arbor ridge master 2015 · 1009 lighting: entry monument 2015 52. arbor ridge p.u.d. homeowners...

Reserve Studies by Reserve Funding ● 800-301-3411

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NW Laidlaw Road & NW 174th AvenueBeaverton, Oregon 97006

July 21, 2014

Prepared by:D.L. "Dan" Huntley, RS, PRA

Tamarra "Tammy" Axton, PRARay Axton, PRA


Reserve Study Professionals credentialed byCommunity Association Institute (RS )and

Association of Professional Reserve Analysts (PRA)

ARBOR RIDGE P.U.D. HOMEOWNERS ASSOCIATION-MASTER

Executive Summary

Fiscal Year of Report

January 1, 2015 to December 31, 2015

Number of Lots 570

Parameters

Beginning Balance $198,946.81

Fiscal Year 2015 Suggested Contribution $30,506.40

Average Annual Reserve Assessment Per Lot $53.52

Prior Year's Actual Contribution $30,444

Fiscal Year Projected Interest Rate .5%

Fiscal Year Inflation Rate 1.77%

Annual Increase To Suggested Contribution 1.47%

Lowest Cash Balance Over 30 Years (Threshold) $64,650

This work is copyright and has been supplied under contract to the Association and/or itsrepresentatives. Apart from the Client's right to reproduce and distribute copies of this report asrequired by its governing documents or state law, no part of this reserve study may be reproduced by anyprocess without prior written permission from Reserve Studies by Reserve Funding or its parentcompany Reserve Funding (Western States Subdivision Consulting). Requests and inquiries concerningreproduction and rights should be addressed to Reserve Studies by Reserve Funding at its main office at16869 SW 65th Avenue, Suite 366, Lake Oswego, OR 97035.

16869 SW 65th Avenue, Suite 366Lake Oswego, Oregon 97035800-301-3411

TABLE OF CONTENTSArbor Ridge P.U.D. Homeowners Association-Master


Executive Summary 2

Category Detail Index 4

Base Line Assessment Funding Model Summary 6

Base Assessment Funding Model Projection 12

Base Line Funding Model & Fully Funded Comparison Chart 13

Asset Current Cost by Category 14

Component Summary 15

Annual Expenditure Detail 17

Annual Expenditure Detail 23

Detail Report by Category 26

Revenue Ruling 70-604 58

Maintenance Plan 59

Funding Goals & Plans 60

Member Summary Report 61

PART I • EXECUTIVE SUMMARY

Executive Report - OR 1-1

PART II • RESERVE STUDY

Part III • Information About Your Reserve Study

Important Information 3-1

Introduction 3-2

Funding Options 3-2

Types of Reserve Studies 3-3

The Reserve Study: A Physical and a Financial Analysis 3-3

Definitions 3-9

Your Reserve Study is a Multi-Purpose Tool 3-10

Arbor Ridge P.U.D. Homeowners Association-MasterCategory Detail Index


Asset IDDescription Replacement Page

Asphalt1012 Asphalt: Overlay-Moon Valley 2031 261001 Asphalt: Overlay-Path 2031 271014 Asphalt: Overlay-Silver Creek 2031 281016 Asphalt: Overlay-Tatum Ranch 2031 291027 Asphalt: Repairs-Moon Valley 2019 301031 Asphalt: Repairs-Path 2016 311032 Asphalt: Repairs-Silver Creek 2019 321033 Asphalt: Repairs-Tatum Ranch 2019 331013 Asphalt: Sealcoat-Moon Valley 2018 341002 Asphalt: Sealcoat-Path 2018 351015 Asphalt: Sealcoat-Silver Creek 2018 361017 Asphalt: Sealcoat-Tatum Ranch 2018 37

Bridge1004 Bridge: Wooden 2026 40

Concrete1024 Concrete: Flatwork-Sidewalks 2015 411022 Concrete: Flatwork-Sidewalks-Moon Valley 2015 421023 Concrete: Flatwork-Sidewalks-Silver Creek 2015 431019 Curb-Gutter: Moon Valley 2015 441020 Curb-Gutter: Silver Creerk 2015 451018 Curb-Gutter: Tatum Ranch 2015 46

Drainage1034 Drainage: Storm Drains-Waste Products 2031 47

Fencing1011 Fence: Chain Link 2031 481010 Fence: Vinyl 2026 491025 Fence: Vinyl-Wash 2020 50

Landscape1006 Bark Dust: Replace 2015 381005 Landscaping: Plant & Arborvitae 2015 51

Lighting1009 Lighting: Entry Monument 2015 52

Arbor Ridge P.U.D. Homeowners Association-MasterCategory Detail Index


Asset IDDescription Replacement Page

Mailboxes1021 Mailboxes: Replace 2031 53

Masonry1007 Brick: Pilaster-Wall 2031 39

Signs1035 Signs: Common Area 2016 541008 Signs: Monument 2016 55

Trees1026 Trees: Renovation-Removal-Trimming 2015 56

Walls1003 Walls: Retaining 2015 57

Total Funded Assets 32Total Unfunded Assets 0Total Assets 32

Arbor Ridge P.U.D. Homeowners Association-MasterBase Line Assessment Funding Model Summary


Report Date July 21, 2014Account Number TMGVersion 1 (2015) Level IIIBudget Year Beginning January 01, 2015Budget Year Ending December 31, 2015

Total Units 570

Report Parameters

Inflation 1.77%

Interest Rate on Reserve Deposit 0.50%

2015 Beginning Balance $198,946.81

Current Assessment Funding Model SummaryCash Flow Time Value of Money With Threshold

BUSINESS JUDGEMENT RULE(as we understand it)

The business judgment of the Board require that board members make ordinary and reasonableinquiry before making a decision. They are protected if they act in good faith, with the best

interests of the Association and with such care as an ordinary prudent and reasonable personin a like position would use.

This reserve study is for budget and planning purposes and identifies the status of the reservefund and schedules the anticipated major commonly owned item replacements.

This reserve study will also estimate the expected useful life and remaining useful life of thebuilding and site components or systems, and will provide an estimate replacement orrefurbishment cost for those components or systems. Major components or systems mayinclude, but are not limited to, painting, gutters and downspouts. mailboxes, roofing, siding,windows, doors, paving, mechanical equipment, common area furnishings and amenities andother commonly owned systems or items.

The scope of work identified within our contract is to provide the association with an"Updated No-Site Visit" (level III) reserve study which includes:

Component/System Inventory



Expected Useful Life and Remaining Useful Life Estimates

Condition Assessment (based upon on-site visual observations if applicable).

Component/System Replacement Schedule and Estimated Pricing

Identify Current Reserve Account Balance

30 Year Funding Plan

How to Use a Reserve Study

The documents included within the reserve study are intended to be used as guidelines andestimates. It is nearly impossible to know exactly when a building component system will fail;however, an estimation of useful life based on similar product history and professionalexperience is used to estimate the time of replacement and associated costs. All costs includedwithin this reserve study should be used as budgeting figures. For exact pricing, a qualified,licensed contractor should be contacted to provide a bid for any anticipated replacements.

The replacement schedule lists all known components and systems that are anticipated to"wear out" or fail within 30 years. Items which are anticipated to be replaced or repaired inthe current year are not included within the reserve study as those items should already bebudgeted for, and scheduled to be replaced or repaired.

On the reserve schedule, review which items are anticipated to fail in the near future, and keepa close eye on them. It is always better to replace items prior to failure to eliminate theopportunity for surrounding components or associated systems to be affected. Be cognizant ofitems scheduled for replacement or repair within 2-3 years of the current year. Remember,items listed are scheduled based on history and replacement or repair is scheduled as anestimate. Items commonly fail sooner or later than the estimated date.

Disclosures

General - The Arbor Ridge P.U.D. Homeowners Association-Master and Reserve Studies byReserve Funding have no professional or personal involvements with each other, other thanthe scope of work identified in the reserve study contract. This relationship cannot beperceived as a conflict of interest.



Physical Analysis - If an on-site reserve study was performed observations were limited tovisual observations only. Destructive testing (invasive testing) was not performed. Any itemsthat were not clearly visible at the time of the site observation were not viewed, and thereforewere not included in the drafting of this reserve study.

Measurements - Measuring and inventory (+/- 10%) were identified via a combination of on-site physical measurements, previous reserve study and/or drawing take-offs. Drawing sets (ifused) were provided by the property manager or Declarant for our use relating only to thereserve study scope of work.

Reliance on Client Data - Data received from property management, associationrepresentatives and/or Declarant is deemed reliable by Reserve Funding. Such data mayinclude financial information, physical deficiencies or physical conditions, quantity of physicalassets, or historical issues.

Scope - The Reserve Study is a reflection of information provided to the Consultant andassembled for the Association's use, not for the purpose of performing an audit,quality/forensic analysis, or background checks of historical records.

Reserve Balance - The actual or projected (estimated) total presented in this reserve study isbased upon information provided or collected and was not audited.

Reserve Projects -Information provided or collected for the purpose of this reserve study willbe considered reliable and should not be considered a project audit or quality inspection.

Adjustments to Reserve Study - Should components suggested by Consultant be removed fromthe reserve study or any life cycles or costs other than current bids, engineering constructionstandards, or current component history be used in this reserve study the Client accepts fullresponsibility for the results of the reserve study and is not warranted by Consultant.

Information Provided - Quantity, design and material information included in this report wasprovided in part by the Association and is subject to course of construction changes.



Limitations on Inventory -The following items, but not limited to, are not included in thephysical analysis because they have a useful life greater than 30 years. Grading/drainage,foundations/footings, party walls, bearing and shear walls, perimeter walls, beams, columnsand girders, sub floors, unfinished floors, concrete stair surfaces, windows, exterior doors,window and door frames, plumbing system, flues (chimneys), air delivery or return systems,ducts, chutes, conduits, pipes, plumbing, sanitary sewage and storm drains, wire, telephone,cable, central television system, sprinklers systems and internet lines.

Warranty or Guaranty - This reserve study and its recommendations should not be construedin any way to constitute a warranty or guaranty regarding the current or future performanceof the components. Components will be replaced as required, not necessarily in their expectedreplacement year.

Annual Updates - Often times there can be a significant expenditure in those years thatexceeds the life of the reserve study. Hence, annual updates should be done to allowadjustments in the reserve contribution each year if required.

Tax Consequences - The tax consequences are not considered in this reserve study due to theuncertainty of all factors affecting net taxable income and the election of the tax form to befiled.

If applicable we recommend a building envelope (water intrusion) inspection every six yearsand a roofing inspection every six years (not funded in the reserve).

House Bill 955 (HB 955), in Oregon since 1/1/2006, specifically calls for the provision of areserve study, reserve study update, maintenance plan and reserve summary. ORS 94.595states that: "The board of directors of the association annually shall conduct a reserve study,or review and update an existing reserve study to determine the reserve study requirements".In addition ORS 94.595 (3)(B)(c) and ORS 100.175 (3)(C)(c) further require that a ReserveStudy Update be done each year.



House Bill 2665 (Chapter 409, Oregon Laws 2007) revises portions on SB 955 by removing therequirement for a maintenance plan from the reserve study and makes it a separaterequirement. Also, after 9/27/2007 HB 2665 no longer requires that owners be provided areserve summary of the reserve study or any revisions thereto.

Further House Bill 2665 makes windows and unit access doors, except for glazing andscreening, general common elements, unless Declaration provides otherwise, (Sec 5).

NOTE: Management or the Board shall notify the reserve study provider if the windows anddoors are the responsibility of the Association and if so, will be added to the next update of thereserve study. Management or the Association to provide the count of windows and doorsincluding type and size.

Preparation of a Reserve Study

Data is collected from many sources to prepare a reserve study and a variety of documentreviews, interviews, and site observations are required to adequately fulfill our duties as areserve provider. The following sources, but not limited to, and methods were utilized in thepreparation of this reserve study document:

Property Management Personnel Interviews

As built Plans and Specifications Document Reviews

On-site Observations - If Applicable

In-house company consultations with accredited RS and PRA personnel

Discussions with Engineering or Architectural Consultants

RS Means Facilities Maintenance & Repair Cost Data, 21st Edition (2014) printedmanual

Interviewing General Contractor Consultants

tabular list of commonly owned items has been developed and given a current conditiongrade, expected useful life, and remaining useful life. A portion of that data will determine inwhat year it is estimated the component should be replaced.



Property Information

Original Starting Date of Reserve Study - Unless otherwise indicated, we have used January 1,2001 to begin aging the original components in this reserve study.

Number of Units/Lots and Location - This reserve study is a total of 570 Lots located inBeaverton, Oregon.

Date of Last Reserve Study (if applicable) - The last plan take-off physical analysis done byReserve Funding by WSSC was completed on October 15, 2004.

NOTE: All interest accrued from reserve savings account(s) must remain in the reserve savingsaccount(s) and not used as an off-set for operating expenses.

Funding Required - A minimum balance of $64,650.00 has been used over the thirty years ofthis reserve study with an average annual reserve assessment of $53.52 per Lot and an annualincrease of 1.47% to reach full funding within the thirty years of the reserve study.

The board/management has expressed a concern regarding the retaining walls and thepaths. We suggest the board seek out a qualified, bonded and licensed contractor(s) to reviewthese concerns and provide the Reserve Study provider with and copy of the results so thatthey can become a part of the reserve study.

The industry standards for percent funded are:

0% to 29% - Poor

30% to 69% - Fair

70% to 100% - Good

This association is 74% funded on 1/1/2015.

Base Line Funding Model Summary of Calculations

Required Annual Contribution $30,506.40$53.52 per unit annually

Average Net Annual Interest Earned $962.29Total Annual Allocation to Reserves $31,468.69

$55.21 per unit annually

Arbor Ridge P.U.D. Homeowners Association-MasterBase Assessment Funding Model Projection


Beginning Balance: $198,947Projected Fully

Current Annual Annual Annual Ending Funded PercentYear Cost Contribution Interest Expenditures Reserves Reserves Funded

2015 509,287 30,506 962 36,996 193,420 259,931 74%2016 518,301 30,955 1,088 6,706 218,757 282,235 78%2017 527,475 31,410 1,229 4,392 247,004 307,680 80%2018 536,811 31,872 1,382 2,462 277,796 335,945 83%2019 546,313 32,340 1,520 6,211 305,444 361,408 85%2020 555,983 32,816 1,662 5,764 334,158 388,225 86%2021 565,823 33,298 1,809 5,588 363,678 416,156 87%2022 575,839 33,787 1,987 399,452 450,640 89%2023 586,031 34,284 2,127 8,430 427,433 477,785 89%2024 596,404 34,788 2,302 1,815 462,708 512,514 90%2025 606,960 35,299 2,313 35,436 464,884 514,734 90%2026 617,703 35,818 1,462 208,297 293,868 344,639 85%2027 628,637 36,345 1,585 13,272 318,525 367,072 87%2028 639,763 36,879 1,762 2,934 354,233 400,764 88%2029 651,087 37,421 1,921 7,402 386,173 431,118 90%2030 662,611 37,971 2,121 426,265 469,954 91%2031 674,340 38,530 322 400,466 64,650 109,564 59%2032 686,275 39,096 483 7,115 97,114 136,708 71%2033 698,423 39,671 639 9,018 128,405 163,001 79%2034 710,785 40,254 832 2,163 167,328 197,197 85%2035 723,365 40,845 830 42,232 166,771 192,521 87%2036 736,169 41,446 993 9,525 199,686 221,073 90%2037 749,199 42,055 1,178 6,238 236,681 254,032 93%2038 762,460 42,673 1,340 11,402 269,292 283,034 95%2039 775,956 43,301 1,464 19,886 294,170 304,700 97%2040 789,690 43,937 1,691 339,797 347,284 98%2041 803,668 44,583 1,882 7,937 378,326 383,342 99%2042 817,892 45,238 2,118 425,683 428,645 99%2043 832,369 45,903 2,304 10,748 463,142 464,685 100%2044 847,102 46,578 2,492 11,360 500,852 501,443 100%

Arbor Ridge P.U.D. Homeowners Association-MasterBase Line Funding Model & Fully Funded Comparison Chart


The Current Assessment Funding Model is based on the current annual assessment, parameters, and reservefund balance. Because it is calculated using the current annual assessment, it will give the accurate projection ofhow well the association is funded for the next 30 years of planned reserve expenditures.

Arbor Ridge P.U.D. Homeowners Association-MasterBeaverton, Oregon 97006

Component Summary


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AsphaltAsphalt: Overlay-Moon Valley 7,547 30 16 2,660 234 2,660Asphalt: Overlay-Path 7,166 30 16 2,526 222 2,526Asphalt: Overlay-Silver Creek 8,143 30 16 2,870 253 2,870Asphalt: Overlay-Tatum Ranch 2,210 30 16 779 69 779Asphalt: Repairs-Moon Valley 575 5 4 107 96 107Asphalt: Repairs-Path 803 5 1 631 141 631Asphalt: Repairs-Silver Creek 889 5 4 166 149 166Asphalt: Repairs-Tatum Ranch 199 5 4 37 33 37Asphalt: Sealcoat-Moon Valley 701 5 3 266 119 266Asphalt: Sealcoat-Path 761 5 3 289 129 289Asphalt: Sealcoat-Silver Creek 795 5 3 302 135 302Asphalt: Sealcoat-Tatum Ranch 205 5 3 78 35 78

Asphalt - Total $29,995 $10,710 $1,615 $10,710

BridgeBridge: Wooden 21,225 25 11 9,800 803 9,800

Bridge - Total $21,225 $9,800 $803 $9,800

ConcreteConcrete: Flatwork-Sidewalks 5,582 10 0 4 5,582 542 5,582Concrete: Flatwork-Sidewalks-Moon .. 631 10 0 4 631 61 631Concrete: Flatwork-Sidewalks-Silver .. 780 10 0 4 780 76 780Curb-Gutter: Moon Valley 2,104 12 0 2 2,104 175 2,104Curb-Gutter: Silver Creerk 2,600 12 0 2 2,600 217 2,600Curb-Gutter: Tatum Ranch 1,808 12 0 2 1,808 151 1,808

Concrete - Total $13,506 $13,506 $1,222 $13,506

DrainageDrainage: Storm Drains-Waste Produ.. 4,634 30 16 1,633 144 1,633

Drainage - Total $4,634 $1,633 $144 $1,633

FencingFence: Chain Link 279,719 30 16 50,638 11,279 98,585Fence: Vinyl 172,675 25 11 79,726 6,535 79,726Fence: Vinyl-Wash 5,764 6 5 880 802 880

Fencing - Total $458,159 $131,244 $18,616 $179,192

LandscapeBark Dust: Replace 4,240 2 0 1 4,240 1,825 4,240Landscaping: Plant & Arborvitae 6,000 10 0 4 6,000 583 6,000

Landscape - Total $10,240 $10,240 $2,408 $10,240

Arbor Ridge P.U.D. Homeowners Association-MasterBeaverton, Oregon 97006

Component Summary


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LightingLighting: Entry Monument 750 8 0 6 750 88 750

Lighting - Total $750 $750 $88 $750

MailboxesMailboxes: Replace 74,456 30 16 0 3,734 26,242

Mailboxes - Total $74,456 $3,734 $26,242

MasonryBrick: Pilaster-Wall 8,938 30 16 3,150 277 3,150

Masonry - Total $8,938 $3,150 $277 $3,150

SignsSigns: Common Area 1,018 10 1 5 933 66 933Signs: Monument 4,885 10 1 5 4,480 319 4,480

Signs - Total $5,903 $5,413 $385 $5,413

TreesTrees: Renovation-Removal-Trimming 2,500 10 0 4 2,500 243 2,500

Trees - Total $2,500 $2,500 $243 $2,500

WallsWalls: Retaining 10,000 10 0 4 10,000 971 10,000

Walls - Total $10,000 $10,000 $971 $10,000

Grand Total: $640,305 $198,947 $30,506 $273,136

Arbor Ridge P.U.D. Homeowners Association-MasterAnnual Expenditure Detail


Description Expenditures

Replacement Year 2015Bark Dust: Replace 4,240Concrete: Flatwork-Sidewalks 5,582Concrete: Flatwork-Sidewalks-Moon Valley 631Concrete: Flatwork-Sidewalks-Silver Creek 780Curb-Gutter: Moon Valley 2,104Curb-Gutter: Silver Creerk 2,600Curb-Gutter: Tatum Ranch 1,808Landscaping: Plant & Arborvitae 6,000Lighting: Entry Monument 750Trees: Renovation-Removal-Trimming 2,500Walls: Retaining 10,000

Total for 2015 $36,996

Replacement Year 2016Asphalt: Repairs-Path 803Signs: Common Area 1,018Signs: Monument 4,885

Total for 2016 $6,706

Replacement Year 2017Bark Dust: Replace 4,392

Total for 2017 $4,392

Replacement Year 2018Asphalt: Sealcoat-Moon Valley 701Asphalt: Sealcoat-Path 761Asphalt: Sealcoat-Silver Creek 795Asphalt: Sealcoat-Tatum Ranch 205

Total for 2018 $2,462

Replacement Year 2019Asphalt: Repairs-Moon Valley 575Asphalt: Repairs-Silver Creek 889Asphalt: Repairs-Tatum Ranch 199Bark Dust: Replace 4,548

Total for 2019 $6,211




Replacement Year 2020Fence: Vinyl-Wash 5,764

Total for 2020 $5,764

Replacement Year 2021Asphalt: Repairs-Path 877Bark Dust: Replace 4,711

Total for 2021 $5,588

No Replacement in 2022

Replacement Year 2023Asphalt: Sealcoat-Moon Valley 765Asphalt: Sealcoat-Path 830Asphalt: Sealcoat-Silver Creek 868Asphalt: Sealcoat-Tatum Ranch 224Bark Dust: Replace 4,879Lighting: Entry Monument 863

Total for 2023 $8,430

Replacement Year 2024Asphalt: Repairs-Moon Valley 628Asphalt: Repairs-Silver Creek 970Asphalt: Repairs-Tatum Ranch 217

Total for 2024 $1,815

Replacement Year 2025Bark Dust: Replace 5,053Concrete: Flatwork-Sidewalks 6,653Concrete: Flatwork-Sidewalks-Moon Valley 752Concrete: Flatwork-Sidewalks-Silver Creek 930Landscaping: Plant & Arborvitae 7,151Trees: Renovation-Removal-Trimming 2,979Walls: Retaining 11,918

Total for 2025 $35,436

Replacement Year 2026Asphalt: Repairs-Path 957




Replacement Year 2026 continued...Bridge: Wooden 21,225Fence: Vinyl 172,675Fence: Vinyl-Wash 6,404Signs: Common Area 1,213Signs: Monument 5,822

Total for 2026 $208,297

Replacement Year 2027Bark Dust: Replace 5,234Curb-Gutter: Moon Valley 2,597Curb-Gutter: Silver Creerk 3,209Curb-Gutter: Tatum Ranch 2,232

Total for 2027 $13,272

Replacement Year 2028Asphalt: Sealcoat-Moon Valley 835Asphalt: Sealcoat-Path 906Asphalt: Sealcoat-Silver Creek 948Asphalt: Sealcoat-Tatum Ranch 245

Total for 2028 $2,934

Replacement Year 2029Asphalt: Repairs-Moon Valley 685Asphalt: Repairs-Silver Creek 1,059Asphalt: Repairs-Tatum Ranch 237Bark Dust: Replace 5,421

Total for 2029 $7,402


Replacement Year 2031Asphalt: Overlay-Moon Valley 7,547Asphalt: Overlay-Path 7,166Asphalt: Overlay-Silver Creek 8,143Asphalt: Overlay-Tatum Ranch 2,210Asphalt: Repairs-Path 1,045Bark Dust: Replace 5,614




Replacement Year 2031 continued...Brick: Pilaster-Wall 8,938Drainage: Storm Drains-Waste Products 4,634Fence: Chain Link 279,719Lighting: Entry Monument 993Mailboxes: Replace 74,456

Total for 2031 $400,466

Replacement Year 2032Fence: Vinyl-Wash 7,115

Total for 2032 $7,115

Replacement Year 2033Asphalt: Sealcoat-Moon Valley 912Asphalt: Sealcoat-Path 990Asphalt: Sealcoat-Silver Creek 1,035Asphalt: Sealcoat-Tatum Ranch 267Bark Dust: Replace 5,815

Total for 2033 $9,018

Replacement Year 2034Asphalt: Repairs-Moon Valley 748Asphalt: Repairs-Silver Creek 1,157Asphalt: Repairs-Tatum Ranch 258

Total for 2034 $2,163

Replacement Year 2035Bark Dust: Replace 6,022Concrete: Flatwork-Sidewalks 7,929Concrete: Flatwork-Sidewalks-Moon Valley 897Concrete: Flatwork-Sidewalks-Silver Creek 1,108Landscaping: Plant & Arborvitae 8,522Trees: Renovation-Removal-Trimming 3,551Walls: Retaining 14,204

Total for 2035 $42,232

Replacement Year 2036Asphalt: Repairs-Path 1,141




Replacement Year 2036 continued...Signs: Common Area 1,445Signs: Monument 6,938

Total for 2036 $9,525

Replacement Year 2037Bark Dust: Replace 6,238

Total for 2037 $6,238

Replacement Year 2038Asphalt: Sealcoat-Moon Valley 996Asphalt: Sealcoat-Path 1,080Asphalt: Sealcoat-Silver Creek 1,130Asphalt: Sealcoat-Tatum Ranch 292Fence: Vinyl-Wash 7,905

Total for 2038 $11,402

Replacement Year 2039Asphalt: Repairs-Moon Valley 817Asphalt: Repairs-Silver Creek 1,263Asphalt: Repairs-Tatum Ranch 282Bark Dust: Replace 6,460Curb-Gutter: Moon Valley 3,206Curb-Gutter: Silver Creerk 3,961Curb-Gutter: Tatum Ranch 2,755Lighting: Entry Monument 1,143

Total for 2039 $19,886


Replacement Year 2041Asphalt: Repairs-Path 1,245Bark Dust: Replace 6,691

Total for 2041 $7,937


Replacement Year 2043Asphalt: Sealcoat-Moon Valley 1,087




Replacement Year 2043 continued...Asphalt: Sealcoat-Path 1,179Asphalt: Sealcoat-Silver Creek 1,233Asphalt: Sealcoat-Tatum Ranch 318Bark Dust: Replace 6,930

Total for 2043 $10,748

Replacement Year 2044Asphalt: Repairs-Moon Valley 892Asphalt: Repairs-Silver Creek 1,378Asphalt: Repairs-Tatum Ranch 308Fence: Vinyl-Wash 8,782

Total for 2044 $11,360



2015 2016 2017 2018 2019 2020 2021 2022 2023 2024DescriptionAsphalt: Overlay-Moon ValleyAsphalt: Overlay-PathAsphalt: Overlay-Silver CreekAsphalt: Overlay-Tatum RanchAsphalt: Repairs-Moon Valley 575 628Asphalt: Repairs-Path 803 877Asphalt: Repairs-Silver Creek 889 970Asphalt: Repairs-Tatum Ranch 199 217Asphalt: Sealcoat-Moon Valley 701 765Asphalt: Sealcoat-Path 761 830Asphalt: Sealcoat-Silver Creek 795 868Asphalt: Sealcoat-Tatum Ranch 205 224Bark Dust: Replace 4,240 4,392 4,548 4,711 4,879Brick: Pilaster-WallBridge: WoodenConcrete: Flatwork-Sidewalks 5,582Concrete: Flatwork-Sidewalks-Moon Valley 631Concrete: Flatwork-Sidewalks-Silver Creek 780Curb-Gutter: Moon Valley 2,104Curb-Gutter: Silver Creerk 2,600Curb-Gutter: Tatum Ranch 1,808Drainage: Storm Drains-Waste ProductsFence: Chain LinkFence: VinylFence: Vinyl-Wash 5,764Landscaping: Plant & Arborvitae 6,000Lighting: Entry Monument 750 863Mailboxes: ReplaceSigns: Common Area 1,018Signs: Monument 4,885Trees: Renovation-Removal-Trimming 2,500Walls: Retaining 10,000

Year Total: 36,996 6,706 4,392 2,462 6,211 5,764 5,588 8,430 1,815



2025 2026 2027 2028 2029 2030 2031 2032 2033 2034DescriptionAsphalt: Overlay-Moon Valley 7,547Asphalt: Overlay-Path 7,166Asphalt: Overlay-Silver Creek 8,143Asphalt: Overlay-Tatum Ranch 2,210Asphalt: Repairs-Moon Valley 685 748Asphalt: Repairs-Path 957 1,045Asphalt: Repairs-Silver Creek 1,059 1,157Asphalt: Repairs-Tatum Ranch 237 258Asphalt: Sealcoat-Moon Valley 835 912Asphalt: Sealcoat-Path 906 990Asphalt: Sealcoat-Silver Creek 948 1,035Asphalt: Sealcoat-Tatum Ranch 245 267Bark Dust: Replace 5,053 5,234 5,421 5,614 5,815Brick: Pilaster-Wall 8,938Bridge: Wooden 21,225Concrete: Flatwork-Sidewalks 6,653Concrete: Flatwork-Sidewalks-Moon Valley 752Concrete: Flatwork-Sidewalks-Silver Creek 930Curb-Gutter: Moon Valley 2,597Curb-Gutter: Silver Creerk 3,209Curb-Gutter: Tatum Ranch 2,232Drainage: Storm Drains-Waste Products 4,634Fence: Chain Link 279,719Fence: Vinyl 172,675Fence: Vinyl-Wash 6,404 7,115Landscaping: Plant & Arborvitae 7,151Lighting: Entry Monument 993Mailboxes: Replace 74,456Signs: Common Area 1,213Signs: Monument 5,822Trees: Renovation-Removal-Trimming 2,979Walls: Retaining 11,918

Year Total: 35,436 208,297 13,272 2,934 7,402 400,466 7,115 9,018 2,163



2035 2036 2037 2038 2039 2040 2041 2042 2043 2044DescriptionAsphalt: Overlay-Moon ValleyAsphalt: Overlay-PathAsphalt: Overlay-Silver CreekAsphalt: Overlay-Tatum RanchAsphalt: Repairs-Moon Valley 817 892Asphalt: Repairs-Path 1,141 1,245Asphalt: Repairs-Silver Creek 1,263 1,378Asphalt: Repairs-Tatum Ranch 282 308Asphalt: Sealcoat-Moon Valley 996 1,087Asphalt: Sealcoat-Path 1,080 1,179Asphalt: Sealcoat-Silver Creek 1,130 1,233Asphalt: Sealcoat-Tatum Ranch 292 318Bark Dust: Replace 6,022 6,238 6,460 6,691 6,930Brick: Pilaster-WallBridge: WoodenConcrete: Flatwork-Sidewalks 7,929Concrete: Flatwork-Sidewalks-Moon Valley 897Concrete: Flatwork-Sidewalks-Silver Creek 1,108Curb-Gutter: Moon Valley 3,206Curb-Gutter: Silver Creerk 3,961Curb-Gutter: Tatum Ranch 2,755Drainage: Storm Drains-Waste ProductsFence: Chain LinkFence: VinylFence: Vinyl-Wash 7,905 8,782Landscaping: Plant & Arborvitae 8,522Lighting: Entry Monument 1,143Mailboxes: ReplaceSigns: Common Area 1,445Signs: Monument 6,938Trees: Renovation-Removal-Trimming 3,551Walls: Retaining 14,204

Year Total: 42,232 9,525 6,238 11,402 19,886 7,937 10,748 11,360

Arbor Ridge P.U.D. Homeowners Association-MasterDetail Report by Category


Asphalt: Overlay-Moon Valley

Asset ID 1012Group Capital

Category AsphaltPlaced in Service January 2001

Useful Life 30Replacement Year 2031

Remaining Life 16

4,750 SF @ $1.20Asset Cost $5,700.00

Percent Replacement 100%Future Cost $7,547.29

Remarks:

This item is the overlay of the asphalt street serving 6 lots per the Declaration calledMoon Valley Terrace.

There are actually 7 lots using this cul-d-sac.

The cost and useful life assumptions are based on accepted industry estimates asestablished by RS Means, Craftsman, Marshall Swift, The National Construction Estimator,National Repair and Remodel Estimator, Dodge Cost Manual, McGraw Hill Professional,assorted independent contractors, various specialists, assorted vendors catalogues, actualquotations or historical costs, Consultant's own experience in like components or as providedby the Client.

The Association should obtain a bid to confirm this estimate.

These costs do not take into consideration any changes to the building code.

Note: This is a provision for an anticipated expense. Should the Association find thatthe cost of this item is greater or less than the amount provided for herein, this reserve studyshould be updated to reflect the actual component cost.



Asphalt: Overlay-Path




Remaining Life 16

4,510 SF @ $1.20Asset Cost $5,412.00


Remarks:

This item is the overlay of the asphalt pathway for the master association.

Funds may be used to repair the asphalt failure if needed (see Asphalt-S/C-Path.).

The board has expressed a concern (2007) regarding the pathways; hence, we suggest alicensed and bonded contractor review the paths and make a recommendation to the board andmanagement.







Asphalt: Overlay-Silver Creek




Remaining Life 16

5,125 SF @ $1.20Asset Cost $6,150.00


Remarks:

This item is the overlay of the asphalt street serving 7 lots called Silver Creek Place.







Asphalt: Overlay-Tatum Ranch




Remaining Life 16

1,391 SF @ $1.20Asset Cost $1,669.20


Remarks:

This item is the overlay of the asphalt street serving 3 lots called Tatum Ranch Place.







Asphalt: Repairs-Moon Valley


Category AsphaltPlaced in Service July 2014


Remaining Life 4

4,750 SF @ $3.75Asset Cost $536.16

Percent Replacement 3.01%Future Cost $575.14

Remarks:

This item is the repairs required on the private street.

There are actually 7 lots using this street.







Asphalt: Repairs-Path




Remaining Life 1

4,510 SF @ $3.50Asset Cost $789.25

Percent Replacement 5%Future Cost $803.22

Remarks:

This item is the repairs required on the pathway.

The asphalt has numerous cracks and subsidence at the present time.

It appears the infastructure base may be failing under the pathway as there appears to beground movement.

Funds may be used from the Asphaly-O/L-Path item if needed.








Asphalt: Repairs-Silver Creek

Asset ID 1032Group Non-Capital



Remaining Life 4

5,390 SF @ $3.75Asset Cost $828.71


Remarks:








Asphalt: Repairs-Tatum Ranch


Category AsphaltPlaced in Service July 2014


Remaining Life 4

1,391 SF @ $3.75Asset Cost $185.18


Remarks:








Asphalt: Sealcoat-Moon Valley


Category AsphaltPlaced in Service September 2013


Remaining Life 3

4,750 SF @ $0.14Asset Cost $665.00


Remarks:

This item is the seal coating, and re-striping of the asphalt street serving 6 lots calledMoon Valley Terrace.

There are actually 7 lots using this street.







Asphalt: Sealcoat-Path




Remaining Life 3

4,510 SF @ $0.16Asset Cost $721.60


Remarks:

This item is the resealing, and re-striping of the asphalt path for the master association.

The asphalt has numerous cracks and subsidence at the present time.

It appears the infastructure base may be failing under the pathway as there appears to beground movement.

Funds may be used from the Asphaly-O/L-Path item if needed.








Asphalt: Sealcoat-Silver Creek




Remaining Life 3

5,390 SF @ $0.14Asset Cost $754.60


Remarks:

This item is the sealcoating, and restriping of the asphalt street serving 7 lots calledSilver Creek Place.







Asphalt: Sealcoat-Tatum Ranch




Remaining Life 3

1,391 SF @ $0.14Asset Cost $194.74


Remarks:

This item is the sealcoating, and re-striping of the asphalt street serving 3 lots calledTatum Ranch Place.







Bark Dust: Replace


Category LandscapePlaced in Service August 2012

Useful Life 2Adjustment 1

Replacement Year 2015Remaining Life 0

24,942 SF @ $0.17Asset Cost $4,240.14


Remarks:

This item is the bark dust spread around the landscaped beds in the common area.







Brick: Pilaster-Wall


Category MasonryPlaced in Service January 2001


Remaining Life 16

15 Each @ $450.00Asset Cost $6,750.00


Remarks:

This item is an allowance for any work required on the masonry pilasters and walls atthe common area fencing and monument, which may have a life expectancy of more than 30years. However, we have allowed for any repair, maintenace or replacement within the 30years.







Bridge: Wooden


Category BridgePlaced in Service January 2001


Remaining Life 11

1 Each @ $17,500.00Asset Cost $17,500.00


Remarks:

This item is the wooden pedestrian bridge over the wet lands in the common area.

The bridge is mostly glu-lam beams or stringers with Douglas Fir uprights.







Concrete: Flatwork-Sidewalks


Category ConcretePlaced in Service January 2001



2,326 SF @ $12.00Asset Cost $5,582.40


Remarks:

This item is 20% of the total concrete sidewalks in the common area, which may needrepairs, maintenance or replacement within a 10-year period.







Concrete: Flatwork-Sidewalks-Moon Valley





263 SF @ $12.00Asset Cost $631.20


Remarks:

This item is the repair, maintenance or replacement of 20% of the concrete sidewalk bythe private street Moon Terrace, which may need work within 10 years.







Concrete: Flatwork-Sidewalks-Silver Creek





325 SF @ $12.00Asset Cost $780.00


Remarks:

This item is the repair, maintenance or replacement of 20% of the concrete sidewalkson the private street Silver Creek, which may need work within 10 years.







Curb-Gutter: Moon Valley





263 LF @ $8.00Asset Cost $2,104.00


Remarks:

This item is the repair, maintenance or replacement of the concrete vertical curb andgutter on the private street.







Curb-Gutter: Silver Creerk





325 LF @ $8.00Asset Cost $2,600.00


Remarks:

This item is the repair, maintenance or replacement of the concrete vertical curb andgutter on the private street.







Curb-Gutter: Tatum Ranch





226 LF @ $8.00Asset Cost $1,808.00


Remarks:

This item is the repair, maintenance or replacement of the concrete vertical curb andgutters on the private street.







Drainage: Storm Drains-Waste Products


Category DrainagePlaced in Service January 2001


Remaining Life 16

1 Total @ $3,500.00Asset Cost $3,500.00


Remarks:

This item is an allowance for any work required on the drainage system in thecommunity.







Fence: Chain Link


Category FencingPlaced in Service January 2001


Remaining Life 16

11,225 LF @ $18.82Asset Cost $211,254.50


Remarks:

This item is the black, vinyl-coated, chain link fencing around the wet lands and streetareas in the common area (NW Laidlaw Road and NW West Union Road).







Fence: Vinyl


Category FencingPlaced in Service January 2001


Remaining Life 11

9,600 LF @ $14.83Asset Cost $142,368.00


Remarks:

This item is the vinyl, 3-rail fencing around the wet lands in the common area, NWLaidlaw Road , NW West Union Road, and some side streets.







Fence: Vinyl-Wash


Category FencingPlaced in Service May 2014


Remaining Life 5

9,600 LF @ $0.55Asset Cost $5,280.00


Remarks:

This item is the washing of the vinyl, 3-rail fencing around the wet lands in thecommon area, NW Laidlaw Road , NW West Union Road, and some side streets.







Landscaping: Plant & Arborvitae


Category LandscapePlaced in Service January 2001



1 Each @ $6,000.00Asset Cost $6,000.00


Remarks:

This item is the replacement of any landscape plants, shrubs, trees.

Funds may be used at any time work needs to be done during the 10 years.







Lighting: Entry Monument


Category LightingPlaced in Service January 2001



6 Each @ $125.00Asset Cost $750.00


Remarks:

This item is the area lighting fixtures at the monuments.







Mailboxes: Replace


Category MailboxesPlaced in Service January 2001


Remaining Life 16

36 Each @ $1,562.00Asset Cost $56,232.00


Remarks:

This item is the gang mail boxes located throughout the subdivision.







Signs: Common Area


Category SignsPlaced in Service January 2001



2 Each @ $500.00Asset Cost $1,000.00


Remarks:

This item is the replacement of any signs in the common area excluding monumentsign.







Signs: Monument


Category SignsPlaced in Service January 2001



2 Each @ $2,400.00Asset Cost $4,800.00


Remarks:

This item is the entry aluminum lettered monument signs at the corner of Laidlaw andWest Union.







Trees: Renovation-Removal-Trimming


Category TreesPlaced in Service January 2001



1 Total @ $2,500.00Asset Cost $2,500.00


Remarks:

This item is an allowance for any tree work in the common area or in the parking strips.







Walls: Retaining


Category WallsPlaced in Service January 2001



1 Total @ $10,000.00Asset Cost $10,000.00


Remarks:

While the retaining wall consists of concrete key-lock blocks and large ballast rocksthat may have a life expectancy of more than 30 years, we have allowed for a portion of thereplacement work that may need to be done every 10 years or during the 10 years.

The board has expressed a concern (2007) regarding the retaining walls; hence, wesuggest a licensed and bonded contractor review the walls and make a recommendation to theboard and mangement.






ASSOCIATION RESOLUTION FOR REVENUE RULING 70-604 ELECTIONEXCESS INCOME APPLIED TO THE FOLLOWING YEAR'S ASSESSMENTS

RESOLUTION MUST BE VOTED ON BY THE MEMBERSHIPAT THE ANNUAL MEETING

ANNUAL RESOLUTION OF THE (Association)____________________________________________________________________________________________________

RE: EXCESS INCOME APPLIED TO THE FOLLOWING YEAR'SASSESSMENTS REVENUE RULING 70-604

WHEREAS, The (Association)_______________________________________ is a (State)___________________ corporation duly organized and existing under the laws of the State of(State) ______________________;

and

WHEREAS, The members desire that the corporation shall act in full accordance with therulings and regulations of the Internal Revenue Service;

and

NOW, THEREFORE, the members hereby adopt the following resolution by and on behalfof the (Association) __________________________________________:

RESOLVED, that any excess of membership income over membership expenses for the yearending _____________________________20__ shall be applied against the subsequent tax yearmember assessment as provided by IRS Revenue Ruling 70-604.

This resolution was voted on and made a part of the minutes of the annual meeting of(Association) __________________________________________________.

BY: ________________________________President

ATTESTED: ________________________Secretary

Form compliant with IRS Ruling 70-604


EAGLE RIDGE HOMEOWNERS ASSOCIATION

Maintenance Plan

The current maintenance plan prepared by Reserve Studies by Reserve Funding is attached as anaddendum to this reserve study by separate document. The reserve study and the maintenance planshould be filed together as one document.

Each year, during the update process whether Level II or Level III, the maintenance plan shouldbe updated and revised as required.

The maintenance plan should be used as a guide for the timing of maintenance procedures andthe forms attached to the maintenance plan used in order to have an on-going record of maintenancedone.

This maintenance plan may be the original maintenance plan done (Level 1) or an update of aprevious maintenance plan.

If component materials have been changed or substituted the Client should notify Reserve Funding byReserve Studies so that changes can be taken into consideration during the preparation of the reservestudy.


FUNDING GOALS AND FUNDING PLANSEXPLANATION OF FUNDING GOALS

In a Full Reserve Study, the reserve provider conducts a component inventory, a condition assessment (basedupon on-site visual observations), and life and valuation estimates to determine both a “fund status” and “fundingplan”.

In an Update with site inspection, the reserve provider conducts a component inventory (verification only, notquantification unless new components have been added to the inventory), a condition assessment (based upon on-site visual observations), and life and valuation estimates to determine both the “fund status and “funding plan.”

In an Update without site inspection, the reserve provider conducts life and valuation estimates to determine the“fund status” and “funding plan.”

EXPLANATION OF FUNDING PLANS

Baseline Funding Model. The goal of this funding method is to keep the reserve cash balance above

zero. This means that while each individual component may not be fully funded, the reserve balance overall does

not drop below zero during the projected period. An association using this funding method must understand that

even a minor reduction in a component’s remaining useful life can result in a deficit in the reserve cash balance.

Greatest risk to Client for a special assessment

Threshold Funding Model. This method is based upon the cash flow funding concept. The minimum

reserve cash balance in threshold funding, however, is set at a predetermined dollar amount (other than $0) and

Client must select a dollar amount. Lesser risk to Client for a special assessment

Full Funding Model (Proportional Funding)---Given that the basis of funding for reserves is to

distribute the costs of the replacements over the lives of the components in question, it follows that the ideal level

of reserves will be proportionately related to those lives and costs. If an association has a component with an

expected estimated useful life of ten years, it will set aside approximately one-tenth of the replacement cost each

year. At the end of three years, one will expect three-tenths of the replacement cost to have accumulated, and if

so, that component will be “fully-funded.” This model is important in that it is a measure of the adequacy of an

association’s reserves at any one point of time, and is independent of any particular method which may have been

used for past funding or may be under consideration for future funding. This formula represents a snapshot in

time and is based upon current replacement cost, independent of future inflationary or investment factors:

Fully Funded Reserves = Age divided by Useful Life the results multiplied by Current Replacement Cost

When an association’s total accumulated reserves for all components meet this criterion, its reserves areconsidered “fully-funded.” Least risk to Client for a special assessment.

Arbor Ridge P.U.D. Homeowners Association-MasterMember Summary Report


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Description

Asphalt: Overlay-Moon Valley 2001 2031 5,700 30 0 16 4750 @ 1.207,547Asphalt: Overlay-Path 2001 2031 5,412 30 0 16 4510 @ 1.207,166Asphalt: Overlay-Silver Creek 2001 2031 6,150 30 0 16 5125 @ 1.208,143Asphalt: Overlay-Tatum Ranch 2001 2031 1,669 30 0 16 1391 @ 1.202,210Asphalt: Repairs-Moon Valley 2014 2019 536 5 0 4 4750 @ 3.75575Asphalt: Repairs-Path 2011 2016 789 5 0 1 4510 @ 3.50803Asphalt: Repairs-Silver Creek 2014 2019 829 5 0 4 5390 @ 3.75889Asphalt: Repairs-Tatum Ranch 2014 2019 185 5 0 4 1391 @ 3.75199Asphalt: Sealcoat-Moon Valley 2013 2018 665 5 0 3 4750 @ 0.14701Asphalt: Sealcoat-Path 2013 2018 722 5 0 3 4510 @ 0.16761Asphalt: Sealcoat-Silver Creek 2013 2018 755 5 0 3 5390 @ 0.14795Asphalt: Sealcoat-Tatum Ranch 2013 2018 195 5 0 3 1391 @ 0.14205Bark Dust: Replace 2012 2015 4,240 2 1 0 24942 @ 0.174,240Brick: Pilaster-Wall 2001 2031 6,750 30 0 16 15 @ 450.008,938Bridge: Wooden 2001 2026 17,500 25 0 11 1 @ 17,500.0021,225Concrete: Flatwork-Sidewalks 2001 2015 5,582 10 4 0 2326 @ 12.005,582Concrete: Flatwork-Sidewalks-Moon.. 2001 2015 631 10 4 0 263 @ 12.00631Concrete: Flatwork-Sidewalks-Silver.. 2001 2015 780 10 4 0 325 @ 12.00780Curb-Gutter: Moon Valley 2001 2015 2,104 12 2 0 263 @ 8.002,104Curb-Gutter: Silver Creerk 2001 2015 2,600 12 2 0 325 @ 8.002,600Curb-Gutter: Tatum Ranch 2001 2015 1,808 12 2 0 226 @ 8.001,808Drainage: Storm Drains-Waste Prod.. 2001 2031 3,500 30 0 16 1 @ 3,500.004,634Fence: Chain Link 2001 2031 211,254 30 0 16 11225 @ 18.82279,719Fence: Vinyl 2001 2026 142,368 25 0 11 9600 @ 14.83172,675Fence: Vinyl-Wash 2014 2020 5,280 6 0 5 9600 @ 0.555,764Landscaping: Plant & Arborvitae 2001 2015 6,000 10 4 0 1 @ 6,000.006,000Lighting: Entry Monument 2001 2015 750 8 6 0 6 @ 125.00750Mailboxes: Replace 2001 2031 56,232 30 0 16 36 @ 1,562.0074,456Signs: Common Area 2001 2016 1,000 10 5 1 2 @ 500.001,018Signs: Monument 2001 2016 4,800 10 5 1 2 @ 2,400.004,885Trees: Renovation-Removal-Trimmi.. 2001 2015 2,500 10 4 0 1 @ 2,500.002,500Walls: Retaining 2001 2015 10,000 10 4 0 1 @ 10,000.0010,000

Reserve Studies by Reserve Funding ● 800-301-3411Page 1-1

RESERVE STUDIES BYRESERVE FUNDING

Attached herewith is the reserve study (physical and financial analysis) for the Association.Interest from reserve savings accounts must stay in the reserve account(s) and not be used as anoffset against monthly assessments.

You are encouraged to thoroughly review this document and its individual reports for conformityto the description of responsibility for the Association’s Common Areas and Commonly MaintainedProperty as those terms are defined in your Declaration of Covenants, Conditions and Restrictions. Inaddition, please pay close attention to the reserve bank balance estimated to be on hand by your staff.Any discrepancy in the figure or interest rate can have a significant effect on the reserve study andthe outcome of the assumptions shown.

The intention of the reserve study is to forecast, as they wear out in future years, theAssociation’s ability to repair, replace, restore or maintain major components with a life expectancy ofover one year and an estimated cost of over one thousand dollars. The reports will provide theAssociation’s Board of Directors (Board) the information necessary to make the reserve projectiondisclosures required by existing statutes, lender’s requirements, or the governing documents.

The cost outlined in the reserve study is subjective in some areas, therefore we may use costssubmitted by the Declarant, Management or the Board, and are for budgetary and planning purposesonly. Actual bid costs would depend upon the defined scope of work at the time the repair, replacementor restoration is done, and on actual price levels prevailing at the time the future repair, replacement, orrestoration must be done.

The estimates on future repair, replacement and restoration in the reserve study will be good faithestimates and projections, based upon the estimated future inflation rate and interest (yield) on themonies set aside which may or may not prove accurate. Consultant submits that the probability that itmay project in its reserve study, or that the Board could project in its disclosures, future costs or actualfuture remaining useful lives of components having useful lives extended beyond one year withprecision is the functional equivalent of winning the lottery (while it may happen in rare instances bychance, one may not reasonably expect it to happen). As a result, Consultant cannot, and does not,warrant or guaranty its projections. Assumptions on future costs and life expectancy’s should bereviewed and adjusted on an annualized basis, as current and future cost projections and lifeexpectancy’s become more uncertain.


This reserve study is limited to an off-site, on-site or plan take-off physical analysis of theproperty, and as such did not disturb the major components. Therefore, all Common Areas andCommonly Maintained Property as those terms are defined in the Declaration for which there is noaccess without defacement are specifically omitted. However, if sufficient historical data including costswere available that would allow a reasonable projection of future expenditures for any unobservedcomponents, e.g., plumbing, utilities, electrical wiring, those components could be included in thereserve study and may require an engineer's report.

Since no destructive testing was undertaken, this reserve study, as stated above, does not purportto address any latent and/or patent defects, nor does it address any life expectancies that are abnormallyshort due either to improper design or installation, or to subsequent improper maintenance. It is assumedthat all components are to be reasonably maintained for the remainder of their life expectancy.

The seals below the signature is evidence that the reserve study was performed under theguidelines and policies of the Association of Professional Reserve Analysts and the CommunityAssociation Institute.

Sincerely,

, PRA, RS

, PRA

Association of Professional Reserve Analyst-APRA-(PRA)Community Association Institute-CAI-(RS) Reserve Specialist


EXECUTIVE SUMMARY

At the direction of the Association that recognizes the need for proper reserve planning, we haveprepared a Reserve Study (physical and financial analysis) of the Association's Common Areas andCommonly Maintained Property as those terms are defined in the Declaration and submit our findings inthis report. The purpose of this Reserve Study is to establish a reasonable yearly reserve contributionnecessary to meet future expenditures for major replacements or repairs of the Common Areas andCommonly Maintained Property as those terms are defined in the Declaration in compliance with TexasTimeshare Act and Texas Property Code 221, as amended, and that components have a life expectancyof more than one year and less than thirty years.

All major Common Areas and Commonly Maintained Property as those terms are defined in theDeclaration are likely to require capital repair or replacement over the next thirty years. Our analysisconsidered current and future costs of replacement for the subject Common Areas and CommonlyMaintained Property as those terms are defined in the Declaration, the average annual fund balance,interest on invested funds, and anticipated inflation. Based on the investigation and analysis as detailedin the accompanying narrative, the attached CURRENT ASSESSMENT FUNDING MODELPROJECTION report details the average reserve contributions that are recommended to fund theexpected capital expenditures of the subject Common Areas and Commonly Maintained Property asthose terms are defined in the Declaration over the next thirty years.

We arrived at these recommendations in part by matching the anticipated expenditures noted inthe ANNUAL EXPENDITURE DETAIL against current fund balances and the annual levels of funding.Reserve funds would not become depleted within the next thirty years at the levels of fundingrecommended.

The CURRENT ASSESSMENT FUNDING MODEL PROJECTION enumerates the detailsregarding recommended annual reserve contributions and projected year-end reserve balances. Werecommend, in accordance with state statutes, subsequent yearly off-site updates of this reserve studyand an on-site physical analysis every five years to confirm that the recommended reserve contributionsare appropriate in view of possible changes in the property, components not completed as detailed in theexpenditure report, interest rates, inflation rates, costs, and movement of any excess operating funds tothe reserve savings accounts as approved by the membership.

It is necessary that regular maintenance of the Common Areas and Commonly MaintainedProperty as those terms are defined in the Declaration be done to insure maximum useful life andoptimum performance of the reserve components. Components of concern include items associated withwater intrusion and safety.

The maintenance plan is a cyclical plan that calls for regular maintenance at regular intervals andwill list the maintenance activity and the frequency of maintenance as well as a short narrative.

Checklists developed by Reed Construction Data, Inc. can be accessed, photocopied ordownloaded from the RS Means web site at www.rsmeans.com/supplement/67346.asp. We stronglyurge the Board to use these forms.


NARRATIVE REPORT

The following reports illustrate our recommendations and observations concerning anticipatedexpenditures, recommended reserve funding and projected fund balances during the next thirty years.

We have not investigated the title to or any liabilities against the property subject to this report.

At the direction of the Association, which recognizes the need for proper reserve planning, wehave made a reserve study (physical and financial analysis) of this community and submit our findings inthis report.

The purpose of this study is to establish a reasonable yearly reserve contribution necessary tomeet future expenditures for major replacements or repairs of the Common Areas and CommonlyMaintained Property of the Association as those terms are defined in the Declaration as of the beginningof its fiscal year.

Reserves for replacement are estimates of that amount of money that must be put aside to repairor replace major items or building components that will wear out before the entire facility or projectwears out.

State law, such as that found in Texas, Nevada, California, Oregon and Washington, clearlyestablishes the fiduciary duty of “boards” and the necessity for adequate assessments including reservefunds. The legislative intent of these acts is to better protect current owners and future buyers of units incommunity associations. Reserving funds for future repair or replacement of the shorter-lived buildingcomponents is also one of the most reliable ways of protecting the future market value of an individual’sinvestment property from the deleterious effects of special assessments.

For the purposes of this study, the detailed cash flow analysis is limited to those components orelements that are likely to require replacement or major rehabilitation during the next thirty-year period.Replacement of an entire planned development or condominium in 50 to 75 years is not a typical event.Preventive maintenance generally extends the useful life of many components. As such, estimatinguseful lives beyond thirty years from the date of this study is indeterminate and it is recommended thatperiodic updates of this study be made to consider actual facts and circumstances regarding extended ordiminished component lives, inflation, and appreciation of the reserves.

Our investigation included Common Areas and Commonly Maintained Property as those termare defined in the Declaration as set forth in your Declaration associated with the property of theAssociation. Excluded from our consideration was all other property, including land, property ownedindividually by unit or home owners that is not Commonly Maintained Property, personal property, andintangible assets.

Expenditures relating to the operating budget and apart from reserves are excluded from thisreserve analysis. It is our understanding that the operating budget and future operating budgets willprovide for the on-going normal maintenance of Common Areas and Commonly Maintained Property asthose terms are defined in the Declaration unless specifically identified in the component description onthe DETAIL REPORT BY CATEGORY.

Our report comprises:

This letter, that sets forth the nature and extent of the investigation, identifies the classes of


property considered, and presents the conclusions reached.

An Executive Summary identifies the property, current reserves, recommended reserve funding,and projections concerning reserve funding.

Consideration and Methodology

The purpose of this study is to estimate the amount of yearly reserve contributions necessary tomeet future expenditures for major replacements and repairs of the Common Area and CommonlyMaintained Property as those terms are defined in the Declaration of the Association without a specialassessment. We reviewed the property subject of this investigation and considered the following:

Local costs of material, equipment and labor combined in the cost factor.

The current and future costs of replacement or repair for the Common Areas andCommonly Maintained Property as those terms are defined in the Declaration asdetailed in the DETAIL REPORT BY CATEGORY.

The cost of removal if required of the worn out components as part of the cost ofreplacement.

The anticipated effects of inflation on the amount to be reserved annually.

The anticipated effects of appreciation of the reserves over time in accord withyour average current return or yield on investments. We were informed allaccrued interest on Association investments would be included within thereserve funds.

The past and current maintenance practices of your Association and their effectson remaining lives.

We have not considered as part of the reserve contributions the amounts required for yearlymaintenance activities.


SUMMARY AND CONCLUSION

This study indicates that based on the anticipated expenditures noted in the ANNUALEXPENDITURE DETAIL report, the current reserves and annual recommended levels of funding areadequate to avoid future special assessments. Reserves would not become depleted within the nextthirty years at current recommended levels of funding.

ASSUMPTIONS, SCOPE, AND LIMITED CONDITIONS

To the best of our knowledge, all data set forth in this report are true and accurate. Althoughgathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data,opinions, or estimates identified as being furnished by others or ourselves that have been used informulating this analysis.

No soils analysis or geological studies were ordered or made in conjunction with this report, norwas any water, oil, gas, coal or other subsurface mineral and use rights or conditions investigated.

Any latent defects will not be a part of the reserve study. Should we find signs of possible latentdefects or problems not within the scope of the reserve study, the Association will be notified so that theAssociation can retain the proper experts. However, the study will not be designed to uncover anypossible latent defects, and the absence of any indications to such effect will not be, and should not beconstrued to be, an indication that there are no defects not so noted, or that we warrant the absence ofany such defects.

Substances such as fungi, mold, asbestos, lead paint, urea-formaldehyde foam insulation, termitecontrol substances other chemicals, toxic wastes, radon gas, electro-magnetic radiation or otherpotentially hazardous materials (on the surface or sub-surface) could, if present, adversely affect thevalidity of our reserve study. Unless otherwise stated in our reserve study, the existence of hazardoussubstances, that may or may not be present on the property, will not be considered nor will there be anyinspection for termites. Our opinions are predicated on the assumption that there is no such material onor in the property nor existence of termites. No responsibility is assumed for any such conditions, andyou are advised that we are not qualified to detect such substances, quantify the impact, or develop theremedial cost.

The Association needs to review each line item in the reports to be certain corrections aremade from information you may possess that we are not aware of. It is assumed in our reservestudy that no work, or expenditures from the reserve funds will occur for the balance of the fiscalyear. If this is not correct, you need to let us know what extra work was done and how muchmoney will be spent.


This physical analysis was made by individuals generally familiar with real estate and buildingconstruction and 33 years experience preparing reserve studies; however, no invasive testing wasperformed. Our report does not consider electrical wiring, plumbing or utilities that may be theresponsibility of the Association. Accordingly, we do not opine on, nor are we responsible for, thestructural integrity of the property, including, but not limited to, its conformity to specific governmentalcode requirements, such as fire, building safety, earthquake, occupancy, land movement and/or slides, orany physical defects that were not readily apparent in our physical analysis. This reserve study is not anengineering study.

The cost outlined in the reserve study is subjective in some areas; therefore, we may usecosts submitted by the Association that are for budgetary and planning purposes only. Actual bidcosts would depend upon the defined scope of work at the time the repair, replacement or restoration isdone, and on actual price levels prevailing at the time the future repair, replacement or restoration mustbe done. The estimates on future repair, replacement and restoration in the reserve study will be goodfaith estimates and projections, based upon the estimated future inflation rate and interest (yield) on themonies set aside which may or may not prove accurate. We submit that the probability that the boardmay project in its reserve study or disclosures, future costs or actual future remaining useful lives ofcomponents having useful lives extended beyond one year with precision is the functional equivalent ofwinning the lottery (while it may happen in rare instances by chance, one may not reasonably expect it tohappen). As a result, we cannot, and do not, guaranty its projections. Assumptions on future costs andlife expectancies should be reviewed and adjusted on an annualized basis, as current future costsprojections and life expectancies become more uncertain.


PROFESSIONAL SERVICE CONDITIONS

The services provided by Reserve Studies by Reserve Funding© were performed in accordancewith our professional practice standards. Our compensation is not contingent in any way upon ourconclusions. We assume, without independent verification, the accuracy of all data provided to us. Wewill act as an independent contractor. All files, work papers or documents developed by us during thecourse of the engagement will remain our property.

Our report is to be used only for the purposes stated herein. Any use or reliance for any otherpurpose, by you or third parties, is invalid. You may show our report in its entirety to those third partiesthat need to review the information contained herein. No reference to our name or our report, in wholeor in part, in any document you prepare and/or distribute to third parties may be made without ourwritten consent.

Association shall defend, indemnify, and hold harmless Reserve Studies by Reserve Funding©

and its employees and subagents, who were or are a party or are threatened to be made a party to anythreatened, pending, or completed actions, suits, or proceedings, whether civil, criminal, administrative,or investigative by reason of the fact that Reserve Studies by Reserve Funding©, and its employees andsubagents, are or were the authorized representatives of the Association, as to any expense, includingattorneys’ fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred byReserve Studies by Reserve Funding© and its employees and subagents, in connection with such action,suit, or proceeding, if Reserve Studies by Reserve Funding© and its employees and subagents acted ingood faith and in a manner Reserve Studies by Reserve Funding© and its employees and subagentsreasonably believed to be in, or not opposed to, the best interest of the Association, and with respect toany criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful.

We have prepared an initial draft of the study and will make one adjustment to the report upon awritten request from the Association within 30 days of the date the initial draft of the study is sent to theBoard.

We reserve the right to include your Association’s name in our client list, but we will maintainthe confidentiality of all conversations, documents provided to us, and the contents of our reports,subject to legal or administrative process or proceedings.

These conditions can only be modified by written documents executed by both parties.

Respectfully submitted,

D. L. “Dan” Huntley, PRA, RS

Tamarra "Tammy" Axton, PRA

Association of Professional Reserve Analyst-APRA-(PRA)Community Association Institute-CAI-(RS) Reserve Specialist


Important Information About Your Reserve Study

Important Information

This document has been provided pursuant to an agreement containing restrictions on its use. No part ofthis document may be copied or distributed, in any form or by any means, nor disclosed to third partieswithout the expressed written permission of Reserve Studies by Reserve Funding©. The client shallhave the right to reproduce and distribute copies of this report, or the information contained within, asmay be required for compliance with all applicable regulations.

This reserve analysis study and the parameters under which it has been completed are based uponinformation provided to us in part by representatives of the association, its contractors, assorted vendors,specialist and independent contractors, the Community Association Institute, Association of ProfessionalReserve Analyst and various construction pricing and scheduling manuals including, but not limited to:Marshall & Swift Valuation Service, RS Means Facilities Maintenance & Repair Cost Data, RS MeansRepair & Remodeling Cost Data, National Construction Estimator, National Repair & RemodelEstimator, Dodge Cost Manual and McGraw-Hill Professional. Additionally, costs are obtained fromnumerous vendor catalogues, actual quotations or historical costs, and our own experience in the field ofproperty management and reserve study preparation.

It has been assumed, unless otherwise noted in this report, that all assets have been designed andconstructed properly and that each estimated useful life will approximate that of the norm per industrystandards and/or manufacturer’s specifications. In some cases, estimates may have been used on assets,which have an indeterminable but potential liability to the association. The decision for the inclusion ofthese as well as all assets considered is left to the client.

We recommend that your reserve analysis study be updated on an annual basis due to fluctuating interestrates, inflationary changes, and the unpredictable nature of the lives of many of the assets underconsideration (our contract provides that we shall update the reserve study annually). All of theinformation collected during our physical analysis of the association and computations madesubsequently in preparing this reserve analysis study are retained in our computer files. Therefore,annual updates may be completed quickly and inexpensively each year.

Reserve Studies by Reserve Funding© would like to thank you for using our services. We invite you tocall us at any time, should you have questions, comments or need assistance. In addition, any of theparameters and estimates used in this study may be changed at your request, after which we will providea revised study. Client shall accept all responsibility and liability for changes made and the resultsthereof. Consultant does not warranty the results of the revised study.

This reserve analysis study is provided as an aid for planning purposes and not as an accounting tool.Since it deals with events yet to take place, there is no assurance that the results enumerated within itwill, in fact, occur as described.


Part III

Introduction

Preparing the annual budget and overseeing the association’s finances are perhaps the most importantresponsibilities of board members. The annual operating and reserve budgets reflect the planning andgoals of the association and set the level and quality of service for all of the association’s activities.

Funding Options

When a major repair or replacement is required in a community, an association has essentially fouroptions available to address the expenditure:

The first, and only logical means that the Board of Directors has to ensure its ability to maintain theassets for which it is obligated, is by assessing an adequate level of reserves as part of the regularmembership assessment, thereby distributing the cost of the replacements uniformly over the entiremembership. The community is not only comprised of present members, but also future members. Anydecision by the Board of Directors to adopt a calculation method or funding plan which woulddisproportionately burden future members in order to make up for past reserve deficits, would be abreach of its fiduciary responsibility to those future members. Unlike individuals determining their owncourse of action, the board is responsible to the “community” as a whole.

Whereas, if the association was setting aside reserves for this purpose, using the vehicle of the regularlyassessed membership dues, it would have had the full term of the life of the roof, for example, toaccumulate the necessary monies. Additionally, those contributions would have been evenly distributedover the entire membership and would have earned interest as part of that contribution.

The second option is for the association to acquire a loan from a lending institution in order to effectthe required repairs. In many cases, banks will lend to an association using “future homeownerassessments” as collateral for the loan. With this method, the current board is pledging the future assetsof an association. They are also incurring the additional expense of interest fees along with the originalprincipal amount. In the case of a $150,000 roofing replacement, the association may be required to payback the loan over a three to five year period, with interest.

The third option, too often used, is simply to defer the required repair or replacement. This option,which is not recommended, can create an environment of declining property values due to expandinglists of deferred maintenance items and the association’s financial inability to keep pace with the normalaging process of the common area components. This, in turn, can have a seriously negative impact onsellers in the association by making it difficult, or even impossible, for potential buyers to obtainfinancing from lenders. Increasingly, lending institutions are requesting copies of the association’s mostrecent reserve study before granting loans, either for the association itself, a prospective purchaser, or foran individual within such an association.


The fourth option is to pass a “special assessment” to the membership in an amount required to coverthe expenditure. When a special assessment is passed, the association has the authority andresponsibility to collect the assessments, even by means of foreclosure, if necessary. However, anassociation considering a special assessment cannot guarantee that an assessment, when needed, will bepassed. Consequently, the association cannot guarantee its ability to perform the required repairs orreplacements to those major components for which it is obligated when the need arises. Additionally,while relatively new communities require very little in the way of major “reserve” expenditures,associations reaching 12 to 15 years of age and older, find many components reaching the end of theireffective useful lives. These required expenditures, all accruing at the same time, could be devastatingto an association’s overall budget.

Types of Reserve Studies

Most reserve studies fit into one of three categories:

Full Reserve Study;

Update with site inspection; and

Update without site inspection.

In a Full Reserve Study, the reserve provider conducts a component inventory, a condition assessment(based upon on-site visual observations), and life and valuation estimates to determine both a “fundstatus” and “funding plan”.

In an Update with site inspection, the reserve provider conducts a component inventory (verificationonly, not quantification unless new components have been added to the inventory), a conditionassessment (based upon on-site visual observations), and life and valuation estimates to determine boththe “fund status and “funding plan.”

In an Update without site inspection, the reserve provider conducts life and valuation estimates todetermine the “fund status” and “funding plan.”

The Reserve Study: A Physical and a Financial Analysis

There are two components of a reserve study: a physical analysis and a financial analysis.

Physical Analysis

During the physical analysis, a reserve study provider evaluates information regarding the physical statusand repair/replacement cost of the association’s major common area components. To do so, the providerconducts a component inventory, a condition assessment, and life and valuation estimates.

Developing a Component List

The budget process begins with full inventory of all the major components for which the association isresponsible. The determination of whether an expense should be labeled as operational, reserve, orexcluded altogether is sometimes subjective. Since this labeling may have a major impact on thefinancial plans of the association, subjective determinations should be minimized. We suggest thefollowing considerations when labeling an expense.


Operational Expenses

Occur at least annually, no matter how large the expense, and can be effectively budgeted each year.They are characterized as being reasonably predictable, both in terms of frequency and cost. Operationalexpenses include all minor expenses, which would not otherwise adversely affect an operational budgetfrom one year to the next. Examples of some operational expenses include:

Utilities: Administrative: Services: Repair Expenses:

Electrical/Lights Supplies Landscape Operating Contingency

Water/Irrigation Bank Service Charges Reserve Study Costs

Insurance

These are major expenses that occur other than annually, and which must be budgeted in advance inorder to ensure the availability of the necessary funds in time for their use. Reserve expenses arereasonably predictable both in terms of frequency and cost. However, they may include significantassets that have an indeterminable but potential liability that may be demonstrated as a likely occurrence.They are expenses that, when incurred, would have a significant effect on the smooth operation of thebudgetary process from one year to the next, if they were not reserved in advance. Examples of somereserve expenses include:

Asphalt Seal Coating Painting-Mail Box Structures

Asphalt Overlays Lighting Replacement

Asphalt Repair or Replacement Underground Utilities

Masonry Repair Concrete Curbs, Sidewalks, Aprons, and Parking Pads

Fencing Repair and Replacement Insurance Deductible

Budgeting is Normally Excluded for:

Repairs or replacements of assets which are deemed to have an estimated useful life equal to orexceeding the estimated useful life of the facility or community itself, or exceeding the legal life of thecommunity as defined in an association’s governing documents. Examples include the completereplacement of masonry walls and concrete. Also excluded are insignificant expenses that may becovered either by an operating or reserve contingency, or otherwise in a general maintenance fund.Expenses that are necessitated by acts of nature, accidents, or other occurrences that are more properlyinsured, rather than reserved, are also excluded.

Financial Analysis

The financial analysis assesses the association’s reserve balance or “fund status” (measured in cash or aspercent fully funded) to determine a recommendation for the appropriate reserve contribution rate in thefuture, known as the “funding plan.”


Preparing the Reserve Study

Once the reserve assets have been identified and quantified, their respective replacement costs, usefullives, and remaining lives must be assigned so that a funding schedule can be constructed. Replacementcosts and useful lives can be found in published manuals such as construction estimators, appraisalhandbooks, and valuation guides. Remaining lives are calculated from the useful lives and ages of assetsand adjusted according to conditions such as design, manufactured quality, usage, exposure to theelements, and maintenance history.

By following the recommendations of an effective reserve study, the association should avoid any majorshortfalls. However, to remain accurate, the report should be updated on an annual basis to reflect suchchanges as shifts in economic parameters, additions of phases or assets, or expenditures of reserve funds.The association can assist in simplifying the reserve analysis update process by keeping accurate recordsof these changes throughout the year.

Funding Methods

From the simplest to the most complex, reserve analysis providers use many different computationalprocesses to calculate reserve requirements. However, there are two basic processes identified asindustry standards: the cash flow method and the component method.

The cash flow method develops a reserve-funding plan where contributions to the reserve fund aredesigned to offset the variable annual expenditures from the reserve fund. Different reserve fundingplans are tested against the actual anticipated schedule of reserve expenses until the desired funding goalis achieved. This method sets up a “window” in which all future anticipated replacement costs arecomputed, based upon the individual lives of the components under consideration. The Reserve Studiesby Reserve Funding© Threshold and the Reserve Studies by Reserve Funding© Current Assessmentfunding models are based upon the cash flow method.

The component method develops a reserve-funding plan where the total contribution is based upon thesum of contributions for individual components. The component method is the more conservative of thetwo funding options, and assures that the association will achieve and maintain an ideal level of reserveover time. This method also allows for computations on individual components in the analysis. TheReserve Studies by Reserve Funding© Component Funding model is based upon the componentmethodology.


Funding Strategies

Once an association has established its funding goals, the association can select an appropriate fundingplan. There are four basic strategies from which most associations select. It is recommended thatassociations consult professionals to determine the best strategy or combination of plans that best suitthe association’s need. Additionally, associations should consult with their financial advisor todetermine the tax implications of selecting a particular plan. Further, consultation with the AmericanInstitute of Certified Public Accountants (AICPA) for their reporting requirements is advisable. Thefour funding plans and descriptions of each are detailed below. Associations will have to update theirreserve studies more or less frequently depending on the funding strategy they select.

Full Funding---Given that the basis of funding for reserves is to distribute the costs of the replacementsover the lives of the components in question, it follows that the ideal level of reserves would beproportionately related to those lives and costs. If an association has a component with an expectedestimated useful life of ten years, it would set aside approximately one-tenth of the replacement costeach year. At the end of three years, one would expect three-tenths of the replacement cost to haveaccumulated, and if so, that component would be “fully-funded.” This model is important in that it is ameasure of the adequacy of an association’s reserves at any one point of time, and is independent of anyparticular method which may have been used for past funding or may be under consideration for futurefunding. This formula represents a snapshot in time and is based upon current replacement cost,independent of future inflationary or investment factors:

Fully Funded Reserves = Age divided by Useful Life the results multiplied by Current ReplacementCost

When an association’s total accumulated reserves for all components meet this criterion, its reserves areconsidered “fully-funded.”

The Reserve Studies by Reserve Funding© Threshold Funding Model (Minimum Funding). Thegoal of this funding method is to keep the reserve cash balance above zero. This means that while eachindividual component may not be fully funded, the reserve balance overall does not drop below zeroduring the projected period. An association using this funding method must understand that even aminor reduction in a component’s remaining useful life can result in a deficit in the reserve cash balance.

The Reserve Studies by Reserve Funding © Threshold Funding Model. This method is based upon thecash flow funding concept. The minimum reserve cash balance in threshold funding, however, is set at apredetermined dollar amount (other than $0).

The Reserve Studies by Reserve Funding © Current Assessment Funding Model. This method is alsobased upon the cash flow funding concept. The initial reserve assessment is set at the association’scurrent fiscal year funding level and a 30-year projection is calculated to illustrate the adequacy of thecurrent funding over time.


The Reserve Studies by Reserve Funding © Component Funding Model. This is a straight-linefunding model. It distributes the cash reserves to individual reserve components and then calculateswhat the reserve assessment and interest contribution (minus taxes) should be, again by each reservecomponent. The current annual assessment is then determined by summing all the individual componentassessments, hence the name “Component Funding Model”. This is the most conservative fundingmodel. It leads to or maintains the fully funded reserve position. The following details this calculationprocess.

Distribution of Reserves

Component Funding Model Distribution of Accumulated Reserves

The “Distribution of Accumulated Reserves Report” is a “Component Funding Model” calculation. Thisdistribution does not apply to the cash flow funding models.

When calculating reserves based upon the component methodology, a beginning reserve balance must beallocated for each of the individual components considered in the analysis, before the individualcalculations can be completed. When this distribution is not available, or of sufficient detail, thefollowing method is suggested for allocating reserves:

The first step the program performs in this process is subtracting, from the total accumulated reserves,any amounts for assets that have predetermined (fixed) reserve balances. The user can “fix” theaccumulated reserve balance within the program on the individual asset’s detail page. If, by error, theseamounts total more than the amount of funds available, then the remaining assets are adjustedaccordingly. A provision for a contingency reserve is then deducted by the determined percentage used,and if there are sufficient remaining funds available.

The second step is to identify the ideal level of reserves for each asset. As indicated in the prior section,this is accomplished by evaluating the component’s age proportionate to its estimated useful life andcurrent replacement cost. Again, the equation used is as follows:

Fully Funded Reserves = (Age/Useful Life) x Current Replacement Cost

The Reserve Studies by Reserve Funding© software program performs the above calculations to theactual month the component was placed-in-service. The program projects that the accumulation ofnecessary reserves for repairs or replacements will be available on the first day of the fiscal year inwhich they are scheduled to occur.

The next step the program performs is to arrange all of the assets used in the study in ascending order byremaining life, and alphabetically within each grouping of remaining life items. These assets are thenassigned their respective ideal level of reserves until the amount of funds available is depleted, or untilall assets are appropriately funded. If any assets are assigned a zero remaining life (scheduled forreplacement in the current fiscal year), then the amount assigned equals the current replacement cost andfunding begins for the next cycle of replacement. If there are insufficient funds available to accomplishthis, then the software automatically adjusts the zero remaining life items to one year, and that assetassumes its new grouping position alphabetically in the final printed report.


If, at the completion of this task, there are additional moneys that have not been distributed, theremaining reserves are then assigned, in ascending order, to a level equal to, but not exceeding, thecurrent replacement cost for each component. If there are sufficient moneys available to fund all assetsat their current replacement cost levels, then any excess funds are designated as such and are not factoredinto any of the report computations. If, at the end of this assignment process there are designated excessfunds, they can be used to offset the monthly contribution requirements recommended, or used in anyother manner the client may desire.

Assigning the reserves in this manner defers the make-up period for any under-funding over the longestremaining life of all assets under consideration, thereby minimizing the impact of any deficiency. Forexample, if the report indicates an under funding of $50,000, this under-funding will be assigned tocomponents with the longest remaining lives in order to give more time to “replenish” the account. Ifthe $50,000 under-funding were to be assigned to short remaining life items, the impact would be feltimmediately.

If the reserves are under-funded, the monthly contribution requirements, as outlined in this report, can beexpected to be higher than normal. In future years, as individual assets are replaced, the fundingrequirements will return to their normal levels. In the case of a large deficiency, a special assessmentmay be considered. The program can easily generate revised reports outlining how the monthlycontributions would be affected by such an adjustment, or by any other changes that may be underconsideration.

Funding Reserves

Three assessment and contribution figures are provided in the report, the “Monthly Reserve AssessmentRequired”, the “Average Net Monthly Interest Earned” contribution and the “Total Monthly Allocationto Reserves.” The association should allocate the “Monthly Reserve Assessment Required” amount toreserves each month when the interest earned on the reserves is left in the reserve accounts as part of thecontribution. Any interest earned on reserve deposits, must be left in the reserve account and onlyamounts set aside for taxes should be removed .

The second alternative is to allocate the "Total Monthly Allocation" to reserves (this is the memberassessment plus the anticipated interest earned for the fiscal year. This method assumes that all interestearned will be assigned directly as operating income. This allocation takes into consideration theanticipated interest earned on accumulated reserves regardless of whether or not it is actually earned.When taxes are paid, the amount due will be taken directly from the association's operating accounts asthe reserve accounts are allocating only those moneys net of taxes.


Users’ Guide to your Reserve Analysis Study

Part II of your Reserve Funding© Report contains the reserve analysis study for your association. Thereare seven types of reports in the study as described below.

Report Summaries

The Report Summary for all funding models lists all of the parameters that were used in calculating thereport as well as the summary of your reserve analysis study.

Index Reports

The Distribution of Accumulated Reserves report lists all assets in remaining life order. It alsoidentifies the ideal level of reserves that should have accumulated for the association as well as theactual reserves available. This information is valid only for the “Component Funding Model”calculation.

The Component Listing/Summary lists all assets by category (i.e. roofing, painting, lighting, etc.)together with their remaining life, current cost, monthly reserve contribution, and net monthly allocation.

Detail Reports

The Detail Report itemizes each asset and lists all measurements, current and future costs, andcalculations for that asset. Provisions for percentage replacements, salvage values, and one-timereplacements can also be utilized. These reports can be sorted by category or group.

The numerical listings for each asset are enhanced by extensive narrative detailing factors such asdesign, manufactured quality, usage, exposure to elements and maintenance history.

The Reserve Studies by Reserve Funding© Detail Index is an alphabetical listing of all assets, togetherwith the page number of the asset’s detail report, the projected replacement year, and the asset number.

Projections

Thirty-year projections add to the usefulness of your reserve analysis study.


DefinitionsReport I.D.Includes the Report Date (example: June 19, 2006), Account Number (example: 9773), and Version(example: 1.0). Please use this information (displayed on the summary page) when referencing yourreport.

Budget Year Beginning/EndingThe budgetary year for which the report is prepared. For associations with fiscal years ending December31st, the monthly contribution figures indicated are for the 12-month period beginning 1/1/20xx andending 12/31/20xx.

Number of Units and/or PhasesIf applicable, the number of units and/or phases included in this version of the report.

InflationThis figure (information taken from “Inflationdata.com" and averaged over 5 years is used toapproximate the future cost to repair or replace each component in the report. The current cost for eachcomponent is compounded on an annual basis by the number of remaining years to replacement, and thetotal is used in calculating the monthly reserve contribution that will be necessary to accumulate therequired funds in time for replacement.

Annual Assessment IncreaseThis represents the percentage rate at which the association will increase its assessment to reserves at theend of each year. For example, in order to accumulate $10,000 in 10 years, you could set aside $1,000per year. As an alternative, you could set aside $795 the first year and increase that amount by 5% eachyear until the year of replacement. In either case you arrive at the same amount. The idea is that youstart setting aside a lower amount and increase that number each year in accordance with the plannedpercentage. Ideally this figure should be equal to the rate of inflation. It can, however, be used to aidethose associations that have not set aside appropriate reserves in the past, by making the initial year’sallocation less formidable.

Investment Yield Before TaxesThe average interest rate anticipated by the association based upon its current investment practices.

Taxes on Interest YieldThe estimated percentage of interest income that will be set aside to pay income taxes on the interestearned.

Projected Reserve BalanceThe anticipated reserve balance on the first day of the fiscal year for which this report has been prepared.This is based upon information provided and not audited.

Percent Fully FundedThe ratio, at the beginning of the fiscal year, of the actual (or projected) reserve balance to the calculatedfully funded balance, expressed as a percentage.


Phase Increment Detail and/or AgeComments regarding aging of the components on the basis of construction date or date of acceptance bythe association.

Monthly AssessmentThe assessment to reserves required by the association each month.

Interest Contribution (After Taxes)The interest that should be earned on the reserves, net of taxes, based upon their beginning reservebalance and monthly contributions for one year. This figure is averaged for budgeting purposes.

Total Monthly AllocationThe sum of the monthly assessment and interest contribution figures.

Group and CategoryThe report may be prepared and sorted either by group (location, building, phase, etc.) or by category(roofing, painting, etc.). The standard report printing format is by category.

Percentage of Replacement or RepairsIn some cases, an asset may not be replaced in its entirety or the cost may be shared with a second party.Examples are budgeting for a percentage of replacement of streets over a period of time, or sharing theexpense to replace a common wall with a neighboring party.

Placed-In-Service DateThe month and year that the asset was placed-in-service. This may be the construction date, the firstescrow closure date in a given phase, or the date of the last servicing or replacement.

Estimated Useful LifeThe estimated useful life of an asset based upon industry standards, manufacturer specifications, visualinspection, location, usage, association standards and prior history. All of these factors are taken intoconsideration when tailoring the estimated useful life to the particular asset. For example, the carpetingin a hallway or elevator (a heavy traffic area) will not have the same life as the identical carpeting in aseldom-used meeting room or office.

Adjustment to Useful LifeOnce the useful life is determined, it may be adjusted, up or down, by this separate figure for the currentcycle of replacement. This will allow for a current period adjustment without affecting the estimatedreplacement cycles for future replacements.

Estimated Remaining Life

This calculation is completed internally based upon the report’s fiscal year date and the date the assetwas placed-in-service.

Replacement Year

The year that the asset is scheduled to be replaced. The appropriate funds will be available by the firstday of the fiscal year for which replacement is anticipated.


Annual Fixed Reserves

An optional figure which, if used, will override the normal process of allocating reserves to each asset.

Fixed AssessmentAn optional figure which, if used, will override all calculations and set the assessment at this amount.This assessment can be set for monthly, quarterly or annually as necessary.

Salvage ValueThe salvage value of the asset at the time of replacement, if applicable.

One-Time ReplacementNotation if the asset is to be replaced on a one-time basis.

Current Replacement CostThe estimated replacement cost effective at the beginning of the fiscal year for which the report is beingprepared.

Future Replacement CostThe estimated cost to repair or replace the asset at the end of its estimated useful life based upon thecurrent replacement cost and inflation.

Component InventoryThe task of selecting and qualifying reserve components. This task can be accomplished through on-sitevisual, review of association design and organizational documents, a review of established associationprecedents, and discussion with appropriate association representative(s).


A Multi-Purpose Tool

Your Reserve Studies by Reserve Funding © Report is an important part of your association’s budgetaryprocess. Following its recommendations should ensure the association’s smooth budgetary transitionsfrom one fiscal year to the next, and either decrease or eliminate the need for “special assessments”.

In addition, your Reserve Studies by Reserve Funding© reserve study serves a variety of usefulpurposes:

Following the recommendations of a reserve study performed by a professional consultant canprotect the Board of Directors in a community from personal liability concerning reservecomponents and reserve funding.

A reserve analysis study is required by your accountant during the preparation of theassociation’s annual audit.

The Reserve Studies by Reserve Funding© reserve study is often requested by lendinginstitutions during the process of loan applications, both for the community and, in many cases,the individual owners.

Your Reserve Studies by Reserve Funding© Report is also a detailed inventory of theassociation’s major assets and serves as a management tool for scheduling, coordinating andplanning future repairs and replacements.

Your Reserve Studies by Reserve Funding© Report is a tool that can assist the Board in fulfillingits legal and fiduciary obligations for maintaining the community in a state of good repair. If acommunity is operating on a special assessment basis, it cannot guarantee that an assessment,when needed, will be passed. Therefore, it cannot guarantee its ability to perform the requiredrepairs or replacements to those major components for which the association is obligated.

Since the Reserve Studies by Reserve Funding© reserve analysis study includes measurementsand cost estimates of the client’s assets, the detail reports may be used to evaluate the accuracyand price of contractor bids when assets are due to be repaired or replaced.

The Reserve Studies by Reserve Funding© reserve study is an annual disclosure to themembership concerning the financial condition of the association, and may be used as a“consumers’ guide” by prospective purchasers.

The Reserve Studies by Reserve Funding© Owners’ Summary meets the disclosure requirementsof the Texas Timeshare Act

Your Reserve Studies by Reserve Funding© Report provides a record of the time, cost, andquantities of past reserve replacements. At times the association’s management company andboard of directors are transitory which may result in the loss of these important records.

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