th St., Ste 620 Calabasas, CA Federal Way, WA 98003 Regional Offices TEL 253/661-5437 Phoenix, AZ FAX 253/661-5430 San Francisco, CA arwa@reservestudy.com Denver, CO www.reservestudy.com Honolulu, HI Las Vegas, NV Update With-Site-Visit Reserve Study Crestwood Terrace Washougal, WA Report #: 20791-3 For Period Beginning: January 1, 2014 Expires: December 31, 2014 Date Prepared: November 15, 2013 Association Reserves, Inc. 11/15/2013 Hello, and welcome to your Reserve Study! his Report is a valuable budget planning tool, for with it you control the future of your association. It contains all the fundamental information needed to understand your current and future Reserve obligations, the most significant expenditures your association will face. ith respect to Reserves, this Report will tell you where you are, and where to go from here. In this Report, you will find 1) A List of What youre Reserving For 2) An Evaluation of your Reserve Fund Size and Strength 3) A Recommended Multi-Year Reserve Funding Plan More Questions? Visit our website at www.ReserveStudy.com or call us at: 253.661.5437 T W Association Reserves, Inc. 11/15/2013 Table of Contents Executive Summary ............................................................................................i Reserve Study Summary .........................................................................................................i Reserve Component List Table 1......................................................................................... ii Introduction, Objectives, and Methodology .....................................................1 Which Physical Assets are Covered by Reserves?.................................................................2 How are Useful Life and Remaining Useful Life established?.................................................2 How are Cost Estimates Established? ....................................................................................2 How much Reserves are enough?..........................................................................................3 How much should we contribute? ...........................................................................................3 What is our Funding Goal? .....................................................................................................4 Site Inspection....................................................................................................5 Projected Expenses ...........................................................................................6 Expense Graph Figure 1......................................................................................................6 Reserve Fund Status & Recommended Funding Plan ....................................7 Funding Plan Graph Figure 2...............................................................................................7 Cash Flow Graph Figure 3...................................................................................................8 % Funded Graph Figure 4....................................................................................................8 Table Descriptions .............................................................................................9 Reserve Component List Detail Table 2.............................................................................10 Contribution & Fund Breakdown Table 3 ...........................................................................11 30 Year Reserve Plan Summary Table 4...........................................................................12 30 Year Reserve Plan Year by Year Detail Table 5...........................................................13 Accuracy, Limitations, and Disclosures.........................................................19 Terms and Definitions......................................................................................21 Photographic Inventory ...................................................................... Appendix Association Reserves, Inc. 11/15/2013 i 3- Minute Executive Summary Association: Crestwood Terrace Assoc. #: 20791-3 Location: Washougal, WA # of Units: 44 Report Period: January 1, 2014 through December 31, 2014 Results as-of 1/1/2014: Projected Starting Reserve Balance: .............................................$107,000 Fully Funded Reserve Balance: .....................................................$412,330 Average Reserve Deficit (Surplus) Per Unit:.......................................$6,939 Percent Funded: ................................................................................. 26.0% 100% Full Funding 2014 Monthly Reserve Contribution:...................$3,830 70% Threshold Monthly Reserve Contribution:..................................$3,670 Baseline Contribution (min to maintain reserves above $0) .............$3,560 Recommended 2014 Special Assessment for Reserves: ........................ $0 Most Recent Reserve Contribution Rate:............................................$3,500 Economic Assumptions: Net Annual After Tax Interest Earnings Accruing to Reserves...... 1.00% Annual Inflation Rate............................................................................ 3.00% This is an Update With-Site-Visit Reserve Study, based on a prior Report prepared by Association Reserves for your 2013 Fiscal Year. The information in this Reserve Study is based on our site inspection on October 3, 2013 and meets or exceeds all requirements of the RCW. This Reserve Study was prepared by a credentialed Reserve Specialist (RS #238). Your Reserve Fund is 26.0% Funded. Comparatively, the 70-130% level is where associations statistically enjoy fiscal stability with low risk of special assessment and/or deferred maintenance. Based on this starting point and your anticipated future expenses, our recommendation is to increase your Reserve contributions to within the 70% to 100% Full Funding level as noted above (Tables and charts herein reflect Full Funding as recommended contribution). Full and 70% contribution rates are designed to achieve the stated funding objective by the end of our 30-year report scope. See photo pages for detailed component information and the basis of our assumptions. Association Reserves, Inc. 11/15/2013 ii Table 1: Executive Summary 20791-3 Useful Rem. Current Future Life Useful Average Average # Component (yrs) Life (yrs) Cost Cost Site / Grounds 120 Asphalt - Resurface 30 15 $59,050 $91,998 121 Asphalt - Seal/Repair 5 1 $9,250 $9,528 140 Wood Fence - Replace 20 5 $41,050 $47,588 205 Mailboxes - Replace 20 5 $6,300 $7,303 Building Exterior 500 Roof: Comp Shingle - Repair/Replace 25 24 $152,000 $308,985 501 Roof: Comp Shingle - Repair/Replace 25 0 $30,000 $62,813 502 Roof: Comp Shingle - Repair/Replace 25 1 $35,000 $36,050 510 Gutters/Downspouts - Repair/Replace 30 15 $33,250 $51,802 520 Siding: Vinyl - Repair/Replace 40 25 $499,100 $1,045,005 525 Exterior Surfaces - Paint/Caulk 8 1 $15,400 $15,862 535 Windows/Glass Doors - Replace 40 25 $132,000 $276,379 540 Decks: Wood - Maintain 0 0 $0 $0 560 Exterior Lights - Replace 20 5 $4,600 $5,333 Systems 900 Plumbing - Repair/Replace 0 0 $0 $0 14 Total Funded Components Note: Cross reference component numbers with photographic inventory appendix. Highlighting denotes projects either anticipated to occur in the initial year or un- funded. Components with 0 UL / 0 RUL and no costs were considered per RCW 64.34.382 but did not meet NRSS criteria (see page 2) for reserve funding in the judgment of the Reserve Specialist. A reserve-funding threshold of $1,000 is suggested for your association (expenses below this level expected to be factored within operating budget). Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 1 Introduction A Reserve Study is the art and science of anticipating, and preparing for, an associations major common area repair and replacement expenses. Partially art, because in this field we are making projections about the future. Partially science, because our work is a process of research and analysis along well defined methodologies. In this Report you will find the Reserve Component List (what you are reserving for). It contains our estimates for Useful Life, Remaining Useful Life, and the current repair or replacement cost for each major component the association is obligated to maintain. Based on that List and your starting balance we computed the associations Reserve Fund Strength (measured as Percent Funded), and created a recommended multi-year Reserve Funding Plan to offset future Reserve expenses. As the physical assets age and deteriorate, it is important to accumulate financial assets to keep the two in balance. A stable Reserve Funding Plan that offsets the irregular Reserve expenses will ensure that each owner pays their own fair share of ongoing common area deterioration. Methodology First we establish what the projected expenses are, then we determine the associations financial status and create a Funding Plan. For this Update With-Site- Visit Reserve Study, we started with a review of your prior Reserve Study, recent Reserve expenditures, an evaluation of how expenditures are handled (ongoing maintenance vs Reserves), and research into any well-established association precedents. We performed an on- site inspection to evaluate your common areas, updating and adjusting your Reserve Component List as appropriate. Reserve Study Reserve Study Component List Reserve Fund Strength Recommended Contribs Reserve Study Reserve Study Component List Reserve Fund Strength Recommended Contribs Reserve Study Types Reserve Study Types Full Update With-Site-Visit Update No-Site-Visit Reserve Study Types Reserve Study Types Full Update With-Site-Visit Update No-Site-Visit Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 2 Which Physical Assets are Covered by Reserves? There is a national-standard four-part test to determine which expenses should be funded through Reserves. First, it must be a common area maintenance responsibility. Second, the component must have a limited life. Third, the limited life must be predictable (or it by definition is a surprise which cannot be accurately anticipated). Fourth, the component must be above a minimum threshold cost. This limits Reserve Components to major, predictable expenses. Within this framework, it is inappropriate to include lifetime components, unpredictable expenses (such as damage due to fire, flood, or earthquake), and expenses more appropriately handled from the Operational Budget or as an insured loss. How are Useful Life and Remaining Useful Life established? 1) Visual Inspection (observed wear and age since last report) 2) Association Reserves database of experience 3) Client Component History 4) Vendor Evaluation and Recommendation How are Cost Estimates Established? Financial projections are based on the average of our Best Case and Worst Case estimates, which are established in this order 1) Client Cost History 2) Comparison to Association Reserves database of work done at similar associations 3) Vendor Recommendations 4) Reliable National Industry cost estimating guidebooks Reserve Components Reserve Components Common Area Limited Useful Life Predictable Life Limit Cost must be Significant Reserve Components Reserve Components Common Area Limited Useful Life Predictable Life Limit Cost must be Significant Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 3 How much Reserves are enough? Your Reserve cash Balance can measure reserves, but the true measure is whether the funds are adequate. Adequacy is measured in a two-step process: 1) Calculate the associations Fully Funded Balance (FFB). 2) Compare to the Reserve Fund Balance, and express as a percentage. The FFB grows as assets age and the Reserve needs of the association increase, but shrinks when projects are accomplished and the Reserve needs of the association decrease. The Fully Funded Balance changes each year, and is a moving but predictable target. Special assessments and deferred maintenance are common when the Percent Funded is below 30%. While the 100% point is Ideal, a Reserve Fund in the 70% -130% range is considered strong because in this range cash flow problems are rare. Measuring your Reserves by Percent Funded tells how well prepared your association is for upcoming Reserve expenses. New buyers should be very aware of this important disclosure! Percent Funded Percent Funded Ideal - 100% - 70% - 30% - 0% Strong Fair Weak - 130% Percent Funded Percent Funded Ideal - 100% - 70% - 30% - 0% Strong Fair Weak - 130% Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 4 How much should we contribute? There are four Funding Principles that we balance in developing your Reserve Funding Plan. Our first objective is to design a plan that provides you with sufficient cash to perform your Reserve projects on time. A stable contribution rate is desirable because it is a hallmark of a proactive plan. Reserve contributions that are evenly distributed over the owners, over the years, enable each owner to pay their fair share of the associations Reserve expenses (this means we recommend special assessments only when all other options have been exhausted). And finally, we develop a plan that is fiscally responsible and safe for Boardmembers to recommend to their association. What is our Recommended Funding Goal? Maintaining the Reserve Fund at a level equal to the physical deterioration that has occurred is called Full Funding the Reserves (100% Funded). As each asset ages and becomes used up, the Reserve Fund grows proportionally. This is simple, responsible, and our recommendation. As stated previously, associations in the 100% range rarely experience special assessments or deferred maintenance. Allowing the Reserves to fall close to zero, but not below zero, is called Baseline Funding. In these associations, deterioration occurs without matching Reserve contributions. With a low Percent Funded, special assessments and deferred maintenance are common. Threshold Funding is the title of all other objectives randomly selected between Baseline Funding and Full Funding. Funding Goals Funding Goals Full Funding Threshold Funding Baseline Funding Funding Goals Funding Goals Full Funding Threshold Funding Baseline Funding Funding Principles Funding Principles Sufficient Cash Stable Contribution Rate Evenly Distributed Fiscally Responsible Funding Principles Funding Principles Sufficient Cash Stable Contribution Rate Evenly Distributed Fiscally Responsible Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 5 Site Inspection Notes During our site visit on October 3, 2013, we had a brief meeting with Crestwood Terrace Condominium Board President Ed Wilson, and then started the site inspection beginning with the asphalt. We visually inspected the buildings and property, and were able to see all visible common areas. Early planning for future maintenance projects and following reserve study recommendations is key to the successful ongoing maintenance of the community. Protection of the building envelope (roof and wall systems) should be viewed as your top priority. Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 6 Projected Expenses The figure below shows the array of the projected future expenses at your association. This figure clearly shows the near term and future expenses that your association will face. $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 2014 2019 2024 2029 2034 2039 2044 Years Annual Reserve Expenses Figure 1 A summary of this information is shown in Table 4, while details of the projects that make up this information are shown in Table 5. Since this is a projection about future events that may or may not take place as anticipated, we feel more certain about near-term projects than those many years away. While this Reserve Study is a one-year document, it is based on 30 years worth of looking forward into the future. Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 7 Reserve Fund Status The starting point for our financial analysis is your Reserve Fund balance, projected to be $107,000 as-of the start of your Fiscal Year on January 1, 2014. This is based on your actual balance on 9/30/13 of $109,300 and anticipated Reserve contributions and expenses projected through the end of your Fiscal Year. As of January 1, 2014, your Fully Funded Balance is computed to be $412,330 (see Table 3). This figure represents the deteriorated value of your common area components. Comparing your Reserve Balance to your Fully Funded Balance indicates your Reserves are 26% Funded. As indicated earlier in the Executive Summary, this represents a weak status. Recommended Funding Plan Based on your current Percent Funded and your projected cash flow requirements, we are recommending Reserve contributions of $3,830/month this Fiscal Year. This represents the first year of the 30-year Funding Plan shown below. This same information is shown numerically in both Table 4 and Table 5. $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 M o n t h l y C o n t r i b u t i o n s 2014 2019 2024 2029 2034 2039 2044 Years Funding Plan Recommended Current Figure 2 Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 8 The following chart shows your Reserve balance under our recommended Funding Plan and your current Funding Plan, and your always-changing Fully Funded Balance target. 30-Yr Cash Flow $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 2014 2019 2024 2029 2034 2039 2044 Years Target Fully Funded Balance Recommended Funding Plan Current Funding Plan Figure 3 In this figure it is easy to see how your Reserve Fund gradually draws closer to the Fully Funded (100%) level. Percent Funded 0% 20% 40% 60% 80% 100% 120% 2014 2019 2024 2029 2034 2039 2044 Years Recommended Funding Plan Current Funding Plan Figure 4 Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 9 Table Descriptions The tabular information in this Report is broken down into five tables. Table 1 summarizes your funded Reserve Components, and is part of the Executive Report summary that appeared earlier in this Report. Table 2 provides the main component description, life, and cost factors for all components determined to be appropriate for Reserve designation. This table represents the core information from which all other tables are derived. Table 3 is presented primarily as an accounting summary page. The results of the individual line item Fully Funded Balance computations are shown. These individual quantities are summed to arrive at the Fully Funded Balance for the association as of the start date of the Report. The figures in the Current Fund Balance column and the Monthly Reserve Contribution column show our distribution throughout the line items. If the association is underfunded, Reserve Funds are distributed first to components with a short Remaining Useful Life. If the associations Reserve Balance is above 100% Funded, funds are distributed evenly for all components. Contribution rates for each component are a proportionate distribution of the total contribution on the basis of the components significance to the association (current cost divided by useful life). This presentation is not meant to cause clients to redistribute association funds, it simply presents one way to evenly distribute the total among all the different line items. Table 4: This table provides a one-page 30-year summary of the cash flowing into and out of the association, compared to the Fully Funded Balance for each year. Table 5: This table shows the cash flow detail for the next 30 years. This table makes it possible to see what components are projected to require repair or replacement each year, and the size of those individual expenses. Association Reserves, Inc. 11/15/2013 10 Table 2: Reserve Component List Detail 20791-3 Rem. Current Useful Useful Best Worst # Component Quantity Life Life Cost Cost Site / Grounds 120 Asphalt - Resurface ~ 36,900 Sq Ft 30 15 $51,700 $66,400 121 Asphalt - Seal/Repair ~ 36,900 Sq Ft 5 1 $7,400 $11,100 140 Wood Fence - Replace ~ 1,866 Lin Ft 20 5 $37,300 $44,800 205 Mailboxes - Replace (6) cluster boxes 20 5 $5,400 $7,200 Building Exterior 500 Roof: Comp Shingle - Repair/Replace ~ 70,400 Sq Ft 25 24 $142,000 $162,000 501 Roof: Comp Shingle - Repair/Replace ~ 9,300 Sq Ft 25 0 $25,000 $35,000 502 Roof: Comp Shingle - Repair/Replace ~ 10,300 Sq Ft 25 1 $30,000 $40,000 510 Gutters/Downspouts - Repair/Replace ~ 5,540 Lin Ft 30 15 $27,700 $38,800 520 Siding: Vinyl - Repair/Replace ~ 71,300 GSF 40 25 $427,800 $570,400 525 Exterior Surfaces - Paint/Caulk Eaves, gables, etc 8 1 $13,200 $17,600 535 Windows/Glass Doors - Replace ~ (342) assorted 40 25 $110,000 $154,000 540 Decks: Wood - Maintain Assorted decks 0 0 $0 $0 560 Exterior Lights - Replace ~ (173) assorted fixtures 20 5 $4,400 $4,800 Systems 900 Plumbing - Repair/Replace Supply, drain systems 0 0 $0 $0 14 Total Funded Components Association Reserves, Inc. 11/15/2013 11 Table 3: Contribution and Fund Breakdown 20791-3 Rem. Fully Current Useful Useful Current Funded Fund Reserve # Component Life Life (Avg) Cost Balance Balance Contributions Site / Grounds 120 Asphalt - Resurface 30 15 $59,050 $29,525 $0.00 $222.34 121 Asphalt - Seal/Repair 5 1 $9,250 $7,400 $7,400.00 $208.97 140 Wood Fence - Replace 20 5 $41,050 $30,788 $22,525.00 $231.84 205 Mailboxes - Replace 20 5 $6,300 $4,725 $0.00 $35.58 Building Exterior 500 Roof: Comp Shingle - Repair/Replace 25 24 $152,000 $6,080 $0.00 $686.78 501 Roof: Comp Shingle - Repair/Replace 25 0 $30,000 $30,000 $30,000.00 $135.55 502 Roof: Comp Shingle - Repair/Replace 25 1 $35,000 $33,600 $33,600.00 $158.14 510 Gutters/Downspouts - Repair/Replace 30 15 $33,250 $16,625 $0.00 $125.19 520 Siding: Vinyl - Repair/Replace 40 25 $499,100 $187,163 $0.00 $1,409.42 525 Exterior Surfaces - Paint/Caulk 8 1 $15,400 $13,475 $13,475.00 $217.44 535 Windows/Glass Doors - Replace 40 25 $132,000 $49,500 $0.00 $372.76 540 Decks: Wood - Maintain 0 0 $0 $0 $0.00 $0.00 560 Exterior Lights - Replace 20 5 $4,600 $3,450 $0.00 $25.98 Systems 900 Plumbing - Repair/Replace 0 0 $0 $0 $0.00 $0.00 14 Total Funded Components $412,330 $107,000 $3,830 Association Reserves, Inc. 11/15/2013 12 Table 4: 30-Year Reserve Plan Summary 20791-3 Fiscal Year Beginning: 01/01/14 Interest: 1.0% Inflation: 3.0% Starting Fully Annual Loans or Projected Reserve Funded Percent Reserve Special Interest Reserve Year Balance Balance Funded Rating Contribs. Assmts Income Expenses 2014 $107,000 $412,330 26.0% Weak $45,960 $0 $1,155 $30,000 2015 $124,115 $428,724 28.9% Weak $48,718 $0 $1,183 $61,440 2016 $112,576 $414,274 27.2% Weak $51,641 $0 $1,390 $0 2017 $165,607 $463,753 35.7% Fair $54,739 $0 $1,939 $0 2018 $222,285 $515,828 43.1% Fair $58,023 $0 $2,525 $0 2019 $282,833 $570,610 49.6% Fair $61,505 $0 $2,848 $60,224 2020 $286,961 $566,184 50.7% Fair $65,195 $0 $3,155 $11,045 2021 $344,266 $613,494 56.1% Fair $69,107 $0 $3,806 $0 2022 $417,179 $674,851 61.8% Fair $73,253 $0 $4,559 $0 2023 $494,991 $739,337 67.0% Fair $77,648 $0 $5,262 $20,094 2024 $557,807 $786,388 70.9% Strong $82,307 $0 $6,017 $0 2025 $646,132 $856,915 75.4% Strong $83,542 $0 $6,846 $12,804 2026 $723,716 $917,777 78.9% Strong $84,795 $0 $7,696 $0 2027 $816,207 $995,103 82.0% Strong $86,067 $0 $8,632 $0 2028 $910,906 $1,076,243 84.6% Strong $87,358 $0 $9,590 $0 2029 $1,007,854 $1,161,356 86.8% Strong $88,668 $0 $9,848 $143,800 2030 $962,570 $1,102,492 87.3% Strong $89,998 $0 $10,047 $14,844 2031 $1,047,772 $1,176,321 89.1% Strong $91,348 $0 $10,857 $25,454 2032 $1,124,524 $1,243,117 90.5% Strong $92,719 $0 $11,763 $0 2033 $1,229,005 $1,339,866 91.7% Strong $94,109 $0 $12,819 $0 2034 $1,335,934 $1,441,301 92.7% Strong $95,521 $0 $13,901 $0 2035 $1,445,355 $1,547,616 93.4% Strong $96,954 $0 $14,921 $17,208 2036 $1,540,022 $1,641,289 93.8% Strong $98,408 $0 $15,965 $0 2037 $1,654,396 $1,757,446 94.1% Strong $99,884 $0 $17,122 $0 2038 $1,771,402 $1,879,095 94.3% Strong $101,383 $0 $16,753 $308,985 2039 $1,580,552 $1,688,206 93.6% Strong $102,903 $0 $8,734 $1,525,213 2040 $166,977 $241,006 69.3% Fair $104,447 $0 $1,723 $95,429 2041 $177,717 $225,261 78.9% Strong $106,014 $0 $2,318 $0 2042 $286,049 $309,595 92.4% Strong $107,604 $0 $3,414 $0 2043 $397,066 $398,786 99.6% Strong $109,218 $0 $4,538 $0 Association Reserves, Inc. 11/15/2013 13 Table 5: 30-Year Income/Expense Detail (yrs 0 through 4) 20791-3 Fiscal Year 2014 2015 2016 2017 2018 Starting Reserve Balance $107,000 $124,115 $112,576 $165,607 $222,285 Annual Reserve Contribution $45,960 $48,718 $51,641 $54,739 $58,023 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $1,155 $1,183 $1,390 $1,939 $2,525 Total Income $154,115 $174,016 $165,607 $222,285 $282,833 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $9,528 $0 $0 $0 140 Wood Fence - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 501 Roof: Comp Shingle - Repair/Replace $30,000 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $36,050 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $0 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $0 $15,862 $0 $0 $0 535 Windows/Glass Doors - Replace $0 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $0 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $30,000 $61,440 $0 $0 $0 Ending Reserve Balance: $124,115 $112,576 $165,607 $222,285 $282,833 Association Reserves, Inc. 11/15/2013 14 Table 5: 30-Year Income/Expense Detail (yrs 5 through 9) 20791-3 Fiscal Year 2019 2020 2021 2022 2023 Starting Reserve Balance $282,833 $286,961 $344,266 $417,179 $494,991 Annual Reserve Contribution $61,505 $65,195 $69,107 $73,253 $77,648 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $2,848 $3,155 $3,806 $4,559 $5,262 Total Income $347,185 $355,311 $417,179 $494,991 $577,901 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $11,045 $0 $0 $0 140 Wood Fence - Replace $47,588 $0 $0 $0 $0 205 Mailboxes - Replace $7,303 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 501 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $0 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $0 $0 $0 $0 $20,094 535 Windows/Glass Doors - Replace $0 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $5,333 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $60,224 $11,045 $0 $0 $20,094 Ending Reserve Balance: $286,961 $344,266 $417,179 $494,991 $557,807 Association Reserves, Inc. 11/15/2013 15 Table 5: 30-Year Income/Expense Detail (yrs 10 through 14) 20791-3 Fiscal Year 2024 2025 2026 2027 2028 Starting Reserve Balance $557,807 $646,132 $723,716 $816,207 $910,906 Annual Reserve Contribution $82,307 $83,542 $84,795 $86,067 $87,358 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $6,017 $6,846 $7,696 $8,632 $9,590 Total Income $646,132 $736,520 $816,207 $910,906 $1,007,854 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $12,804 $0 $0 $0 140 Wood Fence - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 501 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $0 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $0 $0 $0 $0 $0 535 Windows/Glass Doors - Replace $0 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $0 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $0 $12,804 $0 $0 $0 Ending Reserve Balance: $646,132 $723,716 $816,207 $910,906 $1,007,854 Association Reserves, Inc. 11/15/2013 16 Table 5: 30-Year Income/Expense Detail (yrs 15 through 19) 20791-3 Fiscal Year 2029 2030 2031 2032 2033 Starting Reserve Balance $1,007,854 $962,570 $1,047,772 $1,124,524 $1,229,005 Annual Reserve Contribution $88,668 $89,998 $91,348 $92,719 $94,109 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $9,848 $10,047 $10,857 $11,763 $12,819 Total Income $1,106,371 $1,062,616 $1,149,978 $1,229,005 $1,335,934 # Component Site / Grounds 120 Asphalt - Resurface $91,998 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $14,844 $0 $0 $0 140 Wood Fence - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 501 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $51,802 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $0 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $0 $0 $25,454 $0 $0 535 Windows/Glass Doors - Replace $0 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $0 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $143,800 $14,844 $25,454 $0 $0 Ending Reserve Balance: $962,570 $1,047,772 $1,124,524 $1,229,005 $1,335,934 Association Reserves, Inc. 11/15/2013 17 Table 5: 30-Year Income/Expense Detail (yrs 20 through 24) 20791-3 Fiscal Year 2034 2035 2036 2037 2038 Starting Reserve Balance $1,335,934 $1,445,355 $1,540,022 $1,654,396 $1,771,402 Annual Reserve Contribution $95,521 $96,954 $98,408 $99,884 $101,383 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $13,901 $14,921 $15,965 $17,122 $16,753 Total Income $1,445,355 $1,557,230 $1,654,396 $1,771,402 $1,889,537 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $17,208 $0 $0 $0 140 Wood Fence - Replace $0 $0 $0 $0 $0 205 Mailboxes - Replace $0 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $308,985 501 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $0 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $0 $0 $0 $0 $0 535 Windows/Glass Doors - Replace $0 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $0 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $0 $17,208 $0 $0 $308,985 Ending Reserve Balance: $1,445,355 $1,540,022 $1,654,396 $1,771,402 $1,580,552 Association Reserves, Inc. 11/15/2013 18 Table 5: 30-Year Income/Expense Detail (yrs 25 through 29) 20791-3 Fiscal Year 2039 2040 2041 2042 2043 Starting Reserve Balance $1,580,552 $166,977 $177,717 $286,049 $397,066 Annual Reserve Contribution $102,903 $104,447 $106,014 $107,604 $109,218 Planned Special Assessments $0 $0 $0 $0 $0 Interest Earnings $8,734 $1,723 $2,318 $3,414 $4,538 Total Income $1,692,189 $273,146 $286,049 $397,066 $510,822 # Component Site / Grounds 120 Asphalt - Resurface $0 $0 $0 $0 $0 121 Asphalt - Seal/Repair $0 $19,948 $0 $0 $0 140 Wood Fence - Replace $85,950 $0 $0 $0 $0 205 Mailboxes - Replace $13,191 $0 $0 $0 $0 Building Exterior 500 Roof: Comp Shingle - Repair/Replace $0 $0 $0 $0 $0 501 Roof: Comp Shingle - Repair/Replace $62,813 $0 $0 $0 $0 502 Roof: Comp Shingle - Repair/Replace $0 $75,481 $0 $0 $0 510 Gutters/Downspouts - Repair/Replace $0 $0 $0 $0 $0 520 Siding: Vinyl - Repair/Replace $1,045,005 $0 $0 $0 $0 525 Exterior Surfaces - Paint/Caulk $32,244 $0 $0 $0 $0 535 Windows/Glass Doors - Replace $276,379 $0 $0 $0 $0 540 Decks: Wood - Maintain $0 $0 $0 $0 $0 560 Exterior Lights - Replace $9,631 $0 $0 $0 $0 Systems 900 Plumbing - Repair/Replace $0 $0 $0 $0 $0 Total Expenses $1,525,213 $95,429 $0 $0 $0 Ending Reserve Balance: $166,977 $177,717 $286,049 $397,066 $510,822 Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 19 Accuracy, Limitations, and Disclosures Washington disclosure, per RCW 64.34.382: This reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair or replacement of a reserve component. Because we have no control over future events, we cannot claim that all the events we anticipate will occur as planned. We expect that inflationary trends will continue, and we expect that financial institutions will provide interest earnings on funds on-deposit. We believe that reasonable estimates for these figures are much more accurate than ignoring these economic realities. The things we can control are measurements, which we attempt to establish within 5% accuracy. Your starting Reserve Balance and current Reserve interest earnings are also numbers that can be identified with a high degree of certainty. These figures have been provided to us, and were not confirmed by our independent research. Our projections assume a stable economic environment and lack of natural disasters. Because both the physical status and financial status of the association change each year, this Reserve Study is by nature a one-year document. This information can and should be adjusted annually as part of the Reserve Study Update process so that more accurate estimates can be reflected in the Reserve plan. Reality often differs from even the best assumptions due to changing economic factors, physical factors, or ownership expectations. Because many years of financial preparation help the preparation for large expenses, this Report shows expenses for the next 30 years. We fully expect a number of adjustments will be necessary through the interim years to both the cost and timing of distant expense projections. It is our recommendation and that of the American Institute of Certified Public Accountants (AICPA) that your Reserve Study be updated annually. Association Reserves, Inc., and its employees have no ownership, management, or other business relationships with the client other than this Reserve Study engagement. James D. Talaga R.S., company president, is a credentialed Reserve Specialist (#66). All work done by Association Reserves is performed under his Responsible Charge. There are no material issues to our knowledge that have not been disclosed to the client that would cause a distortion of the associations situation. Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 20 We have relied upon the client to provide the current (or projected) Reserve Balance, the estimated net-after-tax current rate of interest earnings, and to indicate if those earnings accrue to the Reserve Fund. In addition, we have considered the associations representation of current and historical Reserve projects reliable, and we have considered the representations made by its vendors and suppliers to also be accurate and reliable. Component quantities indicated in this Report were developed by Association Reserves unless otherwise noted in our Site Inspection Notes comments. No destructive or intrusive testing was performed, nor should the site inspection be assumed to be anything other than for budget purposes. Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 21 Terms and Definitions BTU British Thermal Unit (a standard unit of energy) DIA Diameter GSF Gross Square Feet (area) GSY Gross Square Yards (area) HP Horsepower LF Linear Feet (length) Effective Age: The difference between Useful Life and Remaining Useful Life. Note that this is not necessarily equivalent to the chronological age of the component. Fully Funded Balance (FFB): The Reserve Balance that is in direct proportion to the fraction of life used up of the current Repair or Replacement cost. This benchmark balance represents the value of the deterioration of the Reserve Components. This number is calculated for each component, then summed together for an association total. FFB = (Current Cost X Effective Age) / Useful Life Inflation: Cost factors are adjusted for inflation at the rate defined in the Executive Summary and compounded annually. These increasing costs can be seen as you follow the recurring cycles of a component on Table 5. Interest: Interest earnings on Reserve Funds are calculated using the average balance for the year (taking into account income and expenses through the year) and compounded monthly using the rate defined in the Executive Summary. Annual interest earning assumption appears in the Executive Summary, page ii. Percent Funded: The ratio, at a particular point in time (typically the beginning of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. Remaining Useful Life: The estimated time, in years, that a common area component can be expected to continue to serve its intended function. Useful Life: The estimated time, in years, that a common area component can be expected to serve its intended function. Assoc. 20791-3 Association Reserves, Inc. 11/15/2013 22 Photographic Inventory Appendix The primary purpose of the photographic appendix is to provide the reader with the basis of our funding assumptions resulting from our physical analysis and subsequent research. The photographs herein represent a wide range of elements that were observed and measured against National Reserve Study Standards to determine if they meet the criteria for reserve funding: 1) Common area maintenance, repair & replacement responsibility 2) Components must have a limited life 3) Life limit must be predictable 4) Above a minimum threshold cost (boards discretion typically to 1% of annual operating expenses). Some components are recommended for reserve funding, while others are not. The components that meet these criteria in our judgment are shown with corresponding maintenance, repair or replacement cycles to the left of the photo (UL = Useful Life or how often the project is expected to occur, RUL = Remaining Useful Life or how many years from our reporting period) and a representative market cost range termed Best Cost and Worst Cost below the photo. There are many factors that can result in a wide variety of potential costs; we are attempting to represent a market average for budget purposes. Where there is no UL, the component is expected to be a one-time expense. Where no pricing, the component deemed inappropriate for Reserve Funding. Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 100 Concrete - Repair/Replace Comp #: Quantity: Extensive Sq Ft Location: Driveways, patios, curbing, etc Evaluation: We noted concrete to be in good, stable condition with significant damage/deterioration observed. No trip hazards were observed. Repair any trip and fall hazards (1/2" or larger displacement) immediately to ensure safety. In our experience, patterns of deterioration begin to occur as the community continues to age, but it is difficult to predict timing, cost and scope at this time. Association has not yet reached the condition where we suggest a rotating funding allowance to supplement the operating / maintenance budget. Incorporate funding as conditions, actual expense patterns dictate within future reserve study updates. Treat local needs currently as general maintenance and repair expense. As routine maintenance, inspect regularly, pressure wash for appearance and repair promptly as needed to prevent water penetrating into the base and causing further damage. Monitor tree roots nearby; consult with arborist for best practice. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 1 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 120 Asphalt - Resurface Comp #: Quantity: ~ 36,900 Sq Ft Location: Roadway, parking areas of association Evaluation: Overall fair condition noted with areas of minor cracking and raveling (loss of binder) throughout, but no major deterioration observed. We recommend having surface sealed and repaired regularly as directed in component #121 for maximum design life. Even with ordinary care and maintenance, plan for eventual large scale resurface (overlay) at roughly the time frame below. As timing draws nearer, consult with asphalt vendor/consultant for recommendations and complete scope. As routine maintenance, keep roadway clean, free of debris and well drained; fill/seal cracks (hot rubberized crack fill) to prevent water from penetrating into the sub-base and accelerating damage. Useful Life: 30 years Remaining Life: 15 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $1.40/Sq Ft, Lower allowance to resurface (overlay) $1.80/Sq Ft, Higher allowance to resurface (overlay) $51,700.00 $66,400.00 November 15,2013 Page 2 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 121 Asphalt - Seal/Repair Comp #: Quantity: ~ 36,900 Sq Ft Location: Roadway, parking areas of association Evaluation: Asphalt surface is dry and faded with areas of minor cracking and raveling throughout. Regular cycles of seal coating (along with any needed repair) has proven to be the best program in our opinion for the long term care of lower traffic asphalt areas such as these. The State of Washington, Department of Transportation recommends regular cycles of seal coating (they use the term bituminous surface treatment, BST) for the long-term care of asphalt paving with low traffic and low speed. The primary reason to seal coat asphalt pavement is to protect the pavement from the deteriorating effects of sun and water. When asphalt pavement is exposed, the asphalt oxidizes, or hardens which causes the pavement to become more brittle. As a result, the pavement will be more likely to crack, because it is unable to bend and flex when subjected to traffic and temperature changes. A seal coat combats this situation by providing a waterproof membrane, which not only slows down the oxidation process but also helps the pavement to shed water, preventing it from entering the base material. Seal coat also provides uniform appearance, concealing the inevitable patching and repairs which accumulate over time. Seal coat ultimately extends useful life of asphalt, postponing the asphalt resurfacing, which can be one of the larger cost items in the reserve study (see component #120 for asphalt resurfacing costs). Repair asphalt before seal coating as needed. Surface preparation and dry weather, during and following application, is key to lasting performance. Apply two coats or flood application of quality asphalt emulsion. Incorporate any striping and curb repair into this project. Fill cracks and clean oil stains promptly in between cycles as routine maintenance. See http://training.ce.washington.edu/wsdot/ for additional information. Useful Life: 5 years Remaining Life: 1 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $0.20/Sq Ft, Lower allowance to clean/seal/repair $0.30/Sq Ft, Higher allowance, more repairs, etc. $7,400.00 $11,100.00 November 15,2013 Page 3 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 140 Wood Fence - Replace Comp #: Quantity: ~ 1,866 Lin Ft Location: Perimeter of property Evaluation: Although functional, wood fencing appears to be approaching the end of its typical useful life with areas of deterioration (mainly at base) and some random instability. Plan to replace at roughly the time frame below with funding included here for similar style fence. At next replacement, association might want to consider replacing with lower maintenance products like composite, vinyl, etc; typical costs at installation about ~40 to 50% higher, but requires less maintenance and has significantly longer life. As routine maintenance, inspect regularly for any damage, repair as needed and avoid contact with ground and surrounding vegetation. It appears that the wood fencing is not being stained or treated and is being allowed to gray naturally. Regular cycles of stain/paint will help to maintain appearance and maximize life and can be added to reserve funding in the future if Association desires. Useful Life: 20 years Remaining Life: 5 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $20/Lin Ft, Lower allowance to replace $24/Lin Ft, Higher allowance to replace $37,300.00 $44,800.00 November 15,2013 Page 4 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 157 Retention Walls - Repair/Replace Comp #: Quantity: Extensive Lin Ft Location: Scattered throughout community Evaluation: Fair condition noted with no significant or widespread deterioration, settling or other problems observed. Key to long lasting performance is proper design and installation with adequate base and surrounding drainage. Inspect regularly, repair as needed from operating budget. If any shifting, deterioration, etc is observed, consult with civil or geotechnical engineer or landscape architect for repair scope. At this time, no predictable expectation of large scale repair or replacement; no basis for reserve funding. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 5 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 170 Landscape - Refurbish Comp #: Quantity: Common landscaping Location: Common areas Evaluation: Overall fair condition of common area landscaping noted with no specific problems observed or reported to us. Although typically funded as ongoing maintenance item, this component may be utilized for setting aside funds for larger expenses that do not occur on an annual basis, such as large scale plantings, resodding lawn areas, bark/mulch replenishment, etc... Often times these types of projects can be handled within the annual operating budget as a separate line item from the landscape maintenance contract. At this time no specific projects anticipated. Monitor and include funding in reserve study updates if needed / desired. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 6 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 175 Irrigation System - Repair/Replace Comp #: Quantity: Common irrigation Location: Throughout common area landscaping Evaluation: No problems observed or reported during our inspection. If properly installed and bedded without defect, the elements within this component are generally low cost and have a failure rate that is difficult to predict and best suited to be handled thru the operating budget. No basis for reserve funding at this time. If at some point Association decides to upgrade current system, funding can be incorporated into future reserve study update As routine maintenance, inspect regularly, test system and repair as needed. Follow proper winterization and spring start up procedures. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 7 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 176 Irrigation Timeclock - Replace Comp #: Quantity: (1) Rain Bird controller Location: South side of property Evaluation: No problems observed or reported of irrigation clock. Although eventual replacement will be needed due to parts obsolescence, technological upgrades, etc best suited to be handled as needed within the operating budget and not anticipated as large scale reserve project. Inspect regularly and repair/replace as needed. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 8 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 182 Drainage/Stormwater Sys - Maintain Comp #: Quantity: Common drainage Location: Common areas, hidden Evaluation: Our reserve study includes only a visual review, and majority of the drainage system is out of view. Although there have been past repairs to drainpipes under roadway, there were no current drainage problems observed or reported. No expectation of large scale repairs/replacement at this time. No reserve funding suggested. As routine maintenance, inspect regularly, keep drains and grates free of debris and free flowing to ensure water drains as designed. Pipes can be 'scoped' to allow visual review of the interior of pipes. Repair as needed, including pumping out sediment, if needed, utilizing mobile evacuator service. Fund from operating and maintenance budget. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 9 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 190 Trees - Trim/Remove Comp #: Quantity: Numerous, assorted Location: Throughout community Evaluation: This component may be utilized for larger tree trimming/removal projects which do not occur on an annual basis. If the community has not already done so, consult with a qualified arborist to assess the appropriateness of current plantings and for a long term plan for the care and management of the trees within the community, balancing aesthetics with protection of association assets. Tree trimming/removal expenses can be incorporated into future reserve study updates at the discretion of the Board. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 10 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 200 Entry Sign - Replace Comp #: Quantity: (1) sign Location: Entry location Evaluation: Good, legible condition with no significant damage/deterioration noted, sign was recently replaced. Basic signage is typically a smaller cost item to replace; at this time, we recommend replacement on as needed basis, funded through operating/maintenance budget. No reserve funding suggested. Note: if association desires to upgrade at some point, funding can be incorporated in future reserve study update. Inspect regularly, clean for appearance, touch up, paint and repair from operating budget. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 11 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 205 Mailboxes - Replace Comp #: Quantity: (6) cluster boxes Location: Scattered throughout community Evaluation: Although aged in appearance and showing signs of wear, there were no functional problems reported. Best to plan for total replacement at roughly the time frame below due to constant exposure, usage and wear over time. Inspect regularly, clean by wiping down for appearance, change lock cylinders, lubricate hinges and repair as needed from operating budget. Useful Life: 20 years Remaining Life: 5 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $1,200/cluster stand (x3) plus $600/parcel stand (x3), Lower allowance to replace $1,600/cluster stand (x3) plus $800/parcel stand (x3), Higher allowance to replace $5,400.00 $7,200.00 November 15,2013 Page 12 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 500 Roof: Comp Shingle - Repair/Replace Comp #: Quantity: ~ 70,400 Sq Ft Location: Rooftops of (17) of (22) buildings Evaluation: Roofing is laminated shingles, with closed cut valleys. Ventilation (the lack of which can greatly reduce useful life) was observed at eave and rooftop. Eave venting consisted of openings in blocking between rafters. Rooftop venting appeared to be provided by roof jacks. Visible portions of roof flashing were observed at the rake, headwall, and sidewall conditions. Kick-out flashings were also observed. Gutters blocked the view of eaves, so eave flashing was not confirmed. No debris or moss was observed on roof surfaces. We were informed that the majority of roofs have recently been replaced, with (5) building remaining (see components #501 and #502). Plan for replacement at roughly the time frame indicated below. Costs below include replacing with a similar shingle to what is currently in place. We suggest that the best value (life cycle cost) might be to spend about $2/Sq foot more and install a 40 to 50-year shingle. As routine maintenance, many manufacturers recommend inspections at least twice annually (once in the fall, before the rainy season, and again in the spring) and after large storm events. Promptly replace any damaged/missing sections or any other repair needed to ensure waterproof integrity of roof. Keep roof surface, gutters and downspouts clear and free of moss or debris. Moss growth can decrease the life of the roofing shingles and should be removed sooner than later. Liquid applied fungicide (moss killer) is recommended instead of power washing the living moss off the shingles. Moss roots grow into the shingles. Killing the moss in-place, with a fungicide, allows the roots to gradually release from the shingles where they can be swept away. Do not use high pressure wash. There is a wealth of information available through Roofing Organizations such as the Western States Roofing Contractors Association (WSRCA) http://www.wsrca.com/, Roof Consultant Institute http://www.rci-online.org/ and the National Roofing Contractors Association (NRCA) http://www.nrca.net. NCRA has some very good information for homeowners, they have an entire section dedicated to "consumer" with valuable information including this page for getting your monies worth out of your new roof http://www.nrca.net/consumer/fyi.aspx?homeowners, their page on maintenance is here: http://www.nrca.net/consumer/maintenance.aspx At time of re-roof we recommend that you hire a professional roof consultant such as Architect, Engineer, or building envelope consultant; to evaluate, design, specify, help bid the project, select best bidder, and observe construction to ensure proper installation. We recommend all Associations seek advice from a qualified consultant whenever they are considering having work performed on any building envelope components (roof, walls, windows, decks, exterior painting and caulking/sealant). Useful Life: 25 years Remaining Life: 24 years Best Case: Worst Case: Cost Source: Client Cost History Lower allowance to remove and replace roof Higher allowance to remove and replace roof $142,000.00 $162,000.00 November 15,2013 Page 13 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 501 Roof: Comp Shingle - Repair/Replace Comp #: Quantity: ~ 9,300 Sq Ft Location: Rooftops of (3) of (22) buildings Evaluation: This component represents the replacement of roofing at (3) of the remaining (5) buildings. This project is tentatively scheduled to be completed in 2014. See component #500 for detailed roof maintenance recommendations. Useful Life: 25 years Remaining Life: 0 years Best Case: Worst Case: Cost Source: Estimate Provided by Client Lower allowance to remove and replace roof Higher allowance to remove and replace roof $25,000.00 $35,000.00 502 Roof: Comp Shingle - Repair/Replace Comp #: Quantity: ~ 10,300 Sq Ft Location: Rooftops of (2) of (22) buildings Evaluation: This component represents the replacement of roofing at (2) of the remaining (5) buildings. This project is tentatively scheduled to be completed in 2015. See component #500 for detailed roof maintenance recommendations. Useful Life: 25 years Remaining Life: 1 years Best Case: Worst Case: Cost Source: Estimate Provided by Client Lower allowance to remove and replace roof Higher allowance to remove and replace roof $30,000.00 $40,000.00 November 15,2013 Page 14 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 510 Gutters/Downspouts - Repair/Replace Comp #: Quantity: ~ 5,540 Lin Ft Location: Perimeter of buildings Evaluation: Generally the metal gutters and downspouts appeared in fair condition with some grime buildup, but no significant damage noted. It is our understanding that gutters and downspouts are not being replaced as part of the recent roof replacement project. We suggest planning for eventual total replacement of gutter and downspouts at roughly the 30-year mark of life, due to typical wear and deterioration caused by exposure and usage over time. Evaluate gutters and downspouts as remaining useful life approaches zero to determine if replacement is necessary or if useful life can be extended. As routine maintenance, inspect regularly, keep gutters and downspouts free of debris. National Roofing Contractor Association (NRCA) roofing standard includes installing eave flashings at the gutters. Useful Life: 30 years Remaining Life: 15 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $5.00/Lin Ft, Lower allowance to replace $7.00/Lin Ft, Higher allowance to replace $27,700.00 $38,800.00 November 15,2013 Page 15 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 520 Siding: Vinyl - Repair/Replace Comp #: Quantity: ~ 71,300 GSF Location: Exterior building surfaces: vinyl siding Evaluation: Generally the siding appeared in fair condition, with no missing pieces, significant damage or unusual wear observed. Vinyl siding is mainly horizontal clapboard style. No view of the underlying waterproofing was undertaken as part of this limited visual review. Vinyl siding will fade over the years and when replacing pieces it may be difficult to match the faded color. A 40- year life cycle is used for financial planning purposes. Evaluate the siding, and the critical underlying waterproofing (building paper or house wrap), as the remaining useful life approaches zero years. Adjust remaining useful life as dictated by the evaluation of performance of the underlying waterproofing. Cost allowance below is for siding only. Professional architectural specifications and project oversight may add significantly to total project if elected. See next component for cleaning and inspection. Useful Life: 40 years Remaining Life: 25 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $6.00/Sq Ft, Lower allowance to replace $8.00/Sq Ft, Higher allowance to replace $427,800.00 $570,400.00 November 15,2013 Page 16 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 521 Siding: Vinyl - Clean/Inspect Comp #: Quantity: ~ 71,300 GSF Location: Exterior building surfaces: vinyl siding Evaluation: The majority of exterior vinyl siding surfaces appeared in fair condition, no significant areas of grime or organic growth. We were informed that the Association has elected to perform this as an operating / maintenance item, therefore, reserve funding is not required at this time. Clean vinyl siding as needed to maintain appearance and maximize useful life. When washing be careful to not spray high-pressure water beneath the vinyl. Two types of washing are typically available: Power washing is the least expensive - hand washing is also available, but a more expensive alternative. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 17 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 525 Exterior Surfaces - Paint/Caulk Comp #: Quantity: Eaves, gables, etc Location: Exterior building surfaces: trim, eaves, railing, doors, etc throughout association Evaluation: The painted exterior surfaces appeared in fair condition, no significant deterioration observed. Painted exterior surfaces consist mainly of eaves and gables. Last reported total exterior painting project was done in 2007 with touch-up painting completed in 2012. Useful life shown below is for financial planning purposes at 8-year cycles. Evaluate and adjust remaining useful life if needed as it approaches zero years. As routine maintenance, inspect regularly (including sealants) repair locally and touch-up paint as needed. Typical Northwest paint cycles vary greatly depending upon many factors including; type of material painted, surface preparations, quality of primer/paint/stain, application methods, weather conditions during application, moisture beneath paint, and exposure to weather conditions. Proper sealant/caulking is critical to keeping water out of the walls, and preventing water damage. Two common types of sealants/caulking are urethane and silicone. If properly installed, urethane has a life of approximately 6- 8 years and silicones life can be 16-20 years. Incorrect installations of sealant are common, and can greatly decrease its useful life. Inspect sealant, more frequently as it ages, to determine if it is failing. Typical sealant problems include failure of sealant to adhere to adjacent materials and tearing/splitting of the sealant itself. As sealants age and are exposed to ultra-violet sunlight, they will dry out, harden, and lose their elasticity. Remove and replace sealant as signs of failure begin to appear. Proper cleaning, prep work, and proper installation are critical for a long lasting sealant/caulking. Do not install sealant in locations that would block water drainage from behind the siding. Repair areas as needed prior to painting/caulking. Additional information on painting is available through American Coatings Association at http://www.paint.org/ Useful Life: 8 years Remaining Life: 1 years Best Case: Worst Case: Cost Source: Client Cost History, Adjusted for Inflation $600/unit (x22), Lower allowance to prep and paint / caulk $800/unit (x22), Higher allowance, more prep work $13,200.00 $17,600.00 November 15,2013 Page 18 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 535 Windows/Glass Doors - Replace Comp #: Quantity: ~ (342) assorted Location: Building exteriors Evaluation: Windows are vinyl framed with horizontal and vertical sliders. Head flashing was not observed. Sealant joint at jambs and sills between window frame and cladding was not visible due to vinyl trim. Weep holes, at exterior lower corners, were observed to be clear, in the few windows sampled for our report. No condensation was observed between window panes, which is typically indicative of failed glazing seals. Factors effecting useful life include: quality of windows and installation, waterproofing flashing details, exposure to wind driven rain, building movement over time, structural details, etc... We recommend financially planning for a 40-year useful life range timed with other large scale building exterior projects for efficiency and proper integration into waterproofing systems. Note: there are many types of glazing and windows types, material and quality, available in today's market; and costs can vary greatly. A mid-range funding allowance is presented below. Inspect regularly, including sealant, and repair as needed. Keep weep holes free and clear to allow proper drainage of water that gets into window frame. Do not block (caulk or seal) gap at top of head flashing, if any, as this allows water that gets behind the siding to drain out. Proper sealant/caulking is critical to keeping water out of the walls, and preventing water damage. Two common types of sealants/caulking are urethane and silicone. If properly installed, urethane has a life of approximately 6- 8 years and silicones life can be 16-20 years. Incorrect installation of sealant is common, and can greatly decrease its useful life. Inspect sealant, more frequently as it ages, to determine if it is failing. Typical sealant failures include; lack of adherence to adjacent materials, tearing/splitting of the sealant itself, and loss of elasticity. Loss of elasticity can be caused by exposure to ultra-violet light and general aging. Remove and replace all sealants as signs of failure begin to appear. Proper cleaning, prep work, and proper installation are critical for a long lasting sealant/caulking. One of the most important factors in window selection is the design pressure rating. The design pressure rating (DP) is the ability of the window to withstand wind blown rain, and a few other criteria. Manufacturers can choose to have a sample of their windows tested. Independent third parties perform testing following American Architectural Manufacturers Association (AAMA) standards and procedures. AAMA stickers are placed on windows with the specific DP rating (psf) and largest size of the window that meets the design pressure. Useful Life: 40 years Remaining Life: 25 years Best Case: Worst Case: Cost Source: ARI Cost Database: Similar Project Cost History $2,500/unit (x44), Lower allowance to replace $3,500/unit (x44), Higher allowance to replace; upgraded $110,000.00 $154,000.00 November 15,2013 Page 19 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 538 Doors: Exterior - Repair/Replace Comp #: Quantity: ~ (44) doors Location: Main entrance to each unit Evaluation: Exterior doors appeared in fair condition. No wide spread problems were observed. No predictable expectation of large scale repair or replacement of doors at this time. Therefore, reserve funding is not required. Inspect periodically and repair as needed to maintain appearance, security and operation within maintenance funds. Clean and paint as needed along with other exterior building surfaces, no need for separate funding. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 20 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 540 Decks: Wood - Maintain Comp #: Quantity: Assorted decks Location: Decks throughout association Evaluation: Majority of decks viewed are wood framed structures with open board decking that allow water to drain off in between. We were informed that decks are the responsibility of the individual unit owner to maintain, repair and replace; therefore, reserve funding is not required under this pattern of care. As routine maintenance, inspect deck, steps, and railings regularly and repair as needed. Almost all exterior wood in the Pacific Northwest will decay over time and require replacement. Current building code requires flashing of the ledger joist (at the exterior building wall) to prevent decay from compromising its structural integrity. Useful Life: Remaining Life: 0 years Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 21 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 560 Exterior Lights - Replace Comp #: Quantity: ~ (173) assorted fixtures Location: Exterior common area locations Evaluation: Exterior wall lights appeared in fair condition, with areas of corrosion, but no significant damage noted. Observed during daylight hours and assumed to be in functional operating condition. Best to plan for eventual large scale replacement, for cost efficiency and consistent quality/appearance throughout association. A mid-range replacement allowance is factored below for planning purposes. As routine maintenance, inspect, repair/change bulbs as needed. Useful Life: 20 years Remaining Life: 5 years Best Case: Worst Case: Cost Source: Estimate Provided by Client Lower allowance to replace Higher allowance to replace $4,400.00 $4,800.00 November 15,2013 Page 22 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 605 Garage Doors - Replace Comp #: Quantity: ~ (44) metal doors Location: At each garage Evaluation: Garage doors appeared in fair condition with some random damage, but no significant deterioration noted. These doors can last for many years if properly serviced and not damaged or abused. No reserve funding recommended at this time, as there is no predictable time frame for total replacement. If need becomes apparent to replace in large scale, funding can be incorporated into future reserve study updates. Regular maintenance, inspection and service as needed is recommended for maximum life. Clean and paint as needed along with other exterior building surfaces, no need for separate funding. Note: expect some smaller cost items as periodic repair/replacement of peripheral components (i.e. - springs, motors, sensors, etc) funded as general operating/maintenance expense. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 23 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 900 Plumbing - Repair/Replace Comp #: Quantity: Supply, drain systems Location: Throughout common areas of association Evaluation: Analysis of plumbing system(s) beyond visual inspection is not within the scope of a reserve study as majority of systems are hidden. No reported problems at this time. Treat minor local repairs as ongoing maintenance expense. If patterns of significant repair costs emerge, funding may be incorporated into reserve study updates to supplement the operating budget. No predictable basis for reserve funding at this time. Some types of piping used historically are known to be life limited. Manufacturing defects also become apparent from time to time and certain site conditions can contribute to premature deterioration of system components. Regular professional inspections should be conducted. Typically, if installed per architectural specifications and local building codes, there is no predictable time frame for large scale repair/replacement expenses within the scope of our report. If leaks, poor flow, sediments, defective material and/or installation become evident, have qualified plumber and / or engineer inspect closely and develop scope of any repair/replacement needed; funding for even one time projects can be incorporated within reserve study updates if basis exists. Useful Life: Remaining Life: 0 years Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 24 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 905 Electrical System - Maintain/Repair Comp #: Quantity: Main, branch systems Location: Throughout common areas of association Evaluation: Analysis of electrical system(s) beyond visual inspection is not within the scope of a reserve study. No reported problems at this time. Typically, if installed per architectural specifications and local building codes, there is no predictable time frame for large scale repair/replacement expenses within the scope of our report. Service life typically lasts well beyond rated life of components. Treat minor repairs as ongoing maintenance expense. Periodic inspections of distribution system by qualified electrician are wise to clean and tighten, exercise breakers, etc Some associations employ infrared or other testing methodologies to ward off trouble spots and potential hazards. A good resource book available for purchase is NFPA 70B Recommended Practices for Electrical Equipment Maintenance. Funding may be incorporated into future reserve study updates if conditions dictate. No basis for reserve funding at this time. Some electrical system components used historically are known to be life limited. Manufacturing defects become apparent from time to time and certain site conditions can contribute to premature deterioration of system components. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 25 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 998 Association Annual Inspection Comp #: Quantity: Annual inspection Location: Common elements of association Evaluation: Many Associations are required to have annual inspections by a qualified engineer or architect to assess the physical condition of the improvements. The inspection typically covers, at a minimum, the building envelope, including: roofs, exterior, waterproofing / sealants, flashings, windows, decks and doors. Forensic evaluation is beyond the scope of a typical reserve study. Although your Associations governing documents do not appear to have such a requirement, we recommend the Board provide for periodic building envelope inspections, funded from the operating budget, to help ensure critical areas are functioning properly. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 26 of 27 Client: 20791A Crestwood Terrace 20791A Inventory Appendix Association Reserves Washington, LLC 999 Reserve Study - Update Comp #: Quantity: Annual update Location: Common areas of association Evaluation: Per Washington law (RCW 64.34.380), reserve studies are to be updated annually, with site inspections by an independent reserve study professional to occur no less than every three years to assess changes in condition (i.e., physical, economic, governmental, etc...) and the resulting effect on the community's long-term reserve plan. Most appropriately factored within operating budget, not as reserve component. Useful Life: Remaining Life: Best Case: Worst Case: Cost Source: Does not meet NRSS criteria for reserve funding November 15,2013 Page 27 of 27