Condo Media - January 2021 - 19

NOW THAT YOU HAVE
THE RESULTS, WHERE DO
YOU GO FROM HERE?
In the first half of this article, we discussed reserve studies and selling the
results of the report to your association
(without a revolt!). Now that you have
the association on board with the report, how do you go about implementing the actual findings?
Tom Landry, the legendary head
coach for the Dallas Cowboys, said,
" Setting a goal is not the main thing; it is
how you will go about achieving it and
staying within that plan. " This applies
to associations as well: implementing a
reserve study properly is as important as
obtaining a quality study to begin with.
A reserve fund plan will outline
where your association currently stands
financially and the next steps to maintain
adequate funding. By providing your association with comprehensive inventory
of all common elements and an in-depth
analysis to dictate your community's
maintenance standards, the final report
will greatly assist your association in
reaching maintaining financial stability.
ELEMENTS OF THE STUDY
A reserve study consists of two elements: physical analysis (condition
assessment) and financial analysis
(fund status and funding plan). The
physical analysis, which should always
result from a minimum of one site
visit and meeting with the board of
directors, produces a detailed reserve
component (or asset) list for your
community. This component list will
inventory the association's common
elements and the remaining useful
life (RUL) of each one.
The financial analysis documents
the current reserve fund balance, rate
of contributions, and projects annual
balances based on projected expenses.
The objective is to be sure the balance
remains positive (or at a board-determined threshold) as monies are spent.
We recommend the cash flow method
for funding projections - it's practical
and easy to understand. Some consultants will offer component funding.

money relatively quickly, particularly
FUNDING PLAN
in the case of an emergency, and don't
CONSIDERATIONS
want to go through a bank to obtain a
The funding plan serves a measure of
loan (and therefore, pay interest).
your current condition and as a road
This can be an unpopular choice with
map for the future. While you may be
the residents of your community.
tempted to look only at the bottom line
A special assessment can be a one-time
and determine what your association's
payment or installments, depending
monthly reserve dues will be, individual
on the need and urgency. A wellfeatures such as the inflation factor and
managed association with reasonable
replacement cost cannot be ignored.
reserve planning should work to avoid
To ensure a sound budget throughout
a special assessment.
the years, each piece of the reserve fund
puzzle must work together.
ONGOING
The funding plan will recommend a
MAINTENANCE & UPDATES
monthly reserve contribution, which is
Based on your starting reserve balance,
the amount each homeowner will pay in
the final step is to establish a prevenmonthly dues (or quarterly, depending
tive maintenance program, which is
on your particular association) to the
different than a reserve funding plan.
reserve fund only. The assessments are
If your association does not maintain
based on the funding plan developed to
the components as detailed in the
take your current reserve account to the
report, you run the risk of putting your
funding objective. If your association
association much farther behind in both
currently has a weak account (or none
maintenance and reserve funding.
at all) the reserve dues will naturally
be higher than
those associaA quality reserve study performed by a
tions with wellfunded reserve
professional engineer is the ideal way to continue
accounts. Using
the cash flow
planning for future repairs and improvements.
method, owners
Additionally, updates to the reserve
will pay dues to the reserve fund, destudy should be performed every three
signed to offset the annual expenditures
to four years. Changes to the association
from the reserve fund.
inventory, inflation, significant weather
If your community doesn't have a
events, and updating the RUL are just
reserve fund in place and you have
a few of the factors that can change the
cash needs, you should start the fund
original reserve projections.
immediately and defer expenses where
Reserve studies contain an evaluation
you can. A modest first payment in
of property condition, and most imporexcess of the normal monthly payment
tantly, serve as an indispensable tool in
will help get you started.
projecting costs and managing reserve
Along the same lines, securing a loan
accounts. Major expenses are inevifrom a bank that specializes in comtable; these can often be headed off with
munity associations is another option
advance preparation. Reserve studies
that is growing in use. This can be a
have the unique effect of allowing you to
good alternative for associations who
peek into the future to ensure you plan
are drastically under-funded but don't
appropriately today.
want to impose a special assessment
on the homeowners. Planning ahead
and making regular contributions to
n H. ALAN MOONEY IS THE
the reserve fund will reduce the risk of
FOUNDING PRESIDENT OF
such a loan.
CRITERIUM ENGINEERS.
A special assessment may be necessary for associations that need the
January 2021 CONDOMEDIA

19



Condo Media - January 2021

Table of Contents for the Digital Edition of Condo Media - January 2021

Contents
Condo Media - January 2021 - Cover1
Condo Media - January 2021 - Cover2
Condo Media - January 2021 - Contents
Condo Media - January 2021 - 2
Condo Media - January 2021 - 3
Condo Media - January 2021 - 4
Condo Media - January 2021 - 5
Condo Media - January 2021 - 6
Condo Media - January 2021 - 7
Condo Media - January 2021 - 8
Condo Media - January 2021 - 9
Condo Media - January 2021 - 10
Condo Media - January 2021 - 11
Condo Media - January 2021 - 12
Condo Media - January 2021 - 13
Condo Media - January 2021 - 14
Condo Media - January 2021 - 15
Condo Media - January 2021 - 16
Condo Media - January 2021 - 17
Condo Media - January 2021 - 18
Condo Media - January 2021 - 19
Condo Media - January 2021 - 20
Condo Media - January 2021 - 21
Condo Media - January 2021 - 22
Condo Media - January 2021 - 23
Condo Media - January 2021 - 24
Condo Media - January 2021 - 25
Condo Media - January 2021 - 26
Condo Media - January 2021 - 27
Condo Media - January 2021 - 28
Condo Media - January 2021 - 29
Condo Media - January 2021 - 30
Condo Media - January 2021 - 31
Condo Media - January 2021 - 32
Condo Media - January 2021 - 33
Condo Media - January 2021 - 34
Condo Media - January 2021 - 35
Condo Media - January 2021 - 36
Condo Media - January 2021 - 37
Condo Media - January 2021 - 38
Condo Media - January 2021 - 39
Condo Media - January 2021 - 40
Condo Media - January 2021 - 41
Condo Media - January 2021 - 42
Condo Media - January 2021 - 43
Condo Media - January 2021 - 44
Condo Media - January 2021 - 45
Condo Media - January 2021 - 46
Condo Media - January 2021 - 47
Condo Media - January 2021 - 48
Condo Media - January 2021 - Cover3
Condo Media - January 2021 - Cover4
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