Webinar: Reserve Studies
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RESERVES STUDIES What you don’t know but should !
Mitchell H. Frumkin, P.E., C.G.P., R.S. President Kipcon Inc.
800-828-4118 Kipcon.com [email protected]
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Who am I ? • Mitchell H. Frumkin, PE, RS, CGP
• Past President
> CAI National
> CAI National Research Foundation
> NJ Chapter CAI
• Chair CAI National Reserve Professionals Committee during…
> Development of “National Reserve Study Standards of the Community Associations Institute”
> Development of “Reserve Specialist (R.S.) Designation
• Author: Reserve Funds: How and Why Community Associations Invest Assets (CAI)
• Ongoing Contributor: Audit and Accounting Guide for Common Interest Realty Associations (AICPA)
• Ongoing Speaker on CA Issues
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What I Will Be Talking About…
• What is a Reserve Study ?
• How do you decide if you are adequately funded ?
• How often should you update your study ?
• How to review your study when you get it .
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What is a Reserve Study ?
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• “A budget planning tool which identifies the current status of the Reserve Fund as well as a stable and equitable Funding Plan to offset the anticipated future major common area expenditures.”
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What does a Reserve Study Include?
Reserve Study
Physical Analysis Financial
Analysis
Component Inventory
Condition Assessment
Life and Valuation Estimates
Fund Status
Funding Plan
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The Physical Analysis
Component
Inventory
Condition
Assessment
Life and Valuation Estimate
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The Component Inventory !
»This is the most critical part of the Study, the task of selecting and quantifying the Reserve components
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Developing The Component Inventory Step One:
Review the Governing Documents and Statutes
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Step Two: Is the Component Covered Under a Maintenance Contract?
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Step Three: Is the Component Funded in Another Part of the Budget?
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Step Four: Is the Component a Piece of Mechanical
Equipment ?
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Step Five: Is the Useful Life of the Component within the
Selected Time Window ?
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Step Six: Is the Cost below the Operating Budget Threshold?
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The Financial Analysis
• Fund Status, Percent Funded
• Select the Funding Plan
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The Funding Plan
• An association’s plan to provide income to a Reserve Fund to offset anticipated expenditures from that fund
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What are the choices ?
• Periodic assessments over the life of the assets
• Special assessments at the time of replacement
• Borrowing
• Combinations
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The Funding Plans are based on Periodic Uniform Assessments
over the life of the Asset
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The Advantages of Periodic Assessments
• Helps assure that funds will be available.
• Reduces likelihood of special assessments.
• Charges current rather than future owners.
• Preserves market value.
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What Are the Different Funding Plans ?
Funding Plans
Full/Proportional
Funding Baseline Funding
Threshold
Funding
Statutory
Funding
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Full/Proportional Funding
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Th
ousa
nds
Do
llars
Reserve Fund Balance: Full
Funding PlansProjected 30 Year Cash Flow Analysis
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Baseline Funding
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
Th
ousa
nds
Do
llars
Reserv Fund Balance
Baseline
Funding PlansProjected 30 Year Cash Flow Analysis
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Threshold Funding
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Th
ousa
nds
Do
llars
Reserve Fund Balance: Full
Reserve Fund Balance:
Threshold
Reserv Fund Balance Baseline
Funding PlansProjected 30 Year Cash Flow Analysis
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Funding Plans
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Th
ousa
nds
Do
llars
Reserve Fund Balance: Full
Reserve Fund Balance:
Threshold
Reserv Fund Balance Baseline
Funding PlansProjected 30 Year Cash Flow Analysis
Full Funding
Threshold Funding
Baseline Funding
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The Financial Analysis Fund Status
»The status of the Reserve fund as compared to an established benchmark such as percent funded
»Example ˃ $100,000 Replacement Cost, 20 Year Life, = $5,000 per year,
After 4 Years, $20,000
˃ After 4 Years, only Funded, $10,000, then 50% Funded
˃ Do not let this mislead you, more later !!
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From Where Do the Requirements Arise?
• A Board’s fiduciary responsibility to maintain and preserve the common property
• Association’s governing documents
• Statutory Requirements (if they exist)
• Industry practice
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What are the Standards ?
• National Reserve Study Standards of the Community Associations Institute
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What are the Standards ?
• Reserve Funds: How and Why Community Associations Invest Assets
• Published by CAI
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What are the Standards ?
• AICPA Audit and Accounting Guide for Common Interest Realty Associations
• Chapter 3, Future Major Repairs and Replacements
• Online only
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Statutory Requirements • Vary By State
• Ref: Reserve Funds: How and Why Community Associations Invest Assets
• Appendix 2
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How To Select the Reserve Provider ?
• Reserve Specialist Designation (RS© )
• Education
• Experience
• References
• Licensed Engineer (PE)
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How Do You Decide If You Are Adequately
Funded?
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Adequate Funding
• A Funding Plan in which a deficit does not occur within the cash flow projection period and a risk free threshold is provided
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The Decision each Association Must Make: What is adequate funding ?
• Base upon
• Size of budget
• Cash Flow Projections
• Amount of risk
• Updating frequency
• Cost of most expensive component
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Adequate Funding does NOT always mean Full/Proportional
Funding !!!
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The Critical Decision For Adequate Funding
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Th
ousa
nds
Do
llars
Reserve Fund Balance: Full
Reserve Fund Balance:
Threshold
Reserv Fund Balance Baseline
Funding PlansProjected 30 Year Cash Flow Analysis
What Threshold You Use !
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How Do You Establish Your Threshold ?
• Size of your budget
• Cost of most expensive component
• Frequency of updates (more later)
• Risk Tolerance
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And Remember Adequate Funding Is NOT Full Funding !
Full Funding
$607,658
Actual Funding
$280,212
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How Often Should You Update Your Reserve Study ?
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First, You Should Review “Reserve Study” Yearly ?
• What is anticipated in the next year?
• What happened in the past year ?
• Did actual funding match proposed funding ?
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How Often Should you Update the “Reserve Study”?
• Dependent On
• Funding Plan You are Using and How close to Baseline Funding
• Whether or not a component has been replaced
• Whether a new component has been added
• Whether you have been funding to match plan
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How Often Should you Update the “Reserve Study”?
• General Guidelines
• Associations up to 5 years old, every 3 years
• Associations up to 10 years old, every other year
• Associations over 10 years old, yearly
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What Else Should You Do At Update Time ?
• After 5 years
• Review overall community
• Possibly add components to study
• Give an overall evaluation of existing conditions
• After 10 years
• Review overall community
• Possibly add components to study
• Give an overall evaluation of existing conditions
• Perform moisture probe testing
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How Do You Review Your Reserve Study
When You Get It ?
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Check the Component List
Component List
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Check the Beginning Balance
Beginning Balance
a) effective date
b) amount
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Check the Estimated Remaining Useful Life
Estimated Remaining Useful Lives
a) Planned replacements
b) Historical information
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Check the Threshold and Funding Plan
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Year
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Th
ousa
nds
Do
llars
Reserve Fund Balance: Full
Funding PlansProjected 30 Year Cash Flow Analysis
Threshold
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Meet With The Person Who Prepared the Study !!
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Advanced Techniques
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To Get You To Adequate Funding?
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The Physical Analysis Year one Component Inventory
Deergone Estates
Component Quantity Unit Cost
R e s e rv e
R e q u ire m e n t
P re s e n t D o lla r s
B e g in n in g
B a la n c e
E s t im a t e d
U s e f u l L ife
E s t im a t e d
R e m a in in g
U s e f u l L ife
M o n th ly
R e s e rv e
F u n d in g
R e q u ire d
A n n u a l
R e s e rv e
F u n d in g
R e q u ire d
N o t e sF u ll F u n d in g
B a la n c e
Road Reconstruction 4,200 SY $12.40 $52,075 $4,700 20 10 $395 $4,737 $26,037
Road Sealcoating 4,200 SY $1.24 $5,219 $0 7 7 $62 $746 $0
Driveway Reconstruction 3,555 SF $19.50 $69,323 $6,256 20 10 $526 $6,307 $34,661
Driveway Sealcoating 3,555 SF $1.24 $4,417 $0 5 5 $74 $883 $0
Concrete Paver Entry Walks 3,020 SF $25.00 $75,500 $6,814 30 15 $382 $4,579 $37,750
Guard Rail 90 LF $50.00 $4,500 $325 25 15 $23 $278 $1,800
Street Lights 11 EA $2,762.43 $30,387 $914 30 25 $98 $1,179 $5,064
Irrigation Fund 1 LS $5,000.00 $5,000 $301 15 10 $39 $470 $1,667
Four Foot Chain Link Fence 120 LF $10.81 $1,298 $141 25 10 $10 $116 $779 5
Concrete Patios 3,300 SF $7.62 $25,143 $1,513 30 20 $98 $1,182 $8,381
Aluminum Gutters 2,366 LF $4.41 $10,445 $980 25 12 $66 $789 $5,431
Aluminum Downspouts 2,000 LF $3.14 $6,278 $589 25 12 $40 $474 $3,265
Asphalt Shingles 631 SQ $225.00 $141,975 $13,326 25 12 $893 $10,721 $73,827
EIFS Refinishing 30,000 SF $2.80 $84,000 $7,581 10 5 $1,274 $15,284 6 $42,000
Balconies 3,300 SF $18.36 $60,573 $6,560 25 10 $450 $5,401 $36,344
Totals $576,133 $50,000 $4,429 $53,145 $277,007
Component Inv entory
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Financial Analysis E x a m p le S tu d y
R e s e rv e S tu d y F u n d in g P la n
P ro je c te d T h ir ty Y e a r C a s h F lo w
F U L L CURRENT BASELINE
F U N D I N G A N A L Y S I S F U N D I N G A N A L Y S I S F U N D I N G A N A L Y S I S
Y e a r
B e g in n in g
A n n u a l
C o n t rib u t io n
A n n u a l
C o n t rib u t io n
A n n u a l
E x p e n d itu re
R e s e rv e F u n d
B a la n c e
A n n u a l
C o n t rib u t io n
R e s e rv e F u n d
B a la n c e
A n n u a l
C o n t rib u t io n
R e s e rv e F u n d
B a la n c e
P o o lin g F a c t o r 8 4 . 3 8 %
Beginning Balance $50,000 $ 5 0 , 0 0 0 $50,000
2007 $53,145 $53,145 $0 $103,145 $25,000 $75,000 $44,847 $94,847
2008 $45,352 $45,352 $0 $148,497 $25,000 $100,000 $38,270 $133,116
2009 $46,778 $46,778 $0 $195,275 $25,000 $125,000 $39,473 $172,590
2010 $49,466 $49,466 $0 $244,741 $25,000 $150,000 $41,742 $214,332
2011 $57,298 $57,298 $84,000 $218,039 $25,000 $ 9 1 , 0 0 0 $48,351 $178,682
2012 $35,677 $35,677 $0 $253,715 $25,000 $116,000 $30,106 $208,788
2013 $36,067 $36,067 $5,219 $284,563 $25,000 $135,781 $30,435 $234,003
2014 $35,739 $35,739 $0 $320,302 $25,000 $160,781 $30,158 $264,162
2015 $36,250 $36,250 $0 $356,552 $25,000 $185,781 $30,590 $294,751
2016 $38,049 $38,049 $118,946 $275,656 $25,000 $ 9 1 , 8 3 5 $32,108 $207,913
2017 $30,518 $30,518 $0 $306,174 $25,000 $116,835 $25,753 $233,666
2018 $31,278 $31,278 $163,917 $173,535 $25,000 ($22,082) $26,394 $96,143
2019 $26,737 $26,737 $0 $200,272 $25,000 $2,918 $22,562 $118,705
2020 $26,759 $26,759 $0 $227,031 $25,000 $27,918 $22,581 $141,285
2021 $26,918 $26,918 $164,000 $89,949 $ 2 5 , 0 0 0 ($ 1 1 1 , 0 8 2 ) $22,715 $0
2022 $25,808 $25,808 $0 $115,757 $25,000 ($86,082) $21,778 $21,778
2023 $25,813 $25,813 $5,219 $136,351 $25,000 ($66,301) $21,782 $38,341
2024 $25,798 $25,798 $0 $162,149 $25,000 ($41,301) $21,769 $60,111
2025 $25,801 $25,801 $0 $187,950 $25,000 ($16,301) $21,772 $81,883
2026 $25,813 $25,813 $25,143 $188,620 $ 2 5 , 0 0 0 ($ 1 6 , 4 4 4 ) $21,783 $78,523
2027 $25,779 $25,779 $0 $214,399 $25,000 $8,556 $21,753 $100,276
2028 $25,781 $25,781 $5,219 $234,961 $25,000 $28,337 $21,756 $116,812
2029 $25,780 $25,780 $0 $260,741 $25,000 $53,337 $21,754 $138,566
2030 $25,784 $25,784 $0 $286,525 $25,000 $78,337 $21,758 $160,324
2031 $25,796 $25,796 $119,387 $192,934 $ 2 5 , 0 0 0 ($ 1 6 , 0 4 9 ) $21,768 $62,705
2032 $25,758 $25,758 $0 $218,692 $25,000 $8,951 $21,735 $84,440
2033 $25,758 $25,758 $5,219 $239,231 $25,000 $28,732 $21,736 $100,957
2034 $25,757 $25,757 $0 $264,988 $25,000 $53,732 $21,735 $122,693
2035 $25,758 $25,758 $0 $290,746 $25,000 $78,732 $21,736 $144,428
2036 $25,762 $25,762 $52,075 $264,434 $25,000 $51,657 $21,740 $114,093
TOTAL $962,777 $962,777 $750,000 $812,436
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Copyright Kipcon 2008
Funding Plans
20 07
20 09
20 11
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20 15
20 17
20 19
20 21
20 23
20 25
20 27
20 29
20 31
20 33
20 35
Y ear
($ 200 )
($ 100 )
$0
$1 00
$2 00
$3 00
$4 00
Thou
sand
s
Dol
lars
R ese rve Fu nd Ba lanc e : Fu ll
R ese rve Fu nd Ba lanc e : Current
R ese rve Fu nd Ba lanc e : Base lin e
Deergone EstatesP roje c te d 3 0 Y ea r Cash Flo w Ana lysis
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What Does The Association Do ?
»Current Annual Contribution $25,000
»Full Funding Recommendation ˃ Year One $53,145
˃ Minimum Balance $89,949 (2021)
»Baseline Finding Recommendation ˃ Year One $44,847
˃ Minimum Balance $0 (2021)
IT IS AGREED THAT A JUMP TO $53,145 IS TOO MUCH AND BASELINE IS TOO RISKY…..
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Copyright Kipcon 2008
Try Averaging ? E x a m p le S tu d y
R e s e rv e S tu d y F u n d in g P la n
P ro je c te d T h ir ty Y e a r C a s h F lo w
F U L L CURRENT BASELINE
F U N D I N G A N A L Y S I S F U N D I N G A N A L Y S I S F U N D I N G A N A L Y S I S
Y e a r
B e g in n in g
A n n u a l
C o n t rib u t io n
A v e r a g e d
C o n t rib u t io n
A n n u a l
E x p e n d itu re
R e s e rv e F u n d
B a la n c e
A n n u a l
C o n t rib u t io n
R e s e rv e F u n d
B a la n c e
A n n u a l
C o n t rib u t io n
R e s e rv e F u n d
B a la n c e
P o o lin g F a c t o r 9 7 . 1 4 %
Beginning Balance $50,000 $ 5 0 , 0 0 0 $50,000
2007 $53,145 $33,359 $0 $83,359 $25,000 $75,000 $32,405 $82,405
2008 $45,352 $33,359 $0 $116,719 $25,000 $100,000 $32,405 $114,811
2009 $46,778 $33,359 $0 $150,078 $25,000 $125,000 $32,405 $147,216
2010 $49,466 $33,359 $0 $183,438 $25,000 $150,000 $32,405 $179,622
2011 $57,298 $33,359 $84,000 $132,797 $25,000 $ 9 1 , 0 0 0 $32,405 $128,027
2012 $35,677 $33,359 $0 $166,156 $25,000 $116,000 $32,405 $160,433
2013 $36,067 $33,359 $5,219 $194,297 $25,000 $135,781 $32,405 $187,619
2014 $35,739 $33,359 $0 $227,656 $25,000 $160,781 $32,405 $220,025
2015 $36,250 $33,359 $0 $261,016 $25,000 $185,781 $32,405 $252,430
2016 $38,049 $33,359 $118,946 $175,429 $25,000 $ 9 1 , 8 3 5 $32,405 $165,890
2017 $30,518 $33,359 $0 $208,789 $25,000 $116,835 $32,405 $198,295
2018 $31,278 $33,359 $163,917 $78,231 $25,000 ($22,082) $32,405 $66,784
2019 $26,737 $33,359 $0 $111,590 $25,000 $2,918 $32,405 $99,189
2020 $26,759 $33,359 $0 $144,950 $25,000 $27,918 $32,405 $131,595
2021 $26,918 $33,359 $164,000 $14,309 $ 2 5 , 0 0 0 ($ 1 1 1 , 0 8 2 ) $32,405 $0
2022 $25,808 $33,359 $0 $47,669 $25,000 ($86,082) $32,405 $32,406
2023 $25,813 $33,359 $5,219 $75,809 $25,000 ($66,301) $32,405 $59,592
2024 $25,798 $33,359 $0 $109,169 $25,000 ($41,301) $32,405 $91,998
2025 $25,801 $33,359 $0 $142,528 $25,000 ($16,301) $32,405 $124,403
2026 $25,813 $33,359 $25,143 $150,744 $ 2 5 , 0 0 0 ($ 1 6 , 4 4 4 ) $32,405 $131,665
2027 $25,779 $33,359 $0 $184,104 $25,000 $8,556 $32,405 $164,071
2028 $25,781 $33,359 $5,219 $212,244 $25,000 $28,337 $32,405 $191,257
2029 $25,780 $33,359 $0 $245,604 $25,000 $53,337 $32,405 $223,663
2030 $25,784 $33,359 $0 $278,963 $25,000 $78,337 $32,405 $256,068
2031 $25,796 $33,359 $119,387 $192,936 $ 2 5 , 0 0 0 ($ 1 6 , 0 4 9 ) $32,405 $169,087
2032 $25,758 $25,758 $0 $218,693 $25,000 $8,951 $25,021 $194,108
2033 $25,758 $25,758 $5,219 $239,232 $25,000 $28,732 $25,022 $213,911
2034 $25,757 $25,757 $0 $264,990 $25,000 $53,732 $25,021 $238,931
2035 $25,758 $25,758 $0 $290,748 $25,000 $78,732 $25,021 $263,953
2036 $25,762 $25,762 $52,075 $264,435 $25,000 $51,657 $25,026 $236,904
TOTAL $962,777 $962,778 $750,000 $935,247
Annual
Contributions
Have Been
Averaged
For Years
2007 through
2031
![Page 57: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/57.jpg)
What Did Averaging Do ?
» Current Annual Contribution $25,000 » Full Funding Recommendation
˃ Year One through Twenty Five $33,359 ˃ Minimum Balance $14,309
» Baseline Finding Recommendation ˃ Year One through Twenty Five $ 32,405 ˃ Minimum Balance $0
Still too big a jump from $25,000 to $33,359 ?
Too Small of a Threshold of $14,309
NOW WHAT ??
![Page 58: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/58.jpg)
What Was Agreed Upon ?
• Final Goal
• Establish Threshold Amount of $50,000 Increase Annual Contributions by minimum % per year starting at $25,000 to achieve Threshold
• After Threshold Reached, Average the remaining years
![Page 59: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/59.jpg)
Copyright Kipcon 2008
E x a m p le S tu d y
R e s e rv e S tu d y F u n d i n g P la n
P ro je c te d T h ir ty Y e a r C a s h F lo w
F U L L CURRENT
F U N D I N G A N A L Y S I S F U N D I N G A N A L Y S I S
Y e a r
B e g in n in g
A n n u a l
C o n t rib u t io n
A n n u a l
C o n t rib u t io n
A n n u a l
E x p e n d itu re
R e s e rv e F u n d
B a la n c e
A n n u a l
C o n t rib u t io n
R e s e rv e F u n d
B a la n c e
Beginning Balance $50,000 $ 5 0 , 0 0 0
2007 $53,145 $26,087 $0 $76,087 $25,000 $75,000
2008 $45,352 $27,221 $0 $103,308 $25,000 $100,000
2009 $46,778 $28,405 $0 $131,713 $25,000 $125,000
2010 $49,466 $29,640 $0 $161,354 $25,000 $150,000
2011 $57,298 $30,929 $84,000 $108,283 $25,000 $ 9 1 , 0 0 0
2012 $35,677 $32,274 $0 $140,556 $25,000 $116,000
2013 $36,067 $33,677 $5,219 $169,015 $25,000 $135,781
2014 $35,739 $35,142 $0 $204,156 $25,000 $160,781
2015 $36,250 $36,670 $0 $240,826 $25,000 $185,781
2016 $38,049 $38,264 $118,946 $160,144 $25,000 $ 9 1 , 8 3 5
2017 $30,518 $39,928 $0 $200,072 $25,000 $116,835
2018 $31,278 $41,664 $163,917 $77,819 $25,000 ($22,082)
2019 $26,737 $43,476 $0 $121,295 $25,000 $2,918
2020 $26,759 $45,366 $0 $166,661 $25,000 $27,918
2021 $26,918 $47,339 $164,000 $50,000 $ 2 5 , 0 0 0 ($ 1 1 1 , 0 8 2 )
2022 $25,808 $28,446 $0 $78,446 $25,000 ($86,082)
2023 $25,813 $28,446 $5,219 $101,674 $25,000 ($66,301)
2024 $25,798 $28,446 $0 $130,120 $25,000 ($41,301)
2025 $25,801 $28,446 $0 $158,566 $25,000 ($16,301)
2026 $25,813 $28,446 $25,143 $161,870 $ 2 5 , 0 0 0 ($ 1 6 , 4 4 4 )
2027 $25,779 $28,446 $0 $190,316 $25,000 $8,556
2028 $25,781 $28,446 $5,219 $213,543 $25,000 $28,337
2029 $25,780 $28,446 $0 $241,990 $25,000 $53,337
2030 $25,784 $28,446 $0 $270,436 $25,000 $78,337
2031 $25,796 $28,446 $119,387 $179,496 $ 2 5 , 0 0 0 ($ 1 6 , 0 4 9 )
2032 $25,758 $28,446 $0 $207,942 $25,000 $8,951
2033 $25,758 $28,446 $5,219 $231,170 $25,000 $28,732
2034 $25,757 $28,446 $0 $259,616 $25,000 $53,732
2035 $25,758 $28,446 $0 $288,062 $25,000 $78,732
2036 $25,762 $28,446 $52,075 $264,434 $25,000 $51,657
TOTAL $962,777 $962,777 $750,000
For Year 2007
Through 2021,
Annual
Contributions
Increase by
Approximately
4% per year
Resulting in
Threshold of
$50,000 in 2021
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20 07
20 09
20 11
20 13
20 15
20 17
20 19
20 21
20 23
20 25
20 27
20 29
20 31
20 33
20 35
Y ear
($ 200 )
($ 100 )
$0
$1 00
$2 00
$3 00
$4 00
Th
ou
san
ds
Do
llars
R ese rve Fu nd Ba lanc e : Acce pte d
R ese rve Fu nd Ba lanc e : Current
Deergone EstatesP roje c te d 3 0 Y ea r Cash Flo w Ana lysis
Final Funding Plan
![Page 61: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/61.jpg)
Using Your Reserve Study as a Starting
Point to Reduce Your Energy and Maintenance Costs (and go Green)
• It lists the physical components of the community which are the responsibility of the Association to maintain and replace.
• It helps identify all components which require maintenance
• It helps identify all components which consume energy
![Page 62: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/62.jpg)
But, First We Need To Understand What Makes Up The Associations Budget
Operating Expenses
(Including Energy
Costs), 31%
Administrative
Expenses, 16%Fixed Expenses,
11%
Repair/Reserves,
40%
Other, 2%
![Page 63: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/63.jpg)
And The Relationships Between The Parts
Energy
Replacements
Maintenance
![Page 64: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/64.jpg)
The Basis of the Analysis is Your Reserve Study…
![Page 65: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/65.jpg)
And Cash Flow Projection
![Page 66: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/66.jpg)
Which Looks Like This…
![Page 67: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/67.jpg)
A Note on Your Reserve Funding Plan Funding Plan
Comparison
Annual
Contribution
Averaged
Over 30
Years
Full Funding
(over
funding)
$190,649
Baseline
Funding
(under
funding)
$157,545
30 Year
Savings
$33,104 per
year
($993,305
over 30
years)
![Page 68: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/68.jpg)
Now Lets Begin Looking at the Entire Picture …
Replacements
Cost of Maintenance and Energy
![Page 69: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/69.jpg)
The “Real” Cost….
![Page 70: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/70.jpg)
So, What Do You Do ?
Replacements
Reduced Cost of Maintenance and Energy
Maintenance and Reserves
![Page 71: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/71.jpg)
With a Cumulative Affect of..
![Page 72: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/72.jpg)
To Summarize…
Total Contributions Over 30 Years
Replacement Only $5,719,459
Replacement, Maintenance and Energy with Original Components
$6,318,553
Replacement, Maintenance and Energy with Alternative Components
$5,609,821
30 Year Savings !! Which does not include looking at the various funding plans!
$708,732
![Page 73: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/73.jpg)
Which Leads to a New Way of Bidding Replacement Projects
• The Classic “First Cost” Approach Option One Option Two
Material Cost
Labor Cost ________ ________
Total Cost
![Page 74: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/74.jpg)
Which Leads to a New Way of Bidding Replacement Projects
» The Evaluated Cost Approach
Option One Option Two
Material Cost Labor Cost ________ ________ First Cost 30 Yr. Maint. Cost 30 Yr. Energy Cost ________ _________ Total 30 Year Cost Also must consider any rebates, tax credits etc.
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Analyzing The Information
• Wait Until Replacement is Scheduled ?
• Perform Replacement Now ?
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Analyzing the Information
Existing HVAC System
Replacement Cost $175,000
Useful Life 20 Years
Annualized Cost $8750
Annual Energy Cost $70,000
Total Annualized Cost $78,750
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Analyzing the Information
Proposed High Efficiency
HVAC System
Replacement Cost $250,000
Useful Life 20 Years
Annualized Cost $12,500
Annual Energy Cost $50,000
Total Annualized Cost $62,500
![Page 78: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/78.jpg)
The Results
Increase in Installation Cost ($250,000-
$175,000)
$75,000
Rebate at 50% of incremental Cost $37,500
Incremental Cost
($75,000 - $37,500)
$37,500
Annual Energy Cost Savings
($70,000 – $50,000)
$20,000
Years to Breakeven ($37,500/$20,000) 1.9 years
Cumulative 20 Year Savings
($20,000 x 18.1 years )
$362,000
![Page 79: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/79.jpg)
A Little Commercial
When it comes time to replace the components on your Reserve Study, Kipcon is a full service engineering firm
specializing in Community Associations
Roofs Roads Decks
Balconies Facades Drainage
Water infiltration Expert support
Transition Studies
![Page 80: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/80.jpg)
Upcoming Webinars
Roofing Facades
Pavement Decks
Construction Defects Contract Administration
Details to follow :
![Page 81: Webinar: Reserve Studies](https://reader033.fdocuments.us/reader033/viewer/2022052907/5593688f1a28ab942d8b4728/html5/thumbnails/81.jpg)
Thank You…..Questions ?
Mitch Frumkin, PE, RS, CGP President [email protected] Brandon Femia, RS Manager of Reserve Studies [email protected] Kipcon.com 732-220-0200