Condo Media - July 2010 - (Page 22)

MAINTENANCE by Mitchell H. Frumkin, PE, RS, CGP Value Engineering Optimizing Reserves, Maintenance and Energy Costs rom relationships to puzzles to budgets, experience proves that looking at the whole picture is better than looking at it piece by piece. Nonetheless, community associations generally prepare their budgets by breaking them into separate parts and neglecting how each affects the other. The three main parts of an association’s budget are its reserve study, maintenance schedule and energy fund. With the cost of energy skyrocketing along with maintenance and replacement expenses, it makes more sense than ever for associations to analyze how each of these elements affect each other in order to minimize overall, long-term expenditures. Typically, a reserve schedule is prepared by a firm which specializes in F anticipating and preparing for major common area repair and replacement expenses. Similarly, deferred maintenance schedules are generally prepared professionally and based upon the components included in the reserve study. A deferred maintenance schedule is a calendar of the regular maintenance required to help the common elements obtain their full useful lives. Typical maintenance items include painting, staining decks and caulking windows and doors. Energy costs, the last piece of the puzzle, are estimated based on previous bills received from various utilities or an analysis of the installed equipment along with their energy seers. When these three pieces of the puzzle are analyzed as one entity, substantial savings can be realized in a short period of time. By adding the cost of the maintenance and energy to the 30-year cash flow projection of a typical reserve study, value engineering accounts for the fact that these three factors affect each other. The company compiling your reserve study would then recalculate this 30-year cash flow projection considering replacement suggestions for higher efficiency mechanical equipment and maintenance free materials. When these two figures are compared, the association can clearly see how substituting low efficiency components with higher efficiency components, as well as replacing common elements with maintenance-free materials that do not require future replacement can drastically decrease an association’s annual expenditures. A Few Examples A perfect example of how looking at the whole picture optimizes reserve and maintenance costs is common element wood decks. No matter how you look at it, the total annual cost of wood decks includes both their upkeep and replacement. The average community association considers future deck replacement costs in its reserve fund and separately lists the cost of routine maintenance in its deferred maintenance schedule. A more value-oriented community association puts the pieces of the budgeting puzzle together and pays slightly more to replace their wood decks with a material that requires no maintenance and has an indefinite useful life. Though the initial cost may be more, the decks will not need maintenance or have to be replaced, thus removing the item from both the 22 CONDO MEDIA • JULY 2010

Table of Contents for the Digital Edition of Condo Media - July 2010

Condo Media - July 2010
From the CED’s Desk
President’s Message
CAI News
CAI Regional News
Asked & Answered
Homeowner’s Corner
Vendor Spotlight
Volunteer Spotlight
Board Member Insight
2010 CAI-NE Financial-Reserves Directory
Advertisers Index
Classified Service Directory

Condo Media - July 2010