BOD Responsibility to follow the Reserve Study

Great topic Linda. We had our last Reserve Study in 2012 and this has been a hot topic of conversation since then. Depending on the make-up of the Board members (and how they see budgeting), we've had sporadic movements toward saving enough in our Reserve Fund. Some years we save a lot....some years not so much. We are not 100% funded at this time and, for the first time, we will be asking our Membership to modify our DCC&R to place tighter restrictions on how our Reserve Fund is handled.

Looking forward to hearing how others respond to this.

Thanks!

oljim, in texas

By "following it," Linda, do you mean try to achieve the percent funded that the analysts or specialist recommends??

Part of the answer may depend on your documents - some may require the reserves to be funded at a certain level or that studies must be done a certain number of years. Ideally, you try to follow the reserves as closely as you can, because you can see whats on the horizon and while you can't completely predict how much things will be, you'll at least have an idea of how much you should be saving.

Another issue may be whether the board really understands what a reserve study is, how it was put together and how it will impact the budget (I believe you have another post on this topic and have learned this describes a lot of board member!). Sometimes people tale a look at the numbers and freeze because they know getting the fund to the level it should be will require some tough decisions regarding spending, prioritizing various projects and of course, what to set the assessment (because it will certainly mean they will have to increase). That last one often prompts the board to ignore the study altogether, figuring by the time the caca comes blowing in, they will have sold their homes and it'll be the remaining owners' problem.

In fact, I believe the News section of this website has a story on a community that's looking at a huge special assessment because the assessments weren't set in a way that the money would be there when needed

I went back and looked at your last topic on reserves (Trees: operating or reserve expense) and note that you said you'd asked several questions of your board about the latest study, but they didn't seem to respond, especially the president.

I don't know if your documents need specific language stating the board MUST follow reserve recommendations - the board does need flexibility in setting the budget, depending on what's happening in the community right now. For example, if there's a major delinquency issue, funding reserves will be very challenging, regardless of the study. The study may recommend putting X amount away, but to do it, the association may have to make some tough decisions on what will happen with the rest of the budget, perhaps funding reserves a little less than the recommendation. Whatever happens, the board needs to find a way to fund reserves consistently, because if it doesn't, the association is setting itself up for big assessment increases AND a special assessment (or two, or three).

AS to how the board should use the study, it may be better for the board to have some policies and procedures on how reserve studies will be handled, such as:

Before the on-site visit, the property manager shall prepare a list of reserve components to be reviewed by the board to ensure everything's listed on the study.
The board will prepare criteria defining what is a reserve item vs. an operating budget item - everything on the study should meet that criteria
The reserve study specialist must have a Community Association Institutes (CAI) Reserve Specialist (RS) designation and/or Association of Professional Reserve Analysts (APRA) Professional Reserve Analysts designation.

There are a number of articles on reserve studies and how they're put together - you may want to read a few and then look at the report again to see how the specialist did his/her job. Perhaps the answers to your questions are there, but the report is poorly written and difficult to find (which is another problem worth addressing the next time the association commissions another study) If you still have questions, talk to the board again and ask if your questions could be forwarded to the specialist for a response - both you and the board will get the response. If you still aren't happy, consider asking they hold a special homeowner's meeting where the specialist can make a presentation on the study and people can ask questions (something I suggested in your last conversation).

I urge you, Linda, to review all of the materials about reserves and reserves studies at Davis-stirling.com even though they're a CA law firm. The reason is they cover so many of the questions you have some of which are confused and confusing. You need a systematic understanding of the topic. Your thinking is all over the place while you try to grapple with the topic. In that reference, you'll also see how to calculate your % funded.

Over the past 5 years, we've had three reserves companies, but all three have the % funded clearly on the first 2-3 pages of the studies. Again, I'm wondering if you're just not reading it right

for instance, you have a component called pool resurfacing. To fully fund that component, you only look at its replacement cost for whatever its remaining useful life (RUL) is. Don't try to add its next estimated resurfacing to the total. And, them why is isi t so expensive? Our schedule shows only about $25,000 to resurface the pool. Is yours a huge olympic size?? And how in the world can resurfacing the pool last 25 years. Ours only is estimated to last about 10. Are you sure you're not talking about the deck that surrounds the pool??

I'm really bad with measurements.

If something is 100 yards, I can visualize the length of a football field. Or 12 feet, I have to picture 2 men laying down head to toe.

So I had no idea what the swimming pool might be. But my property is 40 x 80 ft (3,200 sq.ft.) and that looks similar to the pool. So I guess that might take care of the footprint/bottom. And even if you add additional amounts for the four sides (no idea how much) don't think it would be possible to arrive at the 18,000 sq.ft.

Now I feel really silly not knowing immediately that this number is way, way off.

But I'm also finding some inconsistencies for other items. So I would like to get an idea of costs per unit for the following:
1) Asphalt - mill and overlay
2) Asphalt - seal coat & crack fill
3) Drain pans
4) Curb & gutters
5) Concrete sidewalks

Nice help from Douglas, Linda! I also thick you can look these things up online, yes?

Since your reserves study has photos of components, aren't the ones different of the pool and of the pool deck? And aren't the words different? Our pool, btw is 980 GSF. Our pool deck is 3,080 and would cost $175K to replace.

If your original question is: do you have to replace or repair components exactly when the report says so, the answer is no. Our pool "should" be resurfaced this year, but looks great! We won't do it.

When I did our reserve study, we checked with several asphalt companies.
Rates were between 11 and 18 dollars per square foot.

We based our study on $14 a square foot.

Got a copy of the invoice for the work done October 2015 - partial info below:

$4.30/sq.ft. - Asphalt: replace first lift(3") with 3/4" hot base; pave with second lift (3") with 1/2" hot asphaltic mix
$8.50/sq.ft - Concrete drain pans: remove and replace 36"
$30.05/linear ft. - Curb & gutter: remove and replace 18"
$7.50/sq.ft. - Concrete sidewalks: remove and replace

$1.87/sq.ft. for asphalt in the RS seems low but maybe that is based on a lower depth?
Or maybe the vendor is taking advantage of us - especially with a board that doesn't review things.

Tim: Adding the asphalt and concrete drain pans ($12.80/sq.ft.) would be in line with the $14 amount you use. And I think the drain pans are done at the same time as the asphalt.

However the reserve study shows replacing the asphalt every 20 years and replacing the drain pans every 5 years. Is this common?