 2029 $156,848 $178,057 88.1% Low $19,528 $0 $812 $9,076 2030 $168,112 $189,794 88.6% Low $20,113 $0 $643 $99,710 2031 $89,159 $109,003 81.8% Low $20,717 $0 $483 $6,258 2032 $104,100 $122,529 85.0% Low $21,338 $0 $575 $0 2033 $126,014 $143,408 87.9% Low $21,978 $0 $681 $2,383 2034 $146,289 $162,975 89.8% Low $22,638 $0 $746 $17,360 2035 $152,314 $168,235 90.5% Low $23,317 $0 $724 $38,831 2036 $137,523 $152,084 90.4% Low $24,016 $0 $749 $0 2037 $162,289 $176,009 92.2% Low $24,737 $0 $836 $15,712 2038 $172,150 $185,049 93.0% Low $25,479 $0 $920 $2,763 2039 $195,786 $208,297 94.0% Low $26,243 $0 $1,016 $12,197 2040 $210,849 $223,141 94.5% Low $27,031 $0 $727 $158,394 2041 $80,213 $88,482 90.7% Low $27,842 $0 $472 $0 2042 $108,526 $113,583 95.5% Low $28,677 $0 $616 $0 2043 $137,818 $140,110 98.4% Low $29,537 $0 $734 $12,126 2044 $155,964 $155,637 100.2% Low $30,423 $0 $822 $14,139 Association Reserves WA, LLC 12

Table 6: 30-Year Income/Expense Detail (yrs 0 through 4) 24249-1 Fiscal Year 2015 2016 2017 2018 2019 Starting Reserve Balance $16,527 $43,637 $76,518 $113,990 $127,170 Annual Reserve Contribution $12,910 $13,297 $13,696 $14,107 $14,530 Recommended Special Assessments $23,300 $23,300 $23,300 $0 $0 Interest Earnings $150 $300 $476 $603 $646 Total Income $52,887 $80,535 $113,990 $128,700 $142,347 # Component 1 Asphalt Paths (Old) - Repair $0 $4,017 $0 $0 $4,389 2 Asphalt Pahs (New) - Repair $0 $0 $0 $1,530 $0 3 Chain Link Pond Fence - Replace $0 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $0 $0 $0 5 Wood Boarders - Repair / Replace $0 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $6,753 7 Tract 996-2015 One Time Project $9,250 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $0 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $0 $0 $0 $0 $0 10 Play Equipment - Replace $0 $0 $0 $0 $0 11 Basketball Equipment - Replace $0 $0 $0 $0 $0 12 Bike Rack - Replace $0 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $0 $0 $0 $0 $0 14 Gazebo $0 $0 $0 $0 $0 15 Signage $0 $0 $0 $0 $0 16 French Drain Maintenance / Replace $0 $0 $0 $0 $0 17 Swale - Maintenance $0 $0 $0 $0 $0 Total Expenses $9,250 $4,017 $0 $1,530 $11,143 Ending Reserve Balance: $43,637 $76,518 $113,990 $127,170 $131,204 Association Reserves WA, LLC 13

Table 6: 30-Year Income/Expense Detail (yrs 5 through 9) 24249-1 Fiscal Year 2020 2021 2022 2023 2024 Starting Reserve Balance $131,204 $43,257 $58,928 $70,332 $85,301 Annual Reserve Contribution $14,966 $15,415 $15,878 $16,354 $16,845 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $436 $255 $323 $389 $450 Total Income $146,606 $58,928 $75,128 $87,075 $102,596 # Component 1 Asphalt Paths (Old) - Repair $0 $0 $4,797 $0 $0 2 Asphalt Pahs (New) - Repair $0 $0 $0 $1,773 $0 3 Chain Link Pond Fence - Replace $0 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $0 $0 $0 5 Wood Boarders - Repair / Replace $9,042 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $7,829 7 Tract 996-2015 One Time Project $0 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $22,374 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $10,839 $0 $0 $0 $0 10 Play Equipment - Replace $37,097 $0 $0 $0 $0 11 Basketball Equipment - Replace $0 $0 $0 $0 $0 12 Bike Rack - Replace $0 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $22,606 $0 $0 $0 $0 14 Gazebo $0 $0 $0 $0 $0 15 Signage $1,391 $0 $0 $0 $0 16 French Drain Maintenance / Replace $0 $0 $0 $0 $0 17 Swale - Maintenance $0 $0 $0 $0 $0 Total Expenses $103,349 $0 $4,797 $1,773 $7,829 Ending Reserve Balance: $43,257 $58,928 $70,332 $85,301 $94,767 Association Reserves WA, LLC 14

Table 6: 30-Year Income/Expense Detail (yrs 10 through 14) 24249-1 Fiscal Year 2025 2026 2027 2028 2029 Starting Reserve Balance $94,767 $107,381 $125,835 $144,918 $156,848 Annual Reserve Contribution $17,350 $17,870 $18,407 $18,959 $19,528 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $505 $583 $677 $754 $812 Total Income $112,623 $125,835 $144,918 $164,631 $177,188 # Component 1 Asphalt Paths (Old) - Repair $5,241 $0 $0 $5,727 $0 2 Asphalt Pahs (New) - Repair $0 $0 $0 $2,056 $0 3 Chain Link Pond Fence - Replace $0 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $0 $0 $0 5 Wood Boarders - Repair / Replace $0 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $9,076 7 Tract 996-2015 One Time Project $0 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $0 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $0 $0 $0 $0 $0 10 Play Equipment - Replace $0 $0 $0 $0 $0 11 Basketball Equipment - Replace $0 $0 $0 $0 $0 12 Bike Rack - Replace $0 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $0 $0 $0 $0 $0 14 Gazebo $0 $0 $0 $0 $0 15 Signage $0 $0 $0 $0 $0 16 French Drain Maintenance / Replace $0 $0 $0 $0 $0 17 Swale - Maintenance $0 $0 $0 $0 $0 Total Expenses $5,241 $0 $0 $7,783 $9,076 Ending Reserve Balance: $107,381 $125,835 $144,918 $156,848 $168,112 Association Reserves WA, LLC 15

Table 6: 30-Year Income/Expense Detail (yrs 15 through 19) 24249-1 Fiscal Year 2030 2031 2032 2033 2034 Starting Reserve Balance $168,112 $89,159 $104,100 $126,014 $146,289 Annual Reserve Contribution $20,113 $20,717 $21,338 $21,978 $22,638 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $643 $483 $575 $681 $746 Total Income $188,869 $110,358 $126,014 $148,673 $169,673 # Component 1 Asphalt Paths (Old) - Repair $0 $6,258 $0 $0 $6,839 2 Asphalt Pahs (New) - Repair $0 $0 $0 $2,383 $0 3 Chain Link Pond Fence - Replace $81,014 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $0 $0 $0 5 Wood Boarders - Repair / Replace $0 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $10,521 7 Tract 996-2015 One Time Project $0 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $0 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $0 $0 $0 $0 $0 10 Play Equipment - Replace $0 $0 $0 $0 $0 11 Basketball Equipment - Replace $4,051 $0 $0 $0 $0 12 Bike Rack - Replace $3,428 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $0 $0 $0 $0 $0 14 Gazebo $9,348 $0 $0 $0 $0 15 Signage $1,870 $0 $0 $0 $0 16 French Drain Maintenance / Replace $0 $0 $0 $0 $0 17 Swale - Maintenance $0 $0 $0 $0 $0 Total Expenses $99,710 $6,258 $0 $2,383 $17,360 Ending Reserve Balance: $89,159 $104,100 $126,014 $146,289 $152,314 Association Reserves WA, LLC 16

Table 6: 30-Year Income/Expense Detail (yrs 20 through 24) 24249-1 Fiscal Year 2035 2036 2037 2038 2039 Starting Reserve Balance $152,314 $137,523 $162,289 $172,150 $195,786 Annual Reserve Contribution $23,317 $24,016 $24,737 $25,479 $26,243 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $724 $749 $836 $920 $1,016 Total Income $176,355 $162,289 $187,862 $198,549 $223,045 # Component 1 Asphalt Paths (Old) - Repair $0 $0 $7,473 $0 $0 2 Asphalt Pahs (New) - Repair $0 $0 $0 $2,763 $0 3 Chain Link Pond Fence - Replace $0 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $8,239 $0 $0 5 Wood Boarders - Repair / Replace $0 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $12,197 7 Tract 996-2015 One Time Project $0 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $34,858 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $0 $0 $0 $0 $0 10 Play Equipment - Replace $0 $0 $0 $0 $0 11 Basketball Equipment - Replace $0 $0 $0 $0 $0 12 Bike Rack - Replace $0 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $0 $0 $0 $0 $0 14 Gazebo $0 $0 $0 $0 $0 15 Signage $0 $0 $0 $0 $0 16 French Drain Maintenance / Replace $0 $0 $0 $0 $0 17 Swale - Maintenance $3,973 $0 $0 $0 $0 Total Expenses $38,831 $0 $15,712 $2,763 $12,197 Ending Reserve Balance: $137,523 $162,289 $172,150 $195,786 $210,849 Association Reserves WA, LLC 17

Table 6: 30-Year Income/Expense Detail (yrs 25 through 29) 24249-1 Fiscal Year 2040 2041 2042 2043 2044 Starting Reserve Balance $210,849 $80,213 $108,526 $137,818 $155,964 Annual Reserve Contribution $27,031 $27,842 $28,677 $29,537 $30,423 Recommended Special Assessments $0 $0 $0 $0 $0 Interest Earnings $727 $472 $616 $734 $822 Total Income $238,607 $108,526 $137,818 $168,090 $187,210 # Component 1 Asphalt Paths (Old) - Repair $8,166 $0 $0 $8,923 $0 2 Asphalt Pahs (New) - Repair $0 $0 $0 $3,203 $0 3 Chain Link Pond Fence - Replace $0 $0 $0 $0 $0 4 Black Chain Link Fence - Replace $0 $0 $0 $0 $0 5 Wood Boarders - Repair / Replace $16,331 $0 $0 $0 $0 6 Stormwater Ponds - Maintain $0 $0 $0 $0 $14,139 7 Tract 996-2015 One Time Project $0 $0 $0 $0 $0 8 Cluster Mailboxes - Repair / Replace $0 $0 $0 $0 $0 9 Parcel Boxes - Repair / Replace $19,577 $0 $0 $0 $0 10 Play Equipment - Replace $67,001 $0 $0 $0 $0 11 Basketball Equipment - Replace $0 $0 $0 $0 $0 12 Bike Rack - Replace $0 $0 $0 $0 $0 13 Benches, Picnic SE, Trsh - Replace $40,829 $0 $0 $0 $0 14 Gazebo $0 $0 $0 $0 $0 15 Signage $2,513 $0 $0 $0 $0 16 French Drain Maintenance / Replace $3,978 $0 $0 $0 $0 17 Swale - Maintenance $0 $0 $0 $0 $0 Total Expenses $158,394 $0 $0 $12,126 $14,139 Ending Reserve Balance: $80,213 $108,526 $137,818 $155,964 $173,070 Association Reserves WA, LLC 18

Assoc. 24249-1 Accuracy, Limitations, and Disclosures Washington disclosure, per RCW: The reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair or replacement of a reserve component. Because we have no control over future events, we do not expect that all the events we anticipated will occur as planned. We expect that inflationary trends will continue, and we expect Reserve funds to continue to earn interest, so we believe that reasonable estimate for these figures are much more accurate than ignoring these economic realities. We can control measurements, which we attempt to establish within 5% accuracy through a combination of on-site measurements, drawing, and satellite imagery. The starting Reserve Balance and interest rate earned on deposited Reserve funds that you provided to us were considered reliable and were not confirmed historical Reserve project reliable, and we have considered the representation made by its vendors and suppliers to also be accurate and reliable. Component Useful Life, Remaining Useful Life, and Current Cost estimates assume a stable economic environment and lack of natural disasters. Because the physical condition of your components, the association s Reserve balance, the economic environment, and legislative environment change each year, this Reserve Study is by nature a one-year document. Because a long-term perspective improves the accuracy of near-term planning, this Report projects expenses for the next 30 years. It is our recommendation and that of the Financial Accounting Standards Board (FASB) that your Reserve Study be updated each year as part of the annual budget process. Association Reserves WA, LLC and its employee have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. James D. Talaga R.S., company president, is a credentialed Reserve Specialist (#66). All work done by Association Reserves WA, LLC is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the association s situation. Association Reserves WA, LLC 19

Assoc. 24249-1 Terms and Definitions BTU DIA GSF GSY HP LF British Thermal Unit (a standard unit of energy) Diameter Gross Square Feet (area). Equivalent to Square Feet Gross Square Yards (area). Equivalent to Square Yards Horsepower Linear Feet (length) Effective Age: The difference between Useful Life and Remaining Useful Life. Note that this is not necessarily equivalent to the chronological age of the component. Fully Funded Balance (FFB): The value of the deterioration of the Reserve Components. This is the fraction of life used up of each component multiplied by its estimated Current Replacement. While calculated for each component, it is summed together for an association total. FFB = (Current Cost X Effective Age) / Useful Life Inflation: Interest: Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 6. Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded monthly using the rate defined in the Executive Summary. Annual interest earning assumption appears in the Executive Summary. Percent Funded: The ratio, at a particular point in time (the first day of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life (RUL): The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life (UL): The estimated time, in years, that a common area component can be expected to serve its intended function. Association Reserves WA, LLC 20

Assoc. 24249-1 Do-It-Yourself Worksheets Note: Any questions relating to the information contained in this Appendix should be directed to the contact person indicated on the following page, not Association Reserves. Association Reserves WA, LLC 21