tvililer - !.

r(,u5(Jrr rrt':
Preston at Park West

. Periodically sample and test for contaminants.

r Consult with loeal contractors to determine the cost of removing and disposing of the spail, once its
nature is known.

Firms that specialize in this work can be typically found by internet searching "Lake and Pond, Construction
and Maintenance" for your state or area of the country. Some states provide short lists of companies that
speeialize in this type of work.

Please note that the periodic removal of overgrown vegetation from the pond is considered a maintenance
activity and has not been reserved for or included in this study.

BUILDING EXTERIORS
Building Roofing. The buildings are roofed predominantly in asphalt shingles with standing seam metal used
at entrances and over garages. The roofs are in generally good condition.

Asphalt shingle roofs can have a useful life of 20 to 50 years depending on the weight and quality of the
shingle. Weathered, curled, and missing shingles are all indications that the shingles may be nearing the end
of their useful life.

Metal roofing can be standing seam, rolled seam, or shingle with a normal economic life of 50 to 100 years. ln
some cases, recoating or repainting can exiend the useful life of a metal roof.

Access to the roofs was not provided at the time of inspection.

Annual inspections are recommended, with cleaning, repair, and mitigation of vegetation performed as
needed. Access, inspection, and repair work should be performed by contractors and personnel with the
appropriate access equipment who are experienced in the types of roofing used for the facility.

For additional information on roofs and roof maintenance, please see the appropriate tinks on our web site at

Siding and Trim. The exteriors of the buildings are clad in fiber cement and brick veneer siding and trim. The
siding and trim materials are in generally good condition.
Miller - Dodson Associates. lnc. Condition Assessment - Page D6
Preston at Park West May 24,2016

I'
'i

Fiber cement materials typically have an extended useful life and require repainting and recaulking every 10 to
15 years. Following the manufacturer's recommendations for cleaning, painting, and caulking, we expect
cementitious products to have a useful lite of 40 years or more.

Brick masonry is used as a partial exterior cladding at the ground floor level of the buitdings. As masonry
weathers, the mortar joints will become damaged by water penetration. As additional water gains access to
the joints, repeated freeze-thaw cycles gradually increase the damage to the mortar joints. lf allowed to
progress, even the masonry units such as brick, block, and stone can have their surfaces affected and
masonry units can become loose.

ln general, masonry is considered a long-life item and is therefore excluded from reserve funding. However,
because weather and other conditions result in the slow deterioration of the mortar in masonry jolnts, we have
included funding in this study for repointing. Repointing is the process of raking and cutting out damaged
sections of mortar and replacing them with new mortar.

Periodic repointing and local replacement of damaged masonry units will limit the damage done by moisture
penetration. For this study, we assume that 10% of the masonry will require repointing every 10 years after
approximately 30 years. For additional information about masonry and repointing, please view the relevant
links at http://mdareserves.com/resources/links/bu ildino-exterior.
 Assessment is based upon our visual -survey ot t---'-ne
propertyihe
-J*"li,' sole Plrpos:""jr:l?r:'t=:?l
]ffi :l
T: it ff : i,',ffi H i':'ffi J; ;v i" n i" * ni n g u s erur ire a n d
;:H'"i"}}"':";11i"A,,. arrarrrcrian rcqr rmFd"thal
in
"i components met
I

;#:J#?:,*,i,"iJil ; --^^.^
these common erements. our evatuation assumed that all comDonents mgt
of construction' our visual survey was conducted with care
building code requirer"nt, ln force at the time
persons, but no warranty or guarantee is expressed or implied'
by experienced
lntentionally Left Blank
fVliller + Dodson Assoeiates, lnc. Cash Flow Method Accounting Summary - Pagg CF1
Freston ii PJrr west ,.HL##i^1,9

CASH FLOW METHOD ACCOUNTING SUMMARY

This Preston at Park West - Cash Flow Method Accounting Summary is an attachment to the
preston at Park West - Replacement Reserve Study dated t$ay 24,2016 and is for use by
accounting and reserve professionals experienced in Association funding and accounting principles.
This Summary consists of four reports, the 2017,2018, and 2019 Cash Flow Method Category Funding
Reports (3) and a Three-Year Replacement Funding Report.

s CASH FLOW METHOD CATEGORY FUNDING REPORT, 2017, 2018, and 2019. Each of the 54 Projected
Replacements listed in the Preston at Park West Replacement Reserve lnventory has been
assigned to one of 4 categories. The following information is summarized by category in each report:
:J Normal Economic Life and Remaining Economic Life of the Projected Replacements.
--l Cost of all Scheduled Replacements in each category.
: ) Replacement Reserves on Deposit allocated to the category at the beginning and end
of the report period.
J Cost of Projected Replacements in the report period.
.J Recommended Replacement Reserve Funding allocated to the category during the
report period as calculated by the Cash Flow Method.

s THREE-YEAR REPLACEMENT FUNDING REPORT. This report details the allocation of the $294,907
Beginning Balance (at the start of the Study Year) and the $257,164 of additional Replacement Reserve
Funding in 2017 through 2019 (as calculated in the Replacement Reserve Analysis) to each of the 54
Projected Replacements listed in the Replacement Reserve lnventory. These allocations have been made
using Chronological Allocation, a method developed by Miller Dodson Associates, lnc., and discussed below.
The calculated data includes:
J ldentification and estimated cost of each Projected Replacement scheduled in years 2017 through 2019.
J Allocation of the $294,907 Beginning Balance to the Projected Replacements by Chronological Allocation.
,i Allocation of the $257,164 of additional Replacement Reserve Funding recommended in the
Replacement Reserve Analysis in years 2017 through 2019, by Chronological Allocation.

€ CHRONOLOGICAL ALLOCATION. Chronological Allocation assigns Replacement Reserves to Projected

Replacements on a "first come, first serve" basis in keeping with the basic philosophy of the Cash Flow Method.
The Chronological Allocation methodology is outlined below.
') The first step is the allocation of the $294,907 Beginning Balance to the Projected Replacements in the
Study Year. Remaining unallocated funds are next allocated to the Projected Replacements in subsequent
years in chronological order until the total of Projected Replacements in the next year is greater than the
unallocated funds. Projected Replacements in this year are partially funded with each replacement
receiving percentage funding. The percentage of funding is calculated by dividing the unallocated funds
by the total of Projected Replacements in the partially funded year.
At Preston at Park West the Beginning Balance funds all Scheduled Replacements in
the Study Year through 2A28 and provides partial funding (36%) of replacements schedule d in 2A29.

;) The next step is the allocation of the $85,721 ot 2017 Cash Flow Method Reserve Funding calculated
in the Replacement Reserve Analysis. These funds are first allocated to fund the partially funded
Projected Replacements and then to subsequent years in chronological order as outlined above.
At Preston at Park West the Beginning Balance and the 2017 Replacement Reserve
Funding, funds replacements through 2028 and partial funds (66.6%) replacements in 2029.
'-) Allocations of the 2018 and 2019 Reserve Funding are done using the same methodology.
af The Three-Year Replacement Funding Report details component by component allocations made by
Chronological Allocation.
 Miller + Dodson Associates, lnc. Cash Flow Method Accounting Summary - Page CF2
Preston at Park West May 24,2A$
161 56802PRESTON1 7

2017 . CASH FLOW METHOD CATEGORY FUNDING REPORT

Each of the 54 Projected Replacements included in the Preston at Park West Replacement Reserve
lnventoryhasbeenassignedtooneof the4categorieslistedinTABLECF'1 below. Thiscalculateddataisa
summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
r A Beginning Balance of $294,907 as of the first day of the Study Year, January 1 ,2017 .

-; Total reserve funding (including the Beginning Balance) of $380,628 in the Study Year.
J No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.
) All Projected Replacements scheduled in the Replacement Reserve lnventory in 2017 being
accomplished in 2017 at a cost of $27,938.
lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates
to arrange for an update of the Replacement Reserve Study.
2017 . CASH FLOW METHOD CATEGORY FUNDING - TABLE GFl
NORMAL REMAINhIC EgTIMATEO 2017 2011 2017 20't7
ECONOMIC ECONOMIC REPGCEIIENT BEGINNING RESERW PROJECTED ENOOFYEAR
CATEMRY LIFE COST AAIANCE BA]3NCE

SITE COMPONENTS 6 io 40 years 0 to 37 years s347,126 $1 83,953 $75,902 ($27,e38) $231,918

BUILDING EXTERIORS 20 to40years 16 to 3E years $1,905,780
BUILDING EXTERIORS - contd years I to 40 years
15 to 45 s55 t,720 $1 07,954 $9,819 $117,773
BUILDING EXTERIORS - contd 10to25yeers Sto23years $1 3,200 $3,000 $3,000
 Miller + Dodson Associates, lnc. Cash Flow Method Accounting Summary - Page CF3
Preston at Park West l,Iiay 24,2016
161 56802PRESTON1 7

2018 - CASH FLOW METHOD CATEGORY FUNDING REPORT

Each of the 54 Projected Replacements included in the Preston at Park West Replacement Reserve
lnventory has been assigned to one of the 4 categories listed in TABLE CF2 below. This calculated data is a
summary of data provided in the Three-Year Replacement Funding Repo( and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
) Replacement Reserves on Deposit totaling $352,691 on January 1,2018.
) Total reserve funding (including the Beginning Balance) of $466,350 lrom 2017 through 2018.
.) No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates
to arrange for an update of the Replacement Reserve Study.
8. CASH FLOW METHOD CATEGORY - TABLE CF2
NORMAL REUINING ESTIMATED 2018 2O1A 2018 2018
ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTEO ENOOFYEAR
CATEGORY LIFE LIFE CAST AALANCE FUNDING REPLACEMENTS BATANCE
SITE COMPONENTS 6 to 40 years 4 to 36 years $347,126 5231,918 575.902 $307,820
BUILDING EXTERIORS 20 to 40 years 1 5 to 37years S1,905,780
BiJILDING EXTERIORS - cont'd l5to45years Bto39years $551,720 $117.773 $9.819 $127,592
BUlLDING EXTERIORS . cont,d '10 to 25 years 7 lo 22 yeas 51 3,200 $3.000 $3,000
 Miller + Dodson Associates, lnc. c - B_gq tI{
Preston at Park West May 24,2016
161 56802PRESTON17

2019 - CASH FLOW METHOD CATEGORY FUNDING REPORT

Each of the 54 Projected Replacements included in the Preston at Park West Replacement Reserve
lnventory has been assigned to one of the 4 categories listed in TABLE CF3 below. This calculated data is a
summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
.-) Replacement Reserves on Deposit totaling $438,412 on January 1, 2019.
f Total Replacement Reserve funding (including the Beginning Balance) of $552,071 from2A17 to 2019.
J No expenditures from Replacement Reserves other than those speciflcally listed in the
Replacement Reserve lnventory.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates
to arrange for an update of the Replacement Reserve Study.

NCRMAL REMAINING &19 2019

ECONOI4IC ECONOM1C BEGIMf'llttG RESERVE PROJECTED END OF TdR
CATEGORV LIFE LIFE BAI-AIICE FUNDING REPLACEMENTS BALANCE

SITE COMPONENTS 6 to 40 years 3 to 35 years $347,1 26 s307,820 s3'19.975

BUILDING EXTERIORS 20 to 40 years 14 to 36 years $'1,905,780 s72.639
BUILDING EXTERIORS . cont,d 1 5 to 45 years 7 to 38 years $551,720 $127,592 QOra s128.520
BUILDING EXTERIORS - contci 1 0 to 25 years 6 to 21 years $1 3,200 $3,000 s3 000
 Miller + Dodson Associates, lnc. Cash Flow Method Accounting Summary - Page CFS
Preston at Park West May 24,2016
1 61 56802PRESTON1 7

CASH FLOW METHOD . THREE.YEAR REPLACEMENT FUNDING REPORT

TABLE CF4 below details the allocation of the $294,907 Beginning Balance, as reported by the Association and
the $257,164 of Replacement Reserve Funding calculated by the Cash Flow Method kom 2417 to 2019, to the 54
Projected Replacements listed in the Replacement Reserve lnventory, These allocations have been made by
Chronological Allocation, a method developed by Miller Dodson Associates, lnc., and outlined on Page CF1
The accuracy of the allocations is dependent upon many factors including the following critical financial data:
I Replacement Reserves on Deposit totaling $294,907 on January 1,2017.
'-t Replacement Reserves on Deposit totaling $352,691 on January 1,2018
i Replacement Reserves on Deposit totaling $438,412 on January 1 ,2019.
::) Total Replacement Reserve funding (including the Beginning Balance) of $552,071 from 2017 to 2019.
'L No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.
i All Projected Replacements scheduled in the Replacement Reserve lnventory from2017 to 20'l 9 being
accomplished as scheduled in the Replacement Reserve lnventory at a cost of $27,938.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson
Associates, lnc., to arrange for an update of the Replacement Reserve Study.
)D - THREE.YEA - TABLE CF4
DfilD&r oa Esdmrird Titi ,o11 ,0r7 2018 20lt 2018 20t9 7[19 2019
tE Pmlctd Rcplaa(B!t 0fB.giaEi!g Rsn'c Pil,jsred End of Y({r Rt*nr Projdlcd Eido{ltff Renr Prej6&d EEd ot Yer
, EqlGraX l Corrs adrxc Flnfi.9 Rcplscders Balrn(r Fr.dirg R.pLem.& BrhRc fldir! XcpLeera Birc
SITE COMPONENTS

I Csaete drireuay (69/0) 52..il6 71,:8t 16,019 87,100 16,019 103,i lE lor,832
2 C@nete flatwqk (696) I t,5 l2 15,655 l,5lE lqrTJ 3,5t8 22,@l 2i,023
3 lYood PTL deking l!3,650 48,102 ,10,8.{5 88,9.16 .10,845 t29,79t 133,650
4 \t'ood PTL ailing s0,7t7 Ir,279 rS,5I 3t,800 t5.t2r 19,310 50,787
5 Rcainingwall, PTL 21,938 :7,938 (:;,9i8)
6 Foe, 6' riwl olid face 9,579
7 Sign & posf rr4t :,850 l.sl-i
8 Mailbox, clugtr 10,500
9 Postal shelts, PTL 5,600
lo P6tal sh€lter, mebl rcd
II P6gda, PTL-*'ood I t,000
12 StmBfi6ponddredging 25,675
t 3 SM wats pond feilait I,200 l.2m I,200 r,200 t,200 2,.t00
14 Stomui.r tMagment 1,500 1,500 t,500 I,S00 960 2,4&
15 Enuy- Mdudenr I,000 1,000 1,000

BLILDIN-G EXTENORS

16 R@fiDg &?halt shingls ,O,.lO0

l? Rofing asphalt shingls 40,i100
t8 R@fing. 6phah shingls .r0,{o0 25,84-{ 25,844
19 Roffng" Bphalr shinglB 40.400 .10,.100 40.400
20 R@fin& sicl sunding ffim 27,950
2l Rmf ng stcel strnding *am 21,950
22 R@6ng sHl sbditrg ffi 27,950
23 Rofing, stccl sranding sm 2?,9-rO
24 ChiorEy €p, mel 3,900
2-i Chimel cap. mcral 3,900
26 Chimey c4, mml .3,900 2,495 :,{95
27 Chimney cap, mctal 3,900 1,900 3,900
l8 Siding & tim, fibs effir 3E6,395
b Siding & rim, 6bs ce@trt 386,295
30 Siding& air4 fibrcemcm 386,295
II Sididg & rim, fibs cemnt 386,295
l2 Masoul' vow ( lf:6 cpcintiq) 7 t,600

BUILDhIG EXTEzuORS - cot'd

Dor, slid ml arsprinller clM 4,250

Dffi, slid $el arsprintler cl6.t 4,250
.i5 Dffi, solid nel ar sprinuer clGer 4,250
36 Dw, tolid stel st sprilkler dwt 4,250
Colw, fiberglu u otia 57,mO
38 C.imn, fibgglss il nris 57,000
39 Cdmn. fiberglu at ouies 57,000
Miller + Dodson Cash Flow Method
Preston at Park West

FLOW METHOD - FUNDING - TABLE eF4 cont'd

Dc$riplio. of fstiiliid illGrlion 2017 :i[? 20t7 20t8 zt'rE ]0!8 ?dlq :019 lrl9
Illm Proj6ted RsDlncement 0fAdgiiring Rc*nc Projer(d f,nd of Year RNnr Projccled fnd of \'€!r Re*n t Proi((lcd Etrd of Ycrr
Raplacrmnt (:o51s !*lucc Fu.ding Rclrlarcm(trt! Brhnce F!odint Rtlh(tDttrt! Anhntt Futrdinl RtpL$or(ots Bllaotc
40 Colmr, fib€rglN at stris 57,@O
4l Wood PTL miling r2.8:5 4,616 3,919 8,5i5 1,919 12.455 370 12,825

4: wood PTL miling l?,825 t2,815 12,82J 12,825 12,E25

$ \4'oodPTLEiliog r2,825 12,825 12,825 12,825 12,815
.{,1 lvood PTL ailing l3,El5 l:,825 12,825 11,825 12,825
45 $'ood PTL dsking 19,305 6,9.t8 5,900 t:,8,{8 5,900 18,748 557 t9,305
46 \\ood PTL deking 19,305 I9,305 19,305 t9,i05 19,305
41 wood PTL dckint lq3o5 t9,305 19,i05 19,105 t9,105
48 1 'ood PTL d*king l9,l0J r9,105 t9,305 t9,105 19,i05
49 Dtrk stffitur€PTL .r4,550
50 DfrkmffPTL 4.r,550
5l DalEffiePTL 44,550
52 Drk stnrctun PTL 4,1,550

BUILDLiiC EXTERIORS - cold

53 uood PIL sxeps l0:m

5.t Firc pro*tim & alm sJ-srm (allo$. 3,000 1,000 3,000 -i,@0
 Miller + Dodson Associates, lnc. Component Method - Page CM1
Preston at Park West May 24,20'16
2016
151 55802PRESTONi7

COMPONENT METHOD

,: ^^ .^^
$Yu'rdr COMPONENT METHOD RECOMMENDED ANNUAL FUNDING OF REPLACEMENT
RESERVES lN THE sruDY YEAR, 20iz.
$75.32 Per unit (average), recommended monthly funding of Replacement Reserves

General. The Component Method (also referred to as the Full Funded Method) ts a very conservative
mathematical model developed by HUD in the early 1 980s. Each of the 54 Projected Replacements listed in the
Replacement Reserve lnventory is treated as a separate account. The Beginning Balance is allocated to each of the
individual accounts, as is all subsequent funding of Replacement Reserves. These funds are "locked" in these
individual accounts and are not available to fund other Projected Replacements. The calculation of Recommended
Annual Funding of Replacement Reserves is a multi-step process outlined in more detail on Page CM2.

Component Method - Cumulative Receipts and Expenditures Graph

63.500,000

Compon6nt Motfiod - Cutulauv€ RaepG Component Method - Year En{ 88lsne Proided R6ph6msls . Cumulatiw Expefiditua6s
-<o- -t- :
s3,21 7.1 95

$3,000,000

$2,500,000

s2,000,000

$1.500,000

$1,000,000

$500,000

N @ o O -N o v 6 @ N @
NN o o r: N o rt6
N
o !NN N NNN oo oO ct ooot)o @ N @ o o f N o 9 o
+ @
o o o
FiN N
gl o
N Nii
o
E o
E
o
ru o
N o o
N N N
o o
N eN o
N N ciNN ai ai ai 5 o
ii ;+:l $ ++ ;
N N N N N K R RR R R
 Miller + Dodson Associates, lnc. Component Method - Page CM2
-
Preston at Pa* West May 24,2A16
- 161s6802PRESTON1 7

COMPONENT METHOD (cont'd)

Current Funding Objective. A Current Funding Objective is calculated for each of the Projected Replacements
listed in the Replacement Reserve lnventory. Replacement Cost is divided by the Normal Economic Life to
determine the nominal annual contribution. The Remaining Economic Life is then subtracted from the
Normal Economic Life to calculate the number of years that the nominal annual contribution should have
been made. The two values are then multiplied to determine the Current Fundlng Objective. This is repeated for
each of the 54 Projected Replacements. The total, $256,679, is the Current Funding Objective.
For an exampie, consider a very simple Replacement Reserve lnventory with one Projected Replacement, a fence
with a $1 ,000 Replacement Cost, a Normal Economic Life of 10 years, and a Remaining Economic Life of 2 years.
A contribution to Replacement Reserves of $100 ($1 ,000 + 10 years) should have been made in each of the
previous 8 years (10 years - 2 years). The result is a Current Funding Objective of $800 (8 years x $100 per year).
Funding Percentage. The Funding Percentage is calculated by dividing the Beginning Balance ($294,907)
by the Current Funding Objective ($256,679). At Preston at Park West the Funding Percentage is 114.9%
Allocation of the Beginning Balance. The Beginning Balance is divided among the 54 Projected Replacements
in the Replacement Reserve lnventory. The Current Funding Objective for each Projected Replacement is
multiplied by the Funding Percentage and these funds are then "locked" into the account of each item.
lf we relate this caiculation back to our fence example, it means that the Association has not accumulated $800
in Reserves (the Funding Objective), but rather al 114.9 percent funded, there is $9.1 9 in the account for the fence.
Annual Funding. The Recommended Annual Funding of Replacement Reserves is then calculated for each
Projected Replacement. The funds allocated to the account of the Projected Replacement are subtracted from the
Replacement Cost. The result is then divided by the number of years until replacement, and the result is
the annual funding for each of the Projected Replacements. The sum of these is $90,382, the Component Method
Recommended Annual Funding of Replacement Reserves in the Study Year (2017).
ln our fence example, the $9'1 9 in the account is subtracted from the $1,000 Total Replacement Cost and divided
by the 2 years that remain before replacement, resulting in an annual deposit of $40. Next year, the deposit
remains $40, but in the third year, the fence is replaced and the annual funding adjusts to $100.
Adjustment to the Component Method for interest and inflation. The calculations in the Replacement Reserve
Analysis do not account for interest earned on Replacement Reserves, inflation, or a constant annual increase
in Annual Funding of Replacement Reserves. The Component Method is a very conservative method and
if the Analysis is updated regularly, adequate funding will be maintained without the need for adjustments.

Component Method Data - Years 1 through 30

Yegr 2017 2018 2019 2420 2021 m26
Beginnino balsnd s294,907
Re@@nded Snnusl fuadirE 590.382 305.939 s95,939 s95.939 s95.939 $95,951 897.473 $97,479 s97,484
lnteed on re*E
ESelditue s27.S38 51,200 $03,926 s'1,500 $3.000 $32,130
Year end balsne s357.351 S,t53,2€0 $5,t9,229 s645.16S s74 1,1 06 tE35,8,r7 $E67.8?t s963.844 5'1.058,323 t1,123d77
Cumulatiw EJpenditurs s27,5* 527,936 527,93E s27,938 s27,938 929.13E 933.0€5 s9+.565 597.565 S129.685
Cumul3live Receipts $38s,289 $481,228 6577,167 s873.106 $769.045 5861,9E5 5960.938 s1,05E,409 $1,155,8EE 51,253,372

Yed ?327 ?!2a 20?s 2030 2031 m32 2033 2034 2035 2036
Re@mrended annusl fundirE s97,6,t3 $97,753 S97,E39 s98,170 598,170 5S8.170 598,174 s98r32 336,271 t9a,2E9
lnleteston rcse@s
E)p€nditures t32,1S 332,130 S2&.49s $2,2@ 544,e0 s4a,6s 5111,% 5a9,975
Ycar d balere s1.1a9,1$ S1254.8't9 51,O72,1U $1,170,334 sl26a,s $1,364,473 51,418,37 51.467.930 51,4il,973 S1,483,287
Cumhtive E#dilur* $161.825 t193.S55 S474,4S s474,450 $474.450 976,650 5520.9S s569,6m S5&.E27 S7S.a02
Curulali€ Reeids 51,351,015 t1,4A,771 t1,s45,6t3 $1.6,04,783 s1,742.953 $t,84r,'123 S1,S3S37 s2,o37,529 $2,135.800 t2,234,089
Yeir 2037 2q38 2039 2A40 2061 ?o42 204:! 2044 2045 2W
R4omffi ded annual f undino s98,289 $98.306 S98.309 s98.312 s90,315 $98.315 598,315 $98,315 $98,3't5 $38,315
lntcGl on €seffi
ElQenditu6 s43,188 S,r.250 $42s0 tr4,450 59€,O5A $3.330 532.130 s218,067 $3,m 571.800
Y@r end balanG s1.536.388 $1,632.14 51.726.503 $r,8r0,365 s1,E12,622. s1,677,608 $t,943,793 $1.824,041 $1.919,356 31,946,071
Cumulative EleendiluGs E793.9{0 5798,24 S8O2.,(9O s6r6,940 t91 2.997 5946.327 3978.,157 $1.136.52,1 51,1S9,524 51271.121
Cumuleliw R@iEs s2.332.3T7 *.,i30.583 $2.528,993 52,827.3{X 92.725,619 u,62s,93s 52,92.250 $3,020,565 S3,118,880 t3,217,195
Miller + Dodson Associates, lnc. Component Method Accounting Summary - Page CM3
Preston at Park West 1
MaY 24,2016
51 56802PRESTON 1 7

GOMPONENT METHOD ACCOUNTING SUMMARY

This Preston at Park West - Component Method Accounting Summary is an attachment to the
Preston at Park West - Replacement Reserve Study dated May 24,2016 and is for use by
accounting and reserve professionals experienced in Association funding and accounting principles.
This Summary consists of four reports, the 2017, 2018, and 2019 Component Method Category Funding
Reports (3) and a Three-Year Replacement Funding Report.

. COMPONENT METHOD CATEGORY FUNDING REPORT, 2017,2018, and 2A19. Each of the 54 Projected
Replacements listed in the Preston at Park West Replacement Reserve lnventory has been
assigned to one of 4 categories. The following information is summarized by category in each report:
, Normal Economic Life and Remaining Economic Life of the Projected Replacements.
: Cost of all Scheduled Replacements in each category.
., Replacement Reserves on Deposit allocated to the category at the beginning and end
of the report period.
-, Cost of Projected Replacements in the report period.
,, Recommended Replacement Reserve Funding allocated to the category during the
report period as calculated by the Component Method.

. THREE-YEAR REPLACEMENT FUNDING REPORT. This report details the allocation of the $294,907
Beginning Balance (at the start of the Study Year) and the $282,260 of additional Replacement Reserve
funding lrom 2017 to 2019 (as calculated in the Replacement Reserve Analysis) to each of the 54
Projected Replacements listed in the Replacement Reserve lnventory. These allocations have been made
using the Component Method as outlined in the Replacement Reserve Analysis.
The calculated data includes:
: ldentification and estimated cost of each Projected Replacement schedule in years 2017 through 2019.
... Allocation of the $294,907 Beginning Balance to the Pro.lected Replacements by the Component Method.

Replacement Reserve Analysis in years 2017 through 2019, by the Component Method.
 Miller + Dodson Associates, lnc. Component Method Accounting Summary - Page CM4
Preston at Park West May 24,2416
1 61 56802PRESTON 1 7

2017 . COMPONENT METHOD CATEGORY FUNDING REPORT

Each of the 54 Projected Replacements included in the Preston at Park West Replacement Reserve
lnventory has been assigned to one of the 4 categories listed in TABLE CM1 below. This calculated data is a
summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
') A Beginning Balance ot $294,907 as of the first day of the Study Year, January 1 ,2017 .
-j Total reserve funding (including the Beginning Balance) of $385,289 in the Study Year.
-l No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.
-: All Projected Replacements scheduled in the Replacement Reserve lnventory in 2017 being
accomplished in 2017 at a cost of $27,938.
lf any of these critical factors are inaccurate, do not use the data and please contact Milier Dodson Associates
to arrange for an update of the Replacement Reserve Study.
2017 - COMPON CATEGORY -T,
TIORMAL REMAINING ESTIMA1ED 2617 zo17 2017
ECONOMIC ECONOMIC RAIACEMENT AEGINNIiIG RESERVE PROJECTED END OF YER
CATEGOfIY LIFE LIFE cosT B{t-Alt}cE FUNDING REPTACEMENTS BALANCE

SITE COMPONENTS 6 to 40 years 0 to 37 years $347,126 $66,391 $ 1 9,869 $27,s38 $5E,323

BUILDING EXTERIORS 20 to 40 years 16 to 38 years $1,905,780 $134,251 $52,142 $1 86.396
BUILDING EXTERIORS - cont'd 1 5 to 45 years 9 to 40 years $551,720 $93,448 $17,670 sl 11,118
BUILDING EXTERIORS - cont'd 10 to 25 years I to 23 years $13,200 $813 $701 $1 ,514
 Miller + Dodson Associates, lnc. Component Method Accounting Summary - Page CM5
Preston at Park West May 24,2016
161 56802PRESTON17

2018 - COMPONENT METHOD CATEGORY FUNDING REPORT

Each of the 54 Prolected Replacements included in the Preston at Park West Replacement Reserve
lnventory has been assigned to one of the 4 categories listed in TABLE CM2 below. This calculated data is a
summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
., Replacement Reserves on Deposit totaling $357,351 on January 1. 2018.
.; Total reserye funding (including the Beginning Balance) of $481 ,228lrom 2017 through 2018.
-: No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates
to arrange for an update of the Replacement Reserve Study.
I METHOD CATEGORY FUNDING - T,
NORMAL REMAINING EST{MATED 2018 2018 2018 2018
ECOa{OMIC ECONOMIC REPLACEMENT BEGINNJNG RESERVE PROJECTED EI.IDOTYEAR
CAlEGORY UFE LIFE coar BA!.ANCE EALAi',CE

SITE COMPONENTS 6 to 40 years 4 to 36 years $347,126 $58,323 825,427 983,749

BUILDING EXTERIORS 20 to40 years 15 to 37 years $1,905,780 $186,396 s52,142 $238,538
BUILOING EXTERIORS - cont'd 15 to 45 years 8 to 39 years $551,720 $111 ,1 18 $17,670 $128,789
BUILDING EXTERIORS - cont'd 10 to 25 years 7 lo 22 yeats $13.200 $1.514 s701 $2,214
 Miller + Dodson Associates, lnc. cqnLnqlMgllqs Aq_clryglgsurnrnelyjlqge CM6
Prcston at Park West illay 24,2416
15155802PRESTONl 7

2019 . COMPONENT METHOD CATEGORY FUNDING REPORT

Each of the 54 Projected Replacements included in the Preston at Park West Replacement Reserve
lnventoryhasbeenassignedtooneofthe4categorieslistedinTABLECM3below. Thiscalculateddataisa
summary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve lnventory.
The accuracy of this data is dependent upon many factors including the following critical financial data:
- Replacement Reserves on Deposit totaling $453,290 on January 1,2019.
-, Total Replacement Reserve funding (including the Beginning Balance) ot $577,167 from 2017 to 2019.
- No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associates
to arrange for an update of the Replacement Reserve Study.
2019 -
NoRrnAL REITAINING E-STIMATED 201e 2019 2019 2013
ECONOMIC ECONOMTC REPTACEMENT BEGINNING RESERVE PROJECTED END OF YEAR
CATEGORY LIFE LIFE cos? EAIANCE FUNOING REPLACEi'ENTS BALANCE

SITE COMPONENTS 6 to 40 years 3 to 35 years $347,1 26 $83,749 $25.427 $1 09.1 76

BUILDING EXTERIORS 20 to 40 years '14 to 36 years $1,905,7E0 $238,538 $52,142 s290,680
BUILDING EXTERIORS - cont,d 1 5 to 45 years 7 to 38 years 9551,72A $1 28,789 $17,670 $146,459
BUILDING EXTERIORS - cont'd '10 to 25 years 6 to 21 years $1 3,200 92,214 $701 $2,915
 Miller + Dodson Associates, lnc. Component Method Accounting Summary - Page CM7
Preston at Park West May 24,2416
151 56802PRESTONl 7

COMPONENT METHOD - THREE.YEAR REPLACEMENT FUNDING REPORT

TABLE CM4 below details the allocation of the $294,907 Beginning Balance, as reported by the Association and the
$28?,260 of Replacement Reserve Funding calculated by the Cash Flow Method from 2017 to 20.1 9, to the 54
Projected Replacements Iisted in the Replacement Reserve lnventory. These allocations have been made by
Chronological Allocation, a method developed by Miller Dodson Associates, lnc., and outlined on Page CF1.
The accuracy of the allocations is dependent upon many factors including the following critical financial data:
; Replacement Reserves on Deposit totaling $294,907 on January 1,2017.
.,: Replacement Reserves on Deposit totaling $357,351 on January 1,2018.
- Replacement Reserves on Deposit totaling $453,290 on January 1,2019.
:-, Total Replacement Reserve funding (including the Beginning Balance) ol $577,167 fram 2017 to 2019.
-, No expenditures from Replacement Reserves other than those specifically listed in the
Replacement Reserve lnventory.
,-! All Projected Replacements scheduled in the Replacement Reserve lnventory from 2017 to 20'l 9 being
accomplished as scheduled in the Replacement Reserve Inventory at a cost of $27,938.

lf any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson
Associates, lnc., to arrange for an update of the Replacement Reserve Study.
D - THREE-YEAR -T,
:O€ctlFiEoa EsfimrH .U6*rioo 2nt7 2817 znt .1 20r8 uotE znta 2019 xol9 2019
It . :, PEldts! kpl.c.me.i orB.gird"e R.snr Pr0j3ri€d fEd of I'$r hj6cred End of }'dr Resn€ Proj(ted lrd oflerr
, : X.tllffi C6 8rhic. FlEdi.g R.phcae.h Baluc. Fs!.1;!e Rrphccftnk B.laacc FErdir! kpl!.r^rnl. Bslrucc
SITE COIVIPONENIS

I Cosdr dri\'$").- (696) 51,416 7,488 7,48t 7,.t88 14,916 7.{EE 22,464
2 Cmsetc fl@-ork (69i) I 1,512 t,645 I,645 r,645 3,2t9 t,645 4,931
3 l}'ood PTL d€king 133,650 20,474 8,?06 29, r 80 8,706 17,t86 8,706 ,16,592
4 B'@d PTL niling 50,787 7,n0 3.308 I 1,088 1,i08 ll,i97 3,308 t7,70s
5 Retaining *all, PTL 27,938 32,498 (,l,16l) i: t.i97 1,397 1,391 2,794
6 Fae, 6 linyl slid fare 9,579 550 238 7tE 218 I,025 238 1,263
7 Sign & po6r, stret 327 140 468 I40 6G 140 148
E il{ailboq cluster r0,500 1,379 291 1,673 294 1,961 294 2,261
9 Posral shelrs, PTL 5.600 641 ll8 781 138 919 138 1,056
l0 P6td sh.lter, mcBl r@f 1,930 2lt 41 )64 47 itt 47 l6:
ll Psgola, PTL-*'ood t l,000 424 2,.t50 428 2,877 428 3,305
l2 Stom$,al6pooddiedging 25.675 1,284 r,284 t,2u 2,568 1,284 3,85r
ll Sffi sattr pond fMEin r,loo 108 650 108 15t t08 876
14 Stomrrtd tr@agmot t,500 141 4t9 144 631 l,l.a 17A
15 E{u}- tr onumcol r,000 63 6i 63 125 63 lE8

BUILDL\G EXTERIORS

l6 R@6nga 6ph8lt shi.glcs 40,{@ 2,0:o 2,010 2,0?0 4,040 2,020 6,060
11 Rofing asphalt shirgle 40,400 1l2l 2,0&r 4,115 2,004 63b 2,m4 8,3i3
l8 R@fing asphalt shingle 40.400 4.642 t,981 6,618 lB87 8,615 1,9E7 10,@t
l9 Rofin& aqdEli ihingle ,lO,.lOO 6,963 I,967 8,929 t,961 r0,E96 1967 12,863
,o Rofing ed uadilgw 27,950 803 696 I,499 696 2,195 696 a89l
2t Rofing stecl sunding *am 21,950 r,606 693 2,299 693 3,685
22 R@fitrg $cel standif,g mm 27.950 2,408 690 3,89 690 1,789 690 4,479
23 R@fin& stel ffiditrB sam 21,950 3,2il 687 1,898 81 4,586 687 5,273
24 Chimney qp, meul 3,900 195 r95 195 190 I95 585
25 Chimro ep, mctal 3,900 224 l9l 4lE l9i 6ll 193 804
Chimn€y ep, m€al 3,900 ,1.1E t92 64 l9: tt2 192 1,023
21 Chimney cap, metal j,900 672 rm E62 190 I,052 190 t,242
29 Sidiag & ri4 frbo mcnt i86,295 | 1,096 9,620 20,1t6 9,620 30,317 9,620 39,937
29 Siding & rim, fibomcnt 386.?95 22,r9t 9,581 I1,73 9,582 41,155 9,582 50,916
30 Siding& rim, fibec@enr 386,295 33287 9,541 42,828 9,5+l 52,369 9,54t 61,909
3l Siding & rio, fiber cmem 386295 ,l4,l8l 9,498 53,880 9.498 61,378 9,498 72,875
32 Itl.sr] \'d6 ( lel. reprinting) 71.@ 2,387 2,1t7 1187 1.7't3 2,387 7,1@

BUILDf,NG EIiTERIORS - c@t'd

Door, slid ssl at sprinller clsd 195 169 364 169 533 169 702
34 Dmr, solid $eel at sprirkler closei 4,250 391 168 558 l6E 726 l6r 894
l5 D@r, slid stecl at sprinlilq clet 4,250 586 161 753 167 919 167 1,086
36 Dmr, solid seel at sprinkler cl6et 4,250 781 165 916 165 l,l t2 165 1,277
C.rMn, fibergls at enri6 57,000 5,821 1,2,18 7,070 1,248 8,318 1,248 9,566
38 Cdunn, fbergls arric at 57,000 1 111 r,2.lj E.510 1,2.r3 9,163 I,2,u I t,006
fg Colun, fibcrgls ar stri6 57,000 8,732 1,218 9,970 I,2i8 I t.207 1,238 12,,U5
Miller + Dodson Associates, lnc. Component Method Accounting Summary - Page CM8
preston?Tpa* West May 24,2C/'0
'151 56802PRESTON1 7

I IYIE I NL'L' - ,lYlEN I f UNU|NIJ - tAE LE r,lul+ G(,III u

Dsripfior of f$imrred An6elion ztli :017 2017 2018 2018 :0r8 2019 2019 2019
PBiet d Replrccftor ofhsiodns Rcsnr Proj(tcd Eedof\ta. R.sne Prujslcd EDdoflerr k*n€ Proitcied E'dofyc:r
Co$ Batatrce frnilitrg Repl..€mcnts B.knce frrdi[g R€II{rnrDlr Balaoae Fundiog RcpbemEls Brhocc
.lo erric rql87 t,?32 ll,4l9 1,232 l ! rl, I 3,8E3
Colun, fiboglas at 57,000 r 2,65
4l wood PTL niling r1825 r,965 835 2,800 835 3,635 Ei5 4,471
42 wood PTL ailing l2,E:5 2,917 82i j,110 82i a 5s1 823 5,4t7
4i \l'ood PTL railing 12.8?5 3,929 8@ 47i8 809 5,54'l 809 6,355
44 'rlood PTI" oiling 12,825 4,912 791 5,703 191 6,494 791 1,286
45 Wood PTL dskitrg 19,305 1,258 4,2t5 1,258 <
^11
1,258 6,',l30
46 Wood PTL d*kiug 19,305 4,436 1,239 5,675 1,239 6,914 t,2]9 8,15i
47 r*'ood PTL drckiry 19,30-i 5,91J r2t7 7,r32 8,349 l,2t'l 9,561
4E Wood PTL d(king 19,305 7,393 r,19 t 8,585 r, rqr 9,116 l, l9t 10, 7
49 DsksEucturePTl- 4.{,550 4,550 916 976 6,50r 976 1,411
50 Dsk shmE PTL M,59 5,687 972 6,659 972 7,6i0 972 8,602
5l Dek stutue PTL ,14,550 6,825 1 't,7 961 8,759 7 9,727
52 Dck smrctue PTL ,l4,5JO 7,962 qt3 8,925 963 9,888 %.! 10,851

BUILDIiIG EXTERIORS - cotrt'd

53 woodPIL $eps 10,200 469 405 874 405 1,280 405 r,685
54 Firc prdstion & alam sy$m (allow; 3,000 345 293 610 295 935 295 I,210
Miller - DodsoqAssociates, Inc. P

1. COMMON INIEREST DEVELOPMENTS -AN OVERVIEW

Over the past 40 years, the responsibility for community facilitles and infrastructure around many of our homes has shifted
from the local government to Community Associations. Thirty years ago, a typical new town house abutted a public street
on the front and a public alley on the rear. Open space was provided by a nearby public park and recreational facilities
were purchased ala ca(e from privately owned country clubs, swim clubs, tennis clubs, and gymnasiums. Today, 60% of
all new residential construction, i.e. townhouses, single-family homes, condominiums, and cooperatives, is in Common
lnterest Developments (ClD). ln a ClD, a homeowner is bound to a Community Association that owns, maintains, and is
responsible for periodic replacements of various components that may include the roads, curbs, sidewalks, playgrounds,
streetlights, recreational facilities, and other community facilities and infrastructure.

The growth of Community Associations has been explosive. ln 1965, there were only 500 Community Associations in the
United States. According to the 1990 U.S. Census, there were 130,000 Community Associations. Community
Associations lnstitute (CAl), a national trade association, estimates there were more than 200,000 Community
Associations in the year 2000, and that the number of Community Associations will continue to multiply.

The shift of responsibility for billions of dollars of community facilities and infrastructure from the local government and
private seotor to Community Associations has generated new and unanticipated problems. Although Community
Associations have succeeded in solving many short-term problems, many Associations have failed to properly plan for the
tremendous expenses of replacing community facilities and infrastructure components. When inadequate replacement
reserve funding results in less than timely replacements of failing components, home owners are exposed to the burden of
special assessments, major increases in Association fees, and a decline in property values.

2. REPLACEMENT RESERVE STUDY

The purpose of a Replacement Reserve Study is to provide the Association with an inventory of the common community
facilities and infrastructure components that require periodic replacement, a general view of the condition of these
components, and an effective financial plan to fund projected periodic replacements. The Replacement Reserve Study
consists of the following:

. ReplacementReserveStudylntroduction. Theintroductionprovidesadescriptionoftheproperty,reviewstheintentof
the Replacement Reserve Study, and lists documents and site evaluations upon which the Replacement Reserve
Study is based.

. Section A Replacement Reserve Analysls. Many components owned by the Association have a limited life and require
periodic replacement. Therefore, it is essential the Association have a financial plan that provides funding forthe
timely replacement of these components in order to protect the safety, appearance, and value of the community. ln
conformance with American lnstitute of Certified Public Accountant guidelines, a Replacement Reserve Analysis
evaluates the current funding of Replacement Reserves as reported by the Association and recommends annual
funding of Replacement Reserves by two generally accepted accounting methods; the Cash Flow Method and the
Component Method. Miller - Dodson provides a replacement reserve recommendation based on the Cash Flow
Method in Section A, and the Component Method in the Appendix of the report.

. Section B Replacement Reserve lnventory- The Replacement Reserve lnventory lists the commonly owned
components within the community that require periodic replacement using funding from Replacement Reserves. The
Replacement Reserve lnventory also provides information about components excluded from the Replacement
Reserve lnventory whose replacement is not scheduled for funding from Replacement Reserves.

Replacement Reserve lnventory includes estimates of the normal economic life and the remaining economic life for
those components whose replacement is scheduled for funding from Replacement Reserves.

. Section C Projected Annual Replacements. The Calendar of Projected Annual Replacements provides a year-by-year
listing of the Projected Replacements based on the data in the Replacement Reserve lnventory.

. Section D Condition Assessment. Several of the items listed in the Replacement Reserve lnventory are discussed in
more detail. The Condition Assessment includes a narrative and photographs that document conditions at the
propedy observed during our visual evaluation.

. The Appendix is provided as an attachment to the Replacement Reserve Study. Additional attachments may include
supplemental photographs to document conditions at the property and additional information specific to the property
cited in the Conditions Assessment (i.e. Consumer Product Safety Commission, Handbook for Public Playground
Safety, information on segmental retaining walls, manufacturer recommendations for asphalt shingles or siding, etc).
The Appendix also includes the Accounting Summary for the Cash Flow Method and the Component Method.
Miller - Dodson Associates, lnc. Page 2

3. METHODS OF ANALYSIS

The Replacement Reserve industry generally recognizes two different methods of accounting for Replacement Reserve
Analysis, Due to the difFerence in accounting methodologies, these methods lead to different calculated values forthe
Minimum Annual Contribution to the Reserves. The results of both methods are presented in this report. The Association
should obtain the advice of its accounting professional as to which method is more appropriate for the Association. The
two methods are:

Cash FIow Method. The Cash Flow Method is sometimes referred to as the "Pooling Method." lt calculates the
minimum constant annual contribution to reserves (Minimum Annual Deposit) required to meet projected expenditures
without allowing total reserves on hand to fall below the specifled minimum level in any year.

First, the Minimum Recommended Reserve Level to be Held on Account is determined based on the age, condition,
and replacement cost of the individual components. The mathematical model then allocates the estimated
replacement costs to the future years in which they are projected to occur. Based on these expenditures, it then
calculates the minimum constant yearly contribution (Minimum Annual Deposit) to the reserves necessary to keep the
reserve balance at the end of each year above the Minimum Recommended Reserve Level to be Held on Account.
The Cash Flow Analysis assumes that the Association will have authority to use all of the reserves on hand for
replacements as the need occurs. This method usually results in a Minimum Annual Deposit that is less than that
arrived at by the Component Method.

Component Method. This method is a time tested mathematical model developed by HUD in the early 1980s, but has
been generally relegated to a few States that require it by law. For the vast majority of Miller - Dodson's clients, this
method is not used.

The Component Method treats each item in the replacement schedule as an individual line item budget. Generally,
the Minimum Annual Contribution to Reserves is higher when calculated by the Component Method. The
mathematical model for this method works as follows:

First, the total Current Objective is calculated, which is the reserve amount that would have accumulated had all of the
items on the schedule been funded from initial construction at their current replacement costs. Next, the Reserves
Currently on Deposit (as reported by the Association) are distributed to the components in the schedule in proportion
to the Current Objective. The Minimum Annual Deposit for each component is equal to the Estimated Replacement
Cost, minus the Reserves on Hand, divided by the years of life remaining.

REPLACEMENT RESERVE STUDY DATA

ldentification of Reserve Components. The Reserve Analyst has only two methods of identifying Reserve
Components, (1) information provided by the Association and (2) observations made at ihe site. lt is important that the
Reserve Analyst be provided with all available information detailing the components owned by the Association. lt is
our policy to request such information prior to bidding on a project and to meet with the individuals responsrble for
maintaining the community after acceptance of our proposal. After completion of the Study, the Study should be
reviewed by the Board of Directors, individuals responsible for maintaining the community, and the Association's
accounting professionals. We are dependent upon the Association for correct information, documentation, and
drawings.

Unit Costs. Unit costs are developed using nationally published standards and estimating guides and are adjusted by
state or region. ln some instances, recent data received in the course of our work is used to modify these figures.

Contractorproposals oractual costexperience may be available as partof theAssociation records. This is useful
information, which should be incorporated into your report. Please bring any such available data to our attention,
preferably before the report is commenced.

Replacement vs. Repair and Maintenance. A Replacemeni Reserve Study addresses the required funding for Capital
Replacement Expendttures. This should not be confused with operational costs or cost of repairs or maintenance.
Miller - Dodson Associates, lnc. Page 3

5. DEFINITIONS

Adjusted Cash Flow Analysis. Cash flow analysis adjusted to take into account annual cost increases due to inflation and
interest earned on invested reseryes. ln this method, the annual contribution is assumed to grow annually at the inflation
rate.

Annual Deposit if Reserves Were Fully Funded. Shown on the Summary Sheet 41 in the Component Method summary,
this would be the amount of the Annual Deposit needed if the Reserves Currently on Deposit were equal to the Total
Current Objective.

Cash Flow Analysis. See Cash Flow Method, above.

Component Analysis. See Component Method, above.

Contingency. An allowance for unexpected requirements. Roughly the same as the Minimum Recommended Reserve
Level to be Held on Account used in the Cash Flow Method of analysis.

Critical Year. ln the Cash Flow Method, a year in which the reserves on hand are projected to fall to the established
minimum level. See Minimum Recommended Reserve Level to be Held on Account.

Current Objective. This is the reserve amount that would have accumulated had the item been funded from initial
construction at its current replacement cost. lt is equal to the estimated replacement cost divided by the estimated
economic life, times the number of years expended (the difference between the Estimated Economic Life and the
Estimated Life Left). The Total Current Objective can be thought of as the amount of reserves the Association should now
have on hand based on the sum of all of the Current Objectives.

Cyclic Replacement ltem. A component item that typically begins to fail ater an initial period (Estimated lnitial
Replacement), but which will be replaced in increments over a number of years (the Estimated Replacement Cycle). The
Reserve Analysis program divides the number of years in the Estimated Replacement Cycle into five equal increments. lt
then allocates the Estimated Replacement Cost equally over those five increments. (As distinguished from Normal
Replacement ltems, see below)

Estimated Economic Life. Used in the Normal Replacement Schedules. This represents the industry average number of
years that a new item should be expected to ,ast until it has to be replaced. This figure is sometimes modified by climate,
region, or original construction conditions.

Estimated Economic Life Left. Used in the Normal Replacement Schedules. Number of years until the item is expected
to need replacement. Normally, this number would be considered to be the difference between the Estimated Economic
Life and the age of the item. However, this number must be modified to reflect maintenance practice, climate, original
construction and quality, or other conditions. For the purpose of this report, this number is determined by the Reserve
Analyst based on the present condition of the item relative to the actual age.

Estimated lnitial Replacement. For a Cyclic Replacement ltem (see above), the number of years until the replacement
cycle is expected to begin.

Estimated Replacement Cycle. For a Cyclic Replacement ltem, the number of years over which the remainder of the
component's replacement occurs.

Minimum Annual Deposit. Shown on the Summary Sheet 41. The calculated requirement for annual contribution to
reserves as calculated by the Cash Flow Method (see above).

Minimum Deposit in the Study Year. Shown on the Summary Sheet A1 . The calculated requirement for contribution to
reserves in the study year as calculated by the Component Method (see above).

Minimum Recommended Reserve Level to be Held on Account. Shown on the Summary Sheet 41, this number is used
in the Cash Flow Method only. This is the prescribed level below which the reserves will not be allowed to fall in any year.
This amount is determined based on the age, condition, and replacement cost of the individual components. This number
is normally given as a percentage of the total Estimated Replacement Cost of all reserve components.

Normal Replacement ltem. A_component of the property that, after an expected economic life, is replaced in its entirety.
(As distinguished from Cyclic Replacement ltems, see above.)
Miller - Dodson Associates, lnc. P

Normal Replacement Schedules. The iist of Normal Replacement ltems by category or location. These items appear on
pages designated.

Number of Years of the Study. The numbers of years into the future for which expenditures are pro.iected and reserve
levels calculated. This number should be large enough to include the projected replacement of every item on the
schedule, at least once. This study covers a 40-year period.

One Time Deposit Required to Fully Fund Reserves. Shown on the Summary Sheet 41 in the Component Method
summary, this is the difference between the Total Current Objective and the Reserves Currently on Deposit.

Reserves Currently on Deposit. Shown on the Summary Sheet 41 , this is the amount of accumulated reserves as
reported by the Association in the current year.

Reserves on Hand. Shown in the Cyclic Replacement and Normal Replacement Schedules, this is the amount of
reserves allocated to each component item in the Cyclic or Normal Replacement schedules. This figure is based on the
ratio of Reserves Currently on Deposit divided by the total Current Objective.

Replacement Reserve Study. An analysis of all of the components of the common property of the Associalion for which a
need for replacement should be anticipated within the economic life of the property as a whole. The analysis involves
estimation for each component of its estimated Replacement Cost, Esiimated Economic Life, and Estimaied Life Left.
The objective of the study is to calculate a recommended annual contribution to theAssociation's Replacement Reserve
Fund.

Total Replacement Cost. Shown on the Summary Sheet 41, this is total of the Estimated Replacement Costs for all items
on the schedule if they were to be replaced once.

Unit Replacement Cost. Estimated replacement cost for a single unit of a given item on the schedule.

Unit (of Measure). Non-standard abbreviations are defined on the page of the Replacement Reserve lnventory where the
item appears- The following standard abbreviations are used in this report:

EA: each FT: feet LS: lump sum PR: pair SF: square feet Sy: square yard
Miller - Dodson Associates, lnc. Page 5
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What is my role as a Board Member? Community dues, how can a Reserve Study help?
Will a Reserve Study meet my communlty's needs? Will a study help keep my properiy competitive?

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How do I read the report? Where do the numbers come from?

Will I have a say in what the report contains? Cumulative expenditures and funding, what?

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How are interest and inflation addressed? A community needs more help, where do we go?
What should we look at when considering inflation? What is a Strategic Funding Plan?

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Replacenent Reserves,
Withou! triggeriqg'short{€rm" financial crisis.
i.e. delinqueacies or foredosures.
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